Back on track
As $90 million worth of the country’s top thoroughbreds go under the hammer at NZ Bloodstock’s National Yearling Sales, Donna Chisholm finds new investment in the industry is coming from an unlikely source.
As $90 million worth of the country’s top thoroughbreds go under the hammer at NZ Bloodstock’s National Yearling Sales, Donna Chisholm finds new investment in the industry is coming from an unlikely source.
There’s a uniform of sorts on display as a group of Aussie blokes alight from a luxury tour coach in the grounds of Waikato Stud, New Zealand’s leading thoroughbred nursery. Think boater, checked shirt, brightly coloured shorts and track shoes. The only parts of the outfit you can’t see are the deep pockets.
The men look as if they’d be at home downing a schooner at the Parramatta RSL Club, but among them are some of racing’s biggest players. Together, the 18 men are worth about $1 billion; their contacts in the industry are worth even more.
The 84 yearlings being paraded before them will, on January 28 at the Karaka sale yard on Auckland’s southern outskirts, fetch between $8.5 million and $10 million, with the best of them expected to be knocked down for $750,000 or more. These buyers will probably be at the forefront of the bidding.
After the last of the day’s parades at four stud properties in Matamata, they’ll be taken across the road to co-owner Mark Chittick’s “Game Gully”, a stylish mancave decorated with reindeer skins, bison skulls and stag antlers and with a giant brazier burning outside, overlooking grounds that are home to pheasants and deer. The guests will shoot clay birds for a trophy, then dine al fresco on crispy five-spice pork belly, peking duck rolls, scotch fillet and strawberry shortcake, washed down with a premium Te Rere syrah, Mumm champagne or Pyramid Valley pinot blanc.
The nucleus of this group has been visiting Waikato and other New Zealand studs for 15 years. Chittick and his friend, leading Australian trainer John O’Shea, began
“We are trying to produce the best racehorse we possibly can. We’re not trying to breed for the most money we can make but the best horse.”
organising the tours to showcase our best bloodstock to the new ranks of trainers rising to prominence across the Ditch in the wake of such legendary figures as Tommy Smith and Bart Cummings.
“To my eye, New Zealand breeds the best horses in the world,” says O’Shea, who has just returned from three years as a private trainer of the 300-strong string of thoroughbreds in Dubai ruler Sheikh Mohammed bin Rashid Al Maktoum’s Godolphin racing team.
SEVEN-FIGURE BUDGETS
The Australian buyers are typically looking for “stayers”, horses that will contest the longer distances of classic races such as derbies, guineas and Melbourne and Caulfield cups, because their own breeding industry has long been dominated by sprinters.
O’Shea buys two or three Waikato stud yearlings every year and usually spends up to $300,000, but the group here today has clients with seven-figure budgets. Agent Duncan Ramage, for example, manages the bloodstock portfolio of Malaysian billionaire Dato’ Tan Chin Nam, who’s owned four Melbourne Cup winners; Ron Finemore is one of Australia’s biggest trucking agents; Bill Mitchell represents mining magnate and rich-lister Kevin Maloney. “They’re a good group of people to have,” says O’Shea. “The horse game is about relationships, and this trip is about building relationships.”
Some of these relationships are founded strongly on past success with Karaka buys. At the 2008 Karaka sale, Ramage bought So You Think, which became a dual Cox Plate winner in Australia and a champion racehorse in both hemispheres, for the relatively modest sum of $110,000. The horse, bred at Windsor Park Stud in Cambridge, won more than $11 million in four years and now stands at stud in Ireland.
As grooms shine the coats of the last yearlings to parade, the buyers line up in the dappled shade of the golden elm and copper beech above them and down a beer or bottled water. Before they fly home, they’ll have seen close to 400 yearlings over several days, so they will know which ones they want to buy.
A few of the colts are skittish, rearing and pulling as they circle the lawn. “They’re like 17- or 18-year-olds on a path to the All Blacks,” says Chittick. “They’re on a premium diet-and-exercise regime and being well looked after. They’re young men about to go into the world, so they can get pretty full of themselves.”
The most valuable horses at the stud aren’t these yearlings, however, but the seven stallions housed a couple of hundred of metres away, which are together worth more than $40 million. They include three champion racehorses bought for $10 million apiece – Savabeel, now the country’s leading sire, Sacred Falls and Ocean Park.
