Mr Tudor will step down next month and former Carnival Cruise Line executive Jennifer Vandekreeke will take over. His five-year journey started as a six-month contract to get Melbourne surf ready in 2019. The park – in Tullamarine – was still a big, muddy mess. Costs had blown out to $43 million from a projected $28 million.
Urbnsurf had yet to turn a profit and banks could not risk lending to a company that manufactured waves. And after cutting the ribbon in Melbourne, a dust storm, followed by COVID-19 pandemic lockdowns, crimped earnings.
“We closed six times. But when we reopened, we got a lot of interest, and have ridden that wave, no pun intended, ever since” Mr Tudor said.
Bringing in the banks
To complete the Melbourne facility, Urbnsurf raised $8 million from Realside Financial Group, now called Keyview, a private investment firm that offers high-interest debt for special situations. The 12-month, asset-backed loan came with a payment-in-kind feature to ensure the park operator had funding to cover construction costs.
Keyview managing partner Alex Hone discovered Urbnsurf when it was fundraising in 2017. Shortly after first meeting with the company, Mr Hone went to Snowdonia in Wales where a popular surf park existed in freezing cold conditions.
“The park was 100 per cent occupied, and the wave was authentic in its power and shape,” he said of the pool in Wales, adding that he met a father whose children had grown enamoured by surfing in just six months.
Urbnsurf chief executive Damon Tudor will step down next month after five years in the role. Peter Rae
It was booked for months. Mr Hone also visited San Sebastian in Spain, where he met management at Wavegarden. The Spanish company supplied the technology for the pools, and the banker was convinced this business could succeed in surf-mad Australia.
“On the highest setting, it rolls you over, and over, and can push you 30 metres down the pool,” he said of the authenticity of the waves.
Keyview lent another PIK-structured $9.4 million, 18-month debt facility to Urbnsurf to weather the pandemic lockdowns in 2020. As the world, and Urbnsurf’s Melbourne location, reopened, the company needed more money to get its operations in Sydney off the ground. The company approached overseas hedge funds, large family offices and special situations lenders such as Keyview to cut a bigger cheque.
It was Japanese investment bank Nomura that came through. Together with Keyview, Urbnsurf got $40 million over a four-year deal. The first $10 million paid back debt, while the rest was drawn over time to construct the Homebush pool.
Interest on the loan is in the double digits, while Keyview and Nomura are paid back first if the company defaults, such is the inherent risk in financing a nascent asset class. Leisure parks around the world have a history of bankruptcies. Construction is expensive, much of the revenue comes during warmer months or school holidays.
And cost-of-living pressures have meant consumers are increasingly discerning with discretionary income.
Mr Tudor said there was “no doubt” Urbnsurf was a high-risk asset class, but said interest was high. Keyview’s Mr Hone said expansion plans would only become reality once Sydney and Melbourne were successful enough to prove others were feasible.
“It’s the same as a driving range. Have you ever been to Moore Park Driving Range? [The wave park] has a strong symmetry to that from an asset utilisation standpoint. But unlike a driving range, this is the real thing. The waves are as real as the ocean,” he said.
