Why does BDR form its partnerships before purchasing the horse?

 

What is done with the capital raised that is over and above the price paid for the horse?

 

When is the initial equity contribution due?

 

Why is 80 percent the "magic number?"

 

What happens when and if there are not enough funds to cover expenses?

 

How long would I have to continue paying assessments?

 

What happens if a horse is making money?

 

What if a horse is sold or claimed?

 

How Much Involvement Will I have?

 

What happens if the horse becomes ill or has a serious injury?

 

What if I want to sell my share(s)?

 

What are the tax ramifications of thoroughbred ownership?

 

What about financial administration and reporting?

 

Who will be my horse's trainer?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Why does BDR form its partnerships before purchasing the horse?
There are two reasons for this. One, BDR's mission is not to make a profit for itself by marking up its purchase of horses or marking up any of the fees trainers, vets, agents, etc. charge for their services. Neither does BDR charge any management fees. Therefore, it makes little sense to "front" the money when no profit will be derived from doing so.

 

Secondly, auctions are fluid and exciting events- particularly when your team is participating. The night before each session of an auction that BDR is attending, all partners are apprised of what the next day's strategy is, including which horses we're considering bidding on. Some partners actually attend the auctions, but if that's not possible, you can watch them via the Internet in real time. Thoroughbred auctions are unique experiences, usually with electricity in the air. We want you in on it!

 

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What is done with the capital raised that is over and above the price paid for the horse?
Some of the balance of the capitalized amount is used for sales-related expenses such as a bloodstock agent's fee, on-site veterinary work, shipping the horse, etc. What's left is used to pay for boarding and care, training expenses, routine veterinary care, and equine insurance. This amount is calculated to pay all ordinary expenses up to the date when your horse should be ready to race and have a chance at earning purse money. That expected date is listed in each offering.

 

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When is the initial equity contribution due?
About a month before the auction takes place, providing the LLC is at least 80 percent sold. If an offering is not 80 percent sold within 10 days of the intended auction, another auction at a later date will be selected for that LLC and shares will continue to be solicited until the 80 percent benchmark is attained. Those who originally signed on for that partnership are not committed to remain on the roster.

 

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Why is 80 percent the "magic number?"
Eighty percent of the initial equity is about what it takes to buy the horse and pay initial, sales-realted expenses. The remaining expenses are spread over time, so we have a good chance to sell the remaing shares before those expenses come due. If all of those shares are not sold by the time the funds are needed to pay expenses, BDR buys what is remaining in 10 percent increments until the LLC is completely sold out.

 

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What happens when and if there are not enough funds to cover expenses?
It takes about $500 - $600 per month to keep a horse boarded at a farm when not in training. The monthly amount to keep a thoroughbred in training at a racetrack is about $2500 - $3000. If there are not enough funds to cover the upcoming month's bills, an assessment is made for anticipated three months' expenses- between $50 - $300 per month for a 10 percent partner. The total amount can be paid in three equal installments if desired. As a 10 - 30 percent owner, Button Down pays its pro rata assessment just as all owners do.

 

 

How long would I have to continue paying assessments?
If a thoroughbred is either not paying most of its own way from purse money, or is not at least showing definite signs that he or she can get to that point, the horse would most likely be sold or given away. The last thing trainers wants is to have their clients throwing good money after bad, so they are very candid when they believe a horse is going to be a losing proposition for its owners. Each horse's situation is different, but in any case, assessments wouldn't go on for very long.

 

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What happens if a horse is making money?
Once a horse is racing and has accummulated more than it would take to pay six months expenses, a vote would be taken among the partners to see if the majority interest would want a distribution of the excess funds or would prefer to keep the money on deposit.

 

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What if a horse is sold or claimed?
After all expenses are paid, a distribution of the remaining funds would be made and the LLC would be dissolved.

 

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How Much Involvement Will I have?
Partners are encouraged to participate to the fullest extent. They are always welcome at the auctions, the boarding stable, on the backside, and in particular, on race day. Partners are consulted on major management decisions.

 

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What happens if the horse becomes ill or has a serious injury?

The initial equity does not cover any extraordinary expenses for serious injury or illness. An assessment would be made to pay for these types of costs."

 

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What if I want to sell my share(s)?
If a horse is successful, the shares won't be hard to sell; if the horse is not successful, there won't be much of a market. The partnership agreement offers defined but restricted means of selling your interest. It is basically a "first right of refusal" for other partners before you can sell your shares to someone outside the initial LLC.

 

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What are the tax ramifications of thoroughbred ownership?
Thoroughbred ownership is in a very advantageous position from a tax standpoint. This is basically due to accelerated depreciation on the purchase of a horse. Consult your accountant or tax advisor for more information.

 

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What about financial administration and reporting?
BDR furnishes all partners with a quarterly financial statements and a Form K-1 for tax purposes each January.

 

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Who will be my horse's trainer?
As racing manager, BDR selects the horse's trainer. This decision is based upon a particular trainer's strengths that mesh with the horse's needs, the monthly fees particular trainers charge, and sometimes the geographic makeup of the partnership. For example, if four of the shares are owned by Florida residents, it would make sense to strongly consider placing that horse with a Florida-based trainer.

 

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