Maryland Business

A court filing by Joseph De Francis Tuesday painted an interesting analogy for his argument as to why he objects to Magna Entertainment’s attempt to negate a 2002 deal he made with the company when they bought Maryland’s thoroughbred race tracks from his family.

Pimlico Race Course in Baltimore

The deal is a profit-sharing agreement Magna agreed to when it bought controlling interest in Laurel and Pimlico in 2002. The agreement entitles De Francis and others to 65 percent of any pre-tax, future profits the company receives from slot machines if the games are ever approved for the tracks. The profit-sharing lasts for 20 years, with the sellers’ share dropping to 40 percent for the last 10.

The deal applies to any future owner of the track as well and Magna claims it is hindering the auction process for the track now because it has a chilling affect on bids for those properties. De Francis told The Daily Record the agreement was reached because a value could not be placed at the time on what kind of future slots profits his family was giving up by selling the tracks.

In an objection filed Tuesday, De Francis makes his point by comparing selling the intangible (future slots profits) to selling land (a tangible.)

What if, instead, Magna had bought land around Pimlico for a parking lot with the understanding it would obtain zoning licenses from the state before a parking lot was built?

“Under such a scenario [Magna] could not reclaim the tract of land they conveyed several years earlier (irrespective of whether the requisite zoning licenses were obtained),” the filing says. “This hypothetical scenario is conceptually identical to the current scenario — the only difference is that [this case constitutes] an intangible, rather than tangible, undeveloped property right.”

What do you think of this argument? Do you agree that Magna is in the wrong? Or does the reasoning just not fly?

Powered by Bookmarkify™

Pimlico Race Course and Laurel Park dropped in value last year according to a Securities and Exchange Commission filing this week.

The filing by bankrupt owner Magna Entertainment Corp. said that the company’s audit committee approved a $136 million write-down in the value of the company’s assets including the Maryland Jockey Club (which operates Laurel and Pimlico for Magna), Golden Gate Fields, Lone Star Park and The Meadows.

The properties “experienced lower average daily attendance and decreased wagering activity compared to previous years,” the filing said. “In addition, the 2009 business plans for these operations reflected reductions in estimated future cash flows based on lower expectations for growth and profitability resulting primarily from the significant downturn in the U.S. economy.”

In its bankruptcy filings, Magna has not assigned a dollar value to each of its assets up for auction, but the news that they have dropped in value could affect the offers. Do you think this news could attract people looking for a bargain or steer potential track owners away?

Powered by Bookmarkify™