Friday, September 17, 2010

Keeneland -- The View from the Trenches

For the past few years, I've been lucky enough to work as part of the EQB buying team at the Keeneland September yearling sale. EQB, run by my friends Jeff Seder and Patti Miller, has one of the best records in the business for picking out a high percentage of stakes-quality horses at reasonable (whatever that means in the horse market) prices. Everyone can find the million-dollar horse at a sale. But finding the $150,000 horse that's just as good requires a bit more skill.

EQB certainly has the credentials. Among its recent purchases, are Ahmed Zayat's Eskendereya, Zensational, Mushka and J Be K; George Strawbridge's Eclipse Award winners Forever Together and Informed Decision; Ken Ramsey's General Quarters; Bruce Lunsford's Madcap Escapade; and Bill Heiligbrodt's Lady Tak.

This year, EQB is not buying for Zayat, but has a new client, someone who's been in racing for years but is now looking for his Kentucky Derby horse. He's given us a pretty big bankroll to work with, but wants it spent wisely -- no Green Monkeys or Seattle Dancers.

So, how do you find the $200,000 -- or even $50,000 -- Derby horse?

First, by trying to work harder than anyone else. We're probably the only group that actually looks at every horse offered in Books 1 through 4 of the sale. That's 3,185 horses in the catalog, maybe a few less than 3,000 after scratches. To look at that many, and pick out the good ones, requires a fair bit of work, and a fair bit of organization. Besides Patti and Jeff, the EQB team includes two spotters, who do the first looks at every horse and produce short lists for Patti to check, someone to hold the horses in the stall when Patti does ultrasounds of their hearts, a vet to review the records in the repository and scope horses, the invaluable Angie to run the computer analyses of the heart scans and to integrate all the data, and me, to coordinate what everyone's doing and to try to keep everyone sane in the chaos of the sale.

Horses in the sale are spread out over 49 barns, and a lot of success depends on just making sure that someone goes to every one of those barns. We start every morning by dividing the barns up between the spotters, then Patti and I start with second looks at horses identified the day before by the spotters, narrowing the lists down, looking for a racy, two-turn kind of horse, with a big stride and no obvious flaws. Sometimes we get help from those consignors that we trust to be honest and just point us in the direction of the horses that they know are serious candidates; some consignors, on the other hand, try to give us a "short list" that consists of everything in the barn.

The horses that survive these second looks go on the list for heart scans that same day. Somewhere between 2 and 4 pm, Patti gets started doing the rounds of the barns again, with "George," the ancient but still functional ultrasound machine. The scans are done somewhere around 9 or 10 pm, and then Angie stays up until early in the morning processing the data. Then it all starts all over again.

The next morning, the list is cut down further, after the vet reports on flaws that we just can't live with. Then we consult with client, get some guidelines for how much we can bid on those horses that are still on the list, and, in between looking at horses for the next day or two of the sale, run back to the sales pavilion to bid on today's list.

Eating is a challenge, especially since the consignors have gotten a lot less generous in putting out lunch at the barns. Pat Costello's Paramount still offers healthy sandwich wraps, and a couple of barns have pizza for the customers, but the lavish lunch spreads of days gone by are nowhere to be seen. Surviving on cookies and coffee is probably not to be recommended, but that's what's there when you get hungry.

Still, we've been doing pretty well so far, with 17 horses bought, for $3,070,000, over the first six days of the sale. That makes us the 3rd leading buyer to date, and the one among the top buyers with by far the lowest average (just over $180,000 per horse) price. So far, so good.

Now, on to Book 3.

Thursday, September 2, 2010

The State of New York Racing

First NYRA, now the Jockey Club. I'm beginning to wonder what's getting intop these pillars of the establishment when they start doing things right.

In NYRA's case, it was the comments by Chairman Steve Duncker and CEO Charlie Hayward on the need to reduce takeout. Now, as announced at the Jockey Club Round table two weeks ago, the Jockey Club has released statistical fact books on each of the major racing jurisdictions. Breaking down the data state-by-state makes it a lot easier to zero in on trends in the business and to make some predictions about where we're going.

Take New York, for instance. The New York Fact Book for 2010 -- data through the end of 2009 -- shows in stark detail how the industry has shrunk, back to a level of perhaps two decades ago.

Take as a starting point the number of New York mares bred each year. From a high of 2,749 in 2003, that number dropped to 1,599 in 2009, the lowest in at least 20 years, and, based on anecdotal evidence, I'm sure that it will turn out to be even lower in 2010. With a breeding rate that';s barely half the peak level of only a few years ago, that means there are a lot of farms going out of business and a lot of jobs being lost, probably forever, as the racing industry is certainly going to downsize on a permanent basis.

Similarly, the number of stallions based in New York has declined by two-thirds, from 236 in 1991 to only 81 last year. While the average New York stallion's book size has doubled, from 9.1 in 1991 to 19.7 in 2009, that still doesan't compensate for the loss of stallions and mares.

New York's foal crop was 1,684 in 2008, down from a peak of 2,024 in 2004. New York also appears to be losing ground vis-a-vis other states; its foal crop in 2008 accounted for 4.7% of the national total, compared to 5.4% just six years ago. That's a significant reduction in market share.

Increasingly, New York-based mares are being sent to out-of-state stallions. For the 2004 New York foal crop, roughly 65% were sired by stallions standing in the state, while for the 2008 crop, just over 50% had New York-based sires. The big shift was to Kentucky, whose stallions accounted for about 25% of the New York foal crop in 2004 but for 40% just four years later, in 2008.

Moving from breeding to racing, the news is similarly discouraging. Purses in New York reached a peak (in non-inflation-adjusted dollars) in 2005, at $154 million. Last year, they totaled $133 million, about a 15% decline. And the average purse per race, despite big increases by NYRA at Saratoga last year, dropped from $41,229 in 2005 to just $34,832 last year. That's the lowest level since 2000, even before taking inflation into account. And horse owners' costs have certainly increased since them; trainers' day rates are generally 20% higher than a decade ago, not even counting the increasing number of extra charges that trainers tack onto their bills these days.

Meanwhile, as we all are aware, the average number of starts per horse per year continues to decline. From 9.3 starts per horse in 1991, when Lasix was still illegal in New York, the number has dropped to just 6.9 last year, a decline of 26%. More evidence, if such is needed, that the use of Lasix does nothing to extend horses' racing careers. Similarly, the average number of lifetime starts per horse has dropped from 28 for foals born in 1991 to 18 or so for those born in 2003, who would have been six years old last year. Again, the decline correlates very well with the introduction of Lasix in New York.

Auction prices for NY-bred yearlings peaked in 2007, at an average of $38,116. Last year, that average dropped by nearly 30%, to $26,931. With Keeneland and Timonium sales still to go, it's too early to estimate the 2010 number, but the average at last month's Saratoga Fasig-Tipton NY-bred sale, which usually catalogs the cream of the New York crop, was down a couple of percent from 2009, so it's unlikely there will be any overall increase when all the numbers are in this year.

So, the evidence is in. The decline in racing generally hasn't spared New York, even though NYRA presents the best racing product in North America. And the endless dithering in Albany, taking nine years to approve a slot machine operator for Aqueduct, coupled with the follies of the bankrupt New York City OTB Corp., have surely made things worse. Painful as it may be, perhaps it's time to contemplate a more orderly downsizing of the industry in the state -- fewer racing dates, coupled with a better distribution system for the simulcast signal. At least that might provide some stability for those left in the business and allow them to do a little planning for the smaller future that we all face.