The business behind Auckland’s Ellerslie racecourse is keen to see the odds stacked in its favour this season as years of restrictions and relocation end and its $55 million renovation is finally put to the test.
The site, owned by Auckland Thoroughbred Racing (ATR), will kick off its horse racingseason on Sunday, reopening the course and stands after months of construction, with the almost sold-out Karaka Millions meet on January 27 set to be the real test of the new digs.
The upgrade added world-class water drainage under the track, replacing basalt rock with a StrathAyr turf system. However, it means more to the racing industry than just drier hooves: its compounding effect alongside other industry-wide changes is expected to put horse racing on a pedestal nationwide.
On a tour of the new track, repainted stands, retrofitted stables and adjacent event space, ATR chief executive Paul Wilcox tells the Herald itsdecision to fund an upgrade by selling land, liquidating investments and taking on debt for the first time in its 150-year history was made to protect its future.
“This is future thinking so that, when we leave, we’re finished, our time is up here, I want somebody else to come along, him or her, and say, ‘Wow, this is in a really cool position’.”
The industry certainly agrees with his vision, with well-known trainers and buyers telling the Herald the new track signals a much-needed resurgence for domestic racing.
“I think it is a game-changer,” Fortuna Racing director and Ellerslie member John Galvin says of the renovation.
“Ellerslie has always been a jewel in the crown of New Zealand racing, but the investment they’ve put into that new track is huge for racing, not just in Auckland but across the whole of New Zealand because it’s going to be a flag-bearer.”
New Zealand Derby-winning jockey and trainer Lance O’Sullivan, of Wexford Stables, got the chance to gallop on the track before its reopening. He likens it to driving on a new motorway.
“It’s like going to the holy grail racetrack of New Zealand, it’s the undulation, it’s the scenery, the circumference, it’s a good jockey’s track, it’s a good horses track, it’s iconic.”
The renovation also includes a reservoir, an underpass to access the inside of the racecourse and a ground-level car park in the middle of the track.
The miracle
A better track should mean better races, bigger crowds and larger bets.
O’Sullivan says stakes money collected at meets late last year at Pukekohe Park (an Ellerslie relocation site used in 2023) was the highest he’d seen, with horses racing for prizes of up to $80,000.
“Horses can win one race and it pays for upkeep for the whole season.”
Galvin has noticed an uptick in the stakes too, which he concludes was due to more attendees.
“I’ve been to several meetings in the past few weeks and crowds have just been awesome, as good as I’ve seen in the last 10 to 15 years.”
He, O’Sullivan and Wilcox all put the impressive punts and prize money down to British betting giant Entain taking over the management of TAB’s wagering business in a 25-year deal from June last year.
The deal saw Entain cover the costs of online betting operations and marketing, leveraging its existing Australian business, according to an Entain presentation.
Entain sized the total New Zealand betting market at $600m and forecast it to grow over five years to $800m.
Its entry into the local bookmaking market was nothing short of a miracle, according to O’Sullivan.
“We [the industry] were in dire straits, we were in big trouble ... They needed a miracle and they’re probably a bit lucky Entain came on board.”
A slice of the gambling funds collected is distributed to clubs such as Auckland Thoroughbred Racing, which owns the Ellerslie and Pukekohe courses.
ATR took 12.5 per cent of all on-course bets placed digitally and 10 per cent of all bets placed through the tote.
ATR chairman Doug Alderslade said in its 2023 annual report that the Entain deal was “probably one of the most important steps forward for the industry in many years”.
“Not only does it bring to New Zealand a major player in the world’s gaming industry, it also provides a sound financial foundation for the immediate future.”
Industry insiders say that, historically, fees earned from bets weren’t high enough to cover the maintenance of tracks, let alone renovations.
“At most tracks, the facilities are the same as when I had my first raceday ride in 1980, nothing has changed,” O’Sullivan says.
“The only difference is it’s got old and deteriorated. That’s the sad part.”
Ellerslie is an exciting exception.
“I’d be foolish to say it’s not a good revenue generator for us,” Wilcox says of the crowds and their larger bets placed.
