Posts Tagged ‘hok sport’
Friday, September 5th, 2008
By Ray Paulick
In the 46 years since the Breeders’ Sales Company – a co-op established by Central Kentucky breeders — was handed over to Keeneland, the Lexington, Ky., auction house/racetrack has gross receipts of more than $13.5 billion through its sales of weanlings, yearlings, 2-year-olds in training and breeding stock. During that time, the Paulick Report estimates Keeneland has earned commissions of approximately $750 million from horses sold and from buybacks (based on 5% commission from 1962-2000, and 4.5% from 2001 to the present).
That estimated three-quarters of a billion dollars in revenue does not include entry fees from the thousands of horses sold each year (UPDATE: see comment section for a clarification on entry fees) or Keeneland’s portion of the takeout on live racing, simulcasting and account wagering.
What does Keeneland do with all that money?
Because it pays no dividends to its shareholders the way most publicly-held companies do, Keeneland distributes its sizable profits in other ways. For starters, it supplements overnight purses during its two race meetings in the spring and fall, making those meetings among the highest in daily average purses among all North American tracks. The 2008 spring meeting offered total purses of $10,016,860, a daily average of $626,054.
Keeneland makes frequent upgrades to its physical plant, for example adding luxury suites in the early 1990s and expanding its sale pavilion in 2004. It recently contracted with HOK Sport, a leading stadium architecture firm, to examine the possibility of expanding Keeneland to accommodate larger crowds and possibly host future Breeders’ Cup championships. It is currently too small to host a Breeders’ Cup.
Finally, Keeneland makes charitable contributions to the local community and to the horse industry. Since 1936, according to its media guide, Keeneland and its Keeneland Foundation have given more than $15 million to various charities.
As detailed in the Paulick Report’s first installment of this history of Keeneland, the track was funded by Kentucky horsemen and local citizens through an offering of preferred, non-voting stock and common stock that gave shareholders voting rights in certain company affairs. At some point, certainly as early as the 1950s, Keeneland general manager W.T. Bishop began approaching stockholders and requesting they return their shares of common stock to Keeneland. That effort went on for years and was largely successful, in part, some sources say, because Bishop and other Keeneland directors or executives persuaded the stockholders that the shares had no real value, since dividends were not permitted under the 1935 articles of incorporation. As an enticement to return the shares to the association, sources have said Keeneland may have offered lifetime membership in the Keeneland Club or coveted clubhouse or grandstand boxes.
At any rate, of the 3,500-plus shares of Keeneland stock originally sold, only a few remain in the hands of individuals. Those individuals are entitled to attend the annual shareholders meeting, which usually is held in October. At that meeting, shareholders are given an opportunity to inspect the financial records of the company, but no financial materials are distributed.
The vast majority of shares given back to Keeneland are controlled by three trustees who make all of the critical decisions for the company. Keeneland’s board of directors is viewed as a “rubber stamp” board, according to several board members who spoke with the Paulick Report. “It’s usually ‘Here is what we’re going to do, and thank you for coming,’” one longtime board member said. Another said financial documents distributed at Keeneland board meetings are skeletal compared with those of other boards.
The current trustees are Will Farish, Louis Lee Haggin III and William M. Lear Jr. An attorney who is not active in the horse business, Lear only recently replaced another attorney, William T. “Buddy” Bishop III, the son of the longtime Keeneland general manager. Buddy Bishop, who died earlier this year, was named a trustee in 2005 following the death of Charles Nuckols Jr. Farish was named a trustee in 2005 as a replacement for James E. “Ted” Bassett III, who had to step down because of age requirements. Bassett has been associated with Keeneland since 1968 and served as its president and board chairman. Haggin is the longest-running trustee.
There is little known about if, how or when a voting trust was established to represent the shares turned back to Keeneland. It also isn’t known how that trust might have been established, or whether it may have been created by a specific document. It is also unclear if there is a beneficiary to the voting trust, and who or what that beneficiary might be.
Phone messages and a fax to Bassett from the Paulick Report asking specific questions about the voting trust were not answered.
