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Maryland Stallion Station overcomes the odds.
Despite tough economy, leading indicators are on the rise.
Story by Lucy Acton.

Some of the biggest potential returns on investment on this year’s Maryland Million Day won’t be reflected on the tote board. They’ll be the private calculations of David DiPietro, who handles many of the business aspects of Maryland Stallion Station, the Glyndon, Md., establishment that within less than five years has positioned itself as the second most active stud farm in the state.

Three of its current stallions?–?Outflanker, Rock Slide and Seeking Daylight?–?could be represented by Maryland Million Day contenders. And a knockout performance by one or more of them will reverberate within the breeding shed for years to come.
Maryland Stallion Station has already overcome long odds to become what it is?–?home to eight stallions who hold court in a handsome, immaculately tended 99-acre facility in Maryland’s Worthington Valley, overlooking historic Sagamore Farm (which itself is in the midst of a major revival under the ownership of Under Armour founder Kevin Plank).

It’s no secret that in 2007 the doors of its 11-stall stallion barn might have swung shut forever, the building left to stand as a relic to a dream that some people considered impossible all along.

An infusion of capital from its original investors, plus the addition of three more shareholders in the business, bought more time for the operation to improve its bottom line.

“ For a variety of reasons we ended up being in a tricky financial position,” says DiPietro, who in his other life is an investment banker, currently president of Signal Hill Capital Group LLC in Baltimore. “However, we quickly concluded that last year would have been the absolute worst time to give up.

“ Nothing was a certainty, but we had a lot of potential for improvement within our business, just by the passage of time and the opportunity to have more runners out there representing our horses.”

Maryland Stallion Station proceeded to have its best breeding season yet in 2008?–?its eight stallions covering 378 mares, 21 more than were serviced there the year before?–?a particularly noteworthy feat, considering the dwindling broodmare population in the state.

Maryland Stallion Station’s flagship horse, Outflanker (a superbly bred son of Danzig), is doing his part. The second-leading sire in Maryland in 2007 and so far in ’08, topped only by perennial leader Not For Love, Outflanker began his career in Florida; his first Maryland-sired crop came to the races in 2007, and so far includes three stakes winners.

As of late August, he is tied with Not For Love as the leader in the Mid-Atlantic by overall number of 2008 stakes winners, and he leads the way by number of stakes wins (eight).

A brand-new model
Maryland Stallion Station founder/president Don Litz, and his principal partners DiPietro and Herb May, speak in reverential terms about the traditions that lie at the heart of Maryland’s Thoroughbred industry.

But they have created a stud farm?–?and business model?–?that resembles nothing else in Maryland, or in the Mid-Atlantic region.

When Maryland Stallion Station opened its doors in early 2005, it became the first major Thoroughbred breeding establishment built from the ground up in Maryland since the mid-1960s, when the late E.P. Taylor established Windfields Farm in Chesapeake City.

It is also the first Maryland stallion operation to work in close alliance with a Kentucky farm. The nation’s leading commercial breeding enterprise, the Farish family’s Lane’s End, has been involved since the beginning and provides “soup to nuts support,” in the words of DiPietro.

Maryland Stallion Station likely has more owners, per acre, than any farm of its size in the region?–?a total of 30 investors hold shares in the entire enterprise, including the farm’s interest in the stallions standing there.

But the number of horses residing at Maryland Stallion Station is remarkably slim. Only its own stallions are housed on the grounds; there is no boarding of broodmares, who are shipped in for breeding and immediately sent on their way.
The occupancy rate falls even farther in the summer, when two of its stallions leave for stud duty in the southern hemisphere. Maryland Stallion Station’s Seeking Daylight and St Averil are the first in Mary­land to make careers as shuttle stallions.
Litz, who managed Saga­more Farm for a brief time in the late 1980s, soon after Alfred G. Vanderbilt sold the fabled home of Native Dancer, had for many years dreamed of establishing a first-rate stallion facility tied, in some way, to Sagamore.
While totally separate from Sagamore, Maryland Stallion Station’s site is the next best thing?–?on hallowed ground that once was part of that property; it is leased on a long-term basis from owner Katherine St. John.

