Racing bug still biting

By KARYN SCHERER

Auckland entrepreneur Tim Connell was not long out of his teens when he invested in his first racehorse.

Proving that all those stories about wealthy students spending their loans on ski trips are not entirely apocryphal, Connell borrowed "two or three thousand dollars" from the taxpayer for a 5 per cent share in a young thoroughbred called Star Affair.

"I think that was half the problem, because the first one wasn't a very good one," the thirtysomething publisher recalls. "Star Affair was the beginning of the end."

Like thousands of others before him, Connell was bitten by the racing bug. More than a decade later, he has shares in five racehorses.

While that is just a fraction of the number owned by his high-profile buddy, businessman Eric Watson, it is Connell rather than Watson who is becoming the poster boy for an industry that has only recently been able to shake off its image as a destroyer of hard-earned dollars.

The legacy of the questionable bloodstock investment schemes from the 1980s lingers still. Just this week, the sorry saga again hit the headlines when the Court of Appeal cleared the way for the Auckland District Law Society to probe further into allegations against law firm Russell McVeagh.

Nor have the industry's fortunes been helped by the public succumbing to the coquettish charms of newer forms of gambling, such as Lotto, casinos and betting on other sports.

Between 1994 and 1999 the number of thoroughbreds registered in New Zealand fell by 16 per cent to under 3000. Several smaller racing clubs have closed and the number of people employed in the industry, such as jockeys, trainers and apprentices, has also declined.

"I think they're finding it harder and harder to introduce new people because it's always the same people at the track," observes Connell.

It's a trend New Zealand Thoroughbred Marketing chief executive Mark Player doesn't try to deny.

"It's certainly had an effect on the industry - there's no doubt about it," he acknowledges. "It's a challenge for the racing control authorities to really swing that around."

But Player and others remain confident the industry is finally back on the racetrack.

"Things may not have been done in the past the way they should have, but the industry has got some rock-solid foundations and a wonderful record for being able to compete both domestically and internationally," he says.

It is also, he notes, the one sport at which we can take on the Australians and win.

The figures are certainly impressive. New Zealand-bred horses have won 30 of the past 50 Melbourne Cup races and eight out of 10 races in the Cox Plate, which the industry regards as even more prestigious.

The success of superstars such as Sunline in countries like Dubai, Australia and Hong Kong has also encouraged more horses to try their luck overseas.

Player's role is to persuade more people like Connell to literally buy into the dream.

The vendor-funded organisation has set aside $300,000 a year for the next three years to convince more investors to part with their spare cash.

There are about 12,000 thoroughbred owners in New Zealand, from those who own one hair in a single horse's tail to those with their own stables.

The figure is much lower than it once was and the industry hopes the campaign, including direct mail, advertising and national roadshows, will eventually boost numbers by at least 20 per cent.

"The major thing is to try and get people to view horse ownership as something easy and something they can do," says Player.

"We're lucky in New Zealand, in that anyone from any walk of life can own a racehorse.

"Sure, there are costs, but one person can be a member of a syndicate with 500 people and still feel the thrill of ownership - the same as the guy with 10 horses of his own."

Connell is one of those who has already bought the argument. A 10 per cent stake in a promising young racehorse, he estimates, should cost about $150 to $200 a month: "I don't think that's a lot of money".

He attends at least 15 meetings a year, enjoying the camaraderie as much as the competition.

"Racing with your friends is half the fun. I race horses with my doctor, my plumber - all sorts of people have got shares in horses."

Fortunately, the industry can point to some encouraging trends. The amount of prizemoney paid out in New Zealand and the average stake per race have both increased over the years, meaning fewer horses are winning more money.

But the amounts available are still below overseas stakes, forcing many breeders to sell promising young horses earlier than they would prefer, to boost their incomes.

This has led to rising interest from overseas buyers, who believe they are more likely to pick up a bargain here.

The use of "shuttle stallions", which fly into New Zealand to share their sperm and fly out again, has also improved the quality of local stock.

Many credit this revival to Peter and Philip Vela, who five years ago saved the country's largest thoroughbred company, Wrightson Bloodstock, from being sold to the Australians.

Now renamed New Zealand Bloodstock, the company has recovered from its bout of ill health to become a thriving business with steadily increasing turnover.

One of its biggest successes has been the annual auction of 2-year-olds at the Karaka saleyards, known as the "Ready to Run".

Five years ago, around 100 horses went under the hammer at the sale on the outskirts of Auckland, raising just $1.9 million. A change of name, change of date, and new features such as internet access to video footage of all the horses helped turnover top $16 million last year.

More than 500 horses will be on offer at this year's sale, which takes place a week after the Melbourne Cup in November.

The Ready To Run has also stimulated interest in the annual yearling sales: more investors are looking for a bargain in January they can flick on in November for a tidy profit.

Although this year's yearling sales at Karaka failed to provide quite the same frisson as last year's astonishing duel between San Miguel beer baron Eduardo Conjuangco and a Dubai-based buyer (Conjuangco eventually paid a record $3.6 million for a Zabeel-Diamond Lover colt), no one is complaining.

Over the past five years, the average price at the premier auction has increased from $34,000 to $58,000 and total turnover has more than doubled to $68 million.

Over the same period, turnover across the entire industry has risen from $70 million to around $120 million - 80 per cent of which comes from overseas buyers.

The Vela brothers have also given the industry a boost by offering finance to potential buyers and setting up a leasing scheme which has the approval of Inland Revenue.

"The dodgy old days really have almost disappeared," argues Julia Naismith, marketing manager for New Zealand Bloodstock.

"You can be unlucky and if you don't do your homework you could end up stuffed, but there are a lot of people now who realise that the future of the industry depends on people succeeding with their investments."

Naismith thrives on tales of astute buyers who picked up promising yearlings for just a few thousand dollars and retired several years later with millions in the bank.

"There is the potential for exponential returns in the thoroughbred industry," she enthuses. "I don't think any other industry can match it, if you get it right."

Player is nevertheless wary of overselling the story. "We try to be very open and upfront with people ... We all remember the winners very fondly, but we still remember the other ones as well."

Connell agrees. His own advice is not to expect any financial return.

"I've had some healthy cheques and that's been quite good, but I'm not in it for the money - I do it for the exhilaration and the fun of it."

Overall, he thinks, he's probably broken even, "and I think that's pretty lucky".