1989 to 1999, clubs nationwide experienced a 46% growth. By the end of 2000, with an average yearly membership fee of $599, a record 54.5 million Americans exercised in clubs and 32.8 million were regular health club members, up 7% from 30.6 million health club members in 1999. Furthermore, the New York City tri-state region (which includes neighboring New Jersey and Connecticut) saw a 17% growth in health club membership in 2000 — the largest increase in the nation.
TROUBLE IN TRIBECA
With a monthly lease of $15,000, the six story, pre-Civil War building in Tribeca would house the second piece in the Washington-Wilson 24/7 Fitness Empire. In buying the location, however, they underestimated the amount of effort it would take to turn their fitness center dream into reality. Looking back on the project, which he described as nightmarish at times, Wilson says, “There were, and still are, significant problems with the building.…We put hundreds of thousands of dollars into the facility and we’re still not built out yet.” Because the building was so old, it had to be fitted with a new electrical system, lighting had to be added, and the pair had to pay almost $100,000 to excavate the building’s subbasement because of low ceiling clearance.
They signed a 15-year lease, estimating rebuilding costs at $250,000 — $300,000 on remodeling, and another $175,000 on gym equipment. To pay for this, they opted out of a pending real estate deal in Queens and collected their $50,000 deposit. They then raised additional money by selling prememberships to 24/7-Tribeca. “In presales we raised about $130,000,” says Washington. “The gym’s normal annual membership fee was $399, but for those who presigned, we dropped the price to $199.” They presold more than 600 new members and the future looked promising. “Financially we were [over]extended but… it was just too good to pass up,” Washington says. And the area had its allure — it was within spitting distance of the World Trade Center and New York’s financial district, movie studios, and a booming shopping area. Tribeca had a lot to offer.
By February of 2001, construction was underway in Tribeca when another opportunity presented itself. Adolphus Holden, proprietor of Adolphus Fitness and the partners’ main competitor, approached them offering to sell his location. In exchange, they would assume the $150,000 debt Holden had accrued. Holden owed the IRS about $100,000, and he owed contractors an additional $50,000 for construction costs and other expenses. Adolphus Fitness, located in the Union Square area of Manhattan, was a mere five blocks from 24/7-Gramercy Park. They jumped at the opportunity to acquire the competition and have another revenue-generating location, despite the fact that the deal would stretch their already thinning finances. But with 24/7-Tribeca not scheduled to open until July — four months away — another source of revenue would be welcome.
Because resources were extended on the Tribeca location, Washington and Wilson decided to bring in a third partner. The partner, who they refuse to name, would own 50% of the Union Square location with Wilson