Visit_Greater_Palm_Springs_Feasbility_Study-2025.pdf

April 14, 2024

Indoor Sports Complex Executive Summary

Palm Springs, CA

Executive Summary

Summary

The original study was well done. It was very thorough and illustrated the need for an indoor, multi-court facility in the Southern California region. The previously completed study noted the positive demographics and socioeconomics as well as the relative lack of competition from other large facilities. Additionally, the previously completed study outlined the key components for what should be included in a new facility as well as what factors should be considered in site selection. The previous study the region.

addressed, including:

The reach for a complex in Palm Springs should extend beyond the 120-minute mark, which was the limitation of the previously completed study. We believe the super-regional reach of a tournament-capable anchor facility is likely 300+ minutes (5.5 hours).

The competitors cited in the previously completed study are certainly relevant, but national competitors aren’t lease revenue, digital streaming revenue, parking/ gate revenue, membership revenue, etc. We believe that advertising revenue is low, and some expenses are not in line with industry standards.

Greater Palm Springs Revenue. We believe the model also underestimated non-local visitor days.

While the previously completed study outlined funding strategies, there was not one that was recommended, nor was there any commentary on the effect of various funding mechanisms on the P&L or how the proposed facility could meet any debt obligation.

Scope of Work In February 2025, Synergy Sports Global (Synergy) was engaged to review a 2024 completed by CSL, a potential development of a new indoor sports facility in Palm Springs, California, with a goal of expanding on the community’s access to sports and recreation amenities in addition to driving new visitor spending to the region by establishing itself as a destination for tournaments and events, revise as necessary, and provide recommendations for next steps. Below is our Assessment. Included in the Appendix is the raw data and information used to inform our assessments.

Demographic & Socioeconomic Factors

The region is viable as a location for both a community-focused facility and sports tourism driver. Below are the 60-minute, 120-minute, and 300-minute radius populations and the minimum population levels we believe are necessary to be successful as a sports tourism destination.

60-minute radius population: 1,884,826 (750,000) 120-minute radius population: 14,232,252 (1,500,000) 300-minute radius population: 32,403,747 (4,000,000)

The regional (120-minute radius) and super-regional/ national (300-minute) populations will support a sports tourism destination. Thus, the focus should be on securing large scale tournaments and events, which will effectively subsidize any lack of weekday revenue. The below infographic illustrates the different drivetime radii

The initial study focused on drivetime radii of 30 minutes, 60-minutes, and 120-minutes. We believe the drivetime radius should be expanded to include the 300-minute radius to capture the super-regional market

Complex Specifics The original study recommended an 8-court, indoor facility, which is the minimum number of courts required to be relevant in the regional/ national conversation as a sports tourism destination. These "anchor facilities" as they're known, are preferred by regional and national tournament organizers as they actively seek out larger venues with more sports assets to host 100+ team tournaments.

We believe an 8-court facility would limit the opportunities of a facility in the Greater Palm Springs area. A more viable facility should feature 10 courts (20 volleyball courts/ 30 pickleball courts) in order to accommodate larger tournaments as well as provide flexibility to host multiple events/ multiple sports at the same time. In addition to an adequate number of courts, creating ancillary amenities, entertainment, and food and beverage experiences that are intentional will be a key to success for a facility in the Greater Palm Springs area.

Based on the above benchmarks and the availability of adequate land, our recommendation for a complex is below.

Indoor

10 courts 20 volleyball courts 30 pickleball courts Adequate dimensions to accommodate an indoor track (future)

Leasable space for a medical partner Strength & Conditioning/ Fitness space Food & Beverage Family Entertainment space Conference space Community space/ classrooms those with limited mobility and/ or who participate in adaptive sports as noted below:

Wheelchair Sports:

Other Indoor Adaptive Sports:

We believe that the previously completed study’s recommendations for size and components are in line with a tournament friendly facility but limit the facility’s ability to draw large-scale tournaments and events. Additionally, the previous design necessary infrastructure for Adaptive Sports.

Local and Regional Competition

Our research suggests that there are three (3) competitors in the radius of a proposed indoor facility in Greater Palm Springs.

Greater is to develop a 10-12-court facility in Palm Springs. Developing more than

10-12 courts creates excess supply the majority of the time, increases construction costs, and increases operating expenses.

Given these competitors, the San Diego Convention Center should be considered an occasional competitor as their convention space is not exclusively used for sports, nor is it used for sports the majority of the time.

Excluding the San Diego Convention Center, we believe overall competition is low for an indoor facility in Palm Springs.

