Chambers Bay Struggling Financially

[Terry Lavin]

How much do they expect to take in from the AM and the Open to pay down debt?

That's a good question.  I'll venture a guess that they'll make around $4 million on the Open.  Then the question remains how much more in the way of infrastructure will they build and how much will that cost.  At the end of the proverbial day, they'll probably wind up with very little cash after the Open, but the course will be in pretty good shape going forward after its week of worldwide exposure. 

[Jerry Kluger]

I will first say that I thoroughly enjoyed CB and perhaps I was a bit spoiled because Richard Choi led me around - that's because he hits it 50 yards further than I do. The course is great but it is tough and unlike most courses which the average guy plays - firm and fast, contoured greens, etc.  It is expensive but then again it is an Open venue which usually drives up the cost.  That being said, the average guy isn't likely to pay $175 to play a course on a regular basis.  The out of town guy in Seattle on business is interested but it isn't close to downtown so you need to rent a car to get there.  I find it hard to believe that it cost so much to build but if that $21M is correct someone was totally unrealistic in believing that it could make money or even pay for itself. 

[Tom_Doak]

They netted only $15,000 on the Amateur, and now they are looking to the lucrative tourism market from China to help stabilize the balance sheet until the flood of money from the U.S. Open. More wishful thinking.

If Julian Robertson was reading this thread, he would find a way to short the bond offering, except that $21 million is chump change on Wall Street.  But perhaps there is some genius 24-year-old at Goldman who can figure out how to make a 50x leveraged play.

[Lou_Duran]

Calling Cos.

What is the name of that course south of CB built since 2000 that charges around $35 for visitors and has several fee plans for locals?  I only played 4 holes there before being totally drenched, but from what I saw, it is a very good course and a great value.

With courses such as this one helping to set pricing, unless CB can capture the travelling golfer, what might be a sustainable avg. green fee and rounds played to BE (break even)?  $50?

Assuming $21 Million in outstanding bonds, say at 4% i, amortizing it over 30 years, and using $1.5 Million annual operating expenses (maintenance, administrative, capital reserves, etc.- assume pro shop and F & B breaking even), we're talking around 54,000 paid rounds annually at a $50 avg. rate to BE.  Can they physically sell that many rounds in that climate?  At $75, it takes 36,000 rounds.

For other reasons as well, we might hope that China continues to build wealth and its golfing population.  Perhaps the fine folks responsible for CB might consider seeking direct investment from the Chinese authorities who seem to be doing the social welfare thing much better than us.  Come to think of it, if CB was built under Chinese methods and control, I wonder if the $20-some Million might have been three or four.

Richard Choi,

The stockholders of AIG, Lehman, GM, Chrysler, and the many banks merged or closed by the federal authorities might have a few bones to pick with you on your characterization of the bailout.  Owners were wiped out, but the enterprise (the goose) was put on life support with hopes that it will survive awhile longer.  Do you even wonder why Freddie and Fanny, arguably, the ones responsible for starting the snowball rolling, were exempted from the subsequent financial regulation?  Was it a case of govt. professional courtesy?

BTW, since you're a smart guy and an insider, can you explain to me why I still have a 30%+ loss on my MSFT holdings well over 15 years after my investment while your boss' wealth continues to grow impressively?  Is my common stock less common than his?  Or does he continue to receive thousands of additional shares while the company basically stagnates and he is out pursuing non-MSFT Big Picture issues?  Just wondering how the smarts guys do it, but I doubt that I could understand it anyways.      

  

[Peter_Herreid]

Lou, you're  probably thinking of The Home Course in nearby DuPont, WA...

Really, nothing new in this thread at all--everything noted has been and will continue to be the reality for Chambers Bay for at least the next 5 years and likely long beyond that.  Will it really be necessary to rehash this every time the News-Tribune or someone else publishes an update every year?

Also, it's not exactly nonsense, but the conditioning of the greens should in essence be a non-issue going forward.  I think we can all agree that for $175 we would all like flawless greens, but they are no longer the problem that they legitimately were during the first two years of CB's life...It's now an "old-wives' tale" that is popular to moan about, but not grounded in the present day..

[Lou_Duran]

Thank you Peter.  Yes, that's the one.

Does this course have a bearing on what people will pay for green fees at CB?

