Investor Overview Mather Sports Village November 2012

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John Chambers
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1 Investor Overview Mather Sports Village November 2012

2 Mather Sports Village Investor Overview

3 Introduction In August, 2012 Ripken Design was contracted by Mather Sports Village, Inc. to perform a business plan assessment for a multi sport project in Sacramento County known as Mather Sports Village. Located just south of the Mather Golf Course, Mather Sports Village is intended to be a multi sport destination capable of attracting teams and individual athletes from throughout the world. Its emphasis would be along three core lines: Sports Tournaments, Sports Camps & High Level Instruction, and a Sports Academy. During the assessment process, Ripken Design was provided with a full copy of the Mather Sports Village business plan, and a detailed pro forma spreadsheet that shows the revenues and expenses across all business lines. The report that follows is an examination of these documents, weighed against industry standards, previous in market research performed by Ripken Design and internal operating documents and expertise under proprietary control of Ripken Design and Ripken Baseball. As the following report will make clear, the Mather Sports Village project appears to make a series of sound assumptions regarding market conditions, revenue/expense ratios, capital costs and business structure. This suggests that contained within the plan is a fully feasible and economically viable project that will not only realize an adequate return on investment for investors, but will also generate substantial economic impact for the surrounding community. Using the detail of the Business Plan and Pro Forma an optimal project scope can be created that will use is a combination of different revenue streams and project elements maximize these returns and minimize risk. Ripken Design has identified a number of assumptions that appear to understate certain revenue lines (e.g. concessions and merchandise), but may overstate the demand for programming in certain market segments. As such, Ripken Design believes that the total scope of the project will either need to be modified or phased in as laid out in the business plan to ensure operational profitability without saturating the market with excess inventory, or assuming greater market demand for a particular sport or program than exists at this point in time. This is not unusual for projects at this stage. Rather, project phasing and master planning often occurs after an initial business plan assessment typically as part of a larger feasibility study and presents a right sized project that both meets current market conditions and accounts for future growth. With that in mind, nothing in the Mather Sports Village should be dismissed out of hand as unreasonable, nor should it be accepted unconditionally. The reality lies somewhere in between: this is an complex project, but one for which there is both substantial demand while filling a gap in the local/regional supply of high quality facilities. The report identifies the perceived strengths and weaknesses of the model to provide a clear picture of the realities of sports facility operations in the Sacramento market, and its likelihood of success based on that assessment.

4 Local Supply of Facilities Key to an evaluation of the Mather Sports Village is an understanding of the sports field supply in the Sacramento Area. Field supply is critical to determining, on a by sport basis, whether there is a relative surplus or deficit of competitive sports fields in the market. Through the course of this evaluation, it is essential to understand the differences between a sports field and a competitive sports field. There is often an abundance of the former. Parks & Recreation associations will have softball fields in neighborhood parks, or dual purpose baseball diamonds to host soccer in the outfields during the fall and spring shoulder seasons. While fields of this type are certainly part of the local recreation infrastructure, they are ill suited for hosting competitive sports tournaments, and often lack the quality, infrastructure, access or surrounding amenities to attract teams from around the region for competitive play. Therefore, it is necessary that the supply evaluation identify the competitive fields in the area those facilities that can be used for competitive tournament play. Fortunately, there is a simple way to make this distinction. Facilities that are tournament capable are those that are currently used for tournament play. If this seems overly simplistic, consider: the market for any sport is constrained by two things: supply and demand, and the two work in tandem. The demand for tournament play is constrained by the supply of existing local facilities. Any facilities not suitable for tournament play in the current environment would not be suitable in a regional or national market. Consequently, a venture like Mather Sports Village is a supply side program. It assumes that the creation of new high quality field supply will be enough to capture existing regional market demand. Demand is a static measure that will be discussed in the next section. The primary assumption necessary to make projects like Mather Sports Village a success is that of the existing demand for tournament/competitive sports, there is inadequate high quality supply. As such, teams are forced to participate in events that are: In poor locations At poor quality facilities Spread across multiple sites Decentralized to population centers Inconvenient Uncomfortable In other words, there is such a surplus of tournament events at substandard facilities, that the presence of a high quality facility would easily and capably attract teams from throughout the region.

5 This thesis has been borne out at facilities across the country. Some of the national facilities most capable of attracting a regional crowd include: Ripken Experience Maryland (MD) Ripken Experience Myrtle Beach (SC) Cooperstown Dreams Park (NY) Disney s Wide World of Sports (FL) East Cobb Baseball Complex (GA) Baseball USA The Yard (TX) First Tennessee Fields (TN) Each of these facilities has included some or all of the following elements: 1. Provide 1 st Class Playing Facilities and Amenities 2. Be proximate to high quality family entertainment options 3. Have sufficient capacity to host large events on site 4. Have 2 4 hour access to major population centers There are two natural consequences to building a new facility contingent on these factors. One is that other new facilities that offer these items will further dilute the market and diminish a complex s regional competitiveness. This is not always the case. Sometimes, the addition of otherwise competitive facilities will have the opposite effect and create a true regional destination market. Cooperstown Dreams Park set the market in Cooperstown, NY and was followed by Cooperstown All Star Village. The two have specialized to capture two slightly different segments of the market while making Cooperstown a must visit location. First Tennessee Fields is located extremely close to a huge complex in South Haven, MS creating two large tournament facilities in the same market. In that case, each facility came to specialize by sanctioning body. First Tennessee is home to the area s Super Series and Triple Crown tournaments, while South Haven uses USSSA. The second consequence is that over time, if not successful in establishing a successful brand and not active in staying on the cutting edge of the youth sports market, a complex can fall out of favor as other, newer sports facilities enter the market. All that said, in areas with inadequate supply for tournament programming, the circumstances certainly support the saying: if you build it, they will come.

