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Traditional Derby horses, nontraditional owners

Many of the thoroughbreds slated to run in Saturday's Kentucky Derby have owners who live and breathe horses and were raised around racing their whole lives, but a handful of this year's owners didn't grow up as part of the Churchill Downs set. Instead, they earned their fortunes outside of the horse racing world.

Who are these unorthodox owners, and how did they get here?

Leonard Riggio and Samraat

Exercise rider Simon Paine takes Kentucky Derby entrant Samraat for a morning workout at Churchill Downs Thursday, May 1, 2014, in Louisville, Ky.
AP
Exercise rider Simon Paine takes Kentucky Derby entrant Samraat for a morning workout at Churchill Downs Thursday, May 1, 2014, in Louisville, Ky.

Leonard Riggio is the owner of Samraat, a favorite in this year's race. But he is perhaps better known as the founder and chairman of book-selling behemoth Barnes & Noble.

Born in New York City, Riggio started what would become his Fortune 500 bookstore chain in the 1960s. His first foray into horse racing happened more recently, when he decided to fill some empty horse stalls at his farm on Long Island, New York.

"My wife and daughter have both had a long-term interest in show horses," Riggio told CNBC. "We train and breed show horses, and we've had extra stalls at the farm for years, so we decided to give it a go and get into horse racing. That was about 10 years ago."

Riggio's father, a professional boxer, twice defeated future middleweight world champion Rocky Graziano in the mid-1940s, but it was an uncle who first introduced him to the sport of horse racing in his formative years, taking him to the Aqueduct Racetrack in Queens, New York.

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"I would go with my uncle, who was a horse player," said Riggio. "He did teach me the virtues of betting small."

Relative to the wealth he's earned, Riggio joked, his investments in horse racing are "probably something like a $20 exacta box" for the average American.

While the self-made mogul describes horse racing as a "fun business" in which it's "very hard to come out ahead," he said that he may be on the verge of turning a modest profit.

He estimates that the cost of running an elite thoroughbred horse to be between $50,000 and $60,000 per year. Samraat, with winnings of more than $700,000 so far, is his top-earning horse to date.

"I think we're at the cusp of turning the corner here," said Riggio. "We're at the point where we think we can enjoy the sport, and also curtail our investments and make some money."

Joe Ciaglia and Dance With Fate

In the early 1980s, a teenage Joe Ciaglia was working as a night shift manager in Arcadia, California, at the regional grocery chain Ralphs.

Now 50, Ciaglia is an owner of Derby contender Dance With Fate. His main business is California Skateparks, a company that designs and builds skateparks for clients like ESPN's X Games.

Ciaglia told CNBC he has long had a passion for horses, but the path to owning them wasn't easy. The son of a sales manager at a Ford dealership, Ciaglia worked nights at Ralphs, and often went to the famed Santa Anita Park, located in the same city, to watch races during the day.

After three years at Ralphs, Ciaglia started his own company, called California Carpet Care. Ciaglia said he later sold the company with no clear next step. A course of action quickly emerged, however.

"I sold my company, bought a new house, had no money, had no job," said Ciaglia. "I started doing landscaping on my own house, and then did landscaping for about 30 houses in my neighborhood."

Eventually, that led in 1988 to the formation of California Landscape and Design, a company that Ciaglia still operates. Ten years after that, one of Ciaglia's landscaping clients, the city of La Verne, California, encouraged him to bid for a contract to build a skatepark. Ciaglia landed the contract, and California Skateparks was born.

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Since then, Ciaglia said, his clients have included cities around the world as well as top professional skaters like Tony Hawk, and he estimates that his businesses, including California Skateparks and California Landscape and Design bring in total revenue of over $20 million each year.

When California Skateparks began to take off, Ciaglia was finally able to pursue a personal passion for horse racing as an owner. Dance With Fate will be his first horse in the Derby.

We've had some good karma," said Ciaglia. "It's a hard trip."

Mike Pegram and Midnight Hawk and Hoppertunity

If anyone knows how hard the trip to the Derby can be, it's entrepreneur Mike Pegram. He's part-owner of Midnight Hawk along with Chicago Blackhawks head coach Joel Quenneville, and he also owns part of Hoppertunity, with partner and auto dealer Paul Weitman. Both horses that earned enough points to run in this year's Derby.

Pegram and his team elected to scratch both horses from the Derby lineup, however: Midnight Hawk after he lost a close duel for the win at the Illinois Derby, and Hoppertunity when a concerning change in his gait was noticed just this week.

Pegram was also owner of the late Real Quiet, a horse that missed the Triple Crown by a nose at the 1998 Belmont Stakes, after winning both the Kentucky Derby and the Preakness.

"The horse business is always going to keep you humble," said Pegram.

Pegram splits ownership with the Quenneville, Blackhawks assistant coach Mike Kitchen and Mike Tice, offensive line coach of the NFL's Atlanta Falcons.


Pegram, who bred Midnight Hawk, said he gave a 50 percent stake in the horse to the coaches as a gift between friends.

"One day we were having dinner, and the coaches said they wanted in the horse business," said Pegram. "And I said, 'Well, if this is going to be your first horse, I'll make it easy for you.'"

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Despite his Derby miss, Midnight Hawk has still won more than $400,000 to date, and the coaches, said Pegram, have indicated that they'd like to chip in some investment.

"They feel bad. They say, 'We ought to pay for that horse,'" said Pegram. "But I say, 'Hey, a deal's a deal.'"

It's not like Pegram, who owns 26 McDonald's restaurants in the Phoenix area and two casinos in northern Nevada, needs the money. His businesses, he said, generate a total of over $100 million in revenue each year.

It's another shot at the Derby that he's most focused on.

"I live under a good luck star, but this week the luck changed on us," said Pegram, who added: "We'll be back."

—By CNBC's Adam Molon.

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