YouFit health club bankruptcy petition is another blow to mall operators


A Deerfield Beach-based health club chain filed for Chapter 11 protection in Delaware on Monday.

And James D. Silver, a partner at Kelley Kronenberg in Fort Lauderdale, said the YouFit Health Clubs bankruptcy case is one of a line of similar health club chains that have filed for bankruptcy protection, such as LA Fitness and 24 Hour Fitness. These filings will have a negative impact on shopping center operators and landlords.

“You see a lot of stress with these mall owners and landlords who have to pay their own bills and rely on rental streams from businesses that are starting to file for bankruptcy,” Silver said. “The bigger implications could be that malls become more of a tenant market, as businesses can get space for a lot less.”

The mandatory shutdown from March caused by the coronavirus pandemic has forced fitness chains across the country to close, severely affecting the financial health of the industry, which before the pandemic reached more than 30 billion dollars per year, according to Statista. And Jerry M. Markowitz, a partner at Markowitz Ringel Trusty & Hartog in Miami, said it broke a trend.

“Before COVID-19, there was a big movement for gyms to fill the biggest retail space where the stores were that were closing,” Markowitz said, pointing to a mall operator at The Falls in Miami replacing a Bloomingdale vacant by a large gymnasium. “I suspect all of those types of things are on hold at the moment.”

One of the reasons these gyms are suspended is their financial situation. In YouFit’s bankruptcy petition, it reported about $110 million in debt while offering an approaching horse sale in which the primary lender has a credit offer of $75 million. But, Markowitz said, YouFit’s financial troubles predate COVID-19.

“They have been working very seriously for over a year to try to sell the company and have hired very reputable investment bankers to help them through this process,” Markowitz said. “They marketed it pretty widely and no one else came. It certainly looks like they are in pretty bad shape.

Now, the case will go before US Bankruptcy Court Judge Mary Walrath for the District of Delaware.

Read the bankruptcy petition:

Isaac Marcushamer, partner at Mark Migdal & Hayden in Brickell, said part of the problem facing mall operators is disruption of the traditional health club model. These traditional health clubs, which moved to malls, would have rows and rows of machines, large classes and amenities.

“Before COVID-19, some companies were starting to adopt this model,” Marcushamer said. “I don’t know how many people who jumped on the Peloton bandwagon to train at home will be willing to go back to the traditional gym model.”

Marcushamer said it’s easy to look back and wonder how these traditional gym models didn’t see the rise of online workouts coming. When fitness equipment like the Peloton offers a variety of workout options for an entire household for around $40, it’s a challenge for traditional model gyms, like YouFit, to survive in the future.

“The universe of potential customers may have shrunk permanently,” Marcushamer said. “Just on the throttle to embrace this fitness trend.”

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