Our district is alive with chatter about the sale of Clairwood Racecourse. Depending on who’s doing the talking, the Garden Course is being sold to a “Greek with good Government connections”; is going for R375m; no, R475m; Gold Circle members are being cut out; no, they will have to vote. On top of which the front page lead story in The Mercury newspaper didn’t help by quoting a price “between R220m and R250m” – the reporter claiming she’d actually seen the offer to purchase – posted in Alec’s Blog last Friday.
Whew. So many theories, so much gossip. And with Gold Circle schtum on the subject, exaggeration and conjecture is mushrooming. Even people who should be on the inside either claim to have been kept out the loop, or smile like they do know, but when pressed admit they’re not sure. It’s the racing industry’s broken telegraph wires all over again.
In such situations the only way to get things straight is to approach the source. With Gold Circle gone to ground, I called the buyer, 67-year-old Cosmas Cavaleros, patriarch of family-owned Cavaleros Group. He’s clearly no lightweight, having hit the news recently after dumping Southern Sun as manager of his five star Sandton hotel on the corner of Grayston Drive and Rivonia Road. Replaced by Sun International after it signed a 20-year lease and promised to match the R250m Cavaleros will be investing in upgrading the building. Having overnighted there a few weeks back, the tired old hotel needs every cent of that half a billion perk up.
Cosmas, who made his huge fortune through property development, is painfully low profile. He is not connected to racing either. So it was no surprise he didn’t return my call about the proposal to buy the Clairwood racecourse. To his credit, he did ask Andrzej Kiepiela of the KZN Growth Coalition to answer my questions. So, courtesy of Mr Kiepiela, here are the facts:
Yes, Cavaleros Group has submitted an offer to purchase. No the “confused young reporter” at the Mercury has not seen the sales document – she seems to have gotten hold of an earlier draft that has been substantially reworked.
The price being offered is R350m rising to over R400m with escalations dependent on how long it takes for the transaction to be concluded. Best-case scenario: Gold Circle will get its money by May 2012. Worst case – who knows? If there are serious objectors it could be drawn out for years.
A bunch of suspensive conditions are in the sale agreement, binding on both parties. Gold Circle members will have to approve the sale and replacement facilities will need to be secured at the other KZN tracks. Cavaleros need council approval and more.
A non-refundable deposit has indeed been lodged. Kiepiela says he is not at liberty to say how much. But he didn’t deny the R5m number rumoured in our district. Then again, he wouldn’t confirm it either.
What he did say, though, was that Cosmas is a very serious buyer and “in principle this deal should go through – there is no reason why it shouldn’t. I’d say the chances of it happening are very good.”
There was no discussion on why Cavaleros would be prepared to pay so much for the racecourse. But it’s common knowledge Transnet is eyeing the old international airport and is itself in discussions with ACSA to turn the land into Durban Harbour extension. That would significantly improve the value of the racecourse property. But there’s much water to flow under that bridge. And it could take years before anything concrete occurs.
With my racing enthusiast’s hat on, losing Clairwood would be a very sad day. Its long, wide straight makes the track the fairest test of any course in the country. The best horse in the race, correctly weighted, tends to win more often here than anywhere else.
But as one who has also been exposed to business realities, and with the vested interest of a heavy investment in the province’s thoroughbred industry, for me the sale looks like a Godsend for the new KZN-focused Gold Circle. Having analysed my share of mergers and de-mergers, I’d be cautious about completely swallowing claims that with the Cape out the picture, Gold Circle will suddenly become profitable. Numbers have a way of surprising, often nastily.
The new Gold Circle urgently needs to rebuild its balance sheet. And then do more. Primarily, regain the province’s pre-eminent position in South African racing. The starting point would be to close the stakes gap between KZN and Gauteng . Page 14 of the latest Racing Association annual report shows how badly KZN currently lags. At the bottom end, the stake for a Novice Plate in KZN is 75% of the Highveld’s; the closest it comes is 87% in Conditions races. In no single area do KZN stakes exceed those on offer in the north.
Selling Clairwood would provide the firepower to not only close the gap, but push KZN stakes well past Gauteng’s. The course absorbs over R10m in annual expenses. The big kicker would come from a sensible approach to receipts from the sale – turning a dead asset into an annual endowment worth another R28m (with the capital invested at a modest 8% return).
At the risk of being overly simplistic, that means savings from closing the course and income from the new capital injection comes to around R40m a year. Put in perspective, Gold Circle’s latest annual report states KZN stakes last year totaled R81.3m. So cash generated by the Clairwood sale could in theory allow for an almost 50% uplift in stakes. Now we’re talking.
For KZN racing to thrive, it needs to attract the highest quality horses. Not just during the Winter Season, but year round. That will only flow when stakes are more attractive. Owners want to race their best horses where the returns are highest. Losing Clairwood racecourse will be an emotional blow. But the benefit it promises at the price now mooted will turn regret to joy rather quickly.
