Burton expects to move SportsQuest forward despite tight economy

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• Burton expects to move SportsQuest forward despite tight economy



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SportsQuest plan

The vision for SportsQuest is utopian. The financial reality of building a project of its scale is a complicated mix of private money, debt, speculation and doubt.

The idea for SportsQuest is impressive. So is the price tag. It's a $250-million, 250-acre sports facility that will include athletic fields, an ice-skating rink, an entertainment center, training amenities, an athletic center, and a velodrome, as well as retail and office space. It will support youth, Olympic and professional sports.

The project is split into two pieces. The first is the sports complex, which includes a health club, playing fields and a 5,000-seat arena. The second is the corporate and retail complex, which includes 100 rooms, a 250,000-square-foot office park and retail complex, a 100,000-square-foot retail center and about 20,000 square feet of retail inside an entertainment center.

SportsQuest CEO Steve Burton envisions the two pieces working symbiotically. For example, the retail portion would include a restaurant for families to eat between events; the retail unit would include a shoe store for someone who might have forgotten their cleats.

The office building would cater to sports organizations using SportsQuest to train. The hotel would be used for tournament participants and their families.

"This is more than dropping a hotel on a corner or opening a strip mall," Burton said.

. . .

Paying for the two pieces also is separate.

Burton is responsible for the sports portion of the project, which includes fields, arenas and a swim center.

The cost for that portion of the project is about $100 million, and Burton said he's on track to break ground on Dec. 15. He hopes some of the sports fields will open as early as the fall of 2010, with the rest opening in the first quarter of 2011.

According to Burton, 35 percent of the $100 million is coming from a combination of local investors and strategic partners. The remaining 65 percent of the money will come from a combination of senior debt and institutional investors. He hopes to find investors to raise $3-$5 million to complete the $100 million price tag and build all of the sports portion at once. If he can't, the project will still go forward, but will be built in phases.

Burton said he is the second largest investor and is putting up a "substantial amount" of his own money. He wouldn't disclose the identity of the other investors or how much they are putting up. However, all of the investors will join Burton in ownership.

Burton is in the process of finding developers who would buy the retail property and develop it. Finding a developer could be difficult, in the current economy.

"I have no idea who is going to finance" this portion of the project, said Brian Glass, senior vice president of retail brokerage for Grubb & Ellis/ Harrison & Bates Inc.

Given the state of the economy, Glass said banks are reluctant to lend money on projects as retailers hold off on expansion plans.

Two major retail projects in the area are languishing because developers can't attract tenants. At Westchester Commons in Chesterfield and West Broad Village in western Henrico County, empty storefronts make sections of the projects seem like ghost towns.

The overall office vacancy rate for the Richmond area was 15.6 percent in the second quarter of this year, up from 11.7 percent for the same period a year ago, according to CB Richard Ellis, a commercial real estate firm in Richmond. More than 850,000 square feet of office space has come back to the Richmond market since the beginning of the year.

Christopher J. Singleton, managing director of Richmond-based Kanawha Capital Management LLC, says finding financing for large retail and office projects is very difficult in this environment.

"My suspicion is that it is pretty hard these days, and will stay challenging for awhile, when you consider all the retail and office space that's been built over the last five to 10 years without a concurrent increase in population and how reluctant financial institutions are to lend these days," he said.

Burton believes the pieces will be in place to start building the sports and retail sides at the same time.

"We will largely open in sync," Burton said. "Though in reality it is not unlikely that in today's environment the retail may lag a quarter behind."

. . .

SportsQuest already is a profitable enterprise with ice sports, swimming sports, indoor field sports and family entertainment now in place. Burton owns two ice rinks and is confident that once the sports portion of the campus is complete, the revenue streams would continue to make the operation profitable.

"We could open today and be profitable," he said, believing that building a new ice rink on campus will generate enough money to sustain SportsQuest.

But the key to his plan will be health club memberships.

He said there would be three types of memberships: for athletes, fans and visitors. Membership costs would vary depending on several factors including family and individual memberships. Services will increase depending on the level of membership.

A membership gives a person access to the campus during public hours and includes free admission to professional events held at SportsQuest.

Burton said that even though people aren't paying to watch pro events, SportsQuest still will make money through concessions. As owner of both the teams and the arena, SportsQuest won't have the high overhead that comes from leasing a facility. SportsQuest will control scheduling and can hire one staffer to oversee all the operations.

If SportsQuest gets a small fraction of the 250,000 Richmonders it estimates are already members of area fitness clubs, "we have a very profitable business," Burton said.

Using the $100 million figure, SportsQuest would need to maintain between 3,300 and 13,900 members per month, depending on the level of membership, over 25 years.

A steady source of revenue can come from amateur tournaments. Burton believes SportsQuest can attract about 30 tournaments -- from lacrosse to soccer to tae kwon do -- each year, which he projects will bring 200,000 people to the area. Burton's estimates are based on attendance at tournaments from around the country.

According to Sports Backers Executive Director Jon Lugbill, the Jefferson Cup -- a boys and girls youth soccer tournament --this year brought an estimated 32,300 visitors to the Richmond area with an economic impact of $9.6 million.

However, the tournament is one of the largest in the country and is ranked in the top five in terms of quality for boys and girls and should be seen as the exception, not the rule in terms of attendance. This year's tourney took place over three weekends.

Owning the facility gives SportsQuest a distinct advantage in attracting tournaments for Olympic sports as well.

Each sport has a national governing body that oversees tournaments. Governing bodies depend on donations, gifts and the U.S. Olympic Committee for funding, and Burton will have the ability to offer governing bodies profit sharing.

"I can call them up and say, 'I will be one of your largest benefactors,'" he said.

Contact Louis Llovio at (804) 649-6348 or LLLovio@timesdispatch.com.