Re: Pete's Newest Venture.
Struggling Tennis Event to Keep Spot in the Sun
Investor group that includes former players rescues Indian Wells tournament from a move overseas.
By Bill Dwyre, Times Staff Writer
March 1, 2006
The prestigious Indian Wells tennis event, struggling financially the last few years and on the verge of being purchased and moved out of the country, is alive and well and expecting a long stay in the desert, tournament officials said Tuesday.
Charlie Pasarell and Raymond Moore, tournament directors, will announce today that their Pacific Life Open, which opens next Wednesday, is within days of completing a complicated financial package that will avoid what had become a real threat as recently as several months ago. That threat was the sale and move of the tournament to Doha, Qatar.
"At first, the main bidder was Shanghai," said Moore, "but more recently, it was closer to going to Doha."
Pasarell and Moore said that, coming to the rescue, was a group of investors that includes former tennis stars Pete Sampras, Chris Evert and Billie Jean King, as well as the United States Tennis Assn., the Tennis Magazine publishing group and the city of Indian Wells. They also have sold several plots of land, totaling 64 acres, next to the stadium that will become hotels, shops and restaurants in the next few years, and have acquired a more favorable interest rate loan from a new area bank, Desert Commercial. The main developer of that real estate will be Sanderson J. Ray Corp. of Newport Beach, which expects to build, among other things, a nearby hotel named the Remington Las Montanas.
"Much of the money is in escrow," Moore said, "and we expect the final closing to take place Friday."
That closing would allow the new group to take over the 50% currently owned by IMG, which wanted out of the deal and was willing to sell to Shanghai or Doha to achieve that.
The issue was a large loan-service debt, stemming from the construction of the state-of-the-art Indian Wells Garden Stadium, which was opened in 2000 with 16,000 seats, at a price tag of $77 million.
The tournament had grown in the last 30 years from small stadiums at Mission Hills and La Quinta resorts to a fancier one at the Hyatt Grand Champions, to Pasarell's Palace, which last year attracted the second largest tennis audience in the country after the U.S. Open with its 283,653 paying customers.
But it had been built under the presumption that a 10-year marketing contract with European firm ISL would contribute $11 million annually to the event's bottom line. When ISL went out of business after 2 1/2 years, that left Pasarell and Moore's PM Sports Management Co., and partner IMG, with $27.5 million instead of a projected $110 million.
Pasarell and Moore, both former pro tennis stars, wanted to go on, and did so with smoke and mirrors and a bank loan at 8% on the more than $40 million still left to pay off. Eventually, they were generating as much as $3 million annually on tournament operations, and still finding themselves as much as $2 million further behind because of the debt service. IMG's commitment was through this year's tournament only, so the dilemma for PM was to find new partners or sell to foreign interests and ponder the wrecking ball.
The city of Indian Wells bought one 27-acre parcel of land, projected for new housing, and also entered into an agreement to lease another parcel to PM at $1 a year so that there will be sufficient event parking even after Sanderson J. Ray begins to build on current parking areas.
Then Bob Miller and George Mackin, main investors in the Bob Miller Publishing Group that not only publishes Tennis Magazine, but also Spin and Vibe magazines, got Sampras, Evert and King involved, as well as several other local investors.
"I'm a small little piece of the puzzle," said Sampras, who has won at Indian Wells twice. "I just believed it would be a shame to lose this tournament. It is right there behind the U.S. Open as the best tennis event in the country. To have it leave the country would have been a big blow. It's a great spot for tennis. I felt that way as a player, and most of the players I know still feel that way."
While the specific size of investments from various parties was kept private by Pasarell and Moore, the USTA's initial involvement was believed to be between $3 and $5 million, with an option to step up to a higher level.
USTA President Franklin Johnson of Los Angeles, among the first to publicly advocate that his group pitch in to keep the event in the United States, said, "I am absolutely elated. This was a complicated deal, and in the end, everybody pulled together. To lose this one would have been very bad for tennis in this country."
Moore said that, after all the various parts of the deal are signed and funded, the event will have gone from servicing a $40-million debt at 8% to a $16-million debt at 7%. The prize money is $5.2 million, third among U.S. events behind the U.S. Open and the NASDAQ tournament in Miami, held the last two weeks in March. Traditionally, the title sponsor, in this case Pacific Life, handles much of the purse expense.
Pasarell said that they are projecting a $2-million profit on operations this year, thanks to increased sponsorship, ticket sales and TV revenue, and added that the group's partnership with the city of Indian Wells includes a clause that commits them to this event in the desert for the next 20 years.
"I'm relieved," he said. "This year is going to be a much more enjoyable event for all of us."