This is just circulated

[curious]

28 August 2020

 

NZTR CIRCULAR 2019/20 – No.6

 

TO EACH TOTALISATOR CLUB AND SECTOR ORGANISATION

 

RACING CLUB PROPERTY – GUIDANCE FROM NZTR AND REQUEST FOR FEEDBACK

 

The purpose of this circular is to further inform thoroughbred racing clubs about the effects of sections 20 to 22 of the Racing Industry Act 2020, which came into force on 1 July 2020, and how NZTR will work with clubs who want to sell, lease or otherwise deal with their property.

 

As set out in a previous NZTR circular, these sections mean that racing clubs must seek NZTR’s permission before undertaking transactions relating to club racing venues, such as selling or leasing or granting licences over those venues, either in whole or in part. These are requirements imposed by the Racing Industry Act, not NZTR. Clubs need to have regard to these provisions when contemplating property transactions.

 

NZTR’s own view is that in most cases the best steward of a racing venue is the racing club. Clubs that own racing venues ought to be able to get on with the day-to-day activity of running those venues without having to seek NZTR’s permission for routine transactions.

 

NZTR has always encouraged clubs to grow additional sources of revenue. Clubs leveraging their racing asset to add value to thoroughbred racing is a good thing. NZTR also agrees that it is important that clubs have clarity and certainty about how NZTR will deal with applications for permission under section 21 of the Act.

 

Guidance for clubs requesting permission for NZTR under section 21 of the Racing Act 2020

 

Accordingly, the NZTR Board has also considered how it will consider requests by clubs for permission to deal with their property under section 21 of the Racing Industry Act 2020. NZTR recognises that these transactions will often be time-sensitive and very important to the affected club or clubs. Therefore, it is important that applications can be dealt with promptly, and without NZTR needing to seek further information from clubs about applications, which will cause delay.

 

Requests for approval will generally be dealt with at the next possible Board meeting (the Board meets monthly), and clubs should bear that in mind when agreeing timeframes with third parties such as purchasers.

 

The NZTR Board gives the following guidance to clubs preparing applications for permission to deal with their property under section 21 of the Racing Industry Act:

 

• Applications should be in writing, and provided to NZTR as soon as possible;

 

• Applications should include a contact person at the club from whom further information can be sought if necessary;

 

• The Board will have regard to, and an application should address:

 

• • The purposes of the Act and the objectives of NZTR;

 

• • The nature of the proposed transaction, and whether it results in the permanent transfer of a racing asset to a party not associated with a racing entity;

 

• • The cash or other benefit derived by the club because of the proposed transaction;

 

• • The intended purposes for which any revenue from the transaction will be applied;

 

• • The effect of the transaction on the venue’s suitability for use as a racing, trialling, or training venue; and

 

• • Whether work on the transaction began ahead of the commencement of the Racing Industry Act 2020; and

 

• Applications should include, where possible:

 

• • The contract or agreement documenting the transaction;

 

• • A valuation, if applicable, or a reason why a valuation has not been obtained;

 

• • A copy of the relevant Committee minute or other confirmation that the transaction has been duly authorised; and

 

• • As much information about the purchaser as possible.

 

Clubs are of course welcome and indeed encouraged to contact NZTR to discuss possible property transactions ahead of time, or if they have any other questions relating to sections 20 to 22 of the Racing Industry Act 2020.

 

Proposed General Approval for race club property transactions – request for feedback

 

In addition, the Board recognises that there are day-to-day property transactions such as leases and the renewal of existing arrangements which do not require NZTR’s oversight. Clubs can be trusted to manage their own affairs in this regard.

 

For example, the sale in whole or in part of a racecourse ought to require NZTR’s permission. But the lease of a carpark or a catering lease does not need NZTR’s involvement.

 

Following initial consultation with the Race Club Advisory Group, NZTR has prepared the attached draft General Approval on which feedback from clubs is sought. NZTR wants to strike a balance between protecting the broader interests of thoroughbred racing while enabling clubs to carry on with their business-as-usual activities.

 

Feedback will be considered by the NZTR Board at its next meeting in September and should be submitted by email to NZTR at office@nzracing.co.nz by 5 pm on 11 September 2020.

