I've Got The Horse Right Here

Sales of Thoroughbreds are booming, thanks to an injection of new money

Out front at the famous Keeneland auction, valets in pine-green polo shirts are whisking away a steady stream of gleaming Mercedes, Jaguars, and BMWs. Indoors, though, all eyes are on an older form of transportation. A 16-month-old bay colt is snorting and pawing a constantly swept floor in a small center ring. At the sound of the auctioneer's sing-song patter, bids begin. Less than 90 seconds later, the colt sells for $57,000 and is rushed off. After all, there are nearly 300 more Thoroughbreds to go.

Keeneland Assn. in Lexington, Ky., has been auctioning off horses for more than five decades--but 2000 may be its best year ever. The Sept. 10-23 yearling sale took in a record $292 million, a 25% increase over 1999's take. What's more, prices at the high end far exceeded expectations. One colt, fathered by Storm Cat, who's sired more than 80 stakes winners, sold for $6.8 million, almost double its expected price and the most paid for a single yearling since 1985. Another of Storm Cat's offspring, a filly, went for $4.4 million. The average price was $88,085, vs. $77,390 a year ago.

Sales are being driven by both the health of the industry and the steam of economic expansion, say observers. Lured by the excitement of horse racing, the high-risk/high-reward investment, and the social cachet of being an owner, investors are carting cash to Kentucky from Silicon Valley and Wall Street. These new-moneyed players are buying into everything from partnerships in which they own a share of a stallion to farms of their own with dozens of horses.

The Thoroughbred industry has "always been a mirror image of the economy," says Bill Casner, who partnered with Excel Communications founder Kenny Troutt to buy WinStar Farm in Versailles, Ky., in January. "When people have disposable income, they gravitate towards things that are fun," says Casner, a Dallas businessman and Excel investor who was sporting faded jeans and ostrich-skin boots on a recent visit to WinStar's 650 acres.

In the early '80s, the last peak in Thoroughbred investing, oil money was driving growth, Casner says. Now tech-sector success stories and entrepreneurs are behind the boom. WinStar alone purchased 15 horses at the September auction.

Yearlings--under two years old--are not quite full-grown and often have never been trained, much less raced. They're skittish and wild-eyed as they're led through a crowd of buyers who evaluate the angle of the hoof, the slope of the shoulder, the straightness of the leg. With no race history to go by, buyers rely on bloodlines and "conformation," or physical traits, to make a choice.

Keeneland's 900 oak-covered acres are dominated by hundreds of stables and paddocks, where horses are brought the day before the sale so buyers can have a closer look. Groups of conspicuous new horsemen--thirtysomething men in matching uniforms of Wrangler jeans, pressed denim shirts, and sunglasses--stand about offering running commentaries to partners over their cell phones.

"GREAT HOBBY." In recent years, several of these businessmen new to Thoroughbred racing have invested millions. Eugene Melnyk, chairman of Biovail Pharmaceuticals, a Toronto-based drug manufacturer, started buying horses three years ago and has built a sizable stable. At Keeneland's September yearling sale--there is another in July--Melnyk bought 35 horses. "Its a great hobby," says Melnyk. "There's a great thrill in owning a stakes-winning horse and being at the track while it runs." Another heavy hitter is David J. Shimmon, CEO of Kinetics Group, a Santa Clara-based high-tech company. He spent $4.1 million at September's sale, picking up two horses of his own and investing in a partnership.

Wall Streeters also are amassing investment portfolios based on the horse, not the bull. Steve Duncker, a Goldman, Sachs & Co. managing director, picked up four horses at the auction and currently owns pieces of 34 Thoroughbreds. Since he set up a partnership with a dozen colleagues four years ago, Duncker concedes that his returns have been "lumpy" but he likes the entertainment.

Despite all the heated bidding, some industry participants fear that interest in Thoroughbreds could be a fad that will fade. "A few years ago, everyone wanted a Harley, whether they could ride a motorcycle or not," says John Sikura, a Kentucky breeder. Still, the excitement of following a horse to races, sitting in the owners' box, and maybe standing in the winner's circle may make Thoroughbreds a more enduring pastime than polishing a "Hog" every weekend. "It's a lot more fun than investing in the stock market," Sikura says. "What are you going to do if your stock goes up, cut out the newspaper clipping and show your wife?"

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