MEC Hopes to Identify Partners This Year

Magna Entertainment Corp. expects to have partners lined up for some of its pending racetrack gaming operations before the end of this year, and hopes to have a presence in Nevada, where account wagering could be offered in the future.

In an Aug. 5 conference call to discuss second-quarter earnings, MEC officials acknowledged the $26.9-million loss in net earnings but again said the company expects to be profitable in 2007 and beyond. To achieve that goal, MEC plans to sell some real estate and seek partners to develop gaming operations.

The racetracks approved for gaming are Gulfstream Park in Florida, The Meadows in Pennsylvania, and Remington Park in Oklahoma. MEC chief executive officer Thomas Hodgson said slot machines could be operational at Gulfstream "perhaps during the 2006 meet but certainly in 2007," while machines should be operating at Remington in November.

With financing shifted to the Oklahoma project, there is no money available to turn The Meadows, a western Pennsylvania harness track, into a racino. But Hodgson indicated the track isn't off the MEC radar screen.

"There is no financing in place, but clearly it's a priority," Hodgson said of The Meadows. "(A partnership) definitely is one of the potential lines of potential financing, but not the only one. It's very high priority for us."

Hodgson wouldn't name potential partners but said MEC is having discussions with major gaming companies. Four already await licenses for slots in Pennsylvania--Harrah's Entertainment is a partner in Chester Downs, a proposed harness track in the Philadelphia suburbs; the Mohegan Tribal Gaming Authority now owns the Downs at Pocono near Wilkes-Barre; MTR Gaming, parent company of Mountaineer Race Track and Gaming Resort in West Virginia, plans to build a Thoroughbred track called Presque Isle Downs near Erie; and Penn National Gaming Inc. plans to open a slots parlor at its Penn National Race Course near Harrisburg.

When MEC entered into an agreement to sell Flamboro Downs, an Ontario harness racino, to Great Canadian Gaming Corp., speculation swirled as to other holdings the company may sell. Hodgson didn't name names during the conference call, and in fact indicated MEC planned to keep or take on partners for its major racing properties.

"We're not going to sell Gulfstream or Santa Anita Park," he said, noting that portions of the properties could be sold or developed in partnership. "The sale of excess real estate is absolutely the critical part of our debt-reduction strategy."

MEC isn't looking to sell Golden Gate Fields in Northern California, though Hodgson said the track is "unquestionably a potential development opportunity that might be pursued with a partner."

"Our goal is to implement a strategy which maximizes shareholder value," Hodgson said. "It may well be feasible to pursue gaming opportunities without partners, but at the same time it may be the best strategy to enter into a partnership. It's too premature (to make a determination)."

As for other states, Hodgson said MEC is actively involved in lobbing for gaming in Maryland and Ohio, but it's too early to project its chances for passage.

Jim McAlpine, vice president of corporate development for MEC, said account wagering in Nevada would present opportunities--and competition--for the company, which operates the XpressBet account-wagering system. XpressBet is in the process of moving its hub to Oregon.

"We're very interested in providing a service to that market directly or in a white-label capacity to another operator," McAlpine said.

The Nevada Gaming Control Board and Nevada Gaming Commission must hold hearings on the proposal. The regulation as written would allow out-of-state bettors to set up telephone accounts with Nevada casinos, which currently offer wagering on horse racing in race and sports books.