05/13/2011 2:53PM

MI Developments credited with $10.8 million in income

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The racing and gambling assets held by MI Developments produced net income of $10.8 million on revenues of $173.9 million during the first quarter of 2011, according to financial documents MI Developments filed with Canadian regulators late on Thursday.

The assets were classified as discontinued operations by MI Developments, which will transfer the racing and gambling properties to the company’s chairman, Frank Stronach, on June 30, as part of a deal in which Stronach will swap his supervoting shares in MI Developments for the properties. The deal was approved by the company’s shareholders earlier this year.

Because the assets were held by a bankrupt company, Magna Entertainment Corp., in the first quarter of 2010, there is no comparable net income or revenue data for the properties last year. During the quarter this year, two of the assets, Gulfstream Park in Florida and Santa Anita Park in Southern California, held race meets. Prior to Magna Entertainment filing bankruptcy, its first quarter was typically its strongest.

Overall, MI Developments had net income of $23.7 million during the quarter, when including income from the gambling properties. The company derives the brunt of its revenue from rents collected on properties owned by Magna International, an auto-parts company founded by Stronach.
As part of the deal to swap his supervoting shares, Stronach will be required to give up his titles at MI Developments. MI Developments will also be prohibited from doing business with any of the properties.

Magna Entertainment Corp. lost hundreds of millions of dollars before filing for bankruptcy. As part of its bankruptcy reorganization, its assets were transferred to MI Developments. Following the transfer, several large shareholder groups began seeking a way to get rid of the assets, citing their fears that the racing and gambling properties would create a drag on earnings.