Posts Tagged ‘Thoroughbred breeding’

By Ray Paulick
The world was a different place in the first half of 2007, when Thoroughbred breeders finalized the matings that resulted in the 5,000-plus yearlings to be led into the Keeneland sale ring, starting this morning at 10 a.m. and continuing over the next two weeks in what is this industry’s biggest marketplace of its kind.

The Paulick Report will be at Keeneland, providing live blog coverage throughout the day during Monday and Tuesday’s select sessions.

When the 2007 breeding season began, the Dow Jones Industrial Average was flirting with the 14,000 level. Unemployment in the United States was at 4.5%. Financial institutions like Lehman Brothers were solvent. Automakers General Motors and Chrysler, while being outperformed by foreign companies, were not teetering on the brink of bankruptcy. Most Americans had not heard of the term “sub-prime mortgages.” Pari-mutuel wagering on Thoroughbred racing, the economic engine that drives the horse business in North America, was coming off a year of modest growth. The 2006 Keeneland September sales had a blockbuster year, buoying the spirits and pocketbooks of breeders and consignors, and those many other businesses that feed off them.

Then, one year ago, this country was pitched into the depths of a major economic crisis that affected nearly every financial market in the world. It bubbled over in the middle of the 2008 Keeneland September sale, and the ripple effects of this crisis touched everything in our lives. The Dow Jones average plunged, eventually dropping below 6,600 before inching back upwards in recent months to its current level of 9,600. Market capitalization of companies and net worth of individuals plummeted as a result. Businesses failed, led by financial institutions like Lehman Brothers and automakers like GM and Chrysler, leading to government bailouts. Unemployment doubled to its current 9.7%. And in our little corner of the world, the pari-mutuel racing business, handle will have fallen from 2006 levels by almost 20% by the end of this year.

Is it any wonder Thoroughbred breeders are nervous about how their goods will be received at this marathon auction? Even in the “good old days” of 2007, the Keeneland September sale suffered declines from the record average of $112,427 in 2006, and by the end of the 2008 sale, prices had fallen by 19% from 2006 levels. Making matters that much tougher for breeders today is the fact their 2009 yearlings were produced from record or near-record high stud fees, which were driven north by those sky-high sale prices of 2006.

We don’t expect the results of the Keeneland sale to paint a pretty picture. However, the sport of racing continues to hold a grip on people who might not be able to afford an NFL team or Major League Baseball franchise but enjoy the competitive nature of seeing who owns the fastest horse. It’s a game that intrigues sheikhs, princes, and titans of industry, along with individuals of far more modest means who all share the same passion: the Thoroughbred racehorse. It’s a cyclical business, and we’re in a down cycle right now. The only questions are how deep is the bottom and how long till we get there. The next couple of weeks should help answer those questions.ring

10:15 a.m. … The day’s first piece of good news. At 10:05, Sheikh Mohammed, the ruler of Dubai and the industry’s leading buyer of Thoroughbreds, popped out of a black Escalade, with an entourage of eight in tow, including his wife, Princess Haya, and bloodstock agent John Ferguson. There had been some speculation that the sheikh, who was on the sale grounds looking at horses over the weekend, may have left for his home and would not attend the auction personally. He always seems to spend more money when he’s here, so his presence is indeed welcome news for all horse sellers.  Ferguson, the sheikh and his wife ducked into a private meeting room, presumably to plan their strategy for the day. He had a cell phone glued to his ear the entire time, suggesting there may be some business to attend to at home.

The second sighting of the day wasn’t quite as positive. Eddie Musselman, who publishes the Indian Charlie newsletter, was standing by the front entrance. “Hello, Eddie,” I said to him as I walked by. “Hey, Crackpipe,” he said. Funny guy, huh?

