Thursday, June 4, 2020

Pre-Coronavirus Preview of 2YO Sales Season

This piece was published at pastthewire.com just before the March 17-18, 2020 OBS sale of two-year-olds in training.

Thanks to pastthewire.com for asking me to contribute. I’ll be writing about the business of racing, as I’ve done over the years in my blog of the same name. And, since we’re just about to start the two-year-old sales season, let’s take a look at how those sales came to be.
         Back in 1953, there were exactly four thoroughbred farms in Marion County, Florida. The 1953 foal crop in Florida was all of 79 horses. But one of those, Needles, went on the win the Kentucky Derby and the Belmont Stakes, then retired to stud in Florida, and the state’s breeding industry was born.
         Based largely on Needles’s success, the Ocala-area farms changed the way young horses are sold. Before World War II, and continuing into the 1950s, most thoroughbreds were raced by their breeders, who were typically wealthy individuals with their own farms. Some foals would be sold at yearling auctions, but the game was mostly breed-to-race. Then, in the 1950s, newly rich owners came into racing, seeking glory on the track without the years of breeding. Ultimately, that led to the emergence of two-year-old (in racing parlance, “juveniles”) sales, offering horses that were almost ready to race.
In 1958, Ocala Stud sold its entire two-year-old crop off the farm, and the Florida Breeders Sales Co. began selling two-year-olds at Hialeah; often those two-year-olds would be racing there within days or weeks. Fast-forward to 1974, when the late Norman Casse and his fellow Ocala breeding pioneers decided to organize their own sales company; Ocala Breeders Sales Co. (OBS) held its first juvenile sale in January 1975. Forty-five years later, two-year-old sales are a major part of the thoroughbred marketplace. This year’s two-year-old sales season starts in Ocala March 17 and 18, to be followed by OBS sales in April and June, by Fasig-Tipton sales at Gulfstream in April, Timonium MD in May and at Santa Anita in June, by a Keeneland sale in April, and by a variety of small regional auctions.
         From being non-existent some 60 years ago, two-year-old sales have become big business. Last year, 2,312 juveniles, or roughly 10% of the foal crop, were sold at auction, with an average price of over $90,000. Yearling sales are still a bigger piece of the market – almost 7,000 yearlings were sold at auction last year – but the juvenile sales are a major element in what’s now a year-round sales calendar. And the sales have created a previously unknown industry – pinhooking, in which horse traders buy yearlings or weanlings and then resell them at the two-year-old sales. Pinhooking operations may now outnumber breeding farms in the Ocala area, relying on the warmer Florida weather and the high levels of calcium in the grass to develop horses quickly, so they look like promising athletes by the time the sales come around in the spring.
         As the sales have matured, the demands of buyers have escalated. Nowadays, bloodstock agents sit up in the grandstand and hand-time not merely the 1- or 2-furlong breeze that each horse runs, but also the horse’s “gallop-out” around the turn after the finish line. Buyers use slow-motion video and ultrasound scans of horses’ hearts in addition to the traditional physical inspections and review of vet records. And buyers are very, very picky. At most of the sales, barely half of the horses listed in the catalogue end up going to new homes. The rest are either scratched by their consignors because they couldn’t meet the demanding prep schedule or don’t draw a bid higher than the seller’s reserve price.
         The key to selling a horse for lots of money at a two-year-old sale is for the horse to breeze fast – very fast. The bullet breezes at the sales are typically close to 10 seconds flat for an eighth of a mile and 21 seconds for a quarter, faster than those horses will ever run again.  And while there’s a general correlation between fast breezes and later success on the racetrack, it’s only a modest one, and the opportunity for mistakes abounds. Back in 2006, at the Fasig-Tipton sale at Calder, a Forestry colt subsequently named The Green Monkey recorded the fastest breeze of the sale and prompted a bidding war between the Coolmore juggernaut from Ireland and Sheikh Mohammed al Maktoum of Dubai, pushing the horse’s price to a world-record $16 million. The Green Monkey, running in Coolmore silks, never won a race, earning a grand total of $10,000 on the track, and was quickly retired to an ignominious stud career in Florida. It’s easy to make mistakes; maybe if Coolmore and the Sheikh’s people had focused a little more, they would have noticed that the colt did his 9.8-second breeze in a rotary gallop, which can’t possibly be sustained for any real race distance. But, oh well, it’s only money.
         Occasionally, sellers try to convince prospective buyers that the hell-bent-for-leather breeze is a bad idea, and return to the original juvenile sale format, where horses just galloped past the crowd. Pinhooker Kip Elser has had some success doing that recently, and Frank Stronach tried for some years to sell his Adena Springs Farm’s juveniles at the farm with just a gallop show, but mostly speed still rules, not necessarily to the benefit of the horses that are pushed hard to make the sale in time, rather than going through a longer period of gradual bone development.
         This year’s OBS March sale has catalogued some 681 horses, a sizeable increase from recent years, including half a dozen by Triple Crown winner American Pharoah and one by Frankel, arguably the best horse of this century. Virtually all the leading North American sires are well represented, and there are more Kentucky-breds in the catalogue than Florida-breds. So, even as the Florida foal crop has declined drastically since the 2008 financial crash, OBS’s sales business, designed originally as a way of marketing the state’s own foals, has morphed into what amounts to a nationwide profit center. Thanks, pinhookers.
         At last year’s March sale, 306 of the 577 horses originally listed in the catalogue ended up being sold, at an average price of nearly $147,000. With an expanded catalogue this year, it may be hard to match that average. I’ll be writing about what actually happens at this year’s sales, and we’ll see. If you have a weanling or yearling that doesn’t sell, there are always the two-year-old sales. But if your two-year-old doesn’t sell, suddenly you have very few options. So it’s a high-pressure situation; it’ll be interesting to see who the winners and losers turn out to be.
  

