Room to Invest
After behind-the-scenes work, the Club shifts focus to front-of-house upgrades that will enhance the Member experience.
As hard as it is to believe, our Azabudai clubhouse has passed its 12th birthday.
And as it ages, we need to continually make investments to maintain our beautiful home away from home. We want to be good stewards of the Club, not only for our own enjoyment, but for that of future generations of Members.
Until 2021, we did not save for maintenance. Like any business, despite healthy financial results, the capital we can deploy has its limits. Some projects had to be postponed.
While we have made investments in front-of-house areas, such as the fitness facilities and our renewed third-floor restaurant, most of our recent capital expenditure (CapEx) has been directed toward back-of-house, with a focus on safety and comfort to ensure that elevators and air conditioning keep running and that Security keeps us safe. As Members may have noticed, certain front-of-house areas need a refresh.
Continued strong financial stewardship is a priority when budgeting for the Club. To forecast our future facility upkeep CapEx, we commissioned two independent consulting reports in 2022. The recommended CapEx averages ¥187 million annually over the next 30 years and can vary in any given year from ¥33 million to ¥432 million. Our FY2025 budget allocates enough funds—about ¥468 million—to cover the recommended expenditures for fiscal years 2024 and 2025.
To be good stewards of the Club, the Board and the Finance Committee want to ensure that our building maintenance reserve (BMR) not only covers the projected building maintenance CapEx for the current year but also for the next four years.
You may recall from past Annual General Meetings (AGMs) that we chose to direct ¥250 million of operational cash flow to the BMR over the past two fiscal years. And Members approved an increase in the monthly building maintenance assessment. In addition, new Members joining the Club now pay a contribution to the BMR.
These steps have our projected CapEx balanced against our projected BMR-apportioned current balance and future contributions, and we should be able to meet our four-year target until 2033. Starting in 2033, we forecast that we will comfortably have enough reserves to cover at least each year’s projected CapEx for decades to come.
Over the past three fiscal years, we have focused on increasing revenue while being cost conscious. This has enabled the Club to deliver strong results in fiscal years 2022 and 2023. And we are on track to close FY2024 with positive results. This all puts us in a position where we can start to draw down the BMR to meet our back-of-house capital requirements and invest our operational cash flow in front-of-house needs.
In our proposed FY2025 budget that will be presented to Members at November’s AGM, we are therefore in a position to put forward our highest budgeted CapEx since the Azabudai clubhouse was built.
In FY2025, examples of our not-so-glamorous back-of-house CapEx, most of which Members will never notice, include repairing plumbing, air conditioning and ventilation, as well as taking care of exterior building issues, such as repainting, caulking and sealing.
More exciting for Members will be front-of-house projects, such as replacing aging fitness machines, expanding shower capacity, a refresh of the men’s locker room, adding a bar on the third floor to complement 51 East and more.
While we may not get approval or workers to complete all projects, we are confident that FY2025 will see investments in our Club that Members will notice and enjoy daily.
Words: Dennis Hubbs, Patrick McLeod and Rune Sølvsteen
October 2024
