Full Throttle : Special Edition · Mike Neff · Sunday May 25, 2008
After attending the announcement Thursday at Lowe’s Motor Speedway that Speedway Motorsports Incorporated had acquired Kentucky Speedway, I was anxious to find out just how much one of the nicest facilities to not have a Cup date cost. But after looking at Bloomberg.com, I was in total disbelief. In 2000, Kentucky Speedway was constructed for a total cost of $152 million. Bruton Smith, just eight years later, is purchasing the track for $78.3 million. While my math skills aren’t the best, I’m pretty sure that adds up to a $73.7 million loss in just eight years.
NASCAR is the hottest and fastest growing sport in the nation today. People are clamoring to host Cup dates, to attend races, and to spend millions of dollars a year to sport the colors of their favorite drivers. Forbes magazine values a Sprint Cup race at approximately $100 million, which explains why SMI recently paid $340 million in cash to acquire New Hampshire Motor Speedway.
So, in looking at those numbers, something doesn’t quite seem to add up in this latest transaction between SMI and Kentucky Speedway LLC. New Hampshire’s facilities would appear to be worth $140 million if the value of two Cup dates are removed from the purchase price, while the value of the Kentucky facility is only $78.3 million. But the New Hampshire track is ten years older than Kentucky, and is a smaller venue. Both tracks host a Nationwide race and a Truck race, while Kentucky also hosts a Indy Car race that New Hampshire does not feature.
In other recent transactions, Martinsville Speedway was acquired by International Speedway Corporation for $192 million, while North Carolina Speedway was purchased for $100 million. Kansas City Speedway cost $240 million while Chicagoland was constructed for $130 million. All of these numbers are greater than the $78 million for Kentucky and are older facilities.
Some people might be inclined to think that the involvement of the Kentucky Speedway in their lawsuit against NASCAR is part of the reason the sale price is lower. However, SMI, by virtue of their settlement with NASCAR in their Texas lawsuit is prohibited from being a party to the lawsuit, so that responsibility is going to reside wholly with the current ownership group and should not be factored into the sale price.
SMI is going to have to add 50,000 seats to Kentucky to accommodate a Cup race, but the cost of those seats cannot be anywhere close to $73 million, and the majority of the other infrastructure is already in place because the facility was designed with the thought in place that they would eventually host a Cup level event.
So fans are left to look and wonder what it is that is causing this property to be so sorely undervalued compared to the recent transaction for New Hampshire. I honestly don’t know what it is that is motivating the ownership group to sell for such a low price. It could be that their financial burdens from their lawsuit against NASCAR have caused them to have to seek out capital wherever they can find it. There may be some agreement in place with NASCAR that is going to provide the elusive new date to the track that has long been desired in exchange for removing the date question from the pending litigation. It may just be that Bruton is that shrewd of a businessman that he was able to convince the owners of a very modern facility, with three major racing events on their schedule, that their property had depreciated nearly 50% in eight years, while other track values have risen precipitously.
Whatever the case may be, Smith is getting one heck of a bargain purchasing one of the most utilized tracks for Cup series testing, with very successful Truck and Nationwide dates, and an Indy Car race, for just over one half of the price that it took to construct the facility.
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