MI Developments announces 2007 third quarter results



    AURORA, ON, Nov. 9 /CNW/ - MI Developments Inc. (TSX: MIM.A, MIM.B; NYSE:  
MIM) ("MID" or the "Company") today announced its results for the three and
nine months ended September 30, 2007. All figures are in U.S. dollars.

    
                                        REAL ESTATE BUSINESS(1)
                              Three months ended        Nine months ended
                                 September 30,             September 30,
    (in thousands,        ------------------------- -------------------------
     except per share         2007         2006         2007         2006
     figures)             ------------ ------------ ------------ ------------

    Revenues              $    47,316  $    47,874  $   138,156  $   138,191
    Net income            $    27,413  $    23,868  $    72,576  $    75,207
    Funds from operations
     ("FFO")(2)           $    37,292  $    34,962  $   102,777  $   104,224
    Diluted FFO per
     share(2)             $      0.77  $      0.72  $      2.12  $      2.16
    -------------------------------------------------------------------------

                                          MID CONSOLIDATED(1)
                              Three months ended        Nine months ended
                                 September 30,             September 30,
    (in thousands,        ------------------------- -------------------------
     except per share         2007         2006         2007         2006
     figures)             ------------ ------------ ------------ ------------

    Revenues
      Real Estate
       Business           $    47,316  $    47,874  $   138,156  $   138,191
      Magna Entertainment
       Corp. ("MEC")(3)       115,201      114,933      603,078      578,048
      Eliminations             (5,392)      (8,292)     (15,336)     (22,216)
                          ------------ ------------ ------------ ------------
                          $   157,125  $   154,515  $   725,898  $   694,023
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------
    Net income (loss)
      Real Estate
       Business           $    27,413  $    23,868  $    72,576  $    75,207
      MEC - continuing
       operations             (29,203)     (28,158)       8,064      (41,479)
      Eliminations             (1,028)        (748)     (52,620)      (1,103)
                          ------------ ------------ ------------ ------------
      Income (loss)
       from continuing
       operations              (2,818)      (5,038)      28,020       32,625
      MEC - discontinued
       operations(4)                -       (1,772)           -       (1,271)
                          ------------ ------------ ------------ ------------
                          $    (2,818) $    (6,810) $    28,020  $    31,354
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Diluted earnings
     (loss) per share
     from continuing
     operations           $     (0.06) $     (0.11) $      0.58  $      0.67
    Diluted earnings
     (loss) per share     $     (0.06) $     (0.14) $      0.58  $      0.65
    -------------------------------------------------------------------------
    (1) Transactions between the Real Estate Business and MEC have not been
        eliminated in the presentation of each segment's results of
        operations. However, the effects of transactions between these two
        segments are eliminated in the consolidated results of operations of
        the Company.

    (2) FFO and diluted FFO per share are measures widely used by analysts
        and investors in evaluating the operating performance of real estate
        companies. However, FFO does not have a standardized meaning under
        Canadian generally accepted accounting principles ("GAAP") and
        therefore may not be comparable to similar measures presented by
        other companies. Please refer to "Reconciliation of Non-GAAP to GAAP
        Financial Measures" below.

    (3) Excludes revenues from MEC's discontinued operations.

    (4) MEC's discontinued operations for the three months ended
        September 30, 2006 include the operations of the Magna Golf Club, the
        sale of which was completed on August 25, 2006, and the operations of
        the Fontana Golf Club, the sale of which was completed on November 1,
        2006. In addition, MEC's discontinued operations for the nine months
        ended September 30, 2006 include the operations of a restaurant and
        related real estate in the United States, the sale of which was
        completed on May 26, 2006,
    -------------------------------------------------------------------------
    

    REAL ESTATE BUSINESS OPERATING HIGHLIGHTS
    -----------------------------------------
    In respect of our core rental portfolio of Magna International Inc.
("Magna") facilities, during the third quarter of 2007 we brought on-stream
two expansion projects, representing an aggregate of 28 thousand square feet
of leaseable area, at a cost of $10.8 million. In addition, we started one
minor expansion project in Austria.
    At September 30, 2007, the Real Estate Business had two properties under
development for Magna: one in Canada and one Austria. These developments are
expansions to existing facilities and will add an aggregate of 39 thousand
square feet of leaseable area to the Real Estate Business' income-producing
portfolio. The total anticipated cost of these projects is approximately
$5.7 million, of which $5.2 million had been incurred at September 30, 2007.
    "Once again, there is very little to report in terms of new projects with
our main customer, Magna International," said John Simonetti, Chief Executive
Officer. "The level of business we have historically received, and become
accustomed to, has dropped off significantly. We continue to monitor this
situation to see if this will translate into a more permanent reduction in the
quantum of business we will receive from Magna."
    At September 30, 2007, the Real Estate Business had 27.2 million square
feet of leaseable area, with annualized lease payments of $173.1 million,
representing a return of 10.6% on the gross carrying value of our
income-producing portfolio.

    MAGNA ENTERTAINMENT CORP. DEBT ELIMINATION PLAN AND FINANCING
    -------------------------------------------------------------
    On September 13, 2007, MID announced that one of its wholly-owned
subsidiaries (the "MID Lender") had agreed to provide a short-term bridge loan
(the "MEC Bridge Loan") of up to $80.0 million to MEC. The MEC Bridge Loan,
together with a private placement of $20.0 million of MEC's Class A
Subordinate Voting Stock ("MEC Class A Stock") to Fair Enterprise Limited
("FEL"), a company that forms part of an estate planning vehicle for the
family of Mr. Frank Stronach, the Company's Chairman and the Chairman and
Interim Chief Executive Officer of MEC, (the "FEL Equity Investment") is
intended to provide immediate funding to MEC as it implements its debt
elimination plan announced on September 13, 2007 (the "MEC Debt Elimination
Plan"). MID also announced amendments to its project financing facilities with
MEC (the "MEC Project Financing Facilities") including, among other things,
requiring repayment of at least $100.0 million under the Gulfstream Park
project financing facility on or prior to May 31, 2008 and waiving the
make-whole payment, if applicable, for any repayments made under the MEC
Project Financing Facilities prior to that date. Pursuant to a consulting
agreement between MID and MEC, which requires MEC to reimburse MID for its
expenses, MID management is assisting MEC in implementing the MEC Debt
Elimination Plan.
    The MEC Debt Elimination Plan is designed to generate aggregate proceeds
of approximately $600 to $700 million through: (i) the sale of certain real
estate, racetracks and other assets; (ii) the sale of, or entering into
strategic transactions involving, MEC's other racing, gaming and technology
operations; and (iii) a possible future equity issuance by MEC, likely in
2008. These proceeds are to be used to fund MEC's operations and eliminate
MEC's net debt, including amounts owed to the MID Lender under the MEC Bridge
Loan and the MEC Project Financing Facilities, by December 31, 2008.
    "Ultimately, given the amount of debt we have owing to us from MEC and
the value of our MEC equity investment, we have a lot at stake and, therefore,
a very strong interest in MEC successfully achieving its debt elimination
plan," said John Simonetti. "Providing the MEC Bridge Loan was intended to
give MEC time to proceed with its planned asset sales in a prudent and orderly
manner, with the beneficiaries being all MEC shareholders, including MID."
    The closing of the FEL Equity Investment occurred on October 29, 2007,
with FEL purchasing 8,888,888 shares of MEC Class A Stock at a price per share
of $2.25. As a result of the FEL Equity Investment, MID's voting interest and
equity stake in MEC were reduced from 96.3% and 58.3%, respectively, to 95.6%
and 53.9%, respectively.
    The MEC Bridge Loan has a maturity date of May 31, 2008 and bears
interest at a fixed rate per annum equal to the London Interbank Offered Rate
plus 10.0%. In the event MEC does not reach certain specified milestones in
connection with the MEC Debt Elimination Plan, the interest rate will be
increased by 1.0% on December 31, 2007 and/or February 29, 2008. The MID
Lender received an arrangement fee of $2.4 million (3% of the commitment) at
closing and will receive an additional arrangement fee on February 29, 2008 of
1% of the then current commitment. The MID Lender will also receive an annual
commitment fee equal to 1% of the undrawn facility. All fees, expenses and
closing costs incurred by the MID Lender in connection with the MEC Bridge
Loan are paid by MEC. The interest rates and fees reflect MID's assessment
(with the benefit of advice from its financial advisors) of the credit risk
associated with MEC, taking into consideration, among other things, MEC's
revised business plan pursuant to the MEC Debt Elimination Plan and the
security package for the MEC Bridge Loan. To date, $26.0 million has been
advanced under the MEC Bridge Loan.

    REAL ESTATE BUSINESS FINANCIAL RESULTS
    --------------------------------------

    Three Months Ended September 30, 2007

    For the three months ended September 30, 2007, revenues were
$47.3 million, a decrease of 1% from revenues of $47.9 million for the three
months ended September 30, 2006. The lower revenues are due to a $2.9 million
reduction of interest and other income earned from the financing arrangements
with MEC, partially offset by a $2.3 million increase in rental revenues. The
reduction of interest and other income from MEC is due primarily to MEC fully
repaying its previous bridge loan from the Company (the "2005 MEC Bridge
Loan") in November 2006. The higher rental revenues are primarily due to
foreign exchange, which had a $2.2 million positive impact as the U.S. dollar
continued to weaken against most foreign currencies. Magna projects coming
on-stream and contractual rent increases also increased revenues by $0.4
million and $0.3 million, respectively. These positive contributions to rental
revenues were partially offset by the impact of disposals and vacancies of
income-producing properties resulting primarily from activities related to
Magna's plant rationalization strategy.
    FFO in the three months ended September 30, 2007 was $37.3 million
compared to $35.0 million in the prior year period, representing an increase
of 7%. The increase in FFO is due to a $2.5 million decrease in general and
administrative expenses and a $1.1 million reduction in net interest expense,
partially offset by a $0.6 million reduction in revenues and a $0.7 million
increase in current income tax expense.
    General and administrative expenses in the third quarter of 2007
decreased by $2.5 million to $4.4 million from $6.9 million in the third
quarter of 2006. General and administrative expenses for the prior year period
include $2.4 million of advisory and other costs incurred in connection with
the Company's evaluation of certain transactions that, ultimately, were not
undertaken. Excluding this item, general and administrative expenses were
$4.5 million in the prior year period.
    Net interest expense was $1.9 million in the three months ended
September 30, 2007 ($3.9 million of interest expense less $2.0 million of
interest income) compared to $2.9 million for the three months ended
September 30, 2006 ($3.6 million of interest expense less $0.7 million of
interest income). The $1.3 million increase in interest income is due
primarily to the Real Estate Business having more cash available for
short-term investment as a result of MEC repaying the 2005 MEC Bridge Loan.
    In the three months ended September 30, 2007, the Real Estate Business'
income tax expense was $3.3 million, representing an effective tax rate of
10.9%. This amount includes (i) a $1.6 million future tax recovery from the
reduction in the future tax rates in Germany, Canada and the United Kingdom,
and (ii) a $1.1 million current tax recovery due to a favourable tax
reassessment in relation to land sold in a prior year. Excluding these items,
the Real Estate Business' income tax expense for the third quarter of 2007 was
$6.0 million, representing an effective tax rate of 19.5% compared to 15.8%
for the third quarter of 2006. This 3.7% increase in the effective tax rate is
primarily due to changes in the overall mix of taxable income earned in the
various countries in which the Real Estate Business operates.
    Net income increased 15% to $27.4 million compared to $23.9 million for
the prior year period. Positive contributions of $4.7 million resulted from a
$2.5 million decrease in general and administrative expenses, a $1.1 million
reduction in net interest expense and a $1.1 million reduction in income tax
expense. These amounts were partially offset by a $0.6 million reduction in
revenues, a $0.5 million increase in depreciation and amortization and a
$0.1 million decrease in gains from the disposal of real estate.

    Nine Months Ended September 30, 2007

    For the nine months ended September 30, 2007 and 2006, overall revenues
remained constant at $138.2 million. Rental revenues increased by $6.8 million
but were offset by an equivalent reduction of interest and other income from
MEC. The higher rental revenues include $2.1 million from completed Magna
projects coming on-stream, $1.1 million from contractual rent increases and a
$4.9 million positive impact from foreign exchange. The impact of Magna plant
rationalizations and other items had a $1.3 million negative impact on rental
revenues. The reduction of interest and other income from MEC is due primarily
to MEC repaying the 2005 MEC Bridge Loan in November 2006.
    FFO in the nine months ended September 30, 2007 of $102.8 million
represents a 1% decrease from the prior year period's FFO of $104.2 million.
The $1.4 million decrease in FFO is due primarily to a $2.9 million increase
in general and administrative expenses and a $1.4 million increase in current
income tax expense, partially offset by a $2.9 million reduction in net
interest expense.
    General and administrative expenses increased by $2.9 million from
$15.1 million in the prior year period to $18.0 million for the nine months
ended September 30, 2007. General and administrative expenses for the first
nine months of 2006 include (i) $2.4 million of advisory and other costs
incurred in connection with the Company's evaluation of certain transactions
that, ultimately, were not undertaken, and (ii) $0.6 million of costs incurred
in association with the Company's defence against the oppression application
brought by Greenlight Capital, Inc. and certain of its affiliates (see
"GREENLIGHT CAPITAL LITIGATION" for further details), which were offset by a
$1.3 million recovery of such costs under the Company's insurance policy.
General and administrative expenses for the first nine months of 2007 include
(i) $2.1 million of advisory and other costs in connection with the Company's
evaluation of certain transactions relating to its continuing assessment of
its relationship with MEC that, ultimately, were not undertaken, (ii)
$2.0 million of costs associated with the Company's contribution of lands to a
not-for-profit organization established by Magna to assist Hurricane Katrina
redevelopment efforts, and (iii) $0.3 million of costs associated with the
Company's defence against the Greenlight Capital Litigation. Excluding these
items, general and administrative expenses increased marginally from
$13.4 million in the prior year period to $13.6 million.
    Net interest expense was $5.4 million in the nine months ended
September 30, 2007 ($11.1 million of interest expense less $5.7 million of
interest income) compared to $8.3 million for the nine months ended
September 30, 2006 ($10.7 million of interest expense less $2.4 million of
interest income). The $3.3 million increase in interest income is due
primarily to the Real Estate Business having more cash available for
short-term investment as a result of MEC repaying the 2005 MEC Bridge Loan.
The $0.4 million increase in interest expense is due primarily to foreign
exchange as the Company's senior unsecured debentures are denominated in
Canadian dollars.
    In the nine months ended September 30, 2007, the Real Estate Business
recognized a $1.5 million gain on the disposal of one property previously held
for sale and two income-producing properties, compared to a $0.2 million gain
on the sale of two income-producing properties in the prior year period.
    During the nine months ended September 30, 2007, the Real Estate Business
recognized $0.7 million of net currency translation gains compared to currency
translation gains of $1.9 million in the nine months ended September 30, 2006.
These gains, which were previously included in the "accumulated comprehensive
income" component of equity, were recognized in the determination of net
income as a result of the Real Estate Business repatriating funds from certain
of its foreign operations. These gains have been excluded from the
determination of the Real Estate Business' FFO.
    In the nine months ended September 30, 2007, the Real Estate Business'
income tax expense was $13.7 million, representing an effective tax rate of
15.9% compared to an effective tax rate of 14.5% in the prior year period. The
income tax expense for the nine months ended September 30, 2007 includes (i) a
$1.6 million future tax recovery from the reduction in future tax rates, (ii)
a $1.1 million current tax recovery due primarily to the favourable tax
reassessment, and (iii) $0.4 million of income tax expense related to the gain
on disposal of real estate. The income tax expense for the nine months ended
September 30, 2006 includes (i) a $2.1 million future tax recovery from a
reduction in the Canadian future tax rate, and (ii) $0.1 million of income tax
expense related to the gain on disposal of real estate. Excluding these items
and the currency translation gains discussed previously, which are not subject
to tax, the Real Estate Business' effective tax rate for the nine months ended
September 30, 2007 was 18.9% compared to 17.2% for the nine months ended
September 30, 2006. This 1.7% increase in the effective tax rate is primarily
due to changes in the mix of taxable income earned in the various countries in
which the Real Estate Business operates.
    Net income for the nine months ended September 30, 2007 decreased 3% to
$72.6 million from $75.2 million in the prior year period. The decrease
resulted primarily from a $1.3 million reduction in dilution and other gains
and increases of $2.9 million in general and administrative expenses,
$1.6 million in depreciation and amortization and $1.0 million in income tax
expense, partially offset by a $2.9 million reduction in net interest expense
and a $1.3 million increase in the gain on disposal of real estate.

