Archives of the Mayor's Press Office

Mayor Rudolph W. Giuliani today announced that New York City has accepted an offer from GMR-NY, LLC for the sale of the Off-Track Betting Corporation in one of the largest and most profitable privatization deals in the City's history. GMR-NY, LLC is to pay a purchase price projected to be up to $389 million in today's dollars (net present value basis). The offer includes an immediate payment of up to $260 million, and an ongoing annual cash flow that will bring millions of dollars more to the City each year. The offer was approximately $113 million more than the runner-up bid. In addition, the offer provides for $50 million in capital improvements to OTB locations throughout the five boroughs of New York City. This historic agreement marks the end of the City's 31-year involvement in the horse racing industry, and fulfills a commitment made by the Mayor eight years ago.

This transaction is subject to the New York State Legislature's approval and authorization of enhanced business capacity. If the State Legislature approves this sale but does not authorize the business capacity enhancements, then GMR-NY, LLC will pay a purchase price of $284 million, which will include an immediate payment of $150 million, another $50 million paid out over five years, and an additional ongoing annual cash flow. If only some business enhancements are authorized, then GMR-NY, LLC will pay an amount greater than $284 million and proportionate to the extent of the enhancements granted.

Joining the Mayor for the announcement at City Hall were President of the Off-Track Betting Corporation Maury Satin; OTB Vice-Chairman and Corporation Counsel Michael Hess; New York City Economic Development Corporation President Michael Carey; Director of the Office of Management and Budget Adam Barsky; Senior Advisor to the Mayor Geoffrey Hess; GMR-NY, LLC representative Jim McAlpine; and Wilbur Ross, of WL Ross & Co. LLC.

"OTB used to be known as the only bookie in the world who lost money," the Mayor said. "It was a sad commentary on the times when Government shifted its focus from delivering essential services to trying to run a commercial enterprise for profit.

"When I first proposed selling OTB in 1993, few investors were interested in bidding for an organization that operated with a $5.3 million deficit. Since then, our management team reformed the corporation, emphasized accountability, and succeeded in turning this money-losing operation into a profitable business venture. Today OTB has an enormous market value, and it is the right time to sell it. I am very pleased to be able to make good on my earlier campaign promise. But the real winners today are the people of the City of New York, who will
see returns of hundreds of millions of dollars to the City's coffers. This is a great example of how privatizing non-essential services can bring tremendous benefits to our City," Mayor Giuliani concluded.

Michael Carey, President of the New York City Economic Development Corporation, said, "It is always good to turn a loser into a winner. In this case, the Giuliani Administration and OTB have done a phenomenal job in turning OTB around and securing a great price from a premier racing and entertainment group."

Wilbur Ross said, "My estimates of the future value of the City's percentage of GMR-NY, LLC's profits are based on the most conservative assumptions. In reality, the City's long-term profits could prove to be higher than $389 million."

Under the terms of the deal, the City will receive an annual cash flow expected to be in the millions, based on a percentage of OTB's annual gross handle.

Jim McAlpine of GMR-NY, LLC stated, "We are excited to bring our extensive experience in the racing industry to New York City. Horse racing fans and members of the community will be very pleased with the state-of-the-art improvements that we intend to make in OTB's betting parlors. Customers will get a world class racing experience, and the City will continue to receive an annual percentage of GMR-NY, LLC's future revenues."

Maury Satin, President of the City's Off-Track Betting Corporation, said, "When Mayor Giuliani first took office in 1994, there was a $5.3 million dollar operating deficit at OTB. Last year, OTB exceeded $1 billion dollars in gross wagering and its revenues totaled $246 million, with $35 million dollars going directly to the City coffers. It makes sense to sell OTB now. A private entity will be in a better position to adapt to rapid market and technological changes that affect the racing industry."

The GMR-NY, LLC offer was the result of a Request for Proposals issued by the New York City Economic Development Corporation in October 2000. The firm of WL Ross & Co. LLC was retained to act as the City's financial advisor for this transaction.

GMR-NY, LLC is a company whose members are Magna Entertainment Corp.; Greenwood Racing Inc.; and Racing Enterprises LLC, a company owned by William Mack and Robert Baker. Its member organizations have extensive experience in running popular and profitable racetracks throughout the United States, including tracks such as Santa Anita in California; Gulfstream Park in Florida; and other racetracks in Pennsylvania, Michigan, Oklahoma, and Ohio.

The New York City Off-Track Betting Corporation was formed in 1970. The operations at OTB were frequently the source of controversy because of mismanagement and profit shortfalls. Today's announcement marks one of the most profitable privatizations in New York City history.

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