Racing News

Syndicators adapt to steep rise in price of bloodstock

Amidst the celebration and lauding of another exceptionally strong sale at last week’s extraordinary Magic Millions Gold Coast Yearling Sale, one that sets the trend and tone for yearling sales to come across a frenetic six-month period, any industry which possesses a market contested by buyers and sellers is assumed to run on the premise that not everyone wins. 

The majority of vendors, no doubt, have been kicking their heels cockahoot on their journeys home from the Gold Coast. Records smashed and a demand for bloodstock that showed no signs of abating throughout the seven days of trade, resulted in a Book 1 sale aggregate of $229,657,500 – the first time beyond the $200 million mark – and an average of $292,930, a figure up over 43 per cent since a 2017 average of $204,945.

Being on the buying side of this expensive coin would appear a tough task. And perhaps, at first glance, none more so than for syndicators, commonly considered as a bedrock by which the Australian thoroughbred and bloodstock industries have been allowed to flourish. 

Access to racehorse ownership through syndication has paved the way for the widely-cited statistic that one in 244 Australians have a share in a racehorse. But with soaring averages resulting in the price of a luxury commodity such as racehorse ownership becoming ever more dearer, is the syndication model well placed to adapt to such changes, ones that would appear to be challenging to the everyday Australian becoming involved in ownership? 

“I think these rises (in prices) support the syndication model,” said Triple Crown’s Michael Ward, whose red silks of he and brother Chris have been worn by dual Everest (1200m) winner Redzel (Snitzel), among others. 

“Obviously it allows for these horses to be split up into smaller amounts which is of great benefit and allows people to access it. The days of horses being owned by one or two people are gone and I think that bodes well for the syndication market.”

However, while the average price of bloodstock at the Magic Millions Gold Coast Yearling Sale has risen 40 per cent to an all-time record high, the market dictates that in order for syndicators to remain competitive, they themselves have to up their budgets and sourcing value becomes increasingly hard to find. 

In evidence of a prevailingly difficult market for buyers, Triple Crown purchased three yearlings, two for $150,000 and one for $155,000, whereas in each of the past five years they had come away from the Gold Coast with at least five horses on the truck to the Peter and Paul Snowden yard. 

“We would have liked to have picked up a couple more but it was obviously very solid trade right through from top to bottom – it was very competitive,” Ward continued. “But we’re very happy with the three we got. Obviously we keep a very close eye on quality, so we limited it to that and there’ll be other sales throughout the year where we’ll look to be active.”

Part of the difficulty in sourcing horses for syndicators is the knowledge that, when broken down into smaller shares, the share prices passed on to clients are required to be within the realms of their buying potential. Where the syndicators have had to dig deeper, so too have their clients. 

Victorian syndicator Blueblood Thoroughbreds, most recently of Lightsaber (Zoustar) fame, secured six horses at last week’s Magic Millions sale, two of which – the two most expensive at $400,000 and $260,000 – were bought in a 50-50 partnership with trainers Gai Waterhouse and Adrian Bott, the top lot being a Justify (Scat Daddy) colt out of Group 1 winner Savvy Coup (Savabeel). 

“A $150,000 horse is the new $100,000 from a couple years ago,” said racing manager David Mourad. “That’s just the way that Australia is with its economy and we’re seeing that with horses as well. I don’t think it’s going to affect us too much. 

“With this sale it’s almost like you don’t have a choice. If you want to buy you’ve got to up your budget each year and clients will have to do the same. If they can afford it, that’s great for them, but if they can’t they might have to wait for the next sale where prices are a little bit lower.”

Spend more, they have. In 2017, Blueblood Thoroughbreds purchased a solitary lot for $140,000, a number that rose to three horses but at an average of $93,333 a year later, while their six purchases this year came at an average lot price of $114,167.

In similar fashion, Jamie Walter’s Proven Thoroughbreds has gone from an average buy of $116,667 from three horses secured at the 2017 Magic Millions sale, to last week purchasing 11 horses, ten with trainers Steve O’Dea and Matt Hoysted, at an average of $192,272 – an increase of 64.8 per cent. Again, the realities of needing to compete in an ever more competitive market are not lost on the experienced syndicator of more than 20 years. 

“If I was remaining around the same average, which from a business perspective would be more frugal, you’re looking at an ever diminishing pool of horses to choose from,” Walter said.

“In order to stay in the same sector of the market and to remain competitive, you’ve got to pay more.”

Last week, Walter paid a top price of $375,000 for a Deep Field (Northern Meteor) filly out of Ostentatious (Shamardal) from the leading vendor by average, Silverdale Farm. A figure more than double the top price he paid of $150,000 for a Sebring (More Than Ready) filly in 2017, while adding a filly by Snitzel (Redoute’s Choice) for $370,000.