11:45 a.m. … Yearling sales almost always get off to a slow start, especially in such a volatile economy, and this one’s no exception. Of the first 14 through the ring, seven were bought back by consignors, including three of the first four. John Ferguson made his first purchase of the sale, Hip 9, a Storm Cat colt from the Overbrook Farm dispersal consigned by Eaton Sales. Ferguson signed the ticket on behalf of Sheikh Mohammed for  $360,000.  A bigger number came Ferguson, standing alongside the sheikh, bought Hip 39, a Speightstown colt from Gerry Dilger’s Dromoland Farm, for $700,000. Dilger is riding the wave of publicity generated from the Grade 1 successes of two of his 2008 yearling sale graduates, Spinaway winner Hot Dixie Chick (which he co-bred with Peter Blum) and Hopeful winner Dublin.

12:10 p.m. … The early results show a  pretty stiff drop in prices. Of the first 41 yearlings catalogued, there were eight withdrawn from the sale and 15 listed as not sold or Reserve Not Attained. New this year, Keeneland is offering bidding on the RNAs, and the results sheets have a link permitting buyers to submit an online bid. 

Of the 18 that sold from the 33 through the ring (45.4% RNA), the average price is $228,444 and the median $182,500. That’s a big drop from the 2008 opening session when the average price was $363,942 and the median was $300,000. But it’s very early to base anything from these numbers.

3:20 p.m. …  It’s not so early anymore, and the numbers are not looking good for the first session.  Of the first 125 yearlings catalogued, 62 sold for an average of $234,629 and a medican price of $205,000. There have been 49 RNAs, or 44.1%, and 14 have been withdrawn. No horses have yet reached seven figures. Those numbers are substantially worse  in all categories than the opening session in 2008 (down 35% in average, 32% in median).

John Ferguson has signed the tickets on nine yearlings for $3,490,000, or roughly 24% of the gross through the first 125 catalogued.

4:00 p.m. … The RNA rate has dropped only slightly, to 41.5%, through the first 146 catalogued hips. The average of the 76 sold is at $230,315 and the median is $192,500 from a gross of $17,504,000.. The top price is the $925,000 paid by Coolmore agent Demi O’Byrne for Hip 141, an Unbridled’s Song colt out of Goulash, the dam of champion Ashado. 

The RNA average is $185,778, including the $900,000 buyback price for a Distorted Humor colt out of the Unbridled’s Song mare Forest Music. The colt was consigned by Jess Jackson’s Stonestreet Thoroughbred Holdings. 

Ferguson has purchased 13 of the 76 sold for $4,530,000 to pace all buyers.

4:15 p.m. … “In a word, it’s bad,” one consignor told me as the sale’s first day was entering the final 20 hips. “There’s not much depth right now, and you have to remember that as many as 50 of the first-book horses ended up in the Saratoga catalogue. Those horses had to come from somewhere, the most of them would have sold here in the first two days.”

The two-day Fasig-Tipton select sale of yearlings in Saratoga Springs, N.Y., wound up with an average price of $328,434, thanks in large part to the impropved catalogue under the new ownership of Sheikh Mohammed’s associate that bought the company. I don’t have the numbers in front of me, but it will be interested to review the history of the two sales–Saratoga and the first two days of Keeneland September–and see when the last time was that Saratoga had the higher average of the two.

4:30 p.m. … Right now, absent some big horses selling at the end, the average price will be in the $225,000 range and the median will be around $195,000. That’s a drop of as much as 38% in average and 35% in median. The RNAs are at 42.2%, or 62 of the 147 through the ring. Business is brisk in the bar area, though.

I’ll have the final numbers and some comments around  6 p.m.

6:00 p.m. … Monday’s first session ended with predictable business declines across the board, but they were even worse than Keeneland’s director of sales Geoffrey Russell anticipated. The number  of yearlings sold, 107, was down 30.5% from the 154 that sold on 2008’s first day, and the gross, $24,949,000, was a jaw-dropping decline of 55.5% from last year’s $56,047,000. The average price of $233,168 was down 35.9% from 2008, when the average was $363,942, and the $200,000 median represented a 33.3% decline from 2008’s $300,000. “The pendulum has swung on the buyer’s side,” Russell told reporters after the final horse through the ring had sold. He used words like “hesitant” and “careful” to describe their bidding. “It was tough out there,” he said. “Readjustments are never easy, and we are in the middle of a major readjustment.”

