Tuesday, November 17, 2015

Health club update: Fitness Lady closing & JJ reviews the UMMC purchase of Courthouse.

Yet another health club in the Jackson area is closing down.  Fitness Lady will shut its doors on Thanksgiving and become part of Holmes Community College.  Fitness Lady will join the Courthouse Racquet Club and  The Club in selling to non-profit or government agencies and thus going off of the tax rolls. 

JJ  obtained a copy of the purchase agreement for the sale of the Courthouse to UMMC through a public records request.  However, the term "sale" must be loosely used because much of the transaction appears to be a donation.  The contract is posted below.  Some observations of the transaction are:

*The Courthouse owed $9,259,786 on a note held by Trustmark in December 2014.
*The "consideration for the assets shall be equal to the amount of the debt" mentioned above.
*UMMC paid a price that did not exceed the average of two appraisals.
*The owner of the Courthouse transferred $4.8 million to UMMC as a gift at closing.
*John L. Black, Jr. (owner) will pay another $5 million to UMMC in $500,000 annual payments for ten years.
*The annual payments are to be used for operations, capital spending, and offset of losses.
*Attorney William Smith, III of Watkins Eager handled the transaction.
*Courthouse was transferred to UMMC free of all debts.
*Closing Costs were split between buyer and seller.  The seller paid the attorney's fees, debt, and required donations.  The buyer paid its own attorney's fees, recording fees, and title insurance. They paid their own closing costs that they incurrred.
*The agreement was signed by Dr. James Keeton (UMMC), John L. Black, Jr., and John L. Black, III.

 JJ also requested a copy of the settlement statement.  UMMC did not provide a copy of it or the closing package.  UMMC did not admit whether one even existed.

One final note.  Kenneth Stokes once again showed his ability to add and subtract.  He claimed this summer that Jackson suffered a great loss in revenue because the Courthouse clubs were removed from the tax rolls. Um, the only club that was on the tax rolls in Jackson was the Northtown Drive The Hinds County website states that the 2014 taxes were $54,800.  However, that was the total tax bill.  The municipal portion of the taxes were $17,785.  Huge, huge loss to Jackson.  Nice try, Mr. Stokes.

All kidding aside, the question must be asked if it is prudent to allow health clubs to operate as non-profit corporations or part of government entities.  All major health clubs in Jackson are now non-profits: YMCA, MBMC, St. Dominic, UMMC, and Holmes Community College.  Can private health clubs compete with the YMCA and others when they have a decided competitive advantage?

We are told we have to grant some form of tax rebate to retailers if they want to operate here.  We can't have health clubs apparently unless they don't pay taxes.  Developments can't take place in Mississippi unless we give some form of tax credit, a loan, or a grant.  Where the hell will we get our tax revenue? I am oversimplifying to some extent but you probably get the point. Feel free to chime in in the comments.


Anonymous said...

The private/publicly traded hospitals compete quite well in spite of the "disadvantage."
What kind of "settlement statement" were you requesting/expecting to find? They don't exist in these deals.

Kingfish said...

Purchase agreement referred to a closing package. All they had to do was say one didn't exist.

Anonymous said...

Agreed. We generally say if something doesn't exist to make clear we've complied fully. Forgive me for not getting to it in the document but wonder how the $500k was secured.

Anonymous said...

Planet Fitness opening in Deville, Jackson.

Anonymous said...

Wasn't there a Courthouse location in downtown Jackson that was sold to UMMC, in addition to the Northtown facility?

Anonymous said...

This WS, III attorney is always handling the really shady transactions around town. He did the Lost Rabbit PID deal.

Needs A Spotter said...

The massive influx of Costco tax money to the city will quickly offset and exceed any loss from a place that provided bottled water and a neat place to do squats.

$Just Saying said...

If you go back to the original Clarion Ledger article and know a little about the people involved you will see this was a sweetheart deal for an owner(who was fraternity brother)of the buyer who facilitated the sale. The owner was close to losing his rear end and made the deal so he could maintain an operational contract with the facility, no loss of income but a definite loss of tax revenue for the counties & cities involved. Good ole boy Mississippi deal where the taxpayers get screwed.

