DOSWELL, Va.— Before bankers make a big deal, they like to run something called a Monte Carlo. It is named for the city in Monaco and its gambling houses, and it works like this: The lenders plug in the numbers and variables of a deal, then run a series of complex computer simulations to see what can go wrong. The fewer avenues to failure, the more confidence there is in a project’s success.
But as anyone who has ever lost money on a sure thing can attest, the odds are only odds. They are predictive — but only to a point. Which is why a few months back on a beautiful spring day, there was an auction in Caroline County, just beyond the shadow of the monster roller coaster at Kings Dominion. What all the Monte Carlos had indicated was extremely unlikely to happen had in fact happened.
The auction was not that different from the hundreds of thousands of foreclosure sales that have taken place on courthouse steps across America. A borrower had taken on too much debt and couldn’t repay the loans. The lenders’ patience was exhausted, and the negotiations through the bankruptcy process had failed. All that was left on this day was the singsong chant of the auctioneer that ends with the word “sold.”
The 331-acre property belonged to the State Fair of Virginia, which, for most of the past 150 years,has been the annual event where kids from the country showed sheep and where folks from the city wandered around eating corn dogs. In many places, the state fair is run by the government. Not in Virginia. A nonprofit group ran the fair. It had a board filled with important people who know how to get things done. They borrowed $85 million to build a new fairgrounds here, beyond the sprawl. Maybe it was a sound bet, but it was a bet just the same, and when circumstances changed, they lost everything and had to sell it all, down to the dirt.
This is land with a history, so beloved and remembered that for 300 years the heart of the property has been known simply as “The Meadow.” It was beautiful open land, cherished first by the Pamunkey Indians. It exists in hand-drawn maps and in the tight script of deeds written in the 1800s. It is where Secretariat was born and learned to run and later showed us what greatness looks like at full gallop. We are a possessive nation, and the Meadow is land people have wanted to possess.
This being Virginia, a noticeable number of people showed up for the auction in bow ties. But the man who placed the winning bid and agreed to pay about $5.7 million wore a Pink Floyd T-shirt. His name is Mark Lovell, and he runs Universal Fairs, a company based near Memphis that operates fairs and festivals in four states. Virginia will be the fifth. Lovell closed the deal in early July, bringing in the Virginia Farm Bureau Federation as a partner. They will open the State Fair of Virginia at the Meadow Event Park for a 10-day run on Sept. 28 with an expanded purpose beyond providing family entertainment and a venue for the big pumpkins and the Tilt-a-Whirl. The fair will also exist to make money. That is the price of possession.
Making money is not a bad thing. There are plenty of people who say that the fair’s previous owners ran into trouble precisely because they didn’t care enough about the bottom line, that they forgot the truth in the saying that before you can do good, you have to do well. In the Meadow, as at fairgrounds across America today, it’s really a question of finding that balance, a task that can be no less slippery and fleeting than the sweet tangency when the Ferris wheel crests and there is a split second where gravity seems to vanish and you can look out on the midway below and wonder whether you still have time and room for cotton candy.
At the center of the Meadow is a 12,850-square-foot nouveau brick mansion called the “manor house,” often used for wedding receptions. Out back is a covered porch, and on the porch is a plastic folding table and a few chairs, and that is Mark Lovell’s office. It’s mid-July, two months and change before the fair opens, and he’s here for a few days, in flip-flops and shorts, rolling through an endless series of meetings. He has brought along his wife, his son, his mom, his two best friends and their wives.
The husbands rode here on their Harleys from Tennessee, 1,100 miles of back roads. There’s a half-eaten tray of cinnamon rolls in the kitchen, garbage bags piled on the back steps. At night, they tool around the property in one of the fair’s tram trailers. It’s easy to imagine that you’ve wandered into a reality TV show titled what Lovell says he told his wife, Linda, the night he won the auction: “Honey, I bought a fair.”
Lovell is a promoter by trade. What he lacks in the over-the-top hucksterism of the sideshow barker, he makes up for with a serenity and optimism that planning and hard work get things done. He started with concerts, then moved to hunting and boat shows, and finally into the fair business. “It’s all the same,” he says. “It’s like a turkey dinner. You get all the ingredients together. The ladies go into the kitchen and spend an hour or so putting it together, and then the men come in and wolf it all down in 30 minutes.”
Lovell tends to listen hard and speak last, often relying on country wisdom to get his point across. Square pegs can’t be forced into round holes. The rule book is the rule book you make. When you hit rain, you need to keep riding, because it can’t rain forever. When it comes to business, his main point is this: You’ve got to make more than you spend.