The percentage of RNAs, or horses not sold, was 41.2%, a big jump from the 29% unsold on last year’s first day.

That readjustment may have begun two years, at the 2007 Keeneland September sale. The 2007 sale had a tough act to follow, since the overall 2006 sale set an all-time record for gross, average and median prices. The opening day of the 2006 sale had an average price of $471,872 (which actually was down from 2005’s $539,264). Opening day fell to $394,123 in 2007 and the aforementioned $363,942 last year. That’s a decline of 56,8% from 2005 till today.

Worse, the total dollars going into the pockets of breeders fell from $88,712,000 on the first day in 2005 to $24,949,000 today. That’s a $64 million question: How is this 71.9% decline in gross receipts from one day going to affect the business?

There were zero $1 million or more yearlings sold Monday, marking the first time since day one of 1996 that the opening session failed to bring a seven-figure yearling. By comparison there were 21 million-dollar babies sold on day one in 2005.

John Ferguson was the day’s leading buyer, with 14 purchases totaling $4,830,000. Blandford Bloodstock bought eight for $1,842,000, D. Wayne Lukas’s client Westrock Stables LLC bought three for  $1,285,000, Sheikh Hamdan’s Shadwell Estate Company Ltd. bought two for $1,230,000, and Coolmore agent Demi O’Byrne bought two for $1,065,000.

Keeneland’s online bidding for RNA’s attracted a “few bids,” Russell said, but he was unaware that any of the unsold horses had yet found new homes through this new process.

If there is a sliver of good news from these grim statistics, it’s that Keeneland consignors only had to pay a 2.5% commission on RNAs, down from the 4.5% the sale company had been charging. The aggregate cost of Monday’s RNAs was $14.5 million, and under the old 4.5% formula consignors would have paid a commission of $652,500. At 2.5%, consignors paid just $362,500, a different of $290,000 that Keeneland will not be charging and that instead will stay with consignors. Good news for consignors, but that’s not enough of a silver lining to make the dark clouds of this market look any less ominous than they did today.

 Copyright © 2009, The Paulick Report

Savvy businesses recognize value. Advertise in the Paulick Report.

Support the Paulick Report. Make a donation today.

Sign up for our Email Flashes to get the latest news, analysis and commentary from Ray Paulick

Anthony, who spent six years as the staff pedigree consultant for Three Chimneys Farm and has contributed to numerous publications, is the author of a newly published book, “The American Thoroughbred (Volume I).” Click here to learn more about the book. – Ray Paulick

By Edwin Anthony

PAPA CLEM (Smart Strike—Miss Houdini, by Belong to Me)
Some truths are so simple that it is sometimes difficult to believe them. And the truth is that, on an overwhelming statistical basis, stakes quality racemares make the best producers of racehorses. Joe Estes (former editor of The Blood-Horse magazine and inventor of the Average-Earnings Index system) wrote about this, and there is a worthwhile book (“The Estes Formula for Breeding Stakes Winners”)published by the Russell Meerdink Company (www.horseinfo.com) that details his theories.

Recent Arkansas Derby (G2) winner Papa Clem (click here for his pedigree) has important family connections as well as an impressive string of stakes performances in his favor, both of which make him look like a serious contender for this year’s Triple Crown events. It is easy to dismiss one runner-up effort in a notable race, but when a horse continually knocks on the door, then breaks through with an impressive performance, possibly with a change of equipment or adjustment of running style, expectations must adjust in response.

I decided to see if there was a good record of combining Danzig and Beau Pere in pedigrees, thus securing a means of concentrating the influence of Brown Bess. Of course, I found that Smart Strike’s champion half-sister Dance Smartly obviously possesses this combination as she is a daughter of Danzig. But in researching this cross, I found no fewer than 38 G1 winners or otherwise notable breeding animals (the dams of Arch, Distorted Humor, etc.) with the Danzig / Beau Pere combination, including Danehill, Dispute (Kentucky Oaks), Funny Cide (Kentucky Derby, reinforcement), and Sea Hero (Kentucky Derby) as examples.  That’s a combination that works.

