Real estate was a key component in Equinox’s purchase last month of four clubs from The Sports Club Co., sources say.
The purchase price of the clubs was $130 million, according to a source familiar with the negotiations. In the deal, New York-based Equinox takes control of the four The Sports Club/LA clubs in Los Angeles; Beverly Hills, CA; Irvine, CA; and New York City’s Rockefeller Center. The clubs likely will be rebranded as Equinox. With the additions, Equinox will operate 56 clubs in the top eight U.S. markets.
In 2006, Equinox Holdings Inc. was purchased by The Related Companies, a New York-based real estate development firm. The chairman, CEO and founder of Related is Stephen Ross, who also is chairman of the board of the NFL’s Miami Dolphins.
What Related might do, one source says, is sell off the real estate in two of the four clubs it acquired while still operating the clubs, resulting in a greater return on investment for the company.
“They might, in effect, have a chance for two bites of the apple: one, the real estate and two, the operation,” the source says. “Other bidders were also interested in the real estate, so apparently, the real estate must be very desirable.”
Another source says Equinox acquired three attractive clubs while the Rockefeller Center club, with its location, presents operational challenges.
“It’s a departure from their brand offering and takes them more upscale,” the source said of Equinox. “They paid a big price, but these are properties that can’t be replicated.”
The acquisition does not include The Sports Club/LA clubs in Boston, Miami, San Francisco, New York (on the Upper East Side) and Washington DC, nor does it include Reebok Sports Club/NY. All of those clubs will continue to be owned and operated by Millennium Partners Sports Club Management, Boston, which has owned those clubs since 2006. That year, Millennium Partners purchased five of the six clubs from the Los Angeles-based company for $80 million.
The three owners of The Sports Club Co.—President Nanette Pattee Francini, Chairman Michael Talla and CEO Rex Licklider—will not be part of the four new Equinox clubs and are looking into activities outside the fitness industry, the company said. The Sports Club Co. will continue to own other properties but will no longer own any health clubs, the company added. Those other properties involve various real estate holdings.