6 It is no surprise that there are relatively few baseball tournaments given the supply shortage or that those tournaments that do exist operate out of softball complexes at relatively low price points. That is not to say that the demand isn t there. Rather, that supply is constraining the demand in the youth baseball market, ceding to other facilities throughout California. Supply Summary This analysis reinforces some of the information set forth in the CVB analysis: Pronounced shortage of baseball facilities. Few large soccer facilities, none with the amenities or quality to meet market demand for major soccer events. Many softball facilities, but no large marquee facility. The capacity of softball facilities will be increased if baseball programming is shifted to baseball specific fields. Teams in all sports will travel throughout the region for tournaments. Determining factor is the availability and quality of tournaments. Many teams will travel 2 3 times per month and will choose to go to different venues to keep things fresh. The presence of regionally competitive facilities does not diminish the likelihood of success for a new Sacramento based complex. New facilities should be sufficiently large to host major tournament events on site; or to provide an attractive supplement to enormous regional/national events None of the regional facilities have first class family amenities, facility layout or attractions similar to what is found on marquee complexes elsewhere in the country. Throughout the Sacramento area, there are very few softball complexes with more than five (5) fields in one location. Even with this supply restraint, there is very strong demonstrated demand for existing facilities. A new facility could capitalize on that demand by tapping into the existing softball networks and hosting new tournaments, or serving as the home complex for these major events. Baseball tournaments are the hardest to quantify. We have already established the severe shortage of baseball fields, which exceeds the shortages in any other sport. At this time, the Sacramento area is poorly equipped to host even small baseball tournaments, although it does so by using existing softball infrastructure. Tournament complex additions that include baseball fields would be a boon to an area that currently hosts a disproportionately small amount of regional baseball tournaments. There is graphical evidence to support the need for baseball fields in the area as well. Ripken Design s proprietary internal business modeling software is designed to identify the areas with the largest potential pool of tournament baseball teams. This

7 data combines national and regional data from the Sporting Goods Manufacturer s Association with demographic data about tournament participants including, income, family size, age, and other characteristics. Basketball, Volleyball and Court Sports The indoor basketball complex is designed to accommodate fourteen basketball courts for tournament play. This size of facility appears to fill a potential gap in the market it is smaller than the major facilities that can host 30+ courts in the area, but large enough to be able to host self sufficient tournaments and events throughout the year. In other locations across the country, such as Hampton Roads, VA, 1 facilities like this have successfully operated facilities of this size, using the complex for tournaments, camps and also as practice space for area high schools through a deal made with the local school district. While fourteen courts is larger than most other indoor basketball facilities in the country, and may be able to shrink down depending on operator recommendations, it is safe to say that there are not many easily accessible indoor court facilities in the region that are not tied in with universities or other private institutions. Development Costs Development Costs broadly split into three categories: Infrastructure, Common Area and Sports facilities. Mather Sports Village, Inc. has provided an excellent level of detail on the development costs, and Ripken Design has no reason to question their due diligence on either the infrastructure of common area development. One the partners in Mather Sports Village Inc. has spent his career designing and constructing sports facilities, from golf courses to soccer fields to baseball diamonds. He is a grass and dirt guy who knows far more about building fields in California that Ripken Design does, and this despite building a handful of fields in California ourselves. Even so, Ripken Design s experience with sports facility development suggests that some of the cost projections are accurate representations of the what it will cost to build a typical sports field, but perhaps understate the costs required to create the destination facility that Mather Sports Village is projected to be. These observations are noted below: Mather Sports Village is feasible and sustainable and will create huge economic impact for the County of Sacramento, the local communities, and the Sacramento Region. Its planned location and scope will make it one of the best complexes of its kind and it will also meet or exceed the County of Sacramento s objectives of land use, community benefit, funding, and economic impact. 1 The Boo Williams Sports Complex 8 Courts

8 Mather Sports Village will become a destination venue for all sports enthusiasts and participants because of the quality and magnitude of its facilities, tournaments, camps, clinics, and other events. It will be one of the only facilities of its kind in the world and will create an incredible branding opportunity for this region to spur additional growth. Summary The detailed business plan and pro forma for The Mather Sports Village project present sufficient detail and information to draw general conclusions about the overall viability of the venture and the accuracy of the assumptions contained within the model. This is a complex project, and achieving the financial benchmarks will require utilizing professionals with intimate knowledge of the sports landscape for each sport, experienced park/sports facility operators and a well trained sales and operations staff. It will also require that the venture itself be well capitalized, as sports facilities often take 3 5 years to reach maturity in operations. While large and complex in scope, the project is not unrealistic. Many of the assumptions made within this business plan are in line with market rates and expected demand for the facility. In some cases, revenue assumptions appear low relative to industry standard per capita rates and travel party characteristics. In other situations, especially those surrounding the perceived programming demand for various sports (90 Baseball, Lacrosse, Rugby), the assumptions appear high, and may require a correction of the pro forma as well as a reduction in the overall scope of the project through a reduced build out or phased in approach. The model for competitive sports facilities, especially tournament operations and, to a lesser degree camps, is well established and easily replicable. The determinants of success are essentially limited to the local and regional demographic profiles, the quality of the facilities and the degree to which the facility utilizes professional marketing, sales and customer retention techniques. There is no reason to believe that Mather Sports Village will not be able to satisfy any of these factors.

FEASIBILITY STUDY. Executive Summary

FEASIBILITY STUDY. Executive Summary FEASIBILITY STUDY Executive Summary GUIDING PRINCIPLES The purpose of this study was to validate the feasibility of a sports complex in Butte County. The Sports Force uses three basic criteria as part