The parts began coming together after Litz and his fellow Marylanders Frank Bonsal and Chris Everett developed a business plan in 2002. Tim Capps, former executive vice-presi­dent of the Maryland Horse Breeders Association, served as a consultant.

Aiming high, and with nothing to lose by asking, they decided to contact Lane’s End patriarch Will Farish, in hopes that the possibility of a Mary­land outpost might pique his interest.

Litz was driving in his car when his cell phone rang with Farish on the other end of the line. It’s fortunate, he recalls, that the project didn’t come to a crashing end right there.

Farish soon left for an U.S. ambassadorship in Great Britain and turned Litz’s proposal over to his son Bill, the current Lane’s End overseer.
Significantly, Bill Farish scoped it out?–?not through his network in the horse world?–?but within the business community.

Farish turned to Baltimore financier Herb May, his good friend since their days at the University of Virginia (class of 1987), and said, “?‘This is something I’d love for you to take a look at,’?” as May recalls.

May obviously liked what he saw, as an opportunity not only for Lane’s End, but also for himself.

“ I would never be able to get involved in any meaningful way in Lane’s End’s business,” says May, who is currently managing director at Signal Hill. “This was an interesting way to partner and learn the horse business and experience it with Bill.”
DiPietro, after hearing about the project from May, jumped right in. He’d grown up riding and showing in his native Har­ford County, Md., and at that time had just started to get involved as a race horse owner.

(Coincidentally, DiPietro’s first purchase was an Unbrid­led’s Song yearling filly, Rare Gift, acquired just a few months earlier from the Lane’s End consignment at the 2002 Saratoga Selected sale. Bought by DiPietro for $330,000 in partnership with his colleague and friend George Bolton?–? now best known in the horse world as a co-owner of Curlin at the time that horse won the 2007 Preakness?–?Rare Gift won or placed in seven graded stakes, earning $292,078, and is now a broodmare at Lane’s End; she’s in foal for 2009 to Hard Spun.)

Looking at the business model for the Maryland Stallion Station, DiPietro began listing, for himself and others, the reasons why he believed it would be a success.
“ We felt that the market was attractive and under-served,” says DiPietro, who holds a degree in economics from Haverford College and an MBA from Dartmouth’s Amos Tuck School of Business. “Particularly in light of the fact that so few new stallions were brought into Maryland during the previous 10 years.

“ The average age of the top 10 stallions in Maryland when we started this was over 16 years. So we thought, ‘Well look, this is a pretty vibrant market. There are 15 race tracks within a day’s ship of where we’re located. There’s 5,000 or 6,000 mares being bred every year in the general region. If we brought in good horses couldn’t we get 10 percent of that market over the first couple of years?’?”
DiPietro admits that he “wouldn’t have considered this at all had we not had the partnership and support of Lane’s End. I feel like we had access to the very best connections in the business.

“ Obviously, it’s a risky business and nothing can guarantee success. But the Lane’s End connection certainly takes a lot of the risk and uncertainty out of it: their network, their know-how, their connections to potential stallions, it was all a great opportunity.”

After “hundreds of hours of looking at numbers,” it appeared to DiPietro and his partners that “the economics of this business, even with generally conservative estimates, could deliver a pretty good return.”

And he adds, “At the outset, this was always intended to be a business that would provide returns to all those investors who enabled us to have it.”

Maryland Stallion Station’s investors “come from all over,” in the words of DiPietro. “A third are folks that Herb and I work with in the financial services business; many of them are in the New York area. Many of that particular group have no other investments in the business, and just found it to be an interesting alternative investment, as well as supporting an entrepreneurial effort of a former colleague.
“ Another third are mostly local friends and work people who got in at the beginning, and then there is our core group, our board, consisting of the three of us, and Lane’s End (represented by Bill Farish), Frank Bonsal and Bob Manfuso.”
Raising the start-up capital required a Herculean effort.

