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Magna Entertainment Reports Loss for Q3

AURORA, Ontario – (PRESS RELEASE) -- Magna Entertainment Corp. ("MEC") (NASDAQ: MECA; TSX: MEC.A) today reported its financial results for the third quarter ended September 30, 2004.

In announcing these results, Jim McAlpine, President and Chief Executive Officer of MEC, remarked: "The third quarter results for 2004 are disappointing. Despite only a small decline in revenues, our EBITDA loss has been impacted by MEC continuing to incur significant costs ahead of revenues as we position ourselves to achieve our strategic objectives and by higher costs in the pursuit of alternative gaming opportunities and regulatory reform. During the third quarter of 2004, our European racing operations incurred start-up pre-tax losses of $7.9 million and our pre-development and other costs, incurred primarily in the pursuit of alternative gaming opportunities, increased by $4.4 million over the prior year quarter to $5.6 million. We have made a significant investment in certain strategic initiatives, such as Magna Racino(TM), our newest racetrack, near Vienna, Austria and our international wagering business. Despite the disappointing third quarter results, we remain committed to attaining MEC's long term goals and we continue to be excited about our strategic vision to create a global entertainment company built around horseracing."

Mr. Frank Stronach, Chairman of the Board of MEC, also made organizational announcements. "To further strengthen our leadership team, our Board of Directors has appointed an Executive Management Committee to support MEC's operations. The new Executive Management Committee will be chaired by Dennis Mills and will include Jim McAlpine, President and Chief Executive Officer of MEC, and Don Amos, Executive Vice President and Chief Operating Officer of MEC. In addition, Tom Hodgson, President of Strategic Analysis Corporation and a member of the Board of Directors of MI Developments Inc. ("MID"), our parent company, will serve in a special advisory capacity to the Committee." Concurrently, Mr. Stronach announced that the Board elected two new directors, Dennis Mills, who also serves as Vice Chairman of the Board of Directors of MID and John Barnett, President and CEO of Rothmans, Benson & Hedges Inc. and Rothmans Inc. Mr. Mills is a former Vice-President of Magna International Inc. from 1984 to 1987 and served as a Member of Parliament in Canada's federal parliament from 1988 to 2004. While a Member of Parliament, Mr. Mills was Parliamentary Secretary to the Minister of Industry from 1993 to 1996 and served as a member of the Canadian federal parliament's Heritage, Industry and Public Accounts Committees. Mr. Barnett, a former President and Chief Executive Officer of Molson Breweries, is a Chartered Accountant and has over 30 years of experience in the sport and entertainment industry.

Since the end of the second quarter, a number of positive strategic and other developments have occurred, including:

- The ongoing redevelopment of Gulfstream Park, including a new, wider turf course, as well as the construction of a modern clubhouse/grandstand offering an array of restaurants and entertainment facilities.

- The completion by HorseRacing TV(TM) ("HRTV") of an agreement with the operator of the DISH Network(TM) that dramatically expanded HRTV's distribution throughout the United States. HRTV is now available to more than 11 million cable and satellite television subscribers.

- The passage into law of the Pennsylvania Race Horse Development and Gaming Act. We intend to pursue an application for a slot machine license at The Meadows, our racetrack in the Pittsburgh area, in accordance with the requirements of this legislation and the associated regulations, at the earliest possible date.

- The amendment and extension of our preferred access agreements with Magna International Inc. ("Magna") for their use of the MEC golf courses, Fontana Sports and the Magna Golf Club, through December 31, 2014.

- The amendment and extension of our secured term loan facility for The Santa Anita Companies, Inc. until October 7, 2007, subject to a further extension at our option to October 7, 2009.

- The amendment and extension of our $50.0 million senior secured revolving credit facility until October 10, 2005.

In order to fully implement our strategic plan, including the redevelopment of Gulfstream Park, and capitalize on future growth opportunities, we will be required to seek additional debt, equity and/or other financing. We may also decide to sell some of our real estate holdings and other assets and/or enter into leases or similar arrangements with respect to such real estate holdings or other assets in order to fund certain portions of our strategic plan. We are currently in active discussions to secure additional financing and sources of funds from, and may enter into transactions with a variety of public and private sources, which could include MID.

Our racetracks operate for prescribed periods each year. As a result, our racing revenues and operating results for any quarter will not be indicative of our revenues and operating results for the year. The third quarter is traditionally our weakest quarter due to the timing of the race meets at our largest racetracks.

