Continuing to struggle after a $95.6 million loss in 2004, Magna Entertainment Corp. is actively seeking investment partners at its racetracks, including Laurel Park and Pimlico, according to company executives.
While maintaining that the two Maryland thoroughbred tracks are not for sale, Magna Vice Chairman Dennis Mills said the company needs financial backing to accelerate plans for the international expansion of its telephone- and Internet-based account wagering platforms as well as to appease shareholders.
"I will tell you, one of the criteria would be the company's patience in the journey to reinvent the racing industry, not just as a real estate play," Mills said. "We believe people exist in the United States of America that believe as much as we do that the thoroughbred industry is going to have a revival that will be as big as the revival of poker."
Last week, the Aurora, Ontario-based Magna announced a plan to raise $150 million through the sale of "non-strategic real estate, racetracks and other assets" and an agreement to borrow $100 million from its parent company, MI Developments Inc. Magna, which owns 15 racing facilities, is working on selling Flamboro Downs, a harness track in Ontario, for an estimated $63.9 million.
When asked if Laurel Park and Pimlico might be sold since efforts to legalize slot machines at the tracks continue to stall in the Maryland legislature, Mills said: "That's a definitive 'no,' and you can take that as coming from our chairman, Frank Stronach. The only thing we have said before is we are dedicated to the overall renewal of the thoroughbred industry in North America, to get to where we want to go and get the vision executed. If it means we share half of the loaf by selling it, we're happy to do that."
Recently, inquiries from Peter Angelos, principal owner of the Baltimore Orioles, about buying Laurel Park and Pimlico were rejected.
Magna lost $4.1 million in the first quarter of 2005 and is trying to gain solid financial footing. The company not only is looking for partners for Laurel Park and Pimlico, but to join in a bid on the franchise rights to operate New York's premier thoroughbred tracks -- Aqueduct, Belmont Park and Saratoga -- possibly as early as 2007.
As part of the recapitalization plan announced last week, Magna is likely to explore the sale of approximately 72 acres it owns in Howard County, just west of Laurel Park. The company also would like to decide the future of the Bowie Training Center, which it has attempted to close in the past over the objections of horsemen.
Maryland Jockey Club President Joe De Francis said he believes it will be difficult to attract a major investor at Laurel Park and Pimlico, considering the impasse over slots.
"Given the current situation, I can't imagine anyone coming into Laurel and Pimlico," he said. "The current situation being Pennsylvania tracks are about to come in with slots in the next 18 months and hit Maryland like a Mack truck."
Mills suggested a likely partner would be a gaming company or a real estate developer who knows "how to maximize the undervalued real estate potential on the underutilized lands around the racetracks. The fact of the matter is, seven of our ten best [tracks] are in real estate markets that are ranked within the top ten in America."
Magna is currently making plans to install slot machines at tracks in Florida, Pennsylvania and Oklahoma. Major casino or gaming companies are unlikely to show interest in buying a part of Laurel Park and Pimlico unless it's to operate slot machines, said Eric Hausler, a stock analyst who monitors the gaming industry for Susquehanna Financial Group in New York.
"The gaming companies aren't going to do anything that dilutes their equity holders," Hausler said. "Getting involved in Maryland, considering the history of what's going on over there, I don't think so."
Racing Notes: Because of hot weather, Colonial Downs canceled the remainder of the day's card after jockeys refused to ride following the third race.