Savabeel’s service fee this season reached $100,000, although that figure is well short of those commanded by his father, Zabeel ($150,000), and grandfather Sir Tristram ($200,000) at their peak. Despite his price tag, demand is strong. Bookings are capped at 150 mares a season, and that quota was filled five months before the season began. The stallion is syndicated among a number of
Australia is the shop window for New Zealand’s breeding industry, and for now, the shoppers like what they see.
owners, including other studs, but Waikato’s 50% share entitles it to half the bookings.
Savabeel has now produced 70 individual stakes winners, with 10% of his starters winning prestigious stakes races. His local domination was clear at Karaka last year, when his 55 offspring fetched $11.6 million – nearly 15% of the total sale revenue. But ask Chittick to talk numbers and he’ll say it’s not about the dollars. “We are trying to produce the best racehorse we possibly can. We’re not trying to breed for the most money we can make but the best horse.”
About 70% of Chittick’s yearlings at the New Zealand Bloodstock sale will be sold to Australia this month, and the exodus is a no-brainer: the stakes there eclipse those on offer locally. More important, though, Australia is the shop window for New Zealand’s breeding industry, and for now, the shoppers like what they see.
MONEY FLOWS DOWN
New Zealand Bloodstock managing director Andrew Seabrook believes a million-dollar yearling will be sold again this year, after last year’s highest price reached just $800,000 – half a million down on the year before. “I suspect at the sales there’ll be Australians coming specially to buy a Savabeel, and the best thing is that because not everyone can have a Savabeel, the money flows down.” It’s big money, too: the total racing industry contributes about $1.6 billion to GDP. Last season, 1771 horses, valued at nearly $140 million, were exported.
Artificial insemination is allowed in standardbred breeding, but is not permitted internationally in racing thoroughbreds, mainly because of the downward pressure it would have on stallion fees and the prices of their progeny but also the potential effect on genetic diversity if only the most popular stallions reproduced. Bookings for the top stallions now are capped for humanitarian reasons. The harness racing code argues, however, that the use of frozen and chilled semen solves the problem of transport logistics for stallions and mares and reduces both costs and the chances of illness and injury to an expensive sire. The prices fetched by harness horses, and the stakes they race for, however, are significantly lower.
Although the blue-blood breeding of the top-priced lots in the Karaka sale increases their chances of success, they can still be duds. Sun Ruler, the colt by champion sire Zabeel out of champion mare Sunline, sold for $2 million in 2007 but won only two races and earned just $18,000.
“The fact you can’t tell is one of the great things that keeps everyone’s hopes and dreams alive,” says Seabrook. “A $1000 horse can win $1 million and a milliondollar horse can win $1000.”
He hopes two innovations will drive this year’s prices. The first is a change in the sales structure to include more lots in the most prestigious “Book One” catalogue and extending that part of the sale from 500 to 700 lots and from two days to three and a half. (Sales are divided into three books in descending order based on how well bred the yearlings are.) “We wanted to put more horses in front of the international buying bench – we think they’ve been missing out on too many in the second book.”
The second new feature is the introduction of a million-dollar race for three-year-olds sold through the sales, which will be run at a twilight meeting at Ellerslie the night before the sale begins, along with the existing million-dollar race for two-year-olds.
ENTERTAINMENT AND STATUS
Although Australian buyers dominate the market for New Zealand thoroughbreds – about 60% of the horses sold at Karaka’s premier sales are exported, two-thirds of them across the Tasman – the industry is receiving increasing support from an unlikely quarter: mainland China, where betting is illegal and horses are raced by wealthy businessmen for entertainment and status.
“If gambling was legalised there, we wouldn’t have enough horses to sell them,” says Seabrook. Even without that change, however, he believes growth in the market will still be substantial.
Chinese investors are entering the industry in three ways. They’re buying lesswell-bred horses to ship back to China to race on up to 200 courses, built either by the owners or the Government, but increasingly, they are paying much bigger money for higher-priced lots to stay in New Zealand. And now they’re investing in stallions and broodmares at New Zealand studs.
“A $1000 horse can win $1 million and a million-dollar horse can win $1000.”
The highest-profile stallion predominantly in Chinese ownership is Windsor Park Stud’s Mongolian Khan, a $4.5 million-earner for Inner Mongolia-based businessman Lang Lin. The horse won the New Zealand and Australian derbies and the Caulfield Cup before being retired to stud in 2016. Stud manager and co-owner Rodney Schick wouldn’t disclose the stallion’s purchase price, but Lang and the stud share the ownership 50-50.