    MAGNA ENTERTAINMENT CORP. FINANCIAL RESULTS
    -------------------------------------------
    At September 30, 2007, the market value of MID's shareholding in MEC was
$142.6 million, based on the Nasdaq closing price of $2.27 per share for MEC
Class A Subordinate Voting Stock (NASDAQ:   MECA) on the last trading day prior
to that date.
    MEC's racetracks operate for prescribed periods each year. As a result,
racing revenues and operating results for any quarter will not be indicative
of MEC's revenues and operating results for the year. MEC's results have been
restated to distinguish between results from continuing operations and results
from discontinued operations. MEC's discontinued operations for the three
months ended September 30, 2006 include the operations of the Magna Golf Club,
the sale of which was completed on August 25, 2006, and the operations of the
Fontana Golf Club, the sale of which was completed on November 1, 2006. In
addition, MEC's discontinued operations for the nine months ended
September 30, 2006 include the operations of a restaurant and related real
estate in the United States, the sale of which was completed on May 26, 2006.
    MEC's revenues from continuing operations for the three months ended
September 30, 2007 increased marginally to $115.2 million from $114.9 million
in the prior year period. MEC's revenues from continuing operations for the
nine months ended September 30, 2007 increased 4% to $603.1 million from
$578.0 million in the prior year period. The increase in revenues in the third
quarter of 2007 is due to $2.0 million of higher revenue from sales of housing
units at MEC's European residential development, partially offset by a
$1.7 million decrease in MEC's racing and gaming revenues. The decrease in
racing and gaming revenues is due primarily to 29 fewer live race days at
Golden Gate Fields in the third quarter of 2007 due to a change in the racing
calendar, partially offset by the opening of casino operations at Gulfstream
Park in November 2006 and expanded casino operations in March 2007. The
increase in revenues in the nine months ended September 30, 2007 is primarily
due to the same factors noted above for the third quarter of 2007, except that
revenues were also positively impacted by increased revenues from MEC's
acquisition in July 2006 of the remaining 70% equity interest of AmTote
International, Inc. (the "AmTote Acquisition") and were negatively impacted by
fewer live race days, lower handle and attendance at Thistledown and fewer
live race days at The Meadows.
    Earnings before interest, taxes, depreciation and amortization from MEC's
continuing operations excluding real estate disposal gains, dilution and other
gains and the minority interest impact ("EBITDA") for the three months ended
September 30, 2007 was a loss of $26.1 million compared to a loss of
$20.9 million in the prior year. EBITDA for the nine months ended
September 30, 2007 was $1.6 million compared to $6.0 million in the prior year
period. The decrease in EBITDA for the third quarter of 2007 is due primarily
to increases of $5.8 million in operating costs and $1.9 million in general
and administrative expenses and a $1.4 million non-cash write-down of assets
held for sale in relation to the MEC Debt Elimination Plan, partially offset
by a $3.7 million reduction in purses, awards and other expenses. The increase
in operating costs is primarily due to increased operating costs at Gulfstream
Park for the new casino facility, partially offset by a decrease in costs to
pursue alternative gaming opportunities. General and administrative expenses
increased primarily due to $3.8 million of severance costs paid to the former
owners of the Maryland Jockey Club, partially offset by cost reduction
initiatives. The decrease in purses, awards and other expenses is primarily
due to reductions in live race days at Golden Gate Fields, The Meadows and
Thistledown, partially offset by increased wagering at Lone Star Park due to
five additional race days, and increased expenses due to the opening of the
casino facility at Gulfstream Park in November 2006 and the expanded casino
facility in March 2007. The decrease in EBITDA for the first nine months of
2007 is due primarily to increases of $23.2 million in operating costs related
to the Gulfstream Park casino facility, $4.5 million in general and
administrative expenses largely attributable to MEC's Technology operations
resulting from the AmTote Acquisition and the $1.4 million write-down of
assets held for sale, partially offset by the $25.0 million increase in
revenues.
    MEC recorded a net loss of $29.2 million for the three months ended
September 30, 2007 compared to a net loss of $29.9 million in the three months
ended September 30, 2006. For the nine months ended September 30, 2007, MEC
recorded net income of $8.1 compared to a net loss of $42.7 million in the
prior year period. Excluding the $1.8 million loss from discontinued
operations in the three months ended September 30, 2006, the $1.0 increase in
MEC's net loss in the third quarter of 2007 is due primarily to the
$5.1 million reduction in EBITDA discussed above, partially offset by a
$3.4 million reduction in net interest expense and a $0.9 million increase in
the minority interest recovery. The reduction in interest expense is due to
the repayment of the 2005 MEC Bridge Loan in the fourth quarter of 2006,
reduced borrowings under MEC's $40.0 million senior secured revolving credit
facility with a Canadian financial institution and the repayment of other debt
during 2006 from the proceeds of various asset sales, partially offset by
increased borrowings under the MEC Project Financing Facilities and the MEC
Bridge Loan and $0.5 million less of capitalized interest. Excluding the
$1.3 million loss from discontinued operations in the nine months ended
September 30, 2007, the $49.5 million improvement in MEC's net income in the
first nine months of 2007 is primarily due to a $7.4 million reduction in
interest expense for the reasons noted for the third quarter of 2007 and
$45.9 million of increased gains on the sale of real estate, partially offset
by the $4.4 million reduction in EBITDA discussed above. The increase in the
gains on disposal of real estate is driven by $48.8 million of gains (which
are eliminated from MID's consolidated results) recognized in the first nine
months of 2007 related to the sale of MEC's interests and rights in three real
estate properties to MID, in return for cash consideration of approximately
$79.0 million.

    NORMAL COURSE ISSUER BID
    ------------------------
    Pursuant to the terms of two successive normal course issuer bid
programs, the Company has purchased to date, through the facilities of the
Toronto Stock Exchange ("TSX") and the New York Stock Exchange, 826,100 Class
A Subordinate Voting Shares for cancellation for cash consideration of
approximately $26.8 million (Cdn. $32.91 per share on a weighted average
basis). The price that MID pays for shares purchased pursuant to the bids is
the market price at the time of acquisition. Pursuant to the terms of the
Company's current normal course issuer bid program, for which TSX approval was
received on October 2, 2007, the Company is authorized, during the 12-month
period commencing October 8, 2007 and ending October 7, 2008, to purchase for
cancellation up to 2,531,354 Class A Subordinate Voting Shares, being 10% of
the Public Float (as such term is defined by the TSX). Depending upon future
price movements and other factors, MID believes that its Class A Subordinate
Voting Shares may from time to time represent an attractive investment
alternative for MID and a desirable use of any available funds.

    DIVIDENDS
    ---------
    MID's Board of Directors has declared a dividend of $0.15 per share on
MID's Class A Subordinate Voting Shares and Class B Shares for the third
quarter ended September 30, 2007. The dividend is payable on or about
December 15, 2007 to shareholders of record at the close of business on
November 30, 2007.
    MID has designated the entire amount of all past and future taxable
dividends paid in 2006 and 2007 to be an "eligible dividend" for purposes of
the Income Tax Act (Canada), as amended from time to time unless indicated
otherwise. Please contact your tax advisor if you have any questions with
regard to the designation of eligible dividends.

    GREENLIGHT CAPITAL LITIGATION
    -----------------------------
    On August 2, 2005, Greenlight Capital filed an oppression application in
the Ontario Superior Court of Justice against the Company and certain of its
current and former directors and officers. On October 30, 2006, the Ontario
Superior Court of Justice dismissed the oppression application. On
November 29, 2006, Greenlight filed a Notice of Appeal with the Ontario
Divisional Court and on January 30, 2007, Greenlight filed its Appellants'
factum. The Company and the other respondents filed their responding facta in
July 2007 and the Company expects the appeal hearing to take place in late
January 2008. The Company continues to consider Greenlight's oppression claim
to be without merit and, together with the other respondents, will vigorously
defend against the appeal.

    CONFERENCE CALL
    ---------------
    A conference call will be held for interested analysts and shareholders
to discuss the third quarter's results on November 9, 2007 at 10:30 am EST.
The number to use for this call is 1-866-250-4665. The number for overseas
callers is 416-915-5761. Please call 10 minutes prior to the start of the
conference call. MID will also webcast the conference call at
www.midevelopments.com. The conference call will be chaired by John D.
Simonetti, Chief Executive Officer.
    For anyone unable to listen to the scheduled call, the rebroadcast
numbers will be: North America - 1-877-289-8525 and Overseas - 416-640-1917
(reservation number is 21251122 followed by the number sign) and the
rebroadcast will be available until November 16, 2007.

    ABOUT MID
    ---------
    MID is a real estate operating company focusing primarily on the
ownership, leasing, management, acquisition and development of a predominantly
industrial rental portfolio for Magna and its subsidiaries in North America
and Europe. MID also holds a controlling investment in MEC, North America's
number one owner and operator of horse racetracks, based on revenue, and among
the world's leading suppliers, via simulcasting, of live horse racing content
to the growing intertrack, off-track and account wagering markets.


    
    RECONCILIATION OF NON-GAAP TO GAAP FINANCIAL MEASURES
    REAL ESTATE BUSINESS
    RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS
    (U.S. dollars in thousands, except per share figures)
    (Unaudited)

                                 Three Months               Nine Months
                              Ended September 30,       Ended September 30,
                          ------------------------- -------------------------
                               2007         2006         2007         2006
    -------------------------------------------------------------------------
    Net income            $    27,413  $    23,868  $    72,576  $    75,207
    Add back (deduct):
      Depreciation and
       amortization            10,434        9,914       30,581       29,025
      Future income tax
       expense (recovery)        (494)       1,269        1,361        2,008
      Gain on disposal of
       real estate, net of
       income tax                 (61)         (89)      (1,089)         (95)
      Dilution and other
       gains                        -            -         (652)      (1,921)
    -------------------------------------------------------------------------
    Funds from operations $    37,292  $    34,962  $   102,777  $   104,224
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted
     funds from operations
     per share            $      0.77  $      0.72  $      2.12  $      2.16
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Average number of
     shares outstanding
     (thousands)
      Basic                    48,324       48,295       48,348       48,292
      Diluted                  48,332       48,340       48,369       48,343
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    FORWARD-LOOKING STATEMENTS
    --------------------------
    The contents of this press release may contain statements that, to the
extent they are not recitations of historical fact, constitute
"forward-looking statements" within the meaning of applicable securities
legislation, including the United States Securities Act of 1933 and the United
States Securities Exchange Act of 1934. Forward-looking statements may
include, among others, statements regarding the Company's future plans, goals,
strategies, intentions, beliefs, estimates, costs, objectives, economic
performance or expectations, or the assumptions underlying any of the
foregoing. Words such as "may", "would", "could", "will", "likely", "expect",
"anticipate", "believe", "intend", "plan", "forecast", "project", "estimate"
and similar expressions are used to identify forward-looking statements.
Forward-looking statements should not be read as guarantees of future
performance or results and will not necessarily be accurate indications of
whether or the times at or by which such future performance will be achieved.
Undue reliance should not be placed on such statements. Forward-looking
statements are based on information available at the time and/or management's
good faith assumptions and analyses made in light of our perception of
historical trends, current conditions and expected future developments, as
well as other factors we believe are appropriate in the circumstances, and are
subject to known and unknown risks, uncertainties and other unpredictable
factors, many of which are beyond the Company's control, that could cause
actual events or results to differ materially from such forward-looking
statements. Important factors that could cause such differences include, but
are not limited to, the risks set forth in the "Risk Factors" section in MID's
Annual Information Form for 2006, filed on SEDAR at www.sedar.com and attached
as Exhibit 1 to MID's Annual Report on Form 40-F for the year ended December
31, 2006. The "Risk Factors" section also contains information about the
material factors or assumptions underlying such forward-looking statements. In
addition, the MEC Bridge Loan is expected to be repaid through the sale of MEC
assets as part of the MEC Debt Elimination Plan. If MEC is unable to sell
assets in a timely manner or for the prices contemplated by the MEC Debt
Elimination Plan, MEC may be unable to repay the MEC Bridge Loan by May 31,
2008 or at all, which could have a material adverse effect on MID's financial
condition. Forward-looking statements speak only as of the date the statement
was made and unless otherwise required by applicable securities laws, MID
expressly disclaims any intention and undertakes no obligation to update or
revise any forward-looking statements contained in this press release to
reflect subsequent information, events or circumstances or otherwise.


    
    Consolidated Statements of Income (Loss)
    (U.S. dollars in thousands, except per share figures)
    (Unaudited)

                         Consolidated (notes 1, 15)     Real Estate Business
                         --------------------------  ------------------------
                                         (restated
    Three Months Ended                    - note 3)
     September 30,               2007         2006         2007         2006
    -------------------------------------------------------------------------

    Revenues
    Rental revenue         $   41,924   $   39,582   $   41,924   $   39,582
    Racing and other
     revenue                  115,201      114,933            -            -
    Interest and other
     income from MEC
     (note 15)                      -            -        5,392        8,292
    -------------------------------------------------------------------------
                              157,125      154,515       47,316       47,874
    -------------------------------------------------------------------------
    Operating costs
     and expenses
    Purses, awards
     and other                 46,378       50,107            -            -
    Operating costs            73,428       67,677            -            -
    General and
     administrative            25,628       25,951        4,362        6,893
    Depreciation and
     amortization              22,083       21,272       10,434        9,914
    Interest expense, net       9,567       11,169        1,857        2,925
    Write-down of MEC's
     long-lived assets
     (note 4)                   1,444            -            -            -
    -------------------------------------------------------------------------
    Operating income (loss)   (21,403)     (21,661)      30,663       28,142
    Gain on disposal of
     real estate (note 15)         96          200           96          200
    Dilution and other
     gains                          -           28            -            -
    -------------------------------------------------------------------------
    Income (loss) before
     income taxes and
     minority interest        (21,307)     (21,433)      30,759       28,342
    Income tax expense
     (recovery) (note 11)       2,452        3,647        3,346        4,474
    Minority interest         (20,941)     (20,042)           -            -
    -------------------------------------------------------------------------
    Income (loss) from
     continuing operations     (2,818)      (5,038)      27,413       23,868
    Loss from discontinued
     operations (note 3)            -       (1,772)           -            -
    -------------------------------------------------------------------------
    Net income (loss)      $   (2,818)  $   (6,810)  $   27,413   $   23,868
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted
     loss per Class A
     Subordinate Voting or
     Class B Share (note 5)
      - Continuing
        operations         $    (0.06)  $    (0.11)
      - Discontinued
        operations (note 3)         -        (0.03)
    -----------------------------------------------
    Total                  $    (0.06)  $    (0.14)
    -----------------------------------------------
    -----------------------------------------------

    Basic and diluted
     average number of
     Class A Subordinate
     Voting and Class B
     Shares outstanding
     during the period
     (in thousands) (note 5)   48,324       48,295
    -----------------------------------------------
    -----------------------------------------------


                          Magna Entertainment Corp.
                          -------------------------
                                         (restated
    Three Months Ended                    - note 3)
     September 30,               2007         2006
    -----------------------------------------------

    Revenues
    Rental revenue         $        -   $        -
    Racing and other
     revenue                  115,201      114,933
    Interest and other
     income from MEC
     (note 15)                      -            -
    -----------------------------------------------
                              115,201      114,933
    -----------------------------------------------
    Operating costs
     and expenses
    Purses, awards
     and other                 46,378       50,107
    Operating costs            73,428       67,677
    General and
     administrative            20,014       18,072
    Depreciation and
     amortization              11,724       11,395
    Interest expense, net      13,351       16,737
    Write-down of MEC's
     long-lived assets
     (note 4)                   1,444            -
    -----------------------------------------------
    Operating income (loss)   (51,138)     (49,055)
    Gain on disposal of
     real estate (note 15)        100            -
    Dilution and other
     gains                          -           28
    -----------------------------------------------
    Income (loss) before
     income taxes and
     minority interest        (51,038)     (49,027)
    Income tax expense
     (recovery) (note 11)        (894)        (827)
    Minority interest         (20,941)     (20,042)
    -----------------------------------------------
    Income (loss) from
     continuing operations    (29,203)     (28,158)
    Loss from discontinued
     operations (note 3)            -       (1,772)
    -----------------------------------------------
    Net income (loss)      $  (29,203)  $  (29,930)
    -----------------------------------------------
    -----------------------------------------------

    See accompanying notes



    Consolidated Statements of Income (Loss)
    (U.S. dollars in thousands, except per share figures)
    (Unaudited)

                         Consolidated (notes 1, 15)     Real Estate Business
                         --------------------------  ------------------------
                                         (restated
    Nine Months Ended                     - note 3)
     September 30,               2007         2006         2007         2006
    -------------------------------------------------------------------------

    Revenues
    Rental revenue         $  122,820   $  115,975   $  122,820   $  115,975
    Racing and other
     revenue                  603,078      578,048            -            -
    Interest and other
     income from MEC
     (note 15)                      -            -       15,336       22,216
    -------------------------------------------------------------------------
                              725,898      694,023      138,156      138,191
    -------------------------------------------------------------------------
    Operating costs
     and expenses
    Purses, awards
     and other                287,433      287,102            -            -
    Operating costs           255,810      232,617            -            -
    General and
     administrative            78,153       69,664       18,017       15,105
    Depreciation and
     amortization              63,123       60,880       30,581       29,025
    Interest expense, net      28,747       31,801        5,405        8,265
    Write-down of MEC's
     long-lived assets
     (note 4)                   1,444            -            -            -
    -------------------------------------------------------------------------
    Operating income (loss)    11,188       11,959       84,153       85,796
    Gain on disposal of
     real estate (note 15)      1,478        3,092        1,478          209
    Dilution and other
     gains (note 10)              656        2,106          652        1,921
    -------------------------------------------------------------------------
    Income (loss) before
     income taxes and
     minority interest         13,322       17,157       86,283       87,926
    Income tax expense
     (note 11)                 15,339       14,204       13,707       12,719
    Minority interest         (30,037)     (29,672)           -            -
    -------------------------------------------------------------------------
    Income (loss) from
     continuing operations     28,020       32,625       72,576       75,207
    Loss from discontinued
     operations (note 3)            -       (1,271)           -            -
    -------------------------------------------------------------------------
    Net income (loss)      $   28,020   $   31,354   $   72,576   $   75,207
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted
     earnings per Class A
     Subordinate Voting or
     Class B Share (note 5)
      - Continuing
        operations         $     0.58   $     0.67
      - Discontinued
        operations (note 3)         -        (0.02)
    -----------------------------------------------
    Total                  $     0.58   $     0.65
    -----------------------------------------------
    -----------------------------------------------

    Average number of
     Class A Subordinate
     Voting and Class B
     Shares outstanding
     during the period
     (in thousands)
     (note 5)
      - Basic                  48,348       48,292
      - Diluted                48,369       48,343
    -----------------------------------------------
    -----------------------------------------------


                          Magna Entertainment Corp.
                          -------------------------
                                         (restated
    Nine Months Ended                     - note 3)
     September 30,               2007         2006
    -----------------------------------------------

    Revenues
    Rental revenue         $        -   $        -
    Racing and other
     revenue                  603,078      578,048
    Interest and other
     income from MEC
     (note 15)                      -            -
    -----------------------------------------------
                              603,078      578,048
    -----------------------------------------------
    Operating costs
     and expenses
    Purses, awards
     and other                287,433      287,102
    Operating costs           255,810      232,617
    General and
     administrative            56,799       52,331
    Depreciation and
     amortization              32,690       31,955
    Interest expense, net      39,332       46,777
    Write-down of MEC's
     long-lived assets
     (note 4)                   1,444            -
    -----------------------------------------------
    Operating income (loss)   (70,430)     (72,734)
    Gain on disposal of
     real estate (note 15)     48,754        2,883
    Dilution and other
     gains (note 10)                4          185
    -----------------------------------------------
    Income (loss) before
     income taxes and
     minority interest        (21,672)     (69,666)
    Income tax expense
     (note 11)                    301        1,485
    Minority interest         (30,037)     (29,672)
    -----------------------------------------------
    Income (loss) from
     continuing operations      8,064      (41,479)
    Loss from discontinued
     operations (note 3)            -       (1,271)
    -----------------------------------------------
    Net income (loss)      $    8,064   $  (42,750)
    -----------------------------------------------
    -----------------------------------------------

