Billionaire businessman Adrian Portelli has decided not to purchase a stake in the struggling Derrimut 24:7 Gym empire, citing irreconcilable differences with the gym’s owners. This decision leaves the gym’s founder, Nick Solomos, in a precarious position as he battles to prevent the company from being liquidated by the Australian Tax Office (ATO).
Portelli’s withdrawal was announced shortly after a contentious Federal Court adjournment, where the gym’s creditors are pursuing millions in overdue payments. An investigation by The Age in September revealed that the rapidly expanding Melbourne gym chain had failed to meet its tax obligations, pay staff superannuation, and settle debts with numerous businesses and landlords.
Financial Mismanagement and Legal Battles
Solomos has been under scrutiny for his financial management practices, with company accounts reportedly used for personal expenses, including $5,000-a-week pocket money, mortgage payments on his property portfolio, and substantial payments to his ex-wife. Additionally, luxury cars were allegedly gifted to senior staff members.
Portelli, known as the “Lambo Guy” due to his appearances on reality TV show The Block, had been in talks to invest in the gym business to help clear its debts and secure the jobs of over 800 employees. However, in a statement on Instagram, Portelli expressed regret over the failed negotiations, stating, “Unfortunately, we couldn’t see eye to eye and make the deal work, and I’ve had to pull out.”
“I still have massive respect for what the Derrimut team has built and wish them nothing but success in the future.” — Adrian Portelli
Mounting Pressure from Creditors
On Friday, lawyers representing nine different creditors appeared at the Federal Court hearing, pressing for more documentation from Derrimut to demonstrate the feasibility of refinancing its debt. New creditors, including Origin Energy and Equity Trustees, joined the ATO’s legal efforts, bringing the total claims by creditors to over $2 million.
The ATO is seeking to appoint liquidators to Derrimut’s primary entity to recover $12.5 million in tax debts, which includes unpaid superannuation and penalties. ATO lawyer Seraphina Smith requested a four-week adjournment to allow Derrimut time to address its debts, a move opposed by several major creditors who are demanding a shorter timeframe and more transparency.
“There’s simply no evidence that we’re aware of and certainly nothing that’s been filed to demonstrate the solvency of the defendant, to demonstrate what … refinance is being sought.” — Matthew Hicks, Solicitor for Life Fitness
Future Prospects and Financial Estimates
The court case has been adjourned to November 28. Meanwhile, the ATO is also pursuing the liquidation of another dormant company owned by Solomos, seeking an additional $2.9 million in unpaid taxes. Financial analysts estimate that Solomos needs approximately $15 million to settle his tax debts and an additional $15 million to clear outstanding debts to hundreds of creditors.
Derrimut’s gym locations in Thomastown and Ravenhall, which boast thousands of members, are slated for sale by an insolvency firm, along with the company’s corporate office in Derrimut. Sale documents indicate that these properties are being offered vacant, with expressions of interest due by December 4. The properties are expected to fetch a total of $30 million, although this is unlikely to significantly alleviate Derrimut’s financial woes due to existing loans with lenders such as N1, Vance Finance, and Bizcap.
The announcement of Portelli’s withdrawal marks a significant setback for Solomos, who had previously expressed optimism about the company’s future following the potential deal. The unfolding situation highlights the challenges faced by businesses navigating financial distress and the complexities of securing investor confidence.
