27 November 2008

Fort Erie Race Track Appears To Be On Death's Door

Nothing but negativity is coming out of the rumour mill regarding Fort Erie Race Track existing as a race track in 2009. Lets face it, rumours are all there is when dealing with this subject. Oh, and some logic as well. Not that logic weighs heavily when it comes to politicians and racing execs, especially in weak economic times.

Lets look at the facts as I know them. Nordic Gaming has been trying to sell Fort Erie for at least a couple of years now, ever since they realized that slot revenues were dropping severely due to many economic and competitive reasons. They were asking too much. Now the slot revenues have sunk to a level which most likely will be constant more or less for the predictable future. It means around $4 million in profit for Nordic, if all they have to do is sit back and let the OLG run the slots.

The thing is that they have at least up until now, had to race. And they claim that even with the slots, they are losing $4 million a year (as quoted in a recent article by Perry Lefko). This means that they are losing $8 million because of the racing operations a year. Is that possible? I doubt it, but then again, I haven't seen their books. It makes me wonder how so many small tracks that don't have slots survive (like Ohio tracks, although barely today).

They do get betting revenues, and concession stand revenues as well. I don't see how they can possibly be losing money with a $4 million cushion from slots. But if they say they are, lets give them the benefit of the doubt.

The big question that still hasn't been answered is can Fort Erie Slots still operate next year without live racing? And does Nordic Gaming get their cut?

The OLG has to be grossing over $30 million (since the track and horsemen get 10% of gross profits from slots each). Surely they aren't going to walk away from net profits of at least $20 million. Do they actually think that Niagara's casinos and lottery tickets will get that $40 million plus that is lost by patrons at the Fort Erie Slots? I hope they aren't that stupid, and I doubt they are that stupid.

If the slots are closed down or if Nordic can't keep getting their share of the profits, Fort Erie Race Track is pretty much worthless. Property values in the Fort Erie region are on the decline, and if the track closes, there will be a glut of houses on the market. It will mean that developing the Fort Erie land would be a useless endeavour.

So the track that Nordic bought from the Ontario Jockey Club for $10 will be worth about that without slots and live racing.

Does anyone think Nordic Gaming cares? I'm sure they do, but not very much in light of the current global recession. Nordic Gaming is a subsidiary of ElAd Group. ElAd was in the news today. The land for a project in Las Vegas that ElAd is partners in, was just valued at $652 million. ElAd and their partner paid $1.24 billion for that land only last year.

ElAd is a subsidiary of Delek Group. Delek Group is involved in just about anything that can get clobbered during a recession: autos, real estate, insurance, and energy. I don't know how leveraged the company is when push comes to shove, but I do know that their stock is trading around 1/7th what it was trading at only a year ago, so I'm guessing they are leveraged on a few things.

We are talking billions of dollars in lost net asset value right now. Fort Erie Race Track must be on their priority list the same way the weather on Pluto is.

I have another question. Since Nordic obviously can't run a race track ($8 million in losses a year), what would you do if you were the owner? I can come up with 10 bucks right now, and I'm pretty sure I can make the track profitable too (YES, I think that highly of myself).

And forget the government coming to Fort Erie's aid. They don't even have a clue about what is happening today thanks to the Mayor and Fort Erie Economic Development and Tourism Corp feeding politician nonsense. Nordic Gaming's representative has already said that the $300 million pipe dream expansion project has been postponed indefinitely (and this was before the recession was officially announced), yet Progressive Conservative leader John Tory was in Fort Erie and here is what appeared in the Niagara Falls Review 5 days ago:

...it's time for the provincial government to "get on board with tangible support for the development" (said John Tory) of the Fort Erie Race Track.

He blames "bureaucratic inertia" for delaying the implementation of the Sadinsky report's recommendations for the redevelopment of the racetrack, which at a cost of $300-million will include a mega-resort with condominiums and a large-scale entertainment complex.

Are these guys on glue? I hope Tory, Mayor Martin, and the EDTC read this. They aren't helping the situation one bit by barking up the wrong tree.

What can Fort Erie hope for? The owner to walk away or sell it to someone who knows racing for what it is worth, or for WEG (they don't understand racing either, they just have a great location for slots and a huge home market) to jump in and subsidize racing in a creative way (it might give their marketing department something achievable to do, even though this isn't about marketing).

I heard a rumour in the early summer that Ajax was going to take over for Fort Erie dates, and that Ajax knew it. I wonder if the government is making it happen, and has been complicit all along. I hope it is only a rumour.

If Fort Erie Race Track closes, the local economy will be devastated. The most popular places will be by far the unemployment office and the welfare office.

Perry Lefko has also written a new negative (realistic) article on Fort Erie's future at Peter Gross' Down The Stretch Newspaper.


Anonymous said...

We should all be shaken AND stirred. The inertia comes from all sides and it's time to make our voices heard...in fact it is overdue. Tory's comments say a lot-the government does need to wake up and he made that clear in a backward way, didn't he?

FE will be devastated it is true, and not only economically (especially in a recession!). When people are sent to receive government pay such as EI and welfare, (this will cause the government is going to lose $$) - crime will increase. People that have already been living near the poverty level are already struggling. To lose their jobs and livelihoods may be the last straw. It will have a ripple effect over the whole region.

Anonymous said...

I moved to Fort Erie 2 years ago to race and play races,as i loved the town and racetrack,i have given my notice,If F E racetrack were to open for racing in 2009.i will be the most surprised person around.

Anonymous said...

Nobody knows for sure of course. It does seem that hopes are very low for something positive happening for 2009 (and FE has been in trouble for years). At the end of this season, the trainers were not allowed to store their stuff in the sheds for the winter. It helped to shake things up a bit in the backstretch.

However let's not forget that the lower Cdn. dollar might have a silver(-plated) lining for the Fort. More players (Canadian AND American)means more money for the track

Anonymous said...

Nordic just is trying to squeeze the horsemen for a shorter season. No way the racing loses $8 Million. And the racing brings people to the slots, dont forget.

Of course, if the govt is dumb enough to let them run the slots alone, Nordic would be happy with that outcome too.

2009 will be same as last year, after 2010 we'll see Ft Erie running 3 days a week from May 24 to Labour Day.