Overdue, court-ordered rent payments for West Seattle Club lead to hearing as part of owner’s Chapter 11 case

September 3, 2014 at 7:04 pm | In West Seattle businesses, West Seattle news, WS Health Club/ex-Athletic Club/ex-Allstar Fitness | 16 Comments

By Tracy Record
West Seattle Blog editor

Two months after the owner of the West Seattle (Athletic) Club fitness center filed for personal bankruptcy, he and his landlord were in court today because an order to pay part of the club rent hadn’t been complied with.

As the club is a major West Seattle business with thousands of customers, community interest in its status remains high, so we’ve been following the bankruptcy-court-case filings – almost 100 of them – since Sam Adams and wife Erika Adams filed for Chapter 11 bankruptcy protection in late June (reported here on June 30th).

Today’s hearing was not the first held for various motions since then, but it’s the first one we have attended. Sam Adams and John Pietromonaco, owner of the club’s North Delridge site and building, were both in the downtown federal courtroom as their lawyers argued a key point relating to the three-week-old order for rent to be paid.

First, a bit of background:

The Adamses’ Chapter 11 filing on June 28th came just two days before Sam Adams was due in court related to the second “unlawful detainer” case filed on behalf of Pietromonaco’s H-P Properties (we reported the filing in mid-June), the type of case that can lead to eviction. The bankruptcy filing subsequently put that matter on hold – “stayed” it, in legal terminology. Then two weeks ago, according to the King County Superior Court docket, it formally closed because of inactivity; an earlier “unlawful detainer” case closed in February because Adams had paid an amount of money agreeable to the landlord, according to what his lawyer told WSB at the time.

Pietromonaco had said in court documents that Adams owed almost $600,000 at the time of the unlawful-detainer filing in May. In August, via a “motion for adequate protection” granted by the bankruptcy judge handling the case, Marc Barreca, it was agreed that for now, Adams could just pay “post-petition rent.” That was to start with what was owed since the bankruptcy filing, rent for July and August.

Judge Barreca’s order required payment of the July rent, $110,000, by August 12th, and the August rent by August 19th. The same court order called for Adams to pay the $110,000 rent by the 10th of each subsequent month. If the order wasn’t complied with, the judge ruled at the time, the landlord would have the right to seek relief from the stay of state proceedings, which he could grant “upon failure of Debtors to show adequate cause for failing to make such payment,” and that’s what he did today, after observing that “not a dime of rent has been paid” since his order.

The Adamses’ lawyer, Lawrence Engel, wanted to have Sam Adams testify to Judge Barreca today about his ongoing attempts to get a loan for the club. The judge said this hadn’t been called as an evidentiary hearing, so Adams couldn’t speak. Engel then presented a document he described as a “term sheet” for a $3 million loan Adams has said he is seeking. (So far, this is not filed as an official court document, so we haven’t seen it and don’t know what it says.) Engel mentioned that Adams has appeal to lenders because of his past as an NFL player, which is considered, he said, an asset in the health/fitness industry.

Arguing against the judge granting relief from the stay, Engel also said that while that loan is not a sure thing, at least not yet, a $100,000 loan is, and that Sam Adams could get that money within five days or so and give it to Pietromonaco.

Judge Barreca noted that $100,000 would be less than half what is owed for the “post-petition rent” for July and August, let alone the previously unpaid sum and what is due for September. So he signed an order “granting relief from stay,” which means that Pietromonaco and lawyer David Tall are free to go back to King County Superior Court and pursue action relating to the building’s status.

Also of note, Adams is quoted in court documents since the filing as saying that his brother Jeremy Adams is a part owner of the club and serves as its Chief Operating Officer. State documents list Sam Adams as the only governing member of the LLC, as the landlord’s lawyer pointed out while questioning him for a deposition that he gave under Rule 2004 (explained here), but Adams said that his brother was given an ownership interest last year and that the documents had been changed and submitted.

What happens next? The fitness club’s landlord is just one of the Adamses’ creditors; the Chapter 11 case in general is continuing to proceed. We’ll be watching court files, both federal and state (county), to see what happens, especially in the wake of today’s order. A year and a half has elapsed since Adams took over what had been West Seattle Allstar Fitness, after its former owner’s bankruptcy case led to the court-approved sale of its assets for $75,000.

16 Comments

  1. Still, I can’t comprehend leasing a building or space such as that for $110k a month. I cannot fathom what the cash flow must be to pay that, on top of equipment, employees, taxes, general operating expenses… Boggles the mind, as a small business owner… Makes me wonder what the building is valued at? Paying 1.2$ million + a year, I think you could have bought it outright in a few years…?

