Fate of Golden Gate Fields Uncertain

By Richard Brenneman
Wednesday February 25, 2009 - 08:02:00 PM

After failing to raise enough cash to reorganize, the owners of Golden Gate Fields face the threat of liquidation—leaving the future of the Albany race track in doubt. 

Magna Entertainment Corp. (MECA on the stock listings), the company created by Canadian auto parts magnate Frank Stronach after investors in his parts company demanded that he spin off his money-losing racing ventures, issued a warning to investors Feb. 18. 

Magna became the nation’s largest owner of race tracks, acquiring some of the nation’s premier venues. 

The company failed to pull off a joint development at the Albany track with Los Angeles “lifestyle” shopping mall developer Rick Caruso, which would have resulted in an upscale mall topped by condos at the track’s northern parking lot. 

The company hired a law firm specializing in bankruptcy reorganization to help with a corporate restructuring, but the company announced it was abandoning the plan Feb. 18. Company shares plunged on the news, dropping more than 30 percent to an all-time low of 35 cents the next day before closing at 36 cents—a precipitous fall from the stocks’ 52-week high of $20. 

While shares had traded for $154.20 in November 2005, and at $198 in January, 2002, the stock closed at 30 cents Feb. 18, after hitting another all-time low of a quarter of a share two days earlier. 

The share price plunge prompted the Toronto Stock Exchange to announce Thursday that it was reviewing whether or not the company’s Class A subordinate voting shares should be removed from the exchange’s listings. 

“The Company is being review on an expedited basis,” the exchange announced in a formal statement posted in the afternoon. 

Magna had already announced that all its assets were on the table when it announced the planned restructuring in November (see www.berkeleydailyplanet.com/issue/2008-12-04/article/31718). At the time, the company valued its assets at between $100 million and $120 million. 

In addition to Golden Gate Fields, the company owns Santa Anita Park in Southern California, Laurel Park and Pimlico in Maryland, Portland Meadows in Oregon, Lone Star Park in Texas, Remington Park in Oklahoma, The Meadows in Pennsylvania, Gulfstream Park in Florida and the Magna Racino in Stronach’s native Austria.  

Originally created as part of Magna International, Stronach’s car parts firm, the racetracks and associated ventures were spun off into a separate firm, MI Developments (MID), with Magna Entertainment as a subsidiary. 

The goal of the reorganization had been to consolidate the company into Stronach’s hand, with MID arranging the financing. 

But it was that plan which collapsed when MID company found itself unable to renew interim financing arrangement that begin to come due next month. It is those obligations the company announced it may not be able to meet. 

The bad news is merely one in a series of blows that have shaken the company. 

Magna had hoped to win a Maryland state license to install video slot machine at its Laurel Park track, a potential source of ready new cash to supplement the steadily declining revenues from the track. 

But Maryland’s Video Lottery Facility Commission rejected the park’s bid earlier this month. Magna’s local affiliate, the Maryland Jockey Club, has filed a legal challenge. 

Next month Magna faces a series of critical due dates on loans arranged through MID, including $126 million borrowed through an MID subsidiary, another $100 million borrowed for a project at Gulfstream Park, plus a third loan of $48.5 million. 

A new complication was added when a key director and member of the company’s audit committee resigned, leaving the company in violation of a Toronto Stock Exchange requirement that the committee consist of three independent directors. 

Magna has suffered two other major setbacks locally. 

On April 17, 2007, voters in Dixon rejected Magna’s plans for a high tech television-friendly track adjacent to that rural Sacramento Valley community. 

The proposed Dixon Downs would have brought a major racing facility within a half-hour drive of the state capital, featuring what a Magna executive called a “California fair type facility ... together with mixed-use retail.”  

Nine months earlier, LA mall developer Caruso had backed out of his proposal to team with Magna on a $300 million waterfront mall at Golden Gate Fields after the Albany City Council rejected his demand to give his project a full environmental impact review (EIR) even before the council had seen an application describing exactly what the project entailed. 


What next? 

Robert Lieber, the Albany city councilmember who was serving as mayor at the time of the failed mall project, said he doesn’t believe the track is viable any longer. 

With liquidation of Magna’s assets on the table if the company is unable to reach a financing agreement, Lieber said, “I just hope that whoever acquires the track is willing to work with the community.” 

Marge Atkinson, the city’s current mayor, was elected as an opponent of the mall project along with current Vice Mayor Joanne Wile. 

Lieber said a community process now underway is working on alternative visions for the shoreline. 

He said the city hasn’t received any word that a sale might be near, “but we’re always the last to know. We weren’t notified before the sale to the previous two owners either.”  

Rumors are flying about talks between the track’s owners and one possible buyer, but no one was willing to go on the record as of Thursday afternoon.