Even if the greens were Augusta National perfect, do you thing that CB could charge $175 and enough rounds to be financially viable?  In your opinion, can the course achieve 36,000 at $75?

[Bill_McBride]

BTW, since you're a smart guy and an insider, can you explain to me why I still have a 30%+ loss on my MSFT holdings well over 15 years after my investment while your boss' wealth continues to grow impressively?  Is my common stock less common than his?  Or does he continue to receive thousands of additional shares while the company basically stagnates and he is out pursuing non-MSFT Big Picture issues?  Just wondering how the smarts guys do it, but I doubt that I could understand it anyways.      

  

Lou, I was amazed, several years during a college reunion on Orcas Island in the San Juans, to learn that virtually all the large homes, either new or under construction, were built by the so-called "Microsoft Millionaires."

Perhaps this is one of those rare occasions where maybe capitalism isn't all it's cracked up to be!

[Tim Nugent]

Just what is in the $21m number?  I would like to see a breakdown of how it was arrived at.  I would also like to see a comparison of the original "pre-design" Development and Operation Pro-Forma and current account revenues and expenditures.

Then I could arrive at a rational conclusion as to what the situation really is.  It would also be good for others to have it for a Case Study.
I find it interesting that Lake County Illinois got sold the same bill of marketing goods with the development of Thunderhawk.  It came in at more than double the original budget but was promised that it could deliver much from "out-of-area" play (that never developed).

 Unfortunately, local government officials don't have the necessary background to make Development decisions and are too afraid to pull the plug once the ball gets rolling lest they look like they don't know what they are doing.
BTW, notice how the article skirts around the crux of the issue - How many rounds are played? And of that number how many are a) local, b) regional, c) out-of-area?

If I'm travelling on business - especially West Coast, playing golf is not an afterthought.  I can get a late flight out.  Playing golf not only means the extra expense of baggage fees for my clubs, but also a hotel night, a meal or 2  and most likely a rental car or taxi expense. Add close to $200 in greens fees and you're approaching a $400/rnd.  Oh, and I get to know that I'm subsidizing the locals who are think the place should break even (ie not cost them anything to support via taxes).

[Lou_Duran]

Bill,

Capitalism absolutely sucks.  It just happens to be infinitely superior than any other system thus far devised.  We keep hearing of "The Third Way", but it is always a drift to socialism with the "good, smart people" making the decisions which always benefit a very small segment of people like themselves to the detriment of the rest.

I once met a young guy in his early to mid-30s who had just retired from Dell.  The pro at this fantastic course said that the chap was worth somewhat north of $50 Million, and was at the club every day honing his game to compete at the amateur level nationally (I was a good 2 at that time, and this guy wiped me out- though the pro, who also played with us shot something like 10 under to set the new course record- quite a day!).  Perhaps we just picked the wrong professions!

 

[Jerry Kluger]

CB is walking only and the expected caddie fee is around $100 which makes it even more difficult to play on a regular basis if you're an older guy like me. The course is not an easy walk and the sandy waste areas are soft and tough to climb.   I would suggest that they offer annual memberships which would generate upfront cash for them and a reduced fee for the player.  I would further suggest a reduced fee for guests of members so members would be encouraged to invite their friends to play.  

[Phil McDade]

Just what is in the $21m number?  I would like to see a breakdown of how it was arrived at.  I would also like to see a comparison of the original "pre-design" Development and Operation Pro-Forma and current account revenues and expenditures.

Tim:

Glad you asked this question -- I couldn't find anything today in (admittedly, just a few minutes of doing so) searching through some archived news sources. The $21 million cited in the linked article is "loosely sourced," as we used to say in the news business -- a figure thrown out without any attribution, or any context of what was involved. The CBay area is, if I'm not mistaken, part of an enormous public park/recreation area that was once the mining operation.

[Bill_McBride]

Bill,

Capitalism absolutely sucks.  It just happens to be infinitely superior than any other system thus far devised.  We keep hearing of "The Third Way", but it is always a drift to socialism with the "good, smart people" making the decisions which always benefit a very small segment of people like themselves to the detriment of the rest.

I once met a young guy in his early to mid-30s who had just retired from Dell.  The pro at this fantastic course said that the chap was worth somewhat north of $50 Million, and was at the club every day honing his game to compete at the amateur level nationally (I was a good 2 at that time, and this guy wiped me out- though the pro, who also played with us shot something like 10 under to set the new course record- quite a day!).  Perhaps we just picked the wrong professions!