 

Clubs should bear in mind that the General Approval is in draft only at this stage and will not take effect until notified as such by NZTR.

 

James Dunne

GM Legal, Regulatory and Compliance

[mardigras]

Sounds like the agenda of selling up the tracks is in the pipeline - without telling everyone that.

[Freda]

Some feel that the selling-up of club property is now likely to be done to provide funding for all-weather tracks.

[Hesi]

According to Messara, that was the initial plan

It is estimated that the total capital expenditure required at these 28 racecourses plus Cambridge over the next 6 years, that is 2018/19 to 2024/25 inclusive, is $190 million, comprising $101.5 million on racing infrastructure and $88.5 million on facilities infrastructure.  

This is considerably less than the $294 million that would have to be spent on all 48 racecourses if none were closed and all three synthetic tracks built, even if such funding were to be available. And then there are the significant upsides referred to earlier from having more and better racing on better tracks.

NEW ZEALAND RACECOURSES – REQUIRED CAPEX FORECAST

28 Retained Racecourses plus new synthetic track racing at Cambridge and 3 SyntheticTracks in Total $190.0M

48 Racecourses with no closures plus new synthetic track racing at Cambridge and 3 SyntheticTracks in Total $294.0M

[mardigras]

But how do they maintain them once all the money has gone. Sell some more?

[Freda]

If Racing Victoria has come to the conclusion that 2 synthetic tracks is sufficient for Victoria, how on earth do we justify 3 ?

[Hesi]

Out of interest, and for the benefit of people that read this site, can someone put up a case study on where the funding would come from and how much, to make a $30k race pay for itself, including tote, FO, overseas, sports, and typical sponsorship, club contributions etc etc

For example, assuming average margin on the tote is 20%, then there would need to be $150k wagered to generate 30K, but costs have still to be taken out of this

[Hesi]

28 minutes ago, Freda said:

If Racing Victoria has come to the conclusion that 2 synthetic tracks is sufficient for Victoria, how on earth do we justify 3 ?

Geographical factors?

[Freda]

23 minutes ago, Hesi said:

Geographical factors?

Stupidity?

[mardigras]

If you take their average net rate of revenue versus turnover - that is 5%. So multiply by 20, the required turnover to achieve a net effect of the stake. $30k = $600k. Of course that is on average and ratios and margins of fixed odds compared to tote affect all that. And that is based on achieving punter losses of around $75k per race (before expenses).

However, that is not the problem. To have punters lose $75k on a race on average requires punter losses to be suddenly so far beyond what they are in NZ. Believing you can just achieve the required annual net revenue by increasing the individual race turnover is a fallacy.

To get $75k of punter losses for around 2200 races is $165m in punter losses from gallops punters alone. That is around half the total achieved by all racing (including overseas), all sports and pokies.

[Hesi]

24 minutes ago, mardigras said:

If you take their average net rate of revenue versus turnover - that is 5%. So multiply by 20, the required turnover to achieve a net effect of the stake. $30k = $600k. Of course that is on average and ratios and margins of fixed odds compared to tote affect all that. And that is based on achieving punter losses of around $75k per race (before expenses).

However, that is not the problem. To have punters lose $75k on a race on average requires punter losses to be suddenly so far beyond what they are in NZ. Believing you can just achieve the required annual net revenue by increasing the individual race turnover is a fallacy.

To get $75k of punter losses for around 2200 races is $165m in punter losses from gallops punters alone. That is around half the total achieved by all racing (including overseas), all sports and pokies.

That doesn't apply to tote though?, where net revenue is directly proportional to turnover

[Hesi]

As an aside, I see Thommo the great clickbaiter is back, believing someone has to make NZ racing accountable......just won't happen buddy, there are ways, and there are ways

[mardigras]

12 minutes ago, Hesi said:

That doesn't apply to tote though?, where net revenue is directly proportional to turnover

Sure gross revenue is, but the tote is currently an ever decreasing option. But tote turnover won't go up if punters have no more money left.

Edited August 28, 2020 by mardigras

[Freda]

How did you arrive at the 75k figure for punter losses?  ....for the idiot....