Kingfish said...

The downtown location is a lease.

Anonymous said...

Looks like Cheddar's in Flowood closed as well.

Anonymous said...

So the seller/donor keeps running the thing and makes money from monthly payments?

Shouldnt the contract to operate be put out to bid?

Am i missing something?

Anonymous said...

I need some education here. How do you sell your business and basically have to pay the buyer? Maybe someone can spell this out for me or perhaps I'm misunderstanding things.

Anonymous said...

Doesn't a lessor pay property taxes?

Anonymous said...

Whenever I travel, I use the local gyms. I've noticed that cities with better demographics have bigger/better/more health clubs/gyms. Washington, Oregon, British Columbia, Nebraska, and Minnesota have magnificent facilities. I've yet to find their equivalent in Georgia, Alabama, Tennessee, Arkansas, or Florida. And I've spent much more time looking, in those blighted states, than in Omaha, Minneapolis, or Seattle, where within two minutes, I can locate a huge, spectacular facility. It says bad things about the Jackson Metro's 'peoples', that we cannot create/support/maintain a health club that's really superior.

Then again, we lead the nation in things that are bad, but are always hanging off the end like a demographic dingleberry, when it comes to things that are good.

Anonymous said...

Dude I'm really sorry that you can't find an upscale facility in Jackson or other "blighted" areas like Atlanta, Dallas, Austin, Nashville, etc. maybe you are staying in the wrong part of town. Personally rather than spending my dollars to work out I do my own yard work, walk (to old to run) use light weights and a mat at home.

Anonymous said...

Don't forget to listen to Speaker GUNN and vote Republican so they can have a super majority and keep ALL of us undereducated and number 50 in everything while they steal every dime they can get.
Make sure you read all the plans for the BP money, 70 million to rebuild the wetlands yeah wetlands. Guess who will get that scrumptious little contract, I'm willing to bet that the winner is a MAJOR contributor to feel's campaign but I could be wrong...NOT

Anonymous said...

The buyer is paying off the debt of the seller, thus the difference in the sales price and the debt, is being "paid back"

Anonymous said...

9:49am....Yates? Wherever there are good ole boy, backroom, shady construction contracts for large projects in MS, there is Yates.

Rudy's Lake said...

Kudos and a golf clap to the originator of the term 'demographic dingle-berry'. Let it not go unnoticed. But, according to my auto-correct, I have spelled it correctly here.

PittPanther said...

9:03am, what you describe is what happens when people are paid at the abysmal levels that we pay people in this state. The 1%ers are at the River Hills club or The Club. Everyone else is at Planet Fitness. There is nothing else affordable for the Mississippi middle class.

And you will go crazy trying to compare Mississippi to advanced places like Minnesota or Massachusetts. People here don't travel, except for SEC and SWAC football games, so they are extremely ill-exposed.

Anonymous said...

I don't mean to be rude but if I felt as you evidently do I'd just buy me a snowblower and some long johns and get my ass to Minn or Mass. Been to both many times and they are nice but the cost of living is much higher. The higher paying jobs are in the cities. Been there done that

Anonymous said...

The majority owner of Fitness Lady is a woman, and she wasn't in a sorority, much less a fraternity. The silent partner wasn't in a fraternity, either. Neither of the former owners will be running the club, if it continues to exist as one. Fitness Lady is gone. Closed. Some stupid speculation is being thrown around here.

Anonymous said...

9:49; You keep overlooking the fact that Mississippi got to be number 50 during decades of democrat leadership. We have not assumed 50th position in ANYthing since republicans took the lead seats.

Anonymous said...

One time I worked out in a gym that had a boxing ring, and it wasn't in the southeastern US. Can I sit with the cool kids at lunch now?

Anonymous said...

