01/14/2016 3:54PM

Investors would share in revenue of $12 million race


The individuals who purchase a share in a $12 million race that was proposed by racetrack owner and owner-breeder Frank Stronach earlier this week would share in the revenues generated by the race but not in the revenues generated by any other races on the card, a senior official for Stronach’s racing company said on Thursday.

Mike Rogers, a senior vice president with the Stronach Group, said in an emailed response to questions about the race that many of the details in the proposal have yet to be nailed down.

However, he said “it is anticipated” that the shareholders, who would each be required to invest $1 million, would be limited to the revenue derived from the single $12 million race, although that revenue would also include the horsemen’s share of the handle, plus all media rights and sponsorships connected to the race.

As proposed by Stronach, each share would entitle an investor to one starting berth in the race, with the field limited to 12. That right could be assigned or leased to another owner, the Stronach Group and Rogers said.

As designed, the 1/14-mile Pegasus World Championship, as the race is being called, would be the richest race in the world, and the winner would likely take home approximately $7 million before taxes. Currently, the richest race in the world is the $10 million Dubai World Cup, which is underwritten by the ruling family of Dubai.

“The shareholder agreement would need to be struck well in advance of the race,” Rogers wrote in the email, in response to a question regarding the timing of the shareholder agreement and the difficulty in predicting a horse’s schedule or fitness for a race months in advance. “That shareholder will then own a slot in the Pegasus World Championship, and if they don’t own a horse that they want to enter in that race then they can make arrangements with another owner to lease or share the purse or make a business arrangement to put another horse in the spot.”

Rogers wrote that the Stronach Group is “hopeful that the race handle could reach as high as $50 million.”

This year, the Kentucky Derby drew bets in excess of $120 million, while the Belmont Stakes had handle of $82 million and the Preakness Stakes had handle of $52 million. The richest race in the U.S., the $5 million Breeders’ Cup Classic, had handle of approximately $29 million this year. All four races this year featured eventual Triple Crown winner American Pharoah, now retired.

The release from the Stronach Group about the proposal said the investors would be entitled to 70 percent of the revenue associated with the race, with the Stronach Group retaining the other 30 percent. If the investors were able to retain the racetrack’s share and the horsemen’s share, the take from handle would hover around 8 to 10 percent of the total amount bet. If that were the case, the best-case scenario for generating enough handle for the investors to cover the purse of the race would be $170 million.

Rogers said that the Stronach Group has not yet decided whether investors would share in any of the ontrack revenues such as admissions or food-and-beverage sales. “TSG is still working out details as to whether they would be entitled to any of the ancillary revenues,” he wrote.

Under the proposal, the shareholders would be required to lease either Santa Anita Park in Southern California or Gulfstream Park in Florida to stage the race, which would be scheduled for January, “thereby avoiding a conflict with either the Breeders’ Cup or Dubai World Cup” in late March, according to the Stronach Group release. The Stronach Group owns Santa Anita and Gulfstream.