[mardigras]

26 minutes ago, Freda said:

How did you arrive at the 75k figure for punter losses?  ....for the idiot....

The net figure achieved by NZ TAB in recent years is 40% of the gross figure. So if they gross $300m, then they end up with around $120m net of expenses. So $75k gross punter losses at 40% equals $30k net for the industry.

[Freda]

8 hours ago, mardigras said:

The net figure achieved by NZ TAB in recent years is 40% of the gross figure. So if they gross $300m, then they end up with around $120m net of expenses. So $75k gross punter losses at 40% equals $30k net for the industry.

Thanks.

[Freda]

On 8/28/2020 at 6:56 PM, mardigras said:

If you take their average net rate of revenue versus turnover - that is 5%. So multiply by 20, the required turnover to achieve a net effect of the stake. $30k = $600k. Of course that is on average and ratios and margins of fixed odds compared to tote affect all that. And that is based on achieving punter losses of around $75k per race (before expenses).

However, that is not the problem. To have punters lose $75k on a race on average requires punter losses to be suddenly so far beyond what they are in NZ. Believing you can just achieve the required annual net revenue by increasing the individual race turnover is a fallacy.

To get $75k of punter losses for around 2200 races is $165m in punter losses from gallops punters alone. That is around half the total achieved by all racing (including overseas), all sports and pokies.

So...bear with me here...what is the actual 'punter loss '  figure - as opposed to the required figure of around 165 mill as quoted?

[mardigras]

54 minutes ago, Freda said:

So...bear with me here...what is the actual 'punter loss '  figure - as opposed to the required figure of around 165 mill as quoted?

That is the required punters losses required to fund NZ gallops to the level of $30k per race  for 2200 races per year - $165m - that equates to $66m in stakes - and $100m in expenses through NZ TAB.

That leaves nothing for NZTR and nothing for course remediation.

Putting that into perspective, approximately $69m was the gross sum of punter losses on NZ gallops races in 2018. That equates to around $28m in net revenues to NZ TAB from NZ gallops punting through NZ TAB. If NZTR require $6m, that leaves $22m for stakes and additional course management. If we ignore the courses, that is enough for average stake per race of $10,000 per race for 2200 races. 

Edited August 29, 2020 by mardigras

[Hesi]

If you assume that there has been no increase in revenue, then the only  factor that can make things even remotely close to balancing the books, is a substantial reduction in fixed and variable costs.

Surely when Peter's got the Govt bailout approved, then it must have come with substantial cost savings(25-30%) as the strict proviso

[Freda]

1 hour ago, mardigras said:

That is the required punters losses required to fund NZ gallops to the level of $30k per race  for 2200 races per year - $165m - that equates to $66m in stakes - and $100m in expenses through NZ TAB.

That leaves nothing for NZTR and nothing for course remediation.

Putting that into perspective, approximately $69m was the gross sum of punter losses on NZ gallops races in 2018. That equates to around $28m in net revenues to NZ TAB from NZ gallops punting through NZ TAB. If NZTR require $6m, that leaves $22m for stakes and additional course management. If we ignore the courses, that is enough for average stake per race of $10,000 per race for 2200 races. 

Thanks again.

Yep,  I needed to have it put in front of me in simple terms!

[Freda]

34 minutes ago, barryb said:

In other words Pam, the end is nigh.

 

kinda get that, yeah.

[Freda]

so how are some black type races advertised at 500k....and similar?

I fully realise we have been living beyond our means for too long, I'm not that stupid even if basic maths floors me somewhat....but, I can't go and buy something if I don't have the dosh. 

Where's the money coming from?

[mardigras]

3 minutes ago, Freda said:

so how are some black type races advertised at 500k....and similar?

I fully realise we have been living beyond our means for too long, I'm not that stupid even if basic maths floors me somewhat....but, I can't go and buy something if I don't have the dosh. 

Where's the money coming from?

Pokies and sports betting. And offshore betting. And the government.

[Freda]

1 minute ago, mardigras said:

Pokies and sports betting. And offshore betting. And the government.

Don't forget the ' game changer '  the synthetic tracks....

[Freda]

...and our management heads at the CJC think that the Govt needs racing because of all the taxes we pay....