The West Seattle Athletic Club, formerly AllStar Fitness still faces some serious issues including legal, maintenance and financial matters. But the owners say they are working through the problems and are aiming at transforming the troubled business. SEE THE PHOTO GALLERY BELOW FOR MORE IMAGES.
West Seattle Athletic Club has been through serious problems but owners see a brighter future
Legal troubles, maintenance issues and doubts have dogged the company for some time
One of the premier athletic and workout facilities in Seattle area, once called Allstar Fitness and later West Seattle Athletic Club has been through numerous challenges in the last five years. It's been sold out of bankruptcy, had numerous maintenance problems and engendered numerous member complaints but according to the business owners, despite ongoing legal battles, things are looking brighter.
That might seem to be a dubious claim based on published reports and the usual public conjecture regarding the large scale troubles faced by owner Sam Adams and his company Oregon Athletic Clubs but in an interview with the West Seattle Herald last week he offered explanations for every issue he faces.
The business began as an idea from West Seattle's Bob Padgett in 1999 who had already spent years in the exercise and fitness industry. He drew up the plans, and worked a deal to have the building constructed by contractor who would own the structure while he operated the business. Then, later he had the option to buy the building, which he did in 2004 then sold it in a sale lease back arrangement in 2008 to HP Properties. The business which opened in 2001 operated successfully for more than ten years even up through the beginning of the recession in 2008 and beyond with more than 9000 members in the fold.
But a combination of financial dealings and the impacts of the declining economy in 2009 took their toll on Padgett he told the Herald recently and the pressure on the business grew. "It affected the membership and in the meantime our rents were going up." Maintenance on the building began to be tougher to keep up with. With few resources and limited staff Padgett tried to do what he could plus other projects he had launched in Tacoma and Portland proved to be a financial drain. The size of the building and its issues got the better of him and he faced bankruptcy. "I could have closed the doors, and people urged me to do that," he said," but I didn't want to file Chapter 7 because I felt an obligation to the members. I needed to keep the doors open." Instead he filed Chapter 11 hoping to reorganize his debt and keep the business somehow. The plan regardless of his intent did not work and the building moved into receivership in August of 2012 meaning the debts would not be paid and the building would be sold. "I loved that club. I've been here since 1990 and I built that club from the ground up. It was successful because I had a team of dedicated employees and a great loyal membership"" Padgett said.
Comments on internet forums suggesting that he was selling memberships right up until the bankruptcy have troubled Padgett. "No matter what, I knew the club was going to be around. I wasn't going to lock the doors. If I had to give it away to somebody who would take care of it I was prepared to do that." Questions have arisen also about dues billings but Padgett had an outside company handle that and said despite a couple of issues his records were well maintained and accurate.
Adams, who had long wanted a presence in West Seattle, bought the business (not the building) for $80,000 in March of 2013.
Adams, whose 14 year career in the NFL (including the Seahawks from 94-99) served him well financially, got into the fitness and exercise business while he was still an active player. He has owned and operated clubs in Washington, Oregon, and Hawaii for more than 10 years. When he bought the business his early estimate before taking control was that it required over $200,000 of additional investment before it could be back to fully operational status. That would later prove to be a seriously low estimate he said.
But Adams who is CEO of his business Oregon Athletic Clubs said his problems stem primarily from a business arrangement with company called Allstate Financial Group (AFG) (not affiliated with the well known insurance company). Adams is now in a protracted lawsuit with that company and its owner and President, John J. Michael. Allstate was contracted to do the billing of club members. At the time Adams said he was following a common practice in the fitness industry; contracting with an outside company to handle their "dues base" meaning all oversight of billing, and collections from member would be handled by them.
"They've turned out to be the worst thing that we've ever dealt with. It turns out he has shut down more clubs than anyone on this planet. What he does is, he overbills you, he pays you late. He would write us checks for our draft from people who would pay their dues and he would cancel the checks. He would do that during payroll so payroll checks would bounce. He did it multiple times. He did it a couple of times in Oregon with the landlord. In Oregon if you are late paying your rent, they can take the club and what they did is take the club and leased the space to him."
Adams said that Allstate charged his LLC Hollystone Holdings Inc. "exorbitant and phantom fees and he's done it to multiple people in the area," Adams said, "He's closed more Gold's Gyms down than anybody. All the Gold's Gyms in Portland were closed down because of him. Several here locally because of him."
In a story about the Oregon problems Adams faced the OregonLive.com said," John J. Michael, president of Allstate Financial Group, said the change was an “amicable turnover” under an agreement between Adams, lender AFG and landlord D.W. Sivers Co., which had sold the Oregon Athletic Club chain to Adams.
