Is L.A. Getting a Soho House Hotel?
That's one possibility under consideration as billionaire Ron Burkle buys into Hollywood's favorite chain of private clubs.
Billionaire investor Ron Burkle, who recently purchased a controlling 60 percent interest in Soho House Group for about $240 million, is considering building a hotel on property he owns one block from the Los Angeles-area outpost of the posh members-only club. A Soho House-branded hotel is just one potential plan for the company that is expected to expand its reach considerably under Burkle's control.
Yucaipa Cos., the Burkle investment vehicle that recently bought concert promoter Artist Group International and a stake in Relativity Media, is headquartered just down Sunset Boulevard from Soho House West Hollywood, the entertainment industry hangout that opened in spring 2010.
A real estate source says that Burkle, a confidant of Bill Clinton whose investments also include stakes in the NHL's Pittsburgh Penguins and grocery chains Ralphs and Food4Less, has had conversations with hotel operators about building a hotel at the 0.75-acre site. The source believes Burkle, 59, plans to build a Soho House hotel. "Why else would you buy into that, just to make your [money] on a martini when a London rock and roller is in town?" the source says.
A rep for Yucaipa and Burkle did not respond to requests for comment.
Among Soho House Group's properties is a stand-alone hotel, London's Dean Street Townhouse, which is open to the public. And several Soho Houses, including in Miami and New York, have a private club and hotel rooms open to nonmembers. Burkle, a Soho House member for a decade, already owns the building that is home to the New York club and hotel.
A source close to the Soho House Group says that roughly five years ago, the company had a discussion with Burkle about building a Soho House and possibly hotel rooms on his West Hollywood property. However, this person believes that Burkle does not have plans for such a project.
Burkle has become a major hotel investor in recent years. In 2009, Yucaipa invested in hospitality firm Morgans Hotel Group, owner of West Hollywood's Mondrian. On Jan. 12, Burkle closed his purchase of a controlling interest in the London-based Soho House from billionaire businessman Richard Caring and club founder and CEO Nick Jones, who retain interests in the company. "We are thrilled with the deal, and it is a very positive step for Soho House," Jones says.
Soho House, valued at $400 million, has venues in New York, Miami and Berlin and operates several properties in London. Members, including industry heavyweights Harvey Weinstein, Paul Haggis and Jason Reitman, pay $1,800 per year for access to the L.A. club or $2,400 per year for admission to all clubs. (The company does not divulge membership figures, but a source says the L.A. club launched with about 650 members and has grown from there; it has a waiting list of roughly 3,000 people.) The source says that Burkle's purchase will give Soho House the capital necessary to expand to Mumbai, Istanbul, Chicago, Toronto and Barcelona, with Asia and South America as other targets. "Ron is a genuinely big believer in the brand and that he can make money out of it," the source says.
Bruce Baltin, senior vp at PKF Consulting, says a Soho House-branded hotel would be a logical extension in L.A. "It makes total sense," he says. "I think you'd have to go luxury just to keep the integrity of the brand."
However, Baltin cautions that building hotels in West Hollywood can be tough because of construction restrictions and active homeowners groups.
Observers expect that Burkle's purchase of Soho House means there will be some changes, regardless of whether a hotel is built in Los Angeles.
"Ordinarily this would be an ego-driven investment, but I don't think he does that," says Stephen Shapiro of Beverly Hills-based Westside Estate Agency, who represented Ted Field when he sold the famed Greenacres estate in Beverly Hills to Burkle for about $20 million in 1993. "I think he has some plan that will result in great overall returns."