20 January 2009

Fort Erie EDTC Has Conditional Offer To Buy The Track; New Drop Dead Date January 26th


The facts as I know them:

The Fort Erie Economic Development and Tourism Corporation (FE:EDTC) has made an offer to buy Fort Erie Race Track from Nordic Gaming (El Ad Group) for $35 million and turn the track into a not for profit organization similar to Woodbine Entertainment Group.

Meanwhile, Nordic has given the government until January 26th to come up give them $3.2 million in bail out money (which will be part of the purchase price for the track if the EDTC offer is accepted). If the government does not give in to Nordic's demands one way or another, Nordic will withdraw their racing license for at least 2009. Apparently, if Nordic doesn't withdraw, the ORC will be in a position to take the license away from them, and then Nordic may never be able to operate a race track in Ontario again.

Right now, the ORC has given Nordic a license until January 31st. They can choose to extend the license to the end of February, for example, which will buy more time for Nordic to make a conclusive decision regarding the 2009 season.


The question of whether slots will be able to continue at Fort Erie without live racing is also debatable. Nordic has a contract to operate slots until the fall, however, as Sue Leslie (from the HBPA) pointed out on phone at today's press conference, slots were put into race tracks with the intent of propping up the race track industry first and foremost. Without live racing, it is her contention that slots will not be able to operate.

This whole slot situation is a gray area for racing in Ontario and the OLG. And it could wind up in the courts, as slots definitely benefit both Nordic and the OLG, and Nordic especially, if racing were not to continue.


About the proposed purchase

James Thibert, the executive director of the EDTC came up with a pretty inventive plan to try to save Fort Erie racing. However, there are a lot of ifs in the deal.

First, the government has to loan the EDTC the money to buy the place. A 40 year low interest loan underwritten by the Ontario government is being sought. The $35 million purchase price was arrived on what Thibert believes the land to be worth. He states the land is worth on average $100,000 per acre.

I think the price per acre is debatable because if Fort Erie were to close, industrial land prices would go into the toilet in the Fort Erie area, as people would be forced to move causing demand for industrial land to weaken.

Fort Erie race track just had its property assessed at $21 million for tax purposes. Assessment prices are usually on the modest side, but the current global economic recession may mean that the assessment could be considered inflated as real estate prices are dropping in Canada at this time.

Also, Woodbine (the OJC at the time) sold Fort Erie in 1996 or 1997 for $10 plus the assumption of $3 million in debt. Granted, Woodbine wanted out at that time. With slots not in the picture, they were struggling keeping Woodbine afloat.

However, Woodbine must have figured the land was worth something at that time. I have a hard time believing industrial land in Fort Erie has gone up that much since then. But I'm not into real estate, so what do I know?

Thibert did state that Nordic received a similarly priced deal in June by a group of businessmen, but they declined to make the deal because Nordic supposedly cares about horse racing (yeah right!). Most likely is that the deal was conditional on financing that never happened. Nordic knows $35 million is a great deal for them.

And the $35 million price doesn't factor in that the business according to Nordic is a losing proposition. Thibert estimates that the track costs $11-12 million a year to operate, while only taking in around $8-9 million in revenues (which includes $4 million from their share of the slots).

It is pretty much agreed up that the race track can't make too many more cuts to help decrease cost expenses. So Thibert has also proposed a new revenue stream. He believes that he can rent out 200 slots to Woodbine, who have a $900 net per machine, and run at 85% capacity right now. He proposes that Woodbine, the OLG, and Fort Erie split the profits from those machines one third each. For Woodbine, it isn't a bad idea, because they get 20% of profits per machine, and this deal would increase their take on those machines. And for Fort Erie, this could generate a few million dollars each year, which can be used to negate their losses, and even pay back the government loan by the EDTC.

One flaw though. The machines are property of the OLG and not Fort Erie. This deal would have to be approved by both Woodbine and the OLG, and could impact all slot machine deals in the province. It might be easier for Fort Erie to give back machines to the OLG, and receive a bigger slice of the profits (30-40% instead of the 20% they split equally with the horsemen), but again, every other track in Ontario will ask for a similar deal, though Fort Erie has a unique case being the only other thoroughbred track while also being a border track as well.

