FEATURES/Cross Border | Nov 20, 2012 | 8182 views

How Formula 1 Racing Came to Texas

The vision guy got iced out. The bond trader and the billionaire took over. Will the new track be done in time? The sordid story of how Formula 1 racing came to Texas
How Formula 1 Racing Came to Texas
Image: Matthew Mahon / ReduX for Forbes
Bobby Epstein (left) and Red McCombs survived a nasty legal showdown with a partner to bring Formula 1 racing back to the US


obby Epstein guns his Cadillac Escalade up a 130-foot incline, banking left into the hairpin of Turn 1. What’s terrifying at 180mph in a Formula 1 race car is, at one-quarter the speed in an SUV, a soothing break from reality. If he rolled down his window, the chairman of the Circuit of the Americas racetrack would be bathed in the dust and noise of 1,000 workers and heavy machines hustling to prepare the 1,100-acre site for the inaugural United States Grand Prix. The smooth asphalt blowing by quietly beneath us is just about the only thing fully completed.

The pressure is on: 100,000 tickets for the three-day race weekend, November 16–18, have been sold. The race promises to be a boon for Austin, better known for Willie Nelson, the University of Texas, and South by Southwest. The grandstand looks impressive, as does the Paddock Club—12 suites at 10,000 sq ft each—primed for the well-heeled who’ll pay at least $4,200 for the chance to watch 56 laps of the 3.4-mile track from just above the pits. Austin has cooked up the typical self-justifying statistics— the track will boost local business by $300 million a year, according to a study, and Epstein’s figures are still more ebullient ($500 million).

Yet, for all the excitement, Epstein, a 47-year-old bond trader whose idea of a good time is driving his RV around the country, finds himself something of a hostage. He never intended to end up as the biggest investor in a $450 million sports debacle or the central character in a two-year soap opera that pitted him and a San Antonio billionaire against a small-time race promoter.

But here he is, stopping his Escalade in the middle of the track to make sure I get a close look at the 251-foot-tall tower that will provide 100 people a bird’s-eye view of the whole shebang. Building it was his idea, part of a project into which he’s now personally sunk an estimated $50 million or more.

“When the stands fill with people it will feel a lot better than how it feels today,” he admits. “If you had told me up front there would be that many hurdles, I either would have been better prepared or I don’t know if we would have done it.”

The only-in-Texas saga of how F1 came to Austin starts with a guy named Tavo Hellmund. The son of a race promoter, he grew up locally, aspiring to be an F1 driver, and raced stock cars in the US and Formula Three in Europe. His real dream was to bring Formula 1 to Austin.

“I live and breathe racing,” says Hellmund, an intense 46-year-old who alternates spitting out profanities and tobacco juice. “And there’s nothing I wanted to see more in my entire life than a Formula 1 Grand Prix here in my own hometown.”

In 2007, Hellmund sketched out a track design, inspired by the best turns of tracks like Brazil’s Interlagos, England’s Silverstone and Turkey’s Istanbul Park. He brought the plans to Bernie Ecclestone, the billionaire chief executive of Formula 1—and a friend of his father’s.

Ecclestone has long been keen to increase the sport’s presence in the US. In the rest of the world, F1’s races generate $2 billion in revenues, bolstering prospects for an initial public offering that could raise $7 billion—or more, if F1 can get US investors excited. Back in 1982, there were three Formula 1 races in the US. But they faded away as Nascar and its oval tracks ascended; the leftover twisty tracks were unable to keep up with the safety needs of ever more ambitious race cars. The last US race was at the Indianapolis Motor Speedway in 2007.

After what he says were maybe a dozen meetings and many more phone calls, Hellmund eventually coaxed a contract out of Ecclestone that granted him the rights to run a Grand Prix in Austin for 10 years. On some big conditions: He had to build a track, plus pay Formula 1 $23 million a year in sanctioning fees.

With that guarantee, Hellmund turned around and cut what he thought was a solid deal with the state of Texas to tap the Major Events Trust Fund (used to help attract perceived economic boons like the Super Bowl) to pay those $230 million in sanctioning fees over 10 years.

Hellmund priced out how much it would cost to build a raceway—be- tween $200 million and $250 million, he guesstimated—and then set out to find some local deep pockets.

He quickly found Epstein. Little known outside of Austin, Epstein established himself as a bond trading researcher at Dain Rauscher; in 1992, he started and then sold his own broker-dealer, and then founded Prophet Capital Management in 1995. His hedge funds now manage $2 billion.

This article appeared in the Forbes India magazine issue of 23 November, 2012
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