Peter's Backing Out of the Rabbit Hole
Peter's backing out of the rabbit hole
Roy Masters | September 20, 2008
Peter Holmes a Court's plan for a debt-free Souths leagues club hasn't worked out that way, writes Roy Masters.
Peter Holmes a Court's ambition to scythe through what he perceived to be rugby league's inherent inertia, privatise the Rabbitohs and establish a Manchester United-type commercial dynasty at Redfern collided head on with the game's entrenched loyalty when he sought to buy a unit in an apartment building adjacent to South Sydney Leagues Club.
Broadcaster Alan Jones owned the penthouse unit, which he bought mainly out of friendship for George , the long-term Souths president whom Holmes a Court ousted in a power struggle.
mortgaged his Coogee home for $3.2m to borrow the capital to build the 10-residence block, planning to use the rental income to fund the operations of the Rabbitohs.
When Holmes a Court sold his own Centennial Park home for $10m, using $4m to cover a shortfall at the Rabbitohs for the 2007 season, he asked a real estate agent to inquire as to the price of Jones's unit.
Jones suspected Holmes a Court was the buyer and proposed an inflated figure of $1.9m, which Holmes a Court's agent successfully negotiated down to $1.8m.
Asked whether the above scenario was correct, Jones said: "Dead right." Holmes a Court also purchased the adjoining unit, seeking permission from the body corporate to join the units together and renovate the common area outside the lift on that floor.
The process involved obtaining permission from neighbours, including George and Noelene , who also owned a unit.
Noelene, as tough off the field as George was on it, took charge of negotiations. Holmes a Court gained permission, but it took time and dollars.
Currently in New York, Holmes a Court was effectively sacked by the South Sydney co-owner Russell Crowe following a year in which he raised the Rabbitohs' revenue from $9.5m to $15m but allowed expenses to escalate to $19m, increasing the number of full-time staff from 19 to almost 50.
Former football club president Nick Pappas is back as chairman and former chief executive Shane Richardson has returned to rein in expenses, further reinforcing the view that rugby league's insular circles of influence and intrigue are difficult to break.
But the real tale of retreat is at Souths Leagues Club. When Holmes a Court and Crowe won the vote to take control of the football club for $3m, they acquired 75 per cent of the franchise, with Souths members owning the remainder.
They also made an offer for the 10,800-square metre building, 198 undercover car parking spaces, and the apartment block.
The proposal, according to media reports and press releases, was to pay off the leagues club debt of about $7.9m, leave the club with cash reserves of $4.5m, and supply 1500 square metres for a new licensed premises on the third floor, including a $3m fit-out.
Holmes a Court flew to New Mexico, where Crowe was making a movie, and asked for the money. The Oscar-winning actor, who earns $20m a film, is careful with his pennies, and refused.
Holmes a Court was successful in seeking a month's extension from the administrator and sought another, only to have , the biggest creditor via his $3.2m bank loan, decline.
Holmes a Court and Crowe (BlackCourt League Investments) were forced to turn to property developer Albert Bertini of Trivest.
They formed the company High Concept, which is 50 per cent Albert Bertini and 50 per cent Souths Football Club, registered with ASIC only a day before the due settling date.
No mention was made to Souths members of a partner in buying the Redfern real estate when they voted in Holmes a Court, while their 25 per cent share of the Rabbitohs now represented only one-eighth of a leagues club they once owned 100 per cent.
High Concept paid $7m for the building, promised $3m for the fit-out, and paid $3.2m for the units, and threw in 1500 square metres of floor space.
As further evidence of everything retreating to where it once was, Souths Leagues Club then discovered it couldn't operate with 1500 square metres of floor space it was assigned in the agreement and required an additional 1000 square metres, "equal to the old space of the original club", admits leagues club president Bill Alexiou-Hucker.
The additional space is to accommodate poker machines, originally abandoned when Holmes a Court waged his "no pokies" campaign but now to be wheeled back by a needy board when the club re-opens.