In 2002, a new holding company, called Keeneland Trustees, Inc., was incorporated in Kentucky as a non-profit corporation. The articles of incorporation of Keeneland Trustees Inc. state that the purpose of the corporation is “to operate for any lawful purpose or purposes, including, but not limited to, holding shares of stock of Keeneland Association, Inc. or ownership interest(s) in any other entity(ies) and perpetuating the purposes for which Keeneland was formed, including promoting the sport of horse racing, improving the breed of Thoroughbred horses and conducting annual race meetings. The Corporation is authorized to exercise any powers conferred upon corporations formed under the Kentucky Nonprofit Corporation Acts as may be necessary or convenient in order to accomplish the above-described purposes.” The officers of that company coincide with who serves as Keeneland’s trustees.
In other words, the Keeneland Association is now owned by Keeneland Trustees, Inc.
If Keeneland Trustees, Inc. is viewed as a non-profit company by the Internal Revenue Service, its IRS Form 990 is to be made available for public inspection as required by section 6104. However, Keeneland vice president Harvie Wilkinson and treasurer Jessica Green told the Paulick Report upon a request to view IRS Form 990 that Keeneland Trustees Inc. is not a non-profit company.
The Keeneland Association is a for-profit company and has been since the late 1950s. Its earnings are taxed, but the IRS apparently does not have the benefit of a second level of taxes that it enjoys with public companies whose shareholders pay an individual tax on dividends. Keeneland retains a large portion of its annual earnings after subsidizing purses and contributing to its Foundation. Its cash reserves, sources have told the Paulick Report, are in the hundreds of millions of dollars.
“They don’t know where to spend all that money,” one longtime Keeneland consignor said.
Some have suggested the retained earnings could present a tax problem, and that is one reason Keeneland is looking at an expansion project that could take a huge bite out of those cash reserves. Potential legal issues might also help explain why the last two individuals appointed Keeneland trustees are attorneys.
Breeders who have sold the billions of dollars of horses that have helped Keeneland earn that approximately $750 million since the Breeders’ Sales Company dissolved in 1962 might want to have a say in how some of those earnings are spent. Is it, for example, in the best interest of those breeders for Keeneland to expand its facility at great cost in order to attract the Breeders’ Cup? That’s a big investment for one extra day of racing every few years.
Nick Nicholson, the track’s current president, thinks not just breeders but others should have a say in Keeneland’s direction. In announcing the recent deal with HOK Sport to look at expansion, Nicholson said: “The citizens of our community, the state, and the Thoroughbred industry have a sense of ownership in Keeneland, and we respect and embrace that. Keeneland is an important part of Central Kentucky’s history and landscape, and we feel all should have a voice in its future.”
Keeneland was formed because of the widespread support of horsemen and the local community, and it became an extremely profitable company because of the many Thoroughbred breeders who sell their horses there.
It would be a refreshing change to see more than three people have a say in Keeneland’s future.
Copyright © 2008, The Paulick Report
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Tags: Breeders' Cup, breeders' sales company, buddy bishop, charles nuckols, harvie wilkinson, hok sport, irs form 990, James E. Bassett, jessica green, Keeneland, keeneland foundation, keeneland trustees, louis lee haggin, nick nicholson, Paulick Report, Ray Paulick, Ted Bassett, thoroughbred auction, Thoroughbred breeding, w.t. bishop, Will Farish, william lear jr.
Posted in Keeneland, Thoroughbred Auctions | 13 Comments »
Monday, August 25th, 2008
By Ray Paulick
These really must be the dog days of summer! Why else would the Paulick Report decide to “live blog” tonight’s public forum at Keeneland, which will give regular folk in the community a chance to sound off on expansion plans the auction company and racetrack is planning?
Keeneland recently announced that it may dip into its deep pool of cash reserves (estimated by some to be in the hundreds of millions of dollars) to dramatically expand its existing facility. It has contracted with HOK Sport, which calls itself the world’s leading sports architectural firm, to draft a master plan for the sprawling facility located across from Blue Grass Airport in Lexington, Ky.