Our financial results for the third quarter of 2004 reflect the full quarter's operations for all of MEC's racetracks and related pari-mutuel wagering operations. Results of Flamboro Downs were equity accounted during the period prior to our acquisition, which was completed on April 16, 2003. The comparative results for the third quarter and nine months year to date of 2003 do not reflect the operations of Magna Racino(TM), RaceONTV(TM) and our European simulcasting and distribution business, which commenced operations during 2004.

Revenues for the third quarter and first nine months of 2004 decreased 2.1% to $102.3 million and increased 5.3% to $592.6 million from the prior year comparable periods, respectively. The decreased revenues in the third quarter of 2004 resulted primarily from fewer live race days at certain of our racetracks and decreased access fees at our Magna Golf Club and Fontana Sports facilities as a result of a delay in renewing the access agreements with Magna. The increased revenues for the first nine months of 2004 resulted primarily from the sale of four Non-Core Real Estate properties for proceeds of $16.4 million, the acquisition of Flamboro Downs, the opening of Magna Racino(TM), increased decoder revenues at our California racetracks as a result of revenues being recognized for amounts previously in dispute and increased attendance and wagering at Pimlico on the Preakness Stakes®, partially offset by reduced on-track and inter-track wagering revenues at several of our facilities due to lower average daily attendance and decreased access fee revenues from our Magna Golf Club and Fontana Sports facilities as previously noted.

EBITDA was a loss of $30.3 million for the third quarter ended September 30, 2004, compared to a loss of $12.6 million in the prior year period, and was a loss of $11.1 million in the first nine months ended September 30, 2004, compared to earnings of $30.2 million in the prior year period. The decline in the third quarter of 2004 was primarily attributable to pre-operating and start-up costs incurred at Magna Racino(TM), RaceONTV(TM) and our other European business developments, additional predevelopment and other costs, additional distribution and production costs at HRTV(TM), severance and union buyout costs at the Maryland Jockey Club and other one-time costs incurred in connection with the redevelopment of the racing surfaces at Laurel Park, partially offset by the gain on sale of Non-Core Real Estate properties. The results for the nine months ended September 30, 2004 were adversely impacted by the same factors impacting the third quarter as well as by a non-cash write-down of long-lived assets of $26.7 million related to our redevelopment of the Gulfstream Park racetrack and the racing surfaces at Laurel Park.

Net income decreased to a net loss of $50.3 million in the third quarter of 2004 compared to net loss of $15.4 million in the prior year period and for the first nine months of 2004 decreased to a net loss of $54.7 million compared to a net loss of $1.9 million in the prior year period. The net loss in the first nine months of 2004 includes the impact of the non-cash write- down of long-lived assets. The decline in the third quarter and first nine months of 2004 is due to the EBITDA decreases as noted above and increased depreciation and amortization and interest expense in the three and nine month periods ended September 30, 2004 compared to the comparable 2003 periods.

During the three months ended September 30, 2004, cash used for operations before changes in non-cash working capital was $40.4 million, which has increased from cash used for operations before changes in non-cash working capital of $9.0 million in the three months ended September 30, 2003 primarily due to lower net income. Cash used in investment activities during the three months ended September 30, 2004 was $45.4 million, which represents primarily real estate property and fixed asset additions. Cash provided from financing activities of $23.6 million in the three months ended September 30, 2004 was primarily due to the utilization of our senior secured revolving credit facility of $25.0 million partially offset by repayment of long-term debt of $1.4 million.

MEC also announced a pending change in its stock symbol on the Toronto Stock Exchange ("TSX"). Commencing November 17, 2004, the Class A Subordinate Voting Stock of Magna Entertainment Corp. will be traded on the TSX under the stock symbol "MEC.SV.A". This change results from a new symbol naming convention adopted by the TSX. The stock symbol for the Class A Subordinate Voting Stock on the NASDAQ National Market (MECA) is not affected by this change.

MEC, North America's number one owner and operator of horse racetracks, based on revenue, acquires, develops and operates horse racetracks and related pari-mutuel wagering operations, including off-track betting facilities. Additionally, MEC owns and operates XpressBet(TM), a national Internet and telephone account wagering system, and HorseRacing TV(TM), a 24-hour horse racing television network.

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