Frankston Football Club president Jay McGrath said the club would now consider whether to replace the building.
"What we need to do is work out exactly what we can do. We need to sit down with AFL Victoria and the local council to see what we can do."
Mr McGrath said the fire would not affect St Kilda Football Club's move to Frankston, as it had planned to build new facilities there.
He said there had been a problem with homeless people sleeping in the grandstand over the past two years.
Mr Mace, 72, a former Frankston footballer, life member of the club and a manager - known around the club as the "old Godfather" - joined the club when he was 14.
"We're all pretty upset," he said. "It's been an icon for sport here for 75 years. A lot of families have gone through the place.
"They named the thing after me and it's not often you get something named after you, so I'm pretty upset about it.
"Normally you're dead before something's named after you and the grandstand's dead before me."
Frankston Country Fire Authority (CFA) fire officer Andrew McCartney said his brigade was called out at 2.30am.
He said 25 CFA members in eight fire trucks used cherry pickers to help reach the fire.
Mr McCartney said firefighters had in the past been called out to small fires in the grandstand started by "vagrants".
A passer-by saw flames at the Young Street ground about 2.30am.
When police and firefighters arrived, 60-metre-long, heritage-listed
timber stand was engulfed.
Firefighters took just over an hour to extinguish the massive fire.
"The damage bill has been put in excess of several million dollars,'' a CFA spokesman said.
As well as the grandstand, a gymnasium and clubrooms used by visiting football teams were destroyed.
Frankston mayor Alistair Wardle described the loss as a "kick in the guts" for the community.
"It is one of the few historical icons left in the city. People have been coming here for 80-odd years for football and community events.
"It's a kick in the guts."
The council, which owned the ground, had spent around $500,000 revamping the grandstand in recent years.
AFL team St Kilda plans to establish a $10.25 million, state-of-the-art training and administration headquarters at the oval in time for the 2010 season.
Larissa Ham - The Age
with Leo Shanahan and AAP