Owning Thoroughbreds Is an Expensive Gamble Offering Great Rewards--and Costly Losses
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Bizelia hadn't even gone out that day to buy Pride of Summer, but rather to acquire a horse named Cazzy B. for 10 golfing buddies who go by the name TOC (Touch of Class) Stable. Bizelia got Cazzy B. for $25,000, but while he was there, Pride of Summer passed through the sales ring without attracting a bid. Bizelia said to himself, "What the heck," and picked him up for the minimum price--$300. The 10 partners who were going in on Cazzy B. coughed up the extra $30 each to go in on Pride of Summer.
Joe Cornacchia was one of the 10 to ante up the $30 for a share. "I didn't really want to bother, but the rest of them said, 'We want you in it--you're good luck,'" says Cornacchia, a major partner in the Kentucky Derby winners Strike the Gold and Go for Gin. "Watching Pride of Summer win that stake at Saratoga was as much fun as watching Go for Gin win the Kentucky Derby." Actually, someone should have checked Pride of Summer's pedigree, the genealogy of four-legged ancestorsthat means so much to horse buyers. They would have found a blood link to the famous turf racer John Henry.
If Hollywood had come up with the John Henry story, you would give it two thumbs down for being too Hollywood. Sold as a yearling for $1,100 in chump change, John Henry was so puny, ill-bred and ill-tempered that he was gelded. He showed modest talent in winning a few races at low-level tracks in Louisiana, changed hands five times and bounced from track to track, before ending up in New York running in $25,000 claiming races. But his last owner, Sam Rubin, an importer of Korean bicycles and a player of horses, put John Henry in a turf race and the horse turned into a champion. Winner of seven Eclipse Awards (racing's equivalent to the Academy Awards), John Henry earned two Horse of the Year titles, the second of which he won in 1984 at age nine in the final year of his career. No horse so old has ever been so honored. He retired as the sport's then all-time leading money winner, with career earnings of $6,597,947.
But for every Pride of Summer or John Henry, there is a Seattle Dancer or Snaafi Dancer. The highest price ever paid for a yearling at auction was $13.1 million in 1985 for a colt later named Seattle Dancer; that broke the record set two years earlier when Snaafi Dancer went for a bid of $10.2 million. At least Seattle Dancer eked out a couple of Group II stakes wins in Europe. As for Snaafi Dancer, not only did he never make it to the races, he also never made it as a stallion, because he turned out to be sterile.
Somewhere between the fairy tales of John Henry and Pride of Summer and the tragicomedies of Snaafi Dancer and Seattle Dancer lies the reality of thoroughbred ownership--lots of cash up front and no promise of return. Take D. Wayne Lukas, who had a 1995 that most owners only dream about, with horses that included Thunder Gulch, Timber Country and other national champions. In 1987, he coughed up $2.9 million for a colt named Houston. "He's perfect, the best horse I've ever trained," Lukas said at the time. Houston initially looked like a good investment, winning the Bay Shore and the Derby Trial in 1987, but when asked to stretch out to the classic distance of a mile and a quarter in that year's Kentucky Derby, he ran eighth. A sixth-place finish in the subsequent Preakness wasn't much of an improvement. That summer, Houston managed to win another decent little sprint stake, the King's Bishop. But he never hit the big time of Grade I stakes, where the real money is made.
Stories like Lukas' point out a simple truth about horses--every purchase, no matter how perfect the bloodlines or the seasoned judgment of a horse expert, comes complete with an excruciating range of possibilities, from multimillion dollar earnings to an equine money pit. There was a time, however, when only the rich were at risk, because they were the only ones who could afford to play the game. In the 1980s, for instance, Middle Eastern money drove prices for good yearlings into the stratosphere. Today, with the decline of the old-line, blue blood stables, new forms of ownership have evolved, opening up the sport of kings to those lacking regal bloodlines. Where once there was one owner owning 40 horses, increasingly there are 40 owners of one horse. And there may be more than one way to get in: fractional ownership, partnerships and syndicates are letting people get their feet wet in the game without drowning.
The upside of thoroughbred ownership remains not only ever-present, it has gotten a lot more attractive as purses continue to rise. The most prominent examples of this trend are the seven-race $10 million Breeders' Cup, racing's richest day, at Belmont Park in New York; the $3.9 million Japan Cup, the world's richest turf race, at Fuchy racetrack in Tokyo; and the $4 million Dubai World Cup, which became the world's richest race when it was run in the United Arab Emirates for the first time last March.
What kind of animal is worth all this money? What kind of horse is the thoroughbred?
