Magna selling Pimlico, Laurel to own parent

Deal may save Preakness, provokes charges of backroom dealing

March 24, 2010|By Andrea K. Walker |

The Canadian conglomerate that owns bankrupt Magna Entertainment Corp. is buying Laurel Park and Pimlico Race Course from the financially strapped company in a deal that likely secures the fate of the Preakness in Maryland and could open the door for developing the land around the horse tracks.

Magna had planned to sell the Maryland tracks at auction Thursday but instead brokered an agreement with MI Developments, the real estate company owned by horse-racing magnate Frank Stronach that's also Magna's parent company. The agreement must be approved by a bankruptcy judge.

While Magna has millions of dollars in debt from its money-losing tracks, MID is a financially sound company that some industry observers said could help save Maryland's ailing horse-racing tradition. But the deal also elicited cries of "back-room dealing" from critics, including some of the six bidders who had been vying for the tracks in auction. They said ownership is essentially being transferred to the same people who had let the tracks founder in recent years.

An attorney for Magna, which filed for bankruptcy last March, referred questions to MID. An MID executive did not return phone calls Tuesday. The company said in a news release that it was interested in developing land around the tracks but did not give details about its plans, including whether it would partner with local developers.

"We are excited about the development opportunities represented by the land owned by the Maryland Jockey Club," Dennis Mills, MID vice chairman and chief executive, said in the release. "The land is comprised of 565 acres in three major properties well located in the Baltimore-Washington area."

The statement also seemed to leave open the possibility for new gambling operations at the tracks, such as slot machines. The company said it would work with a "financially secure gaming co-venture" to develop any future gambling operations.

Plans to sell the tracks had raised concerns about the future of racing in Maryland and the fate of the Preakness, the second leg of horse racing's Triple Crown. The General Assembly passed legislation last year that gave the state the right to review and match any bid for the race. The state also had the authority to exercise a "right of first refusal" and acquire the tracks and Preakness through eminent domain.

The president and chief operating officer of the Maryland Jockey Club, the umbrella group of the Pimlico and Laurel racetracks, said that Magna wants to keep the Preakness in Maryland and that he has not heard about any plans to put the tracks up for sale again.

"Mr. Stronach loves racing," Tom Chuckas said. "I think he has every impetus to succeed, and I think the opportunity exists for the tracks to succeed."

While MID has not yet agreed to more stringent state covenants to guarantee the future of the Preakness, an attorney for the state said he expects the race will stay in Baltimore. He said the legal protections approved by the legislature remain in place.

"There is no indication at this point that anything would be happening to the Preakness," said Greg Cross, a Venable bankruptcy attorney who is representing Maryland.

John Franzone, chairman of the Maryland Racing Commission, said that MID's renewed interest in the tracks could have been spurred by a growing movement to kill plans for a slots casino at Arundel Mills through a voter referendum. Some believe blocking slots at the Anne Arundel County mall could increase chances for slots at Laurel Park, also in an area that could be zoned for slots, and raise the value of the tracks.

"Frank Stronach understands the connection between racing and slots," Franzone said. "It's not that he needs income from slot machines. But he sees the income from slot machines bolstering racing to do the things he wants to do at the tracks, which is create a new racing model."

Bidders that had expressed interest in the tracks included the Cordish Cos., a prominent Baltimore developer; national casino operator Penn National Gaming Inc.; the De Francis family and Blow Horn Equity LLC, a Pennsylvania horse breeder and racing consultant backed by private equity.

Some of the bidders said they were disappointed by Tuesday's developments.

David Cordish said his company had put in a bid that was "substantially more than what the tracks were going for."

"I will leave it to others to judge what kind of steward Magna has been of horse racing in Maryland, and why they did not put up their money to apply for a casino," Cordish said in an e-mail. "We can only hope for Maryland's racing sake for the best."

Cordish said his company's plans to build a slots casino at Arundel Mills remain unchanged despite the referendum.

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