HOK Sport certainly has an impressive project resume, having designed stadiums for a variety of sports around the world. But HOK Sport goes beyond architecture, according to its Web site, which says: “HOK Sport’s tradition of innovation has transformed the way people have experienced sporting events for nearly 25 years.
“We conceived the design vocabulary used in today’s ballparks, stadiums and arenas,” its promotional material says, “and we continue to chart an inventive course for tomorrow’s venues. Our global client list is diverse and comprehensive, and it includes 24 Major League Baseball franchises, 30 NFL franchises, 80 professional and civic arena clients, 40 soccer and rugby teams and 120 colleges and universities. Our reach is worldwide. Our passion is undeniable, and we approach the architecture of sport unlike anyone else.”
Did I say they were modest, too?
Nick Nicholson, Keeneland’s president and CEO, will emcee the event. Russ Simons, a senior principal for HOK Sport, will also be on hand to make some comments.
“We have charged HOK with two goals,” Nicholson said in a press release. “First and foremost, anything we do must be in the best interest of the horse and its safety. The welfare of horse and rider is our top priority. Another will be to preserve the sight lines of the racetrack, and our ability to offer guests the clearest views of the saddling paddock and races.
 “Secondly, as we explore ways to grow we cannot lose sight of Keeneland’s ‘soul,’ or the essence of what makes Keeneland so special. We must protect that ambience while at the same time enhance our guests’ experience by taking full advantage of all modern technologies. With that in mind, we look to HOK to help us marry innovation and tradition in a way that ensures Keeneland remains the place we all know and love.”
While the track is busting at the seams for big events like Blue Grass Stakes Day, the purpose of the expansion seems to be twofold: 1) Keeneland has made so much money over the years through its Thoroughbred auctions, it needs to do something with it; and 2) there is a shrinking pool of racetracks available to host the Breeders’ Cup, and Keeneland would need to expand in order to do so. Some have suggested that Keeneland’s long-range goal is to host the Breeders’ Cup every year or every other year at the very least.
Tonight’s dog and pony show gets under way at 6 p.m. Eastern from the sale pavilion.
6:05 p.m…..A little bit of a late start as Keeneland CEO Nick Nicholson takes the podium to thank the locals for braving the elements (a nasty thunderstorm hit an hour earlier) and coming out. (By the way, no free food that I could find.). Couple of bad jokes, then launches into the Power Point on the Keeneland Master Plan. Hmmmm. I thought we were here to talk about expansion!
This is Keeneland’s mission, Nicholson points out:
–Racing of the highest caliber
–Sales of global importance
–Industry and community leadership.
6:10 p.m….."I’m standing right where the horses sell," Nicholson tells the crowd. It had just occurred to me, too, that he is standing in the sale pavilion ring where Keeneland has made all of its money these past 50 or so years since it convinced local breeders to give up the sales co-op they started.
6:15…History lesson begins. Aerial photographs of the track from 1935 and stories about Jack Keene that have been passed along…and a picture of the water tower! I wonder how much water is in there.
6:18…If I didn’t know better, I’d say Nick is filibustering. He does have lots of political experience, having worked in Washington D.C. for former Sen. Wendell Ford. Opening day photos from 1936. I’m reminded of that comic from the 1960s, Jackie Vernon, whose "vacation slide show," using no slides but a slide clicker and a dead-pan monlogue, was a hoot. Nick’s not quite as funny.
6:20…We’re in the 1960s now. Bigger crowds and we pictures that look like the current Keeneland….What’s next, that 70s show? Yep.
6:23…And now for a brief history of the sale pavilion, and the Polytrack renovations. ….
6:25…The point is…."We are growing faster than our facility….Our lines are too long. It’s hard to get in the track, hard for you to park, hard for you to leave, too long in lines." Not many other racetracks in this country have that problem. Trouble parking?
Nicholson throws in the fact Keeneland only has 8,500 seats.
