Why This Billionaire-Owned Thoroughbred Horse Farm, Home To A Kentucky Derby Winner, Is…

In this episode of “Priceless,” staff writer Michela Tindera and reporter Isabelle Bousquette explain how Forbes determined the value–from the prize-winning stallions to the lush bluegrass paddocks–of one of the country’s ultimate, billionaire-owned trophy properties: Spendthrift Farm.

Read the episode transcript here:

MICHELA TINDERA: Let’s go back in time. The year is 1876. The United States is celebrating its centennial. Alexander Graham Bell placed what’s considered to be the first ever call with his new invention: the telephone. The first Kentucky Derby race was run one year prior. And at a farm not far from there in central Kentucky, a chestnut-colored Thoroughbred horse with a diamond star pattern and white markings on his legs is born. Not long after, as the story goes, a woman named Annette Swigert returned home to Kentucky from a shopping trip in New York City. Swigert’s husband Daniel watched as the packages from her trip stacked toward the sky were unloaded from the wagon behind her carriage. Seeing this, he told her about the birth of this new chestnut horse. I’ve named him for you, the man told his wife, “Spendthrift.”

By the next year another horse was born, Spendthrift’s brother. Annette told her husband Daniel that the new horse would be named for him, Miser. On the racetrack Miser didn’t end up amounting to much, but within a few years it was clear that Spendthrift was a champion, and in 1879 he traveled to New York and won the Belmont Stakes. When his racing career ended, he was put out to stud and became the great-grandfather of Man-O-War, one of the most legendary horses of the 20th century. But Spendthrift’s own name has lived on too, as the namesake of one of the best known and illustrious Thoroughbred breeding farms in America: Spendthrift Farm.

I’m Michela Tindera, and this is Priceless. In this episode, we’re heading down to the Bluegrass State to share with you the story of Spendthrift Farm and the man behind it, billionaire B. Wayne Hughes. Joining me for this is Isabelle Bousquette, who reported on the Hughes family for the Forbes 400 ranking this year.

ISABELLE BOUSQUETTE: Hi, Michela. Thanks for having me. So I’m here today to talk about the business of Thoroughbred horse breeding and how we at Forbes go about valuing a horse farm like Spendthrift.

TINDERA: And we’ll tell you about a new ruling and lawsuit that may affect the value of Thoroughbreds in the years to come.

Billionaires on our Forbes lists have owned all kinds of horses over the years that we’ve pegged values to. There’s the Dole Fruit and Vegetable billionaire, who’s owned hundreds of Arabian horses, and a Campbell’s Soup heiress with a breeding operation for horses that compete in show jumping and dressage. But when you think of horse racing today—the Kentucky Derby, the Breeders’ Cup, the Belmont Stakes. All of these races are run by one kind of horse: Thoroughbreds. Known for their athleticism and speed, this is a breed that people tracks so closely that the family lines of true Thoroughbreds today can be traced back to three what’s known as founding horses who lived in England in the 16 and 1700s.

BOUSQUETTE: This lineage continues to be followed in something called the American Studbook, which is run by the Jockey Club, a sort of governing body for Thoroughbred horse racing and breeding in the U.S. and Canada. They have all sorts of rules: breeding practices, specific colors, and even specific naming conventions that owners have to follow if they want their horses officially registered as Thoroughbreds.

TINDERA: Okay, but before we get too in the weeds, I think we need a bit of a vocab lesson. Because when you’re talking about horses, there are stallions and weanlings and broodmares and fillies and well, there’s a whole nomenclature unique to this world. So, Isabelle, can you help me out?

BOUSQUETTE: Yep, let’s do it.

TINDERA: Let’s have a little vocab lesson courtesy of the American Studbook. Okay, so a stallion?

BOUSQUETTE: So that’s a male horse that is used to produce foals.

TINDERA: What about a mare?

BOUSQUETTE: That is a female horse used to produce foals.