    See accompanying notes



    Consolidated Statements of Comprehensive Income (Loss)
    (Refer to note 2 - Accounting Changes)
    (U.S. dollars in thousands)
    (Unaudited)

                                 Three Months               Nine Months
                              Ended September 30,       Ended September 30,
                          ------------------------- -------------------------
                               2007         2006         2007         2006
    -------------------------------------------------------------------------

    Net income (loss)     $    (2,818) $    (6,810) $    28,020  $    31,354
    Other comprehensive
     income (loss):
      Change in fair value
       of interest rate
       swaps, net of taxes
       and minority
       interest (note 10)        (191)           -         (247)           -
      Foreign currency
       translation
       adjustment, net of
       minority interest
       (note 10)               45,869       (3,719)      80,717       50,342
      Reversal of
       foreign currency
       translation gain
       related to shares
       purchased for
       cancellation
       (note 8)                (5,778)           -       (5,778)           -
      Recognition of
       foreign currency
       translation gain in
       net income (note 10)         -            -         (652)      (1,921)
    -------------------------------------------------------------------------
    Comprehensive income
     (loss)               $    37,082  $   (10,529) $   102,060  $    79,775
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes



    Consolidated Statements of Changes in Deficit
    (U.S. dollars in thousands)
    (Unaudited)

                                 Three Months               Nine Months
                              Ended September 30,       Ended September 30,
                          ------------------------- -------------------------
                               2007         2006         2007         2006
    -------------------------------------------------------------------------

    Deficit, beginning
     of period            $   (52,785) $   (75,850) $   (69,112) $   (99,527)
    Net income (loss)          (2,818)      (6,810)      28,020       31,354
    Dividends                  (7,255)      (7,244)     (21,766)     (21,731)
    -------------------------------------------------------------------------
    Deficit, end of
     period               $   (62,858) $   (89,904) $   (62,858) $   (89,904)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes



    Consolidated Statements of Cash Flows
    (U.S. dollars in thousands)
    (Unaudited)

                         Consolidated (notes 1, 15)     Real Estate Business
                         --------------------------  ------------------------
                                         (restated
    Three Months Ended                    - note 3)
     September 30,               2007         2006         2007         2006
    -------------------------------------------------------------------------

    OPERATING ACTIVITIES
    Income (loss) from
     continuing operations $   (2,818)  $   (5,038)  $   27,413   $   23,868
    Items not involving
     current cash flows
     (note 13)                  1,245        3,772       10,149        6,967
    Changes in non-cash
     balances (note 13)         6,350        9,108        2,476        2,128
    -------------------------------------------------------------------------
    Cash provided by
     (used in) operating
     activities                 4,777        7,842       40,038       32,963
    -------------------------------------------------------------------------
    INVESTMENT ACTIVITIES
    Acquisition of business,
     net of cash acquired
     (note 3)                       -       (9,347)           -            -
    Property and fixed
     asset additions          (27,149)     (19,703)      (7,082)      (6,589)
    Proceeds on disposal
     of real estate
     properties and fixed
     assets, net                3,529        3,752          927        3,099
    Decrease (increase)
     in other assets             (696)        (438)          (4)          90
    Loan advances to
     MEC, net                       -            -      (10,780)      (7,684)
    Loan repayments from MEC        -            -        2,065        1,600
    -------------------------------------------------------------------------
    Cash used in investment
     activities               (24,316)     (25,736)     (14,874)      (9,484)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
    Proceeds from bank
     indebtedness              25,199       18,129            -            -
    Issuance of long-term
     debt                         205        6,927            -            -
    Repayment of long-term
     debt                      (2,316)      (2,592)        (109)         (91)
    Loan advances from MID,
     net                            -            -            -            -
    Loan repayments to MID          -            -            -            -
    Issuance of shares              -          855            -          855
    Shares purchased for
     cancellation             (11,836)           -      (11,836)           -
    Dividends paid             (7,255)      (7,244)      (7,255)      (7,244)
    -------------------------------------------------------------------------
    Cash provided by
     (used in) financing
     activities                 3,997       16,075      (19,200)      (6,480)
    -------------------------------------------------------------------------
    Effect of exchange rate
     changes on cash and
     cash equivalents           4,506           (5)       4,300          202
    -------------------------------------------------------------------------
    Net cash flows provided
     by (used in) continuing
     operations               (11,036)      (1,824)      10,264       17,201
    -------------------------------------------------------------------------
    DISCONTINUED OPERATIONS
    Cash used in operating
     activities                     -       (6,677)           -            -
    Cash provided by
     investing activities           -       46,056            -            -
    Cash used in financing
     activities                     -      (26,699)           -            -
    -------------------------------------------------------------------------
    Net cash flows provided
     by discontinued
     operations (note 3)            -       12,680            -            -
    -------------------------------------------------------------------------
    Net increase (decrease)
     in cash and cash
     equivalents during
     the period               (11,036)      10,856       10,264       17,201
    Cash and cash
     equivalents,
     beginning of period      203,407      104,214      147,983       66,730
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end
     of period             $  192,371   $  115,070   $  158,247   $   83,931
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                          Magna Entertainment Corp.
                          -------------------------
                                         (restated
    Three Months Ended                    - note 3)
     September 30,               2007         2006
    -----------------------------------------------

    OPERATING ACTIVITIES
    Income (loss) from
     continuing operations $  (29,203)  $  (28,158)
    Items not involving
     current cash flows
     (note 13)                 (8,605)      (2,057)
    Changes in non-cash
     balances (note 13)         3,159        6,506
    -----------------------------------------------
    Cash provided by
     (used in) operating
     activities               (34,649)     (23,709)
    -----------------------------------------------
    INVESTMENT ACTIVITIES
    Acquisition of business,
     net of cash acquired
     (note 3)                       -       (9,347)
    Property and fixed
     asset additions          (20,147)     (13,114)
    Proceeds on disposal
     of real estate
     properties and fixed
     assets, net                2,702          653
    Decrease (increase)
     in other assets             (692)        (528)
    Loan advances to
     MEC, net                       -            -
    Loan repayments from MEC        -            -
    -----------------------------------------------
    Cash used in investment
     activities               (18,137)     (22,336)
    -----------------------------------------------
    FINANCING ACTIVITIES
    Proceeds from bank
     indebtedness              25,199       18,129
    Issuance of long-term
     debt                         205        6,927
    Repayment of long-term
     debt                      (2,207)      (2,501)
    Loan advances from MID,
     net                       10,148        6,272
    Loan repayments to MID     (2,065)      (1,600)
    Issuance of shares              -            -
    Shares purchased for
     cancellation                   -            -
    Dividends paid                  -            -
    -----------------------------------------------
    Cash provided by
     (used in) financing
     activities                31,280       27,227
    -----------------------------------------------
    Effect of exchange rate
     changes on cash and
     cash equivalents             206         (207)
    -----------------------------------------------
    Net cash flows provided
     by (used in) continuing
     operations               (21,300)     (19,025)
    -----------------------------------------------
    DISCONTINUED OPERATIONS
    Cash used in operating
     activities                     -       (6,677)
    Cash provided by
     investing activities           -       46,056
    Cash used in financing
     activities                     -      (26,699)
    -----------------------------------------------
    Net cash flows provided
     by discontinued
     operations (note 3)            -       12,680
    -----------------------------------------------
    Net increase (decrease)
     in cash and cash
     equivalents during
     the period               (21,300)      (6,345)
    Cash and cash
     equivalents,
     beginning of period       55,424       37,484
    -----------------------------------------------
    Cash and cash
     equivalents, end
     of period             $   34,124   $   31,139
    -----------------------------------------------
    -----------------------------------------------

    See accompanying notes



    Consolidated Statements of Cash Flows
    (U.S. dollars in thousands)
    (Unaudited)

                         Consolidated (notes 1, 15)     Real Estate Business
                         --------------------------  ------------------------
                                         (restated
    Nine Months Ended                     - note 3)
     September 30,               2007         2006         2007         2006
    -------------------------------------------------------------------------

    OPERATING ACTIVITIES
    Income (loss) from
     continuing operations $   28,020   $   32,625   $   72,576   $   75,207
    Items not involving
     current cash flows
     (note 13)                 33,519       31,848       30,904       18,133
    Changes in non-cash
     balances (note 13)          (994)     (18,014)      10,563       (5,656)
    -------------------------------------------------------------------------
    Cash provided by
     (used in) operating
     activities                60,545       46,459      114,043       87,684
    -------------------------------------------------------------------------
    INVESTMENT ACTIVITIES
    Acquisition of business,
     net of cash acquired
     (note 3)                       -       (9,347)           -            -
    Property and fixed
     asset additions          (76,055)    (102,820)    (105,956)     (32,894)
    Proceeds on disposal
     of real estate
     properties and fixed
     assets, net               11,859       17,977        6,321        8,921
    Decrease (increase)
     in other assets           (1,731)      (2,242)          54         (867)
    Loan advances to
     MEC, net                       -            -      (27,463)     (69,808)
    Loan repayments from MEC        -            -        4,425        3,400
    -------------------------------------------------------------------------
    Cash provided by
     (used in) investment
     activities               (65,927)     (96,432)    (122,619)     (91,248)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
    Proceeds from bank
     indebtedness              40,940       18,129            -            -
    Repayment of bank
     indebtedness             (21,515)      (5,500)           -            -
    Issuance of long-term
     debt                       4,345       12,134            -            -
    Repayment of long-term
     debt                     (51,647)     (12,765)        (298)        (267)
    Loan advances from MID,
     net                            -            -            -            -
    Loan repayments to MID          -            -            -            -
    Issuance of shares          1,058          855        1,058          855
    Shares purchased for
     cancellation             (11,836)           -      (11,836)           -
    Dividends paid            (21,766)     (21,731)     (21,766)     (21,731)
    -------------------------------------------------------------------------
    Cash provided by
     (used in) financing
     activities               (60,421)      (8,878)     (32,842)     (21,143)
    -------------------------------------------------------------------------
    Effect of exchange rate
     changes on cash and
     cash equivalents           7,919        2,752        7,799        3,156
    -------------------------------------------------------------------------
    Net cash flows used in
     continuing operations    (57,884)     (56,099)     (33,619)     (21,551)
    -------------------------------------------------------------------------
    DISCONTINUED OPERATIONS
    Cash used in operating
     activities                     -       (1,299)           -            -
    Cash provided by
     investing activities           -       47,435            -            -
    Cash used in financing
     activities                     -      (32,427)           -            -
    -------------------------------------------------------------------------
    Net cash flows provided
     by discontinued
     operations (note 3)            -       13,709            -            -
    -------------------------------------------------------------------------
    Net decrease in cash
     and cash equivalents
     during the period        (57,884)     (42,390)     (33,619)     (21,551)
    Cash and cash
     equivalents,
     beginning of period      250,255      157,460      191,866      105,482
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end
     of period             $  192,371   $  115,070   $  158,247   $   83,931
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                          Magna Entertainment Corp.
                          -------------------------
                                         (restated
    Nine Months Ended                     - note 3)
     September 30,               2007         2006
    -----------------------------------------------

    OPERATING ACTIVITIES
    Income (loss) from
     continuing operations $    8,064   $  (41,479)
    Items not involving
     current cash flows
     (note 13)                (46,708)      17,272
    Changes in non-cash
     balances (note 13)       (12,101)     (14,059)
    -----------------------------------------------
    Cash provided by
     (used in) operating
     activities               (50,745)     (38,266)
    -----------------------------------------------
    INVESTMENT ACTIVITIES
    Acquisition of business,
     net of cash acquired
     (note 3)                       -       (9,347)
    Property and fixed
     asset additions          (59,580)     (69,926)
    Proceeds on disposal
     of real estate
     properties and fixed
     assets, net               93,252        9,056
    Decrease (increase)
     in other assets           (1,785)      (1,375)
    Loan advances to
     MEC, net                       -            -
    Loan repayments from MEC        -            -
    -----------------------------------------------
    Cash provided by
     (used in) investment
     activities                31,887      (71,592)
    -----------------------------------------------
    FINANCING ACTIVITIES
    Proceeds from bank
     indebtedness              40,940       18,129
    Repayment of bank
     indebtedness             (21,515)      (5,500)
    Issuance of long-term
     debt                       4,345       12,134
    Repayment of long-term
     debt                     (51,349)     (12,498)
    Loan advances from MID,
     net                       26,477       66,849
    Loan repayments to MID     (4,425)      (3,400)
    Issuance of shares              -            -
    Shares purchased for
     cancellation                   -            -
    Dividends paid                  -            -
    -----------------------------------------------
    Cash provided by
     (used in) financing
     activities                (5,527)      75,714
    -----------------------------------------------
    Effect of exchange rate
     changes on cash and
     cash equivalents             120         (404)
    -----------------------------------------------
    Net cash flows used in
     continuing operations    (24,265)     (34,548)
    -----------------------------------------------
    DISCONTINUED OPERATIONS
    Cash used in operating
     activities                     -       (1,299)
    Cash provided by
     investing activities           -       47,435
    Cash used in financing
     activities                     -      (32,427)
    -----------------------------------------------
    Net cash flows provided
     by discontinued
     operations (note 3)            -       13,709
    -----------------------------------------------
    Net decrease in cash
     and cash equivalents
     during the period        (24,265)     (20,839)
    Cash and cash
     equivalents,
     beginning of period       58,389       51,978
    -----------------------------------------------
    Cash and cash
     equivalents, end
     of period             $   34,124   $   31,139
    -----------------------------------------------
    -----------------------------------------------

    See accompanying notes



    Consolidated Balance Sheets
    (Refer to note 1 - Basis of Presentation)
    (U.S. dollars in thousands)
    (Unaudited)

                         Consolidated (notes 1, 15)     Real Estate Business
                         --------------------------  ------------------------
                                         (restated
                                          - note 4)
                            September     December    September     December
    As at                    30, 2007     31, 2006     30, 2007     31, 2006
    -------------------------------------------------------------------------
    ASSETS
    Current assets:
      Cash and cash
       equivalents         $  192,371   $  250,255   $  158,247   $  191,866
      Restricted cash
       (note 15)               33,914       40,708        5,311        6,514
      Accounts receivable      37,932       43,740        5,992        7,749
      Loans receivable from
       MEC, net (note 15)           -            -      111,799        3,108
      Due from MID (note 15)        -            -            -            -
      Income taxes
       receivable                 372        1,934           45        1,354
      Prepaid expenses
       and other               19,891       16,044        1,823          966
    -------------------------------------------------------------------------
                              284,480      352,681      283,217      211,557
    Real estate properties,
     net (note 6)           2,294,403    2,158,646    1,536,094    1,348,621
    Fixed assets, net          85,943       93,406          474          554
    Racing licences           109,868      109,868            -            -
    Other assets                6,679       11,711          905        3,061
    Loans receivable from
     MEC (note 15)                  -            -       97,865      182,876
    Deferred rent
     receivable                14,743       13,818       14,743       13,818
    Future tax assets          51,283       52,038        6,063        7,277
    Assets held for sale
     (note 4)                  29,150       30,128            -            -
    -------------------------------------------------------------------------
                           $2,876,549   $2,822,296   $1,939,361   $1,767,764
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    LIABILITIES AND
     SHAREHOLDERS' EQUITY
    Current liabilities:
      Bank indebtedness
       (note 7)            $   25,940   $    6,515   $        -   $        -
      Accounts payable and
       accrued liabilities    146,919      157,274       26,909       13,317
      Income taxes payable     11,239        7,083       11,239        7,083
      Loan payable to MID,
       net (note 15)                -            -            -            -
      Due to MEC (note 15)          -            -        5,314        6,648
      Long-term debt due
       within one year
       (note 7)                53,000       86,155          469          378
      Deferred revenue          4,971        8,311        1,845        2,451
    -------------------------------------------------------------------------
                              242,069      265,338       45,776       29,877
    Long-term debt (note 7)    91,706       99,850        6,651        5,991
    Senior unsecured
     debentures, net          262,709      226,596      262,709      226,596
    Note obligations, net     214,416      215,830            -            -
    Loans payable to MID,
     net (note 15)                  -            -            -            -
    Other long-term
     liabilities               16,117       15,787            -            -
    Future tax liabilities    145,775      140,444       50,414       46,090
    Liabilities related to
     assets held for sale
     (note 4)                   1,047        1,047            -            -
    Minority interest         153,064      180,108            -            -
    -------------------------------------------------------------------------
                            1,126,903    1,145,000      365,550      308,554
    -------------------------------------------------------------------------
    Shareholders' equity:
    Share capital (note 8)  1,562,792    1,577,342
    Contributed surplus
     (note 9)                   9,119        2,667
    Deficit                   (62,858)     (69,112)
    Accumulated
     comprehensive income
     (note 10)                240,593      166,399
    -------------------------------------------------------------------------
                            1,749,646    1,677,296    1,573,811    1,459,210
    -------------------------------------------------------------------------
                           $2,876,549   $2,822,296   $1,939,361   $1,767,764
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                          Magna Entertainment Corp.
                          -------------------------
                                         (restated
                                          - note 4)
                            September     December
    As at                    30, 2007     31, 2006
    -----------------------------------------------
    ASSETS
    Current assets:
      Cash and cash
       equivalents         $   34,124   $   58,389
      Restricted cash
       (note 15)               28,603       34,194
      Accounts receivable      31,940       35,991
      Loans receivable from
       MEC, net (note 15)           -            -
      Due from MID (note 15)    5,314        6,648
      Income taxes
       receivable                 327          580
      Prepaid expenses
       and other               18,748       15,304
    -----------------------------------------------
                              119,056      151,106
    Real estate properties,
     net (note 6)             813,817      815,063
    Fixed assets, net          85,469       92,852
    Racing licences           109,868      109,868
    Other assets                5,774       14,276
    Loans receivable from
     MEC (note 15)                  -            -
    Deferred rent
     receivable                     -            -
    Future tax assets          45,220       44,761
    Assets held for sale
     (note 4)                  29,150       30,128
    -----------------------------------------------
                           $1,208,354   $1,258,054
    -----------------------------------------------
    -----------------------------------------------
    LIABILITIES AND
     SHAREHOLDERS' EQUITY
    Current liabilities:
      Bank indebtedness
       (note 7)            $   25,940   $    6,515
      Accounts payable and
       accrued liabilities    120,010      143,957
      Income taxes payable          -            -
      Loan payable to MID,
       net (note 15)          110,120        3,108
      Due to MEC (note 15)          -            -
      Long-term debt due
       within one year
       (note 7)                52,531       85,777
      Deferred revenue          3,491        6,098
    -----------------------------------------------
                              312,092      245,455
    Long-term debt (note 7)    85,055       93,859
    Senior unsecured
     debentures, net                -            -
    Note obligations, net     214,416      215,830
    Loans payable to MID,
     net (note 15)             93,426      182,876
    Other long-term
     liabilities               16,117       15,787
    Future tax liabilities     94,030       94,354
    Liabilities related to
     assets held for sale
     (note 4)                   1,047        1,047
    Minority interest         153,064      180,108
    -----------------------------------------------
                              969,247    1,029,316
    -----------------------------------------------
    Shareholders' equity:
    Share capital (note 8)
    Contributed surplus
     (note 9)
    Deficit
    Accumulated
     comprehensive income
     (note 10)
    -----------------------------------------------
                              239,107      228,738
    -----------------------------------------------
                           $1,208,354   $1,258,054
    -----------------------------------------------
    -----------------------------------------------
    Commitments and contingencies (note 16)

    See accompanying notes



    Notes to Interim Consolidated Financial Statements
    (All amounts in U.S. dollars and all tabular amounts in thousands unless
     otherwise noted)
    (All amounts as at September 30, 2007 and 2006 and for the three-month
     and nine-month periods ended September 30, 2007 and 2006 are unaudited)

    1.  BASIS OF PRESENTATION

    The unaudited interim consolidated financial statements include the
    accounts of MI Developments Inc. and its subsidiaries (collectively,
    "MID" or the "Company"). MID is a real estate operating company that
    currently owns, leases, manages and develops a predominantly industrial
    rental portfolio leased primarily to Magna International Inc. and its
    automotive operating units ("Magna"). The Company also holds an
    investment in Magna Entertainment Corp. ("MEC"), an owner and operator of
    horse racetracks and a supplier of live racing content to the inter-
    track, off-track and account wagering markets. At September 30, 2007, the
    Company owned approximately 58% of MEC's total equity, representing
    approximately 96% of the total voting power of its outstanding stock (see
    note 17 for details on the subsequent reduction of these figures). MEC's
    results are consolidated with the Company's results, with outside
    ownership accounted for as a minority interest.

