Columbia Club faces membership, financial issues

January 15, 2007

The Columbia Club, the tradition-rich enclave where the city's business elite have gathered and cut deals for more than a century, faces a difficult crossroads.

The not-for-profit on Monument Circle recently hired a consulting firm to develop a new strategy. The move comes amid declining membership, the departure of its longtime general manager, and looming financial challenges--including a $5.5 million loan that comes due this summer.

The club, long closely associated with Republicans, enjoyed a spike in membership after the Democrat-leaning Indianapolis Athletic Club closed in 2004. But membership has since fallen, and now stands at 2,100, down one-third from its peak in the late 1990s.

While some members fear for the future of the 118-year-old club, its leadership says all challenges are manageable.

"The club is financially solid enough it has the ability to handle all its obligations in a timely manner," said Columbia Club board member and Past President Alan Symons, CEO of local investment firm AGS Capital Inc. "It's in great financial shape."

While the club's Internal Revenue Service filing shows it lost $284,000 on $6.6 million in revenue in 2005, club officials say the loss stems from the accounting treatment for depreciation and doesn't signal a cash-flow crunch.

Even so, big changes are afoot. The club late last year hired St. Louis-based McMahon Group Inc., a consulting firm specializing in private clubs. And within a month, Edward Albany, the Columbia Club's general manager for 11 years, is stepping down.

Neither club officers nor Albany would discuss whether he resigned or was fired. Albany, who commanded a staff of 41, draws a $155,000 annual salary, according to IRS records. He's in negotiations over severance.

In the meantime, Controller Gary Fletcher is overseeing the club's operations.

"Like football coaches, they don't last forever, unless you're Vince Lombardi," Symons said. "I think every time you make a change, hopefully it's for the good. A fresh manager's views may change the dynamics of the club to attract more members."

Indianapolis institution

Supporters of President Benjamin Harrison formed the Columbia Club in 1889. It moved into its current home, a 10-story building with Tiffany windows and marble floors, in 1925.

The building was added to the National Register of Historic Places in 1983 and remains a favorite venue for blushing brides, hungry executives and overnight visitors who belong to reciprocal private clubs in other cities. Members who live or work downtown drop in to exercise in its gym and enjoy a massage, network in its restaurant, or get their shoes shined.

But city clubs around the nation are struggling to avoid becoming an anachronism. The Washington, D.C.-based National Club Association notes that many affluent businesspeople who used to belong to such clubs have moved to the suburbs. Organizations closer to their homes encroach on traditional city club turf.

In Indianapolis, the Columbia Club once enjoyed a near-monopoly on its niche. Downtown's resurgence has brought along competition from new high-end restaurants and luxury hotels. Those same pressures ultimately led to the dissolution of the Columbia Club's longtime rival, the Athletic Club, which has since been transformed into condominiums.

"Even if members live or work close to the club, it may not be convenient for them to go there, especially for families trying to reconcile the demands of commuting, working and taking care of children, all while chasing an almost endless routine of errands, activities and commitments," a 2005 National Club Association study said.

"[To remain viable], clubs will have to be extremely competitive in the services they offer and the way they offer them."

Balloon loan

It's difficult--and expensive--to maintain quality standards in an aging building, no matter how historically significant. In 2001, the Columbia Club announced plans for $12.3 million in repairs and upgrades.

It designed the project in three phases. For the first, the Columbia Club borrowed $5.5 million from the National Bank of Indianapolis to overhaul its top three floors, including its 10th-floor ballroom. Because of the investment, club officers report occupancy rates in 40 rooms on the upper floors have increased.

"The good news is, we've done a lot of work in the clubhouse," said Columbia Club Board Vice President David Certo, an attorney. "The bad news is, it's a building built in the 1920s, so there's always more work to do."

But the upgrades haven't brought enough new revenue to retire the debt. Structured as a balloon loan, it matures late this summer, Certo said. About $5.2 million in principal remains unpaid.

"We always had the intent to refinance it. We're excited about interest rates being stable, or perhaps falling a bit," he said. "If the time is right, we may even be able to take out some more money for improvements."

The bank declined IBJ's request for comment.

Columbia Club supporters worry about the implications if it can't ink a new deal.

"It's a fixture on the Circle, and really an important part of the fabric of downtown's central core, not just from an architectural point of view, but a civic-life point of view," said Indiana Historical Society CEO John Herbst. "Both the building and the organization are special to Indianapolis. It's irreplaceable."

The Columbia Club originally planned to quickly pay off its first loan, Certo said, then borrow more for the renovations on lower floors.

For now, the club has indefinitely postponed the rest of the project, settling instead for less-expensive "soft renovations" of 57 guest rooms on lower floors, including the installation of new carpets and bed linens.

"It's amazing what you can do to a room without having to reconstruct the walls," said Columbia Club President Jim Anderson, an Anderson attorney. "The soft renovations, you put those in and you can tell a big difference in quality."

The improvements are no panacea, however. Visitors to the city have an abundance of hotel choices. And business groups have plenty of options for meeting space.

Consider the Venture Club of Indiana, a forum for investors interested in speculating on new companies. For the past decade, it's held its monthly networking lunch for several hundred deal-makers at the Columbia Club.

But this year, the club decided the site had become too pricey and opted to move to Barnes & Thornburg. It provides the space at no cost and, unlike the Columbia Club, allows any caterer to provide meals.

The move reduced the Venture Club's costs by one-third, said David Millard, a Barnes and Thornburg partner and Venture Club board member.

"The Columbia Club is a wonderful facility, especially when they redid the ballroom. It just couldn't be better as far as look and feel," Millard said. "But with their increase in costs, the Venture Club is just not able to pass it through to membership. It's not just a matter of a few shekels. The cost differential has been the difference between viability."

Opportunity knocking

When the Athletic Club closed, the Columbia Club gained about 300 of its former members. Even so, membership has slipped about 1,000 from the late 1990s.

Club leaders say that's no cause for alarm. In fact, they say there's reason for optimism. While downtown development has boosted competition, it's also created opportunities.

"Downtown is flourishing with growth," Symons said. "We're not looking at a city that's got everyone moving up to Carmel like they did in the '60s and '70s. As more people move downtown, more people want to become part of the downtown social life. And part of that is becoming part of a top-notch social club. It's the place to be seen and heard."

McMahon's plan, due in about two months, should help the club capitalize, said Albany, the outgoing general manager.

"I think the club has the best address in the city," he said. "You're in the hub, the jewel of the circle. We're the only 24/7 business on the circle. I think they're in the perfect position to position themselves for the next 25 years."

Certo said 2007 is shaping up well. He noted that the club already has reserved 38 weddings and more overnight rooms than it sold in all of 2006.

"We already have stuff on the books that demonstrates to us, and obviously would to a lender, that it's going to be a great year," he said. "When they founded the Columbia Club, according to the [historical] documents, it was because they had such a good time working on Harrison's campaign, they wanted to keep meeting."

"This year, I want us to have a good time," he added. "If we're not having fun, we're not doing it right. And we're planning to do it exactly right."

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