Letters to the Editor

Letter to the Editor | Background on the Madrona mess

Note: This is the first of what Mr. McLaughlin says will be three letters about the situation at Madrona Links Golf Course. Gig Harbor Now allows only one letter per writer per week, so future installments will occur later in November.

Background

PenMet retained NGF to inspect Madrona and prepare a report of its current condition and needed improvements.  Mark Cupit, a Tyson family member and a highly experienced golf course operator, had already provided PenMet’s attorney and Stutsman, the course operator, with a detailed report of his own. 

The NGF report lists many deficiencies which Cupit’s report also mentioned.  The reports are remarkably similar.  NGF estimated the cost to address the issues could be $7.4M.  PenMet’s recent Notice of Termination alleges that Tyson had addressed none of the deficiencies.  Despite Stutsman having Cupit’s report, little was done.  The lease expires in 2028, approximately 4 years from now.  At that time, 70+ acres of the golf course reverts to PenMet.  Tyson would have no hope of recovering in 4 short years the investment PenMet may be demanding.  When I refer to the Tysons in this letter, I am also including Cupit in that reference.

This chart is on PenMet’s website:

NGF made it clear that the current operational structure with leases, subleases, and sub-subleases is draining cash needed to properly maintain the course.  PenMet received just under $400,000 in lease payments and Tyson received more than $500,000.  Stutsman has withdrawn over $1.4M.  Taken together, this drained $2.3M from Madrona.  I agree with that assessment.   

The key points of default listed in the Notice of Termination are:

• Trees:  Instituting a comprehensive tree care program to address overplanting, overhanging limbs, dead or dying trees, and the removal of selected trees to allow more sun on turf areas and to make the course more playable.  PenMet is claiming the Tysons made poor choices when planting trees on the course.  I’ve been told the Tysons only planted about two dozen trees during the initial construction.  And no one, not the City of Tacoma nor PenMet has ever, to my knowledge, raised this issue in over 40 years.  Why not?   
• Cart Paths:  All trees are now almost 50 years older, their roots are bigger and they are damaging the cart paths in many areas.  In PenMet’s Notice of Termination, they stated that Stutsman claims he is not responsible for correcting the condition of the cart paths.  In Parts II and III, I will address the breakdown between capital improvements and operating expenses in more detail.
• Drainage:  Surface regrading is needed and better drainage is needed in certain areas.
• Tee boxes:  Trees need to be removed near the tee boxes to provide for better turf growth and grading is needed to level the boxes.
• Fairways:  There is settling where the Tysons buried stumps and other organic matter during construction.   
• Fairway Aerification:  The fairways need aerification where possible to allow for better fairways offering better lies.
• Bunkers:  Several bunkers need new or improved edges, some need new sand, and some need new lining.
• Ponds:  The ponds need lining to eliminate organic growth.
• Irrigation:  This might require an entirely new irrigation system costing millions.  If so, this is clearly a capital improvement and not maintenance.  Wait for Part II.
• Greens Fees:  There might be unreported greens fees which impact both PenMet and Tyson as they both receive  a percentage of the greens fees as their lease payments.  The NFG report mentions that the greens fees reported by Stutsman do not matchup with what PenMet has received under its lease.  An audit of Stutsman’s books is necessary.  See “Audit,” below.
• Prepaid Greens Fees:  Same issue as above.
• Audit:  The Tysons advised PenMet that they would be auditing Stutsman’s books and records.  Stutsman has not cooperated.  Rather than waiting for Stutsman to do this, the Tysons and PenMet should select their own CPA to audit Stutsman’s books.
• Clubhouse:  The condition of the clubhouse contains both normal operating expenses and capital improvements.  Those that are normal operating expenses would most likely be either Stutsman’s responsibility if outside Hackers or Bob Kelly’s (operator of Hackers) responsibility under his sub-sublease with Stutsman if inside the restaurant.   

PenMet approved the sublease from the Tysons to Stutsman so he could operate the course.  PenMet could have chosen to add its authority to Cupit’s requests to Stutsman to begin addressing the deficiencies.  Obviously, they had no legal obligation to do so since their lease was solely with the Tysons, but I think PenMet’s confirming the Tysons’ requests regarding repairs and improvements would have been a more effective approach.   

PenMet has indicated it’s keeping both Stutsman’s sublease and Kelly’s sub-sublease in place for now.  It has 90 days to let them both know if it’s terminating their rental agreements as well.  For the sake of the dozens of employees of Stutsman and Kelly and their families, I would hope that PenMet would make their decision sooner rather than later.

See Part II on who I believe is responsible for Capital Improvements and Part III on I believe is responsible for the operating expenses and how I would classify each of the deficiencies listed above one or the other.

Craig McLaughlin

Fox Island

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