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FEATURE STORY: Tianjin Track Races for Replacement Investor
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 Local conglomerate seeks to replace Dubai investor, builder
 
altA huge equestrian-themed development in Tianjin’s outskirts is racing to find investors after a Dubai-based real estate developer withdrew earlier this year. Zhang Yu Hai, Chairman of Hua Zhi Jie Horse Industry Investment Co, part of the Tianjin State Farms Group, told Business Tianjin that while his Tianjin Horse City project lost the Meydan (Dubai) group as principle investor, he hopes a Malaysian design firm, the TAK Group, will bring new investors to the project, which is estimated to be valued at USD 2bln. Among the new investors lined up, is renowned Irish-based Coolmore group, one of the world’s leading race horse breeding and training centres.
 
The Meydan Horse City, also known as Tianjin Horse City, and most recently called the Tianjin Equine Culture City (TECC), project was front-page news in the world business press when it was announced in 2010. The project includes 4,000 horse stalls, 150 trainers’ offices, five training tracks, two international standard race tracks, and an international equestrian college.
 
Most recently, UK and Irish media reports during the Irish Agricultural Minister’s visit to Tianjin suggested the project was already underway. However, the site in the industrial hinterlands of Tianjin remains a large leveled field adjacent to several industrial projects under construction. Aside from landscapers planting trees along the boundary next to a public road, no construction has begun. In the original plan, announced in 2010, most of the construction was to have been already been completed by a joint Chinese-Dubai venture. 
 
Surprisingly, the site shows little evidence of the signage or slogans with which Chinese officials like to announce new major projects. Factories, filling stations, and a tame river are the main landmarks marking the local area.  Guards at the gate of the new Lian Run Meat Co factory,  directly opposite the site, said they were unaware of when construction would begin. 
 
altThe equine project is nothing, if not ambitious, for Ninghe County, hitherto a rural township of Tianjin city. When first announced in 2010 by Meydan City Corporation, this 5,000 mu (approximately 3.33 million square metres) site was set to eventually host training and racing facilities for 8,000 equestrian professionals and breed 1,000 high quality studhorses. 
 
In addition to an equestrian college, feedstuff plant, breeding base, horse hospital, and quarantine centre, Tianjin Horse City also promised to include “five-star to seven-star” luxury hotels, as well as offices and apartments. All of this was planned to be in a comparative backwater belt of Tianjin. Horse City also promised to “hold international and domestic professional horse races, promote and impart equine culture and knowledge to youths, provide tourism services for the public, and protect the wellbeing and interests of equines.”
 
The company Zhang heads, Hua Zhi Jie Horse Industry Investment Co Ltd, is a joint venture between International Equine Group and Tianjin Farm Group. The joint venture was set to develop the Tianjin Horse City project. 
 
altSpeaking exclusively to Business Tianjin, Zhang says he is very keen to have Ireland’s Coolmore involved because of its international reputation and success. Mr. Zhang’s  understanding is that both Coolmore and TAK will invest in the project, with his group investing 30%. Additionally, he’s surprised international media reports haven’t included this fact. Press reports on the Irish Agricultural delegation’s visit to China suggested a Coolmore-led horse breeding programme will involve importing over 100 Irish mares in the next three years, as well as the acquisition of stallions over the same period. The ‘Irish Examiner’ newspaper reported that, “the Tianjin Horse City will require between 600 and 800 racehorses in 2013, and Irish breeders are hoping for some of that market. … Irish expertise will be used to build up TECC to rival established centres such as Kentucky, or Deauville in France.” 
 
“This may eventually happen,” explains Zhang, “but, I also expect there will be Irish investment.” As Zhang understood it, the Ireland-based Coolmore would sell horses to them while the business delegation was here, “but the Farm Group contacted TAK first, and TAK looked for other investors … they brought several European companies’ representatives to Tianjin, but no one contacted us at the Tianjin Farm Group after that. So actually, we are also thinking that we could talk to foreign investors directly about the cooperation and the amount of the investment.” 
 
Construction has yet to commence on anything at the site, and it appears unlikely that 600 racehorses will arrive in 2013. TAK is in charge of the design of this project as they have extensive experience in designing projects such as the Horse City. As for a construction contractor, Zhang says his firm will put the project out to tender. “However, all this depends on the partner who holds more shares in this project.”
 
