Tennis Event May Face Make-or-Break Point

One of the crown jewels of tennis, the Pacific Life Open in Indian Wells, is on shaky ground financially and looking for help.

Tournament Director Charlie Pasarell confirmed Friday that heavy debt service on the $74-million stadium that opened in 2000 has put the tournament in a financial spiral.

“The bottom line is that we don’t want to sell,” Pasarell said in response to questions about rumors of an impending sale. “Having to do that would be a tragic loss to this valley, to this state, to American tennis in general.

“But there comes a point when ... well, let’s just say that all my concern and energy are on keeping the event here.”

Pasarell said he had had no discussions with prospective buyers but added that he was aware of “potential foreign buyers.”

The Pacific Life Open has value well beyond the normal tennis event because of its two-week spot on the tennis calendar in March, well-positioned between the Australian Open and the French Open, and because it is one of only two non-Grand Slam tournaments with 96-player draws for both men and women.

The other is the NASDAQ in Miami, which is played the two weeks after Indian Wells. Almost all of the top players compete in both tournaments, making them closest in stature to tennis’ four major events, the Grand Slams.

Asked if a foreign buyer might keep the event here, in the 5-year-old, 16,000-seat stadium, Pasarell said, “Let’s say somebody from Timbuktu bought this. Because of our dates and sanction, this would become the Timbuktu Grand Slam overnight.”

Pasarell said that he and his 50% partner, IMG, were committed to operating the tournament through 2006. He said they had been discussing the problem for the last two years, while the revenue generated by the tournament has steadily increased to where he is projecting it to be around $3 million this year.

“We are getting more and more successful,” he said. “We are getting more attention, selling more tickets, attracting more fans, increasing our sponsorships. This is an event that attracted 267,000 fans last year [up from 209,000 in 2003], generated $100 million in economic impact, had 32-plus hours of TV exposure on ESPN, plus as much as 100 hours more in 37 other countries. It is the biggest tennis event in the western United States and certainly one of the biggest events every year in the state of California.”

So what’s the problem?

The $74-million cost of the stadium was taken on around the time the ATP was signing a widely trumpeted deal with the international marketing firm ISL.

That deal was to bring in $1.2 billion over 10 years to the men’s tennis tour by standardizing sponsorships and locking them in, long term. A few of the men’s tournaments, notably including Indian Wells, cut separate deals with ISL for the slice of that pie they would get. Pasarell and IMG were to receive $11 million a year for the 10-year term of the ISL contract.

That, of course, made financing the construction of a world-class $74-million stadium much easier. But shortly after the deal was struck, ISL declared bankruptcy and Pasarell and IMG were left scrambling to fill an $11-million void.

Then in 2001, after the Sept. 11 terrorist attacks, attempts to find replacement sponsorship for the ISL deal were further hampered.

“In many ways, after 9/11, American business just shut down for about six months,” Pasarell said.

The stadium debt is down to $40 million, Pasarell said, but he is paying 8% interest on that. His cost for debt service and taxes alone last year was $4.5 million, plus an additional $1.2 million in year-round operations and maintenance. That’s $5.7 million that, put against this year’s estimated $3 million in revenue, means the hole will be $2.7 deeper this year, with no end in sight.

Pasarell can’t easily refinance the loan because, despite collateral likely to be well in excess of the $74-million stadium, plus the valuable land around it, the annual revenue generated from operations has made a loan too risky for a commercial bank.

Pasarell is seeking help in the form of a local, state or county bond with a decreased interest rate. Failing that, other avenues would include some sort of county, state or municipal partnership or total ownership; additional partner investments, or increased sponsorship levels.

Pacific Life has been the title sponsor since 2002 -- “They have been incredible,” Pasarell said -- and there are dozens of other sponsors at varying levels of financial commitment, most of them signed on by Pasarell and his main marketing assistants, Raymond Moore and Steve Simon, as well as IMG, after the ISL deal blew up.

“We are trying every way we can to keep this here and going,” Pasarell said. “We know that asking for public help is a tough thing politically, because Indian Wells is one of the most affluent cities in California and this can look like helping the rich. But even though the tennis balls are hit in Indian Wells, the loss of this event and this place would affect the entire Coachella Valley.

“That would be tragic.”