Thursday, January 29, 2009

Bad Time for A New Market?

I've been spending some time researching Northern California racing. As part of my 'hands on' approach to research, I bought 10% of a colt named Valid Port. In his first start with me owning a small share, he managed a decent 3rd place finish. He also promptly strained a tendon and will be getting back to breezing just this weekend. The upside? I'm developing a relationship with our trainer, Armando Lage. He was very forthcoming with information and hid nothing at all. I like his approach and his honesty. That made me lean closer to trying to get a group going in NoCal that would claim a couple of horses and see if we could make some money and get some pictures taken this spring and summer.

As Steve Zorn pointed out on my Facebook page, there is a lot to look into, not the least of which is checking purses and costs and see if there is a reasonable chance to make a dollar. The game is tough enough and if the expense end is too far out of whack (like it is in some places and with some trainers), then there is no reason to even try.

So far, things look promising. Purses are decent, though not great. That said, expenses are not near what they are if you're running in Southern Cal. Costs seem to run a little higher than running at Tampa Bay, but the purses are certainly higher. Dollars and cents, it may make some sense.

Of course there is more to the picture. You need to have the group to be able to move forward. While there has been some interest in Cal, it's not overwhelming by any means. I have also been less than impressed with the results from advertising on-line (Google, Yahoo!, etc.), so generating the leads necessary to put a group together will be a challenge. Last, and certainly not least, pricing the offering right in these times will be important. I'd really like to stick with 5% shares being the smallest amount available, but in this economic climate, that may be impractical for a group that would like to claim and race a couple of $10,000 - $16,000 claimers. If you add in three months estimated expenses you're looking at about $1700 per 5% share. In the grand scheme of horse ownership, this is certainly not a large amount. However, if you factor in the economy, that could be too daunting a number.

The reason I choose 5% is then you only have 20 partners. I think this is a nice number to work with. In fact, I actually think it's rather large, but still workable. If you start moving down to 2.5% or, God forbid, 1% shares, the entire process gets very unwieldy. Communication becomes more generalized. Accounting costs rise (imagine 100 K-1s at the end of the year!!). I don't think our small 'staff' is up to the challenge of keeping all that straight.

The larger question is: Are there enough race fans that still have disposable income available to even make attempting it worthwhile? I may find out the answer to my question soon - or I may put it on hold for a bit. Maybe testing the waters through the weekly updates might be the way to go. However it goes, there will be a lot more research and a lot more testing of the waters before I jump in to the California pool!


G. Rarick said...

Ted - I'm curious about the costs involved (because I'm thinking of putting together something similar for Americans wanting to have a horse in France). Your estimate of $1700 is for a five percent share for three months? (And that includes the purchase price of the horse, right?) That annualizes out to about $68,000 per horse, if I've done the math right (which god knows, I probably did not). I just want to see how my costs would compare.

Ted Grevelis said...

G - an easier way of thinking about it:

A horse in that market costs about $36,000 a year to keep in training (vet, farrier, day rate, etc.). Add to it the cost of the horse and you'll have the total outlay for the year - absent any purse money to defray the costs. Feel free to drop me a line and we can get in to more detail than this comment section provides.

Thanks for taking the time to read and comment.

Andrew said...

I live and follow the Bay Area circuit, having owned horses in the past in partnerships that have run at local tracks. I am interested to hear what you think is the lowest claiming level you think you could become profitable at GGF. I think its probably $16k, maybe $12.5k if you are able to win and move up the ladder. I use Bill Delia as my trainer, very honest guy as well and good horseman. I'm not sure what latest day rate is but I think costs were closer to $30k than $36, but that was 2 years ago the last time I owned a horse with him.

trracki said...

Ted, best of luck putting together a Nor Cal group. Sorry, I'm only interested in owning a horse I can actually see. GGF is a good 450 miles for me so its of the question.

Towards the end of the month I hope you will be getting more traffic as I mentioned your blog in an article being run in "The Horseplayers Magazine". They have a circulation of 25,000 so maybe some will contact you about ownership and you will find the partners that you are looking for. But with this economy and how bad the sport has taken people...



Ted Grevelis said...

Thanks, Troy. I completely understand - a lot of the fun is being able to get out there and seeing your horse live. And thanks for the mention, that was very kind of you.

Andrew - if I had to get more specific, I'd say a solid estimate would be just over $32,000 for the year, but I really prefer to be conservative throwing in the occassional extra vet treatment, ponies to post, etc. In reality, if you can turn out for a couple of months a year, you can probably count on under $30K. However, I'd rather have a few extra bucks in the account backing us up rather than a few too little!

To all: Thank you so much for reading and taking the time to comment. I really appreciate it.