BC Business
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For sheer excitement and drama, nothing beats Hastings racetrack. And getting in on the action with a horse of your own can cost as little as a few hundred dollars a month (if you’re willing to share). But be warned; you could get trampled.
Rob Fiorvento watches anxiously from the stands as his horse, Cherokee Freedom, prepares to compete at Vancouver’s Hastings Racecourse on a cloudy afternoon in May. His four-year-old filly is the odds-on favourite in the second race, but Fiorvento notices that she looks nervous in the gate. When it swings open, Cherokee Freedom breaks out to an early lead, which she holds until midway through the race. Fiorvento bites his nails as the horse falls back into the pack through the final turn. But in the end stretch, Cherokee Freedom seems to find an extra gear and surges toward the lead at the finish line. It’s a photo finish. Fiorvento, a real-estate developer for the Beedie Group, waits quietly until the official results are called out. When Cherokee Freedom is announced the official winner, Fiorvento’s face breaks into a smile as he soaks up congratulatory handshakes and back-pats from fellow horsemen who hope his luck rubs off on them. “It’s as good as it gets when you have friends and family around, your horse wins and everyone comes out safe,” the 39-year-old says from the winner’s circle, where he poses for a commemorative portrait with his horse; his wife, Melissa; his eight-month-old son, Mason; jockey Mario Gutierrez; and trainer John Snow. Cherokee Freedom’s winnings, a 60-per-cent share of the race’s $11,600 purse, don’t hamper his mood either. Like the vast majority of the racehorse owners at Hastings Racecourse, Fiorvento, who owns or co-owns 12 horses, makes his living outside the track. People who go into horse racing do it for a shot at owning a winner. They also gain entry into the colourful world of racing, where tycoons rub elbows with blue-collar workers. Although every owner here dreams of owning a horse that wins a prestigious and lucrative stakes race (named because of the entry fees, or stakes, that owners must pay to compete) such as the B.C. Derby, most are lucky if they cover their costs. “If you go in it full guns a-blazin’ and not know what’s going on,” says trainer John Snow, “you could get killed.” Many owners who are successful in their careers have had to learn how to bring the discipline they’ve developed as business people to the track. Some have lost money because of their personal attachment to their horses; others have found that winning at all costs ends up costing too much. Fiorvento is a good example of an owner who’s passionate about the sport but business-minded about his track decisions. He’s comfortable with the costs and risk level, and he has a strong relationship with his trainer and partners. Though the expenses can be substantial, horse racing is probably the most affordable way to become a professional sports owner and enjoy the accompanying perks and prestige. While the chance to own a sports team such as the Canucks or the Lions is only within the grasp of multi-millionaires, someone belonging to the entry level of ownership at Hastings Racecourse – the syndicate, an organized pool of owners – might only need to spend a few hundred dollars a month. There are many factors a potential racehorse owner should consider before writing out a cheque, not least of which is deciding on the amount of money he or she is willing to commit. It’s not just a choice between owning one or more horses or owning a pricey horse or a cheaper one, but also between having full ownership of a horse or entering some form of partnership. At Hastings Racecourse, the money paid to own a horse outright varies wildly – from a few thousand dollars for a lightly regarded horse at auction to hundreds of thousands of dollars for a notably pedigreed horse. Once purchased, even a relatively inexpensive racehorse can be a cash drain. It costs between $1,200 and $1,800 a month to hire a trainer and keep a horse in the stable or “backstretch” area at Hastings during the racing season, April to November. (In the off-season, horses are shipped to farms in Langley or Northern B.C., where they’re kept at the cost of several hundred dollars a month.) Medication, shoeing and unexpected vet bills – the biggest variable – can push the annual maintenance price tag to around $20,000. An average horse runs between eight to 12 times in a season, and there are usually eight or nine competitors in a race. To make a profit, a horse needs to win about two races and finish in the top five a couple of other times. (The winner of the race gets 60 per cent of the purse, second place ends up with 20 per cent, third earns 11 per cent, fourth earns six per cent and fifth earns three per cent.) Given those odds, it’s easy to see why many owners lose money. Fractional ownership is one way to offset the onerous overhead. The simplest way is to buy a percentage ownership of a horse from another owner. Alternatively, a group of eight or more investors can form a syndicate; they pool their cash to buy a horse, forking out, say, a couple of thousand dollars apiece up front and then a few hundred dollars each a month to maintain it. Dan Jukich has been the announcer and simulcast director at Hastings Racecourse since 1990. About a decade ago, he managed a syndicate for 10 friends. “You need somebody who’ll take charge,” he advises. “Of the 10, probably six of them liked racing, but they had no idea what they needed to do. So I brought them in, got them licensed, got a trainer, claimed a horse. But you need someone who’s a catalyst.” Michael Bye, who has owned the Orchid Tours travel agency in North Vancouver for 34 years, has been a lifelong horse racing fan. As a kid growing up in Montreal, he spent the summers at the Belmont Park racetrack in New York. He uses partnerships to spread his costs, diversify his holdings and, of course, have more horses to cheer for. Bye got into horse ownership five years ago when his