Founded in the depths of the Great Depression, Keeneland has seen hard times and knows how to survive. And the Lexington racetrack needed those survival skills to ride out the roller coaster of the past few years.
The track is pulling back from tough times and is ready to celebrate its 75th anniversary at the fall meet that starts Friday.
"Keeneland is just fine financially," Nick Nicholson, president and chief executive since 2000, said in an interview during the September yearling sales. "It's a strong corporation. And it's going to grow for generations and continue to be strong."
Those yearling sales were the first since 2007 to put a spring back in Nicholson's step. In 2008, after the stock market crashed, the bottom dropped out of the Thoroughbred selling and breeding market.
"The sales after 2008 were half of what they were before," Nicholson said. Keeneland had to do what other corporations did: "You tighten your belt, you cut your expenses and you go forward."
Unfortunately, the worldwide economic downturn hit just weeks after Keeneland announced that it had hired architects HOK Sport to draw up plans for a facelift in time for the 2011 celebration. Big, but subtle, changes were contemplated: Could the grandstand be expanded, possibly even enough to accommodate the Breeders' Cup?
But all that has been shelved, probably permanently.
"I like to build things; I like to try things; I like to spend money," Nicholson said. "The last few years, it hasn't been the time for that. You don't spend what you don't have."
In preparing for speaking engagements on the track's 75th anniversary, Nicholson pored over original minutes, notes, drafts, architect's renderings, old photos, anything and everything to illuminate just how the track became what it is. He thought he would be talking about how much it has changed over the years; instead, he said, he came to see the opposite.
Nicholson said the track survived the latest downturn by relying on the bedrock principles laid down by the company's founders, even though those founders never could have foreseen what Keeneland would become: the world's premier Thoroughbred auction house.
They also never could have foreseen that most of the track's betting revenue would come from outside Lexington. Or that now the fastest-growing segment of the betting market would be online advance-deposit wagering.
Although times have been tough, Nicholson said, "every time I start feeling sorry for myself, I think about what those people were faced with when they were starting this place."
Good money after bad
The facts, according to Nicholson, looked as if they were all stacked against them, and the parallels are unmistakable.
"It's 1935. It's a failed business. It has no future," he said. "The cost of building a racetrack is very expensive for infrastructure, and financing is hard to get — there are no banks. And Lexington has shown they don't want a racetrack because the Kentucky Association went under."
But Kentucky was the best place in the world to raise a Thoroughbred racehorse, and there were people here with the knowledge bred in their own bones of how to do it.
A committee of horsemen and breeders, led by Major Louis Beard, studied the problems. The new group was determined not to repeat mistakes made by the defunct Kentucky Association, the century-old track in downtown Lexington.
The local breeders thought that Lexington needed a track to set the city apart. In their view, they could not afford to wait until times got better and the financial picture improved.
They set a lofty goal of creating a track nice enough and important enough to attract the best horses and horsemen from New York and Chicago.
And, Nicholson said, they intended from the start to "conduct racing of the highest quality possible."
"It had to make business sense," he said. "This was in the Great Depression. They instinctively knew the best way to do this long-term would be to shoot big."
Nicholson said he sometimes wonders whether they worried, "Did we overshoot on this?"
'Lexington needsto do this'
Beard's committee scouted several possible locations but quickly settled on Jack Keene's 1471/2-acre Keeneland Stud Farm on what was then known as Versailles Pike.
Keene already had built a private track and a stone barn on the property, which had been in his family for generations. Over the decades, he had poured thousands into building an indoor training track so his horses could work in the winter and win all the spring races. That plan, however, never quite came together.
So Keene was willing to sell the land, with its advantageous improvements, including an enormous 100,000-gallon (now iconic) water tank, for $130,000, plus $10,000 in association shares — well below fair market value.
Beard, the head of the scouting committee, also was farm manager for John Hay "Jock" Whitney, co-owner of Greentree Stables and an investor in movies; Whitney heard about the track plans and was impressed.
Whitney was not an easy man to impress, but he knew a good thing when he saw it: He and his brother Cornelius Vanderbilt Whitney bought an early stake in Technicolor, and Jock Whitney was a major investor in David O. Selznick's film Gone With the Wind.
Jock Whitney offered to pay for the new track, Nicholson said.
But Hal Price Headley, new president of the group that was dubbed the Keeneland Association, politely declined, saying that this was something Lexington needed to do for itself, Nicholson said.
Still, Whitney's offer spurred interest and was a great marketing tool.
The Keeneland Association was incorporated on April 17, 1935, and Beard set to selling shares — $1 for common stock and $100 each for preferred — to horsemen, to downtown merchants, to his polo-playing friends from Cincinnati. The goal, according to the prospectus, was to "make it into one of the outstanding racing centers of the country," which they estimated would take about $350,000.
They planned to pay 6 percent semi-annually for the preferred shares and retire the stock as rapidly as possibly, but they also wanted to accumulate a surplus as a buffer against future economic downturns.
The track also sold $50 annual clubhouse memberships (for only $25 in 1936, since there was only one race meeting). Or for the princely sum of $500 — the median American annual income at the time was about $1,100 — you could get a perpetual membership, meaning as long as there was someone to inherit it, they would have a place at Keeneland. About 100 of those were sold, according to Keeneland archives.
"We still have 70," Nicholson said. "And we're keeping that promise."
Breaking even,or near enough
Despite frantic building efforts, the track couldn't be ready for a spring meet, but after a scant 15 months of building, the track opened its gates on Oct. 15, 1936.
Keene's limestone "barn/mansion," with its unusual "two-over-two" stonework, became the clubhouse; the indoor training track he had envisioned became the paddock. At least part of the interior had to be dynamited away to reopen the view.
