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Louisiana Racehorse Partnerships. Ownership Seminar 2010. Today’s Card. LRP Introduction So You Want to Buy A Racehorse! Cost of Ownership Partnership Facts and Figures UNDESIDED The Starting Gate. LRP INTRODUCITON. Frank Francois : Over 20 years in law enforcement
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Louisiana Racehorse Partnerships Ownership Seminar 2010
Today’s Card • LRP Introduction • So You Want to Buy A Racehorse! • Cost of Ownership • Partnership Facts and Figures • UNDESIDED • The Starting Gate
Frank Francois: Over 20 years in law enforcement Marine Corps veteran Farm Manager (The Braun)
Sunny Francois: 20 years in Fortune 500 and Federal Government Financial Systems B.S Accounting 1995 Business Manager (The Brains)
Together we are Louisiana Racehorse Partnerships. Married 20 years with three children, we are embedded in our community and share a love of horses and a passion for horse racing. We do this not to make a living, but because we LOVE it and believe 100% that homework and hard work pay off.
Why do we syndicate? Breeder’s Rewards! The state of Louisiana compensates breeders of Louisiana Thoroughbreds at a rate of 22% of the horse’s earnings, no matter who owns the horse during it’s racing career. That’s an attractive incentive to breed winners! While pedigree is important, well bred horses don’t always win – they also need the correct balance of nutrition, training and care to be successful. We feel that by managing the nutrition, training and care of our stock, we have a better chance of creating winners. They go from our good hands to the best training hands we can afford. As breeders we can either sell our stock at public auction and hope for the best, or cultivate an owners group to give our babies the best possible start. Cultivating an owners group takes much more effort on our part, but we believe the payoff will be worthwhile. Entertainment! What better way to enjoy the success of our Thoroughbred offspring than to gather a group of racing enthusiasts together and share in the excitement? We love this game and hope to share it with people who never dreamed they could own a racehorse. THE BOTTOM LINE: WE ARE HARDWORKING, TRUSTWORTHY BREEDERS WHO WANT THE VERY BEST OPPORTUNITIES FOR OUR RACING STOCK.
LRP Goals • Bring new fans to Horse Racing in Louisiana • Bring Racehorse Ownership to everyday people • Provide the very best start for our Thoroughbreds • Take lots of photos in the Winners Circle with our Thoroughbreds and friends! • LIMITED RISK, UNLIMITED FUN! We hope you will love your LRP experience so much that you’ll be hooked on racing! So many people jump in with two feet and lose fortunes in horses. That’s not good for the industry – we want people to know upfront what they are getting into. We want people to have a positive experience and come back for more.
Ownership as a Hobby LRP members buy not only an interest in a racehorse, but a ticket to entertainment for the duration of that horse’s career. Here’s a sample year of Ownership entertainment: • November- Partnership dinner meeting to discuss fall racing plans • December – LTBA Holiday Banquet/Champions Day Celebration • January – Meet the trainer • February-Trip to racetrack to watch your racehorse work • March – Trip to the races to view his first race • April –LRP Spring BBQ/Meet the newborn foals! • May-Educational seminar on conformation/pedigree • June-Visit to Evangeline Downs • July-Evangeline Downs Night in the Clubhouse • August-LRP Fall Planning Dinner • September-Yearling Sales • October-LRP Ownership Seminar
Ownership as a Hobby In addition to ownership events, you will be invited to attend educational seminars to develop your industry knowledge. Sample seminars include: • Veterinary open house • Pedigree seminar • Taxation seminar • How to read a sales page You will also be invited to breeder events including: • Mixed, yearling and two year old in training sales • Pre sales parties • Stallion parades
Ownership as a Hobby What hobbies do you currently have that offer: • Entertainment • Social networking • Thrill of competition • Education in a new industry • Opportunity to get your money back! Consider your annual outlay for such hobbies as golf memberships, rarely used health club memberships, hunting leases, boating/fishing trips, Mardi Gras clubs etc. Racehorse ownership with LRP offers you the entertainment and camaraderie of a social club, the thrill of a competitive sport AND the opportunity to get your money back and more! Not many hobbies can make a similar claim.
Ownership as a Business Be wary of people who use the words ‘horse’ and ‘investment’ in the same sentence. You shouldn’t expect to become wealthy by way of racing horses, though some have done so. As we will demonstrate today, horse racing is a costly undertaking and the stakes are high. By entering the business of horse racing through a partnership you have many financial advantages including: • Tax Benefits • Limited Risk • Diversification • Industry Knowledge • Shared Overhead How many business ventures have the same selling points? Our motto: LIMITED RISK, UNLIMITED FUN!
Cost of Full Ownership At the end of the two year old year you will need to decide whether to continue with your venture or retire the horse. You’ve spent $49,350.00 to determine that.