apartment-complex neighbour Bryant McAfee, who already owned horses, got him involved at Hastings Racecourse. Joining McAfee and others in a group known as G & G Stable, Bye paid $15,000 for a horse named Woody’s Dancer. Since then Bye and his partners have owned 10 horses; they presently own Soldiers Return. Bye also owns another horse, Final Kat, with trainer Mel Snow. In his first few years, Bye says, he spent about $5,000 a year more than his horses earned. He wrote off the expenses as a “restricted farming loss,” which allows for a maximum annual deduction of $8,600. (Losses beyond that amount can also be deducted in years where one’s horses turn a profit.) Last year Bye got lucky – to an extent. Both his horses won races, but both were injured early. Final Kat, purchased with Mel Snow for $8,000 in 2006, won one race with an $11,000 purse. (The victory came before purses were slashed by 20 per cent last September, one of the side effects of the court appeal that’s delayed the introduction of slot machines and slot revenue to the racecourse.) Factoring in a 13 per cent bonus Kat gets as a B.C.-bred horse and the 10 per cent cuts he gives to his trainer and jockey for winning, Bye says he and Snow made about $8,500. Before getting hurt in October, Kat collected cheques in two other races, finishing second in one with an $11,000 purse to win about $2,500 and fifth in another with a $15,000 pot to win more than $500. Soldiers Return earned about $12,000 before injuring himself in August. On the glass-half-full side, Soldiers’s inability to run also substantially cut down his training costs. All told, Bye estimates that his horses’ winnings exceeded his training expenses by a few thousand dollars and would likely have been more had both horses remained healthy. “I’m not in this to pay my mortgage,” says Bye at the Hastings Racecourse stables, where more than 900 thoroughbreds are kept. “I’m in it to break even, maybe make a few dollars and to be here.” Another choice prospective owners have to make is deciding between purchasing a horse as a young and untested yearling or buying a mature, proven horse. It’s financially riskier to buy a horse at auction as a yearling and wait for it to develop, but potentially more lucrative. The alternative is to buy a mature horse at a claiming race. The decision boils down to the level of risk owners want to take and the amount of time they’re willing to commit. “Some people want to go in for the excitement and see the horse run,” says Jukich. These owners will jump into ownership of a competing racehorse through claiming races, where every horse competing can also be bought. Those who like to go through the experience of seeing a young horse develop buy yearlings, he explains. Claiming races are the most common type of competition at Hastings Racecourse. A claiming race allows for horses to be purchased or “claimed” prior to the race at a predetermined price. [pagebreak] The claiming prices keep races competitive by making horses of equivalent value run together. Someone who’d be otherwise tempted to run their expensive horse against cheaper, inferior competition would risk having their horse claimed for much less than its value. A horse worth $25,000 that’s running at the $4,500 level has a better chance of winning the race, but could also then be snatched away by an owner looking for a bargain. Buying horses as yearlings means greater risk and a higher ¬potential reward. With a claiming horse, you’re not likely to get a horse that’s too much better or worse than what you’ve paid. A yearling could have more potential, but it could also be a bust – a horse you have to literally give away. And unlike a claimer, which can normally race immediately, a yearling also requires greater patience as one waits – and pays – for it to develop for up to a year before its first race. “The price is right,” says Tom Bell, VP of corporate development and industrial relations at Great Canadian Gaming Corp., of buying yearlings. “You could buy something at $10,000 that, if you develop it properly, could be worth $100,000. They don’t all have to be superstars, but if you buy four or five yearlings and two of them turn out to be what you think they’re going to be, then you’ve hit a home run.” Falling in love with your racehorse can be the most rewarding aspect of ownership. It can also lead to heartbreak and financial ruin. “I’ve become attached to this one,” says Bye, patting Final Kat’s snout as the horse gently nips him on the shoulder. “You can’t help it. He recognizes me; he knows me.” And yet Bye risks losing Final Kat, his “big baby,” every time the horse is entered in a claiming race. One doesn’t necessarily buy a racehorse thinking it’s a lifelong proposition. The prominence of the lower-end claiming race means it’s intrinsic to the sport that horses trade hands frequently. (An owner might keep a retired stakes-race winner, though, and profit handsomely by breeding it.) As with stocks, it’s better to buy horses when they’re undervalued and sell them when they’re at their peak price. Stocks, however, simply aren’t as pretty as horses. With claiming races, anyone with enough cash who has filled out the proper paperwork and submitted to a background check – owners, for instance, can’t have a criminal record in their recent past – can buy any of the claiming horses running on any given race day. The claimant, who can purchase a horse up until 15 minutes before the start or “post” time, buys the horse as is. At the finish line, the horse, even if it has been hurt in the race, becomes the property and responsibility of the claimant. (The previous owner keeps any winnings the horse might earn in that race.) “If you really want to run a business, it’s really bad to love the horses,” says Niko Kokic, the proprietor of Niko’s Vacs to Wax Supply, a Langley-based janitorial supply business. Kokic has owned racehorses for 30 years. “You never want to lose them. A lot of people who lose their horses claim them back.” “It’s a risk I take,” Bye says of Kat, which he claimed for $8,000 and runs at an $11,000 price tag. Deciding on the claiming race in which to enter a horse involves some careful deliberations. Run a horse at too low a price and you can lose an animal for a fraction of the cost invested in buying and training it. Enter a horse in races at a higher price against superior competition and you never capture enough purse money to recover your expenses. Some owners are also too personally involved to accept their trainers’ advice that the horse they believe is a B.C. Derby contender is actually better off running at a lower level. According to many owners, it’s better to risk losing your horse than to never win. If your horse can’t win at the level you paid for it, then you’ve overvalued it. “The key to running a racehorse like a business is that you have to place them where you can win,” says Bye. “You can’t place them at a race at the $25,000 level because it sounds good when you have no chance to win.” Tom Bell says he made the costly error of trying to win high-level races at all costs instead of focusing on the bottom line. “In the past few years, I’ve been running my horses over their heads,” he admits. “I always worried about how much I’d spent on the horse. And I didn’t think about what their actual earning ability was.” Bell had to swallow his pride with Bengal, his first horse, which he bought for $23,000. “I overpaid for the horse,” he says. The horse is running this year at a $15,000 claiming price. Bell’s childhood fascination with horses was rekindled when Great Canadian Gaming bought Hastings Racecourse in 2004. “When we first bought the racetrack, some people in the industry thought we were more inter¬ested in the casinos,” recalls Bell. “I set out at one point to prove that I really did like racing. And that led me to spend way too much money. I don’t care to make that point now.” Now the owner of 30 horses, Bell initially spared little expense in his desire to win stakes races, the most prestigious and lucrative type (the Kentucky Derby, for instance, is a stakes race). His most expensive acquisition was Alexander’s Run, bought for US$150,000. The horse went on to win the Seattle Slew Breeder’s Cup and the Emerald Derby in Seattle in 2005. Bell also paid $40,000 for Appearance Fee, another stakes winner. Unlike Bye, who claimed his horses, Bell buys his horses as yearlings at auctions in both Florida and B.C. Nowadays, rather than fork out six figures for a horse, Bell is more likely to spend $8,000 to $14,000. Horses in this price range still have a chance to become derby contenders, but if they don’t pan out, it’s less of a hit to run them at lower-tier claiming races. Bell has yet to turn a profit, but feels confident he’s getting close. “In the early stages, I just wanted to win and I was treating it more like a hobby,” he says. “Now I step back and realize how expensive it can be to pursue a win; I’ve decided to treat it like a business.” The joys and sorrows of horse racing hinge on the unpredictability of the sport itself, a quality that often flummoxes and gets the better of even the most prepared and knowledgeable horsemen. Businesspeople accustomed to steady, predictable success have had to adapt to the vicissitudes of racing. “To be real honest with you, and it sounds kind of hokey, but some people are just exceptionally lucky,” observes jockey agent and former owner Paul Mabbott. “Other people aren’t as lucky. It seems like everything goes wrong for them.” While Tom Bell has spent hundreds of thousands of dollars in his pursuit of a B.C. Derby championship, track bartender Ross Rankin has already lived the dream on an initial $470 investment. Rankin has a 10-per-cent share in one of Hastings Racecourse’s most amazing recent success stories, Roscoe Pito. In 2001 Rankin, along with John Snow and racecourse operations director Raj Mutti, paid $4,700 for the horse at auction. As a three-year-old, Roscoe Pito won the 2003 B.C. Derby, collecting two-thirds of the race’s $300,000 purse. The horse, which continues to run in California, went on to win five stakes races. So far it has earned $600,000. “I still pinch myself that a bartender can own a horse that wins the derby here,” notes Rankin from the bar of the George Royal Room at the racecourse. “People think I’ve got a little secret. But it’s just luck.” Trainer and owner Rosann Anderson works full-time at Canada Post as a letter carrier, training horses before and between shifts. At times her love for the sport has brought her to the brink of financial ruin. “A friend of mine wrote a children’s story about the other horse I had,” she recalls, “because I told her one day, ‘If one of these bastards doesn’t win soon, I’m going to have to kill myself and go bankrupt.’ So the next day the horse wins, and she made up a children’s story called Silly Vester Saves the Day.” Owners must brace themselves for some of the inevitable disappointments of racing. Niko Kokic, who presently owns a three-year-old named Bold Knockout, admits that on a couple of occasions the disappointment of losing has led him to walk away from the racehorse business for a few years. “You try all those years and you never get a winner,” he says. “Sometimes you quit for a while.” Tom Bell’s lowest moment came when his horse Appearance Fee, a stakes winner groomed to compete at the B.C. Derby, had to be scratched on the morning of that big race because of an abscess in his foot. The horse was unable to run the rest of that year and then died in the off-season from a ruptured intestine. “It’s pretty disappointing,” he says,“when you’ve had a horse for such a long time and your kids get attached to it.” Once the starting gates open, all the money you’ve spent on your horse and all the time you’ve devoted to researching its pedigree and calculating its chances in that race can fly out the window if it falls or simply chooses not to compete that afternoon – or if another horse runs the race of its life. Being a successful racehorse owner means not only accepting the element of chance but recognizing it as the source of the sport’s beauty and excitement.