When Soho House announced its listing in New York in June, CEO Nick Jones received an email from the fifth member of the club.
Screenwriting agent Greg Hunt wrote that he was sitting at the first Soho House bar in central London.
With more than 119,000 members 26 years later, the company owns 30 Soho Houses in 12 countries and secured a valuation of $ 2.8 billion on Wednesday. A private member club group raised $ 420 million through an initial public offering and sold the shares for $ 14 per share, the lower limit of what they could sell to investors.
“I never imagined I was sitting here with the FT on a pre-float on Monday morning,” said 26 years ago after leasing three adjacent buildings above the Soho restaurant Café Boheme. Jones, who started the Members Club, said. .. “I wanted to survive 1995.”
Targeting “creative”, the company has changed its scale with supermodel Kate Moss and singer Pixie Lott as members. The list has been renamed to Membership Collective Group to recognize other brands such as the London city hotel Zaned and the Scorpios Beach Club on Mykonos.
What hasn’t improved dramatically is Soho House’s bottom line. It was never profitable and instead expanded through high loans and investments from well-funded shareholders. Jones abandoned previous listing attempts in 2018. These potential investors said they were not aware of the benefits of the subscription model.
During the pandemic, restrictions closed the club and MCG made about 1,000 of its 6,100 staff redundant. According to the company, customers could freeze their membership, with only 8 percent of their members canceling.
But even before Covid-19, the income statement looked awkward. Between 2018 and 2019, pre-tax losses increased 37% to $ 123.5 million and revenues increased 12% to $ 642 million. Last year’s revenue was down 40% to $ 384 million, a loss of $ 236 million.
The company has reviewed the cost structure and Aggressive growth strategy To attract investors. Aiming to generate net profit by 2022, the United States is listed in New York with 41% of sales and members paying about $ 3,400 annually. This is the highest price for the entire group.
The United States is also home to Lombark, retail billionaire, MCG’s largest shareholder. Lombard owns 53% of the company pre-float and holds preferred voting rights, along with Jones and hospitality entrepreneur Richard Curling.
According to Jones, up to 7% of the shares for sale were reserved for members, and about a quarter had registered interest.
By 2024, MCG plans to open a home in Nashville, Portland, a second home in Hollywood, a ranch in California, a beach house in Palm Springs, and a Ned branch in New York. We acquired the US boutique hotel group The Line in June and plan to open the Line Hotel in San Francisco next March.
Jones said the secret to breaking into the United States was “not so keen on failure.” The launch in New York in 2003 could mean that “the company just beat us and couldn’t survive and thought it was worth the risk.”
Following WeWork, MCG has also entered the shared office sector with eight sites in London, Los Angeles and New York. Nonetheless, the outlook states that it has no “single direct competitor”, except for local clubs and coworking spaces in individual cities. It claims to be in “one industry”.
Of the $ 450 million that MCG wants to raise, it will use $ 223 million to repay a portion of its $ 600 million net debt. Interest payments will cost 41% of this year’s first quarter revenue. In March, it replaced the $ 345 million facility with Buyout Group Permira, borrowed a £ 560 million loan from Goldman Sachs at an 8% interest rate, and settled $ 79 million in accrued interest.
“The main reason for listing is to repay that debt. It really isn’t necessary for capital investment,” said Andrew Carney, Global President of MCG.
To reach the goal of five to seven new Soho Houses each year, the company uses an “asset light” approach in which real estate owners pay the opening costs.
MCG plans to raise membership income from 26% to more than 50%. Other revenues come from in-house food and beverage sales and a line of interior products that will open its first studio in September. Of course, there are also memberships that accompany it.
Bernstein analyst Richard Clarke said MCG’s recurring revenue subscription model provided valuable lessons for other hotel groups out of the pandemic. .. .. Suggest customers to pay in advance for status, special experiences and perks. ”
He added that the youthful bias of the Group’s customers “should continue to be strong demand for these subscription-type memberships.”
For Jones, adding membership to any brand is a clear choice, and he plans to offer that service to other businesses.
Even underwriters can apply
Pierre Dourneau, MCG’s North American managing director who joined Café Boheme as a waiter in 1995, said Jones is “non-stop” and the company’s entrepreneurial spirit means “if you like it.” .. .. You will have a hard time. Some staff will stay for 3-4 months. Others, such as Dourneau and another longtime employee, membership director Vanessa Xuereb, love “organized turmoil.”
However, one former design team employee said the speed of growth meant that the manager “did not worry about what he needed to do.”They brought a whole new team [but] There was little feedback and I could hardly understand what I needed to do. “
Ben Silbermann, US Producer office A member since 1996, he states that he appreciates the friendliness of the club. .. “
However, some members are afraid that rapid expansion can reduce the value of their membership. “The Soho House is still attractive, but it’s diluted,” said a London member for over three years.
Everything to make sure MCG is “a local club for local members, not a temporary club for people who may not have lived in the city for a long time,” Jones said. He said he made an effort.
As for the standards, he said, even bankers can participate if they have a “creative soul.”
The private members’ club throwing open its doors to the public Source link The private members’ club throwing open its doors to the public