Probable Stallion Deal, does it make sense for us???

[EasternGale]

Question: How is Three Chimneys regarding help with consignment? We have a filly, Stone Hope, by Grindstone out of Fairest by Known Fact, who we just retired as a partnership this week. She won a MSW, and had 1 win in 10 starts and hit the board 6 out 10 times. As anyone with pedigree knowledge would know she is a half brother to MGSW Brilliant. We worked out a deal with Three Chimneys where she will be bred to War Chant, and then will be sold next November at Keeneland in the Breeding Stock sale on their advice that she would bring at least 100K in foal to War Chant. Any positive or negative thoughts about this decision?

[madelyn]

I believe this might be breeding an inside out.. very interesting. If the details are worked out it might be a good deal... does Three Chimneys keep the mare? Do they charge for that against the proceeds? Is it a 50/50 mare share split?

I believe Anne Peters does their matings and by reputation is a pretty good pedigree analyst.

[hpkingjr]

Interesting discussion. It appears War Chant's stock is dropping off like a prom dress. His 05 and 06 crops were less than 50 foals. His yearlings sales averages dropped 50% from last year and the median was $65,000.00 on a 60K stud fee. His yearling fillies did not average his stud fee.

What's in it for Three Chimney's? Mare board of about $10,000.00 whether she gets in foal or not. Sales Prep charges of 3 grand. Commission of 5 grand if she brings the 100K plus FT commission of 5K. They move a War Chant at 50K if the split is 50-50. So bottom line is they receive 68 grand from the 100K. You receive 32K less the 5K to FT for a net of 27K. If her sales price drops to 80K their share is 57K(40 +keep and sales charge) and your share drops to 19K. Great deal for them. All the risk for you. All they put up is a season they're having a hard time selling. You put up a lovely mare. Kindest regards.
2006 (YTD) Covering Sire Weanlings Yearlings 2-Y-Os
Number Sold n/a n/a 21 4
Total Average n/a n/a $96,631 $73,750
Total Median n/a n/a $65,000 $60,000
Colt Average n/a n/a $111,551(15) $73,750(4)
Filly Average n/a n/a $59,333(6) n/a

2005 Covering Sire Weanlings Yearlings 2-Y-Os
Number Sold 6 1 34 5
Total Average $320,000 $90,000 $152,231 $204,000
Total Median $340,000 $90,000 $130,820 $110,000
Colt Average n/a $90,000(1) $174,661(23) $290,000(2)
Filly Average n/a n/a $105,331(11) $146,667(3)

[hpkingjr]

Sorry must have double clicked

[CA Michael]

Excellent analysis.

[EasternGale]

As far as I know under the agreement, we are not paying the stud fee as it will come out of whatever she brings at the sale while in foal to War Chant. And she is going to be residing up by us for most of the ordeal, and will only be in Kentucky when needed, so she won't really be boarding in Kentucky. She'll be up here where we are in NJ/PA.

[hpkingjr]

My bad on the board charge but I made the assumption that you would want the foal to qualify as a KY bred for the incentives and to help the sales price so the mare would need to be here the entire time. I would question not keeping her in KY under your situation.

Clarification: Are they splitting the sales proceeds with you 50-50-or are you going to pay 60K for War Chant from the sales proceeds? If you're going to pay 60K from the sales proceeds then you should just go ahead and give the mare away now. (60K stud + 10K Board +13K Sales prep and commission + 2K vet fees) means your break even is 85K.
Sorry if I seem negative but it appears you do not have all the pieces to the puzzle. Keep asking questions.

[EasternGale]

You see we're just a quarter owner of the mare, and it's the managing partner who organized the deal...And I know for sure that the deal was struck under War Chant's new stud fee of 30K, and not his previous of 60K. What I have said here is what I know. I am not sure of the other details, but she will be selling in-foal so I assume the buyer can then drop the foal wherever he would like to. Again, that's simply all I know.

[Thunder]

hpkingjr - Great analysis - Thanks

[FOS]

hi EasternGale

Let me understand this...Three Chimneys has told you and/or your managing partner that the mare Stone Hope (by Grindstone) "would bring at least $100k in foal to War Chant" (your words) at Keeneland November 2007?

If you've got that in writing (as it relates to the $30k stud fee) that's excellent (to say the least)...but I do find it hard to believe.

Respectfully

[madelyn]

EasternGale, I have to agree with hpkingjr.. I don't think this is a good deal. Since you own a quarter of the mare, you must have a vote?

[Cathy D]

If the stud fee is coming out of the sales proceeds, you are paying the $30,000 stud fee. Effectively, your partnership is giving Three Chimneys a percentage of the mare in addition to the stud fee. Who is responsible for paying for shipping, the mare's board, sales prep, and sales expenses and commission? What happens to you if she only brings $30,000?

I see this is a good deal for them, but not so good deal for your partnership.

[madelyn]

Yes, as Cathy D points out.. you are committing to a $30K stud fee... you could actually end up owing them money if she doesn't bring enough.

[Old Goat]

In the case of Mare Shares if the mare does not sell for the $30K then Three Chimneys would get what she sold for and the mare owner would be left with nothing. The mare shares I have dealt with were like that. The mare owner is responsible for all fees of the mare which would include consignor fees, sale entry fees, etc. Basically, you pay the stud fee by what the mare brings... if she brings over $30K you pay the normal fee but if she doesn't, you pay whatever she brings and pretty much just give the mare away and possibly have bills left to pay. I may be wrong with this mare share but that is pretty well how the ones I have dealt with in the past have gone. If I were a partner, I would want a copy of the contract to read over before it was signed by anyone in the partnership.

[BargainBlueblood]

You're getting very good advice from the folks on the board. In particular, Mr. King points out War Chant's inherent decline in value in the last two years. I seriously doubt your mare (in foal to War Chant) would bring more than $50-75K, based on my knowledge of the market. And like some other posters said, you're going to have to PRAY she brings more than 30K or you're going to be taking a BIG hit on a mare you could easily sell OPEN, today, for a good $20K. Why not just do that? Best of luck to you!