On a sunny, October day in 2011, Leo Hindery and New Jersey Gov. Chris Christie stood on a podium on the banks of the Hudson River and announced an agreement that would bring the world’s most popular motorsports circuit, Formula One, to New Jersey in 2013.
It was a triumphant moment for the former CEO of YES Network. He was a racer who drove in the 24 Hours of Le Mans and fantasized about bringing the most international motorsports series to one of its most international cities. But less than two weeks ago that fantasy was suspended.
|Leo Hindery spoke to the media last year by the Hudson River about the Grand Prix of America.
Their battle was over one thing: money.
Ecclestone said Hindery failed to raise the cash to pay race fees and got behind on payments. Hindery insisted as recently as last summer that money was not an issue, but sources familiar with Hindery’s effort said he struggled to find enough investors for the project and his search was complicated by rising construction costs.
“I don’t see how it could be anything other than economics that are holding it back,” said Zak Brown, who wasn’t involved in the project but as the founder of Just Marketing International has sold global F1 sponsorships to companies such as UBS. “In Formula One, 99 percent of the time it’s economics that are holding it back. Money has a way of solving things.”
Few people were willing to talk about the race’s postponement. Calls to the Weehawken mayor’s office and Roseland Property, which owned Port Imperial, the location of the proposed race paddock, weren’t returned, and Hindery was unavailable for comment. He provided a statement saying that some of the challenges his group had encountered required additional time.
“We’re confident in a 2014 Grand Prix of America at Port Imperial and appreciate the continued support from F1 fans around the world,” he added. “We look forward to bringing them an unforgettable, world-class experience.”
Hindery first met with the New Jersey governor’s office about the race in early 2010. He had commitments from local leaders from Weehawken and West New York, where the race would run, and got the governor’s office to put together a task force to organize state agencies ranging from New Jersey Transit to Port Authority to work on the race.
“We believed it was a done deal for 2013,” said Wayne Hasenbalg, a former deputy chief of staff to Christie who now serves as the CEO of the New Jersey Sports & Exposition Authority. “We knew Formula One still had to put it on the calendar. We knew Leo still had a lot of work to do, but we had great confidence.”
The prospect of an F1 race in New York-New Jersey generated immediate buzz in motorsports circles. The race was announced at the same time that Austin, Texas, which will host its first F1 race next month, ran into issues with Ecclestone over payment for its race. Many in the industry believed only one F1 race would survive in the U.S. and most bet the Grand Prix of America — because of its location and the sports business success of its promoter, Hindery — would be the one to succeed.
Hindery’s 10-year agreement with Ecclestone called for the race organizers to pay a sanction fee of approximately $25 million and another fee of approximately $25 million for the marketing and sponsorship rights to the race, sources familiar with the plans said. The sanction fee bought the right to host the race, while the marketing fee gave Hindery the right to sell a race title sponsorship and other sponsorships to the race. A small staff of about a half-dozen employees worked on the project from the offices of InterMedia Partners, Hindery’s private equity company.
Grand Prix of America President Tom Cotter, chief marketer Trip Wheeler and SJX Partners, which is headed by former USTA chief marketer Harlan Stone, went to market at the start of the year with a title sponsorship package priced at $20 million and later decreased that to $15 million. The group was close to a finalizing a deal with a potential sponsor last summer when Ecclestone made his first public comments questioning the race’s viability.
In an interview with the BBC, Ecclestone was asked whether the Grand Prix of America race would take place in 2013. He said, “No. Definitely, no.”
The comments scared off the potential sponsor, sources familiar with the negotiations said, and put Hindery on the defensive. He told The New York Times that the race was definitely on schedule and money was not an issue.
Sources said throughout the last year that Hindery was searching for investors for the race. He approached Ron Burkle, the billionaire owner of the Pittsburgh Penguins, and others with the opportunity, but they were troubled by the size of Hindery’s more than $40 million financial guarantee for the race and questioned the ability to recoup that money over a single weekend. (A Burkle spokesman didn’t respond to multiple requests for comment. Cotter, Wheeler and Stone declined to comment.)
A few months ago, Hindery renegotiated the terms of his agreement with Ecclestone, giving back the marketing and sponsorship rights. The move left him with no TV camera-visible signage to sell for the race and cut his total fee in half to just the $25 million sanction fee. He continued to search for investors, sources said, and worked with F1’s governing body, the Federation Internationale de l’Automobile, to keep the race on the schedule in 2013. Last month, the FIA included the Grand Prix of America on its calender as a “to be confirmed” race, buying Hindery more time to find investors.
But a few weeks later Hindery issued a release postponing the race because organizers needed additional time to finish the second pits and paddock garage planned along the Hudson River.
“We are going to be racing at Port Imperial, unfortunately just not as soon as we hoped and expected,” Hindery said in a statement.
Hasenbalg said the proposed paddock’s location along the Hudson River means it needs permits from the Army Corps of Engineers and a number of other organizations before construction can begin. The New Jersey Sports & Exposition Authority tried to help Hindery get those permits so the race could go forward as planned, but that was difficult to do in a compressed time frame.
“They didn’t have a final plan so that they could proceed with confidence,” Hasenbalg said. “Those issues can be worked out, but they need more time.”
F1 observers are optimistic the race will happen in 2014. Ecclestone has wanted to get a race in New York for years because of the city’s appeal to sponsors and its media value.
“They’ve probably gotten to second base,” Brown said. “They just need to bring home the runner. Everyone wants to see it work. Maybe [the November F1 race in] Austin will give a funding jolt to New York 2014. It’s a market that no one is going to give up on.”
If a 2014 race happens, it’s unclear if Hindery will be involved. Ecclestone said that he tore up Hindery’s contract for the race. That could open the door for Ecclestone to bring in someone else to promote the race. The F1 CEO last week said he had approached one of Red Bull’s founders about the company taking over the event.
Hindery, who already has invested considerably in the F1 effort, could leverage his ties to New Jersey officials to stay involved in the project, but the strength of those relationships already has been tested by the postponement. Christie last week said he was disappointed the race was postponed and hadn’t spoken to Hindery about why it had happened.
“We’ll get to that at some point,” Christie told The (Newark) Star-Ledger. “It’s going to happen in 2014. If that gives them the time to do it in the right way, make sure it’s done correctly and safely, then that’s good.”
Whoever winds up promoting the race still has considerable work to do. For now, Hasenbalg said that the New Jersey Sports & Exposition Authority is “plowing ahead as though the event” is taking place in 2013. It has meetings on its schedule in the coming weeks about the race, and it won’t cancel them despite the postponement.
“I have great confidence in Leo, and that confidence has not diminished one bit because this was delayed,” Hasenbalg said. “We’re still addressing this as though the race is happening in June.”