Zhang, who currently farms 2,000 donkeys at a large feed lot adjacent to the Horse City site, says the project has all the required certification from the Tianjin government  to start construction, “but since TAK never brought any investor as  promised, construction funds are not in place yet and we are not sure when we should start construction.”
 
altThe commercial viability of the project may also be in question. Horse industry figures in China, spoken to for this article, point out that there’s no racing industry in China because the government continues to ban gambling. Hence, there’s no revenue model to support a racing industry.  Beijing-based David Snodgrass, General Manager for East Asia operations at Alltech, which sponsored the World Equestrian Games 2011, and sells equestrian feed products in China, says horse racing is not profitable in China and won’t be without parimutuel betting being allowed. “That will have to be a political decision if and when it happens,” says Snodgrass. 
 
Having observed racing in various parts of China with local governments putting up prize money, Snodgrass believes development of China’s equestrian scene won’t mirror anything seen in Western countries. “China does things top down, has to be government supported, and there has to be capital with that government support.” Given a culture of equestrian sport doesn’t exist, “successful projects are large-scale, but more like a Disney production, getting Chinese used to being around horses and with aspirations to build on that.”
 
Snodgrass thinks the Tianjin project is one of several being planned in China, “there are a lot of competing forces, a lot building up infrastructure for racing,” but what China needs is not one project, rather several coordinated, projects across the country. However, without legalisation of gambling, horse racing is not sustainable in China. “Someday it will open up, but there’s no timeline. No one really knows when.” 
 
Snodgrass puts the construction of existing racetracks, most noticeably in Wuhan, down to a “risk-reward concept,” on the Chinese side. “There’s an idea it [horse racing with gambling] will open up. People have built massive tracks. There are many already. They’re gearing up so that when it does open up, they’re not left in the dust. There are people importing horses, but it’s definitely not profitable. If they win those, they’ll make money. It won’t be a big industry until that key is turned on wagering.”
 
Corporate sponsorship of racing will remain a less lucrative norm in China’s limited racing scene in the absence of on-site gambling. Sponsorships,  CNY 10,000 would be a large purse, for existing races are being put up by local government or corporations. Likewise, barrel racing, a US equestrian discipline introduced to China, has seen prize money of CNY 20,000 to CNY 30,000 per event. 
 
Contacted for comment on the Tianjin project, editors at Horsemanship Magazine, which claims to be the only official print media authorised by the CEA (Chinese Equestrian Association), were unable to comment on the Tianjin project.
 
Meanwhile, writing on the project, Racing Correspondent at the South China Morning Post, Alan Aitken, points out how public racing at the Beijing Jockey Club was forced to close in 2005 because of the ban on gambling. Set up by Hong Kong businessman Cheng Yun-pung for a reported USD 100 million, the track is currently idle, and much of the facility mothballed, though horse-breeding continues at the stables. 
 
altAitken argues that any Tianjin project will have to figure out how to be commercially viable. “Racing anywhere, with the possible exception of Dubai, needs a commercial basis to exist, and without betting, that simply can't happen. Until China approves gambling on horse racing on the mainland, which is not on any radar yet, there is no commercial imperative to make these things happen the right way, and there must be doubts about the backers of some of these projects even being capable of that.”
 
Aitken points out how, “the real estate development side of things looked like a real possibility,” when the Tianjin equine mega-project was first announced. Real estate has been integral to the horseracing scene in Dubai, whose emir, Sheikh Mohammed, “even sent a couple of stallions to China to stand during 2012, though not anything he might miss.” 
 
Government credit tightening, since 2011, has ensured the cooling of China’s real estate market. Aitken points out how in the original plan, “all sorts of facilities were already supposed to be opened in Tianjin by 2012, and we can't find anything further on them since the announcements two years ago. It doesn't take two years to build anything in this part of the world, where Rome would have been done and dusted by lunchtime, let alone in a day.”
 
Noticeably, Tianjin already has a large, underused equestrian facility. Patrick Lau, Senior Manager at the Tianjin Goldin Metropolitan Polo Club says, “extremely wealthy” locals’ desire for luxury lifestyles, including polo and equestrian activities, makes the club a viable proposition, even though we talked in the club’s eerily empty five-star hotel.  This enormous luxury club has 200 horses, but after two years, only 200 of 2,000 membership spots have been taken. 
 

By Mark Gao
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