Another thing that could hinder the deal is that Nordic would have to stick around through 2009 because the licensing process takes quite some time, and the new owners also need to have clean records, really clean records. Sources say that the government wants Nordic out altogether, if they have any say in the matter.

My prediction is the ORC will extend to February 28th, and that the EDTC deal will be quashed, but the government will give Nordic the $3.2 million to operate for 2009 on condition that they actively try to sell the track at a reasonable price, or more preferably, the OLG will give Fort Erie a special deal on slots where Fort Erie gets 30-40% of the profits.

See also Offer Made To Save Fort Erie Racetrack

Provinces Help Key To Fort Erie Track Deal

Fort Erie Plan Needs Ontario To Pony Up


Is the Fort Still Alive

Also, Fort Erie Gambles On Loan Plan

Track Owner Wants Down Payment By Monday

Fort Erie development group offers to buy racetrack

19 comments:

Anonymous said...

Absolute madness.

Work Harder
millions in government depend on it

Anonymous said...

The Town of Fort Erie will pledge $1 million from slot revenue to keep the track afloat as well. (The town doesn't even get that much from the slots.) This is a scam.

Pick4player said...

It's time for some innovation. Why not start at Fort Erie. I'm getting convinced that eventually all straight betting will be "outsourced" to exchanges like betfair. Let's say a flat commission of 4% for tracks and betfair each, giving you 8% "take". ADWs and pools can focus on exotic wagers, which is currently not feasible via an exchange. Exotics get the bulk of pool money these days anyhow.

Cangamble said...

Anon 12:41. The town gets around 1 million from slots. They get approx. 2.5%, and 10% for the horsemen has equaled around 4 million of late.

Pick4player, you could be right....in a perfect world, though I've seen 2 or 3 team parlays available on Betfair, so exactors and even triactors are possible there as well.

Anonymous said...

I support the plan as it will remove Nordic and for the first time in years there will be a focus on the actual horseracing activity at the track by professionals.
It would appear to provide a long term win win for everyone. With the support of the town, the government and Woodbine we can have our track back!

Anonymous said...

Government has been taken taxes for i guess 111 years from the track and working people. Wouldnt you think the would loan some of if back to us
Cheers RCJ

Cangamble said...

I don't have a problem with the plan, only the price tag which is grossly too high, and that a lot of the ways they intend to pay off the loan will not happen.
So our tax dollars are supposed to go to this, and all this kind of stuff leads to more taxes, and especially will impact the Fort Erie residents with higher property taxes because the town still needs money to keep things going.
Also, this won't rid Fort Erie of Nordic. They have to stay on for a year because of their license and the licensing process. Also, the same management will stay and they will still be faced with budgetary constraints that make growth nearly impossible.
I'm not high on the EDTC either. The town is currently building an office by my house even though they haven't sold it to one tenant yet (as far as I know). A Giant Tiger just closed, there is plenty of empty store in malls as it is.
The EDTC seem too optimistic, and too shady IMO. The 35 million dollar price tag he came up with smells very fishy. I can see a big suitcase full of cash waiting in Israel for a few EDTC members to divvy up if this deal goes through.

Anonymous said...

So true about the EDTC. Check out what happened with the Gypsy Theatre and you'll get an idea of what will happen to the track. Too bad the real stakeholders couldn't do this. As to the town's cut from the slots, being $1 million: that would mean that every dollar from the slots would go to the racetrack. Unfair to property tax payers in town. Taxes will rise to cover the shortfall. The town was stupid enough to spend all the bingo/slots money and not put any aside. Now, in these hard times, the struggling taxpayer will help subsidize a failing industry while our hospital is downgraded. And where is the $2 million?

Anonymous said...

Perhaps the price tag had to be on the high side in the attempt to get rid of Nordic.
However, if the track has to be operated under Nordic for another year I'm afraid there really will not be a track to save.
If it is a licensing issue- then the license should be bought out or leased out for the 2009 season if a deal is agreed.
The press release that I saw said that EDTC would have "professionals" managing the racing, why do you think these people would be from Nordic and under the same restraints that Nordic imposed over the years.
Not sure why the town is building an office, they should take a walk up Jarvis Street, there is plenty of empty buildings there, not to mention the plaza vacancies.
My understanding is that EDTC is funded by the town. If they run the track as a non-profit operation (as they propose) what is benefit to Fort Erie?
If OLG agrees to moving the slots to Woodbine why wouldn't they agree to an immediate transfer of the license from Nordic to EDTC?