When I first moved to Kentucky in 1988, the breeding industry was in the midst of a serious economic slump, one that began in 1985 and didn’t end until 1992. The seven-year downturn was caused by a combination of overproduction (the number of North American foals born topped out at over 50,000 in the mid-1980s), overconfidence in the market, and federal tax reform that took away many of the incentives to own Thoroughbred breeding stock.

The big question at Thoroughbred auctions for several years in the late 1980s and early ‘90s was whether or not the market had hit bottom. It’s a question that really couldn’t be answered until the industry saw an uptick in business, and that didn’t happen until 1992. Then, as now, the first part of a down market was the toughest, because breeders were carrying production costs from a bull market into a sales environment that was anything but bullish.

If 2008 was a tough time for breeders, they’d better strap in for an even rougher ride in 2009. Yearlings were produced from 2007 stud fees, a breeding season that came on the heels of an all-time record year for the average price of weanlings, yearlings and 2-year-olds. In fact, the 2006 bloodstock market hit an all-time high for gross revenue, with more than $1.23 billion in North American sales.

Last year’s economic crisis didn’t really hit until September, though Wall Street had been jittery for months beforehand. Prices for 2-year-olds of 2008 were actually up slightly, and yearling average declined by just 6.9% (though median dipped more sharply, by 16.7%). The weanling and broodmare markets were hit harder, falling by 15.7% and 17.2%, respectively. Most breeders I’ve spoken with are bracing for declines in the yearling market of at least 20%, and some feel it could drop by as much as 40%.

With such dire predictions in the marketplace, it may sound foolish to suggest that 2009 could prove to be a very good year for people to breed their mares. Stud fees are down significantly, and terms for those fees have seldom been as flexible as they are today.

To quote Warren Buffett, the oracle of Omaha: “Be fearful when others are greedy, and be greedy when others are fearful.” I think it’s fair to say that many Thoroughbred breeders are fearful right now.

To that end, the best economic stimulus the breeding industry could have in 2009 is confidence among mare owners that the yearling market of 2011 will have rebounded from the anticipated slump of the upcoming year and, perhaps, 2010. The wild card, of course, is the overall state of the American economy, which even the most optimistic among us does not feel will turn around in the next 12 months.

Not breeding mares that have commercial value is not going to improve anyone’s economic standing, and will not help stimulate the industry to get out of this slump. Stallion farms have reduced fees and are working with breeders to get mares bred and stallion books filled. The breeding sheds are now open: sending your mares to be bred supports the industry in so many ways, from the vanning companies, feed companies, veterinary community, boarding farms and stallion farms, among others.

And yet despite this economic downturn, there is still much support for a good product, a conclusion we have reached due to the strong support of advertisers here at the Paulick Report. Of course, we’d like to recommend you support those stallion farms that have invested some of their advertising dollars at the Paulick Report: Airdrie Stud, Buck Pond Farm, Hill ‘n’ Dale Farms, Hopewell Farm, Spendthrift Farm, Walmac Farm and WinStar Farm. We appreciate each of those businesses, along with our other advertisers (eNicks, Fox Hill Farm, Kris S Bloodstock, Liberation Farm, M & M Thoroughbred Partners, North American Thoroughbred Trainer magazine, and Team Valor), and urge you to recognize and support them in any way possible for their part in contributing to the independent voice the Paulick Report has been bringing to the industry since June 2008.

Visit the Paulick Report for all the latest news throughout the racing world.

Those three interests have been butting heads increasingly as the market has weakened over the last year. Stallion farms and banks for years have put security liens on horses being sold, but now they have company from other businesses: veterinarians, boarding farms, feed companies, even tack shops. More people are fighting over fewer dollars, and some fear market conditions have not reached their low point. 

It’s impossible to say how many horses are sold with liens attached to them, either from banks or stallion farms. One auction house executive is certain it’s less than 50% of the horses that enter the ring. However, one stallion farm representative told the Paulick Report the farm has filed more liens in the past 12 months than ever before.

