Big Splash For Darley Japan At Foal Sales

Darley Japan was quietly busy at the foal sales this season, scooping up a total 17 colts in the middle to lower market at Keeneland, Goffs and Tattersalls. Sheikh Mohammed's Japanese satellite signed for a colt by Animal Kingdom at Keeneland at the start of November, but the team was especially busy in Europe, signing for six at Goffs for a total of €270,000 and 10 at Tattersalls for 492,000gns.

Dr. Harry Sweeney, an Irishman but a Japanese resident of 30 years, is president of Darley Japan, and he said the European buying venture is intended to add some turf influences to Sheikh Mohammed's Japanese stable. While slightly more than half of the Japan Racing Association's races are dirt races, the country's premier races are on turf, and the use of stallions like American Grade I winner Pyro (Pulpit)–a permanent Darley Japan resident and among the leading dirt sires in the country–and Street Sense and Hard Spun, who each spent a year in Japan, means the stable is currently more prominent in dirt races.

“We'd like to expand a little bit and get some more turf influences into our racing,” Sweeney said. “We've seen there's opportunity here [in Europe]–going back to when I first went to Japan, which was 30 years ago, foreign-breds had become very popular to the stage that there were nearly 500 yearlings being imported each year. And then that declined very quickly. They were very successful, but with the arrival of Sunday Silence, Japanese owners kind of decided to buy Sunday Silence and not go abroad. The foreign horses were neglected somewhat and the numbers of foreign-bred yearlings coming into Japan went right down to under 100. It's currently back up to about 100, so still very small numbers considering the scale of Japanese racing and the number of horses we have in training. We felt there was opportunity there, and we're buying colts and buying turf horses.”

Sheikh Mohammed currently has about 175 horses in training in Japan, and the purchase of horses at public auction clearly represents a change in policy, as 49 of this season's 50 individual winners for the stable are homebreds. Notably, just one of the 17 colts purchased this season cost six figures.

“This market over here [in Europe] is extremely fashion-driven,” Sweeney said. “First-season sires and new sires, that's what all the pinhookers want. I try to not look at those but just buy nice horses outside that population. We consider them largely value for money. Horses in the range that we're buying, even when we get them into Japan and we pay the costs and tariffs, we have a very reasonable chance that they will be profitable for us.”

Darley Japan is likely somewhat unique among the world's major racing stables in that it operates at a profit. Its current earnings for 2017 stand at $18.5-million, and Sweeney said at year's end, with all expenses paid, the net profit is expected to be $6-million. This, of course, is largely due to the country's unprecedented purse structure that is fuelled by a young racing fan base that is highly enthusiastic about betting.

“It's an amazing country in terms of the structure of prizemoney,” Sweeney said. “The JRA do an absolutely brilliant job. In Japan the total prizemoney fund between the Japan Racing Association and the NAR [National Association of Racing, the secondary tier of racing] is about $1.3-billion.”

By comparison, the U.S. paid out $1.08-billion in purses last year for more than double the number of races. In Britain, it was £89.7-million ($120.2-million) in 2015.

All that means that, despite the tariffs and costs associated with quarantining and traveling the foals to Darley Japan, they stand a reasonable chance of being profitable. There is currently a ¥3.4-million (about $30,000) tariff on all 'racing prospects' entering Japan, which also includes foals in utero. This, according to Sweeney, has historically been a barrier to Japan's smaller stud farms upgrading their stock, but it is set to change from as early as next year.

“By the time it's all said and done each one of those foals is going to cost us an additional $60,000 by the time they land in Japan,” Sweeney said. “That's a thing that will change a little bit in the future, because of the trade agreement that has been agreed between Europe and Japan. It's been agreed, but not formally ratified, but once it is the tariff will go immediately from all in-foal mares. People buying in-foal mares from Europe won't have to pay the tariff on the unborn foal. The tariff on the yearlings will start to reduce incrementally over about 15 years. It'll start to get cheaper, so I imagine you'll probably see a little more interest in these sales from the Japanese going forward. Unfortunately at the moment in America, because the president has taken the country out the [Trans-Pacific Partnership], the tariff is going to remain on American bloodstock.”

While racing in Japan makes business sense, Sweeney said Sheikh Mohammed's interest in the nation was fuelled after seeing the relatively recent improvement of the Japanese horses in the world's best races, including those at the Dubai World Cup carnival.

