11/11/2010 7:53PM

Stronach takes over as CEO of MI Developments


Frank Stronach has been elevated to chief executive officer of MI Developments, the real-estate and racetrack company he already leads as chairman, MI Developments announced in a release late on Thursday. Stronach replaces Dennis Mills, who resigned on Thursday but will remain vice chairman of the company and a director, the company said.

MI Developments announced the management changes in a statement accompanying its third-quarter financial results. For the third quarter, MI Developments had net income of $8.1 million, down sharply from $35 million in net income for the comparable quarter last year, according to its financial statements.

During the quarter, MI Developments lost $23.2 million from its racing-related operations, according to the statements. Net income of $31.3 million from the company's real-estate business made up for the losses on the racing side.

MI Developments took over the racing assets previously held by its wholly owned subsidiary, Magna Entertainment Corp., at the end of April of this year, as a result of bankruptcy reorganization on Magna's part. The racetrack assets include Santa Anita Park, Golden Gate Fields, Gulfstream Park, Portland Meadows, and a half-interest in Laurel Park and Pimlico Race Course. Other racing-related assets include the account-wagering operation XpressBet, the bet-processing company AmTote, and a 50 percent stake in HorseRacing TV, a television network.

Magna had lost hundreds of millions of dollars on the racetrack assets before being dissolved as part of the bankruptcy reorganization. The third-quarter loss on the racing assets by MI Developments indicates that they remain difficult to turn into profitable entities.

In a release, MI Developments cited "the seasonal nature" of its racing business," lower average daily revenue at its tracks," and "costs incurred to pursue alternative gaming opportunities" for the losses on the racing side. During the quarter, MI Developments funded an unsuccessful petition drive to overturn the zoning approvals granted to a casino that will be located 10 miles from Laurel Park in Maryland.

For the quarter, revenues were $91.2 million, compared to $57 million in the third quarter of last year, when MI Developments did not have the results of the racing operations on its books.

Revenue from the company's real-estate business - which consists primarily of rents collected on properties owned by a related company, Magna International - was $42.8 million in the quarter, down from $57 million. Part of the decline was due to the transfer of the Magna assets, because Magna had previously paid MI Developments rents on its properties. But the results were also boosted by a one-time gain of $18.7 million from an "impairment recovery" on loans to Magna that had been wiped out in the bankruptcy reorganization.

Early in October, Stronach had made an offer to purchase all of the outstanding shares in MI Developments for $13 a share. As soon as the offer was made public, however, stock in MI Developments rose well above $13 a share and is now trading at $16.72, indicating that shareholders believe the offer undervalues the company.

Stronach is a former chief executive officer of Magna Entertainment, and he was chairman of the company for the entirety of its existence. Shareholders of both Magna Entertainment and MI Developments have criticized his leadership of the company in the past.