But where sourcing horses is becoming a more expensive exercise, it dictates that their clients either need to match that increase in their spend, or buy smaller shareholdings.

“We had to go to the extremities of our limits for those two fillies, but we’re very happy to get them,” Walter said, who celebrated Group 1 success with Private Eye (Al Maher) in last year’s Epsom Handicap (Gr 1, 1600m). 

“I’ve never had more owners who want smaller and smaller shares. When I first started syndicating 20-odd years ago the standard shares were ten and 20 per cent. While I still have some of those, more and more the norm is to take 2.5 per cent or five. 

“We’ve now got 100 horses under management, so by definition you require more and more owners.”

In the period between 2017 and 2021, the average Australian wage has risen 10.5 per cent from $81,777 to $90,329. A significant increase, but a far cry from the 40 per cent rise in the price of a yearling at Magic Millions. 

Yet this perceived shortfall for everyday Australians in accessing racehorse ownership does not appear to have been prohibitive. Triple Crown reports that all three of their purchases have now sold out, while Blueblood’s standout Justify colt has few shares remaining. And another, the Newcastle-based syndicator Australian Bloodstock, anticipate that shares in their seven yearlings purchased at Magic Millions will be sold out by the start of the Inglis Classic Sale on February 6. 

Two factors have been cited in making up the deficit; prize-money and strength of the breeding stock sales. 

This year, Australian Bloodstock along with clients made a concerted effort to target the fillies’ market, sourcing high-end yearlings with the potential for significant resale value, a tried-and-tested avenue for buyers to expand their portfolio from small initial shareholdings, to ones that are more significant. 

Miss Canada (Exceed And Excel) was a $240,000 yearling buy in 2019 that sold for $750,000 at the Magic Millions National Broodmare Sale last year, while Game Of Thorns (Animal Kingdom), a $180,000 yearling, was sold for $350,000 at the same broodmare sale. 

“We were fortunate enough to purchase three fillies there with clients in mind, so we’re not having to run around and sell them,” Lovett said, who among the five fillies and two colts purchased at this year’s Magic Millions sale, came away with a $575,000 half-sister to their Group 2-placed Wandabaa (Wandjina) by Deep Field, in conjunction with Kris Lees and Yes Bloodstock.

“If you look at that pedigree, Wandabaa is a length off of a Group 1 filly and the mare has done such a fantastic job, there’s black type running through the page … So if we happen to win a black type race with her, she’s worth half a million dollars that day.

“Obviously the colt market we can’t compete with … but the market for breeding stock, as we saw last May on the Gold Coast, has gone to another level as well. Last year we had fillies like Miss Canada, Wandabaa and Game Of Thorns, they’re all fillies that we bought out of the sales ring as yearlings and have surpassed our expectations. 

“Princess Posh is another one. We paid $25,000 for her (in 2015), she won $800,000 in stakes and then sold her for $600,000, so it’s a near $1.5 million turn around for mum and dad investors, who went in at a $25,000 entry point. 

“There’s two clients that bought ten per cent of Princess Posh, costing them $2,500. So their share of $1.4 million (prize-money and on-sale fee) is $140,000. Now they’ve parlayed into another filly in Miss Canada, paid $240,000 for her, sold her for $750,000. They’re just parlaying it and keeping their engagement without having to put any more capital in, they’re just reinvesting what they’re winning.”

Prize-money, as has been widely noted as the envy of the racing world, has seen incomparable increases over recent years. Since 2011, total prize-money has increased 82 per cent, with in excess of $800 million on offer across the country. It is this that ultimately underpins the sustainability of the syndication market that, although adapting due to the increases in prices, does not appear to be under threat because of it. 

“While prize-money levels are where they’re at, I think it’s sustainable,” Lovett said. “New money, they might just have to come in at a smaller level. The days are gone where a client is going to take 20 per cent in a horse as their first one.”

Although lauding the strength of the market, Triple Crown’s Ward suggested the implications of restrictions induced by Covid-19 has resulted in a demand boom for syndication and bloodstock, one that may plateau in the years to come as society returns to a more normal, post-Covid-19 way of life.

“I think demand is significant. If anything it may well be increasing,” Ward said. “People have had limited outlets to spend their money over the last couple years and their household balance sheets are in better shape and people can live for the moment a little bit more, and one of the ways of doing that is through racehorse ownership. 

“I’m not pushing for further increases, being on the buying side, but the support is there at the moment. I’m not sure whether (the price increases) can be sustained, I think there’s specific reasons for it over the last couple of years, but you’d be a pretty brave person to predict similar rises in the next year or two.”

If one thing is for sure, when both buyers and sellers emerge from a record sale with a smile on their face, the market is certainly in a good place.