Tag: Hank Nothhaft

 

INTERVIEW Bloodhorse Daily “MarketWatch” 

Sept 28, 2018

By Meredith Daugherty

twitter  @BH_MDaugherty

Ten years ago, Hank Nothhaft founded HnR Nothhaft

Horse Racing and dove into the world of

Thoroughbred breeding, racing, and sales. Blood-

Horse MarketWatch spoke with Nothhaft about what

sales mean for his operation, how the state of the market

affects breeders, and what the industry can do to

help ensure continued success at all levels.

MarketWatch: How did you get your start in the

industry?

Hank Nothhaft: After graduating from the (U.S.)

Naval Academy and serving in the Marine Corps, I

became a startup technology executive. I ended up

as the CEO of five venture-backed, high-tech-based

startups in the telecommunications business. It’s a

high growth environment; I call it adrenaline-driven.

Looking over the horizon and going from being

the young bull to the old bull, I realized that even if

I wanted to go on forever, I had to be realistic. So I

systematically decided to start a business that would be

a viable alternative to being a CEO that I could run in

retirement and have a lot of fun with. To have the same

sort of thrills I experienced in the business world. So

in 2007-08, I stuck my toe in the water of the industry

and have proceeded from there via the school of hard

knocks, trying not to make the same mistake twice.

We’ve had a lot of tumult in a short period of time

because of the significant financial recession that

occurred in 2008. I got started just before that, and

I had made some calculations that turned out to be

not very accurate, but because I was a financial expert

when the collapse occurred, I took advantage of that

situation to do what I call a “restart round” and push

aside the things I had done incorrectly to try and have

a more successful path. I certainly had the satisfaction

of enough good things happening that my adrenaline

addiction has been satisfied.

MW: Were you familiar with the industry at all

when you made your transition?

HN: I had no direct connection with the horse

racing industry whatsoever when I started, but I get up

most mornings very thankful that I made that fateful

decision to get involved. My wife and I were very casual

fans, so that was certainly part of it. The other part was, I

went to Europe frequently and I was addicted to reading

Dick Francis novels, and I would carve a day out here or

there to go to tracks within easy rail distance from London.

I had a romanticized view of the British horse racing

industry, but as silly as that sounds, it 

did play a part in my decision.

 

The American Pharoah colt consigned as Hip 91 at the

Keeneland September Yearling Sale

 

MW: Ten years after forming HnR NothhaftRacing, how did you feel

about watching the American Pharoah—Kindle colt that you sold

as a weanling for $400,000 sell for $2.2 million as Hip 91 at this year’s

Keeneland September Yearling Sale.

HN: It was a great time. I derive a lot of satisfaction from those

moments, and it doesn’t have to be a big monetary achievement. I think

the sale was fantastic. I think it was like a Hollywood script that we had

the first yearlings from a Triple Crown winner, and we

had Sheikh Mohammed there for the first time in 10

years. We also had the Coolmore/Godolphin détente in

place and a phenomenal stock market going, a new tax

bill, new players in the industry, a global marketplace …

what could be better than that? The results of the sale

are unequivocally outstanding.

MW: What was special about that colt that you

remember from your time with him?

HN: I paid $50,000 for his dam, Kindle. I had a

tremendous relationship with the horse, spent a lot of

time with her when she was racing, and she was our

first stakes winner. She has the greatest disposition.

The reason I was able to buy her was that she was a

bit short. I moved her to Kentucky because regional

sires are not really commercial, but I breed all my

Pennsylvania mares in Kentucky, and they’re all foaled

out in Pennsylvania.

With Kindle, and a handful of really commercial

mares, I’ve been producing Kentucky-breds, but

mostly I have Pennsylvania-breds. No one knew with

her what kind of foal she’d produce, but she’s a robust

mare. With American Pharoah, I was lucky to have a

couple mares that were good enough to be accepted, so

I bred Kindle to him. From the get-go, she produced

an exceptional foal. Almost perfect. He’s the proudest looking,

most balanced horse, and I love the streak of

lightning blaze on his face. He was the prime candidate

to sell as a weanling. My reserve was $400,000, and it was exactly on

the nose.

I’m so excited for the horse, because I’ve heard rumors that they’ll

ship him to the United Kingdom.  Assuming that’s the case, the top

folks in the Sheikh’s operation will get a good look at him and then

put him in a position somewhere in the world to be as successful as

possible. My great hope would be that he works out as a dirt horse and

that maybe he could be the Sheikh’s Kentucky Derby (G1) horse.

