07/05/2013 2:00PM

High expectations for new Fasig-Tipton July sale format

Photos by Z
Yearlings sold for an average of $81,291 at last July’s sale, up 16 percent from 2011.

The select yearling auction season kicks off at Fasig-Tipton’s Kentucky headquarters July 15, and this year there’s a bonus. Immediately following the yearling session, Fasig-Tipton will offer a new auction: the summer sale of selected horses of racing age.

With this sale, Fasig-Tipton is attempting to establish a new tradition of selling an estimated 50 to 65 “horses with meaningful racing potential to showcase to the sport’s leading buyers,” as chief executive Boyd Browning describes it in the auction’s promotional material.

It might seem a bold step to launch a select racing-age sale at a time when yearlings traditionally are in the limelight, and at a place that does not have a training track for the racing-age stock to show off their abilities. But Browning and Bayne Welker, Fasig-Tipton’s vice president for sales, said the market is ripe for such a racing-age outlet, and that the company’s detailed online catalog will give bidders plenty of ways to assess a runner’s performance.

If this initial July racing-age sale is successful, Fasig-Tipton officials plan to keep it on the calendar, Welker said.

“It’s been on the table for a couple of years now, and it came about for a couple of reasons,” Welker said of the racing-age auction. “There had been a lot of client input to having a sale devoted to horses in training. There had also been a push to have it at a different time of year so that people who wanted to liquidate horses – either because they didn’t meet the standards of their racing stable or because somebody who just had a horse that they wanted to turn into cash and was quite a hot commodity – would have the opportunity to do so.

“Traditionally, the only time format available in the public marketplace has been the fall sales. And with the increased amount of activity that was going on in the private marketplace because of the Del Mar Ship and Win program, there were a lot of external factors that pointed towards July.”

Del Mar’s Ship and Win program has piqued interest in proven runners based outside California. Owners who start a runner at Del Mar who last ran out of state are eligible for two alluring incentives: a guaranteed $1,000 payment just for starting the horse in a Del Mar race, plus a 33 percent bonus added to the horse’s purse earnings from its initial Del Mar start.

“If you’re in the racing game, there is a very healthy market out there for a fit and ready racehorse [who is] ready to be able to go back to the races in, say, weeks or a month,” Welker said. “There’s a strong desire to have those.”

With a vigorous private market, what’s the incentive for sellers to bring their racehorses to a public auction in Kentucky? There are several, according to Browning and Welker, starting with the protections an auction’s conditions of sale can provide for both buyers and sellers.

“The money, the vetting, the administrative difficulties that are inherent in the private marketplace are solved by the sales company,” Browning said. “We’re used to processing and handling transfers of ownership, collecting the money, paying the money. There’s a high level of confidence in the repository in terms of the veterinary procedures. It’s a process everybody’s comfortable with.”

Welker also points to the competition factor: When two or more bidders lock horns over a prized horse, anything can happen, and most of the time, that is good for the seller. “What we’ve seen historically, over and over, is that emotion often plays a large part in the auction process, and when you have that between two bidding competitors, you’re often going to receive a higher price than you possibly would in the private market.”

The racing-age horses, like the yearlings, will only be shown at a walk in Fasig-Tipton’s barn area in the days leading up to the auction. But auction-house officials said that even though bidders won’t be watching the horses work over a racetrack, they’ll have access to thorough information at Fasig-Tipton’s website – including race videos, results, and workouts – as well as catalog pages and pedigree updates.

“On that website, they’ll have the ability to see all the races and all the past performances, and they’ll be able to pull up Ragozin numbers and a summary being done on each horse by Daily Racing Form,” Welker said. “I think most horses in this day and age are gauged by numbers, and all that information is going to be put out there. What’s left is, how are they physically made? You’ll be able to see them on the end of the shank and see how they walk. The performances for most of these horses have been established, so you’ll be able to know what level they’re able to compete at.”

And yearlings, too

In the meantime, of course, Fasig-Tipton’s barn area will be showcasing the summer’s first select-auction yearlings. Browning and Welker hope there will be some “cross-pollination” between the markets, with trainers and their clients checking out both the young and the racing-age stock. Even if that crossover is limited, company officials have a sunny forecast for both their July sale and the broader select-yearling season.

They have some reason for their optimism. Last year, the select-yearling auctions generally posted average and median prices that were either level with 2011 or up, sometimes by double digits, and so did several important regional sales. Fasig-Tipton’s July sale remained level with its 2011 median of $60,000, but the average climbed 16 percent, even though the catalog was 12 percent larger than in the previous year.

The company’s small, highly select Saratoga auction endured a rougher ride, as buyers and sellers alike responded to an apparent change in market mover Sheikh Mohammed al-Maktoum’s buying habits.

After losses on the sale’s opening night, the second session rocketed up, but the two-day sale still ended with an average price lower by 6 percent and a median price down by 10 percent in what was widely regarded as a one-off situation. Keeneland’s long September yearling sale saw gains at its reformatted select session and for the 11-day auction overall, including a record-equaling median of $45,000.

This year’s spring and early-summer juvenile sales consistently produced gains, some of them double-digit increases. That bodes well for the yearling-to-juvenile resellers, called pinhookers, who often shore up returns at select-yearling sales as they look to restock their inventory for the following year’s 2-year-old auctions – although they also will have been affected by a highly polarized market with high withdrawal and buyback rates that, for many consignors, made selling a feast-or-famine enterprise. But those who profited are likely to add stability to this year’s yearling auctions.

“In all yearling markets, the role of the pinhooker certainly has a bearing on how well the yearling markets do,” Welker said. “The better the pinhookers do, the better the overall health of the yearling market is, from top to bottom.”

The annual Thoroughbred foal crop is still falling, which helps to increase competition for a smaller supply of select horses.

“The reduced supply has helped move the market into hopefully a higher category, and I think confidence is higher in the United States economy and the world economy, so there’s more willingness to spend money,” Browning said. “And I think people feel pretty good about the horse business right now as well. We would anticipate the positive momentum of the 2-year-old sales to continue into the yearling sales cycle.”

Welker believes that improved confidence is likely to translate into incremental growth as buyers cautiously up their budgets, but Browning also noted that bidders probably will remain highly selective – and that could mean 2012’s high buyback rates could continue, especially if sellers place aggressive reserves on their stock.

Browning and Welker don’t see major obstacles to healthy domestic spending, particularly at the top of the market. A diverse upper market of U.S.-based buyers was a hallmark of last year’s auction season, which also saw less aggressive spending by two of the U.S. market’s traditional titans: Darley Stud (whose owner, al-Maktoum, is a close associate of the Dubai company that owns Fasig-Tipton) and Coolmore Stud.

“When you see prices come down out of the stratosphere, it gives those who have always thought they can’t play at that level the ability to step up and try to obtain what are perceived as the top offerings,” Welker said. “You get more people in at a higher level than they’ve probably thought about being in the past.”

If those factors line up again at Fasig-Tipton July, both the yearling market and Fasig-Tipton’s new racing-age market could benefit, getting the summer auction season off to a positive start.