6:30…Russ Simons from HOK Sports introduced. HOK Sports’ racetrack experience was "not what attracted us to them," says Nicholson. "I’ve been very impressed by their methodology, how systhematic they are at approaching this."
6:35…Brief review of company by Simmons. HOK Sports is 25-year-old company, with 500 employees worldwide. HOK Sports worked on Camden Yards (home of Baltimore Orioles), the first "retro" Major League ballpark, and many other first-class sports facilities. "Camden Yards is a great example of how we changed the baseball industry. We brought the baseball experience from what it was back to a more personal experience. … That type of experience is what we hope to achieve with Keeneland." HOK Sports is also redoing Yankee Stadium. (Personal aside: I hate the Yankees.) HOK Sports is also doing the Mets new "Citi Field." (Another aside: I’m a Cubs fan and remember 1969. I really hate the Mets. But I won’t hold that against Mr. Simons. NFL stadiums, NHL arenas….good God! Is there any stadium these guys haven’t done?
6:40 … HOK Sports’ Knoxville office handles all equestrian and fairgrounds facilities. Now Simmons is going around the world and showing us all the facilities they have designed. If he says they did the original Circus Maximus in Rome, I’ll believe him.
Simons: "We’re not trying to change Keeneland. We’re trying to make Keeneland change to meet your expectations."
6:45 … Question and answer time. Frist question from a racing fan from Louisville who writes books and wants to know how many of HOK Sports’ facilities have been used in movies. Simons doesn’t know. Hey, this isn’t stump the band! Next please!
Someone identifies himself as a "degnerate handicapper." My kind of guy! Please retain the open area under the grandstand, he pleads, so you can get close to the action. And if you go vertical, he suggests, don’t go like they did at Ascot, which is way too high.
Third person loves the Trakkus system (the automatic charting service that shows animated , numbered horses on the board as the race is going), she loves the food, she loves the tote board, she loves the security people, loves the pony people and outriders. Please don’t close the stable area to the fans, she asks. She also wants to have Keeneland open the infield and call it "college land." That draws a few chuckles from the crowd.
6:50 …A seasonal employee who works in the clubhouse will call window wants more rest rooms in the clubhouse and an expansion and… "please enlarge our ticket booth. There are six of us who work in there and it gets very, very crowded," she says.
6:55 … Here’s the question we’ve all been waiting for from a woman who admits she’s "always bitching about something." She asks if Keeneland is planning to build a casino when they build the new facility. Nicholson answers so quietly I have no idea what he said. Hmmm.
7:00 … Whale bettor Mike Maloney is up next. Says we need to make sure we have the easy access for horseplayers to see horses in the paddock. Nice to be able jump out onto the balcony and see the horses in the paddock, he says. We need to make sure that as we look to changing the facility that we have comfortable facilities for simulcast bettors. Need more data and replay machines, access to computers. Handicapping horses has become more high tech, and I think that’s where the future is going to lead us. Might as well prepare for that now. Also I think you might draw some new people with a small upscale area…more of an upscale area where you might get businessmen who might not necessarily be horseplayers who might come out for a drink. "If you create that upscale option, you might create some new fans."
Good points by Maloney all around. Why hasn’t he been appointed to the racing commission or made commissioner of the NTRA?
7:05 …Somone asks Smons where HOK Sports is on the project? "What are you planning to do here?" she asks. "We can give you better feedback if we know what you’re planning." Simons says, "I don’t have a preconceived notion" of the changes that may be in store. That’s the point of this forum, he says.
7:10 … Back to back comments about not changing the "rural atmosphere" of Keeneland. "Keep it green," one person says. Fix the inside of the building but don’t change the outside. "Part of our discovery process is that we get it right," Simons says in response to a question about what HOK Sports may have learned in the rebuilding process of Ascot racecourse in England.
7:15..That is all.
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Tags: Breeders' Cup, hok sport, Keeneland, keeneland expansion, nick nicholson, Paulick Report, Ray Paulick, russ simons
Posted in Keeneland | 6 Comments »
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