    Comment by Tbone — 7:59 pm September 3, 2014 #

  2. Agreed…poor judgement and advice. Go Hawks!

    Comment by DixieCupDean — 8:54 pm September 3, 2014 #

  3. Shut that dump down already.

    Comment by Guy — 9:46 pm September 3, 2014 #

  4. Excellent synopsis, Tracy. I’m a former member, but know many who still belong. It’s a good facility that should be an asset to the community. I hope it becomes one again soon.

    Comment by onion — 10:09 pm September 3, 2014 #

  5. Tbone, while I don’t think the landlord has been the most affable partner, the rent is probably in line with the value of the land.
    .
    However, I believe the All-Star owners sold the land and switched to being a tenant in the mid/late 2000s, probably to fund all of the other clubs they were building, and the current owners would really like to “maximize” its income in a way that they can’t as health club landlords.
    .
    My idle and completely subjective speculation is that there’s no way in heck Sam Adams is going to get a multimillion-dollar loan to keep a club that can’t even pay its bills month-to-month, he will eventually have the company declare bankruptcy, and the building owner will attempt to tear down the structure and build the largest possible apartment complex.
    .
    For the public, it’s a lose-lose.

    Comment by Mel — 11:38 pm September 3, 2014 #

  6. Thanks for the history, Mel. I hadn’t ever looked back that far but it seems to be so – bottom of this page from the county assessor’s website shows the property-changing-hands history:
    .
    http://info.kingcounty.gov/Assessor/eRealProperty/Detail.aspx?ParcelNbr=9358000300

    Comment by WSB — 12:59 am September 4, 2014 #

  7. My pie in the sky hope is that the West Seattle YMCA will one day buy this building and set up shop there. The current YMCA facility is great as far as the pool goes, but we could really use the extra space in the workout areas, especially the weight room.

    Comment by sn6uV — 8:21 am September 4, 2014 #

  8. I’ve been holding out here until the new LA Fitness opens. I hope beyond hope they can keep it open till then. There’s no adequate substitute in West Seattle.

    Comment by Brian — 8:33 am September 4, 2014 #

  9. I love working out here and have seen some improvements but still has a way to go. I think Adams has a point, it would be easy for him to get lenders to back him due to his NFL background and Status. The landlord is obviously gouging him with such high rent, and Adams has not attempted to raise prices and pass on any of these fees to us members. Maybe a bunch of us could get together and raise the money to help Adams keep this place open.

    Comment by Peter P — 11:34 am September 4, 2014 #

  10. It’s stories like these that make me very glad I work out at home and in our wonderful parks instead of gyms.

    Comment by Bradley — 11:55 am September 4, 2014 #

  11. Yeah Peter, let’s all get together and do that. I can contribute at least $50

    Comment by Marcus M — 8:39 pm September 4, 2014 #

  12. Peter P & Marcus M: I appreciate that you guys have such a positive experience with the club, but isn’t that like throwing good money after bad as the saying goes???

    Comment by jissy — 10:55 pm September 4, 2014 #

  13. On a more positive note I’d like to thank the staff who are hanging in there and keeping the basics going despite this uncertainty. From the front desk to housekeeping staff there has been a decided leap forward in the “can do” attitude of staff. I’m one of the lapsed members who re-upped a few months ago, taking a risk on a one year renewal. Yes, equipment repairs aren’t happening, etc. But the place is cleaner and way more welcoming than in “the old days”. Kudos to the folks on the front lines and I hope there will be a positive resolution to this ongoing challenge. Deodara

    Comment by Deodara — 1:40 pm September 5, 2014 #

  14. I’m in total agreement with Deodara; have been a member since before they built the place and have seen highs and lows. I keep going BECAUSE of the fabulous instructors and the variety of classes offered. The new barre classes are great! Quit the Y years ago as I didn’t enjoy all the screaming three year olds in the women’s showers — a pretty crappy way to end a workout after a stressful day at work. Hoping somehow Adams or possibly a new owner can right this ship before it’s too late!

    Comment by Southpolarprincess — 9:59 am September 7, 2014 #

  15. I’d love to see new ownership because it does have potential.

    Comment by ellenater — 8:24 am September 9, 2014 #

  16. The building is 80,000 square feet people. That is only $15.00 per square foot. Where can a small business rent a space at that rate for your service business that includes already fully built offices, conference rooms, locker rooms, studios, etc. Sam did not have to invest over 5 million dollars to build out the gym or the extra costs for the parking lots, outdoor lights, etc.
    The profit on that gym when run properly, after paying all the employees, rent, utilities, etc..a gym of that size with its originated membership = gym made over 9 million a year. Each square foot made money, makes money in gym world and Sam’ s pipe dream of owning gyms, but having zilch experience = failure. Plus, shame on the landlord to not allowing the same rent deal to the former gym owner that f over leveragef from a terrible recession. The landlord deserves not pity. But Sam, great dream, but your clueless on how to run a gym.

    Comment by Skye — 11:40 pm September 11, 2014 #

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