“ It wasn’t challenging to get the first 60 percent,” DiPietro says. “There were plenty of folks who said, ‘If you do this we’re with you.’ But as in most things, getting the last 30 or 40 percent was a lot of breakfasts, lunches and dinners; long one-on-one conversations. It was countless hours doing it. And I’d say the three of us really did the bulk of that work.”

Ultimately, the partners raised approximately $7 million, and financed the remainder through BB&T. “We’ve been grateful for BB&T’s support,” says DiPietro. “But the fact that we were required to borrow money has made the project that much more challenging. Our goal was to raise $10 million; had we raised less than $5 million, it would have been impossible to proceed.”

Along with DiPietro and May’s business expertise, Mary­land Stallion Station was founded on the horse knowledge of Litz and stallion manager Jim Steele.

Litz’s commitment was a major selling point. “We had somebody who could handle the horse side of this and who was going to put every ounce of energy that he had in it,” says DiPietro.

Steele’s expertise in the breeding shed was also integral to the plan. Since the 1970s, Steele has gained widespread respect while managing one of Maryland’s largest breeding facilities, the Rooney family’s Shamrock Farms in Woodbine.
But one had to wonder?–?did Steele have time for what amounts, during the breeding season, to another full-time job? In addition to his farm duties, he holds a number of volunteer leadership roles?–?including those as current three-term president of the Maryland Horse Breeders Association and longtime chairman of the Maryland Horse Industry Board.

“ Dividing my time has been a challenge,” admits Steele, who frequently relies on his wife, Chris, to handle things at Sham­rock while he is about 40 minutes away at Maryland Stal­lion Station. “It’s better now than in the beginning; I’ve learned what I can and can’t do.”

making it work
Maryland Stallion Station broke quickly from the gate, so to speak, in 2003. At the time, its barn?–?a post and beam structure modeled after the facilities at Lane’s End?–?and 2,500 square-foot breeding shed were still on the drawing board.
Shamrock Farm housed two horses offered under the Mary­land Stallion Station banner in 2003, and five in 2004.

“ The one thing that’s always struck me is that operating out of his car and Shamrock Farm with two stallions in 2003, Don got 91 mares to Eastern Echo and 78 to Jazz Club,” DiPietro says. “Those are good for new stallions in any market; we’ve obviously had a few higher numbers since then, but it was a pretty good performance with absolutely no props or location.”

In 2004, Maryland Stallion Station expanded its roster with the addition of Outflanker, Rock Slide and Seeking Daylight.

Several weeks before the start of the 2005 breeding season, four stallions rolled out of Shamrock, bound for their new quarters. Already, Maryland Stallion Station was working to overcome its first loss. Eastern Echo, a well-proven sire who began his career at Lane’s End, died of a heart attack just before he was to be transported for his first season at the new Glyndon site; he is buried at Shamrock.

The atmosphere was buoyant among the more than 400 people who turned out at Maryland Stallion Station’s first stallion showing, in January 2005. Five horses came out to take a bow, with the marquee belonging to Rock Slide (a full brother to 2003 Horse of the Year Mineshaft), Outflanker, and the newly arrived Bow­man’s Band, a graded-winning son of Dixieland Band entering stud that season.

Then it was down to business. The stallion station concept, while not ideal from a horseman’s standpoint, was non-negotiable for the number-crunchers.
“ Obviously from the horseman’s viewpoint it’s logistically simpler if you’ve got everything right there,” says DiPietro. “But the economy of boarding mares makes the whole thing more challenging. The boarding business is not easy to make profitable. And it would have added an undesired level of complexity.

“ We felt like we had to stick with the main focus here and try to operate the stallion business and have good partners on a satellite farm basis that we could recommend with confidence to customers.”