Wednesday, June 3, 2020

OBS March Sale: Unsettling Indications for the Market

This post was first published in pastthewire.com in March, 2020. https://pastthewire.com/obs-march-sale-unsettling-indications-for-the-market/

This week’s sale of two-year-olds in training at Ocala Breeders Sales Co. was never going to set any records. As Nicole Russo carefully wrote in the Daily Racing Form, “the market was expected to show restraint.” But I suspect that few anticipated the extent of the debacle that actually occurred. In brief: the average price for horses that were sold dropped 34% from last year, from $144,603 to $95,585. The median price, typically a more representative reflection of the sale as a whole, dropped 37.5%, from $80,000 to $50,000. Of the 485 horses that actually went through the auction ring, only 291 were sold – a buyback rate of 40%, compared to just 24% last year. And those 291 sales represented less than 43% of the total number of 681 horses that were in the sales catalogue to begin with, the first time in my memory that fewer than half the horses listed actually found new homes. While some horses in the catalogue, as always, were scratched for physical reasons, or because they just breezed too slowly, it appears a good number were withdrawn because their owners correctly anticipated a poor market.
         There are three overlapping reasons for the declines. First, the sale took place against the backdrop of the coronavirus pandemic, which both limited the number of buyers who felt comfortable going to Ocala – though OBS did provide expanded telephone bidding – and created a huge amount of uncertainty. Will there even be places to race the two-year-olds that one is buying?
         Second, the stock market is in free fall, down some 30% from its high point. And the sort of people who buy expensive racehorses are also the sort of people who have a lot of wealth in the market. So seeing their portfolios drop dramatically might, to say the least, inhibit their willingness to throw money at unproven thoroughbreds.
         Third, even without the possibly temporary hiccup of the coronavirus and stock market crash, racing itself doesn’t have a rosy outlook. Betting handle has been flat – actually declining in inflation-adjusted dollars – for many years, and the recent explosion in sports-book betting on other contests threatens even that modest current handle. In addition, clusters of breakdowns - at Aqueduct in 2011, at Santa Anita last year - have strengthened public support for abolishing racing altogether. The recent indictments of “super-trainers” Jason Servis and Jorge Navarro and other racing insiders just adds to the public perception that racing is crooked, not to mention cruel.
         Still, with the cancellation of the Fasig-Tipton Gulfstream sale and the Keeneland April sale, OBS March was the only place a buyer could look for a high-quality two-year-old that might be ready to race early in the year (assuming that there will be anywhere to race). So it’s a bit surprising that the top prices at the sale were only in the $600,000 range, plus or minus. In most years, there are at least a few million-dollar babies. Last year, for example, the sale topper in March went for $2 million, and none of the five most expensive horses at that sale sold for less than $800,000. There can’t be that much difference in quality from one year to another, so the decline in buyers’ willingness to pay foolishly high prices for horses that probably won’t earn that money back on the race track – remember The Green Monkey! – must in large part result from the three uncertainty factors listed above – the virus, the stock market, and racing’s own uncertain future.
         The OBS March results have unsettling implications for the rest of the thoroughbred sales season. Pinhookers, who buy weanlings and yearlings and then try to sell them at a profit as two-year-olds, need the money from those sales to finance another round of yearling buying. With the Gulfstream and Keeneland sales cancelled – though Fasig-Tipton did add another sale in June at Timonium, MD – it’s getting harder to see where pinhooking consignors will hit those home runs that fuel their next round of buying. Combine that with what’s likely to be a continuing stock-market miasma, and breeders who are sending their yearlings to the summer and fall sales must already be having palpitations. The breeding industry went through one much-needed round of contraction after the financial crash of 2008, with the result that the US thoroughbred foal crop is currently down roughly 50% from its peak. By the time this year’s trifecta of virus, stock market and scandal have played out, thoroughbred racing and breeding may become even more of a niche industry than it already is.