How LRP Partnerships Work • For every LRP horse, a new LLC is formed. • The LLC is named after the horse – for example ‘Undesided Owners Group LLC’. • 10 owners each purchase a 10% share in the LLC. • Proceeds from selling the 10% interest are deposited into the LLC checking account to cover future expenses. • The assets of the LLC include the horse and the balance of the LLC checking account. • All expenses are paid directly from the LLC checking account. • At any point in time, should the horse stop racing, his residual value (if anything), plus the balance in the checking account, is split equally between all partners. • If the horse races beyond it’s 3 year old year, it will either sustain itself on purse winnings it previously earned, or the LLC will agree to contribute the funds required to continue at that time.
How LRP Partnerships Work • If the horse dies, the value of the insurance policy plus the balance of the LLC checking account are split between the partners. • The Horse’s winnings are deposited into the LLC Checking Account. It will be the decision of the partners as to whether the winnings will be fully distributed to the partners, reserved for future racing expenses, or partially distributed and partially reserved for future expenses. This decision will depend on the timing of the winnings. LRP recommends a 50% split – distribute half and reserve half. • LRP retains no ownership interest in the horse. The horse transfers fully to the partners. • Decisions regarding training and racing are made by the management group (LRP) through the horse’s 3 year old racing year. The LLC will determine if they wish for this to continue at the end of the racing year.
How LRP Partnerships Work • There is a management fee included in the partnership pricing. This fee covers: • Transport to and from trainer • Communication with trainers, vets, farriers etc • Coordination of social events and meetings • Communication on horse’s status • Preparation of Financial Statements • Preparation of Tax Documents • Record Maintenance (receipts, registrations etc) • At the conclusion of the horse’s racing career, if the owner group is unsuccessful in placing the horse, LRP will take responsibility for the horse’s placement. • At the inception of the LLC, the Horse’s sales price is paid from the LLC checking account to LRP. The sales price represent’s the breeder’s costs of raising the foal to it’s current age and state.
What Expenses are Covered? • Purchase Price • Management Fee - Through the end of Undesided’s 3 year old racing year. • Entertainment – There is an annual entertainment budget. This covers an annual BBQ. Some events will require payment from the owner’s group for participation. An example would be a trip to the Fairgrounds for the Louisiana Derby. LRP provides a box but each owner is responsible for their food, drink and gambling. • Transport to and from trainer/boarding farm • Mortality Insurance to cover horse’s current value – adjusted throughout career • Boarding for layups, injuries etc. • Training including yearling breaking/training and race training through the three year old racing year • Estimated Vet and Farrier – We’ve done our homework on estimates but it’s possible that veterinary expenses due to an unforseen event could exceed the estimate. In this case, the owner’s group would need to contribute the additional funds unless offset by other savings/winnings.
What Expenses are Not Covered? Expenses Beyond 3 Year Old Racing Year – It is assumed that if the owner’s group decides to continue racing the horse beyond it’s 3 year old, the horse must be paying his way. The owner’s group must at the time of deciding to continue the racing career, agree to the annual or monthly contribution to continue. Excess Veterinary – We’ve done our homework on estimates but it’s possible that veterinary expenses due to an unforseen event could exceed the estimate. In this case, the owner’s group would need to contribute the additional funds unless offset by other savings/winnings.
Partnership Account Example At any point in time, your ownership value is one tenth of the partnership account balance less any outstanding bills. Should the horse be injured or stop racing, each partner will be refunded one tenth of the balance of the account less outstanding bills.
Full Disclosure • As an owner, you will receive: • Frequent emails describing your horse’s activities and progress • A monthly newsletter outlining events and industry news • Quarterly partnership Financial Statements accounting for all revenues and expenses • Copies of bank statements • Annual K-1 and copy of 1065 Tax Forms filed with the IRS • Ability to review receipts and invoices pertaining to your horse
THE SIRE IDE (Forty Niner) Remarkable 75% WINNERS & 10% STAKES HORSES
THE SIRE IDE (Forty Niner) • Average 2009 IDE yearlings sold for $14,860 • 14 progeny earning over 100K • 2009 Louisiana Stallion of the year! • In 2008 ALONE his progeny earned over $2.2M from 102 runners
THE DAM Zarb’s Destiny (Zarbayev) • A Winner over the mile • From a Graded Stakes family • Bred by Foxwood Plantation – the state’s leading breeder across several years. • UNDESIDED is her first foal
The Starting Gate Now that you’re rearing to go - here’s a guide to getting started! • Today: • Sign partnership agreement and provide either a deposit of $500.00 with remainder due in 30 days, or prepay your entire interest. Funds are placed in escrow. • Order your UNDESIDED merchandise (coming soon)! • Within 30 days from seminar: • LRP forms the LLC, gathering your signatures on articles of incorporation. • LRP establishes checking account exclusively for the new LLC • LRP hosts a planning party for UNDESIDED!
