CDI Updates Facility Plans for Turfway Park, Churchill

With historical horse racing back on solid footing in Kentucky, Churchill Downs Inc. expects to complete a new Turfway Park grandstand by the summer of 2022 and will move forward on capital project plans at its namesake track in Louisville, although revisions are expected in that latter plan.

In a conference call with analysts and investors covering a wide range of topics Feb. 25, Churchill Downs Inc. CEO Bill Carstanjen said the company will move ahead on construction at Turfway while it further studies plans at Churchill Downs racetrack that have centered on a new hotel on the property.

Both projects were halted in 2020 because of the COVID-19 pandemic and a September Kentucky Supreme Court decision that found one brand of historical horse racing to not be pari-mutuel. On Feb. 22, Kentucky Gov. Andy Beshear signed legislation that specifically includes HHR under the state's definition of pari-mutuel wagering, clarifying the legality of the games that have benefited Kentucky tracks and purses. The devices, which resemble slot machines but whose results are based on previously run horse races, could still face challenges in the court system.

With that legislation in place, Carstanjen said Thursday that the $145 million Turfway project that will see the construction of a new grandstand and HHR facility at the Northern Kentucky track is in full swing.

"We've already restarted the construction process for our Turfway Park racing and (HHR) facility and are targeting a grand opening in the summer of 2022," Carstanjen said. "We had suspended the significant capital project because of the uncertainty—when (COVID-19) first hit last year and then later until the Kentucky General Assembly had an opportunity to review the Kentucky Supreme Court decision. 

"We anticipate spending approximately $145 million in project capital to finish building this premier facility. And that will deliver approximately 800 construction jobs and 400 full-time permanent jobs in the Northern Kentucky area, as well as revitalize the Kentucky winter Thoroughbred racing circuit."

While it's full steam ahead on Turfway, Carstanjen said the company will take a bit more time to review the best path forward on a project at Churchill Downs racetrack that would include a hotel and on-track HHR. Carstanjen said with plans on hold because of the pandemic and then the HHR legislation, the company has put more thought into the $300 million project that already has seen $15 million spent on underground utilities and site prep.

Currently, CDI operates the very successful HHR facility, Derby City Gaming, located about five miles from the track and Carstanjen said the capital project could now include expansion there. Carstanjen called Derby City Gaming "a juggernaut."

"We are finalizing our revised plans that we believe will be just as impactful and exciting for our customers and community. We believe we can, and should, do the project more cost effectively, as we've reimagined each of the three elements of the overall project—a hotel, an (HHR) facility, and expanded permanent seating hospitality. 

"There is really a fourth element to consider as well, which is the potential future expansion at Derby City Gaming. This facility has really performed well since opening, and in particular, showed its growth potential throughout last year."

Carstanjen said the company likely will have a better idea of the direction it will head on the Churchill project in a few months.

"We're not ready to discuss our revised plans today. We need more time to reflect on all that we have learned," Carstanjen said. "You can expect to hear more from us in the next couple of months, as these plans are solidified."

Carstanjen applauded Kentucky Gov. Andy Beshear and the state's general assembly for clarifying the pari-mutuel rules in Kentucky to specifically include historical horse racing games. The games have been operating in the state for a decade, keying a significant boost in purses for Kentucky racing. The legislation allows CDI to move forward with its Kentucky capital projects with confidence.

In a statement earlier this month, Carstanjen committed CDI to work "constructively to revise and raise the tax structure on historical racing machines, including consideration of a fair and equitable graduated tax structure," which some state lawmakers feel does not currently raise enough revenue for the state.

During the call, Carstanjen touched on a number of points of interest.

• Following up on the company's plans announced Feb. 23 to sell the Arlington International Racecourse property, marketed for development, Carstanjen expressed confidence that the company will be able to relocate its racing license in Illinois.
• "We're optimistic that state and local authorities are interested in finding a path forward with us," Carstanjen said, later adding, "We're excited about what we might accomplish in Illinois."
• The company noted a 50% increase in active customers at its advance-deposit wagering platform, TwinSpires.com. CDI president and COO Bill Mudd said he thinks a large chunk of those TwinSpires players who have come online during the pandemic will continue to use the site, but as tracks open some customers will return to brick-and-mortar locations, preferring to bet at the windows.
• With the Kentucky Derby Presented by Woodford Reserve (G1) returning to the first Saturday in May—after being moved to the first Saturday in September in 2020—Carstanjen is expecting improved performance from its most iconic asset. Contested at an unfamiliar time for sports fans in 2020, the Derby saw a 49.8% decline in handle in 2020 compared with 2019. Last year's postponed Derby went to post with 15 horses, down from the usual 19 or 20 that typically contest the race.