Tuesday, June 2, 2020

Can New York Horsemen Afford to Go to Saratoga This Year?

(The following was published on May 14, 2020 at pastthewire.com. https://pastthewire.com/can-new-york-horsemen-afford-to-go-to-saratoga-this-year/)

The lockdown of major US race tracks appears to be easing, albeit minus in-person spectators. Churchill Downs opens its spring meet this weekend; Golden Gate in northern California is already running; Santa Anita has published its first post-coronavirus condition book and is taking entries for this coming Friday, even without final government approval. On the East Coast, though, things are moving a bit more slowly. Monmouth Park has announced plans to start racing on the July 4th weekend, but neither the Maryland Jockey Club, which operates Laurel and Pimlico, nor the New York Racing Association (NYRA) have been able to convince their state regulators to give them firm opening dates.
         In New York, training continues on the Belmont backstretch, with strong health and safety protocols in place. NYRA has submitted reopening plans to the state, but the famously racing-unfriendly Governor Andrew Cuomo is in no hurry to move those plans to the top of his inbox. And while we can reasonably expect the go-ahead for racing at Belmont sometime within the next month or so, the future of this year’s Saratoga meet remains entirely up in the air.
         This past weekend, broadcaster Mike Francesa caused a Twitter storm by announcing that the Saratoga meet had been cancelled, only to be met by an immediate denial from NYRA public relations chief Pat McKenna, who posted that “NYRA is seeking to resume live racing at Belmont Park in the absence of fans and we have prepared operating plans that follow the same model for Saratoga should that be necessary.” But, with Saratoga’s scheduled opening day of July 16 barely two months away, NYRA is sending decidedly mixed signals. Ticket sales are on hold, reflecting the likelihood of racing without spectators, if, indeed, there’s racing at all. And the Saratoga calendar on the NYRA website is blank for July and August.
         NYRA management clearly wants to run a Saratoga meet of some kind. Last year’s all-sources handle for the 39-day meet (one race day was lost to the weather) was $705 million, an average of better than $18 million a day. And, unusually for racing in the US, that number has steadily increased in recent years, since NYRA went to a 40-day Saratoga meet in 2010. Over the past nine years, total Saratoga handle increased 28%. Even adjusting for inflation, that’s a 9% increase, at a time when US racing’s overall inflation-adjusted handle has been in steady decline.
         So, Saratoga, along with a few other bright spots, like Churchill’s Oaks-Derby weekend and the boutique meets at Keenland, Del Mar and Kentucky Downs, is a part of the racing calendar that no one would like to cancel. But, if the meet has to go ahead without spectators and without the purse supplements that flow from the  currently-closed Resorts World casino at Aqueduct, can New York’s long-suffering owners and trainers actually afford to go there?
         While it’s true that Saratoga purses are the highest in the country (except for the very short Kentucky Downs meet), those purses weren’t enough even last year to attract the usual complement of out-of-town horsemen, and the racing office was scrambling to fill cards from early in the meet. Hard to imagine that $90,000 for maiden specials and $98,000 for an N3X allowance wouldn’t be a sufficient draw, but that’s what happened. And the competition isn’t getting any easier. The condition book for the Churchill Downs meet this year, for example, has purses of $79,000 for maiden specials and $83,000 for an N2X allowance, pretty close to what Saratoga was offering last year.
         The new Churchill condition book does show a small purse decrease from last year, but only a small one – about $6,000 for those allowances, only $2,000 or so for the bread-and-butter claiming races. And the Santa Anita condition book has somewhat larger reductions: from $65,000 to $50,000 for maiden specials and from $43,000 to $29,000 for $25,000 claimers. But neither of those tracks is as dependent on slots money as is NYRA. If Saratoga does run this year, could it even match Churchill’s figures?
