08/16/2010 4:46PM

MI Developments posts loss on racing, gambling operations

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MI Developments, the real-estate operating company that took over the assets of bankrupt Magna Entertainment Corp. earlier this year, lost $6.2 million on its racing and gambling operations in the second quarter of 2010, according to the company’s financial statements.

The loss underscores the precarious financial condition of the former Magna racing assets, which include Santa Anita Park, Gulfstream Park, Golden Gate Fields, Laurel Park, and Pimlico Race Course. While running those tracks and others, Magna Entertainment posted hundreds of millions of dollars in losses before filing for bankruptcy in March, 2009. Magna Entertainment was dissolved earlier this year with the transfer of its remaining assets to MI Developments, a holding company that had loaned Magna approximately $350 million to support its operations.

During the quarter, revenue from the racing and gambling assets was $69.7 million, according to the financial documents, which were released by MI Developments late on Thursday. Tracks owned by MI Developments ran 42 live racing days during the quarter, including Preakness Day at Pimlico on May 15. The results also include revenue from a casino at Gulfstream Park.

Dennis Mills, MI Developments’s chief executive officer, said that the results reflected the “seasonal” nature of the company’s racing business.

“We’ve only had the assets since May 1, and anything that happened prior to that was not of our doing,” Mills said. “It’s really a seasonal sort of racing experience.”

Overall, MI Developments had net income of $11.7 million during the quarter, down from $31.3 million in the second quarter of 2009. Along with the loss on the racing and gambling operations, net income was affected by the loss of interest income that MI Developments had previously generated from its loans to Magna Entertainment. In the second quarter of 2009, MI Developments said, revenue from interest and fees on the loans was $12.1 million. In the first six months of the year, revenue from interest and fees on the loans was $24.8 million.

The principals of the loans MI Developments made to Magna Entertainment were wiped out as part of the bankruptcy reorganization. Under pressure from its shareholders, MI Developments has vowed to adopt guidelines that would limit the company’s ability to support the racing operations if they continue to show losses, but the company has not yet described exactly how those measures will be structured.