Make Soho House Great Again
Can it be done?
News that Soho House went private is like hearing your friends are fixing their marriage by having another kid. It’s nice they’re trying to make it work, but you know it’s just delaying the inevitable—and creating even bigger problems in the process.
For those unfamiliar: Soho House, the 30-year-old international chain of private members’ clubs, went private this past week. It ended its four-year run as a public company.
The TLDR on the deal…
The transaction was for $2.7B (enterprise value), exiting the public markets at $9 per share (≈ 83% premium to its late-2024 unaffected price, but ~35–40% below its $14 IPO)
The deal was led by Ron Burkle and his PE firm, Yucaipa, with ~75% of existing ownership rolling over, alongside new capital from Apollo ($850M hybrid debt/equity), MCR Hotels, Ashton Kutcher’s fund, and Goldman Sachs
The deal almost blew up when MCR failed to fund $200M of its commitment, forcing a last-minute patchwork solution:
$50M personally from Tyler Morse (MCR’s CEO)
Reduced MCR equity
Expanded unsecured debt from Apollo $150M → $220M
Additional equity rollovers from insiders
Post-deal, Soho House carries ~$915M+ of debt across secured bonds and unsecured notes, with maturities pushed to 2029
So, Soho House is now a highly leveraged hospitality company (debt > 5–6× EBITDA by rough estimates) that has never been profitable, entering a period of elevated interest rates and slowing economic growth. Plus it has to compete with an explosion of new social club competition—from higher-end clubs like San Vicente to more-inclusive family-oriented models like Life Time.
Breaking down the challenges ahead
The headwinds don’t disappear just because the stock does.
The same structural problems are still here—and now they’re paired with a lot more leverage and a lot less margin for error.
First, the fundamentals…
Soho House has never really made money. Membership and revenue have grown, yes—but profitability has always stayed just out of reach (adjusted EBITDA has flirted with positive, but the business still relies on external capital to fund growth and keep the lights on).
Going private doesn’t change the cost structure; it still requires expensive leases, heavy staffing, high-touch amenities and thin margins.
So maybe the scrutiny goes away; but the economics don’t.
Then there’s the debt…
Post-transaction, Soho House is carrying north of $900M of debt—roughly 5–6X EBITDA by any reasonable estimate. That’s a lot for a hospitality business, especially one that’s never proven durable cash flow.
Interest expense alone will eat up flexibility, so the “growth capital” now has to compete with debt service, and there’s no public equity market left as a pressure valve. So if they miss the numbers for a year or two, the conversation will quickly shift from “turnaround” to “restructuring.”
The brand is also stretched…
Soho House scaled fast—50 houses, nearly 40 cities—and in the process, the exclusivity that made it special has thinned. Their flagship locations are over-crowded and a less-curated membership base have changed the feel.
At the same time, competition has exploded.
So if SH grows too slowly, then the debt becomes unmanageable; and if it grows too fast, the brand loses what pricing power it still has.
The macro backdrop doesn’t help…
This is a discretionary-spend business heading into slower growth, higher rates, and persistent cost inflation. Food, labor, energy… none of it is getting cheaper.
Members may be affluent, but they’re not immune to pulling back on dinners, drinks, and weekends away. Meanwhile, new houses are still capital-intensive to open, and delays or overruns compound the pressure.
And the ownership structure isn’t clean.
This isn’t a reset with a fresh operator and a new plan. It’s largely the same insiders, now joined by a mix of minority equity holders and a powerful lender who also sits on the cap table. Interests are aligned until they aren’t. If performance slips, the incentives of a credit-heavy partner like Apollo won’t necessarily match the long-term stewardship of a lifestyle brand.
Net-net: going private buys time. That’s it.
It doesn’t solve the leverage, the margins, the brand dilution, or the macro risk.
How to fix the company
Wise words… but Soho House has no choice: they must chase and catch two “rabbits”—debt service coverage & brand equity.
How do you do it? I’m no magician, but I’ll take a crack:
Start by shrinking the business…
Soho House needs to prove that its houses can generate durable cash flow without fresh capital showing up every year. That means getting ruthless about club-level economics—identifying which locations, concepts, or side ventures consistently underperform and either fixing them or shrinking them.
I would:
Slash the coworking business and sub-brands, e.g., The Ned;
Renegotiate every house/hotel lease, e.g., extend by 10+ years in return for TI dollars, or walk away (to be clear, I know nothing of their current lease commitments); and
Try to shift supply-demand in the key major markets like London, LA & NYC by cutting the number of locations while investing heavily in the one(s) that remain
At the same time, focus on ramping EBITDA…
Nearly a billion dollars of debt only works if EBITDA ramps quickly. Excess cash should go toward paying down debt, not opening the next shiny location (see point #1).
If there is expansion, it should be structured with off-balance-sheet financing through JVs or asset-level financing. If that means fewer openings and slower growth, so be it. A slightly smaller, solvent Soho House is better than a sprawling one flirting with a restructuring.
And most importantly, evolve the brand.
Private ownership finally gives Soho House permission to say “No” again.
For starters, I think they need a full-on PR campaign around:
“Tighter membership caps, lower onboarding, and less crowding”
“Revamped programming, food, and service”
“A-listers returning in droves”
This messaging alone is probably enough to bide time for the powers that be by scaring those on the fence (many with their memberships frozen for a year, and about to leave for good, like me) to stick around a little longer in case it actually does improve.
Then they actually need to deliver. Which, in my mind, means:
Finding and taking a bet on an incredibly talented, young, hungry operator (the next Nick Jones) to reposition London, NYC, and LA houses without the luxury of blowing a bunch of money in the first few years to make it cool; or
Bringing in a celebrity creative director like the fashion houses are doing (Pharrell at Louis Vuitton, Jaden Smith at Christian Louboutin, etc.)
My 2¢ as an investor
Even if Zendaya, Bella Hadid and Timothee Chalamet combined forces to Make Soho House Great Again, I wouldn’t have touched this deal unless I could co-invest alongside Apollo on the debt piece, which I assume is juicy.
Said differently, I don’t think they can get to EBITDA positivity and become cool again at the same time.
So my best bet: I’d wait until 2029, when the notes come due, buy the debt with a controlling stake at a steep discount, and bring in Jeff Klein.