         There are two major elements in the Saratoga purse structure that are problematic this year: the lack of casino money and the lack of on-track betting. Casino money is easy to account for; in normal times, Resorts World accounts for 39% of the NYRA purse account. If that money doesn’t come back and can’t be replaced from other sources, those $90,000 maiden races would be at $55,000, back where they were in 2010 before the slot-machine dollars started flowing. And all other purses would take a similar hit.
         On-track betting is a little trickier. Unlike most tracks, Saratoga still earns a significant portion of its handle from on-track betting (including betting on the in-house NYRABets account). Last year, $146.6 million of the total $705 million, or 20.8%, was bet on-track. That compares with a national average of something less than 10% that’s actually bet on-track in the US. And on-track betting is way more lucrative than off-track. NYRA gets, on average, 20% of everything that’s bet on-track (that 20% is the blended “takeout” over all the different kinds of bets that are offered). That’s then divided up among the state, track operations and the horsemen’s purse account. In contrast, only about 8% of what’s bet off-track comes back to NYRA as host fees; the rest goes to ADW operators like Churchill’s Twin Spires or TVG, who actually take the bets, and in rebates to the big players who wouldn’t bet a dollar if they had to play into a real 20% takeout.
         So, if Saratoga runs without spectators, it will probably get only a small fraction – through its NYRABets accounts – of that $146.6 million it took in on-track last year. And, because of the difference between takeout and host fees, for every on-track dollar it loses, it will have to pull in about $2.50 in new off-track betting. To replace the entire lost on-track handle, then, NYRA would need something like $365 million in new off-track betting, over and above the $558 million that it already generated off-track last year.
         Possible? Yes; the last months have shown that there’s an appetite for televised racing, and Saratoga would certainly be the star attraction of the summer season. But, realistically, could NYRA actually generate a 65% increase in off-track betting, above last year’s already high level. Doubtful.
         So, let’s say, for the sake of argument, that a Saratoga meet could hit last year’s handle total - $705 million – but that it would be all off-track. That would reduce NYRA;’s take from betting by about $18 million, or, very roughly, by about a quarter of the total retained by NYRA last year. Applying that to the 61% of purses that are still bankrolled by the takeout, that’s another 15% hit to the purse account. So, our $90,000 maiden, reduced to $55,000 by the absence of slot money, now drops to somewhere around $42,000.
         Would any horse owners or trainers head to Saratoga for a condition book that featured $42,000 maiden specials, $50,000 N2X allowances and $25,000 claimers that had purses equal to the claiming price? Given the costs of operating in New York, which I discussed in two recent posts on pastthewire.com, the answer has to be no.
         So if there is to be a Saratoga meet this year, and if it is to be without spectators and slot-machine money, then NYRA will have to do what Churchill Downs has apparently done with its new condition book: use its cash reserves to keep racing going while it hopes for an eventual recovery. The Churchill condition book does have some small purse decreases from the equivalent period last year – a $6,000 drop for maiden specials and allowances, only $1,000 or $2,000 for claiming races – but nothing like the adjustments that NYRA would have to make. And Churchill has the advantage of having plenty of cash; it drew down a $700 million loan facility at the beginning of this year and doesn’t have to pay the money back until 2024. Though NYRA no longer publishes its financial statements, it’s safe to say that it has nowhere near the financial security net of Churchill.
         NYRA CEO Dave O’Rourke came in as a finance guy in 2008 and understands the numbers as well as anyone. Can he find the money to make a spectator-less Saratoga meet doable? We shall see.

