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Share the Wealth through Fractional Stables
Wednesday, October 26, 2016 - by Rich Fisher

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What’s the best way to feel like a big spender without having to spend big? Simply buy a share of a fractional stable Standardbred.
 
From folks who always yearned to be horse owners, to those who never even followed the ponies, fractional ownership has become a great way to live out a dream, draw new interest to the sport and bring more fans to the tracks. This is particularly true with fractional stables that charge a one-time buy-in investment that covers all expenses, returns a percentage of the winnings and resale price, and does not charge monthly training bills.

Join a Stable
Most fractional stables will be starting operations again in the spring. For more information on all these stables and more, visit the owner information page at www.harnessracingfanzone.com/own or call the USTA’s Owner Concierge Hotline at 877-800-8782 ext. 5555.

“Fractional ownership provides the excitement of owning a horse without the type of risk or expense that other owners face,” said Heather Wilder, who runs Summer Slam Stable based at The Meadows. “I think a training bill can be confusing and it intimidates those new to the business. This allows them to understand and experience the thrill. With our own Summer Slam stable we have seen fractional owners graduate to owning their own horses.”

And rest assured, they are thrilled.
 
“It’s one thing to get excited about betting a horse, but it’s a whole different feeling when you have a part of that horse,” said Dan Poprawski of Summer Fling Racing Team based at Running Aces Harness Park. “Even if it’s only 1 percent, they get the special thrill when a horse they own is behind the gate. It’s a special rush people get when they get involved in ownership, even if it’s just a little bit.”

“When you watch people watch these horses race, they forget that they own less than 1 percent of the horse,” said Howard Pearce of LandMark 10 in Canada. “They think they own the whole horse; that it’s their horse.”

From the stable operator’s standpoint, it is good for the sport in that it introduces a new element to harness racing.

“Whenever a horse in the HorsePlay group races, we always have somewhere between 20 and 50 people there, depending on how the horse is doing and when the race is,” said Jessica Schroeder of HorsePlay Racing Stable based at Scioto Downs. “Four members might come; they’ll bring a wife, a son, a granddaughter. I not only know the 40 owners, I know their husbands and brothers. I’ve met a lot of people; it’s really neat.”

As we take a look at five fractional stables that do not charge training fees, it becomes obvious there are benefits to both running and investing in them.

HorsePlay Racing Stable

Six years ago, Jessica Schroeder and her mother, Susan Schroeder, started a fractional ownership group that did not charge monthly bills. It eventually became HorsePlay Racing Stable and is still going strong today.

 
Conrad Photo
The Horseplay Racing Stable group celebrates a win with Northern River at Scioto Downs in 2015.

“We build into the purchase price the bills for a five-month period you’re going to own a horse,” said Jessica, who is the USTA’s outreach and membership enrichment coordinator and also serves as program manager for HorsePlay.

Susan Schroeder started it as a test program at a Wisconsin fair, charging $50 per horse. It was well-received and four years ago Jessica brought the concept to Ohio. Participants pay $350 for 2 percent of a $5,000 claimer at Scioto. The horse races during the Scioto Downs meet, which runs from May to September. The horse is then typically sold at the Blooded Horse Mixed Sale in Delaware, Ohio, and any surplus is distributed back to the investors. Then the process begins again the next year when Scioto Downs opens in the spring.

HorsePlay sells 40 shares, which effectively sells 80 percent of the horse. Schroeder keeps her people informed with two e-mails. One contains the entries, the driver, the race and the morning line and the other goes out after the race with results. She also posts on Facebook, but sends her postings a day early to members to give it an exclusive feel.

Investors are limited to 40 and in four years HorsePlay has gotten 40, 36, 30 and 40 investors. For the most part, it has made money or lost very little, but it goes beyond that. Camaraderie has developed, and the longtime investors take an interest beyond just their horse on race night.

“This kind of gets them in a group of people,” Schroeder said. “It’s much more fun to go to the races when you have a group and you’re excited and you get people to talk to. Going to races by yourself, in my opinion, is just boring.

“If they’ve been in the group for multiple years, they’re going to the track and betting on the drivers and trainers we’ve used before. Even if it’s a horse we only had for a week, they’re like ‘Oh, (former HorsePlay horse) Better Days Ahead is racing tonight. I’m going to put some money on him.’”

