Racetrack proposal faces long odds
Chris Bryan
Sungold Entertainment Corp. Ltd. is betting its money on a major horse racetrack development project for Richmond, which they are hoping to fast-track through council and have up and running by 2002.
But the project faces some long odds. A look at Sungold’s track record over the 14 years of its history reveals a long list of projects that were heavily promoted but never got off the ground.
Kim Hart, who has been involved with the company since the early 1990s, took over the company in 1998. He says his new management team has what it takes to make the company’s new projects successful.
The company has an option to purchase 92 hectares of land located at No. 8 Road and Westminster Hwy. from A.C. Gilmore and Sons for about $20 million.
According to their proposal, there would be a 1 1/4 mile track, stables for 1,500 horses, parking for 5,500 cars, and a nature park and animal clinic.
Hart owns a racehorse himself, and says he wants to “bring back the rural feeling, and give people a glimpse of how Richmond used to be.”
The whole project is estimated to cost $160 million, and council will likely be discussing the proposal in mid-September.
Sungold has been around the track once before: its first proposal was turned down by council in 1998. The new plan has a number of changes. The key points: this time, no slot machines; the 15,000-seat grandstand, which was rejected because of the impact on the farmland underneath, has been redesigned to “lighten the footprint.”
BIG PLANS, NO PAYOUT
Over its 14 year history, Sungold has taken various forms. Since incorporating in April of 1986 as a numbered company, the name has changed five times. Most recently, the company changed from Sungold Gaming International Ltd. to its current name in March of this year.
Over the course of its existence, it has pitched products, casino developments and a theme park. The only Sungold product to have seen the light of day is a gambling Web site called HorsepowerNet-work.com, a joint venture with an Australian company which was launched at the beginning of this month.
In the past, the company has pitched no less than three casinos that were never developed. One project, planned for a native reserve in Michigan, fell through in 1996. The company is currently suing the Gun Lake native band for $450 million for alleged breach of contract in that case.
Two similar projects planned for South Korea ($300 million and $400 million US respectively) were widely touted, but never amounted to anything.
Hart says he pulled out of the Korean projects when he took over the company in 1998 because of a downturn in that country’s economy.
“I wrote off the Korean ventures, because I wasn’t satisfied with the financial solvency of the companies involved,” Hart said.
Despite the company’s unsuccessful past, Hart opted not to start over because he felt a responsibility to his shareholders and also the fact that he is the largest shareholder.
This year, Sungold is also pitching an $148 million (US) entertainment centre in Toledo Beach, Michigan. That proposal is not very far along, according to Larry Rutledge, the town supervisor in La Salle Township, Michigan.
“They’ve got a couple of drawings, but they haven’t submitted anything,” Rutledge said. “We’ve just been in the talking stage.”
The company has completed a feasibility study, but has not yet submitted any rezoning application or site plan, he said. Rutledge said he’d talked to Hart on the phone, but hadn’t yet met him in person.
“I’ve never had anybody from Sungold come and talk with me,” he said. “I keep telling Kim Hart, you’ve gotta let me know what’s going on.”
Rutledge said he’s open to a proposal, if the company will agree to share their plans with the public.
“People have been asking questions, and they (Sungold) don’t have a lot of answers,” he said.
We’ve just sort of written it off here,” said Gary Bucalski, a business reporter at the Toledo Blade.
HURDLES ON THE TRACK
A big sticking point with some in the agricultural community, and by extension, council, will be the agricultural land reserve. In their development application, the company has applied for “Special Case Use,” to use land in the agricultural land reserve.
A horse racetrack doesn’t qualify for this designation, according to the agricultural land commission. Sherry Sumpton, regional research officer, says the company will be directed to ask for “non-farm use,” which, unlike the other, requires municipal approval before the commission will consider it. Racetracks are not agriculture-friendly enough to receive the special case label, she says.
“Special case is a cheaper and faster process, because it’s felt to be less of a problem for agriculture,” said Sumpton.
Mayor Greg Halsey-Brandt voted against the proposal last time around, and says he’s not too sure about the appropriateness of racetracks on farm land.
“I just don’t think perhaps they’ve told the whole story to people about the ALR and what it’s all about,” said Halsey-Brandt. The mayor says he thinks a horse racetrack could be a good thing for Richmond, but “maybe not that location.”
Bruce May, president of the Richmond Farmers Institute, wrote a letter to council signed by several farmers, voicing opposition to the project. He said he has serious concerns about the impact such a large project would have on the immediate and surrounding lands, and the future of farming in Richmond.