Monday, June 1, 2020

Two-Year-Old Sales Start Up Again

The last time I looked at two-year-olds-in-training sales, the market had virtually collapsed, in the shadow of a looming pandemic and a stock market crash. At the Ocala Breeders Sales Co.’s March sale – the only one held so far this year – both average and median price dropped more than a third from last year, and more than half the horses listed in the catalog went home unsold. After a decade of steadily rising prices – last year some 2,200 juveniles were sold at auction for an average price of more than $94,000 – the game of musical chairs had stopped, and only a lucky few had somewhere to sit. 
         Since then, the coronavirus has caused the cancellation of the marquee Fasig-Tipton Gulfstream sale, as well as the high-level Keeneland 2YO sale. Other fixtures on the calendar, including the Fasig-Tipton Timonium sale and the OBS April and June sales, have been pushed back.
         But now, ready or not, most states are reopening their economies, and the sales are back. OBS will offer its April catalogue from June 9-12, fattened with about half the horses that would have been through the ring at the aborted Gulfstream sale. Fasig-Tipton has rescheduled its Timonium sale, also with a bevy of Gulfstream sale refugees, for June 29-30, and the OBS June sale, usually the last chance for sellers to find a home for their juveniles, will now be held July 14-17, just before the annual yearling sales season begins.
         It’s hard to predict how the market will respond. There are definitely some major negatives. Racing, albeit without fans, has pretty much rebounded from the closings in March and April, but total nationwide betting handle, all of it by phone or online, is just about what it was on corresponding days last year. That’s a discouraging fact, given that all other sports betting and casino gambling has been shut down, leaving potential gamblers nowhere else to go. Even in the absence of other sports, and of betting on those sports, racing seems to have made few new fans. And, from a horseman’s perspective, purses are down at all the major tracks that are restarting racing, reflecting the loss of slot revenue and on-track handle. The stock market has made back some, though by no means all, of its p­andemic losses, but market uncertainty may still deter some big spenders.
         With a truncated two-year-old racing season, with no particular reason for optimism about racing’s long-term future, and with uncertainty caused by the coronavirus by no means abating, it’s hard for sellers and the auction companies to be optimistic about this year’s remaining sales. Most consignors are probably not so much looking for the home run that will buy them a new yacht, but rather just hoping to get enough of their working capital back so they can return to the yearling auctions this summer and fall and stock up, at least to some degree, for next year.
         There are, it’s true, some reasons for at least mild excitement. The breeze show for the June OBS sale is already underway, with consignors pushing their two-year-olds to run a furlong in 10 seconds flat or faster, and a quarter in 21, even though that’s something the horses will never have to do again. And OBS has tried to make it easier, both for potential buyers who are reluctant to attend in person, by permitting online bidding, and for consignors, by waiving its commission on horses that fail to reach their reserve on the auction ring. Fasig-Tipton has taken even greater steps to accommodate those who don’t want to attend in person, putting the x-rays of sales horses online for prospective buyers and their vets.
         And there are some interesting new sires that will be represented at the sales. Two Kentucky Derby winners, California Chrome and Nyquist, have their first juveniles ready this year, as do Grade 1 winners Frosted and Runhappy, whose yearlings sold last year for averages of $160,000 and $200,000 respectively. But will two-year-old buyers pay the same kind of premium that pinhookers were offering for those horses as yearlings last year?
         When the OBS sale results are in, at the end of next week, they’ll require some careful analysis. For one thing, those refugees from the F-T Gulfstream sale will undoubtedly skew the figures higher than they otherwise would have been. Even on the first days of the OBS sale breeze show, four of the seven horses recording bullet works (including a ridiculous 9.4 seconds for an eighth and 20.1 for a quarter) were supplemental entries, added to the OBS catalog after the Gulfstream sale had been cancelled. Probably the best approach to analyzing next week’s sale would be to divide the results into two categories, one for the horses originally catalogued for the spring sale and the other for the supplemental nominations.  Both those categories, I suspect, will continue or even extend the trend of the OBS March sale, with high numbers of unsold horses and declining average and median prices. The silver lining? For those blue-collar owners and trainers who have managed to stay in the game, there will be a lot of two-year-olds on offer for not much money that could well turn out to be decent race horses.

Monday, July 8, 2019

Does NYRA Owe Jerry Hollendorfer Due Process?

On June 22, soon after the fourth horse this year from Hall of Fame trainer Jerry Hollendorfer's barn was fatally injured at Santa Anita, the Stronach Group, owners of the Santa Anita track as well as Golden Gate Fields in Northern California, announced that Hollendorfer was being ejected and would be denied stalls and entries at all their tracks. On June 23, the New York Racing Association, where Hollendorfer had a few horses stabled at Belmont, said, in a statement from NYRA's communications director Pat McKenna, that his horses would be welcome at the upcoming Saratoga meet. But on June 29, NYRA, without any public or private hearing or any other element of due process. reversed position and told Hollendorfer that he could no longer enter horses at NYRA tracks. NYRA's McKenna and its Vice President for Racing Martin Panza, declined comment on the reversal.

In the event, the owners of Hollendorfer's New York-based horses, OXO Racing, promptly contracted with Hollendorfer's New York-based assistant, Don Chatlos, to train its horses; Chatlos was given stalls at Saratoga; and several OXO horses ran at Belmont on the closing weekend of that track's Spring-Summer meet.