In the financial year ended July 2023, ATR saw wagering turnover of $38.6m, down from the previous year’s $45.1m, but the average stakes money increased in the year to $63,000 from $61,000.
ATR dished out almost $8.5m in prize money (down on the previous year’s $9.6m), including $1.3m of voluntary prize money from the club.
That voluntary input amount will increase to almost $3m this year, Wilcox says.
“It only benefits New Zealand racing. So for us, it’s nothing but positives.”
One of the major benefits of increased winnings potential is that higher-quality horses will stay in New Zealand, he says.
“With the increased stakes money you do notice that the horses don’t get sold as much because they can make as much, if not more, [in New Zealand].
“When you do have better-quality horses it makes it harder to pick, so there’s more money invested.”
Fortuna’s Galvin expects increased stakes to eventually lead to upgrades at other tracks.
“We’ve been in somewhat of a downward spiral in New Zealand [horse racing]. Now the wheel has turned and we are now in an upward cycle.”
Financing that track
With limited financing flowing to clubs, one could question how ATR afforded a multimillion-dollar renovation after a period during which the pandemic restricted its activities and hit some revenue streams such as sponsorship.
The answer is diversification.
Aside from racing, ATR is an events operator, investor and property developer. After all, it is situated on prime Auckland land.
“We are centrally located here so our land is very valuable, so it does make it very attractive to developers,” Wilcox says.
In the past six months, ATR has sold two Ellerslie sites to residential developers.
Resource consent for Fletcher to subdivide the site was fast-tracked under a Covid-19 economic recovery scheme and approved in April last year.
The price fetched for the land sales was not made public, but the Herald understands $33m of the cash made from asset realisation went towards the $55m renovation, and another $12m was used to pay down bank debt.
The club is still sitting on more land.
ATR’s annual report showed it owned two residential properties next to the racecourse, collectively worth $3.75m. Public real estate records showed they were bought in 2022.
Wilcox says its recently acquired Pukekohe Park site also adds opportunity, given it is a growing area for Auckland’s population. However, he won’t sell the remaining sites to just anyone, to build just anything.
“Selling land’s easy, right? But you’ve got to do it so you can maximise the value.”
ATR’s investment fund is valuable to the club.
It had $35.6m of financial assets in July last year after at least $10m was drawn out to pay for the rest of the racecourse renovation.
Its millions were spread across a mix of equities, fixed interest and managed funds, overseen by a handful of investment firms including Milford and Craigs Investment Partners.
They made a collective average annual return of 4.8 per cent for the fund in the year to July, compared with the previous year’s hefty negative return, which wiped out more than $6m.
Speaking of losses, ATR itself is in the red.
It made a net loss of $3.1m in the last financial year, an improvement from the $7.9m loss the year before that, but a far cry from its profitability in 2021 when it merged with Counties Racing Club.
That’s despite its events division having its best year yet.
Wilcox says the financial figures do not tell the full story.
“It’s a very prolonged, dedicated strategy coming to fruition and sometimes you have to invest ahead of the curve to reap the rewards.
“When we come back here and have our full season, then those rewards will be richly deserved.”
He expects ATR to be back in the black by the 2025 financial year, with no expectations that the new racecourse will provide a quick return.
“Some would look at that and say, ‘Oh, you’re mad’. But for us, this is a very long-term project.
“This track will be down for 50-plus years. For us, the return is multi-faceted.”
The reopening of the track this month concluded six years of planning – with about four years disrupted by pandemic-induced limits on gatherings.
Wilcox is proud of the fact that it moved ahead with its plans amid adversity and within an industry that was once averse to doing things differently.
“The industry was very hesitant or reserved to do, or to make, change.
“I’ve always been a big fan of that saying ... ‘You can’t change the way the wind blows but you can change the way you set your sails’.”
Horse trainers are clearly impressed with ATR’s innovation.
“They’ve done it the right way,” O’Sullivan says.
“They’ve put the money in the right area. The most important part is stakes money and they’ve done that.”
How ‘horses are like equities’
With stakes set to soar and punting apparently growing in popularity, O’Sullivan and others are surprised by a seemingly sudden interest in the sport from the 20- to 30-year-old demographic.
