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McMahon & Hill Bloodstock Annual Pinhook Partnership
2011-12 Spruce Lane Pinhooking Partnership closed Dec 30, 2011.
Please email or call to join the 2012 pinhook partnership
McMahon & Hill Bloodstock will offer investment in "Spruce Lane Pinhooking 2012-13 LLC" to Accredited Investors beginning August 1, 2012. The partnership will be made up of weanling colts and fillies, purchased at the November Sales, boarded at Spruce Lane Farm, and targeted for resale at the 2013 yearling sales. The Operating Agreement will be available for the inspection of Accredited Investors by emailing mike@mcmahonandhill.com or jamie@mcmahonandhill.com. The Operating Agreement spells out the formation, goals and particulars of the company.
Introduction:
The thoroughbred weanling is one of the most difficult assets to appraise. A young horse, like a young human athlete is full of potential and bound to undergo drastic physical change. Investing in weanlings for resale at the yearling, or two year old market is commonly called "pinhooking".
The business of buying weanling thoroughbreds
The weanling market begins in October, but for the premier horses, November is the key buying time. Fasig Tipton has a very nice selected weanling market but the best prospects are often found at the massive Keeneland November Sale. All weanlings fitting our pedigree criteria are inspected at each sale and the team "short lists" the desirable horses. These are inspected at least once more, before turning over the "shorter" list to our veterinarian Natanya McMahon DVM, who examines the foals for soundness of bone and wind. X Rays are available as needed in the Sale Repositories, but other shots may be required. Endoscopic exams are performed on all weanlings prior to sale.
Since purchasing Spruce Lane Farm in 2005, the McMahon's have purchased three crops of foals for pinhooking. While our first year was lower end horses and yielded a break even result, our second year 2008-2009 yielded two excellent fillies, Nina Fever already a winner of 3 races at Keeneland and black type placed at Woodbine and Listen Dear our best pinhook ever - a purchase of $205,000 resold for $725,000!!
Spruce Lane Pinhooking LLC
To facilitate the management of what is now quickly becoming a popular and growing aspect of McMahon & Hill, we formed LLC for our clientele to invest in annually. Named Spruce Lane Pinhooking, the partnership is managed by McMahon & Hill, which receives a 5% commission on the purchase and a 2% commission on the sale price of each yearling. If the Members ROI is greater than 120% the management fee increases to 5%. The partners invest in units of $25,000 which includes a budget for ongoing costs.
Upon sale of a yearling, our consignor Hidden Brook Farm takes a 3% commission and sends the proceeds to McMahon & Hill, where the money is disbursed minus the 5% management commission. If the partnership reaches the 120% ROI goal, the 5% is held, if not McMahon & Hill returns 3% to the partners. The partnership functions best when enough money is held to carry a horse that does not sell. In our history of managing pinhook prospects (9 years), only one horse has been owned into his three year old year - all others have been sold - and we have NEVER needed a cash call. We have excellent record of moving the inventory of the partnerships along quickly and effectively.
Key to success for the partnership
The partnership is profitable when we buy the precocious weanling that develops into a top grade yearling. The average horse is held for only 10 months and thus expenses per horse (including purchase commissions and mortality insurance) rarely exceed $15,000 per horse. Often a fine line is walked between taking a chance on holding a horse and selling at a loss. The most important aspect of the partnership though is the selling of the best horse. A breakaway sale which far exceeds expectations will generate a windfall return for the partnership. A modest return on the sale of the partnership's best horse will almost always preclude a modest ROR for the members of the LLC.
Conclusion
Accredited Investors should consider joining Spruce Lane with a minimum investment of $25,000 spread over 4 years. The 2012 buying season looks to be a situation of over supply, providing buyers with plenty of opportunity. While the economy is in recession, and many sellers needing to sell, 2012 should be a good time to buy.
Investment for Accredited Investors Only
We will be closing this partnership in Decmber 2012 and if over subscribed we may purchase a horse in January or on the private market. We will only purchase with money already invested. To facilitate planning and purchase please email with the subject line "Spruce Lane Pinhooking, LLC Accredited Investor" to make your investment prior to the conclusion of the offering.
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