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Roy Masters
January 28, 2012
Happy fans but the rescue of the South Sydney football club came at a cost. Photo: Quentin Jones
SOUTH Sydney supporters will be able to buy a beer today at their leagues club for the first time since it closed its doors on March 31, 2007, when all 22 employees were sacked following the privatisation of the football club by owners Russell Crowe and Peter Holmes a Court.
A bar will be open at the club's Chalmers Street premises to celebrate the return of the Rabbitohs to the renovated Redfern Oval for a pre-season match against the Warrington Wolves.
The five-year drought for South Sydney members represents a cautionary tale over the privatisation of football clubs, an option being considered by Cronulla, who may sell a leagues club asset in order to retire a $12 million debt.
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Peter Holmes a Court and Russell Crowe own 75 per cent of the football club. Photo: Wade Laube
When the Rabbitohs went into administration in June 2006, the leagues club owed about $7 million, but had assets worth at least $13.2 million; the administrator described the four-level club as ''asset rich, but cash poor''.
The Crowe-Holmes a Court proposal was for the leagues club to own the fully refurbished premises of 1500 square metres worth about $8 million, with $4.5 million in the bank, and to be debt free. The reality is the leagues club has 2500 sq m of floor space but is saddled with a debt of between $8 million to $12 million and has little in the bank.
Bill Alexiou-Hucker, the chairman of Souths on Chalmers, the new name of what used to be the South Sydney Leagues Club, does not dispute these figures, describing ''our current situation as low cash levels'' and conceding the leagues club ''took over four years to build''.
However, Alexiou-Hucker insists the ''privatisation of the football club has nothing to do with the delay in the opening of the leagues club'', pointing to the fact that both clubs have different boards.
Yet the Rabbitohs football club, owned 75 per cent by Crowe and Holmes a Court and 25 per cent by members, must take the main responsibility for the management of the development.
In November 2006, when the newly privatised football club won the vote held by the administrator to decide control of the leagues club's real estate assets, it could not finance the purchase. Twice it asked the administrator for time extensions and then searched for an equity partner, on-selling half the leagues club assets to developer, Trivest. Trivest later on-sold half its equity in the project to another developer, Sakkara Pty Limited.
The football club also agreed to pay the leagues club $300,000 a year to not have poker machines, but when the Rabbitohs posted a $4.2 million loss in 2008, Crowe and Holmes a Court withdrew from the ''no pokies'' stance.
This meant the leagues club had to change its development plans to include more floor space to house poker machines.
Most importantly, it was also forced to arrange finance to buy an additional 1000 sq m of floor space back from the football club at a price six times what it had sold it for.
In the meantime, the equity partners in the development were bickering, with Crowe and Trivest's Albert Bertini bitterly falling out.
The football club reneged on an earlier pledge to pay $3 million to fit out the leagues club and there were long delays in obtaining finance to complete the project because of approaches to the Marrickville RSL Club, Souths Juniors and Laiki Bank.
Wrangling between the Rabbitohs and the licensed club over strata title continued until last September, when construction finally began.
The plan was for the leagues club to occupy the top floor with views over Redfern Oval. It is now on the first floor above a supermarket.
Alexiou-Hucker concedes: ''You are correct that the original plan was to occupy the fourth floor, but after discussions with architects, restaurants and respected hospitality experts, the decision was made that the best location other than the ground floor would be the first floor, the same floor as occupied by the original club.''
Privatisation is usually a last resort for a sporting club desperate to meet its debts, and Alexiou-Hucker said: ''Everyone knows there is no money to be made from running football clubs. That is why borrowing money from banks is difficult and without a successful leagues club backing the football club, the club may have no choice but to attract private equity funds just like Souths did. My advice is it must be from people who are passionate for their football club and not opportunist businessmen with other agendas. Luckily Souths did not have this problem - Russell's passion and financial generosity, in particular, towards the club was well known.''
However, post privatisation, any money Crowe and Holmes a Court have given the football club are loans. According to reports, by the end of 2010 Crowe was owed $1.65 million and Holmes a Court $4.5 million. They charge 9.7 per cent interest, which equated to $560,000 last year.
Asked if privatisation had its perils, Alexiou-Hucker said: ''It does if the members do not do their due diligence and ensure that what is dear to them is retained. In the case of Souths it was and is - the colours, the running rabbit and that the home of the football club is Redfern - all of which has been delivered and, may I say, all were in jeopardy before the club was privatised.''
The Cronulla Leagues Club, which is controlled by the Cronulla Sharks football club, owes $13 million, almost twice the debt of Souths when they entered administration, despite reducing the annual debt of the Sharks from $2 million-$3 million to $750,000 in the 2½ years since the election of president Damian Irvine.
The Sharks' immediate future depends on the approval in June of a retail-residential development proposal, which will immediately pay off $10 million in debt and provide an income stream of $1 million a year.
Irvine describes the annual return as a conservative estimate on a significant capital asset, but insists the Sharks can sell their 20 per cent share if the rental income is unsatisfactory.
He says: ''No property deal or cash injection is worth much if football continues to lose $2 million-$3 million per annum - very few pots of gold last long enough to continually prop up such a loss and nor should they be expected to.''
South Sydney v Warrington
Redfern Oval, 6pm
Read more: http://www.smh.com.au/rugby-league/...ivatisation-20120127-1qliz.html#ixzz1kfUOkC7E
