Wealthy buyers will be flocking the Fasig-Tipton horse saletoday at the Calder Racetrack in Miami to bid on thoroughbreds in the two-year-old-in-training sale.
But given the economic climate, it's safe to say there won't be any shockers this year, like three years ago when The Green Monkey was bought for a record $16 million. For what it's worth, the horse failed to win a race in three starts and is now standing at stud.
This morning, I spoke to Boyd Browning, the president of Fasig-Tipton.
Darren: In your Winter sale, the amount of horses auctioned off dropped from 510 in 2008 to 306 this year. You have 272 horses going off today, which seems simular to past years. Is that a positive indicator?
Browning:It's really apples and oranges. For the Winter sale, we take all horses presented to us. There is no screening process. They pay a fee and their horse is in. Today is a very selective sale. Typically there will between 750 to 1,000 horses nominated and we inspect all of them in the Fall and narrow it down.
Darren: We hear the usual players like John Magnier, who purchased The Green Monkey, and Sheik Mohammed, who purchased Fasig-Tipton last year, are obviously represented. How many horses are those guys looking at today and what's your sense of the rest of the crowd that will be there?
Browning: The top 10 buyers will cluster together on a certain number of horses, probably the top 50. We charge no admission to this, so the only thing I can go on as far as the crowd we'll have this year is the foot traffic in the barns over the last couple days. If I go by that, I'd say attendance might actually be higher than last year.
Darren: Given the global economic crisis, there are now people and companies that did business a year ago that have now vanished. To what extent is that the case in this business?
Browning: No one has really vanished among the traditional buyers, but I'll be able to tell you more about that tomorrow morning when we see what happens here today. My stomach is tight over that.
Darren: Most sales within this crisis have seen declines of 30 to 40 percent as compared to the year before. Is that what we can expect here?
Browning: Your numbers are accurate. We haven't had a select high-end sale since November, so we haven't quite seen it first hand yet. But there has been some significant change in the global economic environment over the last nine months and we're realistic about that.
Darren: In typical years, how many horses leave the ring without a buyer because the reserve price is not met?
Browning:There's usually what we call a buyback rate of 35 to 40 percent.
Darren: Have the reserves come down so that the rate doesn't increase precipitously this year?
Browning:The consignors set the reserve and I haven't met with them yet, so I don't know if reserves will come down as much as the market has.
Darren: Your company has worked really hard to spruce up this event this year. Tell me about how you've done that.
Browning:We're selling a premium item and we believe buyers and sellers need to provided with an environment that makes the commerce experience great. So we worked with Prime Events to build a hospitality village in our parking lot. Maybe the most important thing we've done is to improve the viewing experience for buyers. We have a new high quality video lounge with HD televisions all over the place.
Darren: Many people have argued in various sectors of business that in depressed times, come great values. How much are you pitching that story?
Browning:We've said that line thousands of times over the last five or six weeks. The purse structure is flat in the US now and we can expect the purchase prices to decrease. That means that the economic return at the track can be better. We'll have to see how much of a discount the buyers expect.
Darren: The group with the most to lose here today are the guys called "pinhookers," who buy these horses when they are young to take the risk of making a big payday today. Tell us a little bit about them.
Browning: They're basically speculators. They bought horses at yearling sales from July to October of 2008 and home raise them to get to this sale today. When they buy them, it's a risk because those horses have never been on a racetrack and never had someone on their back. The good horses, to them, just seem strong from a muscle structure standpoint. But these guys have a high amount of anxiety because the big yearling sale was in early September, right when the markets started to take a turn for the worse.
Darren: Is there any country represented here today that people might be surprised about?
Browning:Well, there is a large Japanese contingent here. And although their market isn't doing that well, the yen to the dollar today is stronger than it has been in recent years.
Darren: Is it possible to see a horse pull a show stopping number today?
Browning: There's not that absolute standout. Last year, our top horse commanded a $2.1 million price tag. I'd be relieved if we could see that this year, but I'm frankly not expecting it. If you were to ask me the over/under on a horse selling for $2.1 million today, I'd take the under.
The auction begins at 11 A.M. ET today and runs for about nine hours. To follow the auction online, click here.
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