@10:03 - you gotta help me out some more here. I understand they buy the place and pay off the debt. But who would sell a business and have to pay ("donate") $500,000/yr for 10 years to the person they sold the business to? IS JLB gonna have some high-paying job at UMC? It just doesn't make sense to me. Maybe I'm just dumb.

Anonymous said...

9:03 sounds like a character in a Wes Anderson movie. Just traveling around the world, ranking places on a scale from "magnificent" to "blighted" based on the quality of health clubs s/he can find.

Marilyn Kuhn said...

There is some misinformation here. I am the owner of Fitness Lady. We paid over $57,000 annually in property taxes, which is quite a burden for a small business in a recession economy. Especially, when my property taxes help maintain public trails which provide free access for fitness enthusiasts, and fund a city owned recreational center which offers competitive fitness classes for a low fee.I was drowning in taxes,and the new Baptist Healthplex opens a huge new tax exempt facility, and charges twice as much as I do.This is a rather sore subject with me. Fitness Lady was the largest ladies health club in the country.Absolutely magnificent.I have many appreciative long term members. My most appreciative members though are from New York, Los Angeles, Atlanta, etc. They know there is nothing else like Fitness Lady in the entire United States. There is some truth to the comment that people in this area are not knowledgeable about what is offered in other areas. I really needed to charge much higher rates, but my members didn't agree. There will now be a huge void in the market. The recession has been brutal on health clubs. I have been operating Fitness Lady for 25 years, and working in health clubs for 37 years. Health clubs need a ready source of capital to constantly upgrade equipment and facilities. The old days of being able to get a line of credit easily ended with the new bank regulations. There will be fewer and fewer private owners of large fitness facilities. Nationwide, most of the large clubs have been bought by private equity firms.Less than 1% of all hospital fitness centers make a profit, but they are operated as big community outreach marketing machines,to make you associate their hospital name with wellness, even if it is at a financial loss. As health insurance companies have started paying for health club dues( another sore point), the private health club owner does not have the power to negotiate favorable reimbursement rates with insurers, or the finances to comply with government regulations. Hospitals will dominate the health club market in the future, as will low price $10 per month clubs like Planet Fitness, the Chucky Cheeses of the fitness industry. The middle range clubs are closing throughout the nation.I am totally impressed with the new leadership of Homes Community College, and even though there will be no more Fitness Lady, I feel reassured that they will continue operating it for the benefit of their students and faculty, and maybe the general public, as a fitness center. Marilyn Kuhn

Kingfish said...

Ms. Kuhn, I'm truly sorry. I took the tax information I posted off of the tax rolls.

I also think it's ridiculous that you have to be a nonprofit to compete as a health club now. This of course will force other private businesses to pay more taxes.

I was just citing the Madison County website for the Sunnybrook location.

Anonymous said...

1:43 PM

I think there is some confusion. The article is about Fitness Lady but the documents relate to the Club I think.

Sorry about that...I should have clarified my question.

So, is the Club contract put out to bid?

I am still so confused.

Marilyn Kuhn said...

That is ok. I just wanted to clear up the misconception. I enjoy this blog. I sense a network of attorneys, furtively hunched over their computers or phones, enjoying the anonymous ability to discuss the local Jackson happenings and gossip.Boy, do I know some juicy tibits from years in my industry...but my lips are sealed.

Anonymous said...

4,7500 per month for Property Taxes.

Probably have to have a hundred memberships per month just for PROPERTY TAX.

Complying with government regulations cost me alot of money. I have a small business and have to spend so much money on government imposed things just to conduct business.

Spandex Marketer said...

If you think municipal walking trails and non-profit exercise centers are 'a thing' now, just wait til we elect Bernie Sanders. There will be very little room for the private sector in any industry. And don't go axing stupid questions like 'Where will the money come from'.

Anonymous said...

Niche market brands seem to come and go. Maybe the Fitness Lady concept has just past it's usefulness? There is a large market for fitness services, but excluding approximately half that market (men) seems to be putting yourself in a hole from the start. Then you take into consideration benefits of family memberships at all inclusive health clubs and this just seems to be a strategy of the past.

