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Hughes sees upside in breeding promotions
Since he purchased historic Spendthrift Farm in Lexington, Ky., in 2004, B. Wayne Hughes has brought the farm back to prominence as a stallion operation and helped revolutionize the stallion business, too.
As the available broodmare population began to contract, Spendthrift devised two new payment schemes that Hughes felt would minimize breeders’ risk: Share the Upside, which allows breeders to earn a lifetime breeding right to a stallion by breeding multiple mares to him early in his career, and Breed Secure, under which a breeder pays his stud fee from the resulting foal’s sale price – and only if the foal sale is profitable. Share the Upside has been widely embraced by other stud farms that need to draw mares to their stallions at a time of declining breeding activity.
Breed Secure has proven more controversial, but Hughes firmly believes that both programs help the “little guy” breeder by shifting his risk to the stud farm. Such programs have helped put Spendthrift back on the map in the stallion game, as has the recent success of Spendthrift stallions. The farm’s flagship sire, Malibu Moon, sired 2013 Kentucky Derby winner Orb and ranks second on the general sire list. Spendthrift’s young stallion Into Mischief, last year’s third-ranked freshman, is among the top five again this year as a second-crop sire.
Spendthrift’s stallions also have lifted the farm’s profile at the racetrack, with such runners as multiple graded stakes winner Kauai Katie and graded stakes winners Winding Way and Freedom Child, all by Malibu Moon and all bred by Spendthrift. But not all of Spendthrift’s runners are by its own sires, as in the case of 2012 Malibu Stakes winner Jimmy Creed, a Distorted Humor colt whom Spendthrift bought from Stonestreet and now campaigns.
Although he has enjoyed success at the racetrack – most notably with 2003 champion juvenile male Action This Day and 2012 champion juvenile filly Beholder – Hughes has been interested in Thoroughbred breeding for about as long as he has been a racing fan. The California native’s first Thoroughbred purchases in the early 1970s included three broodmares whom he bought in partnership at auction in Pomona, Calif., and his first winner was a claiming runner named Patmos whom he and some friends bought at a sale of 2-year-olds.
Since then, alone or in partnership, Hughes has campaigned Breeders’ Cup Mile winner Court Vision, Grade 1 winner Joyeux Danseur, Group 1 winner Shake the Yoke, and such graded stakes winners as Crown of Thorns, Don’t Get Mad, Siphonizer, Greeley’s Galaxy, Lexa, Malabar Gold, Teton Forest, and Osidy, among others.
Hughes founded the Public Storage chain of self-storage facilities. His company American Homes 4 Rent is the nation’s second-largest owner of single-family rental houses, often buying properties at foreclosure auctions and turning them into rental houses. Forbes has estimated his net worth at $1.95 billion as of March.
Hughes, 79, resides at Spendthrift. He has between 12 and 20 horses in training around the nation and maintains a broodmare band of about 120.
He was interviewed by Daily Racing Form’s senior bloodstock correspondent, Glenye Cain Oakford.
You’ve credited your dad with getting you interested in racing. What do you remember about going racing with him?
My dad was older, and we would go to Santa Anita racetrack on Saturdays because he worked during the week. My mom liked betting. One time I had a horse running, and Warren Stute, who was my trainer, saw my mom in the line betting, and she got out of line and said, ‘Don’t tell Wayne that you saw me in the line because he’ll bet for me, and if he thinks I’ve already bet, he won’t do it.’
My dad was a $2 bettor and worked in a factory, and he loved the races. We had a bookie that would take a $1 bet, so in the evening, after my dad got off work, we would drive to the gas station that the bookie owned and put $2 under the door. So, that’s how I got interested. I never really was much for betting.
How did you end up becoming interested in breeding?
We bought a horse in Argentina named Last Home that won the  Matron in Chicago, and so I became more interested in how could you get a good horse, rather than in just getting a horse. It evolved very slowly, and I got more and more involved in the breeding side. I ended up buying some mares and kept them, then I sent them to Kentucky to be bred, and that’s how we got started.
The breeding became much more interesting to me. I’m also interested in the business aspect of it, too. I’m very interested in our industry and what’s happening to it. The farms are an integral part of that, and the breeding industry is a big part. It’s fading away and falling on hard times.
Where do you think things went wrong?
The breeding business is tied to the racing business, and at the end of the day, the racing has degenerated. There’s less money for purses, so you have a deterioration starting there which will then work its way back up through the product line. People that are in breeding are breeding because they love the horses, No. 1, and No. 2, they would like to make money, or at least not lose money, on their programs. So, I think the whole thing is very tied together to the purses and the prices of horses.