A horse is a thoroughbred if its parents were thoroughbreds and their parents were thoroughbreds, and on and on back to the turn of the eighteenth century, when three stallions were imported into England from the Middle East to be bred with the native stock: the Godolphin Barb, the Darley Arabian and the Byerly Turk. Every thoroughbred traces its lineage in an unbroken line back to at least one of these founding stallions.
Thoroughbreds are among the fastest animals on earth over a fairly long distance. They can run up to 39 miles per hour, and the quickest can run the mile in 1:33 flat. They range in size from 15 to 17 hands high (60 to 68 inches) at the withers (where the neck meets the back) and weigh an average of 1,000 pounds.
At more than 100 tracks in North America, thoroughbreds race primarily on dirt tracks at distances from six furlongs (three-quarters of a mile) to a mile and a quarter. Increasingly, races are being held on turf courses, as is the style in Europe, often at longer distances. An average American racehorse will run his first race at age two and may continue running until age seven or longer, although the best breeding prospects tend to be retired earlier.
Though thoroughbred purses continue to climb, not every owner will come out ahead. Robert Clay, owner of Three Chimneys Farm in Midway, Kentucky, and a prominent member of the board of trustees of the Thoroughbred Owners and Breeders Association (TOBA), says owners will pay out a total of $1.2 billion a year and get back $750 million in purses.
While the excitement, fun and competition of thoroughbred racing is payment enough for many owners, how can the prospective owner tap into enough of that $750 million so he doesn't tap out? There is a world of advice awaiting the new owner, but in keeping with the risky, roguish nature of the thoroughbred game, not all of it is good. Fortunately, the thoroughbred industry is now bending over backwards to make the right kind of information available to prospective owners, who in general acquire their horses at auctions, private sales or in claiming races. With the Prospective Owners Seminars that it holds at racetracks across the country, TOBA has become one of the more reliable sources of information for first-timers.
On the Friday before last fall's Breeders' Cup, the association held a seminar at Belmont Park. At 7:30 a.m., midday by racetrack standards, about 75 prospective owners took their places in the inner sanctum of Belmont Park's Turf and Field Club for a one-day immersion into all matters thoroughbred. Allan Dragone, former chairman of the board of the New York Racing Association and owner of December Hill Farms in Kentucky, offered participants the perspective of the sole owner, which he defined as "the one who gets all of the glory...and all the risk."
Wall Street investment banker Donald Little spoke about sharing the rewards and spreading the risk in the kind of racing partnerships his Boston-based Centennial Farms organizes. Centennial's horses, which race out of the barn of Hall of Fame trainer Scotty Schulhofer, include 1992 champion sprinter Rubiano and '94 Belmont Stakeswinner Colonial Affair. "In racing partnerships," Little said, "you find the highs are almost as high as in sole ownership, but the lows are not nearly so low."
Bloodstock agent Reiley MacDonald of Eaton Sales Co. stressed the need for professional advice and offered his guidelines on how to choose an adviser. "You need an adviser to help you develop your plan and set your goals," MacDonald said. "You need to put together a team, perhaps with a bloodstock agent and a trainer. Your criteria for choosing the team should be: one, honesty; two, knowledge; three, connections in the industry, especially if you are interested in private sales; and four, you need team members that will communicate with you."
John Kimmel, a trainer and veterinarian, called racing "the greatest outdoor sport played." He offered this advice for choosing a trainer: "Visit him at the barn in the morning, see how his operation looks, go to the paddock before the races and see how the trainer presents his horse."
Kimmel also explained how trainers bill their clients, displaying a sample monthly bill of his that came to $2,335 (he says the industry average is closer to $3,000). Routine veterinary care and treatment of minor injuries are included.
The real wild cards in the thoroughbred deck are injuries and illness. Viruses, broken bones, sore muscles, respiratory problems, colic, hoof problems and freak accidents can stop the fastest thoroughbred. "These are fragile animals and they are asked to run fast," Kimmel told the seminar participants. "Injuries are part of the game. The key is to address minor injuries before they become major problems."
While a horse is recuperating from illness or injury, the owner not only pays upkeep for an unproductive horse, but he is also faced with veterinary bills. These can include the same range of often pricey procedures humans face--X rays, ultrasound, bloodwork, surgery, even chiropractic and acupuncture--without health insurance to pick up the tab. In worst-case scenarios, the bills can add up to thousands of dollars.
Advances in veterinary medicine are saving horses from maladies that just 10 years ago might have proved fatal--and enabling them to race again. However, illness and injuries still conspire to make thoroughbred ownership a dicey proposition. In the words of actor and owner Jack Klugman, as quoted by thoroughbred owner Dragone, "If someone tells you you're as healthy as a horse, you better run for your doctor!"
