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Club Motorsports (new track in NH) - bad news?

Discussion in 'Ferrari Discussion (not model specific)' started by BigHead, Feb 5, 2004.

  1. BigHead

    BigHead Formula Junior

    Oct 31, 2003
    992
    Outside of Boston
    Full Name:
    Dennis
    I was just presented with a copy of a recent letter printed in The MountainEAR, the local NH newspaper, on the issues surrounding the track (reproduced below). VERY interesting reading.

    A lot of us Ferrari-track-aficionados in the Northeast were really looking forward to this, but we'll see.

    vty,

    --Dennis

    =======

    Letter from The MountainEAR, December 4, 2003


    Valley Motorsports Park promises much more than reality can provide

    To the Editor:

    Club Motorsports Inc., developers of a proposed 250-acre racetrack facility in Tamworth, New Hampshire, claims that it will provide jobs to 40 Tamworth residents. On a November 22nd news broadcast, Club Motorsports Inc. (CMI) was even quoted as offering 200 jobs.

    In actual fact, the optimistic financial assumptions that CMI is currently circulating to prospective investors state that at best, within the next five years, CMI expects to generate only 20 to 25 seasonal jobs for local Tamworth residents at an average pay of only $30,000 per year. In contrast, CMI anticipates creating 15 year round jobs for non-local employees at an average salary of $100,000 per year.

    According to CMI’s financial assumptions, its CEO, Stephan Condodemetraky, plans to pay himself $240,000 per year, more than ten times more than the average Tamworth wage earner.

    At the recently built BeaveRun racetrack in Pennsylvania, which was designed by CMI’s racetrack designer, the developer said there would be 100 jobs. A local Pennsylvania resident notes that in actuality the BeaveRun track employs 8 teenagers in summer, 3 adults in the winter months. Is there any reason to think that CMI's proposed Valley Motorsports Park in Tamworth would turn out differently?

    As a professional private equity investor who has reviewed hundreds of startup business plans, I feel qualified to provide an evaluation of CMI’s proposed financial model. As part of my due diligence, I talked with some veteran racetrack participants who had also reviewed CMI’s business plan.

    These racetrack veterans and I agree that CMI’s inexperienced management team has developed an unrealistic financial model based on many incorrect assumptions, and feel that CMI is likely either to: 1) fail to raise sufficient capital to complete construction of its $14 million racetrack; or 2) be forced to operate the business at a significant annual loss and go out of business within 3-5 years.

    Simply put, CMI’s proposed racetrack venture is an ill conceived business concept. It is unlikely CMI could successfully raise capital from a professional private equity investment firm. CMI’s first investment bank, Arete Capital, was unable to raise the necessary capital and is no longer working with CMI. Arete and CMI are now embroiled in a lawsuit fight. Altogether, CMI has been trying to raise $14 million via equity and membership sales for almost 12 months and has to date raised only 25% of the necessary capital. CMI still needs to raise another $10.4 million to achieve its minimum racetrack objectives.

    One possible reason for CMI’s lack of fundraising success is the proposed valuation of $15 million as today’s value of CMI’s racetrack business concept. As a point of comparison, the average valuation for software and biotechnology startups which raised private equity during 2000 to 2003 was just over $1 million.

    Another important concern that any professional investor would have is that none of CMI’s management team appears to have any prior experience building, marketing or operating a racetrack.

    CMI’s Condodemetraky is an avid entrepreneur who seven years ago grew a small consulting firm up to six employees. This one business success, however, is outweighed by the disappointing results of Condodemetraky’s more recent three entrepreneurial endeavors. Condodemetraky’s last company, Online Environs, was liquidated in September 2002 with net liabilities of $1.9 million, resulting in a $5.1 million investment loss for its primary investor (Jordan Industries).

