Racing commission OKs deal

Las Vegas-based Pinnacle Entertainment Co. is awarded a large stake in the Retama Park racing license. Las Vegas-based Pinnacle Entertainment Co. is awarded a large stake in the Retama Park racing license. Photo: JOHN ALBRIGHT, Express-News Photo: JOHN ALBRIGHT, Express-News Image 1 of / 36 Caption Close Racing commission OKs deal 1 / 36 Back to Gallery

AUSTIN — The Texas Racing Commission on Tuesday approved a complicated deal that gives Las Vegas casino gaming company Pinnacle Entertainment Inc. a majority stake in the racing license at Selma's Retama Park.

The transaction ensures that horse racing will continue at Retama Park, which has never made money since opening in 1995.

Pinnacle executives have envisioned constructing a mixed-used development to complement the track facilities. Officials previously have said the project could include an entertainment center with theaters, restaurants and a bowling alley.

The company also backs expanded gaming at racetracks in Texas, where previous efforts to legalize it have failed. Supporters likely will try again in next year's legislative session.

“We're in the gaming distribution business, so we would support expanding gaming in Texas,” Geno M. Iafrate, Pinnacle's executive vice president of regional operations, said after the commission meeting.

Pinnacle operates casinos in Ohio, Missouri and Louisiana. Some gaming analysts have viewed Pinnacle's involvement in Retama as a way for the company to protect itself in the event Texas gets gaming. But Iafrate called the Retama deal an offensive move by the company.

Under the deal unanimously approved by the commission, Pinnacle will receive a 75.5 percent interest in the racing license for $22.8 million. The purchase price is comprised of $15 million in cash for working capital for Retama and $7.8 million for debt securities and other interests.

Pinnacle also has committed to providing Retama capital advances of up to $2 million a year for the next six years. Some of the money will cover the track's actual operating losses, which are projected to average almost $1.4 million over the next five years.

“I think it's been 16 consecutive years that there's been a rumor that Retama Park is closing. It never ceases to amaze me,” track CEO Bryan Brown told the commission before its vote. “I don't think we'll hear that rumor for some time.”

The 218-acre horse track facility is owned by Retama Development Corp. (RDC), a municipal subdivision of Selma.

The RDC took on enormous debt to pay for the construction of the racetrack. Pinnacle earlier this year acquired most of the bonds used to fund the construction.

The principal and interest on the bonds now exceeds $250 million. The interest expense on the bonds over the next five years is projected to be $141.2 million.

“It's interest expense owed to themselves,” Mark Fenner, the commission's general counsel, said of Pinnacle. “They're paying it to themselves. It's a paper transaction.”

Retama's racing license has been owned by Retama Partners Ltd., a partnership involving numerous individuals and trusts. According to a list compiled last year, the partners included Spurs majority owner Peter Holt, car dealer Marsha Shields of McCombs Enterprises and developer Drake Leddy. A trust affiliated with Joseph Straus Jr., the father of Joe Straus, speaker of the Texas House, also held an interest.

The partners that comprise Retama Partners now will hold a 24.5 percent interest in Pinnacle Retama LLC, the new company that will control the racing license.

The RDC and Retama Partners each have held a 50 percent stake in any additional rights, including expanded gaming rights, granted to a license holder.

Each will now transfer their rights to the new license holder, Pinnacle Retama. The rights are good for the next 25 years.

Pinnacle's license deal is slated to close by Jan. 31, Brown said.

A Pinnacle entity will take over management of the track. Current track employees will have to interview for their jobs, though all are expected to be hired. The track employs about 150 full-time workers and about 280 overall during meets.

“We're just excited,” Brown said. “All of the employees are eager to get going under the new company.”

Retama's current thoroughbred meet runs the next two Friday and Saturday nights.

On Tuesday, Retama received approval for a 26-day thoroughbred meet next year that will run Friday and Saturday nights from Oct. 4 through Dec. 28. A 20-day quarter horse meet will run from June 7 through Aug. 10.