    (a) Magna Entertainment Corp.

        The results of operations and the financial position of MEC have been
        included in these unaudited interim consolidated financial statements
        on a going concern basis, which contemplates the realization of MEC's
        assets and the discharge of MEC's liabilities in the normal course of
        business for the foreseeable future. MEC has incurred net losses
        before minority interest recovery of $65.4 million, $107.4 million
        and $97.5 million for the years ended December 31, 2006, 2005 and
        2004, respectively, and has a working capital deficiency of
        $193.0 million at September 30, 2007. Accordingly, MEC's ability to
        continue as a going concern is in substantial doubt and is dependent
        on MEC generating cash flows that are adequate to sustain the
        operations of the business, renew or extend current financing
        arrangements and meet its obligations with respect to secured and
        unsecured creditors, none of which is assured. During the nine months
        ended September 30, 2007, MEC sold all of its interests and rights in
        four real estate properties to MID for aggregate proceeds of
        approximately $89.1 million (note 15). On September 12, 2007, MEC's
        Board of Directors approved a debt elimination plan (the "MEC Debt
        Elimination Plan") designed to eliminate MEC's net debt by
        December 31, 2008 by generating aggregate proceeds of approximately
        $600 to $700 million from the sale of assets (note 4), entering into
        strategic transactions involving certain of MEC's racing, gaming and
        technology operations, and a possible future equity issuance. In
        addition, to address immediate liquidity concerns and provide
        sufficient time to implement the MEC Debt Elimination Plan, MEC
        arranged $100.0 million of funding, comprised of (i) a private
        placement of $20.0 million of MEC's Class A Subordinate Voting Stock
        ("MEC Class A Stock") to Fair Enterprise Limited ("FEL"), a company
        that forms part of an estate planning vehicle for the family of Mr.
        Frank Stronach, the Company's Chairman and the Chairman and Interim
        Chief Executive Officer of MEC (note 17); and (ii) a short-term
        bridge loan (the "MEC Bridge Loan") of up to $80.0 million from a
        wholly-owned subsidiary of MID ("the MID Lender") (note 15). Whether
        the MEC Debt Elimination Plan will be successful is not determinable
        at this time. These unaudited interim consolidated financial
        statements do not give effect to any adjustments which would be
        necessary should MEC be unable to continue as a going concern and,
        therefore, be required to realize its assets and discharge its
        liabilities in other than the normal course of business and at
        amounts different from those reflected in the accompanying unaudited
        interim consolidated financial statements.

        The uncertainty regarding MEC's ability to continue as a going
        concern does not impact the realization of the Company's assets and
        discharge of its liabilities in the normal course of business.

        MEC's racing business is seasonal in nature and racing revenues and
        operating results for any quarter will not be indicative of the
        racing revenues and operating results for the year. MEC's racing
        operations have historically operated at a loss in the second half of
        the year, with the third quarter typically generating the largest
        operating loss. This seasonality has resulted in large quarterly
        fluctuations in MEC's revenues and operating results.

    (b) Consolidated Financial Statements

        The unaudited interim consolidated financial statements have been
        prepared in U.S. dollars following Canadian generally accepted
        accounting principles ("GAAP") and the accounting policies as set out
        in the annual consolidated financial statements for the year ended
        December 31, 2006.

        The unaudited interim consolidated financial statements do not
        conform in all respects to the requirements of generally accepted
        accounting principles for annual financial statements. Accordingly,
        these unaudited interim consolidated financial statements should be
        read in conjunction with the annual consolidated financial statements
        for the year ended December 31, 2006, except as disclosed in note 2.

        In the opinion of management, the unaudited interim consolidated
        financial statements reflect all adjustments necessary to present
        fairly the financial position at September 30, 2007 and 2006, and the
        results of operations and cash flows for the three-month and
        nine-month periods ended September 30, 2007 and 2006.

        Financial data and related measurements are presented on the
        unaudited interim consolidated statements of income (loss), unaudited
        interim consolidated statements of cash flows, and unaudited interim
        consolidated balance sheets in two categories, "Real Estate Business"
        and "Magna Entertainment Corp.", which correspond to the Company's
        reporting segments as described in note 14 to the unaudited interim
        consolidated financial statements. Transactions and balances between
        the "Real Estate Business" and "Magna Entertainment Corp." segments
        have not been eliminated in the presentation of each segment's
        financial data and related measurements. However, the effects of
        transactions between these two segments, which are further described
        in note 15, are eliminated in the consolidated results of operations
        and financial position of the Company.

        The Company has reclassified certain prior period amounts to reflect
        the restatement for MEC's discontinued operations (note 3(c)) and
        MEC's assets held for sale (note 4).

    2.  ACCOUNTING CHANGES

    The Canadian Institute of Chartered Accountants issued three new
    standards in January 2005 (which have since been further amended) in
    Handbook Sections 1530, "Comprehensive Income", 3855, "Financial
    Instruments - Recognition and Measurement", and 3865, "Hedges". These
    standards provide guidance for the recognition, classification and
    measurement of financial instruments in financial statements as follows:

    -   All financial instruments, including derivatives, are to be included
        on a company's balance sheet and measured, either at their fair
        values or, under certain circumstances, at cost or amortized cost.
        The standards also specify when unrealized gains and losses as a
        result of changes in fair values are to be recognized in the
        consolidated statement of income (loss).

    -   Existing requirements for hedge accounting are extended to
        comprehensively specify how hedge accounting should be performed.

    -   Certain unrealized gains and losses arising from changes in fair
        value of financial instruments will be temporarily recorded outside
        the consolidated statement of income (loss) in "other comprehensive
        income (loss)".

    These new standards are required to be adopted on a prospective basis for
    annual and interim periods in the first fiscal year beginning on or after
    October 1, 2006. In accordance with the prescribed transitional
    provisions, the Company adopted these standards effective January 1, 2007
    without restatement of prior periods, except to classify the "currency
    translation adjustment" component of shareholders' equity as a component
    of "accumulated comprehensive income".

    Under the new standards, all of the Company's consolidated financial
    assets must be classified as "held for trading", "held to maturity",
    "loans and receivables" or "available-for-sale" and all of the Company's
    consolidated financial liabilities must be classified as "held for
    trading" or "other financial liabilities". All of the Company's
    consolidated financial instruments are initially measured at fair value
    with subsequent measurement depending on the classification of each
    financial instrument.

    "Held for trading" financial assets, which include "cash and cash
    equivalents" and "restricted cash", are measured at fair value and all
    gains and losses are included in net income in the period in which they
    arise. "Loans and receivables", which include "accounts receivable" and
    certain "other assets" are recorded at amortized cost. The Company does
    not currently have any consolidated financial assets classified as "held
    to maturity" or "available for sale".

    "Other financial liabilities", which include "bank indebtedness",
    "accounts payable and accrued liabilities", "dividends payable", current
    and non-current portions of "long-term debt", "senior unsecured
    debentures, net", and "note obligations, net" are recorded at amortized
    cost. The Company does not currently have any consolidated financial
    liabilities classified as "held for trading".

    These standards had the following impact on the Company's unaudited
    interim consolidated financial statements upon adoption:

                                                                    Increase
    As at January 1, 2007                                          (Decrease)
    -------------------------------------------------------------------------

    Assets
      Real Estate Business - other assets -
       deferred financing costs(i)                               $    (2,216)
      MEC - other assets - deferred financing costs(i)                (9,191)
      MEC - other assets - interest rate swaps(iii)                      439
      Eliminations - other assets                                      5,626
    -------------------------------------------------------------------------
      Consolidated assets                                        $    (5,342)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities
      Real Estate Business - senior unsecured debentures(i)      $    (2,216)
      MEC - long-term debt due within one year(i)                        (23)
      MEC - note obligations(i)                                       (3,542)
      MEC - loans payable to MID(i)                                   (5,626)
      MEC - future tax liabilities(iii)                                  176
      MEC - minority interest(iii)                                       109
      Eliminations - loans payable to MID                              5,626
    -------------------------------------------------------------------------
      Consolidated liabilities                                        (5,496)
    -------------------------------------------------------------------------
    Shareholders' equity
      MEC - accumulated comprehensive income(ii),(iii)                   154
    -------------------------------------------------------------------------
      Consolidated shareholders' equity                                  154
    -------------------------------------------------------------------------
    Consolidated liabilities and shareholders' equity            $    (5,342)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (i)   Deferred Financing Costs

          As permitted by the new standards, the Company's policy for the
          treatment of financing costs related to the issuance of debt is to
          present debt instruments on the consolidated balance sheet net of
          the related financing costs with the net balance accreting to the
          face value of the debt over its term. Prior to January 1, 2007, the
          Company included deferred financing costs on the consolidated
          balance sheet in "other assets".

    (ii)  Other Comprehensive Income (Loss) and Accumulated Comprehensive
          Income

          The new standards require the presentation of a new statement of
          comprehensive income (loss), which is comprised of net income, the
          net unrealized foreign exchange gain or loss for the period related
          to the Company's net investment in foreign operations and changes
          in unrealized gains or losses related to cash flow hedges.
          Similarly, these changes are required to be accumulated on the
          consolidated balance sheet in a separate component of shareholders'
          equity, "accumulated comprehensive income".

    (iii) Hedging Derivative Financial Instruments

          The new standards require all hedging derivative financial
          instruments to be recognized on the consolidated balance sheet at
          fair value.

          The types of hedging relationships that qualify for hedge
          accounting have been specified under the new standards but do not
          have an impact on the Company's policies or criteria for the use of
          financial instruments and hedge accounting. A description of the
          Company's policies for the use of derivative financial instruments
          is included in notes 1 and 20 to the Company's consolidated
          financial statements for the year ended December 31, 2006. The new
          standards did not impact the accounting for the Company's use of
          derivative financial instruments at January 1, 2007 except as
          discussed below for interest rate swaps.

        Interest Rate Swaps

        MEC occasionally utilizes interest rate swap contracts as hedging
        instruments to hedge exposure to interest rate fluctuations on its
        variable rate debt. These swap contracts are accounted for using
        hedge accounting with the fair value of the hedging instrument being
        recognized on the Company's consolidated balance sheet. To the extent
        that changes in the fair value of the hedging instrument offsets
        changes in the fair value of the hedged item, they are recorded in
        "other comprehensive income (loss)" and "accumulated comprehensive
        income". Any portion of the change in fair value of the hedging
        instrument that does not offset changes in the fair value of the
        hedged item (the ineffectiveness of the hedge) is recorded directly
        in the consolidated statement of income (loss).

        For hedges that are discontinued before the end of the original hedge
        term, the unrealized gain or loss in "accumulated comprehensive
        income" is amortized in the consolidated statement of income (loss)
        over the remaining term of the original hedge. If the hedged item is
        sold or settled, the entire unrealized gain or loss is recognized in
        the consolidated statement of income (loss).

        On January 1, 2007, MEC's interest rate swaps were measured and
        recognized as an asset with a fair value of $439 thousand with a
        related future tax liability of $176 thousand and minority interest
        liability of $109 thousand, resulting in a net amount of
        $154 thousand being recorded in opening accumulated comprehensive
        income. This amount is expected to be reclassified to the
        consolidated statement of income over the year ended December 31,
        2007.

    3.  BUSINESS ACQUISITION AND DISPOSALS

    (a) Acquisition of AmTote

        On August 22, 2003, MEC Maryland Investments Inc. ("MEC Maryland"), a
        wholly-owned subsidiary of MEC, acquired a 30% interest in AmTote
        International, Inc. ("AmTote") for a total cash purchase price,
        including transaction costs, of $4.3 million. At the same time, MEC
        Maryland was also granted options to acquire the remaining 70% of
        AmTote.

        On July 26, 2006, MEC Maryland acquired the remaining 70% equity
        interest of AmTote for a total cash purchase price of $9.3 million,
        including transaction costs of $0.1 million, net of cash acquired of
        $5.5 million.

        AmTote is a provider of totalisator services to the North American
        pari-mutuel industry with service contracts with over 70 North
        American racetracks and other wagering entities.

        The purchase price has been allocated to the assets and liabilities
        acquired as follows:

        ---------------------------------------------------------------------
        Non-cash working capital                                 $     1,203
        Fixed assets                                                  12,691
        Other assets                                                     127
        Long-term debt                                                (1,470)
        Other long-term liabilities                                     (980)
        Future tax liabilities                                        (2,224)
        ---------------------------------------------------------------------
        Net assets acquired and total purchase price,
         net of cash acquired                                    $     9,347
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    (b) Divestiture of The Meadows

        On November 14, 2006, MEC completed the sale of all of the
        outstanding shares of Washington Trotting Association, Inc., Mountain
        Laurel Racing, Inc. and MEC Pennsylvania Racing, Inc., each an MEC
        wholly-owned subsidiary through which MEC owned and operated The
        Meadows, MEC's standardbred racetrack in Pennsylvania, to PA Meadows,
        LLC, a company jointly owned by William Paulos and William Wortman,
        controlling shareholders of Millennium Gaming, Inc., and a fund
        managed by Oaktree Capital Management, LLC (together, "Millennium-
        Oaktree"). On closing, MEC received cash consideration of
        $171.8 million, net of transaction costs of $3.2 million, and a
        $25.0 million holdback note payable to MEC over a five-year period,
        subject to offset for certain indemnification obligations (the
        "Meadows Holdback Note"). Under the terms of the Meadows Holdback
        Note, MEC agreed to release the security requirement for the holdback
        amount, defer subordinate payments under the Meadows Holdback Note,
        defer receipt of holdback payments until the opening of the permanent
        casino at The Meadows and defer receipt of holdback payments to the
        extent of available cash flows (as defined in the terms of the
        Meadows Holdback Note), in exchange for Millennium-Oaktree providing
        an additional $25.0 million of equity support for PA Meadows, LLC.
        The parties also entered into a racing services agreement whereby MEC
        pays $50 thousand per annum and continues to operate, for its own
        account, the racing operations at The Meadows for at least five
        years.

        MEC recognized a $115.2 million gain on this sale transaction in the
        fourth quarter of 2006. Based on the indemnification obligations and
        other terms pertaining to the Meadows Holdback Note, the Meadows
        Holdback Note will be recognized in the consolidated financial
        statements upon the settlement of the indemnification obligations and
        as payments are received.

        MEC was required to use the proceeds from the sale of The Meadows to
        fully repay the bridge loan between the MID Lender and MEC (the "2005
        MEC Bridge Loan" - note 15), to permanently pay down $39.0 million of
        the principal amount outstanding under MEC's senior secured credit
        facility with a Canadian financial institution (the "MEC Credit
        Facility" - note 7), to repay $2.0 million of the BE&K Loan (as
        defined in note 15) and to place $15.0 million into escrow with the
        MID Lender (note 15).

    (c) Discontinued Operations

        (i)   On November 1, 2006, a wholly-owned subsidiary of MEC
              completed the sale of the Fontana Golf Club located in
              Oberwaltersdorf, Austria to a subsidiary of Magna, a related
              party, for a sale value of 30.0 million euros ($38.3 million),
              which included cash consideration of 13.2 million euros
              ($16.9 million), net of transaction costs, and 16.8 million
              euros ($21.4 million) of debt assumed by Magna. MEC recognized
              a gain on disposition of $20.9 million at the date of
              disposition.

        (ii)  On August 25, 2006, a wholly-owned subsidiary of MEC completed
              the sale of the Magna Golf Club located in Aurora, Ontario to
              Magna, a related party, for cash consideration of Cdn.
              $51.8 million ($46.4 million), net of transaction costs. MEC
              recognized an impairment loss of $1.2 million at the date of
              disposition equal to the excess of MEC's carrying value of the
              assets disposed over their fair values at the date of
              disposition. Of the sale proceeds, Cdn. $32.6 million
              ($29.3 million) was used to pay all amounts owing under
              certain loan agreements with Bank Austria Creditanstalt AG
              related to the Magna Golf Club.