One of the perplexing questions about liens is, “Who gets paid first?” If a breeder owes $75,000 to a bank and $25,000 on a stud fee and only gets $20,000 when a horse sells, no one is going to get whole. How that money is divided up is the issue. Auction companies take an arm’s-length position, holding the money while telling the affected parties to negotiate a settlement and tell them who gets what.

A group of chief financial officers for Kentucky farms and many equine lenders met last year at Keeneland to discuss how to resolve credit issues when multiple liens are attached to a horse. “It’s getting very messy,” one farm representative said. “Everybody is filing liens now.”

The meeting was described as a good first step, with open dialogue and identification of the various issues. Nothing, however, was resolved.

Traditionally, banks and stallion farms have worked closely together to resolve these issues, but banks are no longer as flexible as they once were. “Historically, banks have recognized those (stud fee) liens, but the Uniform Commercial Code changed a few years ago and the basic rule in priority has to do with the first to file,” one banker said. “Lienholders like banks have filed some time ago, so it becomes problematic. It’s the bank’s money, or the bank shareholders’ money.”

Complicating the issue are new “pay from proceeds” agreements on stud fees whereby a breeder is not obligated to pay for the fee until after he sells the resulting foal, either as a weanling or yearling. More and more farms are making deals for breeders to pay stud fees from sale proceeds, even if those terms are not the farm’s advertised policy. When fees were due by Sept. 1 or Nov. 1 of year bred, or even when a foal stands and nurses, the stallion farms could withhold the stallion service certificate as its trump card if the stud fee wasn’t paid. That kept a foal from being registered with the Jockey Club or sold at auction.

Now, however, with pay from proceeds agreements, the stallion service certificate is released to the breeder so the foal can be registered and sold. By so doing, the stallion farms have lost their leverage to collect stud fees from some breeders, especially if the resulting sale is lower than the stud fee.

Those farms often have no idea whether or not other liens have been attached to a horse being sold. They can perfect a lien by filing the paperwork in the state where the horse’s primary owner resides, in part to determine if other formal liens have been filed and to determine priority. That can be difficult, too, since it isn’t always easy to identify who the majority or minority owners of a horse are.

“The horse business is tough to be a creditor in, because there is no title registry concerning who owns the horse,” one banker said. “The forensics of trying to find who owns a horse can be staggering. Pieces of them change hands all the time without any paperwork. Stallion farms allow someone to sign a contract even though that person may own no part of only a small part in a mare. The farms are conducting business without the kind of underwriting a bank would do.”

Some breeders would like to see an ownership registry, but that could stifle commerce if paperwork had to be filed with the registry every time a portion of a horse changed hands. Others have suggested the creation of a central clearinghouse for liens, so creditors have some idea whether liens have been filed against individuals, but that would have to be tied in with an ownership registry. “The Jockey Club is the natural party to do that,” one stallion farm representative said, “but they don’t want to get in the middle of this, and neither do the sale companies.”

Without any change in procedures, stallion farms are likely to be standing in line behind banks when foals produced through pay from proceeds agreements are sold.  “It will be a headache, and it’s going to be tougher if more people can’t pay all their debt,” said a banker. “We are looking at a market that is particularly weak, and you’d have to say the chances of people defaulting on loans is increasing. It will get worse."

“It would be less of a problem if you didn’t have pay out of proceeds,” he added, “but it’s a competitive market among the stallion farms, and it’s tough to put the toothpaste back in the tube.”

Copyright © 2009, The Paulick Report

Visit the Paulick Report for all the latest news throughout the racing world.

Sign up for our Email Flashes to get the latest news, analysis and commentary.

The most recent results, in fact, represent the strongest sentiment of any of the 40 polls we have conducted since just before the Breeders’ Cup World Championships in late October. (Click here to see archives of all the Daily Paulick Poll results.) We asked, “Does the National Thoroughbred Racing Association provide a strong central organization to move racing forward in the future?” The results have been stunning, with 94% saying “no” and only 6% answering “yes.”