“All of a sudden racing has become trendy again,” O’Sullivan says.
His stud Wexford is experiencing an increase in queries from younger people wanting to buy shares in syndicated ownership structures of horses.
“We’ve been asked more questions than ever in the past about how people can get involved.
“We have a lot of young people in our syndicates. It becomes contagious.”
Galvin considers it a measure of economic confidence, which could be part of the political cycle.
“There’s a lifting of spirits of late among the people I’m talking to,” he said from the Magic Millions Gold Coast Yearling Sale this week.
While the past 12 months seemed relatively soft for horse ownership demand, he has witnessed a “big resurgence” in the past few weeks.
As an example, all the shares in a horse he bought in November at a ready-to-run sale were sold within about two months.
“Whereas, I bought 43 yearlings at the Karaka sale last year and some of those shares were still sitting around [in November].”
Those remaining shares “disappeared off the shelf” in the past month too, he says.
Fortuna had 32 horses in syndicated ownership hands, with some owners owning as little as 1 per cent of a horse.
That sized portion was typically priced between $1200 and $1300, with Fortuna’s horse purchases budgeted at $120,000.
Maintenance fees on a horse of that value are about $44 a month, Galvin says.
Similarly, O’Sullivan’s Wexford stud offers ownership parcels as low as 1 per cent, which groups can buy collectively.
“No share is too big and no share is too small.”
The cheapest horse Wexford bought last year cost $25,000, with the most expensive costing A$1.3m ($1.4m).
Wilcox is involved in the ownership of three horses. It is, in his words, a high-risk play.
“Horse are much like equities, you have very good years and you have years that are not so good.”
However, O’Sullivan and Galvin, a former financial adviser, do not liken owning horses to financial investments.
“It’s more of a hobby,” Galvin says.
But he acknowledges that the potential return from racehorse ownership can be extraordinary.
Take the case of champion filly (female under 5) Melody Belle.
She was bought for $57,500, won $4m on the track and was sold for $2.6m in 2021. A return of 11,378 per cent (without adjusting for inflation).
“That’s one in 100 probably.”
Fortuna’s current Bellatrix Star is a favourite for this month’s Karaka Millions.
After just four raceday starts, the Australian-bred filly has won $160,000 in prize money since September. She was bought for half that amount last year.
Her ownership is split among 69 people, most of whom will be there to watch her race at Ellerslie.
Picking a winner
Bellatrix Star is typical of the horses Fortuna likes to pick: ready to run and female.
Galvin says it prefers fillies because they hold value for breeding at the end of their careers.
“When you achieve black-type success, stakes races, their value is huge upon retirement.”
Wilcox likes a filly too. “They have a slight edge, better beauty.”
But not all buyers are looking for the same thing.
O’Sullivan says a horse “has got to have a good head on them” – a tip the expert won’t elaborate on too much.
“We’ve trained many horses over the years and we see things in horses we like, and things we don’t like.
“We go [to sales] trying to buy Dan Carter or Richie McCaw and, if a horse looks like a prop, they generally don’t run very fast.”
He and co-trainer Andrew Scott are, after all, recruiting athletes.
“You’re picking an All Blacks team.”
Galvin recommends prospective owners consider the reputation of the syndicator selling the horse.
“There’s a bit of integrity involved there that people should be looking at.”
For punters looking to pick a winner on a raceday, Wilcox says backing a horse with a name you like is as good a strategy as any.
“With a bit of knowledge it becomes dangerous, because then you start bringing too many variables in.”
His other suggestion is to bet on the jockey: “The better jockeys usually have the better rides.”
Or one could do what the judges do and assess how the horse looks in the parade ring before it heads onto the track.
That is now possible for punters at Ellerslie’s new central warm-up ring outside its renovated stables – yet another effort to personalise New Zealand’s horse racing.
It’s part of what Galvin calls a “reflowering of the industry”.
“There’s still a way to go to get racing fully turned around. Many of our tracks are in not such good order in terms of customer facilities and experience, but it’s improving.”
All players are hoping those improvements will pay off at Ellerslie’s Karaka Millions table stakes come January 27.
Madison Reidy is the host of the NZ Herald’s investment show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.