    CMI’s business model is based largely upon the company’s ability to sell 1500 memberships at $15,000 apiece to raise enough money to achieve its ambitious goals. However, as racing industry expert Lou Modestino pointed out in a recent New England Motorsports North column, “[CMI] will be lucky to get 500 members. The concept is very expensive and only appeals to an upscale group who can afford the expensive race/street cars”.

    In its business plan, CMI projected selling 500 memberships during 2003 at an average price of $15,000 each. On November 22, 2003, CMI reported it had sold only 125 memberships. CMI says it has raised $500,000 from these membership sales, which means an average membership price of only $4,000 and over 70% below its targeted $15,000 sales price. CMI is currently discounting its Bronze memberships by 40% in an effort to attract more members. At this price, CMI would have to sell 3000 Bronze memberships to achieve its financial objectives. Does this sound like a promising business venture?

    I am surprised that many Tamworth residents appear eager to embrace outsiders like the CMI team, all of whom reside in southern New Hampshire or Massachusetts, and to accept at face value CMI’s promises to create 40 local jobs and generate substantial tax revenues.

    An important rule in private equity investing is only invest in new businesses led by people you know or by people with successful track records who have positive business references. None of the members of CMI’s management team live in the Tamworth area or were previously known to residents of Tamworth. And none of CMI’s management team has a positive track record growing startup companies. I have also not heard of anyone in Tamworth trying to call any of Condodemetraky’s prior business references. Finally, the noise and air pollution from CMI’s proposed racetrack is likely to have a significant negative impact upon Tamworth’s natural resource-based tourism, which today is a large contributor to the town’s year-round economy. There is also a real risk that CMI will fail to raise enough capital to complete construction of the racetrack, and Tamworth will be left with a half-finished racetrack that becomes a real detriment in a town trying to attract natural resource-based tourism.

    These questions, among others, are ones that I wish more Tamworth residents, and prospective investors, would ask CMI before risking Tamworth’s economic future and blindly accepting CMI’s many promises and optimistic financial projections.

    Alex Moot
    General Partner
    Seaflower Ventures
    Waltham, Mass.
     
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  3. Doody

    Doody F1 Veteran

    Nov 16, 2001
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    Mr. Doody
    mr. moot's analysis is incorrect on a variety of points, but the overall opinions are not inaccurate, imo.

    also, it seems clear he has an agenda, albeit unstated.

    in the end, i bailed on investing myself in nov/dec.

    but i really do hope they get it built.

    doody.
     
  4. paulie_b

    paulie_b F1 Veteran
    Consultant Owner

    Jan 13, 2003
    6,805
    Jupiter, FL
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    Paul Bianco
    the outcome and progress doesn't seem very positive.
     
  5. 95spiderman

    95spiderman F1 World Champ
    Silver Subscribed

    Nov 1, 2003
    10,854
    ny
    there is a racetrack - country club proposal for eastern penn i read about in autoweek. they want $40k initiation as a loan refundable later on then a yearly membership fee i dont remember exact amnt but seemed reasonable. i also hope this gets built but dont see how it can succeed esp where winter can limit you to 7 months/year use. track day driving hobby can never work on a golf club model.
     
  6. Doody

    Doody F1 Veteran

    Nov 16, 2001
    6,099
    MA USA
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    Mr. Doody
    what's the name of that facility? hasn't it been in-process forever?

    CMI was planning to do neat stuff like snow driving and snowmobiles and 4x4s and the like on the facility. that could be neat! ATVs around the track in the snow? sounds a lot more fun than skiing to me! but your point is valid. AZ, NV, FL, CA - makes tons more sense - but i still hope they build it!

    interesting - why do you believe this to be true? i believe it can work on a golf club model BUT you have to build a full-service club. you've gotta have function space, a restaurant or two, a pool, tennis courts, stuff for the kiddies and wife, locker rooms, a pro-shop, and all the other amenities. but instead of greens and fairways, you've got a track, garages, and some decnet lodging since these things are never 15 minutes from home. but i don't' see why it couldn't work in the abstract. i'd pay. in fact i'm hoping to pay for CMI in NH - but i want to see some real progress before i plunk down buckages.

    doody.
     
