07/01/2006 11:00PM

Partnerships may be key to New York bids


Although 16 companies met the June 30 deadline to identify themselves as bidders for the franchise held by the New York Racing Association, that number is expected to drop considerably by the time formal bids are due on Aug. 15.

Simply put, many of the 16 companies do not have the financial resources to make an individual play for the franchise, which includes the right to operate Aqueduct, Belmont Park, Saratoga Race Course, and a 4,500-slot-machine casino at Aqueduct. Some of the companies are expected to strike partnerships with others that met the deadline set by the Ad Hoc Committee on the Future of Racing, a state panel that will review the bids.

The most obvious partnership is among the five New York offtrack betting corporations - Capital OTB Corp., New York City, Nassau, Suffolk, and Western - which could be one of the stronger players.

The OTB's are owned by counties in New York, and each has longstanding ties to politicians and state regulatory officials. Combining the five companies would only multiply their political strength. There are six OTB companies, but one of them, Catskill in upstate New York, did not submit an intention to bid.

The Ad Hoc Committee on the Future of Racing will issue its recommendations on Sept. 15 in a report to Gov. George Pataki and the state legislature. Both the governor and the legislature need to approve a winning bidder, and politics is expected to play as much of a role in the process as raw numbers.

Because significant changes are expected to the state's racing laws and because Pataki is leaving office this year, it is not clear that the committee's recommendation will be the final say. Many racing officials believe that the process will serve only as a framework for another round of bidding when Pataki's replacement takes office.

The committee has asked for bids under six different scenarios, depending on changes to the racing law and the possibility of operating slot machines at Belmont Park. Under several of the scenarios - and especially if Belmont Park gets slots - the price of the franchise would likely exceed $1 billion.

That puts most of the racing companies behind the eight ball. Three of the companies - NYRA, Magna Entertainment Corp., and Monticello Raceway Management - would find it difficult, if not impossible, to raise that kind of money. The third, Churchill Downs Inc., has a strong balance sheet, but $1 billion is still a bit of a longshot without a partner.

The two most obvious candidates for partnerships with the racing companies are MGM Grand and LRW Development, both Las Vegas casino companies. MGM Grand is already partners with NYRA in a planned casino at Aqueduct. LRW Development is owned by Wynn Resorts, a casino company owned by New York native Steve Wynn.

Another potential partner for the racing companies is Television Games Network, which is owned by Gemstar-TV Guide Inc., a publicly traded company. Charles Hayward, the chief executive of NYRA, said on Saturday that officials of TVG alerted NYRA on Friday that the company had submitted its name but that NYRA has had no other discussions with the company.

"Their attorney told our attorney that they were going to be on the list, but only as a place-card, so to speak," Hayward said.

One intriguing bidder is Excelsior Racing Associates, a partnership that includes as its principals Steve Swindal, a general partner in the New York Yankees and the son-in-law of George Steinbrenner, the Yankees' managing partner. Steinbrenner is a horse owner and breeder. Excelsior also includes David Cordish, the president of the Cordish Company, a huge real estate development group that specializes in mixed-use properties like those found in many revitalized downtowns.

Two wild cards notified the committee about their intention to bid. One is Capital Play Pty Ltd., an Australian bookmaking company based in Canberra. According to the company, Capital Play provides betting from Australia on North American racetracks.

The other wild card is WNY Gaming Associates. Robert Williams, the executive director of the ad hoc committee, said on Friday that nothing was known about the individuals behind the group, and that the committee had only received a letter from the company indicating its desire to bid.

Finally, the bidders include Empire Racing Associates, a group formed earlier this year that includes several New York businessmen with strong ties to the financial community. Empire has been endorsed by the New York Thoroughbred Horsemen's Association, the organization representing trainers and owners at NYRA.

Officials of Empire have not disclosed any of the group's potential partners, but the group could easily strike a deal with any of the bidders. Jeff Perlee, the chief executive of Empire, has said that the group has had discussions with companies that have "deep operational experience" in the racing industry, but has declined to comment further.

Earlier this year, the group hired several lobbyists to help with its goal of changing the racing laws. Among the lobbyists is Brian Meara, who is also employed by the Yankees.