TINDERA: Okay, so what’s a foal?

BOUSQUETTE: So a foal is a young horse of either sex in the first year of its life.

TINDERA: Okay, and there’s a bit of a twist here, right?

BOUSQUETTE: Yeah, so foals can either be sucklings or weanlings. Sucklings mean they’re still nursing, and weanlings have finished nursing, but we will not get into that much detail here.

TINDERA: Okay, so that’s good to know. How about a filly?

BOUSQUETTE: So that’s a female horse that is four years old or younger.

TINDERA: And a colt?

BOUSQUETTE: That’s the male version of a filly. So a male horse that’s four years old or younger.

TINDERA: Okay, thank you so much for that. And so, there are even more types of horses that we could get into here based on their age and development, but these are the main ones our listeners need to know for this show.

So full disclosure, we want to share with listeners that while we were reporting this episode B. Wayne Hughes, the billionaire who purchased Spendthrift Farm in 2004, died at the age of 87. Spendthrift announced his death on Twitter in August this year saying that he passed away peacefully at the farm with his family by his side.  

He joined the Forbes 400 rankings in 1996. But it wasn’t his horse farm that put him on Forbes’ radar to begin with.

BOUSQUETTE: That’s right. If you’ve driven on a highway in the United States at some point over the last 50 years, you probably passed by the things he originally built his fortune from: self-storage facilities.

TINDERA: Yep, he was the cofounder of Public Storage, which you’ll probably recognize as those big, boxy buildings with the bright orange doors that you can often see located just off some highway exits outside cities.

BOUSQUETTE: Back in 1972, B. Wayne Hughes made a $50,000 investment to start that company in California. It’s now publicly-traded and brings in about $3.6 billion in annual sales.

TINDERA: But at the time of his death, he actually owned less than 1% of Public Storage stock. Years earlier, he transferred much of his stake in the company to his daughter Tammy and his son B. Wayne Hughes, Jr., who now both appear on our Billionaires list.

BOUSQUETTE: More of his fortune was made up of a stake in a publicly-traded REIT he founded called American Homes For Rent, and investments like his Thoroughbred operation.

TINDERA: While Spendthrift declined to comment, there are indications that Hughes transferred ownership of the farm to his daughter Tammy and son-in-law, her husband, Eric. And so, to determine the value of the farm, it’s not as simple as tallying up the latest share count in Public Storage. There are a lot of pieces to this puzzle. There’s the land on the main farm in Kentucky, and the horses who live there. There’s also an operation in Australia too. And we have to solve for each part a bit differently. But with the help of some equine experts, we’ll show you how, for the Forbes 400 ranking this year, we put a number on all the main parts of the farm and figured out how much Spendthrift Farm is worth.

So, let’s get back to the stallions.

BOUSQUETTE: To help us figure out how much these stallions are worth. We called several experts in the equine industry.

CHAD SCHUMER: I describe myself as a stockbroker and a real estate agent for horses. I also should mention I’m a bit of a therapist at times.

TINDERA: That’s Chad Schumer. He’s the founder of Schumer Bloodstock Agency out of Louisville, Kentucky.  

PETER BRADLEY: Our primary focus is buying and selling Thoroughbred racehorses and breeding stock. Along with that we do insurance on Thoroughbreds, and we do appraisals for banks. Pretty much if it has to do with dollars, cents and Thoroughbreds—we do that.

TINDERA: And that’s Peter Bradley, the owner of Bradley Thoroughbreds, based in Lexington, Kentucky.

BOUSQUETTE: Okay, so Spendthrift currently advertises that it has about two dozen stallions on the farm in Kentucky.

TINDERA: It’s pretty easy to find out which stallions a stud farm has since their names are on their website. Why? They’re looking for customers to pay to have a stallion breed with their mare. So Spendthrift, in fact, has this lovely catalogue of their stallion roster that’s sort of like a glorified Bumble or Tinder page for each of their stallions. They have really nice photos, a QR code you can use to look at a video of the horse walking, its pedigree, lists of its races and awards. I like this quote from someone in the industry on one of their horse’s profiles. It says, “One of the best yearlings I saw in 2015. He’s LeBron James.”