Lang founded the Rider Horse Group in Inner Mongolia in 2006 and has since sent more than 1000 horses, worth about $12 million, back to China. He owns 100 horses at the Cambridge stud, including 60 broodmares. “Last year, we went to the Easter sale on the Gold Coast and he gave us $2 million to buy good young mares to go to Mongolian Khan,” says Schick. “It’s fantastic; it creates employment. I’ve had to take on more staff to handle his horses.”
Most of Lang’s horses will be raced in New Zealand – despite our comparatively small stakes. “There’s a huge amount of wealth in China and not a lot they can spend their money on. Racing is about an experience; it’s not always about prize money. Having these Chinese wanting to invest here is one of the more exciting things happening in New Zealand. We need international investment, and they are giving it to us.”
He’s sent staff to China to inspect the facilities and says the horses are well looked after in good conditions. Schick says Mongolian Khan’s fame brought Lang huge kudos in his homeland and an “unbelievable benefit” for his business – he made his fortune in restaurants and is now looking to float Rider on the Chinese sharemarket. Last April, Lang’s group donated $150,000 to the National Party.
Auckland bloodstock agent Alex Teng says that until about four years ago, mainland Chinese buyers were investing mainly in cheap horses to race in China, but now they pay an average of $40,000-50,000 for each horse and are keeping them to race here or in Australia.
Most of those who race horses at home are “at least billionaires”, he says. “It’s a hobby for them; it’s about the prestige.” Some are getting involved early in the hope they will be well established if gambling is legalised, but Teng says that won’t happen in the near future because of Government worries about corruption. Even casinos are banned there. Gambling is allowed in Hong Kong – where it was legal before the former British colony returned to Chinese rule in 1997 – and the autonomous region of Macau.
Teng says some Chinese owners are big punters through the New Zealand TAB, and it’s not uncommon for him to place $5000 bets on their horses racing here. “I’ve become an elite customer of the TAB,” he says. “Most of my people aren’t big gamblers, though – they just love horses.”
STUBBORNLY LOW STAKES
Despite the enthusiasm of Seabrook and others for the growth in the industry in China, Chittick is more sceptical, pointing out that because there’s no Chinese stud book for the horses, their racing performances aren’t recorded and don’t contribute to their pedigree. (A stud book is a catalogue of every horse bred, with their parentage.)
He says a breeder friend sold six or eight fillies to China and got $6000-15,000 for each. “He was rapt to get it, but they’ve effectively disappeared. We need them to develop their stud book so their racing is internationally recognised. They can go and win the biggest race there, but it’s like winning at the Castlepoint beach races.”
Chittick says although the breeding industry is healthy, if the racing industry was healthier, “it’d be absolutely booming. But racing is very, very sick. Ten years ago, I’d go in with a few mates and say, ‘Let’s buy a horse’, and if we won a race we could hopefully pay for it. But now it’s costing a whole lot more than that and the stakes haven’t improved or have gone backwards.”
High-profile Wairarapa bloodstock agent Bruce Perry, racing manager for Wellington businessman Lib Petagna, agrees and largely blames the Racing Board’s management of the industry. “In my opinion, it’s forgotten who it works for. Betting turnover has to increase – that’s the only thing we can drive stakes on.”
He says we have too many racetracks and smaller courses should be closed, but consolidation has been too slow. Because there are so many different tracks, he says, punters, particularly internationally, lack the information to bet with confidence. “There’s no strategic thinking or understanding
Sun Ruler, the colt by champion sire Zabeel out of champion mare Sunline, sold for $2m but won only two races and earned just $18,000.
of where we are trying to go.”
Says Chittick: “If it was your own business, you’d basically go in there and shut it down and start again.”
Winnings remain stubbornly low: prize money for maiden (non-winners) races is about $10,000 here compared with $30,00045,000 in Australia, despite the Racing Board pumping an extra $12 million into stakes this season.
The industry costs more than $200 million a year to run. “It’s got right out of hand,” says Chittick. The Racing Board has 835 employees (including casuals and part-timers) and “three-quarters would be making more money than most of the trainers in New Zealand”.
The board’s 2017 annual report shows 136 employees are on salaries of more than $100,000, a dozen on more than $200,000 and five on $300,000 or more.
Racing Board chief executive John Allen, head of the Ministry of Foreign Affairs and Trade (MFat) before joining the organisation in 2014, told the Listener the country has 64 tracks in the three racing codes (including harness and greyhounds) and “obviously that’s a lot of track infrastructure for a country our size, and much of it has been underinvested in for a long time. That’s an issue of real importance to the industry and it’s being actively debated.”
