Despite new LA venues, Soho House faces cash troubles

Los Angeles /
Apr.April 18, 2016 09:30 AM

The latest cash struggles of the exclusive Soho House show that karma may be on the side of the finance cronies the club once rejected.

As the creatively-oriented membership company rapidly expands around the globe — in L.A., its West Hollywood spot opened six years ago and two others in the Arts District and Malibu are in the works — Soho House is facing increasing pressure to generate margins.

The London-based company’s ratio of debt to earnings before interest, tax, depreciation and amortization has increased by more than 14 times, the Financial Times reported, citing ratings agency Standard & Poor’s, which downgraded Soho House‘s outstanding debt from B- to CCC.  To boot, Moody’s said the club is burning through more cash than it’s taking in.

Each new location takes several years to reach maturity, and its growth may simply by outpacing its financial capacity, despite continuous revenue gains.

Meanwhile, the financial community may be in a state of schadenfreude. The New York Soho House pushed out hundreds of members last year to avoid an overwhelming presence of “corporate types.”

But the club, which boasts a global membership of 56,000, argued it isn’t anti-finance — it just requires members to have a “creative soul.”

In dealing with this hiccup in margins, Soho House executives — Yucaipa’s Ron Burkle, British businessman Richard Caring and founder Nick Jones — have a plan: a two-step equity infusion from shareholders.

Meanwhile, L.A.’s second Soho house is slated to open later this year. [FT]Cathaleen Chen


Related Articles

arrow_forward_ios
Renderings of the project at 8500 Santa Monica Blvd (Tighe Architects)
Six-story apartments eyed at Santa Monica and La Cienega
Six-story apartments eyed at Santa Monica and La Cienega
IWG's Mark Dixon and 925 North La Brea Avenue (IWG, Google Maps)
IWG takes over chunk of WeWorks turf in West Hollywood
IWG takes over chunk of WeWorks turf in West Hollywood
Crown Equity Partners' Michael Shabani, Sterling Organization's Brian Kosoy and 8379 Melrose Avenue (Loopnet, Sterling Organization)
Michael Shabani buys Casper mattress store on Melrose
Michael Shabani buys Casper mattress store on Melrose
Brokers see retailers flock back to Melrose Avenue
Brokers see retailers flock back to Melrose Avenue
Brokers see retailers flock back to Melrose Avenue
8899 Beverly out of gate with new high for LA condo
8899 Beverly out of gate with new high for LA condo
8899 Beverly out of gate with new high for LA condo
John Kukral in front of the the London West Hollywood Hotel at 1020 North San Vicente Boulevard in West Hollywood (Getty Images, iStock/Photo Illustration by Steven Dilakian for The Real Deal)
West Hollywood luxury hotel hits market
West Hollywood luxury hotel hits market
Tyler Siegel, Tom Kundig, John Irwin, Eklund Gomes' John Gomes, Julia Spillman and Fredrik Eklund; and 8899 Beverly (Nils Timm, Getty Images)
Townscape Partners releases pricing at 8899 Beverly
Townscape Partners releases pricing at 8899 Beverly
400 South San Vicente Boulevard and The Abraham Companies' J.J. Abraham (The Abraham Companies)
Beverly Grove strip mall set for apartments
Beverly Grove strip mall set for apartments
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...