I’m not really smart enough to tell you what all the problems are, but I’d say one big problem we have is that we have racing every day or five or six days a week [at many] racetracks, and it’s not an event. People love racing, but they don’t want to be there grinding it out in the middle of the week with nobody else there. If you have a program going that is attractive and exciting, and you get crowds – but I’m not here to say how racetracks can improve themselves. I’m not that clever.
I know that on the breeding side, the small breeders are getting squeezed out, and I think that’s a shame because that’s where a lot of the good horses actually come from. So, at Spendthrift, we’re trying to play a role there that makes it easier for them, rather than more difficult, to make a profit.
Your Share the Upside program has spread to other farms over the last several years.
I think almost every single farm does it now. A lot of them have said it’s not a good program, so I don’t know if everyone is doing it, but most everyone is doing it. It’s really only fair. If you think about it, the chances of one particular mare having a stakes winner with as good a sire as you’re going to find has maybe 10 percent stakes winners. That means you’ve got one chance in 10, on average. A stallion, though, he’s got a hundred mares coming [to him], and if he gets 10 stakes winners, he’s going to be a big success.
Why shouldn’t the people supporting the stallion by bringing their mares to him and paying the money to raise the [foal] to get it to auction be able to participate in the percentage play that is much higher on the stallion than it is on the mare or on the foal? That was the genesis of the Share the Upside program.
And it came out pretty good because guys made a lot of money on the first one we did, which was Into Mischief. We’ve got other ones coming, and I think it will be more popular in years to come. You know, there’s a resistance on the part of everyone to change. That’s a natural instinct for people. But it’s a nice program, and we’re happy to be part of it. I don’t have any pride in being the first to start it. I just want it to be good for our industry, that’s all. It’s certainly been good for our farm.
The Breed Secure program has been somewhat more controversial. Some have said it amounts to unfair pricing and encourages breeders to bring lower-quality mares into production. What is your response to those points?
My response is that I don’t have a response to that kind of activity, so I prefer not to comment on it ... Breed Secure isn’t a benefit for us; it’s a benefit for the breeder. It changes the cash flow of the farm, where they’re delayed two years in putting up money that costs them on every single foal. If you can change your cash-flow requirements by delaying that payment for two years, you see that the economics of that are tremendous. And if our stallion makes a bad foal, maybe we don’t deserve to get paid.
That’s a pretty brave statement. What made you decide to be the guy who would stand up for not getting paid until a foal sold profitably?
We have a breeders’ party every year, and it’s getting bigger and bigger every year, and we listen to what they say. I see their problems, and don’t forget, I was a breeder, too, before I owned a farm, and I can see the problem. If you’re trying to make a living out of it, which a lot of the small breeders are trying to do, who is anyone to say that their mare is lesser than another mare?
If you saw Goldencents’s dam [Golden Works], the owner was really a nice lady I know fairly well, and she gave the mare away with the foal. And now look at that horse. He won the Santa Anita Derby. I think the breeder has to make his own decisions as to what mares to breed and where. And so, for us, it’s not as good as getting paid, obviously – and I like getting paid – but in the long run, I think it’s way better because the people that are breeding are breeding to more than one stallion. We’re trying to have a long-term relationship with our breeders, and that’s what the other farms don’t like.
I think the farms have to worry about their customers. Without the breeder, they don’t need stallions. The fundamental thing is to have the breeder do well ... What’s in our best interests is clearly the same as the breeders’ best interests. We’re partners.
Do you agree with the criticism that American Thoroughbred breeding is geared too much toward speed and the sale ring?
My view isn’t very intellectual, but you breed for speed because that’s something you can pass on rather easily in the breeding shed, and then you hope that your mare or stallion is going to produce some with stamina. That’s a breeder’s decision, really.
My horse Malibu Moon, no one thought he was worth anything, and we stood him for $3,000 in Maryland. Now he’s standing for $70,000 in Kentucky. He’s got stamina, and he looked like he had speed in the beginning. He has everything. But I’m not smart enough to be able to tell you how to breed. Ned Toffey runs our breeding program on the farm.
Are you hands-on at the farm, or do you turn over the mating plans to your staff?
I don’t study the pedigrees at all. I don’t make those decisions. What I like are the foals. And if you come to look at our stallions, you won’t find a crooked horse there, and you won’t find one that’s not eye-catching. We have good-looking stallions, and that’s about my only contribution to the breeding side.
What do you believe is the best decision you ever made in the Thoroughbred business?
