Minimal Gains For Magna

- I read the other day that it was going to be "only" 102 degrees that day in Dallas. They've had an awful heat wave in the northern parts of Texas, and I hope that any readers from that area are doing ok.

So by that standard, I guess we can say that Magna Entertainment "only" lost $21.3 million in the second quarter; that as opposed to $23.4 million a year ago. As usual, the company won't meet its targets to reduce its debt. As usual, it acknowledged that its future as a going concern is in substantial doubt. As usual, Frank Stronach highlighted the sunny side.

"Despite difficult economic conditions in the U.S.," earnings before income tax, depreciation and amortization were up by $1.2 million, chairman and CEO Frank Stronach said in a statement.

"This improvement was primarily due to improved results at Gulfstream Park, Santa Anita Park and our real estate operations partially offset by disappointing results at The Maryland Jockey Club," Stronach said. [Canadian Press]

(Laurel Park cut six stakes from its schedule today, and announced that Pimlico will close for training at the end of this month.)

And when Frank talks about improved results at Gulfstream, he's not talking about the racing other than from the introduction of year round simulcasting....at the end of the 2008 race meet. The company said that the slots and poker at the track netted an additional $5.5 million as opposed to the same quarter last year.

Of course, these results are through June, and the blackjack tables at the nearby Hard Rock didn't open until the 23rd of that month. So we don't yet know the effects of those table games, which opponents have been unable to stop despite the court ruling which essentially declared them illegal. This is the pdf document with the revenue figures for all of the Broward County parimutuels through June. You'll notice that the figures for all have three declined rather sharply over the second quarter. Of course, the tourist season ends over that period. But I'd be surprised if there weren't other factors at play.

Regardless, Gulfstream is in a bad spot here, compacted into a highly unfavorable competitive position by Governor Crist's agreement with the tribe, which I'd guess will eventually take effect in one form or another, leading to an expansion of the games at Hard Rock. Last month, a reader informed me that a reliable acquaintance who lives near the track reported that construction on the Village at Gulfstream Park, the planned retail and condo complex, has been halted due to lack of interest on the retail side. (Not the only project that developer Bruce Ratner is not currently constructing.) Early in July, the city of Hallandale Beach put off a decision on providing incentives to help attract retail tenants. The reader's Florida connection also told him that track workers reported what they described as potential Arab buyers on the grounds.

Indeed, Matt Hegarty reports in the Form that Frank Stronach indicated that marquee tracks may be sold. However, the company's statement indicated that such sales may not be imminent.

Although we continue to take steps to implement our debt elimination plan, real estate and credit markets have continued to demonstrate weakness to date in 2008 and we do not expect that we will be able to complete asset sales at acceptable prices as quickly or for amounts as originally contemplated. Also, given the announcement of the reorganization proposal for MI Developments Inc. ("MID"), our controlling shareholder, and pending determination of whether it will proceed, we are in the process of reconsidering whether to sell certain of the assets that were originally identified for disposition under the debt elimination plan. [Fox Business]

The reorganization process referred to is the plan proposed by Stronach in which he would essentially buy Magna Entertainment from himself....and assume its debt, himself, so that he can owe money to, himself. In any event, the plan has not yet been voted on by shareholders, and I seriously doubt that Frank will abandon ship before he gets a chance, if permitted by shareholders, to give his scheme a try.