BOUSQUETTE: So along with that, we can see that each horse has a price listed with him called a stud fee. A stud fee is the price paid by the owner of a mare to the owner of a stallion for the right to breed the female animal with the male animal.

TINDERA: Spendthrift has horses advertised on their upcoming 2022 roster for stud fees ranging from $5,000 all the way up to $250,000. That’s for a stallion named Into Mischief. Peter says that typically the owner of a mare will contact a stud farm like Spendthrift to tell them that they’d like to breed with the stallion.

BRADLEY: Basically, you go to the farm. You ask to buy a season at a set price. And the farm will accept the mare, send you a contract for that year’s breeding, which you will sign off on. And then you get to breed your mare.

TINDERA: Stud fees can change over time, going up or down depending on how a stallion’s children, or progeny, do once their own racing careers start. For example, a 2013 article in the Lexington Herald Leader reported that Into Mischief got off to a “tepid start in the stud barn.” His stud fee in 2012 when he was a 7-year-old was $7,500 and jumped to $20,000 the next year as some of his progeny began to win important races. By 2021, as a 16-year-old horse, Into Mischief’s stud fee had gone all the way up to $225,000, which was the highest advertised stud fee of the year in North America. When Spendthrift announced its 2022 stud fees, the farm bumped Into Mischief’s fee up once again to $250,000.

BRADLEY: It gets that high because the horse produces extremely good horses, through his foals. And so the demand goes up because the buying public will spend more on those yearlings, and as his yearling price goes up, usually the stud fee follows suit.

TINDERA: And so the very general rule of thumb for valuing a stallion is taking its stud fee and multiplying it by 300 or 400 times. That equation assumes the horse will book—that is mate with—100 mares per year over three to four years. However, some stallions like Into Mischief who covered 214 mares during the 2021 breeding season, and 248 during the 2020 breeding season, book many more than that in a year, which drives up revenue for the farm and increases their own value in turn.

To refine our methodology Chad suggested that we factor in the exact ages of each stallion on the roster, and the number of mares they covered during the most recent breeding season.

SCHUMER: I advised Isabelle, and I would advise anyone doing that to not take 100% of the number because obviously all the mares aren’t going to be pregnant. Some are going to die. Some are going to be barren. Some will not have live foals. So I think a reasonable estimate is 80% to 85% of the number of mares bred and the cover fee. And that’s the income for one year. Now, a young horse—8, 9, 10, 11 years old—he could be worth four or five years worth of income. As a horse gets older, I would change that number to two or three. But you’re buying an asset, and like any business, you’re looking for a rate of return. And I think the stallions, you know, typically you want to make sure, a good investment in a stallion would have you out in four or five years.

TINDERA: Based on this method and using the 2021 stud fees when we did our reporting over the summer for our 2021 Forbes 400 issue, we estimated that Into Mischief alone was worth about $135 million. For the rest of the stallions, we applied a similar methodology, where we estimated that each of those stallions could be worth between about $500,000 and $40 million, which is about what we estimated for Authentic, the horse that is one of Into Mischief’s offspring and also, well, just listen here—

ARCHIVAL NBC CLIP FROM 2020 KENTUCKY DERBY, ANNOUNCER: As they come to the final furlong, Authentic is digging in. Tiz the Law all out to get by him. Authentic and John Velazquez have the lead as they come down to the sixteenth pole. Tiz the Law still trying to get him. Authentic. Tiz the Law. Here’s the Beyer. Authentic has won the Kentucky Derby!

BRADLEY: You know there is such an attrition rate with stallions. It all sounds like it’s just printing gold bars, but it’s not.

