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Wednesday, August 06, 2008

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 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.


Wind Gatherer said...

I owe myself millions of dollars and am going to make a killing on the juice.
Plus, I'll never take myself out.

Anonymous said...

There is movement in re-opening Hialeah, which would finish Gulfstream.

El Angelo said...

Frank Stronach's debt retirment advice apparently came from Hillary Clinton's campaign.

I'd love to see them try to sell some of these tracks. Outside of Harrah's, etc., who on earth is going to buy them?

Anonymous said...

Real Estate Developers will buy them, the land's best use is/was as shopping centers, at least before the bubble burst.

El Angelo said...

Anon: I agree, but given the state of the credit/debt market, getting financing for the price that Stronach is going to want will be quite difficult to say the least, not to mention then having the capital to raze and build whatever it is that the developers want.

Anonymous said...

Magna has effectively killed Maryland racing such that I hope someone (anyone!) will step in and take the MJC off their hands.

As cited with Hialeah this is perhaps the one chance that track has of rising again from the dead. The rub being John Brunetti, of course. Provided he sells to Minor then now would be the time to pounce and take away the Gulfstream racing.

Magna fools ruined Gulfstream with their out of touch with racing visions gone amuck.

Anonymous said...

What is the line item for Mardi Gras Dog Track? Winnings withheld from excluded persons..$5,408.
Mardi Gras is also pretty sharp. They own Hazel Park Race Track which is in pretty run down condition so they invested some money into it. Tore down the aging grandstand it replaced it with a smaller on. Then they built a very large building to house slot machines. Only problem is they never got the ok for slots. So it sits empty.
I know people who used to spend the winter in Florida because of Gulfstream. Now if they go it's for a week.
The one track and casino who could be predicted to do well is Harrah's Louisiana Downs/Casino. The Shreveport area sits on top of the Haynesville Shale gas deposits and millionaires are being created hourly.


Alan Mann said...

>>What is the line item for Mardi Gras Dog Track? Winnings withheld from excluded persons..$5,408.

I imagine it's money that some guy who wasn't supposed to be there won! Either he'd enrolled in a self-exclusion program or was banned.

A new Hialeah (assuming, not "new" in the Gulfstream sense!) would certainly get me going to South Florida for racing during the winter again.