03/07/2002 12:00AM

Magna to purchase Lone Star for $100M


Frank Stronach's Magna Entertainment has reached an agreement to purchase Lone Star Park near Dallas for

$100 million. The deal, which is subject to regulatory approval, is scheduled to close in the second quarter of 2002.

Lone Star opens for its fifth season of racing on April 4, and will be the 11th racetrack owned by Magna, which also owns Santa Anita and Gulfstream Park. Lone Star has been awarded the 2005 World Thoroughbred Championships.

Magna is acquiring the racing assets of Lone Star Race Park Ltd., a partnership of 50 investors that developed and operate Lone Star, and hold the track's parimutuel license. The partnership leases its racing facility from the city of Grand Prairie. The lease runs through 2027 and when it expires, Magna will have an option to purchase the facility.

Under the deal announced Wednesday night, Magna will pay $80 million cash, plus $19 million in assumed liabilities (such as lease agreements on the facility and tax obligations tied to the land).

The city of Grand Prairie in 1992 passed a half-cent sales tax increase to finance $65 million to build the track. The total cost of the project was $100 million. Lone Star opened for live racing on April 17, 1997.

Lone Star Park Ltd. is headed by Trammell Crow, an international real estate developer from Dallas whose family owns about 65 to 70 percent of the partnership. Crow's family committed $10 million to get the Lone Star project off the ground in 1995, and later invested another $8 million into the startup of the track, according to Bob Kaminski, chairman of Lone Star.

Lone Star Park Ltd. will retain certain non-racing assets, such as its equity partnership in Texas Next Stage, a new 6,300-seat concert hall located on the property of Lone Star.

Magna will assume Lone Star Park Ltd.'s operating lease agreement on a new outdoor skate park on the property owned by the city of Grand Prairie.

The entertainment facilities, as well as Lone Star's on-site simulcast pavilion, made the track attractive to Magna, which plans to develop and market both Santa Anita and Gulfstream as wide-ranging entertainment centers, said James McAlpine, president and CEO of Magna. The management of Lone Star has had the same vision for its track, and developed the skate park and Texas Next Stage.

"Lone Star is already ahead of the game," said McAlpine.

McAlpine also said the Lone Star's racing dates - a Thoroughbred meet from April to July, and a Quarter Horse meet from October to November - were attractive to Magna, and would not be changed. Gulfstream and Santa Anita run primarily winter dates.

"We were looking to basically fill out our schedule over the course of the year," he said. "Winter continues to dominate our content."

Stronach inspected Lone Star over Easter weekend last year. Kaminski said the track was not actively seeking a buyer, but began formal talks with Magna in September. He said that Magna was not the only corporation that had expressed an interest in purchasing Lone Star. "We've been contacted in the last 18 months by all the obvious players in the industry," said Kaminski.

Kaminski said Lone Star was at a turning point when it began talks with Magna. "The landscape of the racing industry has changed from 1997, when Lone Star opened, to today," he said, referring to the consolidation of racetracks by such corporations as Magna and Churchill Downs. "We had to decide if we were going to be a consolidator ourselves, or the flip."

Lone Star had appeared to be positioning itself as a consolidator. The track serves as chief racing advisor to Hipodromo de las Americas, and a yet to be constructed track in Amarillo, Texas. Lone Star is also bidding for the right to reopen a shuttered track in Uruguay. Those contracts are expected to fall to Magna.

Lone Star has been the most successful racetrack in Texas since its opening in 1997. The track handled an average $2.3 million a day on its live races during its inaugural Thoroughbred meet, while attendance averaged 9,672. Handle peaked in 1999 when $2.7 million a day was bet on the track's races. Last year, daily handle on Thoroughbred races from Lone Star averaged $2.6 million.

Attendance during last year's Thoroughbred meet averaged 8,892, down from the track's peak daily draw of 9,808 in 1998.

Kaminski said he had been told by Magna officials that they intend to keep the same management team in place at Lone Star, although he will step down as chairman when the deal closes and serve as an advisor to Magna.