Magna gives its Md. tracks positive review

Support follows news of MEC losses

Horse racing

August 11, 2007|By Sandra McKee | Sandra McKee,Sun reporter

Amid voiced distress over high losses by Magna Entertainment Corp. in the second quarter, Blake Tohana, the company's executive vice president and chief financial officer, gave Maryland racing passing marks yesterday.

"When you look at the results in Maryland," Tohana said, "that operation has done quite well. Year after year they've had positive results, and the Preakness this year was great."

The supportive words came during a conference call in which Tom Hodgson, senior partner of Greenbrook Capital Partners Inc., said there will be "no half-measures taken, no stone left unturned and no sacred cows" as he undertakes a strategic review of MEC.

"My big focus when I was at MEC was restoring fiscal discipline," said Hodgson, a former chief executive officer at MEC. Hodgson was brought on to do the review after MEC's announcement Thursday that it had lost $23.4 million in the quarter that ended June 30.

In an unusual move, it was Hodgson - rather than MEC chairman and acting CEO Frank Stronach - who anchored yesterday's conference call to discuss the second-quarter losses. Stronach said in a formal release Thursday that the losses required "immediate and drastic action."

"The key message the company wants to convey is that the focus is on asset review and operations review," Hodgson said about his role in the call.

As for how thorough he will be when it comes to making recommendations about the company's "core properties," a list that includes Laurel Park, Pimlico Race Course and the Preakness, Hodgson said to view his "no sacred cows" statement this way: "We're going to be doing a very comprehensive review and it may well include acts to existing racetracks."

Lou Raffetto, president and chief operating officer of the Maryland Jockey Club, said he is happy to hear the positive review.

"Certainly I can't speak for them in terms of what may happen," Raffetto said. "But I'm happy corporate is pleased with our numbers and performance and the job we do month after month. We have a lot of hurdles we have to face in Maryland, and I think we've done as good a job as we can do."

Doug Illig, Maryland Jockey Club's chief financial officer, said the MJC's bottom line was a net profit of $4.6 million in the second quarter, up from last year's $4.4 million.

"We've actually been doing pretty well," Illig said. "We're about $1 million ahead of budget this year. And that's really what corporate looks for. They're happy as long as you meet your numbers."

MEC officials also said they believe slots will be coming to Maryland "within a reasonable time frame," and Tohana added: "There's a lot of positive momentum in those jurisdictions [around Laurel Park and Pimlico]. A lot more positive momentum than previously in the state."

Thursday, Magna said it would immediately shed several of its assets: Magna Racino in Vienna, Austria, and Michigan Downs near Detroit. It also is terminating its racetrack development project in Dixon, Calif., and will sell that property, as well as 450 acres in Ocala, Fla., and 800 acres in Porter, N.Y.

"The excess real estate has to be dealt with quickly to address the debt issue," Hodgson said.

Ceasing operations in Austria is projected to save $6 million, while all other disposals are expected to bring in approximately $71 million.

Some of those properties have been available for sale, and when asked what is different now, Hodgson said the company would now actually be advertising the properties and seeking buyers.

sandra.mckee@baltsun.com

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