Churchill Downs Inc. announced it will invest more than $200 million in Derby City and Churchill Downs racetrack in Louisville, Kentucky. Plans for the 3-year-old Derby City historical racing center include a 135,000-square-foot expansion, featuring a 5-story, 123-room, hotel tower and 41,000 square feet of new casino floor space with 200 new gaming positions and a VIP gaming area. A new restaurant, sports bar and live entertainment stage also are planned. The projects are expected to create 400 construction jobs and 60 permanent positions. Work will begin early next year and be completed in late 2022 and early 2023, officials said.
Several projects also are in the works for the racetrack itself, officials said. Churchill Downs will spend $45 million to renovate the Homestretch Club in time for the 148th Kentucky Derby next May. Outdoor bleachers near the Winner’s Circle will be converted into new seating with better views of the starting gate, Big Board and homestretch.
In addition, the company will spend $90 million on the Turn 1 Experience, adding 7,100 seats, including 5,100 covered, and two concourses, ready by the 2023 Derby. Also, the Paddock and Plaza areas will be redesigned and be finished by Derby Day 2024.
In a call with analysts, Churchill Downs Inc. Chief Executive Officer Bill Carstanjen said, “Derby City Gaming is even more of a juggernaut than we ever thought. And generally in business, it doesn’t have to be complicated; when you have something working well, invest more in what’s working. So Derby City Gaming really powered right through the pandemic and we need to respect that and invest around that.”
He added, “Derby City Gaming continues to exceed the company’s expectations. The expansion of this premier gaming property is intended to create an elevated experience for our guests that is inclusive of all their hospitality needs and is anticipated to fuel ongoing growth in purse contributions for Churchill Downs Racetrack.”
Macquarie Analyst Jordan Bender called the Churchill Downs Racetrack an “irreplaceable asset.” He stated, “An underappreciated part of the investment story, in our view, is the growth through the historical racing machines in Kentucky at Derby City. What Derby City Gaming has been able to do is capture that part of the market where there is significant population in Louisville. People don’t have to drive from downtown over the river anymore. The gaming’s really staying in the state.”
According to Churchill Downs’ recently released second-quarter results, Derby City, which offers about 1,000 historical horseracing machines, generated more revenue in April through June than any of Churchill Downs’ eight actual casinos it operates in other states. In comparison, Derby City, opened in 2018, lacks real slot machines, table games, sports betting and other casino features that are illegal in Kentucky.
Churchill Downs also operates historical horseracing facilities near its Turfway Park in northern Kentucky and on the southern Kentucky border at Oak Grove, designed to attract the Nashville market. Oak Grove generated $25.6 million in net revenue in the April-June quarter, ahead of four of Churchill Downs’ eight casinos.
Churchill Downs now is said to be considering a fourth casino-like venue in downtown Louisville. Carstanjen said, “We think now is a great time to invest in our hometown, and that it will be a win-win for our community and Churchill Downs.”
Meanwhile, Churchill Downs did not submit racing dates to the Illinois Racing Board for 2022 for its Arlington International Racecourse, meaning it’s likely there will be no racing at Arlington next year. If Churchill Downs does not accept a bid on the Arlington property from an interested development group, the racetrack will close forever at the end of the 2021 racing season.
Several months ago, Churchill Downs said it would sell the property to developers. The bidding window closed in June with no word from Churchill Downs officials. One group, whose spokesman is former Arlington president Roy Arnold, said it would divide the properties and continue to hold races. The Chicago Bears also placed a bid and said it would move from Soldier Field.
As it stands, Illinois will have just two racetracks in 2022. Hawthorne Racecourse in Stickney applied for 365 days of Thoroughbred racing and, operating as Suburban Downs, for 365 days of Standardbred racing. Fairmount Park in East St. Louis, which runs a Thoroughbred meet, applied for 150 days, from March 12 through November 20.
Hawthorne planned to add a casino under 2019 legislation, but construction has significantly slowed. After lobbying for years for a casino license at Arlington, Churchill Downs declined to apply for a casino license when it had the opportunity two years ago, stating gaming taxes were too high to make a profit. Observers took that to mean Arlington’s days were numbered. Churchill Downs owns a majority stake in Rivers Casino, located only 12 miles east of Arlington.