The truly American fair, with its delicious mix of commerce, entertainment and education, is said to date to the early 1800s and a pair of merino sheep on the village green in Pittsfield, Mass. They belonged to Elkanah Watson, a farmer, industrialist and all-around big thinker whose ideas included building the Erie Canal. The sheep drew a crowd, and Watson is said to have remarked, “If two animals are capable of exciting so much attention, what would be the effect of a display, on a large scale, of different animals?” The fair of the Berkshire Agricultural Society started in 1811, complete with premiums and promotion, and the idea spread quickly through a young nation that still had both hands firmly on the plow.
Two hundred years later, many fairs still deliver on those blue-ribbon promises, even if most of us are now removed from the land. Jim Tucker, president of the International Association of Fairs and Expositionsin Springfield, Mo., says with all seriousness that fairs are of strategic importance, providing one of the few places where people can learn about where their food comes from: “It’s the human animal interacting with the farm animal.”
Lovell says he knew nothing of the Meadow’s past when he won the auction. So he did what a lot of us would do to learn about history, which is watch the Hollywood version, in this case, the movie “Secretariat.” What he realized, he says, is that the challenges he and the movie’s heroine, Penny Chenery, faced were pretty similar. They each had come to possess the Meadow, and they needed to do what was necessary to hang on to it.
“This is land that inspires,” says Kate Chenery Tweedy, Penny’s daughter and the author of “Secretariat’s Meadow,” a book about the stallion and the farm where he was raised. “This has been a place of dreams but also of disappointment.”
She remembers as a child her frequent visits to the farm, which was then 2,600 acres and ran for miles between two loops on the North Anna River. It was bursting with life and redolent with the smells of the fields and the stables.
The Meadow started as a Colonial land grant, passed into the Chenery family, then out of it, then back again when Tweedy’s grandfather, Christopher Chenery, returned in 1936 and set about building a horse farm to rival the best in Kentucky. When his health failed in 1967, his daughter began taking control of the sprawling operations. They hit pay dirt with Riva Ridge, whose winnings in 1972 allowed them to keep racing and hang on to their stable of horses, including Secretariat. A year later, with the country demoralized by the steady drip-drip of Watergate, the big red stallion with the enormous heart spoke to our better angels. He won the Kentucky Derby and the Preakness as a great horse, then ran into the record books after crushing the field by 31 lengths in the grueling mile and a half of the Belmont Stakes.
That’s where the movie ends; history is rarely that tidy. The two horses saved the Meadow for the Chenerys, but it was only a temporary reprieve. Secretariat’s stud fees were syndicated for $6 million, but the estate taxes after Chris Chenery’s death in 1973 were too much. The Meadow was sold, first to newspaper executives, then to a Caroline County businessman who went into default, then to another man who went to prison for mortgage fraud, then to the owner of a chain of sporting goods stores, and finally 10 years ago to the nonprofit organization that ran the state fair.By then the fair was flush with cash and needed a new home.
For years, home had been the Richmond International Raceway. The fair owned the land and leased the property to the raceway. But NASCAR wanted its race operators to own their tracks, so in 1999 the fair sold the property to the raceway for $47 million and set out to build a fairgrounds from scratch.
A lot of counties wanted the fair, but it’s easy to see why the fair’s board chose Caroline County and the Meadow. It was a stone’s throw from Interstate 95. The Secretariat tie-in gave an authentic back story. And perhaps most important, the Meadow is about 25 miles north of the raceway, putting the fair closer to Northern Virginia and thousands of suburban families looking for a fun outing.
When developers talk about projects in the Washington exurbs, the phrase they often toss around is “beyond the blast zone.” Although a little gruesome, the idea is that if somehow the nation’s capital were destroyed, life and work would still carry on in the industrial parks and offices 60 miles away. The term Gary Wilson, Caroline’s director of economic development, uses is less heavy-handed. With perhaps understatement, he calls his county, with its 539 square miles of small towns, fields and pine forests, “strategically safe.”
Wilson and colleagues recruited the State Fair with zeal and pushed through a controversial rezoning in 2005 that allowed the property to be used for a fair but not much else. “They wanted rural, beautiful, safe and secure,” Wilson says. “The Meadow filled the bill. As soon as you cross the river, it’s just, boom, a panorama of green.”
When the fair was at the racetrack, it lost money on operations but used the return on its investments to cover those losses. A move to the Meadow would require a change in its financial model. Here is where things got tricky.