        (iii) On May 26, 2006, MEC completed the sale of a restaurant and
              related real estate in the United States and received cash
              consideration of $2.0 million, net of transaction costs, and
              recognized a gain at the date of disposition of $1.5 million.
              MEC was required to use the net proceeds from this transaction
              to repay principal amounts outstanding under the MEC Credit
              Facility (note 7).

    MEC did not have any assets or liabilities related to discontinued
    operations at September 30, 2007 or December 31, 2006. MEC's results of
    operations related to discontinued operations for the three and nine
    months ended September 30, 2006 are shown in the following table:

                                                   Three Months  Nine Months
                                                          Ended        Ended
                                                      September    September
                                                       30, 2006     30, 2006
    -------------------------------------------------------------------------
    Revenues                                        $     4,381  $    13,909
    Costs and expenses                                    3,759       10,584
    -------------------------------------------------------------------------
                                                            622        3,325
    Depreciation and amortization                           606        2,047
    Interest expense, net                                   593        1,934
    Impairment loss recorded on disposition               1,202        1,202
    -------------------------------------------------------------------------
    Loss before undernoted items                         (1,779)      (1,858)
    Gain on disposition                                       -        1,495
    -------------------------------------------------------------------------
    Loss before income taxes and minority interest       (1,779)        (363)
    Income tax expense                                    1,254        1,813
    Minority interest                                    (1,261)        (905)
    -------------------------------------------------------------------------
    Loss from discontinued operations               $    (1,772) $    (1,271)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    4.  ASSETS HELD FOR SALE

    (a) On August 9, 2007, MEC announced its intention to sell real estate
        properties located in Dixon, California, Ocala, Florida and Porter,
        New York and has begun activities to sell these properties, including
        listing each property for sale with a real estate services company.

        In accordance with the terms of the MEC Bridge Loan with the MID
        Lender, MEC is required to use the net proceeds from the sale of
        these properties to pay down principal amounts outstanding under the
        MEC Bridge Loan and the amount of such net proceeds will permanently
        reduce the committed amount of the MEC Bridge Loan.

        In connection with the sales plan relating to the Porter, New York
        real estate, MEC recognized a non-cash impairment loss of
        $1.4 million, which represents the excess of the carrying value over
        the estimated fair value of this property, less estimated selling
        costs.

    (b) In addition to the sale of real estate described in section (a)
        above, the MEC Debt Elimination Plan also contemplates the sale of
        real estate properties located in Aventura and Hallandale, Florida,
        both adjacent to Gulfstream Park; Anne Arundel County, Maryland,
        adjacent to Laurel Park; and Ebreichsdorf, Austria, adjacent to the
        Magna Racino(TM). MEC has also announced that it intends to explore
        selling its membership interests in the mixed-use developments at
        Gulfstream Park racetrack in Florida and Santa Anita Park racetrack
        in California that it is pursuing under joint venture arrangements
        with Forest City Enterprises, Inc. ("Forest City") and Caruso
        Affiliated ("Caruso"), respectively. MEC has also announced that it
        intends to sell Great Lakes Downs in Michigan (at which the 2007 meet
        will be the last meet run by MEC); Thistledown in Ohio; and its
        interest in Portland Meadows in Oregon. MEC has also announced that
        it intends to explore other strategic transactions involving other
        racing, gaming and technology operations. These potential
        transactions may include: the possible sale of Remington Park, a
        horseracing and gaming facility located in Oklahoma City;
        partnerships or joint ventures in respect of the existing gaming
        facility at Gulfstream Park; partnerships or joint ventures in
        respect of potential alternative gaming operations at other MEC
        racetracks that currently do not have gaming operations; and
        transactions involving MEC's technology operations, which may include
        one or more of the assets that comprise MEC's PariMax business.

        At September 30, 2007, all of the criteria required to classify an
        asset as held for sale, or operations as discontinued operations
        (note 3), in accordance with GAAP were not met in relation to the
        assets and operations described in the preceding paragraph and,
        accordingly, these assets and operations continue to be classified as
        held and in use. Once the criteria to classify an asset as held for
        sale, or operations as discontinued operations, are met, these assets
        or operations will be reclassified to "assets held for sale" or
        "discontinued operations" as appropriate.

    (c) MEC's assets classified as held for sale and corresponding
        liabilities, related to the transactions described in section (a)
        above, at September 30, 2007, with comparative restatement as at
        December 31, 2006, are shown in the table below.

                                                      September     December
        As at                                          30, 2007     31, 2006
        ---------------------------------------------------------------------

        ASSETS

        Real estate properties, net
          Dixon, California                         $    19,139  $    18,711
          Ocala, Florida                                  8,399        8,427
          Porter, New York                                1,612        2,990
        ---------------------------------------------------------------------
                                                    $    29,150  $    30,128
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        LIABILITIES

        Future tax liabilities                      $     1,047  $     1,047
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    5.  EARNINGS PER SHARE

    Diluted earnings per share for the three-month and nine-month periods
    ended September 30, 2007 and 2006 are computed as follows:

                                 Three Months               Nine Months
                              Ended September 30,       Ended September 30,
                          ------------------------- -------------------------
                               2007         2006         2007         2006
    -------------------------------------------------------------------------
    Income (loss) from
     continuing
     operations           $    (2,818) $    (5,038) $    28,020  $    32,625
    Loss from discontinued
     operations                     -       (1,772)           -       (1,271)
    -------------------------------------------------------------------------
    Net income (loss)     $    (2,818) $    (6,810) $    28,020  $    31,354
    -------------------------------------------------------------------------
    Weighted average
     number of Class A
     Subordinate Voting
     and Class B Shares
     outstanding during
     the period
     (thousands)               48,324       48,295       48,348       48,292
    Stock options
     (thousands)                    -            -           21           51
    -------------------------------------------------------------------------
                               48,324       48,295       48,369       48,343
    -------------------------------------------------------------------------
    Diluted earnings
     per Class A
     Subordinate Voting
      or Class B Share
      - from continuing
        operations        $     (0.06) $     (0.11) $      0.58  $      0.67
      - from discontinued
        operations                  -        (0.03)           -        (0.02)
    -------------------------------------------------------------------------
                          $     (0.06) $     (0.14) $      0.58  $      0.65
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The computation of diluted earnings per share for the three-month and
    nine-month periods ended September 30, 2007 excludes the effect of the
    potential exercise of 551,544 (2006 - 400,000) and 140,000 (2006 -
    20,000) options, respectively, to acquire Class A Subordinate Voting
    Shares of the Company because the effect would be anti-dilutive.

    6.  REAL ESTATE PROPERTIES

                                                                   (restated
                                                                    - note 4)
                                                   September 30, December 31,
    As at                                                  2007         2006
    -------------------------------------------------------------------------

    Real Estate Business

    Income-producing properties under
     operating leases
      Land                                          $   220,981  $   206,990
      Buildings, parking lots and roadways - cost     1,410,057    1,298,073
      Buildings, parking lots and roadways
       - accumulated depreciation                      (327,777)    (274,931)
    -------------------------------------------------------------------------
                                                      1,303,261    1,230,132
    -------------------------------------------------------------------------

    Development properties
      Land and improvements                             226,158      115,910
      Properties under development                        5,254          648
    -------------------------------------------------------------------------
                                                        231,412      116,558
    -------------------------------------------------------------------------

    Properties held for sale                              1,421        1,931
    -------------------------------------------------------------------------
                                                      1,536,094    1,348,621
    -------------------------------------------------------------------------

    MEC

    Revenue-producing racetrack properties
      Land and improvements                             198,302      208,355
      Buildings - cost                                  637,576      631,495
      Buildings - accumulated depreciation             (196,810)    (177,538)
      Construction in progress                           59,826       19,024
    -------------------------------------------------------------------------
                                                        698,894      681,336
    -------------------------------------------------------------------------

    Under-utilized racetrack properties                 105,664      103,163
    -------------------------------------------------------------------------

    Development land and improvements                         -       20,705
    -------------------------------------------------------------------------

    Revenue-producing non-racetrack properties
      Land and improvements                               4,496        6,521
      Buildings - cost                                    4,850        3,410
      Buildings - accumulated depreciation                  (87)         (72)
    -------------------------------------------------------------------------
                                                          9,259        9,859
    -------------------------------------------------------------------------
                                                        813,817      815,063
    -------------------------------------------------------------------------

    Eliminations (note 15)                              (55,508)      (5,038)
    -------------------------------------------------------------------------

    Consolidated                                    $ 2,294,403  $ 2,158,646
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    7.  BANK INDEBTEDNESS AND LONG TERM DEBT

    (a) During the nine months ended September 30, 2007, MEC extended the
        maturity date of the $40.0 million MEC Credit Facility from March 30,
        2007 to January 31, 2008 and modified a financial performance
        maintenance covenant relating to earnings before interest, income
        taxes, depreciation and amortization. Borrowings under the MEC Credit
        Facility are available by way of U.S. dollar loans and letters of
        credit and loans under the MEC Credit Facility bear interest at the
        U.S. base rate plus 5% or the London Interbank Offered Rate ("LIBOR")
        plus 6%. Borrowings under the facility are secured by a first charge
        on the assets of Golden Gate Fields and a second charge on the assets
        of Santa Anita Park, and are guaranteed by certain of MEC's
        subsidiaries. At September 30, 2007, MEC had borrowed $15.0 million
        (December 31, 2006 - nil) under the MEC Credit Facility and had
        issued letters of credit totalling $24.7 million (December 31, 2006 -
        $24.7 million), such that $0.3 million (December 31, 2006 -
        $15.3 million) was unused and available. The weighted average
        interest rate on the loans outstanding under the MEC Credit Facility
        at September 30, 2007 was 9.3%.

        At September 30, 2007, MEC was not in compliance with one of the
        financial covenants contained in the MEC Credit Facility agreement. A
        waiver for this financial covenant breach was obtained from the
        lender.

    (b) MEC's wholly-owned subsidiary, The Santa Anita Companies, Inc.
        ("SAC"), which owns and operates Santa Anita Park, has a
        $10.0 million revolving loan arrangement under its existing credit
        facility. The revolving loan arrangement was scheduled to mature on
        October 8, 2007, but was amended and extended on October 2, 2007 to
        October 31, 2012 (note 17). The revolving loan agreement is
        guaranteed by MEC's wholly-owned subsidiary, The Los Angeles Turf
        Club, Incorporated ("LATC"), and is secured by a first deed of trust
        on Santa Anita Park and the surrounding real property, an assignment
        of the lease between LATC and SAC, and a pledge of all of the
        outstanding capital stock of LATC and SAC. At September 30, 2007, MEC
        had borrowed $8.6 million (December 31, 2006 - $6.5 million) under
        the revolving loan agreement. Borrowings under the revolving loan
        agreement bear interest at the U.S. prime rate. The weighted average
        interest rate on the borrowings outstanding under the revolving loan
        agreement at September 30, 2007 was 7.8% (December 31, 2006 - 8.3%).

    (c) On May 11, 2007, AmTote, MEC's wholly-owned subsidiary, completed a
        refinancing of its existing credit facilities with a new lender (the
        "AmTote Lender"). The refinancing included (i) a $3.0 million
        revolving credit facility to finance working capital requirements
        (the "AmTote Credit Facility"), (ii) a $4.2 million term loan for the
        repayment of AmTote's debt outstanding under its existing term loan
        facilities, and (iii) a $10.0 million term loan to finance up to 80%
        of eligible capital costs related to tote service contracts. The
        AmTote Credit Facility matures on May 11, 2008 and borrowings under
        the AmTote Credit Facility are available by way of U.S. dollar loans
        and letters of credit, bearing interest at LIBOR plus 2.5%. The
        $4.2 million term loan matures on May 11, 2011 and the $10.0 million
        term loan matures on May 11, 2012, with both facilities bearing
        interest at LIBOR plus 2.8%. The AmTote Credit Facility and the two
        term loan facilities are collateralized by a first charge on AmTote's
        assets and a pledge of stock of AmTote.

        At September 30, 2007, AmTote had borrowed $2.4 million under the
        AmTote Credit Facility, which is included in MEC's "bank
        indebtedness" on the Company's unaudited interim consolidated balance
        sheet, such that $0.6 million of the AmTote Credit Facility was
        unused and available. At September 30, 2007, $3.5 million was
        outstanding under the $4.2 million term loan facility, which is
        included in MEC's "long-term debt" on the Company's unaudited interim
        consolidated balance sheet, and there were no borrowings under the
        $10.0 million term loan facility. At September 30, 2007, the weighted
        average interest rates on the borrowings under the AmTote Credit
        Facility and the term loan were 8.2% and 8.5%, respectively.

        At September 30, 2007, MEC was not in compliance with certain of the
        financial covenants contained in the above arrangements with the
        AmTote Lender. A waiver for the financial covenant breach at
        September 30, 2007 was obtained from the AmTote Lender.

    (d) On July 24, 2007, one of MEC's European subsidiaries amended and
        extended its 3.9 million euro bank term loan by increasing the amount
        available under the bank term loan to 4.0 million euros
        ($5.7 million), bearing interest at the Euro Overnight Index Average
        rate plus 3.0% per annum, and extending the term to July 31, 2008. At
        September 30, 2007, this bank term loan facility was fully drawn.

    8.  SHARE CAPITAL

    Changes in the Company's Class A Subordinate Voting Shares and Class B
    Shares are shown in the following table:

                             Class A Subordinate
                                Voting Shares            Class B Shares
                          ------------------------- -------------------------
                                            Stated                    Stated
                               Number        Value       Number        Value
    -------------------------------------------------------------------------
    Shares issued and
     outstanding,
      December 31, 2005,   47,742,083  $ 1,558,016      548,238  $    17,893
      March 31, 2006
      and June 30, 2006
    Issued on exercise of
     stock options             30,000        1,043            -            -
    -------------------------------------------------------------------------
    Shares issued and
     outstanding,
     September 30, 2006    47,772,083    1,559,059      548,238       17,893
    Issued on exercise of
     stock options             10,000          390            -            -
    Shareholder conversion
     of Class B Shares to
     Class A Subordinate
     Voting Shares                825           27         (825)         (27)
    -------------------------------------------------------------------------
    Shares issued and
     outstanding,
     December 31, 2006     47,782,908    1,559,476      547,413       17,866
    Issued on exercise of
     stock options             38,456        1,303            -            -
    -------------------------------------------------------------------------
    Shares issued and
     outstanding,
      March  31, 2007 and
      June 30, 2007        47,821,364    1,560,779      547,413       17,866
    Shares purchased for
     cancellation            (485,700)     (15,853)           -            -
    -------------------------------------------------------------------------
    Shares issued and
     outstanding,
     September 30, 2007    47,335,664  $ 1,544,926      547,413  $    17,866
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                     Total
                          -------------------------
                                            Stated
                               Number        Value
    -----------------------------------------------
    Shares issued and
     outstanding,
      December 31, 2005,   48,290,321  $ 1,575,909
      March 31, 2006
      and June 30, 2006
    Issued on exercise of
     stock options             30,000        1,043
    -----------------------------------------------
    Shares issued and
     outstanding,
     September 30, 2006    48,320,321    1,576,952
    Issued on exercise of
     stock options             10,000          390
    Shareholder conversion
     of Class B Shares to
     Class A Subordinate
     Voting Shares                  -            -
    -----------------------------------------------
    Shares issued and
     outstanding,
     December 31, 2006     48,330,321    1,577,342
    Issued on exercise of
     stock options             38,456        1,303
    -----------------------------------------------
    Shares issued and
     outstanding,
      March  31, 2007 and
      June 30, 2007        48,368,777    1,578,645
    Shares purchased for
     cancellation            (485,700)     (15,853)
    -----------------------------------------------
    Shares issued and
     outstanding,
     September 30, 2007    47,883,077  $ 1,562,792
    -----------------------------------------------
    -----------------------------------------------

    Pursuant to the terms of a normal course issuer bid program for which the
    Company received approval from the Toronto Stock Exchange ("TSX") on
    September 29, 2006, the Company was authorized, from October 4, 2006 to
    October 3, 2007, to purchase for cancellation, through the facilities of
    the TSX and the New York Stock Exchange ("NYSE"), up to 3,257,895 Class A
    Subordinate Voting Shares, being 10% of the Public Float, as such term is
    defined by the TSX. During the three-month and nine-month periods ended
    September 30, 2007, the Company purchased 485,700 Class A Subordinate
    Voting Shares for cancellation for cash consideration of $15.4 million
    (Cdn. $32.58 per share on a weighted average basis), of which
    $3.6 million was paid after September 30, 2007. The purchase price in
    excess of the Company's historical Canadian carrying value of the shares
    purchased for cancellation was $6.2 million, which has been credited to
    "contributed surplus" (note 9). The purchase price in excess of the
    Company's U.S. historical reported carrying value of the shares purchased
    for cancellation, less the amount credited to "contributed surplus",
    resulted in a charge to "accumulated comprehensive income" of
    $5.8 million (note 10). The Company purchased a further 316,100 Class A
    Subordinate Voting Shares for cancellation under this bid subsequent to
    September 30, 2007 for cash consideration of $10.6 million (Cdn. $33.36
    per share on a weighted average basis).

    Pursuant to the terms of a normal course issuer bid program for which the
    Company received approval from the TSX on October 2, 2007, the Company is
    authorized, during the 12-month period commencing October 8, 2007 and
    ending October 7, 2008, to purchase for cancellation, through the
    facilities of the TSX and the NYSE, up to 2,531,354 Class A Subordinate
    Voting Shares, being 10% of the Public Float. The Company has purchased
    24,300 Class A Subordinate Voting Shares for cancellation under this bid
    for cash consideration of $0.8 million (Cdn. $33.61 per share on a
    weighted average basis).

    The price that MID pays for shares purchased pursuant to the bids is the
    market price at the time of acquisition.