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  8. 95spiderman

    95spiderman F1 World Champ
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    Nov 1, 2003
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    doody
    i dont play golf or belong to a country club but i was just thinking of volume. on 2nd thought, maybe having a single regional track club covering tri state population can work when there are 5 golf clubs in the small suburban area i live in alone? i will try to find the name of the penn operation but i saw ad in autoweek classifieds 2 weeks ago.
     
  9. WCH

    WCH F1 Veteran
    Owner

    Mar 16, 2003
    5,180
    Doody: 2 big problems, for me, with the motorsports country club concept:

    As a track junkie, I'm not interested in going ten, or even three, times a year to the same track.

    No matter how much you dress up a race track, my wife and daughter are not going to want to vacation there. My wife likes Laguna Seca because of Carmel, and Moroso because of Palm Beach, etc, but that's about it.

    Also, it's very clear to me that an enormous capital expenditure is needed to build a proper track. Beaverun in PA currently is an example of a partially executed idea; fully built, it should be an interesting track but, as built, it's just ok. I wonder how much the Barber or VIR folks have spent to get where they are today.
     
  10. 95spiderman

    95spiderman F1 World Champ
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    Nov 1, 2003
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  11. TCM

    TCM Formula Junior

    Nov 10, 2003
    552
    Tyngsborough, MA
    The Penn track is backed by the same investors as the NH facility. The facility in NH is running into problems with the local town government and now the winter weather. This bitter cold spell has delayed any construction for at least another couple of months. I do not think this will get off the ground either. Too many problems from the get go. Why a facility in NH by the Lakes region? It is hard to get to, cold in the winter, hot in the summer .They would have been better off building it in Western Mass or Vermont IMHO. The money they want is too much for what they are offering as well. For $40k, you can get a significant amount of goodies for your track car and still attend all the club events at different tracks around the region. We will see what happens, but I have my doubts.
     
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  13. Doody

    Doody F1 Veteran

    Nov 16, 2001
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    i don't mean to beat a dead horse, but i feel there's value in replying to and questioning some of the things that have been said because i do STRONGLY believe that such a facility could be a HUGE success. even in snowy New England.

    are you sure about this TCM? that was not what i understood. i almost invested in CMI and have been through all their paperwork and talked with them about BR and this never came up. maybe i just missed it, which is totally possible. CMI is purely angel-funded at this point.

    the location was chosen for a few reasons: (1) a big piece of land was available (250+ acres); (2) it was an interesting piece of land (neat elevation changes; great view; etc.); and (3) most importantly, there is no zoning in tamworth NH. you can build whatever you like on any lot in tamworth (more or less). this is NOT the case in most towns. i'm not sure whether any town in MA has a no-zoning setup (my understanding is that that's rather rare). they did look in western MA, nothing of that size was vaguely affordable, apparently, and the towns were going to be more minefield-y than tamworth nh.

    you don't have to sign up for the highest-end solution, clearly. if they did it right, the costs would be WAY below what you'd pay at a high-end golf/country club annually.

    that's rational, WCH. their counter-arguments would be that the track layout is designed to be reconfigurable into three (or four) separate setups, so there would be variation. it wouldn't be the same exact track all the time.

    ah, i think this is KEY to why this could work, and the analogue is the golf club where daddy is out on the back nine and mommy and the kids are at the pool or taking tennis lessons or goofing around in the club house for the day or for the weekend. in fact, i think these businesses will flat-out FAIL without all the mod-cons of a high-end golf/country club. that's why daddy will be able to sucker mommy into this exercise. without these amenities (restaurants, tennis, pool, rec rooms, nice accomodations, etc. etc.) the country club model can pretty much ONLY cater to single guys, unless you happen to live down the street from the facility.

