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Slim pickings for racehorse owners

Behind the glitz and glory of the racetrack, most thoroughbred owners are struggling with an economic model that doesn't make sense.

November 02, 2009|David Wharton

The price tag on racehorses -- starting at a few thousand and rising steeply from there -- is only a beginning. These finely tuned animals need to be housed, fed, trained and, much like children, kept in new shoes.

It is a perfectly sunny afternoon at Santa Anita Park, and Peter Lurie is watching the races, scribbling notes between quick bites of lunch, telling the story of how he came to own his first thoroughbred.

After a lucrative year as a voice-over actor, Lurie needed a tax write-off.

"Two things you've got to do," his accountant told him. "You've got to buy a house, and you've got to get a hobby that loses money."

To which Lurie replied: "What about owning a racehorse?"

"Yeah," the accountant said. "That'll work."

Even then, more than a decade ago, Lurie understood the truth about thoroughbreds, a reality that might get overlooked at Santa Anita this week.

The Southern California track will play host to the Breeders' Cup on Friday and Saturday, the second year in a row the series of big-money races featuring top horses from around the world has come here.

It is a glitzy event that reinforces the "Sport of Kings" image, the notion that racing is populated by sheiks and wealthy businessmen who spend millions on Kentucky-bred yearlings at auction. But the fact is, most owners are relatively normal people struggling with an economic model that doesn't make sense.

Meanwhile, attendance is stagnant at most tracks, and the industry suffered a reported 11% drop in wagering this year, so purses keep shrinking.

Jeffrey Strauss, a Del Mar restaurateur who has part ownership of eight thoroughbreds, explains: "Anyone who goes into this business expecting to make money, they're not playing with a full deck."

Daily bills

During the last fiscal year, more than 4,700 racehorses were purchased for a total of $83 million at authorized sales and in claiming races throughout the state, according to the California Horse Racing Board. Those figures do not include private sales.

As an organization that helps promote racing, the Thoroughbred Owners of California nonetheless warns prospective buyers about a laundry list of costs they will face in upkeep.

The biggest part of maintenance is the "day rate," which pays for housing, feeding and training at the track. Depending on the trainer's reputation, this fee can range from $45 to $120.

That adds up to as much as $3,600 a month.

Veterinary bills start at about $250 a month but often run higher, the TOC says, and racehorses need new shoes every month at $100 to $200 each time.

On race day, an owner must pay for the jockey and the pony that guides the horse to the gate. Additional vet treatments, including Lasix and vitamin shots, can run $170 or more.

With taxes, insurance and transportation to other tracks, the annual total may be about $60,000 per horse.

"Let's just say this," Strauss said, "we all pray that the post office will close down on Saturdays so we'll have two days a week when we don't get bills."

Expenses are tough to recoup because a great majority of horses run at levels below the lucrative stakes races.

In allowance races, there are set conditions -- weight, experience -- meant to level the playing field. In claiming races, every horse can be "claimed" or bought for a predetermined price, the idea being that owners will enter horses of like value and ability.

Last year in California, the average purse at these lower echelons was $20,400, the TOC reports. The winner received 60%, second place took 20%, on down to 2% for fifth.

So a horse crossing the line first in an average race earned $12,240. And the owner, after paying a 10% winner's share to the jockey and another 10% to the trainer, walked away with about $9,800.

Figuring that most horses run seven to 10 times a year, it takes a lot of winning to cover expenses.

Finding a way

The arithmetic improves considerably when a talented yearling or a special claimer comes along, developing into a stakes contender.

This is a sport populated by owners searching for gems among about 34,000 thoroughbreds born in North America each year. They want the next Seattle Slew, a $17,000 horse that went on to win the Kentucky Derby and two other events that comprise racing's Triple Crown.

Strauss did well paying $150,000 for a Kentucky-bred gray -- named the Pamplemousse after his restaurant -- at a sale, and Lurie won big when he claimed Da Svedonya for $16,000. Both had impressive winning streaks.

Steve Kenly did even better when he spotted a $50,000 claimer at Del Mar in 2004. Lava Man went on to win 36% of its races, earning more than $5.2 million.

"That's the crazy exception to the rule," Kenly said. "Generally, if you have a decent horse that plugs along, paying its own way, you're doing well."

So, like a lot of owners, he suggests proceeding cautiously.

A horse that is injured or inactive for a while can be shifted to a farm where the day rate drops significantly. Owners can ease costs even further by taking on partners.

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