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Thursday, March 19, 2009

Tables Turned

Here's a case of the shoe on the other foot - NYRA is on the creditors committee for the Magna bankruptcy. Not too long ago, Magna was an investor in Empire Racing, and on track to control, along with Churchill Downs, the precious simulcasting rights to New York races had Empire won the franchise. Now Magna owes over $1 million to an entity which recently emerged from bankruptcy itself.

MI Developments said that it intends to bid for the Magna properties that it hasn't already agreed to buy.

Dennis Mills, a former chief executive of Magna and the current chief executive of MI Developments, said that MI Developments had its eye on Magna properties "with a huge real estate upside" if those properties go to auction. Magna, which filed for bankruptcy last Thursday, asked a bankruptcy court to approve a plan to offer Santa Anita Park, Laurel Park, Pimlico Racecourse, and other properties at auction in August through a motion filed on Tuesday. [Daily Racing Form]
Having already agreed to purchase Gulfstream, Golden Gate, Lone Star, Xpress Bet, and AmTote, Frank Stronach, the controlling shareholder of MI Developments, would effectively retain control of his crumbling empire. Other companies are free to bid for the properties as well. And while Mills also told the Form's Matt Hegarty that he didn't know if MI Developments "had assigned specific valuations to the properties within the bundle," (I thought he was the CEO!), Steve Zorn reports on his Business of Racing blog that Magna, in a filing with the SEC, wrote down the value of its properties by $136 million. So the bundle is worth even less than it was before.

Golden Gate is one track which is surely slated for closure and development should MID Developments take control.
"If MID acquires the Golden Gate Fields property, it intends to immediately commence seeking all required approvals to develop the property for commercial real estate uses," MI stated in regulatory documents it filed March 6.

"Racing at Golden Gate Fields would cease prior to commencement of construction on the rezoned property," MI stated in the government documents. [Mercury News]
Such a shutdown would likely take several years according to the article, and the track's GM Robert Hartman protests that the track is profitable and "very important to the city." But at least one local politician disagrees.
"Racing revenues used to be 25 percent of our general fund," Albany City Councilman Robert Lieber said. "Now it's about 2 percent."

Lieber said he'd like to see the 154-acre site transformed into at least 60 percent open space and no more than 40 percent commercial development.

"A racetrack is a poor use for one of the best pieces of land that exists in the Bay Area," Lieber said. "I don't see horse racing as being viable in Northern California at this point. But we would like to see racing continue there for a while."

7 Comments:

Anonymous said...

I wonder how the NYRA can be on the creditor's committee, a contrary position to the debtor(MEC), when Brian Rosen the lead attorney for MEC still represents or has a relationship with the NYRA from the New York bankruptcy case? Hard to belive this judge or U.S. trustee in the MEC bankruptcy let this slide.

alan said...

Interesting, thanks for the observation. Rosen was indeed NYRA's bankruptcy attorney as well, though I'm not clear if he still has an official relationship with NYRA. Still, certainly seems like something that the judge or trustee would at least take notice of.

El Angelo said...

I'm equally surprised Weil Gotshal would let that through; you know their conflicts department vetted it.

Anonymous said...

Even if Rosen is currently not working the NYRA case in New York bankruptcy court, clearly a conflict of interest exists with the NYRA sitting on the creditor's Committee, regardless of who represents them. I think it's in house counsel Kehoe.

Sunny Jim said...

Thanks, Alan, for these updates, although each week brings more and more bad news for racing.

When the MI chairman is saying that the Magna properties have "a huge real estate upside", is he saying that their future as racetracks is pretty much doomed?

So Santa Anita and Gulfstream may not even make it? Isn't Hollywood Park (owned by Churchill) already headed for the wrecking ball later this year? What, Del Mar will have year-round racing?

Here in Jersey, I saw how quickly Garden State Park was shut down a few years ago, then torn down, then replaced by condos and a mall full of the same big box department stores you can find anywhere. And that was that.

I guess if any of us are planning to visit any of these imperiled tracks out of state, we shouldn't wait too long to do it.

Cheers.

Anonymous said...

You will see the same quote in a few years in New York, just substitute Aqueduct for Golden Gate Fields.

Gulfstream appears safe, and I would be surprised if a white knight does not step in to rescue Santa Anita.

Normally I would say the others are doomed, but in this environment think their best use may still be as racetracks since zero development will be happening anywhere anytime soon.

Anonymous said...

Well,

Hialeah looks like it might get racing back (kinda)!