“Sheikh Mohammed has enormous interest in Japan,” Sweeney said. “He has enormous respect for Japanese racing and has seen Japanese-trained horses run well at the Dubai World Cup Carnival. Sheikh Mohammed is a true sportsman and he appreciates the high standard and competitive nature of Japanese racing.”

The aforementioned high purses in Japan are fuelled by the betting turnover from the highly enthusiastic Japanese fans, who are encouraged by a competitive product and an inherent love for the sport. Last year, $27.8-billion was wagered on JRA and NAR racing. It was $10.7-billion, again on more than double the races, in the U.S. last year.

“Japanese racing fans are truly enthusiastic about racing,” Sweeney said. “The Japanese calendar is designed in such a way that you find out who are the best racehorses. We only have 23 Group 1 races per year, and when you take juvenile races out of it or fillies races out of it, if you're a 10-furlong colt there are limited races you can run in. It's not like Europe where you can run in the UK or go to France and pick your spot. You can't do that in Japan. If you're that class you have to run. In some of these Group 1 races there is just incredible depth in quality. You can have 10 Group 1 winners lining up against each other.”

“In Japan, there is absolutely true progeny testing,”Sweeney added. “We're sure at the end who the best racehorses are. We don't have to guess or make assumptions. Japanese fans are truly interested in racing and they love being part of it. They love the whole drama of it. Betting turnover in Japan is enormous–there's more gambled on Japanese horse racing than the U.S. and the UK combined. And while that's the case, it's not about making profit for a lot of them. I often cite the situation when Deep Impact was running. He was just an awesome racehorse, and when he was running in the Japanese St Leger, the betting turnover on him was so great that finally the odds returned zero. It was already assured on the boards that the odds were zero, so you put down $10 and you got $10 back. But people kept betting because they wanted to be a part of it. There's an enormous fan base. People come to Hokkaido when the horses retire to stud, and normally we open our farm during the summer for an hour during the afternoons, and there isn't an afternoon when 30 or 40 people don't turn up.”

An Answer To Sunday Silence…

The JRHA foal sale has historically been the premier market for the Japanese to buy their racing prospects in their country, and Sweeney said there are numerous reasons the Darley Japan team has stuck with that model for their imports, rather than buying yearlings or 2-year-olds.

“I was reared, and the whole Japanese market was, on the foal market,” he said. “In Japan we now have a yearling market, but in the history of things far more very good horses came out of the foal sale than the yearling sale.”

“For us, there are a few logistical reasons for buying at the foal sales,” Sweeney continued. “We need to have these horses in Japan if we can by August of their yearling year. They'll winter here in Europe, probably in Ireland, and then they'll go to Japan. We need time for quarantine, and we need to have them on the farm by August. We'll break them in Japan and because trainers in Japan only have 20 stalls, we need to get them [allocated] early on, otherwise we'll go to them in September and say, 'we've just bought these 20 nice horses, will you take one or two?' And they may say, 'we'd love to take them, but we're actually full,' because they only have 20 stalls.”

Sweeney said he thinks there is value to be found at the foal sales as well.

“We think the yearling markets over here are competitive and there are a lot of competing forces,” he said. “We're competing with more end users there. Here we're competing with some end users, but mostly traders and pinhookers and the like. There is some risk, we understand that, but there's risk buying yearlings as well.”

Sheikh Mohammed's satellites in other countries have historically been active at public auction–extensively in Europe and America–but this is new ground for Darley Japan.

“People kept saying, buying in the name of Darley Japan, that had never happened before,” Sweeney said. “Darley Japan, we're the youngest of the Darley family. So it's a bit like being the youngest of four sons. We have the U.S. and of course Europe and Australia who are older and bigger. Darley Japan is starting to come of age. Up to now our older brothers looked after us, but now we're starting to assert ourselves a little bit. We're starting to go out on our own, at night time.”

The foals bought over the last few weeks aren't the only horses Darley Japan will be importing: the farm purchased this year's GI Maker's 46 Mile winner American Patriot and will stand the son of War Front beginning next year. He will be one of two sons of War Front standing their first seasons in Japan, with the JBBA having leased The Factor for one season. Sweeney said American Patriot has two distinct qualities that are important to Japanese breeders: he is a fast turf miler and is free of Sunday Silence blood.

