Betting on a racetrack
Steven Roth, the tough, entrepreneurial chief executive of giant Vornado Realty Trust, has his sights set on Boston's Suffolk Downs. And it is a better bet than any you could place at the struggling track that the opportunity he sees is not in a bunch of old men shouting at a TV screen and betting two bucks on a race at Aqueduct.
Suffolk Downs is a dying business, and has been for years. But make no mistake: There is value there, and the smart money is lining up.
Vornado, a New York real estate investment trust with a market value of $9 billion, has launched a tender offer seeking to buy the shares of Suffolk Downs's constantly warring stockholders. Boston concessionaire Joe O'Donnell, the track's largest shareholder, is heading a group that has offered to match Vornado's offering of $300,000 a unit. John Hall, Suffolk Downs's managing partner, says the board will meet with Vornado soon. ''All the directors are going to meet with Vornado with a completely open mind," Hall said yesterday.
It is clear, however, that O'Donnell, Hall & Co. are not thrilled to have a consummate real estate investor like Roth on their doorstep. Forbes magazine called the bargain-hunting Roth ''No Mr. Nice Guy" a few years ago. Roth rarely talks to the press, and he wouldn't talk to me. But in an interview with The New York Times, he explained why he liked markets like Boston. ''Wherever it's impossible to add supply, that's where I want to invest," he said.
The Suffolk Downs owners are a dysfunctional bunch. Patricia Moseley, whose late husband, James Moseley, led the revival of the track in 1992, and her brother, Donald Little, tend to regard O'Donnell and Hall as mere developers. O'Donnell and Hall see Moseley and Little as North Shore horse snobs. Several years ago, Moseley angered O'Donnell and Hall by killing a deal that would have brought in a national racing company to operate the track. Two cash calls on the partners in the last few years haven't improved the karma.
An unhappy minor partner, David Geller, brought Vornado to Suffolk Downs. Last summer, Vornado made an offer to buy Suffolk Downs and its 160 acres for $58 million, but was rejected. Now it has come back with a tender offer, which O'Donnell, Hall, and a third partner, John Collins, have offered to match. Vornado, however, needs the approval of the board to proceed.
Gambling is the wild card. All the tracks, including Suffolk Downs, say they need slot machines to survive, and think they have a shot now that Tom Finneran is no longer House speaker. O'Donnell and Hall want to see how that debate plays out; they know slots at Suffolk Downs would be a gold mine. If gambling fails, then they will turn to development. Boston developer Stephen Karp, an O'Donnell partner and now on the Suffolk Downs board, is already building a Stop & Shop and a Target on land he bought from the track in 2003.
Steve Roth has seen the future of Suffolk Downs, and it is not gambling. The only question is who will build that future: Roth or O'Donnell and Karp, or will they do it together? They should get on with it.
