Veteran institution the Kirribilli Club has failed in its public cry for help and has entered voluntary administration, citing the pressures of rising rent and falling revenue.
The venerable Kirribilli Club was founded in 1946 in support of returned defence force personnel and their families.
There was talk of relocating, but a lack of suitable properties on the ritzy lower north shore instead brought about a major refurbishment in 2007 on the 1,834 sqm site on Harbourview Cres, despite significant debt.
But regardless of its picturesque harbour views and affluent locals, the Club continued to have financial trouble.
In 2014 the property was sold for $15.5 million to NSW Harness Racing, and in 2022 sold again, for $22.8 million to Stadia Capital.
The lease on the Club was set to renew in November, bringing a fixed three per cent increase to the rent, which is an annual condition of the lease agreement.
In an attempt to engineer its own fortunes, in late March management sent emails to thousands of locals, explaining that the club’s rent was about to hit more than $2 million annually, ancillary and building expenses added another $1 million a year, and the board had been forced to make the reluctant decision to not exercise its renewal option.
The message also revealed the board’s rather ambitious goal for the club to buy the property, asking over 18,000 members to invest in $2,000 debentures (a type of long-term business debt not secured by collateral).
“We request your serious assistance as this is your club, and the Kirribilli Debenture opportunity is the best solution for our longevity and continued existence going forward.”
Financial records show that in 2021 the club reported profit of over $480K, from revenue of around $6.1 million. If each member bought into the debenture program, it could generate $36 million.
But the hail Mary scheme did not hit the mark and the club failed to raise enough money to purchase the prime harbourside lot, and this week it entered voluntary administration with Hugh Armenis from SV Partners.
“Unfortunately, due to a combination of overwhelming financial, operational and hospitality market circumstances we have exhausted all available options and have not come to this conclusion lightly,” former Club chair Lukas Bendt emailed to members.
“It has always been the board’s priority to ensure the club’s members, ex-services, staff, and guests have a place to call, ‘Home’.
“We hope further opportunities to re-establish the Kirribilli Ex-Service Club going forward in the future, have not been completely extinguished. Somewhere, somehow.”
Jilly Gibson, former mayor of North Sydney and lifelong Kirribilli Club member credited the initiative but doubted it would be successful, and is now concerned for “well-meaning locals” who invested, asking “Can they get that money back now?”.
The combination of rapidly rising operating costs and patrons feeling the pinch and reducing discretionary spending has led to many suburban clubs struggling, often seeking support from their communities, amalgamating with other clubs, even pivoting into property development to improve stability.
Stadia Capital managing director Scott Staniforth says he feels for the plight of clubs such as their tenant, suggesting many are in “situations where they need to rethink their business model”.
Armenis reports the Club will continue to trade while its business, property and financial circumstances are assessed, and that both he and the club “appreciate the members’ support” during this time.
“As soon as I am in a position to do so, members will be provided an update as to the status of the club.”
First meeting of creditors is scheduled for 28 June.