“War Front is a very well proven turf sire; we particularly like that,” he said. “American Patriot himself is a Grade I winner on turf. That's generally what we need in Japan; good, fast turf milers to 10 furlong horses. We can take a mile and a half horse as well, but it needs to be a fast mile and a half horse. He's popular, and he's free of Sunday Silence blood. There's a huge concentration of Sunday Silence genes in the whole population in Japan. If you have Sunday Silence mares there are limited opportunities there. That's another reason why we're buying foals over here, because they're all free of Sunday Silence influence. If one them was to strike big, the fact that they're free of Sunday Silence makes them far more valuable to us than having a Japanese-bred horse who is from the Sunday Silence line.”

The level of prizemoney in Japan means that any racehorse owner in the world would want to compete there, but the government–which operates the JRA–keeps it heavily guarded, with all prospective owners required to go through a rigorous application process. Sweeney said obtaining a JRA license is essentially as difficult as it was 30 years ago, the main difference being that applicants are no longer required to be a Japanese citizen or permanent resident; they must, however, appoint a Japanese-speaking representative.

“The rules are largely the same for foreigners now as they are for Japanese,” he said. “The JRA are very thorough in their investigations. They ask a lot of questions. The questionnaire you have to fill out is very detailed. There's one question that always amuses me: 'any outstanding student loans?' I find it amazing that someone who might be applying for an owner's license to race horses in Japan might have an outstanding student loan.”

“The JRA do a great job to keep Japanese racing clean, and they want to keep out any bad influences from racing,” he added. “The application process takes time. It is very thorough and maybe a little bit invasive. It's more onerous than getting a racing license anywhere else in the world but it's the same requirements for Japanese as for foreigners, except they do require you appoint someone who is a Japanese speaker in Japan to help out with any issues with language.”

Breaking Down Barriers…

Sweeney himself has certainly been a pioneer of the Japanese Thoroughbred industry. He had to break down a few significant barriers–including becoming the first foreigner to gain a JRA license and membership with the Hokkaido Breeders Association, as well as the country's first foreign agricultural land owner–to start his Paca Paca Farm, which is located a few miles from Darley Japan in the popular Hidaka breeding region of Hokkaido. The significant hurdles have proven worthwhile, with Paca Paca having produced the likes of G1 Tokyo Yushun (Japanese Derby) winner Deep Brillante (Jpn) (Deep Impact {Jpn}), G1 NHK Mile winner Pink Cameo (Jpn) (French Deputy) and champion 2-year-old Ampere (Jpn) (Wild Rush).

“We're lucky to own the most beautiful, spectacular farm,” Sweeney said. “Whenever I go to Tokyo and I meet people at different events there, they always ask, 'what space are you in, what are you doing?' I say, 'farmer.' They always think I'm referring to pharmaceuticals, like 'pharma.' Whenever they hear I'm truly a farmer, owning land, they're always like, 'wow, that's amazing.' I love where we're based. Every day I wake up and walk around my farm and I think 'wow, I'm really lucky to own this.' Japan is a fantastic country and has a fantastic racing structure, just amazing.”

Sweeney's latest project has been starting a racing club, which got off the ground this year after about four years of paperwork. Membership in a racing club is popular in Japan, as it provides an avenue to racehorse ownership without the headache of obtaining a JRA license, and any one individual–local or foreigner–is permitted to own up to 49% of any horse in the club. Large-scale racing club Carrot Club races this year's Tokyo Yushun winner and recent G1 Japan Cup second Rey de Oro (Jpn) (King Kamehameha {Jpn}), and another club, DMM.com, burst onto the international scene this year after buying Gentildonna (Jpn) (Deep Impact {Jpn})'s full-sister at the JRHA foal sale, and a Frankel (GB) filly for 1.4-million gns at Book 1 of Tattersalls October.

“Racing partnerships in Japan, or clubs as we like to call them, are very difficult to get,” Sweeney said. “In Japan there have only been 23 racing clubs ever ratified in the history of JRA racing. It's extremely well policed and supervised but once you get the license it's open to anybody.”

With world-class regulatory and prizemoney structures in place and an enthusiastic fan base to match, and barriers to horse importation and ownership slowly being eased, the future appears bright for racing in Japan, and Darley Japan looks poised to be a big part of that success.