Kentucky Thoroughbred Industry in Slump : Horse Farm Sales Pace Slows to a Trot

Standing among the rolling hills of the Kentucky bluegrass are many signs of the times. They say “For Sale,” and they tell the story of the slumping thoroughbred horse industry.

Raising animals for the sport of kings often takes a royal fortune. Just five years ago, sons of Arab sheiks and Texas oil barons were spending those princely sums, gobbling up land in a seller’s market that seemed infinite.

But the giddy days of the Lexington land boom are over. The two sons of the Emir of Dubai have their land and are busy building air-conditioned horse barns. And Nelson Bunker Hunt has stopped paying top prices for tracts of land to add to his Bluegrass Farm.

When the decade began, the market for thoroughbred horse flesh was strong. Hushed crowds filled the Keeneland Sales Pavilion and watched as auction bids at $1 million a wink pushed prices for yearlings to astronomical heights.

But now, although the very top of the market may still be firm, even the most optimistic of industry observers admits the middle has gone soft.

And as the horse market goes, so goes the market for thoroughbred real estate.

Much Land for Sale

“I’ve been in this business for 30 years, and I don’t ever remember this much land being up for sale,” said Paul Sturgill, who specializes in thoroughbred real estate for the wealthy.

“I think it’s a reflection of the state of agriculture in general and the horse industry in particular,” said Nick Nicholson, executive director of the Kentucky Thoroughbred Assn., the major industry group in the state.

“The horse business is in a downward trend,” said Bill Justice, whose real estate firm specializes in horse farms. “But as with the horse business, the top end of the market is still good. The well-situated, well-improved horse farm is still commanding a top price.”

At Keeneland’s July Selected Yearling Sale last year, while those with horses of lesser pedigree were taking a beating, a colt sired by Nijinsky II smashed previous records by selling for $13.1 million.

But during the less-prestigious September yearling sales, the prices were off considerably. And that forced some marginal operations out of business.

“The fall sale took a big dip,” Sturgill said. “Some people say there are too many of those type horses on the market. And it’s not like hogs or cattle. When you have too many hogs, you slaughter them and eat them. But you don’t eat a brood mare. And they keep producing year after year.”

There will always be high demand top-of-the line horses with fine breeding, perfect confirmation--the correct combination of shape and size. But in producing that rare combination of genes and luck, a lot of not-so-hot horses are bred. And the farms that raise and care for borderline horses are not doing well.

“The bottom got hurt the worst, and the middle has suffered badly as well,” said Justice, adding that boarding operations and the marginal stud farms are seeing their worst times in years. And with some of those operations leaving the business, he estimated that prices for all but the best land have fallen between 20% and 30%.

Sturgill said he believes that much of that because the thoroughbred industry is not attracting the same kind of investors it did five years ago.

“A lot of people came in looking to move to a good tax situation, rather than looking to raise a good horse,” Sturgill said.

“Five years ago, everything was inflated,” said J. T. Denton, who has been in the land auction business for 40 years. “But that has changed.”

Advantages Threatened

With tax reform pending in Congress, many of the advantages in raising thoroughbreds are threatened.

“The pending tax changes, I don’t think would be conducive to the industry,” Sturgill said.

Jane Winegardner, who lists some of the top farms, said today’s buyers are far more selective than five years ago.

“It’s not a panic market at all,” she said. “I just think they are more sophisticated. Just like they really check out a horse for pedigree and conformation, it’s the same for a horse farm.”