09/09/2013 6:00AM

Keeneland September: Q&A with Nick de Meric and Case Clay

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Keeneland’s September yearling sale, with 3,908 horses on offer, presents the best look at the health of the Thoroughbred yearling market. In the month leading up to the two-week auction, positive results from the 2-year-old auctions and smaller yearling sales have many market players feeling confident. Daily Racing Form’s senior bloodstock correspondent, Glenye Cain Oakford, spoke with Nick de Meric, a leading yearling-to-juvenile reseller, and Case Clay, president of the major consignor Three Chimneys Farm, about their assessments of the yearling market and what it means for their own participation at opposite ends of the yearling-auction transaction.

NICK DE MERIC

What’s your assessment of the yearling market today? “I’d say it’s definitely a competitive yearling market right now. Everybody is aware that there’s a supply-and-demand factor that’s definitely kicked in the last 12 or 18 months, and there is a little bit of a perception out there that there’s a shortage of horses, and that there are more orders than there are horses to fill them.

“We try not to get carried along with the tempo of a sale – just set our limits and stick with them. But at the same time, you have to make minor adjustments to accommodate the changing marketplace, or you’re just going to go home empty-handed. We try to walk that line between not getting carried away but, at the same time, being realistic about what the horses are likely to bring in this market. I think what we’re seeing right now is good for everyone. It does make it harder for people like me to buy horses, but I’d rather be that way and see a breeder getting a bit of return on their investment and hope the ones that we buy for resale have a shot of providing a decent return when they reform accordingly. When the reverse is true and there’s a downward spiral in the marketplace, it’s demoralizing.”

You said you have to be prepared to make adjustments to the marketplace. What adjustments are you making? “Just to use hypothetical figures, where in previous years I might have paid $50,000 for a horse, I might now bid to $55,000 or $60,000 if it’s one I feel good about. There’s probably a 15 to 20 percent kick that you’ve got to be prepared to accept that you’re going to have to pay if you’re going to go home with some stock. And we all have to do that; we can’t make a living out of empty barns. We’re being very selective, as we always are, on physicals, but when they jump through all the hoops, we’re probably making a 15 to 20 percent adjustment on what we might have spent in previous years.”

[More Keeneland September coverage: Bellwether auction will test strength of yearling market]
[
Keeneland September: Hips to watch at first session]
[Keeneland September: Blame, Quality Road among first-crop sires]
[Keeneland September: Pinhookers ready to restock after strong juvenile season]

Did the strong 2-year-old sales make you plan to buy more yearlings this year, or will you buy the same number and just expect to spend more on average? “I don’t think the 2-year-old sale season made us want to double up on numbers, but it did make us cognizant of the fact that your money might not go as far as it has in other years. That actually makes you want to be even more careful about what you buy. When you’re spending more on them, you’ve got to be as certain as you can be that you’re on the right ones. A less expensive mistake is easier to work yourself out of. The more you spend, the deeper the hole.”

Is the market actually more selective for yearlings now than it used to be? “If anything, in a strong market, when the bar gets higher and people are having a harder time filling inventory, people get a little bit more forgiving, whether it’s on vet work, whether it’s on pedigree, whether it’s on sire, or conformation. They’ll live with little things they might not have lived with in the past. But when you’re spending more money, you also tend to get doubly careful and doubly thorough.”

What do you think of this year’s Keeneland September format change? “I understand what they’re trying to do. I think for a few years, there was a perception that the Book 1 horses were only for the rarified few who could afford to play at a certain level, and that for mortals who make a living in the industry, you were better off waiting until prices settled down to where they were more realistic in terms of what you were likely to get for what you spent. Because that perception was out there, it tended to have the reverse effect: There were some definite holes in the Book 1 prices. Yes, you saw the big prices for the very special horses, but a lot of horses that were just a notch below that – which in later books would have and have sold very well – were kind of overlooked in Book 1. I think this format will help that, but to be honest, it doesn’t really change my game plan.”

CASE CLAY

What’s your assessment of the yearling market today? “We’re all keeping an eye on the market as these first few sales have occurred, and I’m feeling encouraged and positive about the market heading into the September sale. If you look back three or four years ago, we were all asking, ‘Has the market hit the bottom yet?’ I don’t think we’re asking that question anymore. It’s, ‘Are we seeing positive growth?’ I think we are, and if you’re looking at the world economy, where you look at benchmarks like employment, what we have to go by are these sales ... So far, they all seem to be positive and heading in the right direction.”