Michael said AFG, which operates more than 200 athletic clubs nationwide, aims to restore the two locations to its standards set before Adams took over."
Adams had at one time six clubs, four in Oregon and two in Washington. But the billing problems with Allstate Adams said, went on for 18 months. It led to the closing of three clubs in Oregon and one in Tacoma and claims in excess of $638,000 for what they said was the removal of exercise equipment. Adams response to the claim was, "they are claiming I took gear that was all good but a lot of it was broken vacuum cleaners and broken exercise equipment."
He was also evicted from the club in Tacoma at Lincoln Plaza amid claims of unpaid wages and taxes. Adams maintains that it all stems from his cash-flow troubles he said were caused by AFG. They've filed a lawsuit against AFG and stopped using his services. They now handle their billing in house with Motion Soft software, a process they started two months ago.
More recently a hearing was scheduled at the Kent Justice Center that might have seen them evicted from the West Seattle Club. But it was settled before the hearing took place.
This has all been taking place during the past 2 years so once Adams took control of the West Seattle club he faced more money trouble. He said he found that the computer controls for the HVAC system had been removed for the entire building, which came as a shock. Padgett said when asked about this that when he left in January, that gear was still in place. It's not clear who removed it or why.
In a building of that size (more than 55,000 square feet) and diversity (exercise floors, swimming pool, sauna, lobby and offices) that represents both a complex and expensive resolution. "That's $300,000 to fix," Adams said.
The Herald consulted with a certified professional building maintenance engineer who confirmed that could easily be an accurate number. But that's only part of the required investment. All tolled Adams estimates the building and equipment upgrades will cost between $1 million to $1.5 million.
Among the issues they found were home style water heaters in use where commercial water heaters were needed. Broken exercise gear, non functional urinals, paint flaking off the ceiling in the pool area and other locations, a sprinkler system that by current code must be lowered some 12 inches. In the interim ceiling panels have been removed in the locker rooms, giving the sprinklers greater functionality but it doesn't look as it should. The hot tub, they said, was no longer up to city code and it meant replacing sumps, filters, pumps and more. That work is now complete and the hot tub will open this week.
To accomplish the remaining fixes they've hired a new maintenance engineer and will approach the problems in a way that makes the most sense. Jeremy Adams, brother of Michael and Chief Operating Officer said, "We are fixing the problems as we can afford to and working on them with the idea of resolving those problems that affect the most people first. Do we have maintenance issues? Of course we do and we are taking care of them one by one."
For a while we struggled with towels," Sam said,"when I first got here I bought a thousand new towels.
Beyond the legal, financial and physical plant problems the company is dealing with, the actual name of the club is in question. He faces a copyright infringement claim from the Seattle Athletic Club who feel his business name is too close and/or confusing for people. Adams disagrees of course and the matter is currently undecided but, "If we have to change the name, we will."
In the meantime, that means no sign goes up on the exterior wall.
Adams said there are some misconceptions among the public that he would like to see corrected. "The biggest one is the bankruptcy... they think it's us. We are not filing bankruptcy. It's not in my blood, and we're not bankrupt. Two, we didn't get kicked out and we weren't getting kicked out but people start believing those things. Three, the amount of maintenance stuff here has been overwhelming from the $20,000 we had to spend on the hot tub to the $30,000 we spent on the sauna and the sprinkler system is another thing."
He's financed the fixes primarily out of his personal funds, not cash flow since that was a problem.
"We have borrowed money but I played ball for 14 years and I did OK. We owe no one a red cent right now."
They currently have 6500 members but they anticipate gaining more (up to 9000) as they address the issues and confidence in their operation returns. Currently memberships cost between $34 and $49 per month. Professional trainers on staff charge $70 per hour. The club is located at 2629 SW Andover St.
"I'm going to make sure that this place is beautiful, upgraded and brand new because that's what the people deserve here. We're here to service the community. We're not here for ourselves."
As other clubs make investments in the area Adams believes he can solve his problems and make the club a success. "We know LA Fitness is coming. We are well aware of that."
He's not scared he said.
"I had Larry Allen chasing me and Eric Williams chasing me so LA Fitness does not scare me," he said laughing. I played against Emmitt Smith and Michael Irvin. . I played against the greatest and they didn't scare me. So by the time LA Fitness opens this will be a brand new club. Bring it on."
Adams recognizes that his reputation has been tarnished by his legal troubles but he remains confident.
"Now we have the opportunity to prove ourselves and if you do the right thing, people forgive you."
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