The bankrupt owner of the Honolulu Club is preparing to open a 30,000-square-foot fitness center at the upscale Ko‘olani condominium project in Kakaako in the next few months.
The Honolulu Club’s owner, Los Angeles-based Meridian Sports Clubs California LLC, which filed Chapter 11 bankruptcy reorganization in October, said it hopes to operate both the Ko‘olani club and the 40,000-square-foot Ward Avenue club.
Meridian said it is in negotiations with the landlord at the Ward site to bring down its costs and keep the more than 30-year-old club open.
Meridian filed for bankruptcy to reorganize debts and keep the Ward facility open along with nine other fitness clubs in California and Nevada following a slumping economy that hurt membership and revenue over the past four years while property rents remained at pre-recession levels.
"The reality is that the company is still in discussion with the landlord to achieve an equitable lease structure," said Rivian Bell, a spokeswoman for Meridian Sports Clubs. "Over-market leases were a primary reason why the company sought a financial restructuring in the first place, and we have worked successfully with many of our landlords in that regard. We remain hopeful that we can do so in this case as well. Regardless, we intend to remain in Honolulu and provide outstanding service for the long term."
Renegotiating a lease to reflect current market conditions is key in the viability of the fitness club operation over the long term.
"When you negotiate leases that were pre-2008 when the market declined so dramatically, then you’re dealing with a cost structure that’s out of step with the current economy. And that’s what the company’s trying to correct," Bell added. "Ideally we’d like to be able to operate two clubs in Honolulu. That would be the best for everyone."
The company, which has between 80 and 90 employees, estimates it will hire the same amount for the new club.
Membership has remained steady over the past year, Bell said, though she wouldn’t disclose the member count.
Meanwhile, a bankruptcy confirmation hearing is scheduled for mid-May, and the company said it expects to emerge from bankruptcy protection soon thereafter.
Meridian said it generates the bulk of its income from membership dues. The fitness club operator recorded about $23.1 million and $21.5 million in revenue in 2010 and 2011, respectively, posting earnings before interest, taxes, depreciation and amortization of $2.4 million and $862,000.
The building owner, a partnership between local businessman Richard Gushman and California real estate investment trust Douglas Emmett Inc., couldn’t be reached for comment Friday. The partnership bought the property in 2008 in a deal that included the club.
Lynne Matusow canceled her Honolulu Club membership effective March 31 because she was concerned the club could close.
"I don’t feel safe having them hold any of my money," said the downtown Honolulu resident, who paid about $1,700 in dues last year. "They’re getting a lot of money upfront, but then what happens if they shut down? You’re not going to see your money. We’ve seen a lot of gyms go bankrupt or out of business in this town. It’s a pattern across the country. They’re trying to get rents rolled back to where they were years ago. Good luck."
