Posted: 6:58 pm Tue, March 23, 2010
By Liz Farmer
Daily Record Business Writer
To obtain Pimlico Race Course and the rest of Magna’s Maryland assets, MI Developments will pay out about $114 million, including $89 million to settle a lawsuit filed by Magna’s unsecured creditors committee.Maryland’s race tracks have again been yanked off the auction block — this time because their owner has reached an agreement to sell them to its parent company.Ontario-based Magna Entertainment Corp. on Tuesday notified the six parties who were to bid on the properties, which include Pimlico Race Course and Laurel Park, that Thursday’s auction was canceled.
Magna parent MI Developments will pay $89 million to settle a lawsuit filed by Magna’s unsecured creditors committee. That money will be used to pay general unsecured claims against Magna.
MID also will pay about $13 million to cover secured claims of PNC Bank, about $6 million for holders of unsecured claims against the Maryland Jockey Club and $5 million to the former owners of Laurel Park and Pimlico.
Per a settlement reached this week, former owner Joseph De Francis and his sister Karin will also receive an additional $1 million from MID because it is purchasing the assets without an auction, and the former owners stood to share in the auction proceeds.
The jockey club operates Magna’s Maryland assets (Pimlico, the Preakness Stakes, Laurel Park and the Bowie Training Center) and was the entity technically on the auction block.
Maryland Jockey Club President Tom Chuckas said MID is a separate entity from Magna.
“MID was well funded and capitalized; [Magna] wasn’t,” said Chuckas. “Whereas [Magna struggled], MID can provide a better vision for the future.”
Chuckas said MID is “committed” to keeping Preakness in Maryland. The state of Maryland has been battling in bankruptcy court to retain its right of first refusal to the race.
Frank Stronach, founder of MID and chairman of Magna, did not respond to multiple attempts to reach him for comment.
In a news release, MID’s Vice-Chairman and CEO Dennis Mills said his company is “excited about the development opportunities represented by the land … which is comprised of 565 acres in three major properties well located in the greater Baltimore-Washington area.”
Jonathan Cordish, vice president of The Cordish Cos., which was one of the six bidders, said in an e-mail Tuesday that his company had a plan to bid on the properties that included keeping Preakness in Maryland and revitalizing the tracks.
“I will leave it to others to judge what kind of steward Magna has been to horse racing in Maryland, and why they did not put up the money to apply for a casino,” he said. “We can only hope for the sake of Maryland’s racing for the best.”
Cordish Cos. President David Cordish was awarded the only slots license for Anne Arundel County after Magna failed to include the $28.5 million licensing fee in its application.
Cordish plans to build a slots casino near Arundel Mills, but that development was stalled after anti-slots groups, led by the jockey club, succeeded in petitioning for a referendum on November’s ballot that allows county voters to approve or reject the casino. Cordish has filed a lawsuit against the county elections board over how the petition signatures were validated.
Because of the fight involving the state’s potentially most lucrative slots site, a new owner, if approved by the bankruptcy judge, doesn’t mean closure is here.
“Hopefully, overall, when slots gets resolved we can move forward,” said Cricket Goodall, executive director of the Maryland Horse Breeders Association. “It’ll be interesting to see what MID does if, in fact, their quest for Laurel doesn’t work out.”
Goodall also added that it was encouraging that Stronach, an avid breeder, “made every effort” to keep the properties.
“Hopefully it’s a good thing that Mr. Stronach felt so strongly about the assets in Maryland that he wanted it resolved this way,” she said.
As for the future of the jockey club, Chuckas said he is “cautiously optimistic” it will remain intact.
Magna was formed in 1999 as a spinoff from then-parent Magna International Inc., an auto parts supplier. In 2003, MID was also spun off from Magna International and acquired the gaming company in the transaction.
Magna purchased majority interest in Maryland’s tracks from the De Francis family and other owners in 2002 and fully acquired the tracks in 2007.
Magna also owned tracks in California, Florida, Texas and Oklahoma before it filed for bankruptcy in March of last year.
Since 2002, Magna has lost an average of more than $100 million per year, and the number of racing days has steadily declined. However, the Preakness has remained a consistent shining star for racing in Maryland, with attendance topping 100,000 eight of the last nine years.
Bidders interested in the tracks included Cordish, Penn National Gaming Inc., De Francis and his family and Blow Horn Equity LLC, a Pennsylvania horse breeder and racing consultant.