Also, you have to take look at the latest fads that come and go and suck in members (I guess today's would be crossfit?). Markets change and you have to change with them, or you go out of business eventually. Pretty basic business life cycle it seems.

Anonymous said...

So Fitness Lady is actually closing in its current form and Holmes is purchasing the assets. Holmes may or may not sell memberships to the public. I get that.

I still can't follow the Courthouse deal. (Yes, I read the contract.) The owner sold the Assets to UMMC for an amount equal to his $9.3 million debt, but Trustmark still had to be paid that amount to satisfy the Note. (Or did Trustmark forgive some of it for some reason?) Then he donated $4.8 million to UMMC at closing and he's donating another $500k/year for each of the next 10 years. Where's the $4.8m and $500k/year coming from? Was the rest of the business worth $9.8 million over the Consideration for the Assets?

And I guess I've been in a cave. When did the Club sell, and to whom?

Anonymous said...

10:00 AM, I don't want to be ugly, but you sound like one of the paid trolls "controlling the conversation" about the Costco travesty. Did they "take you off Costco" for a while, so you could "control the gym conversation"?

Anonymous said...

Don't worry 12:01, you can't help it if you're ugly. We're all God's children...bless your heart. That being said, not a paid troll by anyone, I've just been a consumer of health club services for about 20 years now and have enough common sense to observe changes over the last 20 years. Ms. Kuhn brought up the Baptist facility and them charging twice as much as she does. I'm not a member of the Baptist facility and I've never used one of her facilities (I'm a man you see), but Baptist seems to offer quite an impressive list of amenities, and I have a hard time believing her facilities would be comparable.

I don't care about Costco one way or the other. Fine if it comes, but doubt I will join.

Squat This said...

If a work out place were to be named something like 'Gentleman's Palace' or 'Fitness Gentleman', we'd assume it was akin to a bath house. I never did understand why anybody would establish a venue that is sex-exclusive.

What Ms Kuhn, and others who think like her, are saying is 'Women are victims, fragile creatures, and they need a safe venue, free from the glares of men and apart from the real world....a place where they don't have to wear makeup or worry about muffin-tops.....just a place for us girls, don'tcha see'.

These are work-out places for Heaven's sakes. Who cares if one opens or closes or how much new equipment costs. You don't run a profitable grocery store by selling steak for sixteen cents a pound. Charge enough markup to make a damned profit. Econ 101.

Kingfish said...

Smith and his Covington law firm closed quite a few deals for Claiborne Frazier. Smith also was tight with Charles Evans. He was involved in a at least one Evans transaction. Then there is Lost Rabbit.

Anonymous said...

6:07 AM (and 10:AM - It's rather obvious you're the same person), we were recently informed that the City of Ridgeland had contracted with a firm which was to "monitor conversations" on the Internet. ( http://kingfish1935.blogspot.com/2015/10/ridgeland-paid-22500-to-company-to.html ) It would be sickening to discover that you are someone indirectly paid by the city, to mock Marilyn Kuhn, after all the taxes she has paid to the city. However, after the mocking of concerned Ridgeland residents and taxpayers, who dared express themselves regarding Costco, I WOULD NOT BE SURPRISED.

Anonymous said...

6:07, the only thing obvious is that you need to talk to your therapist about your Ridgeland/Costco obsession. I'm not 6:07, but if you think anyone with basic common business sense is a paid operative of your mayor, then you've got a problem.

6:97 Back Again said...

I'm 6:07 and have neither mentioned nor do I care one whit about Ridgeland or Costco and have never heard of Marilyn Kuhn. Nor am I any other poster. My point remains: Businesses open and close and trendy venues for women-only will not survive for long, the exceptions being nail salons and places to get they hair did.

My thought is that Holmes purchased this site because of the proximity to its campus and for no other reason. If memory serves, it's just around the corner. Maybe Holmes will purchase (and bulldoze) the Overhead Door place, just down the street.

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