“If people don’t want farming in East Richmond, that’s fine, but you have to think of the impacts,” he said. Hart contends that the horse breeding and racing is an agricultural business. “We’re governed by Agriculture Canada,” he says. “If anyone were to say horse breeding were not agriculture obviously has not done their research. This will be the most intensive farming in Richmond, easily.”
Hart has several supporters among the horse breeding industry and also among local farmers. The city has received several letters supporting the racetrack idea over the last few months.
ODDS OF FIELDING A WINNER
“We have solid financing in place,” Hart says. “The board of directors are putting up the equity financing for the project, in exchange for stock in the company. This is really a private job. Our board of directors are really prominent people.”
Hart dismisses the company’s unsuccessful past, saying the failures have departed with the former board of directors.
“The company is formed by individuals,” he said. “The management team that I’ve got have lifetimes of success. If anything, I find it distasteful to talk about previous management.”
Last year, the company made $210. They are working with a deficit of $6.7 million.
When the VSE kicked Sungold off the exchange in 1997, they didn’t have the same confidence in the company’s financial strength. That year, Sungold had been heavily promoting the two casino projects in South Korea. Under the agreements they annouced, the first casino, valued at $400 million, would be financed solely by Sungold. The second, at $300 million, would be a 50-50 financing arrangement with the Chong-Nam Group.
Just a month before, trading in Sungold stock had been halted on the VSE, and a scathing bulletin was issued. The reasons for the stop in trading included: “The Company appears to be insufficiently capitalized to execute the business plan,” “The Company’s management does not have a record of success with public companies.”
In December of 1997, the company was de-listed on the VSE, and soon re-appeared on the Over-The-Counter Bulletin Board in the U.S. The OTCBB is an over-the-counter exchange which requires minimal reporting from member companies, and has gained notoriety for the questionable conduct of some of its members. Two weeks ago, the BC Securities Commission issued a warning about the OTC, citing serious concerns about the lack of regulation.
“The problem is, the bulletin board has become sort of the Wild West of stock markets right now,” says Dean Pelkey, the commission’s spokesperson. “There have been a number of cases of stock manipulation on that exchange in the past year.”
But Hart says he took the company to the bulletin board because of the VSE’s own bad reputation.
rpl.richmond.bc.ca
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My two cents:
In the event that SGGNF gets a preliminary approval for the track by city council on Sept. 19, 2000 I will be selling my position on a run up.
When the Korean project past the STZ in 96, the stock moved and the project went no where.
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SEE:
Monday Dec 2 1996
News Release
Mr Hans Banziger reports
Sungold has been informed by the Chung-Nam group, its Korean partner in the planned hotel/casino project, that the comment period for the STZ (special tourist zone) approval, referred to in a news release in Stockwatch October 16 1996, has now expired. There have been no public objections. Consequently, an official STZ designation by the government authorities is now assured. Meanwhile, Sungold has engaged Jeter, Cook & Jepson of Hartford, Connecticut (architects and designers of the Foxwood casino resort) to develop a concept design for the project. Furthermore, Sungold and the Chung-Nam group have signed a preliminary joint
venture agreement which expands upon the terms set out in the commitment letter signed by the parties on January 27 1996, as follows:
The project will consist of a high stakes hotel/casino destination resort with associated amusement facilities.
The total amount of investment in the project is estimated at US$300 million.
Chung-Nam group will contribute the 18 acre Seok-Dae-Do Island and additional land onshore (24 acres) to be used for retail space and parking and will build an access bridge to the island, which together will constitute one half of the total equity in the project.
Sungold will arrange US$150 million in project financing which will constitute the other half of the total equity in the project. The project will be operated under a perpetual joint venture with profits being distributed 50% to Sungold and 50% to Chung-Nam Group. Sungold will join with a major casino management company to finance and operate the project.
Friday Jan 17 1997
In the News
The Financial Post, in a full-page corporate profile in its Friday edition, says that Sungold Gaming is very, very upset about press reports questioning its recent multi-million-dollar Asian casino deal, according to director Henry Schwang. Reporter Keith Damsell notes that president and CEO Hans Banziger says there has been no manipulations of the stock. Sungold shares now trade at $13.85, after surging from $4 two months ago to a high of $17.90 on January 9. Sungold is confident its casino will open in the next 12 months in Michigan with the Gun Lake Indians, although the band still needs recognition from the US government and must hammer out a land-claims settlement. Calgary-based newsletter writer Ted Carter, a long-time fan whose 600 readers control about one million shares, blames short sellers for the recent stock drop. Mr Carter bets that Sungold will open at least one of its three proposed casinos, which will push the stock to more than $100. The shares could even reach $150, based on 15 times potential earnings. |
