Pinnacle buys Ohio racetrack for $45 million

Las Vegas-base Pinnacle Entertainment acquired a racetrack in Ohio last week for $45 million on the hopes the state moves forward with plans to legalize slot machine-like video lottery terminals.

The regional casino operator bought the River Down Racetrack, which is in the Cincinnati area.

Ohio’s outgoing governor had proposed allowing the state’s racetracks to operate up to 17,500 VLTs. It’s unclear, however, if the incoming governor would move forward with the idea.

VLTs are slot machines connected to a central server run by the state lottery. Gov. Ted Strickland proposed allowing the machines at the state’s seven racetracks to help close growing budget deficit.

Legal challenges have stopped slots and Strickland lost the November election to John Kasich, who has said he is not against the plan but that he wants to further study the idea.

Pinnacle said the deal includes 155 acres, 35 of them still undeveloped. It said the racetrack would compliment Pinnacle’s nearby Belterra casino just over the state border in Indiana, which attracts customers from Cincinnati.

"Given our financial liquidity profile and property development experience, we are prepared to move quickly on the creation of a new gaming entertainment facility at the track," Pinnacle Chief Executive Officer Anthony Sanfilippo said.

If the state allows VLTs, Pinnacle could spend up to $100 million to build a facility to house at least 2,500 machines.

Janney Montgomery Scott gaming analyst Brian McGill said the move by Pinnacle is a gamble.

If VLTs were allowed at the tracks, River Downs would be the fifth casino in the Cincinnati area. There are three Indiana riverboat casinos catering to Cincinnati, including Belterra, which is the furthest away from the city and draws the least number of customers.

Market share is expected to drop when a standalone downtown Cincinnati casino operated by Caesars Entertainment opens, possibly by 2012.

“We do not think Pinnacle can sell the track back, if VLTs are not allowed,” McGill said. “The track, like most tracks without casino gaming, is not profitable.”