 

Are you saying that how the MSFT millionaires cashed in while you're down over 30% LTD (lifetime to date) represents a "drift to socialism?"

[Adam Clayman]

Anyone know what the managhement Co. Netted?

[Lou_Duran]

Are you saying that how the MSFT millionaires cashed in while you're down over 30% LTD (lifetime to date) represents a "drift to socialism?"

No.  I should never have jumped into the tech bubble- long story, but it had to do with the city I lived in refusing me zoning to build a golf course for which I had some equity saved and needed to do something with it.  I knew better, but I never liked sitting on cash and thought that maybe the smart guys who opined about a "paradigm shift" (in PE ratios for highly productive industries) could be right.  What a stupid!

I am saying that people who are uncomfortable with market-led capitalism yet understand that socialism can't work yearn for another way.  For example, our local newspaper prides itself on walking the center line, maybe leaning a little Republican, but mostly "progressive".  Simultaneously, through its editorial page, it laments the decline of our (TX) educational system while endorsing amnesty and more open immigration.  It seems to endorse "public/private" partnerships to solve all sorts of "fantasy problems" (e.g. bringing business and development to poor areas where market economics, crime, demographics, etc. won't support it).  This is the drift to socialism that I am speaking about.

This drift from our founding is further illustrated by what James Madison had to say on govt. and charity below.

 "In 1794, when Congress appropriated $15,000 for relief of French refugees who fled from insurrection in San Domingo to Baltimore and Philadelphia, James Madison stood on the floor of the House to object saying, 'I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents.'
-James Madison, 4 Annals of congress 179 (1794)

'…[T]he government of the United States is a definite government, confined to specified objects. It is not like the state governments, whose powers are more general. Charity is no part of the legislative duty of the government.' "
-James Madison

I suspect that even "middle of the road" guys like you have a hard time understanding where Madison was coming from.  In a continium with Madison (right) and Marx/Lenin at opposite ends, where would you put that "center" mark today?  I would put it well left.    
          

[Bill_McBride]

Lou, you mentioned the "drift to socialism" in the context of the MSFT insiders making fortunes while you didn't, so I'm not sure exactly where Madison and the "drift to socialism" come into the picture.

[Matt_Ward]

Lou:

Let me point out a fairly learned man -- Abe Lincoln -- once said the Republican party is for both the man and the dollar.

But when in conflict -- the man BEFORE the dollar.

Makes me wonder where the Grand Ole Party has gone wrong since his time.

[Jerry Kluger]

Matt: Enough with the politics and blaming everyone for everything.  We are talking about how to keep an architecturally significant course going and where they went wrong so future planners don't make the same mistake.

[John Kavanaugh]

I can't believe a site dedicated to golf is getting their panties in a bunch over 21 million dollars of government monies.  I have plans to visit Seattle solely because of the construction of this course.  It reminds me of the St. Louis Arch, who cares about the pay back if it becomes a symbol of a region.

Take a second and consider where 21 million stands in the scheme of government spending.  Us golfers are lucky to get it and should hope to get some more.

[Tim Nugent]

Just what is in the $21m number?  I would like to see a breakdown of how it was arrived at.  I would also like to see a comparison of the original "pre-design" Development and Operation Pro-Forma and current account revenues and expenditures.

Tim:

Glad you asked this question -- I couldn't find anything today in (admittedly, just a few minutes of doing so) searching through some archived news sources. The $21 million cited in the linked article is "loosely sourced," as we used to say in the news business -- a figure thrown out without any attribution, or any context of what was involved. The CBay area is, if I'm not mistaken, part of an enormous public park/recreation area that was once the mining operation.

Phil, when I see these huge sums it usually has things lie debt service, non-golf items (in this case, perhaps the cost to turn the rest of th acrageinto a park, maintenance costs include the rest of the parkland in addition to the golf course, etc. I would also be interested in what the management company's role was in the pre-development or were they just hired after construction? If before, I wonder if their contract will be renewed?

John, "Government Monies"? By this, do you refer to taxes and fees of local residents?

[John Kavanaugh]

Yes Government Monies are the monies the government gets their hands on.  It is one reason I love the Arch and the St. Louis Zoo, two things I enjoy for free.  The Arch I somehow supplement, the Zoo I do not.  I love many of our government parks but hell I love our bombs and missiles and planes and things too.  I just heart or government, sorry, can't help it.