Site Location

The original CSL study did not specify a potential site, though it did outline the criteria by which a successful site should meet. We agree with those criteria and have listed the key components that make a particular site successful as a sports tourism facility. Below are the criteria we feel should be considered when determining an ideal location:

Adequate acreage for current needs as well as future expansion

Existing infrastructure Access to major thoroughfares Adequate road capacity bordering the site Proximity to public transportation Proximity to hotels, retail, and food and beverage Location within the future growth pattern of the region Proximity of additional available land for complementary development

Site Plan

Based on conversations with key stakeholders, ADA compliance and the ability to cater to Adaptive Sports is a key opportunity for the proposed facility. Taking that approach into account, while still focusing on sports tourism, we created additional site analysis, due diligence, and opportunity for complementary development should be done.

Estimated Cost The original CSL study estimated a $275/ sqft cost for construction. We agree with that estimate as current construction costs range between $250- $350/ sqft. In our opinion, the proposed building would be approximately 200,000 square feet. Land acquisition, development, and other soft costs are not included.

Operations, Tournaments & Events

As noted previously, given the local population and average median household income, the facility should not be challenged from a daily operations standpoint. However, care should be taken when considering program pricing due to local median household income

With respect to larger tournaments, it is our opinion that the facility should not be challenged to attract adequate teams/ tournaments to supplement weekday operations for certain sports given the Palm Springs climate, area attractions, and proximity to family entertainment and activities

As both a community quality of life amenity and sports tourism facility, a complex in Palm Springs would be well positioned to host events, offer memberships and passes, run leagues, offer private training, host birthday parties, etc. It should be noted that care should be taken when pricing the above services because, as stated previously, the local and sub-regional socio-economic level is equal to the national average.

Through a management agreement with a private operator, we believe that a combined indoor/ outdoor complex capital repayment based on our modeling

Whether the City will charge for gate and/ or parking Will there be a membership option for the public?

Is there an opportunity for streaming revenue If retail is sold, what is the split?

Real Estate taxes reaching out to local, regional, and national tournament organizers to secure Letters Of Intent will help populate the model more accurately.

Financial Model - 10 Court Surface

10 COURT SURFACE - REVENUE YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

Sponsorship / Advertising $250,000 $257,500 $265,225 $273,182 $281,377

Gate / Merch $169,275 $174,353 $179,584 $184,971 $190,521

Tenant $920,000 $947,600 $976,028 $1,005,309 $1,035,468

Medical $480,000 $494,400 $509,232 $524,509 $540,244

PT / S&C $320,000 $329,600 $339,488 $349,673 $360,163

Concessions - F&B Split $120,000 $123,600 $127,308 $131,127 $135,061

10 Court Surface $2,390,750 $2,462,473 $2,536,347 $2,612,437 $2,690,810

Court $1,750,000 $1,802,500 $1,856,575 $1,912,272 $1,969,640

Turf $640,750 $659,973 $679,772 $700,165 $721,170

GROSS POTENTIAL INCOME $3,730,025 $3,841,926 $3,957,184 $4,075,899 $4,198,176

Vacancy 8% 6% 6% 4% 4%

EFFECTIVE GROSS INCOME $3,431,623 $3,611,410 $3,719,753 $3,912,863 $4,030,249

Expenses

Real Estate Taxes $- $- $- $- $-

Insurances $94,000 $95,880 $97,798 $99,754 $101,749

Utilities Electric / Gas / Water $245,000 $249,900 $254,898 $259,996 $265,196

Repairs & Maintenance $48,000 $48,960 $49,939 $50,938 $51,957

Landscaping $15,000 $15,300 $15,606 $15,918 $16,236

Janitorial & Trash Disposal $40,000 $40,800 $41,616 $42,448 $43,297

Management Fee (6%) $205,897 $210,015 $214,216 $218,500 $222,870

$195,000 $198,900 $202,878 $206,936 $211,074

Marketing $20,000 $20,400 $20,808 $21,224 $21,649

Professional Fees $15,000 $15,300 $15,606 $15,918 $16,236

General & Admin. $12,000 $12,240 $12,485 $12,734 $12,989

Program Expenses $150,000 $153,000 $156,060 $159,181 $162,365

TOTAL OPERATING EXPENSES $1,039,897 $1,060,695 $1,081,909 $1,103,547 $1,125,618

Net Operating Income $2,391,726 $2,550,715 $2,637,843 $2,809,316 $2,904,631

Reserves 5% $119,586 $127,536 $131,892 $140,466 $145,232

NOI Less Reserve $2,272,139 $2,423,179 $2,505,951 $2,668,850 $2,759,399

Naming Rights $2,000,000 $2,000,000 $2,000,000 $2,000,000 $2,000,000

Municipality Backstop ($60M) ($4,080,000) ($4,161,600) ($4,244,832) ($4,329,729) ($4,416,323)

NET INCOME $192,139 $261,579 $261,119 $339,121 $343,076

Naming Rights there to be as much as $2M/ year in naming rights opportunities within a facility developed in Palm Springs. Naming rights is

Economic Impact study). A conceptual economic impact model is below

Our assessment of the potential visitor impact, sales and hotel tax, and TBID revenue are noted below.

