Churchill Downs Moves On Expansion, But Nixes New Chicago Projects
Posted on: October 29, 2021, 03:54h.
Last updated on: October 29, 2021, 01:52h.
Churchill Downs Incorporated plans to grow the company with the money it will receive from land sales at Arlington Park and Calder Casino. That’s according to CEO Bill Carstanjen, speaking during the company’s third-quarter earnings conference call on Thursday.
In doing so, the Louisville-based gaming company will look to conduct a 1031 exchange, a federal tax policy that would allow Churchill to essentially swap properties. That would allow them to defer the capital gains taxes from the sales.
We have a number of organic capital growth projects that we believe will qualify, and we will also explore potential acquisitions that fit within our strategic framework,” Carstanjen said on the call.
Last month, Churchill Downs announced the sale of Arlington Park, a 326-acre racetrack in suburban Chicago, for $197.2 million to the NFL’s Chicago Bears. However, Carstanjen said that transaction won’t close for at least a year, and perhaps not until early 2023. That’s because of “due diligence and other customary closing conditions.”
In Miami Gardens, Fla., Churchill Downs is looking to sell 116 acres surrounding its Calder Casino, which also once served as a thoroughbred track. The land has received a lot of interest from bidders, and Carstanjen said the company will likely provide “definitive information” about a sale before the end of the year.
Growing in Kentucky
Churchill Downs is not lacking for projects, especially in its home state. The company is investing millions in upgrades to its flagship track, Turfway Park, and its historical horse racing parlors.
Among the projects slated for the namesake track is a $90 million expansion at the first turn. That will add 1,750 premium seats and convert more than 8,500 existing seats into premium seats. At Turfway in northern Kentucky, a rebuilt clubhouse is expected to open at the track by next July. That will include the installation of 850 to 1,000 slot-like HHR machines and the ability to expand up to 1,200.
At its Derby City Gaming HHR parlor in Louisville, Churchill Downs is investing $76 million to add 200 gaming machines and create space for another potential 250. It currently holds 1,000 machines. The expansion plans also call for a five-story, 123-room hotel.
Churchill Downs is also building a second HHR gaming venue in its home city. It plans to spend $80 million to build a parlor in downtown Louisville that would look to draw tourists and convention visitors. It would feature amenities like a premium lounge and what Carstanjen called a “premium” bourbon library.
Construction will start in the coming months, with a grand opening in the first half of 2023.
Churchill Expanding Elsewhere
There are several Churchill projects outside of Kentucky as well. An $87 million expansion is in the stretch run at Rivers Des Plaines, a suburban Chicago casino it owns with Rush Street Gaming. The biggest casino in Illinois in terms of revenue generation, it will also be the first in the state to reach the maximum 2,000 gaming seats as a result of the addition that’s set to open early next year.
In Louisiana, the state is allowing racetracks to install HHR machines at their off-track betting venues. With a $35 million investment, Churchill Downs plans to add 600 of the gaming machines at its 15 off-track parlors.
Churchill Downs also has an eye for Indiana, where it is one of four companies bidding for the casino license in Terre Haute. At $240 million, the proposed Queen of Terre Haute Casino would feature 1,000 slots, 50 table games, and a 125-room luxury hotel.
The Indiana Gaming Commission is scheduled to select the winning proposal on Nov. 17.
No Plans for New Chicago Projects
One state where you won’t likely see Churchill Downs grow in the near future is Illinois.
Besides selling Arlington Park, Churchill Downs officials also pulled a casino proposal for Waukegan, which was another joint proposal with Rush Street. Carstanjen said Churchill and Rush Street officials began talking as the selection process dragged out on Waukegan, and that led to the partners choosing to focus on the Rivers casino expansion.
Carstanjen also told analysts on Thursday’s call that the company would not submit a bid or partner with anyone on a proposal for the downtown Chicago project. Bids for that are due Friday afternoon.
He added that company leaders were “sad” to sell Arlington. But they also believe the Bears will turn the property into a state-of-the-art football stadium with other amenities surrounding it.
Our decision to sell Arlington Park really wasn’t any kind of comment on Chicago or the Chicagoland region or even the state of Illinois,” Carstanjen said. “It was really a comment on the archaic racing laws that really haven’t been changed in any material way in that state in 30 plus years, and no longer worked.”
He didn’t go further into that but said that when lawmakers finally passed an expanded gaming law that allowed racetracks to offer casino gaming, it wasn’t done in a way to “make up for the racing paradigm,” he said.
Critics, including Illinois horsemen, have said that Churchill passed on an Arlington casino because of its relative proximity to Rivers.
Carstanjen, though, did note that the gaming law passed two-and-a-half years ago and neither of the other tracks has opened a casino either.
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