Carole and Bill McAlpin

Carole and Bill McAlpin

Anne M. Eberhardt

Bloodstock & Markets - Profits on the Rise

Reduced stud fees lead to better percentages during '11 yearling sale season.

In the wake of an American recession that expanded into a global financial crisis in the latter part of 2008, prices for Thoroughbreds at public auction plummeted. Stallion managers responded by cutting stud fees, and, this year, commercial breeders are finally starting to benefit from those reductions at yearling auctions.

During the Fasig-Tipton Kentucky July select sale, 35% of the horses offered by consignors were profitable compared to 27% in 2010 based on The Blood-Horse’s calculations even though this year’s average price for the auction fell 7.8% from 2010. But helping to offset that decline was a 22.1% drop in the average stud fee paid to produce the 2011 yearlings to $23,914. The price-to-stud fee ratio rose to 2.78 from 2.34 last year.

At the Fasig-Tipton Saratoga select yearling sale, 69% of the horses offered were profitable compared to 49% in 2010. The auction’s average price increased 15.9% from a year ago while the average stud fee paid to produce those horses declined 29.3% to $57,974. The price-to-stud fee ratio grew to 5.23 from 3.19 in 2010.

Even more encouraging developments occurred during the two evening select sessions of the Keeneland September yearling sale. Forty-six percent of the horses offered by consignors were profitable compared to 33% in 2010 even though the select sessions’ average price rose only 1.3%. The average stud fee paid to produce this year’s yearlings fell 32.9% from last year to $93,991. The price-to-stud fee ratio advanced to 3.57 from 2.38 in 2010.

The Blood-Horse’s calculations for profitability take into account the costs of raising yearlings and the sale company’s commissions.

Fleeing to Fillies?

In 2000 Coolmore Stud acquired the breeding rights to Kentucky Derby (gr. I) winner Fusaichi Peg­asus in a transaction that the operation’s spokesman, Richard Henry, said was a record for a stallion. He didn’t offer any details, but there were reports that it was worth upward of $70 million for a horse that had been purchased for $4 million as a yearling. The previous record had been the $40-million deal involving Shareef Dancer in 1983.

Because of the recent American recession, global economic setbacks, and struggles within the Thoroughbred industry, stallion prospects are nowhere near as valuable today. For Centennial Farms, which puts together racing partnerships, fillies are becoming increasingly more attractive as investment opportunities.

During the first seven sessions of the Keeneland September yearling sale, Centennial purchased an Elusive Quality—Shady Reflection colt and a Corinthian—On Kris’s Wings colt for $210,000 and $90,000, respectively. Centennial also bought a Me­daglia d’Oro—Veiled Threat filly and a Mr. Greeley—Back Bay Dixie filly for $170,000 and $150,000, respectively.

“The stallion market has cooled off,” said Dr. Steve Carr, Centennial’s manager of horse operations. “The only way you’re going to get a lot of money for a colt as a stallion prospect right now is to have a home run kind of horse like our horse Corinthian (who stands at Gainesway Farm near Lexington). You need to have a multiple grade I winner, a Breeders’ Cup race winner, or a Triple Crown race winner. The horse has to have everything, including (a commercially appealing) pedigree.”

According to Carr, who provided what he called “a little bit of an exaggerated example,” a grade III-winning colt with an “OK pedigree” is worth $75,000 while a grade III- or grade II-winning filly is worth several hundred thousand dollars. For a partnership business that emphasizes racing over breeding, that’s important because the goal is to sell the horses after they are finished competing.

“Donald Little Jr. (Centennial’s president), Paula Parsons (Centennial’s yearling trainer), and I have discussed it and decided to supplement our purchases with some fillies and our partners are happy with that,” Carr said.

Corinthian, an 8-year-old son of Pulpit, won the Metropolitan Handicap (gr. I), Gulfstream Park Handicap (gr. II), and Breeders’ Cup Dirt Mile in 2007. Members of his first crop are beginning to race this year. Through Sept. 18, he had five winners: Buccella, Hunt Crossing, My People, Preach Easy, and Takes the Gold.

Sharing the Wealth

During the third session of the Keene-land September yearling sale, Catherine Parke, in the name of her Valkyre Stud near Georgetown, Ky., sold a Bernardini —Silk n’ Sapphire filly for $1.2 million to Benjamin Leon Jr.’s Besilu Stables. Parke bred the dark bay or brown yearling in a foal-sharing arrangement with Sheikh Mohammed’s Darley operation, which stands homebred Bernardini in Kentucky. The filly is a half sister to 2010 Emirates Airline Breeders’ Cup Filly & Mare Turf (gr. IT) winner Shared Account (by Pleasantly Perfect).