The one thing I realized by selling horses is that they

end up in better hands than mine. People with better

contacts, more money, and better resources than my

own. There couldn’t be anyone that meets that criteria

better than Sheikh Mohammed. When you sell them,

you set in motion a chain of events that could never

have occurred had you retained ownership yourself.

I bred Kindle to Pioneer of the Nile, and I have this

phenomenal Pioneer of the Nile colt. He’ll be in Book

1 of the Keeneland November Breeding Stock Sale.

I also had Hip 1 in the (September) sale. She was an

RNA, so I have entered her in the Fasig-Tipton October

Yearling Sale (as Hip 624). I want to try to capitalize

on the current market demand for quality American

Pharoah bloodstock. I am confident that given a better

position, she will be a standout in this sale. If not, we

are certainly prepared to keep and race her, as she is a lovely filly.

“When you sell them you set in motion a chain of

events that could never have occurred had you

retained ownership yourself.”

—HANK NOTHHAFT

 

MW: From a breeder’s perspective, what did you

think about the Keeneland September sale and the

quality of the yearlings being offered?

HN: In terms of the sale’s success being a mark

of our industry turning the corner from the market

downturn, the thing that I really look at as a breeder

is, how many horses are being bred? The last numbers

that were available are not super encouraging. We kind

of flattened out more or less three or four years ago,

and we haven’t really turned the corner. Kentucky has

gotten back to where they were 20 years ago, but if

you look at what percentage of horses that represents,

they’ve gone from being 35% of the horses bred in the

industry to somewhere around 55%. That means, likely,

if you look at each state, all the other states have had

significant declines.

I look at those bigger states that have had a tradition

in the horse racing business, and some of them are

at a third of where they were, some have all but

disappeared. So coming out of the sale, I think the thing

is that the industry will have really turned when the

horse population responds or we reduce the amount of

racing that is taking place, because there aren’t enough

horses to feed the engine we currently have.

I think you have to look at the sales and look at the

later books and see how many horses are being sold at

a loss. You have to ask yourself, “Why and how could

this sustain itself if there are people who are breeding

and losing money?” And they can’t continue to do that

indefinitely. I think one of the bright spots can be state

incentive programs like in Pennsylvania, where I’m

involved. You can breed a reasonably competitive horse

there, keep it, race it, and make money and have fun,

or take it to a sale and maybe it sells at a loss, but if

the owners race it, then you can actually break even or

make a profit.

What’s kept me happy and in the game is that I’m

treating this like a startup. I’ve been bootstrapping and

reinvesting what I have back into the business to grow

it, and one of the big things that has helped me do that

is the state incentive program. Relative to my needs,

it’s generated a lot of cash that’s helped keep me in

the game. I can tell you without breeders, there is no

industry. Period.

If the industry wants to maintain the broad racing

schedule they have, they’re going to have to inevitably

produce more horses. Eventually, it has to be profitable,

or at least help people break even, for breeders and

enthusiasts to get into the game. I do know a lot of

people took mares out of service in smaller states, so we

need those to come back in.

MW: Do you think the market can continue the

trajectory it has taken this year?

HN: There are hard-core, central players in the

Thoroughbred industry, and those non-newcomers

are not that affected by the stock market and non discretionary

income. They are to a certain extent, but I

think the U.S. economy is in a sweet spot, and the only

thing that could upset the apple cart in my mind would

be the federal reserve  increasing interest rates too

fast and somehow cutting off this really perfect scenario

we’re seeing in the economy.

My view right now is that we’re solid in the U.S.

I think other countries will adopt more pro-growth

strategies (for) their economies, and that will provide

even more underpinning to the industry. The other

side of the coin, however, is that with breeders, some

other countries have the same problem I proposed that

we have. I think they’re thinking, for example in the

U.K., of putting together a type of incentive program.

Hopefully, breeding numbers start reflecting that

programs are working here in the states.

The top end and the middle market are much higher

than they were. People have got to bid higher for horses

than they would have had to previously. I think what is

true is that people had to bid more money because you

have more money chasing the same number of horses.

The thrill of owning a horse and being involved in the

industry is fantastic. If people were more exposed to it,

many people would want to do it. BH