    95spiderman - the pent-up demand for renting the track for club events is humungous. it is nearly impossible to get decent track time at lime rock. it's damn difficult to get time at NHIS. a properly setup track can do quite well without selling memberships.

    doody.
     
  14. Texas Forever

    Texas Forever Four Time F1 World Champ
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    Apr 28, 2003
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    Texas!
    BWHHHAAAAAA! ROTFLMSAO! Are you talking about the people's republic of Mass-Vermin? Doody's right. You would stand a better chance of building a race track in Harlem than in Mass or Vermont.

    As far as the market goes, I also think that the family approach will be required. But the main thing, for me anyway, would be fly 'n drive. I'd love to have a Frog (Free Room Over Garage)/Garage condo that had a support structure where I could fly in, drive a rental POS to the track, drive my track car all weekend, fly out, and leave the car for Luigi to service until next time.

    I know that the racer types are more into running the circuit. But, in my case, I'd love to have a homie track that I could really get down with my car. Then when the Racer Ricks come a calling, I can blow them into the weeds. (Just kidding.)

    The Mt. Tremblant track is a good model for this idea (except that I don't have a zillion dollars to do this myself.)

    As far as the fly/drive stuff goes, this needs to be anywhere that Southwest flies. I'd vote Albany, NY or Reno, NV.

    So, who is gonna build this sucker for me?

    Dr "Homie" Tax
     
  15. jakermc

    jakermc Formula 3
    Owner

    Jan 17, 2004
    1,778
    Palm Beach, FL
    Full Name:
    Rob
    I belong to this race track country club in Cresson, TX (near Ft. Worth)

    http://www.motorsportranch.com/secondary.html

    Its just a track, a small locker room and club house, and garage spaces. Nothing fancy, but its only $2400 to become a member plus $75/month. 30 minute sessions are $20. The track is blast to drive and I don't get bored since I have a lot to learn still as a driver. Its also fun to bring friends and chase each other on a relatively empty track. If you make changes to your car, a member day is a great way to get them sorted out.

    This venture has been VERY successful. Cash financed by the owner, about 380 members, and the allocated non-member days have been rented out through the middle of 2005. The garage spaces go for $175/month and there is a waiting list more than 50 members long. 40 new garages are being built and will be cash flow positive from day one.

    I believe the real trick here is hard-core track guys want to drive, not be coddled in a country club environment. All the frills of these other business plans add a lot of expense without driving up membership. They are missing the mark and pricing the product out of reach for most of their audience.
     
  16. johnny308

    johnny308 Karting

    Dec 3, 2011
    146
    Greenfield, MA. USA
    There is ground/location in Southwest Vermont with a parking lot that is circa 1 mile crossed. It has a large grandstand that is empty and available.

    Old Green Mountain raceway.

    It would be possible to build a road course on this location.

    Location is 45 mins from Albany NY. 10mins for Bennington VT. Etc ETC.
     
  17. enjoythemusic

    enjoythemusic F1 World Champ

    Apr 20, 2002
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    Steven
    For those who missed my other thread, joined Club Motorsports as a Bronze member back around 2004, took them a decade or so to get the track built. During that time asked for a refund and they said it would be honored once more members joined.

    Welp, gave up ever seeing my $$$. The warnings quite a few cars guys gave many years ago seem to be right. Ah well, so called them and said just donate it to charity or for safety gear or ??? because this way at least i feel like, somehow, they did something good with my 'paltry' few grand.

    Next time you visit Club Motorsports, thank them for my kind donation to help them out.
     
  18. henryr

    henryr F1 World Champ
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    Nov 10, 2003
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    Juan Sánchez Villa-L
    i'm confused...

    is the objective to build a race track or provide shovel ready jobs ?
     
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  19. kes7u

    kes7u Formula Junior

    Oct 18, 2017
    762
    Shorewood, MN
    Full Name:
    Kevin
    You and your free market, private sector people....:rolleyes: Don't you know that everything should be done for the good of the Party?

    Kevin
     

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