As compensation for no pokies and the licence to operate the hospitality side of the club, Holmes a Court had offered $300,000 a year and an additional 1000 square metres. However, when forced to tip in $4m to meet the Rabbitohs' shortfall, he advised the leagues club he was withdrawing from the Memorandum of Understanding on the poker machines and cancelling the offer of the additional space.
High Concept has put a price of $6m, or annual rent of $500,000, on the additional 1000 square metres.
The original deal, including purchase price and fit-out, valued the whole 10,800-square metre building and car spaces - less the 1500 square metres to be provided rent-free as part of the deal - at $10m.
On those figures, the proposal would mean an area of 1000 square metres, effectively sold for a little under $1.1m, may now be bought back for $6m.
When it was put to Alexiou-Hucker, a customs broker, that the Holmes a Court undertaking of a cashed-up, debt-free leagues club and 1500 square metres of floor space had turned into a club needing more space and in debt, he said: "Correct." He argued it was the administrator who sold the floor space, saying, "It wasn't the leagues club who sold the floor space". However, the administrator (PKF's John Lord) said at the time that while the sale was "not in the spirit" of what members voted, he was powerless to act because the club had passed out of administration.
Alexiou-Hucker insists the Holmes a Court proposal kept the leagues club at Redfern and $40m will be spent on the building, now merely a shell, with work expected to start next week.
If $40m is spent, as promised, the additional $6m ask comes close to adding up, though still needing the club to borrow most of it.
Souths members were initially told the redeveloped leagues club would open in March 2008 and Alexiou-Hucker anticipates it will open in March next year, proceeding with the 2500 square metres plan.
A Development Application was approved by the City of Sydney last Friday but involves a floor space of only 1500 square metres and no provision for poker machines.
It is also on the first floor of the premises, not according to Holmes a Court's vision of situating it on the third floor overlooking Redfern Park, recently renovated by the City of Sydney for $23m.
Alexiou-Hucker insists consultants believe a third-floor club would be "unworkable, too similar to a New York-type loft club". Instead, the licensed club will sit above a supermarket, although, as Alexiou-Hucker says: "You won't see the supermarket and it will overlook Redfern Park." A Holmes a Court-owned company, International Sports Facilities Management (ISFM), was hired by the Leagues Club as a consultant to handle its interests in the development application.
ISFM was also used by Alexiou-Hucker in 2006, a year before Holmes a Court bought the company, to prepare and manage his ticket for the leagues club board, which Holmes a Court supported.
Holmes a Court says of ISFM, which is run by former Test cricketer Graeme Watson: "All work conducted by Graeme for the Leagues Club was negotiated without any involvement of mine. I became an investor in ISFM after they had an established relationship with the club." Alexiou-Hucker admitted the leagues club has $1.678m in the bank, with "$3m (for the fit-out) forthcoming". The $1.6m in the bank equates to the $1.5m left from the sale price of $10.2m, after a $7.9m leagues club debt was settled and $700,000 in administrator's fees were paid.
While Holmes a Court is confident Souths have a greater future than under , he admits that "when the building is complete, it may generate a small profit to the football club". While his critics accuse him of broken promises, he says they have "misinterpreted the plans".
Of a report the club would have $4.5m in cash - it has just under $1.7m - he says, "it was never the final deal". Of a promise the club would be debt-free - it needs to borrow more than $4.3m to acquire the floor space it needs - he said if they wanted to buy additional space it was "up to them". Of the club being open in March this year, not March 2009, he describes it as "a hope" rather than a promise. Of the leagues club being owned by the football club, rather than half-owned by a developer, he maintains any renovation of a licensed club demands a partner.
Of owning 1500 square metres of premises on the third floor, but now requiring 2500 metres on the first floor, he said: "Again, this was never a promise." Holmes a Court's somewhat silent financial partner, Crowe, is to play the sheriff in Nottingham, his next movie. It's a sympathetic portrayal, while Robin Hood is cast as a less than charitable figure.
South Sydney members claim to relate more to the words of the sheriff in the 1991 movie Prince of Thieves, in which he said: "That's it, then. Cancel the kitchen scraps for the lepers and orphans, no more merciful beheadings, and call off Christmas."
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