Several local farms, most notably Shamrock, opened their doors to broodmares who routinely ship from as far as New York and Kentucky for breeding at Maryland Stallion Station. Others operating as satellites for the stud farm include Dr. Michael Harrison’s Willowdale Farms in Butler, Dr. Charles Haugh’s Cordelia Stables in Street, Brad and Faith Leatherman’s Winding Creek Farm in Union Bridge and Tim Clark’s Glengar Farm in Glyndon.

Adds Litz: “As we go forward, it’s a continuing concern that we have enough facilities; as we become more and more successful our numbers of mares needing places to board in Maryland will dramatically increase. So I’m always looking at that.”

Utilizing Sagamore’s extensive facilities, a focal point of Litz’s original vision, is not currently an option.

“ Kevin Plank really at this point wants to keep that as a private operation,” says Litz, who is naturally thrilled about the full-scale improvements that Plank has undertaken since buying Sagamore in February 2007. “We have had discussions about it. I’m not saying he’s closed to the idea, but at this point in time he’d like to keep it for his own horses.”

For DiPietro, the Sagamore connection never was high on the list of priorities.
“ To me, where our services are delivered is not going to drive our success or failure,” he contends. “It’s going to be how are these horses doing, and what is the experience like from the standpoint of a breeder dealing with us. Is the follow-up good? Do they get scheduled when they want? Does the phone get answered? Do outstanding issues get resolved? Does the mare get in foal? I know Don’s got a stronger view of the location than we do, but I think those other factors overwhelm the long-term success and viability of the business.”

The stallion station has turned traffic control during the breeding season into a science, says Litz.

“ It all works smoothly. It starts in the office, with our office manager, Amanda Bed­ford, who has been with us since day one. Many times you don’t have a lot of notice when people want to breed their mares; they’re close to ovulation,” Litz continues.

Other key members of the staff include Doris Hogarth, the on-site stallion manager; Kris Close, who performs double duty in the breeding shed and office; and Paul Drake, a local equine dentist who works part-time in the breeding shed and as a general handyman.

As for the breedings that take place far from home: Shuttling stallions was not part of Maryland Stallion Station’s original game plan, and it is not a make or break part of the business, according to DiPietro. Still it’s a welcome source of additional revenue, as well as a means of increasing a stallion’s number of runners.
Seeking Daylight was the first to strike out for distant parts. He’s in his fourth year at Haras La Providencia in Hinojo, Argentina.

“ A representative of the farm owner approached us,” recounts DiPietro. “Obviously it’s really important to know as much as possible about the farm where the horse is going. Lane’s End had previous dealings with this farm, and we built our confidence around that.”

St Averil, a son of Saint Ballado who entered stud at Maryland Stallion Station in 2006, shuttles a much greater distance, to Goodwood Park Stud in Queensland, Australia. His co-owner Peter Bradley is a partner with a co-owner of that farm.
St Averil’s shuttle career got off to a rocky start in 2007 when he flew to Australia but never left quarantine due to the outbreak of equine influenza going on in that country. “In hindsight, it was a blessing he never made it to the farm,” says DiPietro. St Averil returned this year without incident.

all about the horse
Creating a business plan, in retrospect, may have been the easiest task for the Maryland Stallion Station founders. Finding the right stallions to fit the mix is the key element. And it’s a never-ending process, involving both business and horse pros.

“ For the horses that we have, we’ve looked at five or 10 for every one we’ve acquired,” says DiPietro, who has furthered his perspective as a member of the Maryland Million board of directors, and currently serves as Maryland Million vice-president. “We have a fairly disciplined purchasing model and quality criteria that I don’t think we’ve deviated from since day one.”

The initial point man is Litz, who “screens and tries to determine whether or nor the horse actually fits into the roster, whether he would be attractive to the Maryland and Mid-Atlantic market?–?what the appeal would be on a variety of fronts,” explains DiPietro.