I bought a farm because I thought my grandkids would like to come visit me on a farm because that’s what I would have liked when I was a child. I bought the farm for the wrong reason, and it turned out that I made a business out of it and made it much more interesting for me. So, I’d say buying Spendthrift. We’re basically a caretaker there. Spendthrift Farm is a piece of history, and I’m very proud to be one of the pieces of that history.
What was it that appealed to you about Spendthrift as a property when you bought it?
In the beginning, the price. I knew Ned Toffey, who worked at Three Chimneys, and I hired him. It’s just gradually grown into what it is today, and we’re happy with it. I had no clear vision whatsoever; it just evolved.
What would you consider the greatest mistake you have ever made in the Thoroughbred industry?
I would say associations. I would say you should get the right people around you, that’s all.
What other advice would you have for someone wanting to get into the Thoroughbred business?
If you don’t enjoy it, you probably could find a better business. If you enjoy it, then just go slow at the beginning until you know more. With good luck, you can make money. But life isn’t all about just making money. Life’s about enjoying things and having good feelings, and the Thoroughbred business has that. You can make money in the business; I’m making money. But it’s not going to be easy, and you’ve got to have a little luck.
Spendthrift Farm at a glance
Principal: B. Wayne Hughes (purchased farm in 2004)
Born: Sept. 28, 1933
Business: Founder, Public Storage Inc. and American Homes 4 Rent
Farm location: Lexington, Ky.
Stallions for 2013: Archarcharch, Dominus, Into Mischief, Line of David, Malibu Moon, Notional, Paddy O’Prado, Temple City, Tiz Wonderful, Tizway, Warrior’s Reward, Wilburn
Best runners bred and/or raced by Hughes after Spendthrift purchase: Action This Day, Beholder, Crown of Thorns, Court Vision, Dominus (in partnership), Don’t Get Mad, Freedom Child (in partnership), Greeley’s Galaxy, Into Mischief, Jimmy Creed, Kauai Katie, My Pal Charlie, Osidy, Prospective, Siphonizer, Teton Forest, Winding Way
Other notable horses bred and/or raced by Hughes: Joyeux Danseur (in partnership), Lexa, Malabar Gold, Malibu Moon, Shake the Yoke
Share the Upside program
Spendthrift’s Share the Upside program allows breeders to earn a lifetime breeding right to a stallion by breeding multiple mares to him early in his career. How it works:
◗ Secure the spot by paying a one-time deposit.
◗ Sign a lifetime-breeding-right contract to breed to an eligible Spendthrift stallion. The number of contracts available is limited.
◗ Breed a mare to the stallion in both the first and second year, produce a live foal each year, and pay the stud fees when each of the resulting foals stands and nurses.
◗ The lifetime breeding right to the stallion begins after the second stud fee is paid.
Breed Secure program
Spendthrift’s Breed Secure program allows breeders to delay paying the stud fee until they sell the resulting foal profitably and recoup some of the initial costs. How it works:
◗ The breeder pays a $100 security fee and breeds a mare to one of the Spendthrift stallions eligible for the Breed Secure program. No stud fee is paid until after the foal sells at public auction – and only if the foal sale is profitable.
◗ Get a mare in foal and choose where to sell the foal at auction. Options are to sell the mare in foal or sell the foal at a weanling or yearling auction.
◗ Once a sale is made at public auction, the breeder get first proceeds up to $12,000 for a yearling sale, up to $10,000 for an in-foal mare sale, and up to $6,000 for a weanling sale.
◗ After the breeder receives first proceeds from the sale, the breeder pays the stallion’s stud fee from the remaining money earned at auction. If the money brought at auction exceeds the first proceeds plus the stud fee, the breeder gets to keep the rest. Any shortcomings are forgiven.
For more information on Spendthrift’s breeding programs, contact the farm at (859) 294-0030.
I've always thought Wayne Hughes was a throwback from the days of old. This interview conforms my thoughts. I'm glad he remained in the business and endured. He has proven to be a great sportsman. I wish California could put his attitude through a copy machine and dispense it throughout the industry. Spendthrift Farm and Wayne Hughes are a perfect match. Two class acts!!!
So happy that Mr. Hughes finally got rid of two no horseman trainers he kinda started out with, George Vogel and Ron Ellis! His business is much needed in the industry, and so glad he corrected his judgements in the training end of the business instead of giving up! Of course I doubt 'quit' is even in his vocabulary! Good luck Sir, from a lifelong horseman.
i met Mr. Hughes at Churchill Downs on the backside Derby week an what stuck in my mind about him was the fact that he was so down to earth an nice. For a man of his wealth thats really hard to find, best of luck with rebuilding to Spendthrift name