“We had a very financially sophisticated board ... people who’ve done transactions of this size, people who’ve done real estate deals,” says Curry Roberts, former State Fair president. “I think the board had a better understanding of what this structure was about and how it would work than unfortunately some of the lenders we ended up dealing with.”
I met Roberts at the headquarters of Union First Market Bankshares in Richmond. The bank’s CEO, Billy Beale, chairman of the old board with Roberts, and he joined us in a conference room with a pretty view of the James River in the distance.
In his early years, Roberts was something of a boy wonder of Virginia politics, and he can still be impatient, a man in a hurry. Gov. Gerald Baliles appointed him secretary of economic development in 1988, when he was all of 30. He left government to work for John Kluge, the broadcasting billionaire and investor, running a kosher meatpacking business, among other things, before coming to the State Fair in 2004. The fair had bought the Meadow property for $5.3 million in 2003, but it needed financing to build a fairgrounds.
The answer was the $42 million investment portfolio that remained after the sale of the racetrack and the purchase of the Meadow property. The portfolio would secure loans and kick off enough cash to pay most of the construction debt. The fairgrounds, when finished to the tune of $80 million, would serve as additional collateral. That was the theory, anyway.
The fair ended up borrowing $85 million, with most of the funds coming from corporate or tax-exempt bonds sold through a syndicate of farm-credit banks. Included was $9.3 million in three loans from the U.S. Department of Agriculture, which also agreed to guarantee repayment of $23 million of the bonds, should something happen.
And of course, something did happen. The roulette ball landed in the wrong pocket. The new fairgrounds weren’t even finished when the economy and stock market collapsed in 2008, taking the investment portfolio into a free-fall. This was a problem on two fronts. First, there was no way the smaller portfolio could pull its expected weight on the bond debt. Second, the loan agreements required this investment account to be at least $35 million, or else the fair was in default. It wasn’t long before it fell below that threshold and the lenders were watching their collateral disappear at an alarming rate.
The two sides negotiated several reductions in the portfolio level, allowing the fair to use principal rather than returns to make debt payments. In addition, the lenders ordered the fair to take the portfolio to cash, selling at the bottom of the market and locking in its losses. With the benefit of hindsight, it’s easy to say the lenders should have just waited a little longer. The market eventually bounced back.
Although he chooses his words carefully, Beale is disappointed in the lenders: “You can’t spend time saying it will get better, put your head in the sand. And it’s not going to go back to the way it was, so you have to deal with what’s before you, and in this case, we didn’t have anybody who wanted to react to what was before them.”
Roberts is more blunt. “They panicked. They flat panicked.” Everybody knew the risks, he says. “If you hit a bump, you’ve got to ride it out, because if you don’t, you’ve killed your own loan.”
This is the lament from all of us who can’t make the payments on a car, a home or, in this case, a top-of-the-line fairgrounds. The bank just didn’t want to listen.
Christy Myatt is having none of that. She is a bankruptcy attorney in Greensboro, N.C., who represented the lenders, led by a farm credit bank in South Carolina called ArborOne. She says the problem wasn’t panic among the bankers but arrogance among the borrowers, that they alone knew what was best and that ArborOne and the rest just had to nod in agreement. There was too much spending on personnel and not enough attention to holding down costs. “They just didn’t want to turn loose of the reins, and instead they put all the blame on the bondholders,” Myatt says.
It’s important to note that 2011 was the fair’s best year since moving to Caroline County in 2009. Attendance — helped by the recovery and dry weather — was 269,000, up almost 20 percent from a disastrous 2010. A growing number of attendees were from points north. Still, the fair had operating losses of $4.9 million during the previous three years. Two months after the midway company packed up the rides, the fair filed for bankruptcy, first Chapter 11, which is the hopeful filing, one of reorganization, and later, Chapter 7, which means a sale.
The auction took only six minutes. Lovell’s winning bid was essentially the same price that the previous owners had paid for the Meadow nine years earlier, which at first blush seems improbable given that the fair had pumped $80 million in improvements into the property. But it makes sense in a perverse sort of way that underscores the problems with the deal in the first place.
The portfolio, which was the life-support system for all that investment, was gone, and in the end, the Meadow was the only thing of lasting value. The money poured into it was lost to finger-pointing and second-guessing, giving Lovell a bargain. Here, for the time being, he has no rain to ride through.
When you ask Lovell, 54, what he likes about fairs, he says flatly that he likes running them, and his journey to fair kingpin has little to do with looking into the eyes and soul of a prize-winning sow. It happened, he says, because his kids didn’t feel safe at what was then the established fair in Memphis, the Mid-South Fair, which had been a fixture for more than 100 years.
