Its founding was inspired in part by the success Perth Glory was enjoying as a mainstream club (as opposed to the league's mainstay European migrant founded clubs), as well as an opportunity to tap into the previously unrepresented northern suburbs of Sydney.

Beset by Palace's financial problems, he relinquished his option to a group of players and coaches including Graham Arnold, Robbie Slater and Ian Crook.

The decision was motivated mainly by money, with North Sydney Oval not drawing enough people to make a profit.

The 23,000 capacity Brookvale Oval, a rectangular rugby league venue (home of the Manly-Warringah club) which is located roughly halfway between North Sydney Oval and Pittwater Park, was considered as a possibility for the new home but was eventually overlooked by the Spirit.

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