“ Then Don usually talks to Herb and me about what we could stand him for, the economics. If we all feel like this is an interesting opportunity?–?obviously we look at the horse’s physical characteristics very carefully?–?and we get to the point where we think we could stand him for X, generate a decent return, then we go to the other board members and say we think this is one we ought to consider: Here’s what we think we would pay, here’s how we would finance that. The final decision is a group decision by our board of directors.”

Adds DiPietro: “When you’re making decisions on stallions you often don’t have a big window of time. We’ve had some with a very short window. So most of the time we don’t actually come together in one place for a meeting; we ‘vote’ over the phone.”
Close votes are rare, DiPietro relates. “But we have walked away from situations where we loved the horse. There have been occasions when we thought a horse would do great here, but he just kind of got outside the price range that would allow us to recover our cost in a reasonable period of time.

“ Others have been compelling on the surface, but had some physical aspects that raised concerns. Breeders in this region are pretty savvy. We try to make sure to eliminate all the reasons to not want to breed to a horse before we bring him into the barn,” DiPietro states.

On one occasion, a major adjustment has been called for. Bowman’s Band, after covering 100 mares at Maryland Stallion Station in 2006, was relocated to Lane’s End for the 2007 breeding season.

While the sudden loss of one of Maryland’s most promising young stallions raised eyebrows throughout the region, and caused some people to wonder if Lane’s End’s might in fact be pursuing some hidden agenda, DiPietro says there’s no mystery about what happened.

“ We needed to raise some capital, pay down some of our debt, and it was at a very tricky operating period. Lane’s End did us a favor of doing a very fair deal. The other thing is that they were pretty confident that they could do well with him.”
Bowman’s Band proved popular during two seasons in Kentucky before his untimely death, following colic surgery, this past August.

“ He rolled off the van on [2006] Breeders’ Cup weekend and bred 104 mares in 2007. Which was his third year at stud,” observes DiPietro. Maryland Stallion Station retained an option of buying back equity in Bowman’s Band, DiPietro explained. “So we still had a vested interest in him.”

As to whether Bowman’s Band might have returned to Maryland Stallion Station: “I think it’s impossible to say,” DiPietro comments. “We’ve got to be very flexible and nimble in this business, and if the right opportunity had presented itself, we certainly would have talked about that.

“ What we wanted to avoid as a general business matter was taking Kentucky outcasts from places that just needed a regional market to download them into. And we haven’t done that at all. But that doesn’t mean that a horse can’t move from a Ken­tucky farm to Maryland Stallion Station under sensible circumstances. And if the sensible circumstances arise, then we certainly would consider it.”
As everyone in the horse business is well aware, these are tough times to be starting a new operation?–?let alone a stallion enterprise.

“ The thing we have no control over is the external environment, and that continues to be a challenge,” concedes DiPietro. “The number of mares bred in this region has declined by 15 to 17 percent. Our math shows that in the 10 years prior to our formation, there were only something like 10 new stallions brought into Maryland, and that includes Eastern Echo and Jazz Club.

“ Since we opened our doors, 22 new [commercial] stallions have come into Maryland. You have the challenge of a declining mares-bred population, with really a pretty significant increase in the supply of commercially viable stallions.
“ The numbers that always get reported—the number of stallions is way down from 170 or something like that—disguise the fact that if you look at high-caliber stallions of the type we’re trying to bring in, the number of those who have entered the market in the last five years is significantly greater than it was in the 10 years prior to our formation.”

Maryland Stallion Station isn’t looking to expand its stallion roster for 2009.
“ We are more in a mode of optimizing the roster we have for the time being?–?both from the standpoint of the market’s ability to absorb a horse and the financial constraints,” relates DiPietro. “But having said that?–?if the right opportunity arises, we’re not out of the market for new horses. If a new opportunity presents itself, we’ll do what we always do and evaluate the merits. . . opportunities come out of left field sometimes.”