Summer Fling Racing Team

When Susan Schroeder left Wisconsin to become executive director of Minnesota Harness Racing Inc., she started a fractional ownership group at Running Aces Harness Park called Summer Fling Racing Team. When she moved to Ohio to become project coordinator at the Ohio Harness Horsemen’s Association, Dan Poprawski took over as MHRI’s executive director and the Summer Fling Racing Team's corresponding officer.

 
Dee Leftwich photo
Members of the Summer Fling Racing Team hang out with their horse, Finn Jett, at Running Aces Harness Park.

The stable has two horses, and sold 16 shares at $110 each for a $5,000 conditioned claimer and 30 shares for $50 for a $3,000 claimer. Regular Facebook updates keep investors informed.

“They have no other expenses,” Poprawski said. “They get free pictures in the winner’s circle and a T-shirt, and at the end of the year they get a check for 1 percent of what the horse earns. The people who paid $50 lost a few bucks but had a lot of fun, and the people who paid $110 won some money and had a hell of a lot of fun.”

Summer Fling operates for the duration of the Running Aces May-September live racing season, and Poprawski feels this method is more laid-back than his original endeavor.

“They just know they’re getting 1 percent of the net,” he said. “The way I had it set up 10 years ago, people were in it to try and make money. We would give them a Schedule C and Schedule E for their tax return to show profit and loss. It was more in-depth.

“The way we do it here, it’s a great way to get people interested in it. Hopefully down the line they want to go further. Some people get involved more seriously once they get their feet wet in the fractionals.”

Poprawski feels more folks should look into starting up stables, saying “It doesn’t cost anything but time. And the people seem to enjoy it. They come to the track.”

Summer Slam Stable

As the public relations and marketing director for the Meadows Standardbred Owners Association, Heather Wilder actually got help at her job when the Washington, Pa. track opened Summer Slam Stable in August 2015.

 
Photo courtesy Heather Wilder
Visiting their horse in the barn is a big part of the Summer Slam ownership experience.

“It has been a wonderful experience,” said Wilder, who is married to driver Mike Wilder. “I see so many of those owners come out not only on their race days, but to others as well. They’ve become a group of friends and can be found at picnic tables on our apron almost every race card.

“One of the greatest things to come from this is the fact that our other horsemen are able to see how much fun fractional ownership can be. Many are willing to start stables of their own.”

Wilder said the USTA approached The Meadows about starting the stable, and trainer Tim Twaddle worked feverishly to get things off the ground between licensing, setting up contracts and the post office box. The Meadows offered a $350 buy-in fee for one share, which attracted 27 of a possible 40 investors, who were allowed to buy up to two shares. Race dates, times, finishes and pictures of the owners at the track are posted on Facebook, while e-mails regarding training issues are sent out and a Summer Slam party in the Meadows’ Bistecca Skybox Suites is held.

Twaddle has been invaluable, said Wilder. After Ashes N Dust suffered an injury in December that sidelined him for six months, the trainer saw to his recovery and graciously allowed all 27 investors to remain as owners on replacement horse Handsome Prince.

“Handsome Prince has been a check-getter for the stable almost every start,” Wilder said.

Twaddle also opens his barn to the ownership group, and has allowed one investor to jog the horse and take him on training miles.

“We have four two-seated jog carts, so we really can let the new owners take the lines,” Wilder said.

Wilder advised that anyone looking to start a fractional stable should provide the ability for investors to pay by credit card on a website.

“One of the problems facing modern day ownership is the fact everyone is busy,” she said. “After working all day, sitting down to write a check and address an envelope falls through the cracks. I think one way to improve ownership is to make paying via your website by credit or debit card a reality.”

First Turn Stable

Investors at First Turn Stable, which started operations in June at Hoosier Park, have seen quite a few horses go through their stable, but they have seen some success as well. As of late September, trainer Jeff Cullipher had put four horses in the winner’s circle with three starts or less.

 
Photo courtesy First Turn Stable
The members of the First Turn Stable at Hoosier Park enjoy plenty of wins, even if they have to continue to play the claiming game to do so.

And that’s just the start of the whole experience for the 50 Indiana residents who spent $250 per share.