Along those same lines, in early December we asked, “Are you confident the individuals in charge of the most prominent racing and breeding organizations in the United States are adequately addressing the problems the industry is currently facing?” That resulted in an 85% no confidence vote, with 10% saying they are confident in our industry leaders and 5% unsure.

One of the first projects that landed on my desk when I joined the Thoroughbred Times as managing editor in 1988 was a feature story on the Jockey Club, the organization historically entrusted with registering Thoroughbreds and being the keeper of the Stud Book. The article was accompanied by a lengthy mail-in survey of Thoroughbred Times readers. The story and the survey results were of great interest, for at the time I had no idea how broadly the Jockey Club reached across the entire industry and how unhappy rank and file breeders then were with the organization’s service, pricing and activities.

It should be noted that there was an agenda to the article. The Thoroughbred Times was then owned by Richard F. Broadbent, whose Bloodstock Research Information Services was facing new competition from a subsidiary of the Jockey Club. There were questions about whether a tax-exempt breed registry like the Jockey Club should create a subsidiary to compete with a private enterprise company like BRIS, which supplied statistical data to breeders, owners and various publications. A few years later, the Jockey Club helped form another for-profit company, Equibase, which competed with the Daily Racing Form to collect racing results (the Form eventually closed its track and field operations and became Equibase’s biggest customer). The Jockey Club has since started other for-profit businesses.

One of the things that struck me was the comparison between how the Jockey Club and the American Quarter Horse Association conduct their business. The Jockey Club is clearly a breed apart from its Quarter Horse counterpart. The AQHA, then and now, is a relatively transparent organization, one whose membership is open and whose leadership is democratically elected through regional and national elections. There is a board of directors, from which comes an executive committee and elected officers. The AQHA has term limits that prevent individuals from maintaining longstanding control of the organization. The AQHA web site publishes a great deal of information about its governance and membership rules, which can be read here.

By comparison, membership in the Jockey Club has always been by invitation only. Click here for an explanation about membership. It is "governed" by a rotating board of stewards, though that term is used loosely since the Jockey Club has been under the firm control of just two men since 1982, when Ogden Mills “Dinny” Phipps was named chairman and William S. Farish became vice chairman (pictured left). Click here to see the current list of Jockey Club members, stewards, and officers.

The AQHA is a huge organization that maintains the registration of more than five million Quarter Horses, with 135,000 registered in 2007 alone. There are nearly 350,000 AQHA members. According to Internal Revenue Service Form 990 for tax exempt organizations, the AQHA generated $54.4 million in revenue in the 2005-06 fiscal year, the most recent year available. At that time it had $73 million in total assets, including nearly $49 million in investment securities. Click here for the AQHA Form 990.

The AQHA, like the Jockey Club, maintains pedigree records, but also promotes the Quarter Horse breed through horse shows and publishes three magazines (the Quarter Horse Journal, the Quarter Horse Racing Journal, and America’s Horse) that had total circulation of over 400,000 in 2006.

The AQHA charges as little as $25 to register a Quarter Horse foal if done within seven months of birth. The organization is based in Amarillo, Texas, and its highest-paid officer, longtime executive vice president Billie G. Brewer, earned an annual salary of $424,928; treasurer Lee Callaway was paid $221,965 (both figures are from the IRS Form 990.) The two executive salaries represented 5.5% of the AQHA’s total payroll of $11,725,124.

In addition, the Jockey Club claimed that its subsidiaries generated over $25.7 million in income for 2006 ($13.7 million by TJC Holdings Inc. & Subsidiaries, which is engaged in information services and software solutions; $4.9 million by The Jockey Club Racing Services, for the collection of Thoroughbred racing data; and $7.1 million by The Jockey Club Technology Services, Inc., for its technology services). Click here for more information on those subsidiaries, which include shared ownership in the data collection company Equibase, and full ownership of TJCIS (The Jockey Club Information Systems  and data supplier Equineline), and InCompass Solutions, which provides software systems for racetracks.