There’s been a lot of discussion about whether foreign buyers are so concerned about U.S. medication policies and soundness issues that they will become less active here. Are you worried that we might see less foreign participation? “I don’t anticipate that there’s going to be a massive influx of foreign buyers at the September sale. At the November sales, you continue to see many more international buyers to buy those bloodlines and those mares to take back, whether to Japan, England, Ireland, France, etc. But I see two positives. One is that the Saratoga sale was highly domestic, which is excellent. The other positive is [the emergence of] Kitten’s Joy and War Front. Those types of sires, like the old Dynaformer, raise some heads with the European buyers. You see Coolmore is very involved in War Front and has had lots of success with him and Kitten’s Joy [progeny] on the grass, that certainly doesn’t hurt.”

What advice are you giving your clients who are selling at Keeneland September? “My advice, either with our own horses or with clients’ horses, is: Don’t take a little bit of positive news and go crazy on your reserves. Right now, there’s a very nice union between buyers and sellers, and we saw that with the low buyback rates up in New York. At the end of the day, it’s the owner’s horse, but in a way, we all have a responsibility – buyers and sellers alike – to not go crazy and to sell at fair market values.”

This is your first major sale since Borges Torrealba invested in Three Chimneys. How’s it going? “It’s been going great. We’ve gone from a one-family business to a two-family business, and so far, it’s been really good. We have a shared vision for Three Chimneys to be a strong player in the stallion market and also breed and race some very good stock.”

You’ve lit up the board some as a buyer, most recently when your father signed for the Saratoga select sale-topper on Borges Torrealba’s behalf. Can we expect to see Three Chimneys buying as well as selling in September? “We’re very focused on good families and trying to get into some good families, and so whether it is Three Chimneys in partnership or Borges Torrealba by themselves, the goal is to get into some great families. Certainly, September is going to offer some nice fillies and some nice families. We’ll be shopping, and maybe we’ll buy one or two if we can. If not, maybe in November.”

What’s the toughest challenge for sellers today? “It’s got to be the scrutiny and the focus on X-rays and scopes and how to provide buyers with full disclosure of information in a way so that information that may be irrelevant doesn’t get in the way of a good racehorse. If there’s an X-ray issue at Saratoga, it’s like, ‘Well, there are 3,000 more horses coming in September.’ If there’s one in September, it’s, ‘There are 3,000 other horses at this sale.’ It’s tough to tell whether this chip in this area is going to mean it’s not a Grade 1 winner. So, the toughest challenge is, with X-rays and scopes, how do you present them so the buyer doesn’t lose an opportunity to buy a good racehorse based on a blemish on the X-rays that may be irrelevant?”

NICK DE MERIC
Age:
59
Family: Wife Jaqui, daughter Alexandra, son Tristan
Owner: De Meric Thoroughbred Sales and Eclipse Training Center
Website: www.demeric.com
Background: Grew up in England; studied rural estate management at Cirencester Agricultural College; worked for trainer Tommy Smith in Australia and several other trainers in England, including Brian Swift, Roger Stack, and R. C. Sturdy; competed as an amateur rider in point-to-point races; came to the U.S. in the early 1980s and worked for sales agents L. Clay Camp, Lee Eaton, and Fred Seitz and broke and rode young horses for a number of respected Florida farms
Operation: Leased some property with his wife in Ocala in the mid-1980s and later purchased 40 acres they called Manuden; in 1997 added 230 acres that became Eclipse Training Center; wife Jaqui’s main focus is the breaking program, while Nick takes over the horses’ care after they are ready for more serious exercise and prepares them for the sales
Notable program graduates: Capo Bastone, Currency Swap, Dream Rush, Gorgeous Goose, Homeboykris, Recapturetheglory, Spurious Precision, Successful Appeal

CASE CLAY
Age: 40
Position: President, Three Chimneys Farm in Midway, Ky.
Website: www.threechimneys.com
Background: Graduated from DePauw University with a major in economics; worked in sales at Three Chimneys and spent six years in Chicago, where he worked at Arlington Park, Ernst & Young, and Hyatt Corporation while performing improv at night; worked for a year at the Irish National Stud in Kildare, Ireland, and Arrowfield Stud in Scone, Australia; returned to Three Chimneys in 2004; took over as president of the farm in 2008 when longtime farm President Dan Rosenberg retired
Other industry involvement: Member, Breeders’ Cup Ltd.; chairman of the board, University of Kentucky Maxwell H. Gluck Equine Research Foundation; serves on the board of directors of Horse PAC, National Museum of Racing and Hall of Fame, Kentucky Derby Museum, and Kentucky Equine Education Project (KEEP)