TINDERA: Peter Bradley said that roughly 10% to 30% of all stallions that go to stud actually make it.

BRADLEY: There’s a very polarized market here for the stallions, you know, it’s either chicken or feathers.

TINDERA: And in fact, there is actually this new rule from the Jockey Club last year that may impact Spendthrift and other farms in their ability to as Peter said, “print gold bars.” In May 2020, the Jockey Club announced that for stallions born in 2020 and later, those horses cannot cover, or mate with, more than 140 mares per year in North America. So, while for some horses that doesn’t make too much of a difference, that could be a big revenue cut for some of the most desirable stallions.

BOUSQUETTE: We reached out to the Jockey Club to ask if they would tell us more about why they decided to create this new rule, but they declined to add more than what was in their original statement which said the purpose was, “to preserve the health of the Thoroughbred breed for the long term.”

TINDERA: Chad Schumer elaborated on it a bit more for us.

SCHUMER: The Jockey Club’s mission is the fostering, nurturing and advancement of the Thoroughbred. And in their opinion, limiting a stallion to 140 mares provides greater genetic diversity going forward. I can’t speak for the Jockey Club. But from what I’ve read and I understand, there are studies showing that the current Thoroughbred is more inbred than it has ever been.

BOUSQUETTE: And so it might not be a surprise to say that in February of this year Spendthrift and two other farms filed a lawsuit against the Jockey Club. They’re asking for the rule to be repealed.

TINDERA: The complaint filed in the lawsuit states that as a result of this new ruling, “The highest quality Thoroughbred horses will be bred less times than market economics would otherwise dictate. Hundreds of millions of dollars of stud fee revenues will be impacted. All owners of mares will pay higher prices to breed their mares, and less well-connected owners of mares will be precluded entirely from access to high quality stallions.”

BOUSQUETTE: Because this will only affect horses born in 2020 and later, bloodstock agents like Chad Schumer are hesitant to speculate on how this new ruling will impact values of future Thoroughbreds.

SCHUMER: Those horses won’t race in the classics until 2023. They won’t go to stud probably ‘til the earliest until 2024. So, we won’t really know how it affects things for a number of years. One could surmise that the fact that there are fewer opportunities to breed would damage their value. Conversely, one could look at it as well, if they’re going to breed fewer mares, they can have a higher stud fee, so it doesn’t really change their value.

TINDERA: As of publication, the lawsuit is still ongoing. So we’ve got $135 million for Into Mischief. And for the rest of Spendthrift’s stallions we estimated over the summer that they were worth about $165 million. So that gives us a total of roughly $300 million.

Now, let’s talk about the other horses on the farm.

BOUSQUETTE: Yeah, this is trickier because Spendthrift doesn’t advertise rosters of the rest of their Thoroughbreds—that is mares, foals and yearlings in the same way they do with their stallions. And Spendthrift declined to comment on any of our estimates or to participate in the story. So instead, we look to the auctions to get a handle on their inventory. Every year there are sort of three big organizations that run auctions for Thoroughbreds: Keeneland, Fasig-Tipton and OBS, down in Florida. They each hold a number of auctions throughout the year where farms come to buy and sell their horses.

ARCHIVAL CLIP FROM FASIG-TIPTON SALE: With Elite as agent, this is Monomoy Girl. TK Tapizar out of Drumette, five-year-old mare into the ring and she walked off the van this morning here at Fasig-Tipton like she hadn’t even run yesterday.

TINDERA: This is from an auction at Fasig-Tipton last year, where Spendthrift purchased a horse named Monomoy Girl for $9.5 million.

ARCHIVAL CLIP FROM FASIG-TIPTON SALE: And she is that close to walking into this ring undefeated, the one and only Monomoy Girl. Oh my goodness right here …

TINDERA: Bloodstock agent Chad Schumer attends these events frequently for his clients.

