Golden Gates Fields is not in any immediate danger of being closed and could possibly remain a racing operation indefinitely, a leading official with MI Developments said March 12.
Reacting to a bloodhorse.com article discussing plans for assets MID might acquire from its bankrupt subsidiary, Magna Entertainment Corp., MID’s Dennis Mills wanted to assure interested parties that any proposed redevelopment of the Northern California track into a non-racing commercial operation could take years to accomplish.
“The thinking of many people is that should we be successful in our bid, that racing would immediately cease at Golden Gate,” said Mills, who is MID’s vice-chairman and chief executive officer. “That’s not the case. It’s not our intention to cease operations.”
As reported in the article, a filing with the Securities and Exchange Commission detailed some of the plans MID would implement if its $195-million “stalking horse bid” for certain assets of MEC is successful in a federal court auction. Included were statements by MID that it would “immediately” pursue commercial rezoning for Golden Gate Fields, and would cease racing at the Albany, Calif., track “prior to commencement of construction on the rezoned property.”
Mills said many people incorrectly translated the conveyed plans into an immediate closure of Golden Gate, and inundated MEC’s California-based officials with concerned calls and comments.
“Many people just saw the words ‘immediate’ and ‘cease,’ but nothing is going to happen at Golden Gate until proper processes are explored and approved,” Mills said.
Those “processes,” which in California include extensive zoning, land-use, and environmental approvals, as well as community input, can take years, Mills said. The long-time MID/MEC executive was on the frontline of the company’s four-year battle to build a $250-million racetrack complex in Dixon, Calif., a project that was narrowly defeated by voters in April 2007.
“It’s one of the toughest, if not the toughest, places to get approvals,” Mills said of California. “I was deeply involved with Dixon. It’s very comprehensive. It means that you have to go through a whole development process that could take five or six years.”
But Mills confirmed that MID will still have to make a decision by the end of 2011 on all of the assets it is seeking to acquire from MEC, which would be held under a separate entity generically called “Raceco.” If the assets are profitable or self-sustaining, Raceco will either sell or spin-off the assets to MID shareholders; but if they are not profitable, the company intends to “cease racing and gaming operations … and either sell or develop all of Raceco’s remaining assets,” according to the SEC filing.
“If it’s economically feasible, you will keep it going,” Mills said. “If something doesn’t make money after a certain amount of time … then obviously, you look for the highest and best use. That's ... what we need to do to satisfy our shareholders."
MID is a publicly-traded subsidiary of auto parts entity Magna International, and those two companies, as well as MEC, are chaired by founder Frank Stronach. MID for years has endured the criticism of prominent minority shareholders who call the company’s investment in horse racing a failed venture.
In addition to Golden Gate Fields, other assets MID is seeking to acquire from MEC include Gulfstream Park and Lone Star Park, as well as well as totalizator company AmTote International and advance deposit wagering entity XpressBet.com, among others.
Golden Gate is encumbered by a first mortgage held by a subsidiary of Bank of Montreal resulting from a $40-million loan extended in 2005 to MEC. A court filing said if successful, the stalking-horse bid would pay off the estimated $39.9 million owed on the loan, as well as $4.2 million owed by AmTote International on a loan with Suntrust Bank.
Third-party individuals or entities can top the $195-million bid of MID, although MEC in a court filing is requesting that such offers be at least $1 million higher and "be on terms that are not materially more burdensome or conditional" than the stalking-horse bid. Purchase offers can also be submitted for individual assets MID has packaged into its bid.
MEC is asking that all bids be submitted for court approval by July 8, and be auctioned on July 16. A hearing on the request is scheduled for April 3 in U.S. Bankruptcy Court Delaware District, where MEC’s Chapter 11 reorganization is being heard.