So he did what any good father would do. He started his own, the Delta Fair & Music Festival, in 2007 and located it in the eastern suburbs. Lovell says it’s now the second-largest fair in Tennessee. He expanded to operate the King County Fair in Enumclaw, Wash.; the Ostrich Festival in Chandler, Ariz.; and the Georgia State Fair in Macon, which despite its name is not the official state fair of Georgia. None of these has the stature of the State Fair of Virginia, but they each had run into significant financial problems and needed a change.
The government in King County, which includes Seattle, turned the event over to the small community of Enumclaw when budget problems hit three years ago. “We ran it for a year, and it almost died,” says Mike Thomas, the city administrator. “It was, frankly, pathetic.” Officials brought in Universal last year and hammered out a contract that brought the city $30,000 in rent and concession payments on attendance of 14,000 people. Thomas says Universal has kept the event going, but most people who want the real deal go to the big fair 20 miles away in Puyallup.
The Macon and Memphis fairs are known in industry parlance as “urban fairs,” meaning they are long on entertainment and rides, which tend to make money, and a bit short on agriculture and competitions, which tend to cost money. From the moment Lovell won the auction in Doswell, he was pounded with questions about how he was going to preserve the educational work that had been an essential part of the Virginia State Fair. He didn’t have a good answer, fueling concerns that the fair was going to lose much of its agricultural roots.
This is where the Virginia Farm Bureau Federation got involved. It has more than 150,000 members, a political-action committee and a wide range of businesses that feed its nonprofit mission of being an advocate for farmers. Bureau President Wayne Pryor says the organization waited until the fair was auctioned, then approached Lovell. Together, they formed a company called Commonwealth Fairs and Events to own and manage the fairgrounds, and a new nonprofit that owns the fair and will pay Commonwealth rent and other fees. “I don’t think he needs our help in operating a fair, but if we’re going to keep it an agricultural fair, then we have a lot to offer, and I think he realized that,” Pryor says.
Because the sale didn’t close until mid-July, a seven-month planning process has been crunched into an eight-week sprint this year. And in the uncertainty, some of the most important traditional participants, including the youth livestock competition, have gone elsewhere — at least for the time being. Lorene Blackwood worked for the fair when it was in Richmond, and she has returned as programs director, with dominion over the competitions and displays. To purists, these are what separate fairs from carnivals.
Blackwood promises plenty of farm animals and agricultural displays, including petting zoos and a forestry exhibit, but she admits it’s a work in progress. “We’ve tried to look objectively at what we could do well in a short period of time,” she says.
The fair is the biggest event at the Meadow, but Lovell and the Farm Bureau have to keep the place busy the other 50 weeks. The auction price included a Celtic festival, typically held after the fair, and beyond that are plans for flea markets, wine tastings and the big money in equestrian events, which should be helped by the Farm Bureau’s connections and the land’s history.
That brings us to the name of the place. Meadow Event Park was a nod to the heritage of the land that was there in the beginning. But it’s bland to Lovell, and there’s discussion about a new name, perhaps striking an arrangement with the Chenery clan to use Secretariat’s, linking what’s left of the Meadow with the star power of its rightful heir.
Thomas Jefferson’s early childhood home, Shadwell, near Monticello is gone. So is George Washington’s home on Popes Creek in the Northern Neck. The birthplace of greatness can be elusive, so when we find the source, we look closely for the answers it holds. The foaling shed where Secretariat was born used to be near the iconic yearling stables, but it was moved across the highway and now sits near the riding arenas and parking lots, baking in the Virginia sun. It is a squat structure, devoid of charm or grace, and perhaps that is why it remains a shrine 42 years later. Horses, unlike us, are lacking in pretense, and the simplicity of this manger is what gives it permanence and meaning.
Each year, at the end of March, Secretariat’s fans show up at the Meadow for his birthday, and they go to the foaling shed to pay respects. During the bankruptcy proceedings, the gates were locked, and more than 100 people gathered a few miles away at Randolph-Macon Collegein Ashland. But Tweedy and about 20 others drove to the fairgrounds and sneaked through the gate and up to the shed. They threw the three flowers of the Triple Crown over the fence. Roses for the Derby. Black-eyed Susans for the Preakness. White carnations for the Belmont. And in what remains of the Meadow, they drank a toast to Secretariat’s memory.
Ken Otterbourg lives in Winston-Salem, N.C., where he writes frequently about business and politics. To comment on this story, send e-mail to email@example.com.