He says the discussion is progressing slowly because it requires decisions by the asset-owning clubs, the three codes and the board, as well as input from local government and developers, “and that won’t happen overnight. But the conversation on this now is more active than it’s ever been. What you’ll see over the next six to 18 months is real action.”
There won’t be track closures in that time, but the infrastructure at several venues will improve, he says. “It’s almost certain New Zealand will have fewer tracks in future, but it’s important that racing is active in smaller regions. Kaikoura has an annual race meeting, which is one of the most well attended and well supported in the country.”
He disagrees that the industry is “very, very sick”, but admits it’s “not in the robust good health we need it to be. Improving stakes is critically important, because they represent returns for owners and income for trainers, jockeys and drivers. If we get them to the right level – and we’re not there yet – it certainly improves the economic underpinnings of the industry.”
The board needs to continue to work on
its cost structures, he says, “but the narrative that the costs are out of control is just wrong”. Operating expenses reduced by $2 million in the past year and staff costs were down by $3 million. Senior staff bonuses have been removed and there was no pay increase for senior staff last year. “I understand the criticism and I can appreciate that every dollar we spend is a dollar that can’t go into stakes, but this is a large, complex business.”
When Allen was appointed to the board from MFat, where he was already one of the most highly paid public servants, his salary increased from $600,000 to between $960,000 and $970,000.
ATTENTION TO DETAIL
All studs are busy places at this time of year, but the size of Waikato Stud means Chittick is busier than most, supervising more than 55 staff and ensuring the Karaka draft reaches the sale ring in top condition. His phone rings constantly, its ringtone the familiar bugle call used to signal the arrival of horses on the track before each race.
A whiteboard in the stable area lists the day’s tasks (“all horses groomed, yard blown. If time, bird poo scrubbed off door”) along with any horses being treated for minor ailments. The attention to detail extends to the staff ahead of the afternoon’s parades. “Everyone to be wearing a blue polo and jeans, brown shoes.”
Chittick was 23 when he moved here from Palmerston North with his parents, Garry and Mary, after they took over the stud. They had owned a smaller stud there, but he says they were “farmers with horses”.
“When we moved up and made the decision to become 100%, it was the best decision we ever made. I noticed a massive difference between Manawatu and here in terms of the level you had to operate on. We really had to up our game in the presentation of the farm, the animals and ourselves. We present things the best we possibly can.”
It’s why Chittick won’t allow the horses to be photographed if they’re not wearing their dressiest leather head-collars or the staff to be photographed if they’re not in Waikato Stud-branded gear.
On the day the Listener visits, the stud’s full-time vet, Chris Phillips, is X-raying the yearlings; the images are made available to prospective buyers ahead of the sale. In a bay nearby, grooms are rinsing a filly’s freshly dyed tail and Chittick sighs with resignation at the sight of another horse that has had its tail chewed off by a paddock mate. “Hair extensions! That’ll be the next thing. You spend all year trying to avoid it, and the one day you want to have it right, you go out and find that.” Another has a swollen hock after “an altercation with a fence”.
But you get the feeling that Chittick, whose jokey, blokey manner makes him racing’s answer to former All Black, Warriors player and television presenter Marc Ellis, doesn’t sweat the small stuff, especially since losing his wife, Lisa, to leukaemia in 2014, leaving him a solo dad to Charlotte (now 16), George (15) and Harry (12).
“What we went through was very hard to handle, but being in the horse industry, you learn to roll with the punches. You can win a Group 1 race at 4pm, then go to the foaling paddock and lose your best broodmare. It just beats you sometimes.”
Chittick has since become engaged to Pippa Hay, whom he had once dated when both were growing up in Palmerston North. Last year, at 45, she gave birth to their son Charlie, whom she calls “our beautiful surprise”. “All those stallion awards have Savabeel’s name on them, but I’m actually stallion of the year,” Chittick jokes.
At Karaka this month, he’ll be hoping Waikato Stud sits once more at the top of the vendor leaderboard, a position it’s held for the past four years after knocking Sir Patrick Hogan’s renowned Cambridge Stud off that perch.
Yes, it’s big business, but essentially, Chittick says, “you’re selling a dream”, and that’s a gamble for both buyers and sellers. “People ask if I have a bet. I don’t, really, because we’re punting every single day.”
“Improving stakes is critically important, because they represent returns for owners and income for trainers, jockeys and drivers.”