Owner Back in the Saddle at Santa Anita Race Track
By Charles Proctor, Los Angeles Business Journal Staff
Monday, February 8, 2010
Less than a year after it appeared that Santa Anita Park was headed for the auction block, the raceway is on track to remain under the ownership of Canadian horse-racing enthusiast Frank Stronach despite his financial woes.
A deal that has been worked out among Stronach's bankrupt Magna Entertainment Corp. and its creditors also would end the bid by L.A. developer Rick Caruso to buy the Arcadia track, where he plans to build another Grove-style mall in its vast parking lot.
Under the agreement, ownership of the track would be transferred to MI Developments Inc., an Aurora, Ontario-based real estate company controlled by Stronach.
Stronach also would get to keep two other Magna-owned race tracks, Golden Gate Fields in Berkeley and Gulfstream Park in Hallandale Beach, Fla., while selling three others, said Brian Rosen, an attorney for Magna, also based in Aurora.
The reorganization plan still must be approved by a U.S. Bankruptcy Court judge in Wilmington, Del., and a Canadian judge since bankruptcy petitions were filed in both countries.
Once that happens, Rosen said, "MI Developments will essentially take ownership of Santa Anita Park."
Asked if Santa Anita was still up for sale, he said, "Not anymore."
The future of the horse-racing venue was thrown into doubt in March when Magna sought Chapter 11 bankruptcy protection after defaulting on a bank loan. Stronach, who made his fortune becoming one of the largest parts suppliers to automakers, built Magna into the biggest track owner in the United States. However, the racing enthusiast ran into trouble with his free-spending ways, including a $200 million demolition and reconstruction of Gulfstream Park in 2004 that failed to find favor with fans.
In May, a judge permitted Magna to put the Arcadia raceway up for sale to pay back creditors, and Caruso expressed interest in purchasing the park, which occupies more than 300 acres when stables, parking and other facilities are included.
Caruso told the Business Journal in March that he was weighing whether to make a bid for Santa Anita, mostly to prevent a rival developer from buying the track and putting his proposed $500 million Shops at Santa Anita on ice.
Now, Caruso said he is not at all disappointed that he won't own the oldest race track in California.
"My interest in bidding for the track was driven by my desire to protect our project," he said. "As long as we end up with the project, I'm happy with the outcome. It will certainly expedite getting things done."
However, the mall project is tied up in litigation with Westfield Group, which owns an adjacent Arcadia mall.
Others that expressed interest included the Thoroughbred Owners of California, an association of horse owners based in Arcadia. Rumors also circulated that a Chinese group was interested in the track, as was an Indian tribe that wanted to replace it with a casino.
Officials in Santa Anita also said they were satisfied with Stronach retaining control, given their fears that another buyer may have wanted to reduce racing or even bulldoze the venue. "We're happy with the news," said Jason Kruckeberg, assistant city manager of Arcadia. "We are under the assumption that Magna will continue to attempt to run horses at the race track, and it's our goal to retain Santa Anita as a race track." Steve Schwartz, president of Thoroughbred Owners of California, declined to comment in detail on Manga's plan because it was still making its way through the courts.
Stronach was not made available for comment, and calls to MI Developments were not returned. But in an interview with the Courier-Journal in Louisville, Ky., Stronach said he was pleased that he would get to keep three of his race tracks.
"Under the circumstances, you do what you have to do," said Stronach, who has owned Santa Anita since 1998.
While the ownership issue of the track appears to be settled, the venue still faces challenges, even though it remains one of the premier tracks in the United States and has hosted international racing's biggest event, the Breeders' Cup, two years running.
Even before Magna put it up for sale, the track was struggling with declining attendance and fierce competition from Las Vegas and Indian casinos, and even local card clubs.
For those reasons, attendance is down at horse tracks around the country and Santa Anita is no exception: Over the last five years, Santa Anita's annual attendance declined to about 665,000 from more than 765,000. During that same period, annual on-track handle - the amount of the money bet at the track - fell to about $143 million from nearly $190 million.
It remains to be seen how Stronach and MI Developments may attempt to reverse the trend. Kruckeberg said the city would like to see track management work on marketing initiatives to boost attendance. Last year the track rolled out a Free Fridays campaign that granted patrons free attendance, with hot dogs, popcorn, beer and soda priced at $1 each. The initiative boosted Friday attendance by 55 percent and the betting handle by 15 percent compared with 2008.
Caruso said he had some ideas on how to make Santa Anita a more family-friendly venue, though he declined to provide details.
"That's a discussion I'm going to leave between me and Frank," he said.
Caruso also said that his Shops at Santa Anita, when completed, should provide a revenue boost to the track by luring in shoppers and restaurantgoers in much the same way that the Grove shopping center off Fairfax Avenue boosted attendance at the Farmers Market.
When completed, the mall would have 820,000 square feet of shops, restaurants and a multiscreen theater. But the project has been relegated to legal purgatory for years largely because of opposition by Westfield, which doesn't want to see a massive competitor open next to its Arcadia mall.
Caruso and Westfield have slugged it out in the courts over environmental impact reports and other details about the development. Caruso said he now hopes to break ground on the project in 2011 if the legal issues can be resolved.
"This development is where we can make the track more appealing to families and other people who might not otherwise come," he said.
The bankruptcy settlement, if approved, would close a troubled chapter in the 75-year history of Santa Anita, which Stronach bought for $126 million and spent $50 million renovating.
Shortly after Magna filed for bankruptcy protection, a committee of unsecured creditors filed a lawsuit in bankruptcy court, accusing Stronach and Magna of making fraudulent transactions of more than $125 million to companies controlled by Stronach before the bankruptcy.
In settling the lawsuit, MI Developments will pay unsecured creditors $76.5 million in cash and $20 million from the sale of Magna's Lone Star Park race track in Grand Prairie, Texas.
The creditors could also receive additional payments from the sale of Thistledown in North Randall, Ohio, and Baltimore's Pimlico Race Course, which hosts the Triple Crown's Preakness Stakes.
Magna plans to include more details about the plan in its bankruptcy filing. Rosen, the company's attorney, said the plan could be approved by late April.
original article at: http://www.labusinessjournal.com/weekly_article.asp?aID=144588