Travel sports destination hits bond trouble in first year of operation

A nonprofit created to build a venue for a wide swath of youth and other participant sports in the Phoenix area has stumbled out of the gate in its first year of operation, according to bond disclosure documents.

Legacy Cares, the 501(c)3 behind the 320-acre Bell Bank Park sports venue in Mesa, Arizona, failed to make three full monthly payments toward the revenue fund that supports debt service on $284 million of bonds issued in 2020 and 2021 through the Arizona Industrial Development Authority, according to a notice trustee UMB Bank, N.A., posted Thursday on the Municipal Securities Rulemaking Board's EMMA disclosure website.

That means "events of default" exist, the notice said.

Icon Architectural Group

Debt service has been paid in full through the July 1 interest payment.

Legacy Cares was converted into an Arizona nonprofit from a limited liability company in January 2020, according to its offering documents, the same year that it sold $250.8 million of revenue bonds through the Arizona Industrial Development Authority. That was followed by another $33 million of debt in 2021.

Ziegler was the underwriter of the unrated bonds. Gust Rosenfeld, P.L.C., was bond counsel.

All but $7.3 million of the debt is tax-exempt.

Legacy Cares sets forth a mission statement of "providing athletes and non-athletes alike of all ages, economic backgrounds, and levels of athletic proficiency the opportunity to participate in sports while fostering the enjoyment and camaraderie of teamwork and perseverance, key components in athletic competition and lifetime success."

What that translates to is a 320-acre venue for youth and amateur sports competitions in multiple sports, one of the larger entries in a growing but competitive market seeking to attract events like large-scale youth soccer and volleyball tournaments.

Its Bell Bank Park in Mesa, Arizona, stretches its offerings to provide home venues for a nearby college's athletic teams, an outdoor concert stage, and 41 pickleball courts highlighted by a stadium court with room for 2,500 spectators.

Bell Bank Park, so-named as a result of a 10-year naming rights deal announced with a North Dakota-based bank with branches in the Phoenix area, opened to the public in January, in line with the projections it made in its bond offering documents.

Its objective: take advantage of a growing market for sports-related travel, in particular youth sports travel teams participating in tournaments.

From 2015 to 2019, the last full pre-pandemic year, sports traveler numbers were up almost 6% and their spending in that period rose more than 16% to more than $45.1 billion, according to the 2021 State of the Industry Report published by trade organization Sports Events & Tourism Association.

"The demand for facilities exceeds the supply of facilities in the Phoenix Metropolitan area, particularly with tournament programming," the Legacy Cares bond offering documents said. "Most sporting events included in the Legacy Sports Park business model require large facilities with multiple outdoor fields or indoor courts to accommodate concurrent gameplay throughout each day of a tournament to ensure all teams are afforded the opportunity to participate and advance toward championship status. Currently, each tournament organization is required to scatter its tournament play over many individual facility locations."

Bell Bank Park

Legacy Cares sought to address that with a facility combining 24 soccer/lacrosse/football fields, 57 indoor volleyball courts, eight baseball & adult softball fields, 16 fast-pitch softball and Little League baseball fields and 19 basketball courts, providing enough venues to accommodate entire tournaments, plus an arcade for the less-athletic siblings and a sports bar for mommy and daddy to drink at.

The offering memorandum notes numerous sports parks have been developed around the country.

"Because of its all-inclusive features, Legacy Sports Park anticipates it will exceed revenues produced by similar facilities," the offering says.

Despite the obstacles posed by the pandemic, Bell Bank Park opened, as promised in the offering documents, in January 2022.

And despite lingering effects of the pandemic, Bell Bank Park reported hitting the three-million-visitor mark before the end of September — meeting an annual projection set forth in the offering documents.

But financial woes brewed. Long before Municipal Market Analytics flagged Legacy Cares' troubles in its Oct. 26 Default Trends newsletter, investors expressed concerns reflected in bond disclosure documents posted on EMMA.

A June 7 call with investors left questions open that the borrowers only answered later in writing, in some cases not for more than two months.

Those disclosures paint a picture of investors concerned about, among other things, inadequate interim disclosure, the number of events booked at the facility and the financial impact of canceled or postponed events.

On Oct. 5, Legacy Cares posted a notice on EMMA saying it is exploring potential "defeasance, redemption, open market purchase and/or exchange" of the bonds.

The original unrated 2020 bonds priced at yields from 6.25% to 7.836% at a time when rates were much lower than today.

Legacy Cares officials did not respond to email or phone call requests for comment.

The lure of youth sports tournaments and visitors has encouraged some governments to issue debt to help build facilities, which has not always turned out well.

No governments are on the hook for the Legacy Cares bonds.

Mesa provided $1.5 million of cash incentives, such as bed tax rebates and permit fee waivers, to support the facility, and also included $40 million in the city capital improvement budget for off-site infrastructure to benefit the venue, which also received $5 million from Arizona Sports and Tourism Authority, according to offering documents for the Legacy Cares bonds.

The trustee has hired Bryant Barber of the firm Lewis Roca Rothgerber Christie to assist with prosecuting the events of default, according to disclosure documents.