The Jockey Club’s IRS Form 990 lists its annual Round Table Conference in Saratoga Springs, N.Y., publication of its Fact Book, and providing financial support to other industry organizations among reasons for its tax-exempt status, in addition to its breed-registry responsibilities.

The Jockey Club charges $200 to register a Thoroughbred foal, considerably higher than the AQHA’s fee. Its last increase was in 2000, when it was upped from $175. The Jockey Club, which for many years was known as the “New York Jockey Club,” relocated its registration department from New York to Kentucky in 1988. 

Its highest-paid officer is president Alan Marzelli  (pictured, left), who earned $672,796 in 2006, 58% more than the AQHA’s top executive. The Jockey Club has three executive vice presidents: James Gagliano, with a salary of $256,885; Daniel Fick, $243,546; and Laura Banllaro, $243,804. IRS Form 990 also lists but does not itemize another $542,776 in 2006 pension plan contributions for those officers. The salaries represented 39.1% of the Jockey Club’s total payroll of $3,626,092 (exclusive of its subsidiaries, each of which have its own executive staff and employees).

The Jockey Club’s 2006 tax return came to light recently when an entity called “CTBA Boardwatch” (which generally concerns itself with the inner workings of the California Thoroughbred Breeders Association) distributed IRS Form 990 to numerous individuals. A number of those people contacted the Paulick Report and were outraged over the salaries paid to Marzelli and his three executive vice presidents.

I don’t know the going rate of executive compensation for a tax-exempt company in New York, where three of the four Jockey Club officers are based (only Dan Fick, a former AQHA executive, is located in the Lexington offices of the Jockey Club). Perhaps those numbers are perfectly in line with other non-profits. I would imagine, though, that the going rate for an executive staff is higher in New York than it would be in Kentucky.

It does seem strange to me that the Jockey Club continues to maintain a nicely appointed office in the high-rent district of midtown Manhattan, on 52^nd Street just off Park Avenue. I doubt that it’s gotten many walk-in customers seeking to register their foals since the registration department was moved to Lexington more than 20 years ago. It is conveniently located near the headquarters of Bessemer Trust, the Phipps family-run wealth management firm whose offices are just a few blocks away on Fifth Avenue.

I asked Jockey Club communications officer Bob Curran why the Jockey Club continues to have a New York office 20 years after the organization’s primary function was relocated to Lexington. A few days later I received the following statement from Jockey Club president Marzelli: “Beginning in 1989, when the first of our commercial subsidiaries was incorporated, The Jockey Club has created and developed a group of for-profit subsidiaries and strategic partnerships, each designed to serve specific segments within the industry by utilizing highly efficient, state-of-the-art technology platforms. We have built and managed this growing list of technology-based companies with a corporate office based in New York and operations centers in Lexington, Ky., and Mountain View, Calif.”

That didn’t really answer the question “why a New York office is necessary” although it did tell me something I didn’t know; namely, that the Jockey Club now has a division in California’s high-tech Silicon Valley town of Mountain View.

The bigger question is who is the Jockey Club accountable to. Is it simply Phipps and Farish and their hand-picked stewards? Is the breeders who have paid registration fees over the 100-plus years of its existence? Is the Thoroughbred industry at large? If there is accountability to the industry, why isn’t there more transparency in the operational and financial activities of the Jockey Club and its various subsidiaries? Why is its membership so restrictive and its governance so secretive?

James Gagliano, one of the aforementioned executive vice presidents, touched on some of these questions, during the Jockey Club Round Table in August in which he discussed some of the activities of the Jockey Club and its affiliate for-profit companies. Click here to read Gagliano’s remarks.

Are you satisfied that the Jockey Club is properly and responsibly representing the best interests of the Thoroughbred industry? Let us know in the comment section below, or take the Daily Paulick Poll about the Jockey Club and its activities, located on the left-hand column of the Paulick Report home page.

Copyright © 2008, The Paulick Report

Visit the Paulick Report for all the latest news throughout the racing world.

Sign up for our Email Flashes to get the latest news, analysis and commentary.