Anonymous said...

couldnt they just build a whole new track for, say, $20 Million?

Pick4player said...

The population of Fort Erie is about 30k. It is fair to burden them with such a huge amount of debt (full 35 million if 100% financed)? If gaming companies are not interested (eg great canadian), it suggests it may not be in the best interest of taxpayers to step in.

Anonymous said...

As a tax payer of Fort Erie, I would be more than willing to pay an additional $100.00 a year on my taxes to live in a flourishing town to the alternative of living in a ghost town with lower taxes. I am sure the additional $100.00 would soon be eaten up on gas by having to go to St. Catherine or over the bridge for groceries, banking etc.
If the town was flourishing it would attract new people and business, which would offset some of the tax burden over the years.
As far as building a new track- I doubt that it could be done for 20M, purchasing the required land, building all the structures and surfaces needed, not to mention the time and redtape it would involve.
And lastly we would have lost a big part of the towns history to foreign ownership (Nordic) that the govn't allowed.
I think the track needs to be protected for the betterment of Fort Erie and since the govn't created this situation it is up to them to now pony up and remove this foreign ownership once and for all.

Cangamble said...

Anon 9:40, what does foreign ownership have to do with Fort Erie's plight? What would be wrong with an American owner who cared about horse racing taking over the track for example?
The government didn't create this problem either. External factors did. And Fort Erie's slots took another hit the other day when the courts ruled that the Seneca's could build their downtown casino, which may affect future earnings for the Fort Erie casino, and not in a positive way.
The 35 million figure is bogus. It is basically what the owner wants, and not what the place is worth.
The town sells industrial land for 50k or less per acre. The only reason the land is worth something right now is because a racetrack is there. A failing business, losing, if you believe Nordic, 3 million a year. In other words, the business is worthless.
So to back this land up as collateral, one has to assume that the track is torn down, the land passes environmental tests, and that there will be someone coming along to build on it.
If the track goes, houses will be sold, businesses will shut down and industrial land will go down in price.
What does that mean? I'd say the track might be worth 30k per acre without a track. 10 million might be a reasonable price.
If you had 50 million bucks, would you invest 35 million in this business, where you stand to lose 3 million a year, and if the business closes down completely, you might recoup 10 million?

Anonymous said...

I do not believe when a Canadian town's very existence is dependent on a historic operation/landmark that it should be sold to non-resident foreign ownership. Esp-when it involves a highly regulated business as "Gaming". I hold the govn't responsible as they approved the sale and terms from Woodbine to Nordic and have been held to extortion negotiations ever since. (Just my opinion).
If you are correct in your land prices, 35M is a vast overpayment, however, from the govn't position, they have have to look at the long term effect. The costing of what they will be paying out in welfare and the demise of this border town.
I had suggested leasing the racing operation from Nordic for a 10 year term, however,I am not sure if that was ever considered or presented.
My fear is with Nordic they have the means and would be very prepared to let the property sit vacant, subsequently letting the town go under. After all they picked the track up for a song and a dance,and have been receiving (extorting) monies ever since for the agreed continuance of racing.
I just feel we are looking at more than bricks and mortar here, what price (if any) is the "goodwill" worth? What is the track worth to Fort Erie?

Cangamble said...

I'm not fan of Nordic. And it is very obvious they are extorting now.
But back when Nordic bought the place, they were viewed as saving the track that the ORC was giving up on.
I can't blame the government. If anyone is to blame, it is Woodbine.

Anonymous said...

