Conway Daily Sun, letter to the editor
8/4/2004

How will CMI come up with the money?

—To the editor:
It's too bad the residents of Tamworth have been forced to spend thousands of hours and tens of thousands of dollars debating a racetrack that probably can't be built.

It's a shame Tamworth has been divided into pro-track and anti-track factions by a project that is simply too expensive to build and was an ill-conceived business concept from the beginning.

Is anyone else wondering how Stephan Condodemetraky, CEO of Club Motorsports Inc. (CMI), thinks he can raise $40 to $50 million to build CMI's proposed racetrack development?

CMI's projected costs have skyrocketed since the company first announced its plans for a $14 million development in July 2003. Even if CMI eventually succeeds in obtaining all the necessary federal, state and local permit approvals necessary to begin construction, it is not at all clear that CMI can raise the necessary money to finance its proposed race track.

After being forced to redesign its track to minimize wetlands impact, CMI announced in April 2004 that the total project cost had doubled to $28 million. Now it appears that the total project cost is going to be over $45 million.

Craig Lizotte of ESS Group, CMI's engineering firm, has reportedly told Condodemetraky that the cost of building CMI's redesigned racetrack will be above $32 million. When you add other upfront costs outlined in CMI's original business plan, the total cost of CMI's proposed race track development skyrockets to over $45 million.

Haley & Aldrich, an engineering consulting firm that has extensively reviewed CMI's new track design, estimates that 500,000 cubic yards of bedrock would need to be blasted and over one million cubic yards of soil would need to be moved. James Barrett of Haley & Aldrich estimates it would cost $15 million just to fracture the rock which would still have to be excavated, hauled and crushed before it could be placed elsewhere on-site, or trucked off-site at additional cost.

How does CMI plan to raise that much money? CMI’s original plan was to raise $5 million from equity investors and $15 million from member initiation fees. CMI targeted selling 1000 memberships during 2003 and 2004 at an average price of $15,000 each.

But between July 2003 and March 2004, CMI only sold 225 memberships at an average price estimated at $4,000 to $5,000 (CMI's current list price for a membership is $5,000). That’s only about $1 million from initiation fees so far.

Even if CMI manages to sell the remaining 775 memberships at $10,000 each (twice CMI's current Bronze membership price), that’s only another $8 million. CMI would still need to raise over $37 million from equity investors.

Can Condodemetraky convince new equity investors that CMI's race track will generate enough profits over the next 10 years to generate a positive return on their $37 million? It’s unlikely. Under CMI’s original investment model, a $5 million equity investment yielded a modestly attractive positive 27% return over 10 years. But that $5 million isn't enough anymore — it has ballooned to $37 million after the track redesign. Unfortunately, a $37 million investment yields equity investors a unacceptable negative 3.4 percent return over 10 years.

Investors will also see that none of CMI’s management team have any prior experience building, marketing or operating a racetrack.

Over the past 18 months, CMI has only raised an estimated $4 million in total capital from founders, equity financings, land mortgages, and membership initiation fees. In April 2004, CMI said it had commitments for about half of a new $3 million Series B equity round, but these funds appear to be in escrow and unavailable to CMI until the company has all necessary permit approvals to start track construction.

My calculations indicate that CMI has probably spent $3 to $4 million to date on land acquisitions, management salaries, public relations, marketing and sales, lobbyists, lawyers, Web site development, racetrack design, engineering consultants and permitting consultants.

If my calculations are correct, CMI may soon run out of money to pay critical expenses. It’s unclear how CMI can continue funding its current level of operations through Nov. 13, the date by which the Army Corps of Engineers must issue their decision on CMI's wetlands permit application. CMI will also soon need additional funds to refund deposits already paid to reserve 27 dates during 2004.

Condodemetraky doesn't have long to raise the necessary $40 to $50 million, either, since CMI has promised to refund members their initiation fees if the racetrack isn't open for racing by Dec. 31, 2005.

Alex Moot
President, Chocorua Lake Association

Note: CMI was shown the letter above and invited to submit a response. The letter below ran opposite Mr Moot's letter. 

CMI opponent presents biased, outdated information

—To the editor:
It is unfortunate that The Conway Daily Sun has decided to publish today’s letter from publicly acknowledged Club Motorsports opponent Alex Moot, particularly since Mr. Moot himself has admitted to the Sun that the financial numbers upon which he bases his arguments are outdated. While CMI respects the right of anyone to express a public opinion — for or against our project — we believe you should be aware of the following facts regarding Mr. Moot’s activities pertaining to CMI, so that you can judge for yourselves the credibility of his claims.

1. In November 2003, Mr. Moot posed as a potential CMI investor to obtain a Private Placement Memorandum (PPM) containing confidential financial information.

2. On the very first page of the PPM is the confidentiality agreement, which plainly and boldly states: This memorandum is not to be reproduced in whole or in part or used for any purpose other than the evaluation of an investment in the company.

3. In December 2003, Mr. Moot violated the confidentiality agreement by using PPM financial data to attack the viability of CMI’s project in letters to the editor and online forums.

4. Several newspapers — including the Sun — refused to publish Mr. Moot’s December 2003 letter because he obtained the information under false pretenses and used it to malign our project and the reputation of CMI employees.

5. Other newspapers in the valley region have refused to publish his current letter.

6. Mr. Moot’s current letter is based on outdated financial information, which has been revised in a subsequent PPM, as Mr. Moot has admitted to the paper.

7. Mr. Moot is not an objective analyst, as his letter would have you believe. He has publicly opposed CMI personally, and for the Chocorua Lake Association.

8. When directly questioned by CMI, Mr. Moot admitted that he is not an expert on motorsports developments and has no experience in this regard.

9. Mr. Moot’s letter contains several factual inaccuracies and misrepresentations. For example, the total estimated project cost never “doubled” to $28 million. We have said from the beginning that Phases I and II would cost approximately $14 million, and Phase III would cost another $14 million for a total of $28 million.

10. Mr. Moot’s letter relies on unattributed hearsay (reference to Craig Lizotte of ESS “reportedly told Condodemetraky…”) to make its financial projections.

11. Mr. Moot’s letter relies on the estimate of a tainted “expert” from the firm of Haley & Aldrich, which is being paid by opponents (FOCUS: Tamworth) to testify against CMI’s project.

Given the deceptive manner in which Mr. Moot obtained financial information from CMI, his status as a biased opponent, his admitted reliance on outdated numbers, as well as the numerous factual errors and misrepresentations in his letter, we urge you to consider the credibility of his arguments carefully.

CMI is pleased to have recently received a wetlands permit from the N.H. Department of Environmental Services. This is a major step forward toward our ultimate goal of building a world-class facility that will provide good new jobs and hundreds of thousands of dollars in annual tax revenue to the Town of Tamworth.

Stephan Condodemetraky
President and CEO, Club Motorsports Inc.