Billionaire businessman Adrian Portelli has announced his withdrawal from a potential investment in the troubled Derrimut 24:7 Gym empire, citing an inability to “see eye to eye” with the current 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).
The announcement came shortly after a contentious Federal Court adjournment, where creditors are pursuing millions in overdue payments. An investigation by The Age in September revealed that the rapidly expanding Melbourne gym chain has been struggling with unpaid taxes, staff superannuation, and debts to numerous businesses and landlords.
Financial Mismanagement and Legal Battles
Solomos has been accused of using company funds for personal expenses, including $5,000-a-week pocket money, mortgage payments on his property portfolio, $30,000 weekly payments to his ex-wife, and luxury cars for senior staff. Portelli, known as the “Lambo Guy” for his appearances on the reality-TV show The Block, had initially expressed interest in purchasing a stake to help settle the gym’s debts and secure the jobs of over 800 employees.
However, in a statement on Instagram, Portelli expressed regret over the failed negotiations.
“Unfortunately, we couldn’t see eye to eye and make the deal work, and I’ve had to pull out,” he stated. “I still have massive respect for what the Derrimut team has built and wish them nothing but success in the future.”
Legal Proceedings and Creditor Pressure
On Friday, lawyers representing nine different creditors appeared at the Federal Court hearing, demanding that Derrimut provide more documentation to justify its claims of potential debt refinancing. Two new creditors, Origin and Equity Trustees, have joined the ATO’s legal efforts, bringing the total claims against Derrimut to over $2 million.
The ATO is seeking to appoint liquidators to recover $12.5 million in tax debts, including unpaid superannuation and penalties. ATO lawyer Seraphina Smith requested a four-week adjournment to allow Derrimut time to address these debts, a move opposed by major creditors such as AGL, Bourke Street Properties, and Life Fitness.
Matthew Hicks, solicitor for Life Fitness, expressed skepticism about the need for another adjournment, stating,
“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.”
The case has been adjourned to November 28.
Future Prospects and Financial Challenges
Despite public optimism from Solomos following the initial announcement of a potential deal with Portelli, the financial outlook remains grim. The ATO is also pursuing the liquidation of a dormant company owned by Solomos for an additional $2.9 million in unpaid taxes. Financial experts estimate that Solomos needs approximately $15 million to settle his tax debts and another $15 million to clear outstanding debts to hundreds of creditors.
Derrimut’s gym locations in Thomastown and Ravenhall, along with its corporate office in Derrimut, are slated for sale by an insolvency firm. These properties, expected to fetch a combined $30 million, are encumbered by loans from lenders such as N1, Vance Finance, and Bizcap, limiting their potential to alleviate the company’s financial woes.
A source familiar with the sale process, who requested anonymity, indicated that the properties are being marketed as vacant, with expressions of interest due by December 4. However, the proceeds are unlikely to significantly reduce Derrimut’s mounting debts.
As the situation unfolds, the future of Derrimut 24:7 Gym remains uncertain, with stakeholders watching closely to see if Solomos can navigate the financial and legal challenges ahead.