I agree with you, however the govn't supported Woodbine, and gave their stamp of approval. For this I hold them (govn't) accountable.
As I have previously stated Woodbine is more than willing to help us and will make room for the "Prince of Wales" on their race card! Once again for their own self supporting support! Thxs.
I'm only hoping that a deal is struck even if the cost may be on the high side. We are in desperate times here, no doubt!
I love this town, everything it could be, and should be, however,it will never happen under the tutelage of Nordic.
For that, I am ever so upset with govn't and Woodbine for their short sightedness and total abandonment that has brought us to this point of "deal or die".
If their is anyone that has a better solution please voice it now, we need all the creativity possible as the clock is running out!

Cangamble said...

The government is not to blame for the sale of Fort Erie to Nordic, not even in any way. I don't believe in government getting in the way of capitalism.
That being said, I also thought that the Fort Erie horsemen wanted to buy Fort Erie when Nordic bought it, but Woodbine didn't want the horsemen to have that much power and they wouldn't sell to them (not sure if the rumour is true or not).
Yes, a deal is needed. But 35 million is ridiculous, and I think the government knows it, at least I hope they aren't a bunch of stooges running our country.
Nordic needs to go completely. But will they deal fairly? So far, no.
What will Nordic do if their choice is a closed casino? They are really in the same position as Woodbine was over 10 years ago. A business that loses money that they don't want anymore. Except Woodbine took 10 bucks, and Nordic wants 35 million.
There are only three solutions.
Nordic sells.
Nordic leases to a turn-around management team who try to make the track profitable, while the government promises to pay for any deficits for a period of around 3 years.
The government gives them a bigger cut of the slot revenues.

Daryl G. Ezra said...

Jan 21 2009


Here's a decent proposal...similar to the EDTC propoasal...WEG purchases Fort Erie Racetrack for its realistic value [15 - 30 million]...
The province lends WEG the money at a non or reduced interest rate... WEG then installs 400 of Fort Erie's vacant machines at its now
other entity Woodbine...Fort Erie operates in or around a 50% or less capacity... Win per unit under $100...WEG operates at an
amazing 85% capacity [ sometimes 60% capacity and sometimes 100% and could do another 40%...] Win per unit over$900 daily...If those
400 machines are used 100 days in a year... Here's the math... 400 x 900 = 360 000 x 20% [WEG's cut] =72 000 x 100 days = 7.2 million... Half to
the purse account, half to WEG = 3.6 million each.... the province gets 36 million extra

This would allow WEG to pay of the loan at its highest purchase price within 10 years. This would save the local economy, not injure
the industry, save countless jobs, allow more aggressive marketing between both tracks and lets the government save face

Most tracks are crying for more slots, by allowing the TRANFER of slot machines between the same owner you solve many problems, the
government does not grant additional slots machines, maximizes earning potential, saves the racing industry and does not require any
additional revenue sharing spits that have already been negotiated. Toss in a few territorial by-laws. WIN WIN WIN can you hear the
bells, sires and whistles going off?

Sincerly, Daryl G. Ezra

DARYL G. EZRA said...

Jan 21 2009

Jan 21 2009


Here's a decent proposal...similar to the EDTC proposal...WEG purchases Fort Erie Racetrack for its realistic value [15 - 30 million]...
The province lends WEG the money at a non or reduced interest rate... WEG then installs 400 of Fort Erie's vacant machines at its now
other entity Woodbine...Fort Erie operates in or around a 50% or less capacity... Win per unit under $100...WEG operates at an
amazing 85% capacity [ sometimes 60% capacity and sometimes 100% and could do another 40%...] Win per unit over$900 daily...If those
400 machines are used 100 days in a year... Here's the math... 400 x 900 = 360 000 x 20% [WEG's cut] =72 000 x 100 days = 7.2 million... Half to
the purse account, half to WEG = 3.6 million each.... the province gets 36 million extra

This would allow WEG to pay of the loan at its highest purchase price within 10 years. This would save the local economy, not injure
the industry, save countless jobs, allow more aggressive marketing between both tracks and lets the government save face

Most tracks are crying for more slots, by allowing the TRANSFER of slot machines between the same owner you solve many problems, the
government does not grant additional slots machines, maximizes earning potential, saves the racing industry and does not require any
additional revenue sharing spits that have already been negotiated. Toss in a few territorial by-laws. WIN WIN WIN can you hear the
bells, sires and whistles going off?

Sincerley, Daryl G. Ezra