    9.  CONTRIBUTED SURPLUS

    Changes in the Company's contributed surplus are shown in the following
    table:

                                 Three Months               Nine Months
                              Ended September 30,       Ended September 30,
                          ------------------------- -------------------------
                               2007         2006         2007         2006
    -------------------------------------------------------------------------
    Contributed surplus,
     beginning of period  $     2,674  $     2,342  $     2,667  $     2,112
    Purchase price in
     excess of carrying
     value of shares
     purchased for
     cancellation (note 8)      6,222            -        6,222            -
    Stock-based
     compensation                 223           58          475          288
    Transfer to share
     capital on exercise
     of stock options               -         (188)        (245)        (188)
    -------------------------------------------------------------------------
    Contributed surplus,
     end of period        $     9,119  $     2,212  $     9,119  $     2,212
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    10. ACCUMULATED COMPREHENSIVE INCOME

    Changes in the Company's accumulated comprehensive income are shown in
    the following table:

                                 Three Months               Nine Months
                              Ended September 30,       Ended September 30,
                          ------------------------- -------------------------
                               2007         2006         2007         2006
    -------------------------------------------------------------------------
    Accumulated
     comprehensive income,
     beginning of period  $   200,693  $   159,100  $   166,399  $   106,960
    Adjustment for change
     in accounting policy
     related to the fair
     value of interest
     rate swaps (note 2)            -            -          154            -
    Change in fair value
     of interest rate
     swaps, net of taxes
     and minority interest       (191)           -         (247)           -
    Foreign currency
     translation adjustment,
     net of minority
     interest(i)               45,869       (3,719)      80,717       50,342
    Reversal of foreign
     currency translation
     gain related to
     shares purchased for
     cancellation (note 8)     (5,778)           -       (5,778)           -
    Recognition of
     foreign currency
     translation gain in
     net income(ii)                 -            -         (652)      (1,921)
    -------------------------------------------------------------------------
    Accumulated
     comprehensive income,
     end of period(iii)   $   240,593  $   155,381  $   240,593  $   155,381
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (i)   During the three and nine months ended September 30, 2007 and the
          nine months ended September 30, 2006, the Company recorded
          unrealized foreign currency translation gains related to its net
          investments in currencies other than the U.S. dollar, primarily due
          to the strengthening of the euro and the Canadian dollar against
          the U.S. dollar. During the three months ended September 30, 2006,
          the Company recorded unrealized foreign currency translation losses
          related to its net investments in currencies other than the U.S.
          dollar, primarily due to the weakening of the euro against the U.S.
          dollar.

    (ii)  Included in the Real Estate Business' "dilution and other gains"
          for the nine months ended September 30, 2007 is a $0.7 million
          currency translation gain (2006 - $1.9 million) realized from
          capital transactions that gave rise to a reduction in the net
          investment in certain foreign operations.

    (iii) Accumulated comprehensive income consists of:

                                                   September 30, December 31,
    As at                                                  2007         2006
    -------------------------------------------------------------------------
    Foreign currency translation adjustment,
     net of minority interest                       $   240,686  $   166,399
    Fair value of interest rate swaps, net
     of taxes and minority interest                         (93)           -
    -------------------------------------------------------------------------
                                                    $   240,593  $   166,399
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    11. INCOME TAXES

    The Real Estate Business' income tax expense for the three and nine
    months ended September 30, 2007 includes a future tax recovery of
    $1.6 million realized from the reduction in future tax rates in Canada,
    Germany and the United Kingdom enacted in the third quarter of 2007.

    The Real Estate Business' income tax expense for the nine months ended
    September 30, 2006 includes a future tax recovery of $2.1 million
    realized from the reduction in the future Canadian tax rate, enacted in
    the second quarter of 2006.

    12. STOCK-BASED COMPENSATION

    (a) On August 29, 2003, MID's Board of Directors approved the Incentive
        Stock Option Plan (the "MID Plan"), which allows for the grant of
        stock options or stock appreciation rights to directors, officers,
        employees and consultants. Amendments to the MID Plan were approved
        by the Company's shareholders at the May 11, 2007 Annual and Special
        Meeting, and became effective on June 6, 2007. At September 30, 2007,
        a maximum of 2.61 million MID Class A Subordinate Voting Shares are
        available to be issued under the MID Plan.

        MID has granted stock options to certain directors and officers to
        purchase MID's Class A Subordinate Voting Shares. Such options have
        generally been granted with 1/5th of the options vesting on the date
        of grant and the remaining options vesting over a period of four
        years at a rate of 1/5th on each anniversary of the date of grant.
        Options expire on the tenth anniversary of the date of grant, subject
        to earlier cancellation in the events specified in the stock option
        agreement entered into by MID with each recipient of options.

        Activity in the MID Plan was as follows:

                                     2007                      2006
                          ------------------------- -------------------------
                                          Weighted                  Weighted
                                           Average                   Average
                                          Exercise                  Exercise
                                             Price                     Price
                               Number      (Cdn. $)      Number      (Cdn. $)
        ---------------------------------------------------------------------
        Stock options
         outstanding,
         January 1            465,000        36.08      390,000        33.49
        Granted                     -            -       20,000        39.12
        Exercised             (38,456)       32.19            -            -
        ---------------------------------------------------------------------
        Stock options
         outstanding,
         March 31 and
         June 30              426,544        36.43      410,000        33.77
        Granted               125,000        32.21            -            -
        Exercised                   -            -      (30,000)       31.85
        Forfeited             (35,000)       41.17      (60,000)       35.62
        ---------------------------------------------------------------------
        Stock options
         outstanding,
         September 30         516,544        35.09      320,000        33.60
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Stock options
         exercisable,
         September 30         280,544        31.15      202,000        33.07
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The Company estimates the fair value of stock options granted at the
        date of grant using the Black-Scholes option valuation model. The
        Black-Scholes option valuation model was developed for use in
        estimating the fair value of freely traded options, which are fully
        transferable and have no vesting restrictions. In addition, this
        model requires the input of subjective assumptions, including
        expected dividend yields, future stock price volatility and expected
        time until exercise. Although the assumptions used reflect
        management's best estimates, they involve inherent uncertainties
        based on market conditions outside of the Company's control. Because
        the Company's outstanding stock options have characteristics that are
        significantly different from those of traded options, and because
        changes in any of the assumptions can materially affect the fair
        value estimate, in management's opinion, the existing models do not
        necessarily provide the only measure of the fair value of the
        Company's stock options.

        The weighted average assumptions used in determining the fair value
        of the MID stock options granted are shown in the table below.

                                 Three Months               Nine Months
                              Ended September 30,       Ended September 30,
                          ------------------------- -------------------------
                               2007         2006         2007         2006
        ---------------------------------------------------------------------
        Risk-free interest
         rate                    4.3%            -         4.3%         4.0%
        Expected dividend
         yield                  1.92%            -        1.92%        1.76%
        Expected volatility
         of MID's Class A
         Subordinate Voting
         Shares                 18.9%            -        18.9%        21.3%
        Weighted average
         expected life
         (years)                    4            -            4          3.0
        Weighted average
         fair value per
         option granted         $5.51            -        $5.51        $5.67
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Effective November 3, 2003, MID established a Non-Employee Director
        Share-Based Compensation Plan (the "DSP"), which provides for a
        deferral of up to 100% of each outside director's total annual
        remuneration from the Company, at specified levels elected by each
        director, until such director ceases to be a director of the Company.
        The amounts deferred are reflected by notional DSUs whose value
        reflects the market price of the Company's Class A Subordinate Voting
        Shares at the time that the particular payment(s) to the director is
        determined. The value of a DSU will appreciate or depreciate with
        changes in the market price of the Class A Subordinate Voting Shares.
        The DSP also takes into account any dividends paid on the Class A
        Subordinate Voting Shares. Effective January 1, 2005, all directors
        must receive at least 50% of their Board and Committee compensation
        fees (excluding Special Committee fees, effective January 1, 2006) in
        DSUs. Under the DSP, when a director leaves the Board, the director
        receives a cash payment equal to the value of the accrued DSUs at
        that time. There is no option under the DSP for directors to receive
        Class A Subordinate Voting Shares in exchange for DSUs. During the
        nine months ended September 30, 2006, 11,715 DSUs were redeemed by a
        former director for $0.4 million.

        A reconciliation of the changes in DSUs outstanding is presented
        below:

                                                           2007         2006
        ---------------------------------------------------------------------
        DSUs outstanding, January 1                      27,319       23,092
        Granted                                           4,241        3,984
        ---------------------------------------------------------------------
        DSUs outstanding, March 31                       31,560       27,076
        Granted                                           3,025        3,882
        Redeemed                                              -      (11,715)
        ---------------------------------------------------------------------
        DSUs outstanding, June 30                        34,585       19,243
        Granted                                           3,568        4,350
        ---------------------------------------------------------------------
        DSUs outstanding, September 30                   38,153       23,593
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        During the three and nine months ended September 30, 2007, the Real
        Estate Business recognized stock-based compensation expense of
        $0.2 million (2006 - $0.3 million) and $0.8 million (2006 -
        $0.8 million), respectively, which includes nil (2006 - $0.2 million)
        and $0.3 million (2006 - $0.5 million), respectively, pertaining to
        DSUs.

    (b) MEC has a Long-term Incentive Plan (the "MEC Plan"), adopted in 2000
        and amended in 2007, which allows for the grant of non-qualified
        stock options, incentive stock options, stock appreciation rights,
        restricted stock, bonus stock and performance shares to MEC's
        directors, officers, employees, consultants, independent contractors
        and agents. A maximum of 9.2 million shares of MEC Class A Stock are
        available to be issued under the MEC Plan (note 17), of which
        7.8 million are available for issuance pursuant to stock options and
        tandem stock appreciation rights and 1.4 million are available for
        issuance pursuant to any other type of award under the MEC Plan.

        During 2005, MEC introduced an incentive compensation program (the
        "MEC Program") for certain officers and key employees, which awards
        performance shares of MEC Class A Stock (the "2005 Performance Share
        Awards") as contemplated under the MEC Plan. The number of shares of
        MEC Class A Stock underlying the 2005 Performance Share Awards was
        based either on a percentage of a guaranteed bonus or a percentage of
        total 2005 compensation divided by the market value of the stock on
        the date the MEC Program was approved by the Compensation Committee
        of MEC's Board of Directors. The 2005 Performance Shares Awards
        vested over a six or eight month period to December 31, 2005 and were
        distributed, subject to certain conditions, in two equal instalments.
        The first distribution date occurred in March 2006 and the second
        distribution date occurred in March 2007. At December 31, 2005, there
        were 199,471 vested 2005 Performance Share Awards outstanding with a
        grant-date market value of either $6.26 or Cdn. $7.61 per share.
        During the year ended December 31, 2006, 131,751 (nine months ended
        September 30, 2006 - 115,408) 2005 Performance Share Awards were
        issued with a stated value of $0.8 million (nine months ended
        September 30, 2006 - $0.7 million), and 4,812 2005 Performance Share
        Awards were forfeited. During the nine months ended September 30,
        2007, 62,908 2005 Performance Share Awards were issued with a stated
        value of $0.2 million. Accordingly, there are no 2005 Performance
        Share Awards remaining to be issued under the MEC Program at
        September 30, 2007.

        In 2006, MEC continued the MEC Program as described in the preceding
        paragraph. The program is similar in all respects except that the
        performance shares granted in 2006 vest over a 12-month period to
        December 31, 2006 and were distributed, subject to certain
        conditions, prior to March 31, 2007 (the "2006 Performance Share
        Awards"). During the nine months ended September 30, 2006 and year
        ended December 31, 2006, 162,556 2006 Performance Share Awards were
        granted under the MEC Program with a weighted average grant-date
        market value of either $6.80 or Cdn. $7.63 per share and 1,616 2006
        Performance Share Awards were issued with a nominal stated value.
        During the year ended December 31, 2006, 42,622 (nine months ended
        September 30, 2006 - 12,490) 2006 Performance Share Awards were
        forfeited. During the nine months ended September 30, 2007, 111,841
        2006 Performance Share Awards were issued with a stated value of
        $0.4 million and 6,477 2006 Performance Share Awards were forfeited.
        Accordingly, there are no 2006 Performance Share Awards remaining to
        be issued under the MEC Program at September 30, 2007.

        In the nine months ended September 30, 2007, MEC issued 30,941 (nine
        months ended September 30, 2006 - 25,896) shares of MEC Class A Stock
        with a stated value of $0.1 million (nine months ended September 30,
        2006 - $0.2 million) to MEC's directors in payment of services
        rendered.

        MEC grants stock options ("MEC Stock Options") to certain directors,
        officers, key employees and consultants to purchase shares of MEC
        Class A Stock. All MEC Stock Options give the grantee the right to
        purchase MEC Class A Stock of MEC at a price no less than the fair
        market value of such stock at the date of grant. Generally, MEC Stock
        Options under the MEC Plan vest over a period of two to six years
        from the date of grant at rates of 1/7th to 1/3rd per year and expire
        on or before the tenth anniversary of the date of grant, subject to
        earlier cancellation upon the occurrence of certain events specified
        in the stock option agreements entered into by MEC with each
        recipient of MEC Stock Options.

        Activity in the MEC Plan was as follows:

                                     2007                      2006
                          ------------------------- -------------------------
                                          Weighted                  Weighted
                                           Average                   Average
                                          Exercise                  Exercise
                                             Price                     Price
                               Number      (Cdn. $)      Number      (Cdn. $)
        ---------------------------------------------------------------------
        MEC Stock Options
         outstanding,
         January 1          4,905,000         6.08    4,827,500         6.14
        Forfeited or
         expired             (166,000)        6.74            -            -
        ---------------------------------------------------------------------
        MEC Stock Options
         outstanding,
         March 31           4,739,000         6.06    4,827,500         6.14
        Forfeited or
         expired              (25,000)        5.71      (64,000)        6.80
        ---------------------------------------------------------------------
        MEC Stock Options
         outstanding,
         June 30            4,714,000         6.07    4,763,500         6.13
        Granted               390,000         3.20            -            -
        Forfeited or
         expired              (14,000)        5.20            -            -
        ---------------------------------------------------------------------
        MEC Stock Options
         outstanding,
         September 30       5,090,000         5.85    4,763,500         6.13
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        MEC Stock Options
         exercisable,
         September 30       4,435,668         6.02    4,279,700         6.08
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The fair value of MEC Stock Options granted is estimated at the date
        of grant using the Black-Scholes option valuation model, which
        requires the use of subjective assumptions and may not necessarily
        provide the only measure of the fair value of MEC Stock Options (as
        described further in note 12(a)).

        The weighted average assumptions used in determining the fair value
        of the MEC stock options granted are shown in the table below.

                                 Three Months               Nine Months
                              Ended September 30,       Ended September 30,
                          ------------------------- -------------------------
                               2007         2006         2007         2006
        ---------------------------------------------------------------------
        Risk-free interest
         rate                     4.2            -          4.2            -
        Expected dividend
         yield                      -            -            -            -
        Expected volatility
         of MEC Class A Stock   55.9%            -        55.9%            -
        Weighted average
         expected life (years)      5            -            5            -
        Weighted average fair
         value per option
         granted                $1.36            -        $1.36            -
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        During the three and nine months ended September 30, 2007, MEC
        recognized total stock-based compensation expense of $0.5 million
        (2006 - $0.4 million) and $0.7 million (2006 - $2.1 million),
        respectively relating to performance share awards, director
        compensation and stock options under the MEC Plan.

    13. DETAILS OF CASH FROM OPERATING ACTIVITIES

    (a) Items not involving current cash flows:

                                 Three Months               Nine Months
                              Ended September 30,       Ended September 30,
                          ------------------------- -------------------------
                                         (restated                 (restated
                                         - note 3)                 - note 3)
                               2007         2006         2007         2006
        ---------------------------------------------------------------------

        Real Estate
         Business
        Straight-line
         rent adjustment  $       150  $        41  $       387  $       109
        Stock-based
         compensation
         expense                  226          265          763          763
        Depreciation and
         amortization          10,434        9,914       30,581       29,025
        Interest and other
         income from MEC         (156)      (4,402)        (299)     (11,876)
        Gain on disposal
         of real estate           (96)        (200)      (1,478)        (209)
        Future income taxes      (494)       1,269        1,361        2,008
        Dilution and other
         gains                      -            -         (652)      (1,921)
        Other                      85           80          241          234
        ---------------------------------------------------------------------
                               10,149        6,967       30,904       18,133
        ---------------------------------------------------------------------

        MEC
        Stock-based
         compensation
         expense                  463          380          735        2,069
        Gain on disposal
         of real estate          (100)           -      (48,754)      (2,883)
        Depreciation and
         amortization          11,724       11,395       32,690       31,955
        Interest expense
         with MID                   -        4,211           75       10,837
        Amortization of debt
         issuance costs           752        1,579        1,678        5,331
        Write-down of MEC's
         long-lived assets      1,444            -        1,444            -
        Dilution and other
         gains                      -          (28)          (4)        (185)
        Future income taxes      (124)         139       (1,692)        (574)
        Minority interest     (20,941)     (20,042)     (30,037)     (29,672)
        Other                  (1,823)         309       (2,843)         394
        ---------------------------------------------------------------------
                               (8,605)      (2,057)     (46,708)      17,272
        ---------------------------------------------------------------------
        Eliminations
         (note 15)               (299)      (1,138)      49,323       (3,557)
        ---------------------------------------------------------------------
        Consolidated      $     1,245  $     3,772  $    33,519  $    31,848
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    (b) Changes in non-cash balances:

                                 Three Months               Nine Months
                              Ended September 30,       Ended September 30,
                          ------------------------- -------------------------
                                         (restated                 (restated
                                         - note 3)                 - note 3)
                               2007         2006         2007         2006
        ---------------------------------------------------------------------
        Real Estate
         Business
        Accounts
         receivable       $     1,525  $       (91) $     2,219  $    (2,297)
        Loans receivable
         from MEC                (128)         640         (128)         251
        Prepaid expenses
         and other               (789)       1,197         (744)      (1,946)
        Accounts payable
         and accrued
         liabilities            3,326        4,516        5,386        2,440
        Income taxes             (439)          68        4,576         (991)
        Deferred revenue       (1,019)      (4,202)        (746)      (3,113)
        ---------------------------------------------------------------------
                                2,476        2,128       10,563       (5,656)
        ---------------------------------------------------------------------

        MEC
        Restricted cash        (6,842)      (7,532)       5,591       (6,540)
        Accounts receivable     8,031       15,170        5,634       11,934
        Prepaid expenses and
         other                  1,210       (2,255)      (3,436)      (5,963)
        Accounts payable and
         accrued liabilities    4,230        2,197      (17,995)      (9,413)
        Income taxes             (932)         375          584           48
        Loans Payable to MID      128         (640)         128         (251)
        Deferred revenue       (2,666)        (809)      (2,607)      (3,874)
        ---------------------------------------------------------------------
                                3,159        6,506      (12,101)     (14,059)
        ---------------------------------------------------------------------
        Eliminations
         (note 15)                715          474          544        1,701
        ---------------------------------------------------------------------
        Consolidated      $     6,350  $     9,108  $      (994) $   (18,014)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


    14. SEGMENTED INFORMATION

    The Company's reportable segments reflect how the Company is organized
    and managed by senior management. The Company's operations are segmented
    in the Company's internal financial reports between wholly-owned
    operations (Real Estate Business) and publicly-traded operations (MEC).
    The segregation of operations between wholly-owned and publicly-traded
    operations recognizes the fact that, in the case of the Real Estate
    Business, the Company's Board of Directors and executive management have
    direct responsibility for the key operating, financing and resource
    allocation decisions, whereas, in the case of MEC, such responsibility
    resides with MEC's separate Board of Directors and executive management.
    As described in note 1, the Company's unaudited interim consolidated
    statements of income (loss), consolidated statements of cash flows, and
    consolidated balance sheets have been arranged so as to provide detailed,
    discrete financial information on the Real Estate Business and MEC
    reporting segments.