Inside the now-open ring, Headley planted trees, including the giant sycamore that remains in the saddling ring to this day. Headley focused on the track, sending equipment and workers over from his nearby Beaumont Farm. Keene had envisioned races being run in the morning, so he laid out the track facing west; Headley was stuck with improving on that design.
Beard concentrated on the grandstand, working with Robert McMeekin, a University of Kentucky and MIT graduate who won a contest to design the all-wood stands, which originally seated only 2,500.
This was the Depression; everything that could be was salvaged — stones from Keene's stables, trees from around the property, barns and seats from the old Kentucky Association's estate sale. Even the old track's iron gatepost. According to Keeneland legend, Headley himself ordered that the cast-iron post be dug up and moved to Keeneland's entry, where the prominent "KA" still stands out in gold.
Even though crowds poured into the initial nine-day fall meet and more than $500,000 was wagered, the track barely scraped by that first year, losing $3.47. But by the first full year of operation, the track was $8,286.41 in the black.
Nicholson imagines that breaking even must have been satisfying, particularly to Headley. Although a savvy businessman, Headley wasn't looking on Keeneland as a profit maker.
"We want a place where those who love horses can come and picnic with us and thrill to the sport of the Bluegrass," he said, according to Keeneland's official history. "We are not running a race plant to hear the click of the mutuel machines. We want them to come out here to enjoy God's sunshine, fresh air and to watch horses race."
Keeneland's founders also succeeded in drawing in their friends from the coasts: The first race ever run was won by Royal Raiment, owned by Jock Whitney.
From the beginning, Keeneland was intended to benefit the community; its unique articles of incorporation spell out that profits should go to purses, track improvements and local charities. It's impossible to say now how much of that was pure altruism and how much was savvy business sense. Either way, it worked, creating a strong positive link between the city and the track. Never again would Lexington see the track as something to be ashamed of.
In fact, Keeneland's founders specified that the grounds would always be maintained.
Local horsemen had decided that of all the bad business decisions the Kentucky Association had made, letting the grounds deteriorate was the worst, Nicholson said.
"Lexington wasn't proud of it," Nicholson said. "Hal Price Headley knew we had to keep the grounds up and keep people coming in."
So they created a park-like setting, leaving the stables and grounds open for people to walk through, and they deliberately fostered the community connection through charitable contributions.
"That was one of those Depression decisions," Nicholson said. From a business standpoint, it would have been cheaper to spiff up for meets, and then close down in the off-season, as most tracks do.
Not Keeneland. Trash is picked up every day in public areas. Paint is constantly refreshed. Horse poop is scooped.
"Not a year goes by when we're not planting new trees and bushes," mostly from the track's on-site nursery, Nicholson said. "It's very expensive to keep these grounds up. But a central part of the connection people have with Keeneland is the way it looks. They're proud of it. ... And from a business standpoint, it's one of the reasons we're so successful."
Sales almost an afterthought
But one of the main reasons that Keeneland became the economic engine that it is today for Kentucky and a whole industry was practically a fluke.
In early notes on the track, there are occasional mentions of sales, Nicholson said, but nothing even remotely along the lines of today's worldwide powerhouse that welcomes buyers from more than 50 countries.
In fact, the first animals sold at Keeneland apparently were not Thoroughbreds at all. More likely, they were farm animals, including Angus bulls, and maybe some draft horses or show horses.
Kentucky Thoroughbred horse breeders already had a system that worked well for them, Nicholson said: Every summer, they would load their prize yearlings on trains for Fasig-Tipton's Select Yearling Sale in Saratoga Springs, N.Y., where wealthy East Coast buyers summered at the Hudson River Valley's spas and casinos.
But in 1943, with wartime restrictions on transportation, Keeneland decided to hold an auction in a modest tent in the track paddock, under the auspices of Fasig-Tipton.
"They didn't think it would go well, because of the war and because the buyers were primarily from the Northeast, all happily ensconced in Saratoga," Nicholson said. The conventional wisdom, he said, was that it would be a fire sale.
"But it worked," he said.
In three days, 312 yearlings sold for $929,850 — at an average price of $2,980, three times the average of the 1942 Saratoga sale, according to The Blood-Horse magazine at the time.
The high-water mark might have been set by Hip 134, a bay colt by famed Claiborne Farm sire Sir Gallahad III. A then-unknown Alabama horseman named Fred W. Hooper came to Lexington looking for his next winner.
"I didn't know a soul in Kentucky, and they didn't know me," Hooper said later. But he knew bloodlines and bought the son of Sir Gallahad for $10,000 and named him Hoop Jr. in honor of his own young son.
Two years later, Eddie Arcaro rode Hoop Jr. over a muddy track at Churchill Downs to win the 1945 Kentucky Derby.
After 75 years,nothing's changed
The success of that first sale was a revelation.
The now-established premise that people would come from around the world to Lexington to buy world-beaters drove Keeneland to new heights and fueled the track's purses to some of the highest in racing.
The system worked beautifully until the late 1980s, when the horse market crashed and major Arab and European buyers packed up their jets and left town.
It took 20 years for the market to recover from the go-go '80s.
But it did, and Keeneland was still there. As the recovery took hold, Keeneland renovated and updated the grandstand, the sales ring, the barns behind the sales ring, even the track's surface.
As the recovery from this latest crash appears on the horizon in the form of improved sales, Nicholson said, it is the guiding principles laid down by Headley, Beard and other founders that have seen the track through.
"I think we're doing exactly what they did. We're being responsible, we're conducting racing at the highest quality possible, and the grounds have never looked better," Nicholson said. "The place is prettier than it was then, but philosophically, we haven't changed one whit. We're exactly where we were in 1936."