Churchill Downs has budgeted nearly $1 billion to three major construction projects that are slated to be completed by the 2028 Kentucky Derby, the company announced on Wednesday afternoon, a signal that the company believes that it can continue to leverage the most prominent Thoroughbred race in the U.S. for the next several decades.
The three projects include a renovation of the entire section of the grandstand just beyond the finish line and into the first turn, plus the construction of buildings in the infield that will transform the area from a relatively sparse, sprawling lawn into a complex of covered suites and crescent-shaped platforms allowing for elevated views of racing.
Together, the three projects and related infrastructure improvements have been budgeted for $920 million over the three-year construction timeline, exceeding, by $200 million, the entire amount Churchill has spent over the past 20 years on dozens of capital projects at the racetrack. Those projects have transformed Churchill into a facility that would be virtually unrecognizable to a visitor from decades past, save for the building’s iconic twin spires, which are now framed at the track’s entrance by the $200 million renovation of the track’s paddock unveiled just prior to the 2024 Derby.
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“These projects reflect the company’s commitment to providing world-class hospitality and premium seating options for guests for many decades to come,” said Bill Carstanjen, the chief executive officer of Churchill Downs Inc., the track’s parent company. “We have a proven track record of prudently investing capital in the Kentucky Derby to create once-in-a-lifetime experiences for our guests while also creating significant long-term value for our shareholders.”
Churchill is embarking on the investments at a time when the U.S. racing industry as a whole is shrinking under declining foal crops and an erosion in handle, and when top-class racing on several major circuits, particularly California and Florida, is under threat. At the same time, racing in Kentucky and Arkansas is thriving, while the racing industries in the two other Triple Crown jurisdictions, New York and Maryland, have reached long-term commitments with their state governments to keep racing stable.
In a conference call Thursday morning with analysts, Carstanjen said that the company has a proven track record in turning its capital investments into money-makers at the track, and he said that the new projects would capitalize on a worldwide trend toward “experiential events” and on excess demand for Derby tickets.
Churchill’s projects “always pay off and meet our hurdles,” Carstanjen said, noting that Derby week ticket sales are “outpacing” sales at this time last year. “It’s now just time to take it to a much higher level.”
Carstanjen also said that the paddock renovation unveiled last year “drove the Derby experience and our financial results to a level we could not have imagined just a few years ago.”
The three new projects will be funded with cash and proceeds from Churchill’s existing line of credit, Churchill officials said.
The Derby is by far the most popular race in the United States, and Churchill has seized on its bucket-list stature to re-make its grandstand into a menagerie of premium seating areas with cost tiers running from a few hundred dollars to $16,000 or more. After the company released its second-quarter results last year, Carstenjen said that the 2024 Derby produced $50 million in additional revenue over the 2023 Derby – in a quarter when the track’s entire net revenue was $228 million.
The grandstand project on the first turn, which is being called the “Skye Project,” will replace 11,500 existing seats with 13,300 seats “providing a variety of premium hospitality experiences that include improved track views and upgraded amenities,” Churchill said. The first three floors of the five-story structure, budgeted at $465 million, are expected to be completed by the 2027 Derby, and the remaining floors will be completed by the 2028 Derby.
(Churchill Downs)
The more expensive infield project, called the “Conservatory Project,” will entail the construction of several buildings along the entire length of the stretch, centered on a building behind the Derby winner’s circle with a transparent roof. The new buildings will have seating for 7,100 with 36 suites and will replace temporary grandstands and structures that were erected only for Derby week that had seating for 2,100. That project is budgeted for $330 million.
(Churchill Downs)
The second infield project will entail the construction of three crescent-shaped structures on the back half of the infield that will contain amenities and provide rooftop viewing for infield attendees, fronted by lawn areas. The project is budgeted for $70 million, with one building slated for completion each of the next three years.
(Churchill Downs)
Churchill announced the projects on the same day that it reported record 2024 revenue and net income, during a year in which it opened two new casinos, one in Indiana and the other in Virginia. One week ago, Churchill also opened a new casino in Owensboro, Ky., as an adjunct of its racing and casino license at Ellis Park.
For the year, Churchill reported net income of $426.8 million on revenue of $2.73 billion while generating significant growth in its live and historical racing business and its casino division. Both of those were impacted positively by the opening of the casinos in Indiana and Virginia.
While the Derby and the company’s historical horse racing machines generated outsized returns, financial statements distributed by Churchill indicated that handle through its account-wagering operation, Twinspires.com, declined 2.5 percent on the year, to $1.94 billion (the amount does not include undisclosed handle by computer-assisted wagering teams that Churchill routes through a separate company known as Velocity). For the year, total wagering on races held at U.S. tracks declined 3.55 percent during 2024, according to Equibase.
Not counting Kentucky and Virginia, which operate historical horse racing machines rather than traditional casino games or slot machines, Churchill now owns and operates casino facilities in nine states. Total revenue from those facilities was $1.04 billion in 2024, up 7.2 percent over the division’s revenue in 2023, according to the financial statements.
Interest expense in 2024 was $289.8 million, up 7.9 percent over 2023. According to its balance sheet, Churchill is carrying $1.77 billion in long-term debt and another $3.08 billion in notes payable.
Churchill’s stock traded at $131.59 at the beginning of the year. The stock closed at $119.54 on Wednesday, its lowest share price since late last March.
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