The Hollendorfer issue poses an early challenge for new NYRA CEO Dave O'Rourke, who was confirmed in the top job only a few months ago, following the firing of former NYRA CEO Chris Kay for using NYRA personal for gardening and other chores at Kay's private residence.

O'Rourke, who came to NYRA a decade ago without any racing background, has been a quick and effective study in his decade at the track. He's been primarily responsible for overseeing the growth of NYRA's ADW betting arm, NYRABets, and for expanding the track's television presence, as well as for gaining control of its finances. Two areas that he hasn't ventured into, though, at least before his appointment as CEO, were legal affairs and racing operations. The Hollendorfer ban will require that he take charge in these arenas as well.

Hollendorfer's exclusion by the Stronach Group and by NYRA raises an important legal issue. Can a race track take away a trainer's livelihood without any sort of due process. Certainly, if a state agency were to suspend or revoke a trainer's license, it would have to provide some sort of due process. In fact, in New York, a trainer's appeal of a license suspension can drag on for years, muting the impact of the suspension; by the time a final appeal verdict is rendered, most people in racing will have forgotten what the original cause of the disciplinary action even was.

Did Hollendorfer use illegal drugs on his horses? Neither the Stronach Group nor NYRA made that accusation; they just said go away. But if one race track owner controls a significant share of a regional market, as Stronach does in California, Florida and Maryland, and as NYRA does in New York, isn't saying go away tantamount to depriving a trainer of his or her livelihood, and, if so, shouldn't the trainer have some sort of recourse?

In New York, the courts, both state and federal, have consistently held NYRA, in all its various pre- and post-bankruptcy permutations, to be so significantly entwined with the State of New York that NYRA's actions should be held to the same due-process standards as those that apply to state agencies.

As far back as 1973, New York's highest court held, in the case of trainer Buddy Jacobson, that NYRA was required to provide at least some justification before revoking or suspending the right of someone who held a New York State racing license to pursue their profession on the track. Similar decisions have required NYRA to provide due process in the case of veterinarians (Michael Galvin), jockeys (Larry Saumell) and other backstretch workers who hold state licenses. The cases distinguish NYRA, on the one hand, from small privately owned harness tracks, because NYRA has a near monopoly on thoroughbred racing in the state and because NYRA and its finances are so thoroughly intertwined with the state. In addition, NYRA has certain powers (such as appointing its own police force) that are typically held only by government entities, and ultimately any profit that NYRA is left with reverts to the state.

NYRA was reorganized once again in 2017, and no cases have decided whether the current incarnation should still be treated like a government agency for due-process purposes, but the earlier cases all dealt with versions of NYRA that were considerably less government-like than the current one. So is NYRA still a public agency? If the issue ever goes to court, I think the answer is inevitably, yes.

From the time "new NYRA" was established in 2011 until mid-2016, it conducted itself as if it were a governmental entity, acting in ways that were consistent with New York State's open meetings law and freedom of information law. As well it should have. "New NYRA" was a creation of legislation in 2011 that rescued old NYRA from bankruptcy, transferred the land under NYRA's race tracks to the State, and gave the state, and in particular, Governor Andrew Cuomo, effective control over appointments to the NYRA Board of Directors, and subjected NYRA to close oversight by the State Budget Department's Franchise Oversight Board. In the wake of the legislation,  "new NYRA" live-streamed its Board of Directors meetings and made them open, if somewhat inconvenient to the public, and posted its annual and quarterly financial reports on its website. In other words, it acted like a state entity.

New legislation in 2017 changed way NYRA Directors are appointed -- creating an essentially self-perpetuating Board instead of one appointed by Albany -- while at the same time giving the Franchise Oversight Board even greater powers. That legislation was signed by Cuomo as part of the State's 2017-18 budget, but did not go into effect until the fall of 2017, when "new" Directors -- who in fact were virtually the same as the previous Directors -- were appointed.

In 2017,  NYRA ceased posting the financial reports and stopped streaming Board of Directors meetings. It has not issued any sort of formal statement rejecting its status as a quasi-governmental entity, but it (or at least the people who decide how to treat Board meetings and financial reports) is certainly acting as if it believes itself to be a private corporation, not subject to the higher standards placed on government.

