Tough odds for Pimlico

Financial woes weigh on future of Magna, Md. racing industry

Preakness Stakes

May 20, 2005|By Bill Ordine | Bill Ordine,SUN STAFF

With an unabashedly grand corporate name and equally grand plans to promote Maryland horse racing, Magna Entertainment Corp. arrived three years ago hailed by some as a savior of the state's ailing thoroughbred industry.

Now, not only is Maryland racing still struggling, but the once-deep-pocketed Ontario-based company that was launched five years ago with nearly $500 million in investment money is facing severe financial problems and is in need of a cash infusion itself.

Some racing industry figures believe that the money problems faced by Magna Entertainment, which runs 13 race tracks in North America and Europe, could have disastrous implications for the state's thoroughbred business - namely, the loss of the Preakness Stakes, the second jewel in racing's Triple Crown, set for its 130th running tomorrow at Pimlico Race Course. Should that happen, the state's two thoroughbred tracks would also be in jeopardy, despite the state's traditional standing as a racing stronghold.

Meanwhile, some opponents of what Magna Entertainment says is the answer to its problems in Maryland - slot machines - insist the racing industry has itself to blame for its woes and now seeks a jackpot bailout.

"When [Magna Entertainment] came here, they said they were going to build up the racing industry and that they didn't need additional revenues to do it," said Maryland House Speaker Michael E. Busch, who has resisted slots. "Now they're saying, `We should be entitled to slots because we have a failing business.'"

Racing leaders have worked behind the scenes to hint that this could be the last Preakness, a threat Magna has not made directly and publicly.

Tom Bowman, a former president of the Maryland Horse Breeders Association, said the prospect of the company moving the Preakness to another of its tracks, such as Florida's Gulfstream Park or California's Santa Anita Park, is real.

"I have a fear that [the upcoming Preakness] will be one of the last," said Bowman, who is also a Chestertown race horse owner and veterinarian.

"I think that Magna will make a move to be responsible to its shareholders," he added, "and it won't be a move popular with the horse industry in Maryland."

Magna officials have avoided explicitly threatening to move the Preakness, while also acknowledging that the company faces enormous pressure from restless investors. Magna Entertainment has lost nearly $220 million since 2002.

"Absolutely, we hear our shareholders," said a Magna vice chairman, Dennis Mills.

"Our intense focus on the Maryland scene is one thing that signifies we're taking [stockholders] seriously," he said referring to the three-year slots debate in Annapolis.

Magna Entertainment, led by Austrian-born auto parts tycoon Frank Stronach, has had a mercurial rise on the horse racing scene since it was launched in 2000 as a spinoff of automotive corporate heavyweight, Magna International. An industrialist with a passion for horse racing, Stronach is often called a visionary for his efforts in transforming the sport by both supporters and those who believe his reach often exceeds his grasp.

Stronach has directed the company with an iconoclastic style similar to that of another gambling industry leader whom Stronach admires, casino impresario Steve Wynn, who opened the opulent Bellagio casino resort in Las Vegas seven years ago and recently unveiled a $2.7 billion mega-resort there. Stronach once asked to meet with Wynn, and the two swapped ideas at a lengthy animated meeting in Lake Tahoe.

In fact, Stronach's notions for what race tracks should look like lean more toward modern Vegas than venerable Saratoga Springs. Plans for the tracks he has accumulated have included fine dining restaurants, retail shops and hotels. Fueling those grandiose plans, in Stronach's view, would be wagers not only made at the tracks but at simulcast sites and by bettors in front on their TVs and computers.

"With [Stronach's] ideas, 75 percent of the time he's dead-on and the other 25 percent, you wouldn't all agree. And there's a small percentage of the time when he's out there," said Drew Couto, president of the Thoroughbred Owners of California, who once worked for Stronach. "Sometimes the plans are grander than it's possible to execute. The way they prioritize or allocate resources doesn't always allow you to achieve the objectives. But you can't question the motivation."

In the last five years, the company has assembled a substantial portfolio of thoroughbred and harness tracks and has tried to extend the reach of horse racing with its own niche TV network. On Tuesday, it received a license to open another race track in Romulus, Mich., where the company has said it plans to build $100 million Michigan Downs despite the fact that the state does not have slots at tracks.

Stronach echoed what Magna officials had said three years ago when the company purchased the Maryland Jockey Club, that slots weren't necessary to make horse racing viable.

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