Exclusive Soho House Wants More Members—Lots of Them
London-based private-club company wants to expand globally—and is considering a public stock offering to fund it
The 23-year-old London operation says its 19 locations in nine markets around the world currently have 71,000 members, who pay $1,050 to $3,200 each in annual dues for access to the club and its hip events and social networks. (Food and drink not included.)
The company plans to open as many as five new clubs each year in major cities around the world, and is considering a public stock offering in the U.S. as a way to fund that expansion, said founder and Chief Executive Nick Jones. The company’s current locations include London, New York and Istanbul, and new sites are planned in Amsterdam, Hong Kong and Mumbai, among others.
“We really do feel there are some good, long legs here,” said Mr. Jones, who opened the first Soho House in London in 1995. Location No. 20 is set to open later this month in Brooklyn’s Dumbo neighborhood. “There is a lot of white space for us. There are a lot of countries, a lot of cities where there could be more clubs.”
Soho House’s core business model isn’t new. Private social clubs have been around for centuries, popularized in British high society in the 19th century and later in university and city clubs initially tailored to elite businessmen in the U.S.
Membership in Soho House is selective. Admission requires a lengthy application and interview process, and the waiting list hovers around 27,000, the company said. But unlike elite private clubs of the past, membership isn’t based primarily on wealth or family status.
There’s no set formula for new admissions. Membership committees for each house meet quarterly and decide how many new members to admit, considering factors such as overcrowding. Members include Matthew Rhys, star of the FX series “The Americans,” and actress Jodie Foster.
Soho House has purged its ranks when members don’t fit the image they want to portray. In New York after the financial crisis, it removed several hundred bankers from its rolls, the company said. Membership committee decisions are final.
Its average member is 36 years old and getting younger, the company said, compared with an average age of about 50 for the typical U.S. private club, according to data from the National Club Association. Executives say Soho House is tapping into a desire for flexible workplace arrangements such as those offered by WeWork Cos.
“There’s plenty of proof that people are less corporate, more entrepreneurial. The 9 to 5 is disappearing,” said Mr. Jones, who said the company’s model provides spaces for social gatherings, meetings or workouts throughout the day, along with options to stay overnight at many locations.
Soho House is majority-owned by billionaire investor Ron Burkle’s Yucaipa Cos., which took a 60% stake in the company in 2012. London fashion and restaurant impresario Richard Caring has a 30% stake, and Mr. Jones owns the rest.
The company posted $371 million in operating revenue in 2016, up 21% from a year earlier, according to data provided to the U.K. government. Approximately half of revenue comes from food and beverage, 20% from membership and the remainder from hotel rooms and other services, according to the company.
As it has pursued global expansion plans in recent years, Soho House has taken on significant debt that led to ratings downgrades by Standard & Poor’s and Moody’s in 2016. Those firms found that the company’s construction and development costs for new properties were quickly eating up its cash.
In early 2017, the company agreed to a consolidation of its debt with one of its bondholders, Permira Debt Managers, according to a person familiar with the matter. The agreement extended the company’s debt maturity to 2022, from 2018, and reduced its average cash cost of debt by 30%, the person said.
“We were going down the motorway a few years ago and skimmed the central barrier. It was a brief skid,” said Mr. Jones. “We’ve been growing at a heavy pace, which takes capital.”
The popularity of the new breed of urban social clubs like Soho House comes amid a decline in private club membership across the U.S. over the past decade, as the baby-boomer generation ages and some suburban country clubs are in decline. Membership in private clubs overall has fallen about 5% over the past decade, according to data from the National Club Association, though membership in urban clubs not tied to golf has increased 7% over the same period.
Frank Vain, president of the McMahon Group, which consults for private clubs, said the new generation of urban clubs has found a way to create a mystique around membership without being overtly exclusive or stuffy.
“People always want what they can’t have, and they want something that’s special,” said Mr. Vain. The new clubs “have redefined special. There’s an anticlub aspect to them that is creating a buzz.”
The Wing, a women’s social club and co-working space, started in New York in 2016 and has four locations, with plans to expand to seven new sites around the world. Its Dumbo site is near the soon-to-open Soho House.
NeueHouse, a co-working company founded four years ago, is borrowing aspects of the Soho House model at its locations in New York and Los Angeles. But the company is focused on building spaces more oriented toward work than socializing, said Jon Goss, the company’s chief commercial officer. Investors in the company include the Hong Kong real-estate company Great Eagle Holdings and the family office of Barry Diller and Diane von Furstenberg.
Like Soho House, NeueHouse holds events for members and offers a “social membership” that grants access only to panels it hosts and happy hours. About 1,600 members pay anywhere from $150 to several thousand dollars a month for a space big enough for multiple employees. NeueHouse doesn’t offer overnight rooms, but there are screening rooms, bars and auditoriums for after-work activities.
Though Soho House runs restaurants, bars and hotels as part of its business, the company says its profit margins aren’t as tight as those industries because members’ dues provide a steady revenue base. Marketing and customer acquisition costs are also low, said Peter McPhee, the company’s chief financial officer, because of its long waiting list.
“Ultimately, there’s more demand than supply,” he said.