On balance, NYRA was right when it decided back in 2011 that it should act like a public entity. Nothing of legal significance has changed between then and now, except for the change in the way NYRA Directors are appointed. But Michael Del Giudice, a longtime Cuomo adviser, in both official and unofficial roles, remains chair of the NYRA Board. The current Board is a mix of people with multiple state jobs on their resumes (Del Giudice, Joe Spinelli and Vincent Tese), Jockey Club grandees (Stuart Janney, Ogden Phipps II and Earle Mack) and new members appointed by those same primarily government appointees who were on the old Board after 2011. Because of the self-perpetuating nature of the new NYRA Board, where the old, government-appointed Directors select their replacements and fill other vacancies, nothing much has changed. It's inconceivable that a Board nominee whom Andrew Cuomo opposed would be chosen.

I suspect that new CEO Dave O'Rourke did not play a major role in the Hollendorfer decision(s). And in practical terms, the one case probably doesn't matter a whole lot. OXO Racing's half-dozen or so horses based in New York won't be deprived of the opportunity to run. Don Chatlos, a veteran trainer, will get a turn in the spotlight, and the impact on Jerry Hollendorfer will be far less than the impact on him from the Stronach Group's ban in California. And Hollendorfer probably doesn't, at age 73, have the time or inclination to pursue a multi-year legal action in New York.

But if NYRA takes no further action, the denial of stalls and entries would set a very bad precedent and set up potentially embarrassing challenges in the future. NYRA has been recognized as a state actor for nearly half a century, and thus has been required to provide some minimal due process before depriving racing license holders of their livelihoods. Due process isn't so hard. A notice of charges, an opportunity for a meaningful hearing, and a right of appeal will do the job very nicely. As I suggested six(!) years ago at the Saratoga Racing and Gaming Law Symposium, it wouldn't be that difficult. And it would be a good model for other tracks around the country to follow.

I trust Dave O'Rourke will rapidly get a handle on the legal and racing decision-making at NYRA and that he will use the goodwill accompanying his rise to the top to make NYRA a model, not just for good racing but also for good citizenship, by enshrining due process for those who make the show possible.

Thursday, April 12, 2018

F-T Gulfstream 2YO Sale -- Picky, Picky

The movable feast that is the Fasig-Tipton Florida two-year-old sale (at Calder for many years, then Palm Meadows, now Gulfstream) moved on the calendar this year as well. Long the first of the juvenile sales, F-T Florida was moved back to March 28th, leaving the debut spot to Ocala Breeders Sales Co.'s March selected sale. (For my analysis of that sale, see here.)

Did the change in timing make much of a difference in results? If you look at the typical indicators, the sale can be reported as a success. Both the average price for the 61 horses sold ($385,000) and the median ($295,000) were comfortably above last year's numbers at the same sale, although the buyback (RNA) rate was 33%, more than double last year's 14%.In a sale that typically produces multiple million-dollar babies, there were three this year.

But on some other measures, not so much. Originally, there were 166 horses catalogued for the sale. Of those, 75 were scratched before the auction began, in many cases because their breezes weren't fast enough to attract buyers' attention. Including those scratches in the calculation means that the sale's clearance rate -- horses sold as a percentage of the catalogue -- was only 36.7%, well below last year's 44%. So, as has become the pattern in these select sales, buyers concentrated on the very best prospects, leaving a bunch of potentially good but not great race horses to head home without a new owner.

At the very top of the sale were the usual suspects. Barbara Banke of Stonestreet went to $1,200,000 for Hip 9, a Medaglia D'Oro filly out of the stakes-placed Distorted Humor mare Mi Vida. New shooter Larry Best of OXO Equine also spent $1,200,000, in his case for an Into Mischief colt. Best entered racing only two years ago, spending at the top of the market. So far, his most successful purchase has been the three-year-old colt Instilled Regard, who won the LeComte Stakes at the Fair Grounds earlier this year and who has earned in purses about half the $1 million-plus that Best paid for him last year. The third million-dollar horse was Hip 31, a Scat Daddy colt out of New York-bred stakes winner Risky Rachel. In the absence of Coolmore's usual Irish buying crew, Todd Pletcher signed the ticket for the colt.

Coolmore and its longterm rival, Sheikh Mohammed's Godolphin operation, were very low-key at the Gulfstream sale, compared to their very visible presence some years past. It was Coolmore's Demi O'Byrne, remember, who went to a ridiculous $16,000,000 some years ago for a colt that became The Green Monkey, who's now 11 years old and still a maiden. Coolmore is in the business of making stallions, and this year's purchase might be seen as an attempt to find a replacement for Scat Daddy, who died at the early age of 11 and whose final crop are two-year-olds this year.