With a “nice” stallion, Darley might offer 10-20 foal sharing opportunities each year, according to Charlie Boden, who is the head of sales for the operation in this country.

“Sheikh Mohammed enjoys owning a piece of one (of a top stallion’s offspring) that is in a good part of the Keeneland September yearling sale and is a nice horse, and we certainly like to try to make something like that happen,” Boden said. “He probably wouldn’t get to sell a lot of horses for a lot of money at a sale, so when he can, he probably gets a kick out of it. It’s also a great way to be able to bid on, and buy, a horse he owns a piece of with 50-cent dollars.”

Doing foal share deals also can be beneficial to a stallion, especially early in his career when he is trying to establish his credentials in the sale ring and on the

“It (a foal share) can help us a get a really nice mare from a breeder who doesn’t have the resources to pay a big stud fee,” Boden said. “It’s great when we can help someone breed a nice horse, but it also gets another nice mare to a good stallion that would go to a lesser stallion otherwise. Other farms with nice stallions do foal shares, so we’re trying to be competitive in that way. Good breeders make the difference, so we’ll do whatever we can to keep them coming back.”

Curlin’s Promise

Through the first seven sessions of the Keeneland September yearling sale, Curlin  was the leader among first-crop sires based on the $158,433 average price for his progeny. Thirty of his yearlings had been sold, with a filly out of stakes winner Tears I Cry (by Chester House) bringing the highest price of $700,000 from West Point Thoroughbreds during the second and final select session Sept. 12.

“If I had to pick one (a first-crop stallion) that will make it, Curlin would be the one,” said pinhooker Randy Hartley of Hartley/De Renzo Thoroughbreds. “They (Curlin’s offspring) are exceptional; he has beautiful babies. They’re real consistent, and they have good bodies and good shoulders.”

Curlin is a 7-year-old son of Smart Strike, whose sire is Mr. Prospector. According to Hartley, Smart Strike’s offspring tend to look like Mr. Prospector and have “a big old shoulder and are light behind.” Curlin’s progeny, however, tend to be more balanced, with big shoulders and hips that are bigger in proportion to their sire’s, Hartley said.

When Curlin entered stud at Will Farish’s Lane’s End Farm near Versailles, Ky., he had a stud fee of $75,000. He was the Horse of the Year in 2007-08, and he also was a champion in the United Arab Emirates.

Hartley/De Renzo sold the most expensive Thoroughbred ever offered at public auction, The Green Monkey, who brought $16 million from Demi O’Byrne at the 2006 Fasig-Tipton Florida select juvenile auction. A son of Forestry, The Green Monkey stands at Hartley/De Renzo Thoroughbreds’ farm in Florida.

Trying Again

Bill and Carole McAlpin bred the $1.35 million Awesome Again —Legs Lawlor colt and consigned him to the Keeneland September yearling sale in the name of their 280-acre Greenwood Lodge Farm near Paris, Ky.

“We’ve owned the property for about seven years,” Bill McAlpin said.

The breeding decision that resulted in the seven-figure colt came about because Legs Lawlor previously had produced another colt by Awesome Again.

Foaled in 2008, “he was an absolutely super horse,” McAlpin said. “Beyond that, he had a wonderful personality; he was such a character. I think he would have ended up selling very well. We were out to lunch the day of the Preakness (gr. I) and we got a phone call. That was probably 3 o’clock and by 6 o’clock, he was dead. He had a perforated stomach.

“The mare was already in foal to Indian Charlie,” McAlpin continued, “so the next opportunity we had to breed the mare, we bred her back to Awesome Again and obviously she did just as well this time with this colt. He is almost identical to the first Awesome Again colt.”

McAlpin is the chairman of Distant Lands Coffee.

“We’re coffee farmers; we farm in Latin America, and we’ve expanded so we have roasting plants in North America as well,” he said. “You really don’t see the Distant Lands name publicly; we don’t have a brand ourselves. But all the coffee at Panera Bread is ours, and McCafé espresso coffees are ours. That’s the kind of business that we do.”

According to The Jockey Club, Legs Lawlor produced a dead foal this year. But she is in foal to Tiznow , McAlpin said.

After the mare’s $1.35 million yearling went through the auction ring, McAlpin expressed satisfaction with the September auction in general.

“It’s a very, very solid sale,” he said. “I think Keeneland’s done a great job with the way it is organized now, and the market has been holding strong throughout the whole thing.”