Despite the earlier announcement that Magna Entertainment Corp. had a quarterly loss of $48.4 million and is seeking to sell core assets, including one or more of its top racetracks, management of the company that holds 60% equity interest in MEC continues to be optimistic of a turnaround.
"I believe that MEC has tremendous assets and potential upside,” Dennis Mills, vice chairman and chief executive officer of Magna Developments Inc., said during a Nov. 8 conference call announcing MID’s third-quarter results. “I am also encouraged by MEC's announcement earlier this week that it has engaged a financial adviser to help develop and execute a plan to sell, or enter into joint ventures with respect to, certain core assets and enhance MEC's capital structure.
"Although I have no doubt that it will be a challenge, I still believe there is an opportunity to turn things around at MEC."
MID is a Canadian-based real estate company that owns 105 properties representing 27.3 million square feet of leaseable area. MID focuses primarily on the ownership, leasing, management, acquisition, and development of a predominantly industrial rental portfolio for Magna International, the auto parts manufacturer.
During the third quarter of 2008, MID reported a 17% increase in revenue to $55.3 million, with net income of $42.8 million, compared with net income of $27.4 million during the same period one year ago.
Mills asked for “patience” from MID shareholders with regard to MID’s relationship with MEC. Among the positive developments that could enhance MEC are retaining the firm of Miller Buckfire & Co. to "review and evaluate various strategic alternatives including additional asset sales, financing, and balance sheet restructuring opportunities" and voter approval in Maryland for a referendum allowing slot-machine gaming at five locations, one of which could be MEC-owned Laurel Park.
In announcing its quarterly results, MID also said it had extended until Dec. 1 the deadline for MEC to repay a bridge loan that began at $80 million and has since been increased to $125 million.
Noting the unlikelihood that MEC will be able to meet the Dec. 1 deadline, or to make a required $100-million repayment of a loan used to renovate Gulfstream Park, MID said the racetrack operating company will have to obtain additional waivers, modifications, or extensions from lenders.
“If MEC is unsuccessful in its efforts, it could be required to liquidate assets in the fastest manner possible to raise funds, seek protection from its creditors in one or more ways, or be unable to continue as a going concern,” the MID quarterly report said. “Accordingly, MEC's ability to continue as a going concern is in substantial doubt.”