As usual, buyers concentrated on the horses that breezed the fastest. One consignor who tried to buck the trend was Kip Elser of Kirkwood Stables, who sent five horses to the sale and, instead of breezing against the clock, just had them gallop through the stretch -- the way two-year-old sales used to be done. Elser sold three of the five, although for relatively modest prices, and the other two were RNAs.  Some years past, Frank Stronach tried a similar approach at his Adena Springs sale, but never managed to wean the major buyers away from their stopwatches. Since horses breeze faster at the juvenile sales than they'll ever run in their racing careers,  and since there's only the most tenuous correlation between horses that breeze fast and those that do well on the race track, it would be good to see some other important consignors follow Elser's lead and reject the time-trial competition.

There were some nice horses that were scratched out of the Gulfstream sale. You might look for them at Fasig-Tipton's follow-up at Timonium in May.

With Barretts' California sale out of the way already, and with Keeneland no longer hosting a juvenile auction, the next big two-year-old auction will be OBS's April extravaganza, from April 24th through the 27th, with some 1222 horses in the catalog. Usually lots to choose from for buyers at all levels in that sale, so one would expect the clearance rate to be a lot higher than in the select sales. We shall see.

Monday, March 19, 2018

2YO Sale Season Gets Started

The two-year-old sale season has returned, with neither a bang nor a whimper. In contrast to prior years, when the Fasig-Tipton South Florida sale led off the calendar, this year the Ocala Breeders Sales Co.'s March sale was first, with the elite Fasig-Tipton sale, now hosted by Gulfstream, moving to the end of the month.

Whether the timing change affected results is unclear. Overall, the OBS results were pretty similar to last year's OBS March sale: 261 of the 573 horses originally catalogued were sold, for a 45.5% clearance rate. Those 261 include 44, an unusually high 17% of the total number sold, that were bought privately after failing to attain their reserve in the auction ring. Those "post-sale" purchases, as the sales companies describe them, are almost all for a price less than the sellers wanted, i.e., below the reserve, but were enough to convince the sellers not to take the horses home and try again later.

One hundred and two of the horses that actually went through the sale were listed as RNAs (reserve not attained) and did not sell privately before they left the sales grounds. That number was 17.8% of the total catalog. Using the sales companies' preferred measure of success, that meant that the "buy-back" or RNA rate was 28% of the horses that actually went through the ring. But another 210 horses originally catalogued for sale were scratched, many after poor breezes or after they failed to attract enough potential buyers to take a look at them in the days before the sale. So, looking at the catalogue as a whole, of the 573 horses originally listed, 45.5% sold (including "post-sales"), 17.8% were RNAs and 36.7% were scratched. Those numbers are roughly in line with the higher-quality sales in 2017.

The average price for horses sold at OBS March was $164,854, a decline of more than 12% from last year's $187,741, but the median price increased from $95,000 in 2017 to $105,000 this year, a 10.5% jump. The decline in the average reflects a slight weakening at the top of the market. At last year's OBS March sale, five horses sold for $1 million or more, and another four went for between $900,000 and $1 million. This year, the top price was $875,000 (for a Scat Daddy filly).Those million-dollar babies pulled the average up last year, but this year there were comparatively more sales in the $200,000-$400,000 range, pulling the median up.

As always at the two-year-old sales, blistering quarter-horse speed was at a premium. An astonishing 95 horses breezed an eighth of a mile in 10.0 seconds or less, 17 of them recording a time of 9.4. Another 11 "stretched out" to a quarter of a mile in less than 21 seconds. Reminder: a dozen years ago, The Green Monkey recorded one of the first-ever 9.4 breezes, at the Fasig-Tipton then-Calder sale. He sold for a record $16 million -- after Godolphin's John Ferguson and Coolmore's Demi O'Byrne engaged in conspicuous displays of masculinity for some 15 minutes -- and never won a race.

Nine of those horses with sub-10 furlongs or sub-21 quarters ended up in the list of the top 20 highest-priced horses at the Ocala sale, including the $875,000 sale-topping Scat Daddy filly. While it's true that, in the aggregate, the horses that breeze faster at the two-year-old sales do better on the race track than those that don't breeze well, it's also true that pressuring a horse to run faster than it ever will again, at a time when some of the horses aren't even 24 months old, can't help but contribute to unsoundness and shorter careers. Everyone knows this, but the buyers -- and especially the agents -- with the big bucks still want to see speed. As the late Pete Seeger said in another context, when will they ever learn?