    The Company's reporting segments are as follows:

    Real Estate Business

    The Real Estate Business owns real estate assets in Canada, Austria, the
    United States, Germany, Mexico, the United Kingdom, the Czech Republic,
    Spain and Poland. Substantially all these real estate assets are leased
    to, or are under development for subsequent lease to, Magna's automotive
    operating units. The Real Estate Business also owns certain properties
    that are being held for future development or sale.

    MEC

    MEC operates or manages eight thoroughbred racetracks, one standardbred
    racetrack, two racetracks that run both thoroughbred and quarterhorse
    meets, and one racetrack that runs both thoroughbred and standardbred
    meets, as well as the simulcast wagering venues at these tracks. Three of
    MEC's racetracks (two in the United States and one in Austria) include
    casino operations with alternative gaming machines. In addition, MEC
    operates off-track betting ("OTB") facilities, a United States based
    national account wagering business known as XpressBet(R) and a European
    account wagering service known as MagnaBet(TM). Pursuant to a joint
    venture with Churchill Downs Incorporated ("CDI"), MEC also owns a 50%
    interest in HorseRacing TV(TM) ("HRTV(TM)"), a television network focused
    on horseracing. Under an agreement with CDI and Racing UK Limited, MEC is
    a partner in a subscription television channel called "Racing World" that
    broadcasts races from MEC's and CDI's racetracks, as well as other North
    American and international racetracks, into the United Kingdom and
    Ireland. MEC also owns AmTote, a provider of totalisator services to the
    pari-mutuel industry. To support certain of MEC's thoroughbred
    racetracks, MEC owns and operates thoroughbred training centres in Palm
    Beach County, Florida and in the Baltimore, Maryland area and, under a
    lease agreement with MID (note 15), operates an additional thoroughbred
    training centre situated near San Diego, California. MEC also owns and
    operates production facilities in Austria and in North Carolina for
    StreuFex(TM), a straw-based horse bedding product. In addition to
    racetracks, MEC's real estate portfolio includes a residential
    development in Austria.

    15. TRANSACTIONS WITH RELATED PARTIES

    Mr. F. Stronach, the Company's Chairman and the Chairman of Magna and
    MEC, and three other members of his family are trustees of the Stronach
    Trust. The Stronach Trust controls the Company through the right to
    direct the votes attaching to 66% of the Company's Class B Shares. The
    Stronach Trust also controls Magna through the right to direct the votes
    attaching to 66% of Magna's Class B Shares. As the Company and Magna are
    under the common control of the Stronach Trust, they are considered to be
    related parties for accounting purposes.

    (a) Bridge Loans and Project Financings

        On September 13, 2007, MID announced that the MID Lender had agreed
        to provide MEC with the MEC Bridge Loan of up to $80.0 million. The
        MEC Bridge Loan, together with a $20.0 million private placement of
        MEC Class A Stock to FEL (the "FEL Equity Investment" - note 17) is
        intended to provide immediate funding to MEC as it implements the MEC
        Debt Elimination Plan. MID also agreed to amend the MEC Project
        Financing Facilities (as defined below) by, among other things,
        requiring repayment of at least $100.0 million under the Gulfstream
        Park project financing facility on or prior to May 31, 2008 and
        waiving the make-whole payment, if applicable, for any repayments
        made under either of the MEC Project Financing Facilities prior to
        that date. Pursuant to a consulting agreement between MID and MEC,
        which requires MEC to reimburse MID for its expenses, MID management
        is assisting MEC in implementing the MEC Debt Elimination Plan.

        (i)   MEC Bridge Loan

              The MEC Bridge Loan of up to $80.0 million has been made
              available through a non-revolving facility provided by the MID
              Lender. The MEC Bridge Loan proceeds may only be used by MEC in
              accordance with the MEC Debt Elimination Plan and are available
              solely to fund: (i) operations; (ii) payments of principal,
              interest and costs, fees and expenses due under the MEC Bridge
              Loan and the Project Financing Facilities; (iii) mandatory
              payments of interest in connection with permitted debt under
              the MEC Bridge Loan; (iv) mandatory capital expenditures; and
              (v) capital expenditures required pursuant to the terms of the
              joint venture arrangements (note 16) between MEC and Forest
              City and Caruso.

              The MEC Bridge Loan has a maturity date of May 31, 2008 and
              bears interest at a rate per annum equal to LIBOR plus 10.0%.
              In the event MEC does not reach certain milestones in
              connection with the MEC Debt Elimination Plan, the then
              applicable interest rate on outstanding and subsequent advances
              under the MEC Bridge Loan increases by: (i) 1.0% from and after
              December 31, 2007 if MEC has not completed asset sales, entered
              into sales contracts approved by the MID Lender in respect of
              asset sales ("Approved Sales Contracts") or raised equity
              (excluding the FEL Equity Investment), yielding aggregate net
              proceeds of not less than $50.0 million that are payable to the
              MEC Bridge Loan; and (ii) 1.0% from and after February 29, 2008
              if MEC has not entered into Approved Sales Contracts yielding
              aggregate net proceeds sufficient to repay the then current
              commitment in full.

              The MEC Bridge Loan is secured by certain assets of MEC,
              including first ranking security over the Dixon and Thistledown
              lands, second ranking security over Golden Gate Fields and the
              Ocala lands and third ranking security over Santa Anita Park.
              In addition, the MEC Bridge Loan is guaranteed by certain MEC
              subsidiaries and MEC has pledged the shares and all other
              interests MEC has in each of the guarantor subsidiaries (or
              provided negative pledges where a pledge was not possible due
              to regulatory constraints or due to a pledge to an existing
              third party lender). The MEC Bridge Loan is cross-defaulted to
              all other obligations of MEC and its subsidiaries to the MID
              Lender, including the MEC Project Financing Facilities.

              The MEC Bridge Loan must be repaid with, and the commitment
              will be reduced by, amounts equal to all net proceeds realized
              by MEC from asset sales and issuances of equity (other than the
              FEL Equity Investment) or debt, subject to amounts required to
              be paid to MEC's existing lenders. Amounts repaid cannot be re-
              borrowed.

              The MID Lender received an arrangement fee of $2.4 million (3%
              of the commitment) at closing and will receive an additional
              arrangement fee on February 29, 2008 of 1% of the then current
              commitment. The MID Lender will also receive an annual
              commitment fee equal to 1% of the undrawn facility. All fees,
              expenses and closing costs incurred by the MID Lender in
              connection with the MEC Bridge Loan are paid by MEC.

              Pursuant to the terms of the MEC Bridge Loan, advances after
              January 15, 2008 are subject to the MID Lender being satisfied
              that the MEC Credit Facility will be further extended to at
              least April 30, 2008 or that a satisfactory refinancing of that
              facility has been arranged. In addition, the first advance that
              would result in the then outstanding loan amount under the MEC
              Bridge Loan exceeding $40.0 million is subject to the MID
              Lender being satisfied that MEC is in compliance with, can
              reasonably be expected to be able to implement, and is using
              all commercially reasonable efforts to implement, the MEC Debt
              Elimination Plan.

              At September 30, 2007, $9.3 million under the MEC Bridge Loan
              was included in the Real Estate Business' current portion of
              "loans receivable from MEC, net" on the Company's unaudited
              interim consolidated balance sheet, net of $2.3 million of
              unamortized deferred arrangement fees. MEC's current portion of
              "loans payable to MID, net" on the Company's unaudited interim
              consolidated balance sheet includes $8.8 million, net of
              $2.8 million unamortized deferred financing costs. This net
              balance is being accreted to its face value over the term to
              maturity of the MEC Bridge Loan.

        (ii)  MEC Project Financings

              The MID Lender has made available two separate project
              financing facilities to the wholly-owned subsidiaries of MEC
              that own and/or operate Gulfstream Park and Remington Park
              ($162.3 million and $34.2 million, respectively, plus costs and
              capitalized interest as discussed below) (together, the "MEC
              Project Financing Facilities"). The MEC Project Financing
              Facilities have a term of 10 years (except as described below
              for the two slot machine tranches of the Gulfstream Park
              project financing facility) from the relevant completion dates
              for the construction projects at Gulfstream Park and Remington
              Park, which occurred in February 2006 and November 2005,
              respectively.

              The Remington Park project financing and the Gulfstream Park
              project financing contain cross-guarantee, cross-default and
              cross-collateralization provisions. The Remington Park project
              financing is secured by all assets of the borrower (including
              first ranking security over the Remington Park leasehold
              interest), excluding licences and permits, and is guaranteed by
              the MEC subsidiaries that own Gulfstream Park and the Palm
              Meadows Training Center. The security package also includes
              second ranking security over the lands owned by Gulfstream Park
              and second ranking security over the Palm Meadows Training
              Center and the shares of the owner of the Palm Meadows Training
              Center (in each case, behind security granted for the
              Gulfstream Park project financing). In addition, the borrower
              has agreed not to pledge any licences or permits held by it and
              MEC has agreed not to pledge the shares of the borrower or the
              owner of Gulfstream Park. The Gulfstream Park project financing
              is guaranteed by MEC's subsidiaries that own and operate the
              Palm Meadows Training Center and Remington Park and is secured
              principally by security over the lands (or, in the case of
              Remington Park, over the leasehold interest) forming part of
              the operations at Gulfstream Park, Palm Meadows and Remington
              Park and over all other assets of Gulfstream Park, Palm Meadows
              and Remington Park, excluding licences and permits (which
              cannot be subject to security under applicable legislation).

              Prior to the relevant completion date, amounts outstanding
              under each of the MEC Project Financing Facilities (other than
              the new tranches of the Gulfstream Park project financing
              facility described below) bore interest at a floating rate
              equal to 2.55% above MID's per annum notional cost of borrowing
              under its floating rate credit facility, compounded monthly.
              Since the relevant completion date (or since inception for the
              new tranches of the Gulfstream Park project financing facility
              described below), amounts outstanding under each of the MEC
              Project Financing Facilities bear interest at a fixed rate of
              10.5% per annum, compounded semi-annually. Prior to January 1,
              2007, payment of interest was capitalized (except in relation
              to the December 2006 tranche of the Gulfstream Park project
              financing facility described below, for which the interest
              capitalization period was extended). However, since the
              completion date for Remington Park, there has been in place a
              mandatory annual cash flow sweep of not less than 75% of
              Remington Park's total excess cash flow, after permitted
              capital expenditures and debt service, which is used to pay
              capitalized interest on the Remington Park project financing
              facility plus a portion of the principal under the facility
              equal to the capitalized interest on the Gulfstream Park
              project financing facility. During the three and nine months
              ended September 30, 2007, $1.6 million and $3.3 million,
              respectively, of such payments were made. Commencing January 1,
              2007, the MID Lender receives monthly blended payments of
              principal and interest based on a 25-year amortization period
              under each of the MEC Project Financing Facilities (except in
              relation to the December 2006 tranche of the Gulfstream Park
              project financing facility described below, for which the
              interest capitalization period was extended to May 1, 2007, at
              which time monthly payments commenced).

              In June 2006, the MID Lender consented to the release and
              transfer to MEC of up to an aggregate of $10.0 million of funds
              from the subsidiaries that operate the racetracks at Gulfstream
              Park and Remington Park, subject to approval by MID management
              over the amount and timing of such releases. Such funds, which
              would ordinarily be "trapped" at the applicable subsidiaries
              pursuant to the terms of the MEC Project Financing Facilities,
              were in excess of the existing cash requirements of the
              applicable subsidiaries and were used by MEC solely to fund
              payments that were necessary in connection with the operation
              of the business of MEC and that could not be deferred on a
              commercially reasonable basis. The MID Lender received waiver
              fees of $0.1 million (1% of the full amount released), which
              fees were capitalized under the applicable project financing
              facility.

              In July 2006 and December 2006, the Gulfstream Park project
              financing facility was amended to increase the amount available
              from $115.0 million plus costs and capitalized interest by
              adding new tranches of up to $25.8 million (plus costs and
              capitalized interest) and $21.5 million (plus costs and
              capitalized interest), respectively. Both tranches were
              established to fund MEC's design and construction of slot
              machine facilities located in the existing Gulfstream Park
              clubhouse building, as well as related capital expenditures and
              start-up costs, including the acquisition and installation of
              an aggregate of 1,221 slot machines. The new tranches of the
              Gulfstream Park project financing facility both mature on
              December 31, 2011. Interest under the December 2006 tranche was
              capitalized until May 1, 2007, at which time monthly blended
              payments of principal and interest became payable to the MID
              Lender based on a 25-year amortization period commencing on
              such date. Advances relating to the slot machine tranches are
              made available by way of progress draws and there is no make-
              whole payment associated with the new tranches. Also in July
              2006, the Gulfstream Park project financing facility was
              further amended to introduce a mandatory annual cash flow sweep
              of not less than 75% of Gulfstream Park's total excess cash
              flow, after permitted capital expenditures and debt service,
              which will be used to repay the additional principal amounts
              being made available under the new tranches. The July 2006 and
              December 2006 amendments did not affect the fact that the
              Gulfstream Park project financing facility continues to be
              cross-guaranteed, cross-defaulted and cross-collateralized with
              the Remington Park project financing facility. The
              consideration for the July 2006 and December 2006 amendments
              was an arrangement fee of 1% of the amount of each new tranche,
              which amounts are capitalized under the Gulfstream Park project
              financing facility.

              In September 2007, the terms of the Gulfstream Park project
              financing facility were amended such that: (i) MEC was added as
              a guarantor under that facility; (ii) the borrower and all of
              the guarantors agreed to use commercially reasonable efforts to
              implement the MEC Debt Elimination Plan (including the sale of
              specific assets by the time periods listed in the MEC Debt
              Elimination Plan); and (iii) the borrower became obligated to
              repay at least $100.0 million under the Gulfstream Park project
              financing facility on or prior to May 31, 2008. In
              consideration of these amendments and subject to certain
              conditions, the MID Lender agreed to waive the make-whole
              payment for any repayments made under the MEC Project Financing
              Facilities on or prior to May 31, 2008 and, provided that (i)
              repayments under the Gulfstream Park project financing facility
              are first applied to the July 2006 slots tranche, then to the
              December 2006 slots tranche (for each of which there is no
              make-whole payment), and then to the original tranche and (ii)
              no event of default exists under the MEC Project Financing
              Facilities, adjust the amortization schedule for the Gulfstream
              Park project financing facility following receipt of the
              $100.0 million repayment.

              At September 30, 2007, there were balances of $133.8 million
              (December 31, 2006 - $134.8 million), $24.8 million
              (December 31, 2006 - 19.4 million) and $13.3 million
              (December 31, 2006 - nil) due under the initial tranche, the
              July 2006 slots tranche and the December 2006 slots tranche,
              respectively, of the Gulfstream Park project financing
              facility. A balance of $28.4 million (December 31, 2006 -
              $31.7 million) was due under the Remington Park project
              financing facility. The current portion of the MEC Project
              Financing Facilities included in the Real Estate Business'
              "loans receivable from MEC, net" at September 30, 2007 was
              $102.5 million (December 31, 2006 - $3.1 million), including
              the required $100.0 million repayment discussed above. The
              current and non-current portions of the MEC Project Financing
              Facilities of $101.3 million and $93.4 million, respectively,
              as reflected in MEC's "loans payable to MID, net" on the
              Company's unaudited interim consolidated balance sheet, are net
              of $1.1 million and $4.4 million, respectively, of unamortized
              deferred financing costs. These net balances are being accreted
              to their face values over the terms to maturity of the MEC
              Project Financing Facilities.

              In connection with the Gulfstream Park project financing
              facility, MEC has placed into escrow (the "Gulfstream Escrow")
              with the MID Lender proceeds from an asset sale which occurred
              in fiscal 2005 and certain additional amounts necessary to
              ensure that any remaining Gulfstream Park construction costs
              (including the settlement of liens on the property) can be
              funded, which escrowed amount has been and will be applied
              against any such construction costs. In addition, in November
              2006, MEC deposited into the Gulfstream Escrow sufficient
              proceeds from the sale of The Meadows to repay all remaining
              indebtedness under a loan from BE&K, Inc. ("BE&K"), the parent
              company of Suitt Construction Co. Inc., the general contractor
              for the Gulfstream Park redevelopment project (the "BE&K
              Loan"). At September 30, 2007, the amount held under the
              Gulfstream Escrow (including accrued interest) was $5.3 million
              (December 31, 2006 - $6.5 million). All funds in the Gulfstream
              Escrow are reflected as restricted cash and due to MEC on the
              balance sheet of the Real Estate Business.

        (iii) 2005 MEC Bridge Loan

              In July 2005, the MID Lender provided MEC with the 2005 MEC
              Bridge Loan of up to $100.0 million expiring August 31, 2006.
              The amount of available funding under the 2005 MEC Bridge Loan
              was subsequently increased to $119.0 million and the term was
              extended to December 5, 2006. On November 14, 2006, MEC used
              part of the proceeds received in connection with the sale of
              The Meadows to repay in full the 2005 MEC Bridge Loan.
              Accordingly, the 2005 MEC Bridge Loan was terminated.

