The following couple of videos basically sum up the deal. The main speaker is Jim Thibert of the EDTC of Fort Erie.
Please excuse the shakiness. I was standing while holding a digital camera and I either had too much coffee or not enough coffee (I'm not sure how that works anymore).
A summary of the deal (Letter Of Intent) is as follows:
The EDTC offered $35 million ($33 million of which they don't have) to purchase Fort Erie race track.
A non refundable deposit of $2.25 million was handed over to Nordic Gaming. $1.5 million came from the $2 million the government foolishly handed over to the EDTC last year to do due diligence on the $300 million dollar smoke and mirrors expansion project. They managed to blow half a million of it in almost no time.
$500,000 came from the HBPA and $250,000 came from the Town of Fort Erie (lets put it this way, no live racing most likely means no slots which means no $1 million the town gets from slot revenues).
Nordic Gaming is willing to take back a mortgage on the remaining $32.75 million if the deal actually happens, as long as the mortgage is guaranteed by the Government of Ontario.
The Letter of Intent is good for 90 days. In other words, the EDTC has 90 days to convince the government that they can 1) Justify the $35 million price tag (LOL), and 2) Show that they can make mortgage payments while not losing money each year on top of that (something Nordic claims they haven't been able to do for the last 3 years).
At the end of the 90 days, if the mortgage can't be guaranteed, the deal is over, but Nordic must still race to the end of October. In return, they get a free $2.25 million which is probably closer to the $3-4 million in losses they are claiming to lose of late each year.
In other words, Nordic caved because they probably don't lose $3-4 million a year, and they knew that no racing means no slots and that if they lose their racing license, they would have a very hard time getting it back. In other words, the joint would be very close to worthless.
Hats off to Sue Leslie especially, of the Ontario HBPA, for working diligently on getting this project together, and Jim Thibert for at least being whimsical enough to come up with this deal in the first place. It appears that the main politicians Kim Craitor and Tim Hudak did next to nothing really to make this particular deal happen, but somehow I expect them to take a lot of credit.
Meanwhile, the EDTC which has claimed from day one that they don't understand racing very much, though Thibert said his knowledge has increased of late, has hired a consultant firm to look at the Fort Erie books in detail and to make recommendations going forward.
He emphasized that he is not accepting tenders for the consulting firm, so look for nepotism to weigh in heavily in the firm he decided to go with. This isn't good, because what they need right now is a consulting firm that understands both horse racing and gambling, and even the gambler's psyche. Horsemen collectively don't understand the bettor, or that without the bettor there is no business (and yes, bettors can and do go elsewhere). And most business execs have no idea in regard to what makes today's gambler tick.
Thibert did say that it was going to cost a lot for the consulting (where is the money coming from?).
They will be looking to piece off a lot of the unused property to help pay the mortgage, which in the end means they will have less land and probably owe about the same amount more or less when the dust lands.
They are still banking on "lending" Woodbine 200 slots, while expect the OLG to change their payment schedule on those slots (where the track/horsemen, the OLG and Woodbine get 1/3 of the net each. Right now, the OLG gets around 77% of the net.). They don't even know if Woodbine would go for the deal, and extra slots only means more potential money if a patron actually leaves the slots disillusion that he or she couldn't lose money because every machine was taken. More slots for Woodbine, most likely doesn't mean that the bottom line of money lost by customers would increase, even if the slots are at full capacity. People stay and lose what they were going to lose regardless of capacity in most cases. More slots doesn't means more money lost by customers.
In fact, casino gamblers are more eager to play if it looks like a machine to sit at or a table to sit at looks hard to come by.
If the OLG is going to make concessions, the realistic one is to increase the percentages Fort Erie gets from 20% to 30-35%. In return, Fort Erie can easily give up 4-500 machines. Again, a separate case can be made for Fort Erie being Ontario's only other thoroughbred track.
Bottom line, the track isn't worth $35 million. I had to laugh when Thibert calls himself a businessman, and also stated that in these rough economic time, it is a good time to buy.
A real businessman takes advantage of these times. Sure it is a good time to buy....IF THE PRICE IS RIGHT! You don't put an offer on the table to satisfy the maximum a seller is willing to accept.
With more tracks bound to come on the market thanks to the Stronach fiasco, Fort Erie is worth even less today than it was a few weeks ago.
The business allegedly loses $3-4 million a year, and the land isn't worth very much at all.....maybe $35,000 an acre on average TOPS (which means the land is worth $12 million if the right buyers came along). Fort Erie can't even half fill an indoor mall with businesses, and I don't see demand going up in the near future.
In fact, a lower amount was allegedly accepted by Nordic years earlier when the business was breaking even. But the deal fell through because Nordic wasn't doing as well as they originally stated they were doing.
So what will happen?
90 days will come and go. Nordic will get much of the money they originally looked to extort in the first place. At that time, new offers will be allowed to come in for the track. It is to everyone's best interest that this deal doesn't happen, even if the EDTC were to come back in again, the amount offered should be at least cut in half.
The horsemen and the tracks future though will be in doubt for 2010 and beyond, until Nordic decides to sell the track for a fair price.
Fields will be short this year, and since Fort Erie's track takeouts are astronomical, I don't see very much betting on their product. As a representative of HANA (a horseplayers group that collectively puts through between $50-100 million plus a year in handle), I wouldn't even try to convince the membership to make even one bet at Fort Erie, unless it was done at a rebate shop that gave considerable rewards. Fort Erie ranks 55th out of 56 tracks by HANA. Only Assiniboia Downs rated lower when it comes to bettor friendly tracks. Check out Fort Erie's track takeout and compare with other tracks here.
Fort Erie needs to get rid of allowance races so that they can give more money to lower claimers, so that owners have a chance to make money or at least break even. If a horse is worth over $14,000, send it to Woodbine to race and see if you are right.
They also need to cut track takeout, so that gamblers will last longer, and perhaps start spending more time handicapping and coming to the track, even bringing friends and family.
They also need their own ADW, so that they can market racing to their home market of 400,000 people. In the real world, there has been a shift which will not change, bigger bettors are betting mostly from home.
See also, Fort Erie Back At The Starting Gate, Nordic's press release, Odds Still Unclear on Fort Erie's Survival, Fort Erie Racetrack Survives Again, and Racing To Continue at Fort Erie.
Article on Derby hopeful Patena.
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Horseplayers speak with their wallets. Thank you Standardbred Canada for acknowledging HANA.
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