During the seminar, the prospective owners were also guided through the business, tax and legal issues of thoroughbred ownership and were given a workbook that takes them step by step through the process of acquiring a thoroughbred, or at least a piece of one. After touring the barns and talking to leading trainers, the prospective owners spent the rest of the day at the races.
You've done your homework, you've gone to the races, you've observed trainers in action, you've read the trade publications like The Blood-Horse, Thoroughbred Times and Daily Racing Form. You've introduced yourself to trainers and owners and you've been to the TOBA seminar. You're ready to take the plunge, but which way do you jump? Sole ownership? Partnership? Do you get a horse out of a high-profile yearling sale or claim a horse that's ready to run?
For most new owners, it makes sense to start as a part owner. Place a call to Dogwood Stable in Aiken, South Carolina. If you're lucky you'll be left on hold, because then you'll hear the race call of the stretch run of a major Dogwood triumph, such as Summer Squall's winning run to the wire in the 1990 Preakness. Dogwood Stable is considered the gold standard of the thoroughbred partnership business, in part because it practically invented the concept in 1969.
"I was the first to put together a limited partnership for the purposes of thoroughbred ownership," says Cot Campbell, the 67-year-old founder of Dogwood Stable. "Our first was a filly named Mrs. Cornwallis and she ran a hole in the wind. She won three stakes and finished second or third in three others."
Since Mrs. Cornwallis, Dogwood has campaigned approximately 50 stakes winners that have won over 100 stakes among them. Dogwood has ranked consistently in the top one-half of one percent of the 20,000 North American stables since 1978. It currently has 60 horses in training and operates a training facility in Aiken, in the heart of horse country. In a typical Dogwood partnership, Campbell buys a horse and marks it up about 30 percent, then sells four shares of 23.75 percent, retaining a 5 percent share and the title of managing partner. Share prices for Dogwood Stable horses range from $15,000 to $77,000. Campbell bills his clients on a quarterly basis, with the average bill per share amounting to $2,000. "Except for life insurance, it costs as much to keep a good horse as a cheap one," he says.
"Here's the proposition: You might make money--you probably won't--but if you lose money, you'll be able to write it off," Campbell says. "And you'll find yourself in a tremendously exciting sport. It's a heck of a lot of fun and a great adventure. But if you don't think it will be a lot of fun, if the idea of watching your horse running down the stretch with a chance to win doesn't ring your chimes, then don't touch this game with a 10-foot pole." Campbell takes every opportunity to warn people off. "I rub people's noses in it," he says. "Thirty percent will make money, 70 percent won't. It's like drilling for oil. You're going to hit a lot of dry holes."
Mark Rovner's LSI Gold Stable operates a bit farther down the thoroughbred food chain. The 33-year-old Long Island real estate lawyer wanted to make the move from fan to owner, but he got sticker shock when he saw how much it would cost to get the kind of horsepower he would need to compete in New York.
"I tried to buy a horse alone, but at my level I'd be in the low end of the game," Rovner says. "I came across a book on thoroughbred syndication--it was 4,000 pages long and boring--but I read it from cover to cover. I had done real estate syndications and saw that thoroughbred syndication was a way to make a high level of racing affordable."
The minimum price for a share of an LSI Gold horse is $5,000. In a general partnership arrangement, Rovner retains a 10 percent share of each horse and divides the other 90 percent into 40 shares. LSI Gold Stable currently has 15 horses on track, primarily in the Belmont Park barn of trainer H. Morgan Tesher, and 130 owners.
"You buy a share, you're an owner. You get the same rights and privileges of any owner, even a big-time owner like George Steinbrenner," Rovner says. Those privileges include access to the barns, clubhouse and box seats, and, hopefully, posing with your horse in the winner's circle.
Not all partnerships are as formal as Dogwood, Centennial, LSI Gold and dozens of others. Friends in pursuit of a good time often form partnerships.
Gary Biszantz bought his first racehorse when he was 21, for $400. The horse turned into a winner and Biszantz was hooked. Today, the 61-year-old chairman of Cobra Golf Inc., manufacturer of King Cobra golf clubs, keeps enough horses in training that he can see them run 10 to 12 times a month. Biszantz recently purchased a Kentucky farm and has a legitimate Triple Crown candidate in multiple-stakes winner Cobra King. He still enjoys running his horses in partnerships.
"I have partners in every one of my horses. I get my friends involved; it's just more fun that way," Biszantz says. "It's like we're all partners in our own pro franchise. When we all go down to the winner's circle, it's the best thrill there is, and the wonderful thing is, it never changes. It doesn't matter if it's your first winner or your hundredth."