    Approximately $11.8 million of costs have been incurred, including
    $1.3 million and $1.6 million in the three and nine months ended
    September 30, 2007, respectively, in association with the MEC Bridge
    Loan, the MEC Project Financing Facilities and the 2005 MEC Bridge Loan.
    At the MEC segment level, these costs are recognized as deferred
    financing costs and are being amortized into interest expense (of which a
    portion has been capitalized in the case of the MEC Project Financing
    Facilities) over the respective term of the MEC Bridge Loan, each of the
    MEC Project Financing Facilities and the 2005 MEC Bridge Loan. At a
    consolidated level, such costs are charged to "general and
    administrative" expenses in the periods in which they are incurred.

    All interest and fees charged by the Real Estate Business relating to the
    MEC Bridge Loan, the MEC Project Financing Facilities and the 2005 MEC
    Bridge Loan, including any capitalization and subsequent amortization
    thereof by MEC, and any adjustments to MEC's related deferred financing
    costs, are eliminated from the Company's consolidated results of
    operation and financial position.

    (b) MEC Real Estate Acquired by MID

        During the first quarter of 2007, MID acquired all of MEC's interests
        and rights in three real estate properties to be held for future
        development: a 34 acre parcel in Aurora, Ontario, a 64 acre parcel of
        excess land adjacent to MEC's racetrack at Laurel Park in Howard
        County, Maryland and a 157 acre parcel (together with certain
        development rights) in Palm Beach County, Florida adjacent to MEC's
        Palm Meadows Training Center. MID paid cash consideration of
        approximately Cdn. $12.0 million ($10.1 million), $20.0 million and
        $35.0 million, respectively, for these interests and rights and
        granted MEC a profit participation right in respect of each property
        under which MEC is entitled to receive additional cash proceeds equal
        to 15% of the net proceeds from any sale or development of the
        applicable property after MID achieves a 15% internal rate of return.

        During the second quarter of 2007, MID acquired all of MEC's interest
        and rights in a 205 acre parcel of land located in Bonsall,
        California for cash consideration of approximately $24.0 million. The
        property currently houses the San Luis Rey Downs Thoroughbred
        Training Facility operated by MEC. This property is being held for
        future development and MID has agreed to lease the property to MEC on
        a triple-net basis for nominal rent while MID pursues the necessary
        development entitlements and other approvals. The term of the lease
        is three years, subject to early termination by either party on four
        months written notice.

        At the Real Estate Business and MEC segment levels, these
        transactions have been recognized at the exchange amount, resulting
        in MEC recognizing a gain in the three and nine months ended
        September 30, 2007 of $0.1 million and $48.8 million, respectively.
        The effects of these transactions are eliminated from the Company's
        unaudited interim consolidated results of operations and financial
        position, except that $1.8 million of costs incurred by the Real
        Estate Business and MEC in conjunction with these transactions have
        been included in the consolidated "general and administrative"
        expenses in the nine months ended September 30, 2007.

    (c) Hurricane Katrina Relief Effort

        In October 2005, the Real Estate Business purchased 791 acres of land
        in Simmesport, Louisiana for $2.4 million. In the fourth quarter of
        2005, the Real Estate Business committed to donating approximately 50
        acres of this land to a not-for-profit organization established to
        assist Hurricane Katrina redevelopment efforts with charitable
        funding from Magna and other Canadian sources. In the second quarter
        of 2007, the Real Estate Business committed to donating the remaining
        741 acres of land to the same not-for-profit organization. As a
        result, $2.0 million of costs associated with this further donation
        have been included in the Real Estate Business' "general and
        administrative" expenses in the three and nine months ended
        September 30, 2007. At September 30, 2007, the Real Estate Business
        has accrued a liability of $2.4 million for the carrying value of the
        land to be donated. The founding members and officers of the not-for-
        profit organization are officers and employees of MID and Magna.

    (d) MEC's Sales to Magna

        On March 31, 2006, MEC sold a real estate property held for sale and
        located in the United States to Magna. A gain on sale of $2.9 million
        was recognized based on the cash consideration received, net of
        transaction costs, of $5.6 million. MEC used the net proceeds from
        this transaction to repay principal amounts outstanding under the MEC
        Credit Facility (note 7).

    (e) MEC's Option to Acquire The Maryland Jockey Club

        On September 24, 2007, MEC exercised its option to acquire the
        remaining voting and equity interests in The Maryland Jockey Club,
        pursuant to an agreement with certain companies controlled by Joseph
        De Francis, a member of MEC's Board of Directors, and Karin De
        Francis. Under the terms of the option agreement, MEC paid
        $18.3 million plus interest on October 5, 2007. At September 30, 2007
        and December 31, 2006, this obligation was reflected in MEC's "long-
        term debt due within one year" on the Company's unaudited interim
        consolidated balance sheets and was secured by letters of credit
        under the MEC Credit Facility (note 7).

    16. COMMITMENTS AND CONTINGENCIES

    (a) In the ordinary course of business activities, the Company may be
        contingently liable for litigation and claims with, among others,
        customers, suppliers and former employees. Management believes that
        adequate provisions have been recorded in the accounts where
        required. Although it is not possible to accurately estimate the
        extent of potential costs and losses, if any, management believes,
        but can provide no assurance, that the ultimate resolution of such
        contingencies would not have a material adverse effect on the
        financial position of the Company.

    (b) On August 2, 2005, Greenlight Capital, Inc. and certain of its
        affiliates ("Greenlight") filed an oppression application in the
        Ontario Superior Court of Justice against the Company and certain of
        its current and former directors and officers. On October 30, 2006,
        the Ontario Superior Court of Justice dismissed the oppression
        application. On November 29, 2006, Greenlight filed a Notice of
        Appeal with the Ontario Divisional Court and on January 30, 2007,
        Greenlight filed its Appellants' factum. The Company and the other
        respondents filed their responding facta in July 2007 and the Company
        expects the appeal hearing to take place in late January 2008. The
        Company continues to consider Greenlight's oppression claim to be
        without merit and, together with the other respondents, will
        vigorously defend against the appeal.

    (c) On May 18, 2007, ODS Technologies, L.P., doing business as TVG
        Network, filed a summons against MEC, HRTV, LLC and XpressBet, Inc.
        seeking an order that the defendants be enjoined from infringing
        certain patents relating to interactive wagering systems and an award
        of damages to compensate for the infringement. An Answer to
        Complaint, Affirmative Defences and Counterclaims have been filed on
        behalf of the defendants. At the present time, the final outcome
        related to this summons is uncertain.

    (d) MEC generates a substantial amount of its revenues from wagering
        activities and is subject to the risks inherent in the ownership and
        operation of a racetrack. These include, among others, the risks
        normally associated with changes in the general economic climate,
        trends in the gaming industry, including competition from other
        gaming institutions and state lottery commissions, and changes in tax
        laws and gaming laws.

    (e) The Company had $4.7 million (Real Estate Business - $3.7 million;
        MEC - $1.0 million) of letters of credit issued with various
        financial institutions at September 30, 2007 to guarantee various of
        its construction projects. These letters of credit are secured by
        cash deposits of the Company. The Company has also issued
        $0.3 million of letters of credit under the Real Estate Business'
        $50.0 million unsecured senior revolving credit facility and
        $24.7 million of letters of credit under the MEC Credit Facility
        (notes 7 and 17).

    (f) MEC has provided indemnities related to surety bonds and letters of
        credit issued in the process of obtaining licences and permits at
        certain racetracks and to guarantee various construction projects
        related to activities of its subsidiaries. At September 30, 2007,
        these indemnities amounted to $6.1 million with expiration dates
        through 2008.

    (g) At September 30, 2007, the Company's contractual commitments related
        to construction and development projects outstanding amounted to
        approximately $3.1 million (Real Estate Business - $0.9 million; MEC
        - $2.2 million).

    (h) At September 30, 2007, one of MEC's wholly-owned subsidiaries, SAC,
        entered into three interest rate swap contracts, one on March 1,
        2007, one on April 27, 2007 and one on July 26, 2007, all with an
        effective date of October 1, 2007, which fix the rate of interest at
        7.0%, 7.1% and 7.2% per annum, respectively, to October 8, 2009 on a
        notional amount per contract of $10.0 million of the outstanding
        balance under SAC's term loan facility.

        (i)   On March 4, 2007, MEC entered into a series of customer-focused
              agreements with CDI in order to enhance wagering integrity and
              security, to own and operate HRTV(TM), to buy and sell
              horseracing content, and to promote the availability of
              horseracing signals to customers worldwide. These agreements
              involved the formation of a joint venture, TrackNet Media
              Group, LLC ("TrackNet Media"), a reciprocal content swap
              agreement and the purchase by CDI from MEC of a 50% interest in
              HRTV(TM). TrackNet Media is the vehicle through which MEC and
              CDI horseracing content is made available to third parties,
              including racetracks, OTB facilities, casinos and advance
              deposit wagering ("ADW") companies. TrackNet Media will also
              purchase horseracing content from third parties to be made
              available through the respective MEC and CDI outlets. Under the
              reciprocal content swap agreement, MEC and CDI will exchange
              their respective horseracing signals. On March 4, 2007, HRTV,
              LLC was created, with an effective date of April 27, 2007, in
              order to facilitate the sale of 50% of HRTV (TM) to CDI. Both
              MEC and CDI are required to make quarterly capital
              contributions, on an equal basis, until October 2009 to fund
              the operations of HRTV, LLC, however, MEC may, under certain
              circumstances, be responsible for additional capital
              commitments. MEC's share of the required capital contributions
              to HRTV, LLC is expected to be approximately $7.0 million, of
              which $0.8 million has been contributed to September 30, 2007.

        (j)   On November 15, 2006, MEC's wholly-owned subsidiary, Gulfstream
              Park Racing Association, Inc. ("GPRA"), opened the slots
              facility at Gulfstream Park, which now offers 1,221 slot
              machines, 516 of which were operational initially, with an
              additional 705 slot machines becoming operational on March 20,
              2007. GPRA opened the slots facility at Gulfstream Park despite
              an August 2006 decision rendered by the Florida First District
              Court of Appeals that reversed a lower court decision that
              granted summary judgment in favour of "Floridians for a Level
              Playing Field" ("FLPF"), a group in which GPRA is a member. The
              Appeal Court ruled that a trial is necessary to determine
              whether the constitutional amendment adopting the slots
              initiative, approved by Floridians in the November 2004
              election, was invalid because the petitions bringing the
              initiative forward did not contain the minimum number of valid
              signatures. FLPF filed an application for a rehearing, a
              rehearing en banc before the full panel of the Florida First
              District Court of Appeals and Certification by the Florida
              Supreme Court. On November 30, 2006, in a split decision, the
              en banc court affirmed the August 2006 panel decision and
              certified the matter to the Florida Supreme Court, which stayed
              the appellate court ruling pending its jurisdictional review of
              the matter. On September 27, 2007, the Florida Supreme Court
              ruled that the matter was not procedurally proper for
              consideration by the court. Its order effectively remanded the
              matter to the trial court for a trial on the merits. MEC has
              disclosed that it expects that a trial on the merits will
              likely take over a year to fully develop and that it could take
              as many as three years to achieve a full factual record and
              trial court ruling for an appellate court to review. At
              September 30, 2007, the carrying value of MEC's fixed assets
              related to the slots facility is approximately $32.0 million.
              If the matter is ultimately decided in a manner adverse to MEC,
              a write-down of these fixed assets may be required.

        (k)   In May 2005, MEC entered into a Limited Liability Company
              Agreement with Forest City (collectively with MEC, the
              "Partnership Members") concerning the planned development of
              "The Village at Gulfstream Park(TM)". That agreement
              contemplates the development of a mixed-use project consisting
              of residential units, parking, restaurants, hotels,
              entertainment, retail outlets and other commercial use projects
              on a portion of the Gulfstream Park property. Under the Limited
              Liability Company Agreement, Forest City is required to
              contribute up to a maximum of $15.0 million as an initial
              capital contribution. MEC is obligated to contribute 50% of any
              equity amounts in excess of $15.0 million as and when needed.
              However, to September 30, 2007, MEC has not made any such
              contributions. At September 30, 2007, approximately
              $28.0 million of costs have been incurred by The Village at
              Gulfstream Park, LLC, which have been funded by a construction
              loan from a third party bank, as well as equity contributions
              from Forest City. Included in MEC's "accounts payable and
              accrued liabilities" is an obligation of approximately
              $2.8 million reflecting MEC's share of capital contributions in
              excess of $15.0 million. The Limited Liability Company
              Agreement also contemplated additional agreements, including a
              ground lease, a reciprocal easement agreement, a development
              agreement, a leasing agreement and a management agreement, all
              of which have been executed. Upon the opening of The Village at
              Gulfstream Park(TM), annual cash receipts (adjusted for certain
              disbursements and reserves) will first be distributed to Forest
              City, subject to certain limitations, until such time as the
              initial contribution accounts of the Partnership Members are
              equal. Thereafter, the cash receipts are generally expected to
              be distributed to the Partnership Members equally, provided
              they maintain their equal interest in the partnership. The
              annual cash payments made to Forest City to equalize the
              Partnership Members' initial contribution accounts will not
              exceed the amount of annual ground rent.

        (l)   On September 28, 2006, certain of MEC's affiliates entered into
              definitive operating agreements with Caruso regarding the
              proposed development of The Shops at Santa Anita on
              approximately 51 acres of excess land surrounding Santa Anita
              Park. Westfield Corporation ("Westfield"), a developer of a
              neighbouring parcel of land, has challenged the manner in which
              the entitlement process for such development has proceeded. On
              May 16, 2007, Westfield commenced civil litigation in the Los
              Angeles Superior Court in an attempt to overturn the Arcadia
              City Council's approval and granting of entitlements related to
              the construction of The Shops at Santa Anita. In addition, on
              May 21, 2007, Arcadia First! filed a petition against the City
              of Arcadia to overturn the entitlements and named MEC and
              certain of its subsidiaries as parties of interest. If either
              Westfield or Arcadia First! is ultimately successful in its
              challenge, development efforts could potentially be delayed or
              suspended. The first hearings on the merits of the petitioners'
              claims are scheduled for late April 2008. Under an April 2004
              Letter of Intent, MEC is also exploring the possibility of a
              joint venture with Caruso to develop excess lands surrounding
              Golden Gate Fields. To September 30, 2007, MEC has expended
              $9.7 million on these development initiatives, of which
              $3.4 million was paid in the third quarter of 2007. These
              amounts have been included in MEC's "real estate properties,
              net" on the Company's unaudited interim consolidated balance
              sheets. Under the terms of these arrangements, MEC may be
              responsible to fund additional costs. However, to September 30,
              2007, no such payments have been made.

        (m)   The Meadows (note 3) participates in a multi-employer defined
              benefit pension plan for which the pension plan's total vested
              liabilities exceed the plan's assets. An updated actuarial
              valuation is in the process of being obtained, however, based
              on allocation information currently provided by the plan, the
              portion of the estimated unfunded liability for vested benefits
              attributable to The Meadows is approximately $3.7 million.
              Effective November 1, 2007, the New Jersey Sports & Exposition
              Authority ("NJSEA") withdrew from this plan, and The Meadows is
              now the only participant. In light of the NJSEA's withdrawal
              from this plan, MEC is considering its options with respect to
              The Meadows' participation in this plan and has yet to
              determine whether The Meadows will also withdraw. As part of
              the indemnification obligations under the Meadows Holdback Note
              (note 3), a withdrawal liability that may be triggered if The
              Meadows decides to withdraw will be settled under the terms of
              the Meadows Holdback Note.

    17. SUBSEQUENT EVENTS

    (a) On October 2, 2007, SAC amended and extended its term and revolving
        loan arrangements with a U.S. financial institution. The principal
        amendments to the term and revolving loan agreements included
        reducing the amount available under the revolving loan facility from
        $10.0 million to $7.5 million, requiring the aggregate outstanding
        principal under the revolving loan facility to be fully repaid for a
        period of 60 consecutive days during each year, increasing the amount
        available under the term loan facility from $60.0 million to
        $67.5 million, reducing the monthly principal repayments under the
        term loan facility to $375 thousand, extending the maturity date for
        both facilities to October 31, 2012 and modifying certain financial
        covenants.

    (b) The closing of the FEL Equity Investment (note 15) occurred on
        October 29, 2007, with FEL purchasing 8,888,888 shares of MEC Class A
        Stock at a price per share of $2.25. The price per share was set at
        the greater of (i) 90% of the volume weighted average price per share
        of MEC Class A Stock on NASDAQ for the five trading days commencing
        on September 13, 2007 (the date of announcement of the FEL Equity
        Investment); and (ii) U.S. $1.91, being 100% of the volume weighted
        average price per share of MEC Class A Stock on NASDAQ for the five
        trading days immediately preceding September 13, 2007. The shares of
        MEC Class A Stock issued pursuant to the subscription agreement were
        issued and sold in a private transaction exempt from registration
        under Section 4(2) of the United States Securities Act of 1933, as
        amended. As a result of the FEL Equity Investment, MID's voting
        interest and equity stake in MEC were reduced from 96.3% and 58.3%,
        respectively, to 95.6% and 53.9%, respectively. A dilution loss
        created by the FEL Equity Investment will be recorded by the Company
        in the fourth quarter of 2007.

    (c) On April 16, 2007, MEC filed with the Securities and Exchange
        Commission (the "SEC") a definitive Proxy Statement, which included a
        proposal for MEC's stockholder approval to increase the overall
        number of shares available for awards under the MEC Plan by 2,000,000
        shares of MEC Class A Stock, which proposal was approved by MEC's
        stockholders on May 9, 2007. On October 31, 2007, MEC filed a
        registration statement on Form S-8 for the purpose of registering
        these additional 2,000,000 shares under MEC's currently effective
        registration statement on Form S-8, originally filed with the SEC on
        March 14, 2000. The original registration statement registered an
        aggregate of 8,000,000 shares of MEC Class A Stock under the MEC Plan
        (note 12).
    





For further information:

For further information: Richard Smith, Executive Vice-President and
Chief Financial Officer, at (905) 726-7507; For teleconferencing questions,
please contact Angie Palmer at (905) 726-7508

Organization Profile

MI DEVELOPMENTS INC.

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