2005: Meadowbrook undergoes course correction

By Michael A. Boslet

CHAMPIONSGATE, FLA.

For months, speculation on Meadowbrook Golf Inc.’s financial health has been fueled by accounts of the golf course owner and manager pulling out of a multicourse purchase deal, terminating lease contracts and returning properties to lenders.

During a span of 20 months, Meadowbrook, headquartered southwest of Orlando, dropped a dozen golf courses from its portfolio by negotiating its way out of leases and mortgages, according to Ron Jackson, chief executive and president of the company. The sales of four other Meadowbrook courses are pending.

All of the courses, Jackson said in early June, were underperforming assets that were a financial drain on the company. Eliminating them from the course portfolio, he said, ultimately will make Meadowbrook stronger as it turns its attention to acquiring and running high-end golf properties.

In an interview with Golfweek’s sister magazine, SuperNEWS, Jackson seemed surprised when he was told that the business moves, which included pulling out of a deal to buy five PGA Tour Tournament Players Clubs for a reported $40 million, had sparked a flurry of back-channel speculation that the company was teetering.

The October departure of Don Rhodes, Meadowbrook’s vice president of acquisitions and new business development, after less than two years with the company, did not go unnoticed either. But with Meadowbrook in the midst of restructuring and, unexpectedly, forced to deal with $25 million in hurricane damage to its Florida properties, Jackson said there was little for Rhodes to do. Jackson added that insurance coverage and business-interruption insurance saved the company from incurring substantial losses.

Meadowbrook, he said, had a net profit of $800,000 in 2004. Jackson, who joined Meadowbrook as CEO in 2001, said last year was the company’s best since it was founded in 1998.

Jackson said leases and courses that were considered bad for business were let go, including:

Thunderhill Golf Course, a daily-fee in Madison, Ohio. It was the first lease to be terminated under Jackson’s restructuring.

Six Philadelphia municipal courses. According to Barry Bessler, chief of staff for the city’s Fairmount Park Commission, Jackson informed park officials in October that Meadowbrook wanted out of its lease commitment, which ran until 2009. Under terms of the contract, Meadowbrook was to pay the city $1 million a year in combined lease payments, Bessler said. After negotiating a settlement with the city, Meadowbrook was released from its contract March 31.

The Gauntlet at Curtis Park in Fredericksburg, Va. In February, Meadowbrook got out of its contract to operate the Stafford County-owned course.

Four Orlando-area golf courses that Meadowbrook bought in 1999. Twin Rivers, Sabal Point and Winter Springs, all located in Seminole County, were returned in March to the mortgage holder, Banc of America Strategic Solutions Inc. Jackson said the agreement also called for Meadowbrook to pay compensation to the lender.

Another course, Kissimmee Bay Country Club, was returned to its sellers last November. Jackson said Meadowbrook decided not to renew the financing on the property. But Bill Stine, former president and chief operating officer of Meadowbrook and part owner of Kissimmee Bay, said Jackson’s company stopped making payments in 2003.

“We went to a full foreclosure on them to get the property back,” Stine said.

Jackson said the 16 properties were poorly performing courses and didn’t fit into the company’s plans to focus on high-end courses and private clubs. Meadowbrook owns and manages 35 courses nationwide, and Medallion Golf, a sister company Jackson also heads, has agreements to acquire eight upscale facilities, Jackson said.

Medallion was to buy five TPC courses last year, but it backed out of the deal with the PGA Tour. Jackson said the four Florida hurricanes in six weeks forced Medallion to walk away from the deal.

“Three weeks away from closing on the TPC deals, and the hurricanes hit,” he said. “I had six golf courses shut down (two in the Panhandle remain closed). Three of the TPC courses we were buying were in Florida. People were not playing golf after the hurricanes. . . . We would have lost millions over the next 120 days if we had closed that deal.”

Having disposed of the weaker assets, Jackson sees Meadowbrook and Medallion positioned to resume expansion, and with that in mind, Rhodes, a veteran of golf course acquisitions, rejoined the company in April. Meadowbrook and its outsource maintenance company, International Golf Maintenance, recently took over management of MetroWest Golf Club in Orlando and South Bend (Ind.) Country Club, and four third-party contracts are in the works, Jackson said.

A longtime golf course broker with knowledge of Meadowbrook’s dealings called Jackson’s moves smart business decisions.

“I think (Meadowbrook is) solid, and it’s going to get better,” said Hilda Allen, president of Hilda W. Allen Real Estate Inc. in Adel, Ga.

“I think getting rid of underperforming assets was a good thing.”

Allen said she didn’t think Meadowbrook’s image was tarnished by the restructuring, adding that the measures Jackson took were not unusual in the golf market.

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