04/01/2009 11:00PM

Developer to bid on Pimlico and Laurel


The Cordish Cos., a Baltimore-based real estate development company, will attempt to buy Pimlico Race Course, Laurel Park, and Bowie Training Center in Maryland from bankrupt Magna Entertainment Corp., the company's chief, David Cordish, said Thursday.

If Cordish is successful, the company will run the racetracks and host the Preakness Stakes, the second leg of the Triple Crown, at Pimlico, Cordish said. The company has already begun due diligence with Magna's bankruptcy adviser, Miller Buckfire, according to Cordish, who also said that the racetrack properties included excess real estate that could be developed for mixed-use retail and business.

Cordish is the first company to publicly acknowledge that it is interested in buying any of Magna's assets out of bankruptcy. Magna filed for Chapter 11 bankruptcy protection on March 5, and the company is seeking approval from the court to auction off its properties to the highest bidders, though the specifics of those auctions are being opposed by a large number of the company's creditors, including its unsecured creditors' committee, according to filings in bankruptcy court.

The Cordish Cos. recently submitted a bid with the state of Maryland for a slot-machine license at a shopping mall in Anne Arundel County, where Laurel is located. Magna also submitted a bid for the license, but its application was disqualified when the company did not include a $28.5 million licensing fee with the bid. As a result, the Cordish Cos. has the only qualified bid for the one license available in the county. The company is widely expected to get approval for the license and begin building a $1 billion casino adjacent to the shopping mall later this year.

Under Maryland law, holders of slots licenses must contribute 9 percent of the gross proceeds to the racing industry, in a mix of subsidies for purses, capital improvements, and operating funds. Cordish said that the subsidy was a prime motivator for making an attempt to bid on the tracks. If Cordish's bid is successful, Cordish's casino at Arundel Mills, the shopping mall, would be subsidizing his own racetracks.

"I'm going to be sending Pimlico and Laurel a fortune every year, in the tens of millions of dollars," Cordish said. "So why not pay myself?"

Cordish would not provide a figure for what he would be willing to bid for the two racetracks and the training center.

Magna, which has lost $500 million over the past five years, announced a plan in 2007 to begin seeking buyers for some of its distressed properties as a way to retire some of its crippling debt load, but no firm offers were ever made. Magna continues to hold three properties on its balance sheet that were classified as discontinued operations last year.

When Magna filed for bankruptcy, it said it had reached an agreement to sell a bundle of its properties, including Gulfstream Park, Golden Gate Fields, and Lone Star Park, to its parent company and largest creditor, MI Developments, for a $195 million mix of cash and credit, though that bid could be matched or exceeded by another party in an auction. Other assets, including Pimlico, Laurel, Santa Anita Park, and the three discontinued tracks, were to be auctioned off separately.

Most of the objections to Magna's auction plans, including those filed by the creditors' committee on April 1, contend that Magna and MI Developments are attempting to rig the rules of the auction to pave the way for MI Developments to buy the tracks at cut-rate prices. The objections all point out that Magna and MI Developments are both controlled by Frank Stronach, the multiple Eclipse Award-winning owner and breeder who founded Magna in 1998.

The creditors' committee in its April 1 filing said that the MI Developments deal is an "attempt by [Magna Entertainment] to set these cases on a course that principally benefits only insiders, who forced the debtors into the position that they are currently in, and who are now poised to cherry-pick the debtors' assets on an accelerated schedule, in a highly challenging environment, with limited competition or none at all."

Magna was seeking to get the approvals for the auctions at a hearing scheduled for Friday, but the company asked the court to delay acting on the motions until a hearing "determined at a later date" in court filings on Wednesday. The court is expected to approve the delays at the Friday hearing.