Thursday, March 16, 2017

The OBS March 2YO Sale: Good at the Top, Not So Much Lower Down

The Ocala Breeders Sales Co.’s (OBS) March sale of two-year-olds in training, the second big sale of the year, is in the books. You can see the complete results here, and the conventional rose-colored-glasses interpretation by the industry press here, here and here

The way I see the results, there are three notable results: (1) for the sale as a whole, it was pretty much business as usual, with overall results similar to the last couple of years; (2) breaking the sale down, there was a good market at the top, but lots of weakness lower down; and (3) we saw a pinhooking home run for first-time sellers Zayat Stables. Here are some details.

Overall, 414 of the 677 horses originally catalogued for the OBS March sale went through the ring, with 300 (72.5%) of them selling, either in the ring or post-sale, before they left the sales grounds. That’s on a par with last year, when 73.7% of horses that went through the auction ring found new owners.

Although the gross and the average for the sale were both ahead of last year, the median price, a better indicator of the overall health of the auction and one that isn’t swayed by a few high-priced stars, actually declined by an insignificant 2.5%, from $102,500 last year to an even $100,000. So, taking all these indicators together, this year’s March sale was pretty much business as usual.

But, to move to my second point, the overall clearance rate – the percentage of horses cataloged that eventually were sold, was a mere 44.3%, similar to what it was at the Fasig-Tipton Gulfstream sale earlier this month, but less than OBS had seen in recent years. At OBS, there were 677 horses original listed in the catalog. Of those, 263 were scratched, many of them between the breeze show last week and the actual sale on Tuesday and Wednesday. So, lots of horses that breeders and pinhookers hoped to sell are still at home, waiting for buyers. Looking at the results sheets for the sale, it appears that most of those through the ring but not sold (RNAs) fetched final bids somewhere between $40,000 and $100,000. This range is what has come to be called the “middle market.” My guess is that many of the horses that were scratched had originally been expected to bring similar prices, since the cheaper horses, the ones with less pedigree or poorer physicals, tend to be entered in OBS’s later sales, in April and June. So the March OBS results show substantial weakness in that middle market, and we haven’t even reached the lower market strata (where people like me search for that overlooked diamond in the rough). Even though there’s been substantial adjustment since the 2008 financial crisis, with a huge drop in the number of foals born annually, it still looks like there are still too many horses for the available demand. Further adjustment is on the way, because that’s the way capitalism works.

Returning to the top of the market, the big surprise was the first-year success of Zayat Stables’ pinhooking venture. Previously, Ahmed Zayat and his team had focused, with excellent results, on buying horses to race. Now, having won the Triple Crown with American Pharoah and established Pioneer of the Nile as a major stallion, they’re branching out. The Zayats entered a number of horses at both the F-T Gulfstream and the OBS March sales. Not all sold: two were RNAs and one broke down in the F-T breeze show and had to be euthanized, but overall, the success rate was astonishing. Here’s a list of the Zayat horses that were pinhooked at the two sales and went to new owners:

Ÿ          F-T Hip 132 (f. Pioneer of the Nile–She Herarah) bought for $180,000 at Keeneland September, sold (post-sale) for $350,000.
Ÿ          OBS Hip 493 (c. Curlin-Devious Intent) bought for $425,000 at Keeneland September, sold (post-sale) for $350,000.
Ÿ          OBS Hip 178 (c. Tapizar-Shining Victory) bought (post-sale) at F-T October for $50,000, sold for $50,000.
Ÿ          F-T Gulfstream Hip 118 (c. Bodemeister-Pink Diamond) bought for $190,000 at Keeneland September, sold for $750,000.
Ÿ          F-T Gulfstream Hip 21 (c. Tale of the Cat-Awesome Bull) bought for $160,000 at F-T Saratoga, sold for $250,000.
Ÿ          OBS Hip 360 (f. Congrats-Azalea Belle) bought for $250,000 at Keeneland September, sold for $1,700,000 (the OBS sale topper).
Ÿ          OBS Hip 489 (c. Mission Impazible-Deputy Reality) bought for $185,000 at F-T July, sold for $280,000.

So, for the seven Zayat pinhooks that did sell, that’s aggregate sales proceeds of $3,730,000, compared to an aggregate purchase price of $1,450,000, or a return on investment of 157%. Even after factoring in the agents’ and auction-house commissions, the training costs and the prices of the horses that weren’t sold, that’s still something like doubling their money in less than a year. Lots of credit all around – to the Zayats, father and son, to the EQB team led by Jeff Seder and Patti Miller, who picked out the horses (disclosure: I worked with Jeff and Patti at Keeneland), to the McKathan Brothers, who trained the horses up to the sales and consigned a couple of them, and to consignors Eddie Woods and Ciaran Dunne.

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