[Lou_Duran]

Lou, you mentioned the "drift to socialism" in the context of the MSFT insiders making fortunes while you didn't, so I'm not sure exactly where Madison and the "drift to socialism" come into the picture.

I did no such thing.  My reference to the drift to socialism was in response to your question specifically in the context of your often stated position as an independent, center-line person/voter.

My suggestion is that what you contend is the center can only be accurate if that line has greatly veered to the left.  My reference to Madison, and I could have cited any number of our founding fathers, was to identify what might be the polar right of the economic and political continium.

I assume that the MSFT executives took advantage of options, warrants, etc. and the great appreciation during the company's earlier years and cashed some of their shares to enjoy their life's work and for financial diversification purposes.  My question to Richard was serious, and since he is a smart guy who knows the company well, I thought he might be able to answer.  I suppose I could do the research myself and find out what accounts for Gates' growing fortune, but I guess I am not that interested.

Matt,

One of the great ironies of taxes to pay for government services is that most people are for them so long it is someone else who pays for them and tey like to use or depend on those services.  During the Buda this year I was astounded by comments made by one of the guys who posts on this site from time-to-time with a clear Democrat slant.  He was talking about how his business allowed him to avoid paying taxes and didn't appear to think there was anything incongruent between his political orientation and his actual behavior.  I think this chap has a lot of company in your side of the aisle.   That around 50% of the American people were for maintaining the Bush tax cuts for all brackets is a wonder considering that well over 95% would not have been affected by the Democrat's stance increasing the rate on "the rich".

RE: Lincoln and the GOP, his ire would not be in the direction you suggest.  You see Matt, and I know that you will never believe this, if you do as you seem to indicate, you will have far more Men than Dollars and getting worse ad infinitum.  We have one of the most progressive tax systems in the Western World, and it is still not enough for your guys.  We will either learn to make do on around 19% of GDP, or we will erode into economic oblivion.  Regardless what the "progressives" can show you with their impressive research and "experinmental economics", it really is that simple.  Something to do with the vulgar expression about IF ("my aunt had a [certain part of the male anatomy], she'd be my uncle").  

Jerry,

I will accept your admonishment to Matt and cease.  I didn't mean to get carried away.  Time for another 12-month hiatus.  

 

[Sean Leary]

Lou, you're  probably thinking of The Home Course in nearby DuPont, WA...

Really, nothing new in this thread at all--everything noted has been and will continue to be the reality for Chambers Bay for at least the next 5 years and likely long beyond that.  Will it really be necessary to rehash this every time the News-Tribune or someone else publishes an update every year?

Also, it's not exactly nonsense, but the conditioning of the greens should in essence be a non-issue going forward.  I think we can all agree that for $175 we would all like flawless greens, but they are no longer the problem that they legitimately were during the first two years of CB's life...It's now an "old-wives' tale" that is popular to moan about, but not grounded in the present day..

Agreed. The greens are much better now. But people have long memories of paying $175 when the greens were quite poor...

[Jerry Kluger]

Lou: I don't have a problem with discussing the issue but Matt seems hung-up on turning things into a political war.  Microsoft may be relevant as it is a Seattle based company but unfortunately it is not located anywhere near CB and my recent trip out there exposed me to some ugly traffic problems. 

[Lou_Duran]

Jerry,

I am the one who brought Microsoft into the thread, unwisely I might add, and it really doesn't have much bearing on this discussion.  I have a burr in an uncomfortable place having to do with my investment in that company, and for whatever reason, when Richard Choi posts, the irritation comes to mind.  Nothing to do with Richard at all, he seems to be a fine young man; it is solely my problem that I need to get over.

Concernig traffic, on my two visits from Bellevue down to CH, traffic was difficult.  The twilight round and dinner was easier, missing the rush hours.

Sean,

What will that market bear even if the greens are perfect?

How many rounds do the best munis do annually?  How about Aldarra?  

[Matt_Ward]

Jerry:

Hold the phone amigo.

The thread was ALREADY CRUSING AT HIGH SPEED before I interjected.

Target the venom and angst at another direction -- please.

Jerry, the war was already underway with the deviation from the topic at-hand. If you want to target me -- fine, just be sure to be fair and add the main folks who hijacked the thread long before I got involved.

adios partner ...