ECONOMIC IMPACT YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

Non-Local Participant Days 190,217 199,728 209,715 220,200 231,210

Non-Local Spectator Days 247,283 259,647 272,629 286,261 300,574

Total Non-Local Days 437,500 459,375 482,344 506,461 531,784

Average Daily Spending Per Non-Local Person $70.00 $73.50 $77.18 $81.03 $85.09

Direct Spending by Type:

Hotel 50% $15,312,500 $16,882,031 $18,612,439 $20,520,214 $22,623,536

Restaurant / Meals 30% $9,187,500 $10,129,219 $11,167,464 $12,312,129 $13,574,122

Entertainment/Leisure 10% $3,062,500 $3,376,406 $3,722,488 $4,104,043 $4,524,707

Retail/Shopping 7% $2,143,750 $2,363,484 $2,605,742 $2,872,830 $3,167,295

Transportation 1% $306,250 $337,641 $372,249 $410,404 $452,471

Other 2% $612,500 $675,281 $744,498 $820,809 $904,941

TOTAL 100% $30,625,000 $33,764,063 $37,224,879 $41,040,429 $45,247,073

Annual Economic Impact $30,625,000 $33,764,063 $37,224,879 $41,040,429 $45,247,073

Indirect/Induced Spending 63% $19,293,750 $21,271,359 $23,451,674 $25,855,470 $28,505,656

Total Annual Economic Impact $49,918,750 $55,035,422 $60,676,553 $66,895,899 $73,752,729

Potential Sales Tax Revenue 1.5% $744,188 $820,467 $904,565 $997,282 $1,099,504

Potential Hotel Tax Revenue 12% $1,760,938 $1,941,434 $2,140,431 $2,359,825 $2,601,707

GPS TBID Revenue 1% $153,125 $168,820 $186,124 $205,202 $226,235

Based on our assessment, a facility developed in Palm Springs could support its operating expenses and the cost of capital to develop the facility. The above model illustrates that the region can realize significant sales tax, hotel tax, and TBID revenue.

Funding Options

Typically, for large, sports-tourism focused facilities, there are generally four options for funding, as described below historically, bonding has been the primary method of funding for municipality-led sports complexes.

However, with the ever-increasing cost of these facilities, the limited support by the public, the relatively long development time, and the public procurement requirements, bonding has become a less desirable option as part of a long-term plan (i.e. 10+ years), some municipalities have included sports facilities in their capital improvement plans. The general downfall of this strategy is that priorities often change, and contemplated facilities are typically not developed by partnering with a developer, a municipality asks a private entity to pay for, own, and operate the complex. This approach can lead to creating an elitest facility, thus excluding the public due to the inherent under a leaseback agreement, the private side develops the complex using private funding in partnership with the municipality. Once the complex is developed, it is leased back to the municipality under a long-term master lease agreement. This arrangement does not use the municipality’s municipality’s credit rating and balance sheet, so an underfunded municipality, while this is a good option, may not be able to secure the funding through a P3 partnership. Additionally, under this arrangement, the complex is operated privately with revenues going to the municipality.

Recommendations As a result of our assessment of the initial Study as well as conversations with key stakeholders, we believe the following are the inherent goals of the project:

Provide quality of life amenities to the residents of Palm Springs

Provide economic impact through sports tourism

Support existing businesses and provide a catalyst for new commercial development

As such, our recommendations for a successful project are stated below:

Develop an 10-12 court indoor complex

Focus on securing large scale tournaments as well as weekday programming

In order to mitigate risk, a percentage of revenue along with naming rights capital can be used as a backstop funding source for the facility, thereby reducing the potential for an annual City subsidy

Pursue a Public-Private Partnership whereby private capital can be used to fund the development of the complex as part of a Master Lease Agreement

Conclusion

Conclusion complex in Greater Palm Springs can have an amazing impact on the community and the region.

We look forward to building on our partnership!