Del Mar fair board refinances bonds, considers new music venue

Like a homeowner who refinances a mortgage to get a better interest rate and pull out cash for renovations, the Del Mar Fairgrounds has just completed a refinance of bonds used to pay for upgraded grandstands and other projects at the state-owned property.

The $47.4 million bond sale was expected to close this week, said Russ Penniman, a member of the 22nd District Agricultural Association board, at a meeting on Tuesday, Aug. 11. Penniman led the effort to refinance the bonds, which will net the district about $24 million in cash to use for various projects after the old bonds are paid off.

In an interview, Penniman said the refinance would also save the district, which runs the fairgrounds for the state, about $1.6 million in interest costs over the life of the bonds. The interest rate on the new bonds is about 4 percent, said Penniman, compared with about 4.4 percent on the old bonds.

Annual debt service will drop to $3.3 million from $4.7 million, he said. The maturity dates of the new bonds are staggered, with the longest extending to 2038. At the Aug. 11 meeting, Penniman told the board he expected they would be paid off two to three years early.

One reason the board acted now to refinance the bonds, he said, is that officials with the Federal Reserve Board have been talking about raising interest rates. “You obviously want to get in before the rates go up so you’re buying cheaper money,” he said.

Penniman praised 22nd DAA chief financial officer Rita Walz, and her counterpart with the Del Mar Thoroughbred Club, Mike Ernst, for their work on the refinancing effort.

“This was a good project, and I’m happy with the end results,” Penniman said.

The 22nd DAA board unanimously approved the bond refinance deal at a special meeting in July.

The first $5 million from the bond proceeds will pay for an already completed project to replace the synthetic surface of the fairground’s horse-racing track with dirt, said Tim Fennell, fairgrounds general manager and CEO.

The rest of the money will be spent on a variety of projects, which include $1.1 million for new elevators and escalators in the grandstands, $900,000 for a new grandstand video display, and $1 million for new roofs for fairgrounds livestock barns, Fennell said.

One thing the money won’t be used for, he said, is the much-needed replacement of the fairgrounds’ aging exhibit halls.

Fennell estimated that replacing the exhibit halls could cost as much as $150 million, depending on the final design and amenities. Money to pay for that project has yet to be identified.

“That’s a good question, how are we going to address that? To be continued,” Fennell said. Financing the replacement of the outdated exhibit spaces “is going to take some creative thinking,” he said.

Also at the Aug. 11 meeting, directors heard an update on an effort to find new revenue-generating uses for the Surfside Race Place, a satellite wagering center on the fairgrounds property that has seen declining attendance and income in recent years.

Over the past two years, the 22nd DAA has been looking at a number of potential new uses for the 91,000-square-foot building, which have included a movie theater complex, bowling and entertainment center, and a craft brewery. So far, none of the ideas has panned out.

The focus now is on a possible 2,000-seat music venue, which is lacking in North County, said director Stephen Shewmaker, who is leading the effort to find new uses for the satellite wagering center.

“I believe that’s the best bet for us long-term, a music venue,” Shewmaker said.

Fennell said a music venue would complement the San Diego County Fair and horse racing meets held at the fairgrounds each year, and would not preclude a restaurant, craft brewery tasting room or continued satellite wagering.

Director David Watson said a music venue would fit in with the fairgrounds’ mission of providing cultural and recreational opportunities. “I think this fits perfectly with what we are mandated to do by statute,” he said.

Fennell said he and his staff would work on a business plan for converting the satellite wagering center into a music venue, which he will bring back to the board in the next 60 days.

“We’ll put a hard number to it and see if it pencils out,” Fennell said.