“We’ve been in the claiming game,” said Nicole Frankowski, race marketing coordinator at Hoosier Park. “We were hoping to have one horse and we’re actually on our fourth horse, but it’s sort of been a blessing in disguise because all 50 of the new owners have seen how quickly a claimer can go.

“They’ve also been able to see just that level of horses and where they’re at, and small adjustments and things with the trainer. They see how quickly you can turn a horse and get it in the winner’s circle. What an incredible experience to spend $250 and work with four different horses in two or three months.”

First Turn planned on selling just 40 shares—limited to Indiana residents only--and they went so quickly that 10 more shares were sold. The one-time investment went for trainer, stable and farrier fees, while Hoosier Park buys or claims the horses.

E-mails from Frankowski provide entry race details along with a comment from Cullipher about what the horse has been doing, and results. Facebook also keeps owners in the loop, which is something extremely important to the First Turn staff.

Prior to launching the stable, a seminar was held to gauge the interest in horse ownership. Those who didn’t have racing connections were hesitant, so Hoosier Park went the fractional route. Since starting, First Turn holds monthly review sessions at Hoosier Park, at which all the finances for that month are broken down, and Cullipher holds a question and answer session.

Frankowski said the stable is accomplishing its goals. Friends and relatives of owners are asking to be wait-listed, while several individuals are looking to buy their own horses.

“People who had no idea about Hoosier Park or harness racing got brought in by word of mouth,” Frankowski said. “You truly have to get people out here so they can see and appreciate everything that goes on. You take them to the barn to see what goes into getting their horse ready to go on the track, and that builds up that team spirit. Being able to expose everyone to seeing there’s much more than just what goes on at the track, they feel it’s something they want to expand upon. We couldn’t ask for anything better.”

LandMark 10 Racing Stable

Unlike the previously listed fractional ownership groups, LandMark 10 is not confined to one track. Its horses race at various venues in Ontario.

 
New Image Media photo
The LandMark 6 Racing Stable was the most successful of the LandMark partnerships. Their horse, Harper Blue Chip, earned more than $800,000 at ages 2 and 3.

The “10” represents how long the stable has been in operation. Starting with LandMark 1, owners buy in every year and own pieces of anywhere from three to six 2- and 3-year-olds, of which 25 to 50 percent were bought as yearlings.

It started in 2006 when the Standardbred Breeders of Ontario Association offered new owners the chance to buy one horse at $4,500 a share with Mark Steacy as the trainer. That lasted one year and Howard Pearce, a retired professor from Queens University, teamed with Steacy to start LandMark. Five of the original SBOA members and 11 newcomers bought in at $5,000 per share, a figure that was dropped to $2,000 in 2013.

“That makes it much more affordable and attractive,” Pearce said. “A lot more people that wouldn’t have gotten in for $5,000 are now getting in. We increased the total assets by decreasing the value of the share.”

Owners can purchase unlimited shares, with 10 being the most anyone bought. LandMark has grown from 17 to 43 owners since its inception.

“Depending on the number of shares, we use half the money to buy yearlings, we keep the other half back to pay all the training, all the vet bills, all the stake payments for the first year,” Pearce said. “The plan is that the money earned as 2-year-olds is rolled into paying the expenses to race when they’re 3-year-olds.

“It’s conceivable that none of them make any money as 2-year-olds and therefore we’d have to ask the partners for more money. But in the first nine LandMark stables, that’s never happened. When we disperse the stable, we send them a check for the total of the amount of money that the horses earned in races and what we got for them at the sale.”

LandMark 6 had the biggest success story with Harper Blue Chip, who finished third in the 2014 Hambletonian and Canadian Trotting Classic, fourth in the Breeders Crown and second in the Matron. LandMark took a large group of owners to the Meadowlands for the Hambletonian.

“Every once in a while we get a bad customer who expects miracles,” Pearce said with a laugh. “But overall it’s a bunch of nice people and they all get a LandMark jacket and we have hats and they meet each other at the racetrack. I have people from about five to eight different states, five to six different provinces. Those that meet each other really enjoy sitting together at the track.”

How to Start Your Own Fractional Stable

From all indications, starting a fractional stable has been good business for the stables and tracks at which they race--and great fun for those who invest.
 