SCHUMER: I’m going to give you a description of a normal year, not COVID-related because I think that makes things obviously very complicated. So in a normal year, the horses are absolutely physically there. They’re there for inspection. A sale in September, for example, would start on a Monday, the horses would ship in the Thursday or Friday. Prior to that people would have all weekend long to look at the horses, sometimes they look two, three, four or five times even. They get their vets to go and check the horse with a scope and read the X-rays. A scope is a tube that goes down the throat to make sure it has a normal functioning airway, which is obviously very important.

If you can’t breathe, you can’t run very fast, right? So that’s an important component. But they are there on the grounds. People do attend, you can bid online, you can bid on the phone with an agent like myself, you could bid yourself. Whatever your preference is. Most people have a team or advisors or, you know, a system for what they’re doing. A typical day at the auction for me, I’d be at the sale grounds by 7:30 in the morning, out in the barns by about 7:45. We work the barns until 10 o’clock when the auction starts. And then it doesn’t end until it ends. No breaks. No lunch. Starts at 10 o’clock. Sometimes it ends at four o’clock. Sometimes it ends at seven o’clock at night. Depends. So it’s a very, very difficult day. And that happens sometimes as many as 10, 12 or 14 consecutive days.

ARCHIVAL CLIP FROM FASIG-TIPTON SALE: All right, I think he’s done. Nine-five, nine-seven … (gavel)

TINDERA: After an auction, the results are cataloged and published. And so through that, sources we spoke with suggested that we go back and piece together an estimate for the number of horses that Spendthrift buys and sells each year, as well as the prices for each transaction.

BOUSQUETTE: We found that over the last decade Spendthrift had purchased roughly 150 mares and fillies—that is young female horses that will one day become mares—at the three auctions we mentioned.

TINDERA: And in reviewing all of their purchase prices, we found that the median amount Spendthrift spent on those horses was about $230,000 per animal.  

BOUSQUETTE: That’s significantly higher compared to other buyers in the industry. The median sale price for a mare in 2020 was about $15,000, according to one industry trade publication.

TINDERA: But in some cases, Spendthrift is willing to pay much more than that median dollar figure. As we mentioned, just last year, they spent $9.5 million on one mare named Monomoy Girl. And so keeping that in mind, we came up with an estimate for this bunch, valuing them all at about $50 million. But then the other piece of our puzzle is determining the value of the horses that are actually born on the farm.

BOUSQUETTE: Spendthrift had said in an old marketing video from 2020 that that year they had about 85 foals and 50 yearlings living on the farm.

TINDERA: To estimate the value of those we again turned to the auction catalogues to look and see what Spendthrift typically sells its own young horses for, which is about $37,000 per horse. We also noticed in the auction records that Spendthrift was buying on average seven colts every year.

BOUSQUETTE: And again, we noticed Spendthrift was paying a lot more for these colts they purchased at auction compared to the ones they were selling at auction. Their median purchase price was about $450,000. So figuring both these new purchased colts and the value of the horses born on the farm, we estimated that the total value of the group is about $10 million.

TINDERA: Okay, so we have estimates of about $50 million for the mares and fillies, and about $10 million for the foals, yearlings and purchased colts.

BOUSQUETTE: That’s right. But it’s very important to note here that these values, like stocks, can really shift up or down at a moment’s notice. And we’re working on estimates using as much information as we can about these animals, and Spendthrift’s own buying and selling practices.

TINDERA: And as we can see from the climbing stud fees on Spendthrift’s 2022 roster, I wouldn’t be surprised if the value of the farm goes up even further when we review these figures again next year.

SCHUMER: I mean, look, it’s again, it’s a very optimism, blue sky-based business. People buy yearlings, untried horses. They have no idea if they have the heart or will to win races. They buy them based on their pedigree, and their physical appearance and on X-ray results. Imagine these yearlings as if they were 13, 14, or 15-year-old kids, and you were drafting them for your basketball team. By the time you had them on the court would be a year later, or even two years later. Imagine how much they would change physically, you know, but now they’re NBA players.

