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