So why aren’t there more?  Basically, people don’t know how to go about it.
 
Fear not. Jessica Schroeder, the USTA’s outreach and membership enrichment coordinator, is happy to help.

“I’ve had quite a few inquiries,” said Schroeder. “Anyone is eligible, really. We helped First Turn Stable answer some questions about how to set it up. They did it from a management standpoint at Hoosier Park as opposed to an individual trainer. As far I’m concerned, if the racetrack is willing to pick a trainer to do that and they want to do it on their own, and the trainer wants to start it up and expand it that way, anybody can start one.
 
“But the USTA will help out with things. When you register the stable with the USTA, if we get a listing of the members that are in your stable, we’ll set it up for free. That’s a $175 savings for the person who wants to set it up.”
 
With that in mind, Schroeder provides the following list of steps to take:
 
1) File a farm/stable name with the USTA. Make sure the corresponding officer is a current member with the USTA.

2) Register the LLC, or other business type, with the home state.

3) Apply for an EIN number with Form SS-4 (can be completed online)

4) Open a checking account specific to the stable

5)  Secure a trainer for the group

6) Create an operating agreement (For an example; one can be requested by e-mailing owners@ustrotting.com)

7) Create a sign-up sheet and e-mail account

8) Create flyers, send out e-mails, and market to prospective investors

9) Host an informational meeting for people to ask questions and meet the trainer

10) Take sign-ups and buy a horse

11) Create a Facebook page for the group so members and their friends and family can follow the horse

12) Race the horse throughout a designated time and keep people interested and feeling a part of it all by:
A) Sending out e-mails when the horse is in-to-go
B) Having designated tables at the track for the group to congregate
C) Hosting one or two informational seminars and being prepared to answer a lot of questions
D) Sending out post-race e-mails with results.

13) Sell the horse

14) Host an end-of-the-year party and pay out dividends

15) Submit tax filing paperwork. If “Single Member LLC,” file a 1040 with schedule F, SE, C or E
 
“Technically, fractional stables don’t require USTA approval,” Schroeder said. “However, if stable managers would like assistance with the free USTA Stable Registration and stable T-shirts, then we require the registering with the state, a separate bank account, IRS tax ID and a list of the people who signed up to be part of the stable.
 
“I feel like if people don’t want to take the first initial five steps, than they’re not going to do very well with the follow-up and keeping members interested and involved and educated. We want to make sure things are legitimate and it’s not just running through your own stable account. You should have something separate set up.”
 
Schroeder said the initial start time varies, depending on each stable manager’s financial situation.
 
“When I started, I was unable to put up money to buy the horse myself so I had to wait until I had enough buy-ins,” she said. “The first year you set it up, if you don’t have the money to front it and pay yourself back, I’d say give it at least three months.
 
“The creative process of starting a Facebook page, creating a flyer or putting an ad in the program to get people to know about it, that’s kind of what takes a long time. Especially when you’re starting from scratch.”
 
And while Facebook is pretty necessary, it is not going to provide a deluge of investors. Schroeder said she had just two people sign up from Facebook.
 
“I don’t get a lot of ‘cold call’ sign-ups,” she said. “I would suggest you go to the track you want to race at, and get a third-page or half-page ad in the program if there’s extra space. Most of your time will be spent spreading the word, getting your name out there.

I was lucky. I told basically three people about it the first year, who went out and told their friends. After that first year I basically had a group of 40 people I could draw from.
 
“Don’t expect to get 40 people right away. But don’t let that discourage you. If you can get 10 new people and somehow get the numbers to work, especially with a trainer that’s already got some horses, that’s still 10 more owners that we haven’t had before. Hopefully 20 more people come to the track whenever the horse races and when he wins you have 30 extra people in the winner’s circle.”
 
From there, it can grow organically.
 
“Other people at the track, or watching the simulcast, will say ‘Wow, there are a lot of people involved with that horse; they look like they’re having fun. That’s something I want to do.’”
 
For further questions or information on starting a fractional stable, call the USTA Owner Concierge Hotline at 877-800-8782, ext. 5555 or e-mail
owners@ustrotting.com


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The views contained in this column are that of the author alone, and do not necessarily represent the opinions or views of the United States Trotting Association.