TINDERA: So in total, we estimated that all of the horses that were not stallions at Spendthrift were worth about $60 million, making the total equine value about $360 million. But the other part of valuing Spendthrift Farm is valuing the farm itself—its land. In one way or another Spendthrift Farm has occupied a piece of land in the heart of horse country, about 20 minutes from downtown Lexington, Kentucky for much of the last century.

And remember Daniel Swigert? The guy who named his horse, Spendthrift? So in 1937, Swigert’s great-grandson, a man named Leslie Combs II founded his own horse farm and named it Spendthrift after his great-grandfather’s prize-winning stallion. Over the next few decades, he grew the farm from roughly 100 acres to more than 2,000, and it eventually became the home to two Triple Crown winners Seattle Slew and Affirmed. And celebrities from around the world came to visit like Princess Margaret, Fred Astaire and MGM executive Louis B. Mayer.

BRADLEY: Leslie Combs was one of the great salesmen and horse traders of his time. He had a beautiful home on the farm where he’d bring potential buyers in, and he would bring them in and let the horses out in the paddock right in front of his house and the one that went to the front, he would say, “That’s the one you need to buy Mrs. Green—or whomever.” And every day a different one would go to the front and hopefully he had two or three buyers for the better horses he had lined up before the sale—just from his cocktail parties.

TINDERA: In 1983, Spendthrift Farm had an initial public offering. But things pretty quickly started to go downhill from there. The farm faced lawsuit after lawsuit in the 1980s from its investors, and in 1989, the farm declared bankruptcy. Eventually new owners bought it and in 2004, California billionaire B. Wayne Hughes came along and purchased the farm for an undisclosed price. At its current size today, it’s made up of more than 1,000 acres of lush paddocks, more than 60 miles of fences, with assortments of barns and training facilities spread about the land that’s equivalent to about 750 football fields.

BOUSQUETTE: The farm is located in Kentucky’s Fayette County. So we turned to that county’s assessor to pull public land records and get a sense of the value. The assessor prepares their own valuations of every parcel in the county, taking into account what the land and what any buildings on the land are worth. So, I didn’t realize this, but the horses actually eat the grass that they’re living on. So while the farm isn’t growing a crop like soybeans or corn, it’s important that the soil is good enough to grow grass that the horses can eat.

So for example, just one parcel—the county lists its assessed value at $5.9 million. That’s 330 acres, which includes the value of the land, plus improvements, which on this parcel include horse stables, a couple of run-in sheds, which are like carports for horses, and a few mobile homes. If we add up the fair cash values of the 15 parcels that we found tied to Spendthrift, we get a sum total of about $25 million.

TINDERA: We should note that this number may be low. Fayette County updates its assessment every four years. So most recently on this farm they updated it in 2018. So normally to value land like this, we would look for comparable transactions, but horse farm sales in the area are pretty rare.

BOUSQUETTE: We also checked for debt on the property filed with the county but didn’t find any.

TINDERA: Spendthrift Farm also has another operation in Australia, which allows them to breed more horses during the southern hemisphere’s own distinct breeding season. We estimated that the land and the horses who live there are valued at about $15 million.

BOUSQUETTE: So there you have it folks, we’ve gone through the horses and the land to show you how we value Spendthrift Farm.

TINDERA: In total, we estimated that it was worth about $400 million.

Not half bad for the family farm.

Thanks for listening to Priceless. This episode was reported by me, Michela Tindera and Isabelle Bousquette. It was co-produced by me and Jonathan Palmer, with additional research by Sue Radlauer. Special thanks to the Keeneland Library for additional research.

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Additional audio credits: NBC Sports, Fasig-Tipton Co.

The story about Spendthrift Farm’s origins is based on “Spendthrift Farm Mob” and additional reporting. For more on the legacy of B. Wayne Hughes, read here.