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As pinhookers spend more, juvenile prices skyrocket
Fasig-Tipton will conduct its Florida select 2-year-old sale on Tuesday at Calder Race Course in Miami, and both sales officials and consignors have reason to believe that the auction will continue the steady, upward trend in the overall select juvenile market.
The auction is one of four major juvenile sales each year, but it has been the leading edge of the market's recent explosive growth, setting world records for a 2-year-old sale price in 2004, 2005, and 2006. In fact, the $16 million paid by Coolmore Stud in 2006 for The Green Monkey shattered the record auction price for any Thoroughbred, surpassing the $13.1 million that Seattle Dancer brought as a yearling in 1985.
Those prices underscore the transformation of the select 2-year-old market from a local marketing tool for Florida-breds to an important source of high-quality runners with a circuit of major sales in Florida, California, and Kentucky. The key to the market's growth has been the work of pinhookers and their increasing willingness to reinvest their profits in better yearling resale prospects. Largely based in Ocala, Fla., where the climate is conducive to their winter breaking and training programs, pinhookers have paid more for well-bred, racy-looking yearlings to resell as juveniles. Buyers have responded with multimillion-dollar bids that would have been unthinkable at a 2-year-old sale two decades ago.
"As those consignors have enjoyed success over the last 10 to 20 years, they've basically reinvested and gradually brought a better and better quality horse in terms of physicals and pedigrees," said Boyd Browning, Fasig-Tipton's chief operating officer. "As they've bought better horses, they've sold better horses. That's snowballed, and I don't think it's done yet."
A turning point for the juvenile market came in the late 1990's, when top-caliber runners began emerging from them on a regular basis. An especially glowing example was Chilukki. A $100,000 Keeneland September yearling, she resold for $875,000 to Stonerside Stable at the 1999 Fasig-Tipton Calder sale, then went on to become that season's juvenile filly champion. The same year, the Ocala Breeders' Sales Co.'s February auction yielded Grade 1 winner Swept Overboard for $525,000. The following year, the juvenile auctions produced such Grade 1 winners as Songandaprayer, a $470,000 yearling who brought $1 million as a 2-year-old; Harmony Lodge, a $1.65omillion juvenile; and Yonaguska, who went from a $145,000 yearling to a $1.95 million juvenile.
The resellers plowed their profits back into the yearling sales, starting a cycle that continues to churn out seven-figure prices a decade later.
"I think the prices today are indicative of growing consumer confidence," said Browning. "And I think there was some recognition among 2-year-old consignors five or six years ago that they needed to do a more effective job of promoting themselves and their successes and their ability to buy and produce Grade 1 and classic-type horses."
But today's buoyant juvenile marketplace remains risky for resellers. With yearling prices on the rise, especially for well-bred and well-conformed stock, yearling-to-juvenile resellers find themselves competing against so-called "end users," or racehorse buyers, for suitable yearlings. That means they pay retail for the yearlings they hope to sell back to the buyers they outbid the first time around.
A case in point at the upcoming Fasig-Tipton Calder sale is Hip No. 71, a Storm Cat-Moon Safari colt whom pinhooker Hoby Kight and partners paid $1 million for at last year's Keeneland September yearling sale.
"My intent was to try to buy the best horse I could buy, and not a cull, and bring him to the next level," Kight said. "I wanted to try it and see what would happen if you brought one of the top 10 yearlings at a yearling sale here to the 2-year-old sale.
"When we first started doing this, we were buying culls, nice horses with little pedigree. You'd bring them out here, and the ones that could run you could sell good. But now the buyers have gotten so selective, they only want to buy the best ones and the fastest ones. The guys with the money want the pedigree, the horse, the vetting - they want it all. You've got to bring a really good horse here. You used to be able to buy a really nice yearling for $75,000, but now all the 2-year-old guys are so good at picking out horses, it's just tough."
The potential rewards on such a high-priced yearling outlay are obvious, given the series of record prices at Fasig-Tipton Calder. But there are many perils, too. Once in training, a horse can sustain an injury or turn out to be too slow to catch bidders' attention. Or worse, a horse could suffer the sad fate of another Storm Cat colt in the Fasig-Tipton Calder catalog. That one, a son of Gone to the Moon, cost Randy Hartley and Dean De Renzo $900,000 as a yearling; he collapsed and died of an abdominal aneurysm after putting in a good breeze at the the sale's first under-tack preview. A year ago, Hartley and De Renzo climbed the mountain when they sold The Green Monkey for $16 million.
The risk is not all on the sellers' side, either. Buyers are looking for any edge they can get to be sure they are spending their money wisely, not on a one-hit wonder whose speed only extends to an eighth-mile work at an under-tack show. That has led to the development of bloodstock-selection businesses geared specifically to, or expanded into, the juvenile sales.
"Everything changed about five or six years ago, almost like a perfect storm," said Robert Fierro, a partner in DataTrack International, which markets its trademarked BreezeFig stride-analysis figures to 2-year-old buyers. DataTrack, which has a financial relationship with Daily Racing Form, initially offered its BreezeFigs as a handicapping tool on the DRF website. Now the company has joined several other biomechanical analysis companies such as Thoroughbred Analyst, Equix Biomechanics, and EQB Thoroughbred Racing that offer services to buyers at the juvenile sales.
Pinhookers traditionally complain that buyers are too selective now that juvenile prices have risen, perhaps because they are afraid to overpay for a less-than-perfect horse. The result, sellers say, is that buyers are overlooking good runners they could purchase for relative bargain prices. That's borne out by some of the research conducted by DataTrack, according to Fierro. DataTrack recently analyzed racing performances of every horse to breeze at the 2006 juvenile sales, even those who were scratched from the auction or failed to reach their reserve prices.
"There were decent horses off their lone BreezeFig that won either first or second start out or were stakes horses," Fierro said, adding that the good horses who failed to reach their reserves at auction were likely falling victim to a buyer's personal prejudices or hyper-selectivity, or else to a seller having set the reserve too high for the market.
In an era when pinhookers are paying more than ever to acquire the best-bred and best-conformed yearlings they can afford, those reserves might stay high. For now, pinhookers seem convinced that buyers will stay on board and pay top dollar for a ready-made racehorse that has the breeding and performance to become a star.
"The biggest selling point about buying 2-year-olds versus buying yearlings is the fact that at a 2-year-old sale you're buying a horse that has withstood training for six months, breezed four or five times, and is still sound," said Ocala Stud owner Mike O'Farrell, whose father, Joe, helped launch the 2-year-old marketplace in Florida in 1957. "And you can see how they move. The 2-year-old sales have become more accepted."
Juvenile sales are here to stay, thanks largely to the higher-quality pedigrees and careful training that pinhookers have brought to the market in the last decade. Whether the sales will continue to reward sellers who have spent aggressively for their yearlings remains to be seen. High-end pinhookers like Kight are willing to gamble.
"You've got to have the whole package," Kight said. "But the guys at the yearling market are here to buy our horses. The thing that we've got to do is get the middle-market people here to buy, say, the $250,000 to $400,000 horse. But the 2-year-old market probably has more stakes winners come out of it. These guys are good. They hand-pick those horses and develop them, and you get to see the whole picture. If I was a racehorse guy, this is where I'd be buying horses."