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  • Oz Fitness can't work out lease, will close April 30

  • Oz Fitness will close its financially embattled Medford Center gym April 30, leaving some three-dozen employees out of work and thousands of members in search of new workout locations.
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  • Oz Fitness will close its financially embattled Medford Center gym April 30, leaving some three-dozen employees out of work and thousands of members in search of new workout locations.
    "I want you to tell everyone I'm sorry and that this is the worst nightmare for me," owner Ian Riley said Thursday. "We've had to go through some awful things. I feel extremely bad. I'm apologetic to the loyal and wonderful staff in Medford, and the members who trusted me; I feel I've let everybody down, and I'm disappointed."
    Riley, who put the Medford gym into Chapter 11 court protection late last year, said the shopping center's owner, Kimco Realty Corp. of Hyde Park, N.Y., was unwilling to renegotiate its lease with his company or with potential buyers.
    Riley numbered the local staff at 35 and membership at more than 4,000. The gym gained some modest acclaim in 2008, when then-presidential candidate Barack Obama stopped in for a workout.
    Riley said the Medford Oz stopped taking new memberships at the beginning of the week and employees were notified Thursday morning.
    "I tried everything that was available to me to continue," he said. "It was the same issue for the people or groups trying to acquire (the Medford Oz Fitness club) — the groups trying to deal with the landlord."
    He said the court-appointed trustee will auction off the gym's equipment sometime after this month.
    Ryan said the nature of full-service clubs with cardio equipment, weights, saunas, whirlpools, swimming and class space will always be a challenge.
    "You need a large amount of space and you have to pay for that space," he said. "It's difficult to find the right location."
    Riley acquired Medford and Springfield gyms from 24 Hour Fitness in 2004. The Springfield fitness center was sold in 2012.
    "Unfortunately, the lease I acquired had the tenant improvement allowances tacked on and the escalation was astronomical; that's a challenge for a lot of facilities."
    Court documents show Kimco, a real estate investment trust, has the largest unsecured claim, $500,903, against Oz Fitness. As of Dec. 31, Kimco owned interests in 852 shopping centers with 125 million square feet of leasable space in 42 states, Puerto Rico, Canada, Mexico and South America.
    "If the rental rate would've been accurate for the marketplace I don't think it would have been an issue," said Riley, who is based in Spokane, Wash. "Our market comparisons show the (local) rental rate is far less than what they were charging. They totally get it because they are Realtors, they're a large corporation with their feelers out there, they understand the marketplace. They own the property and can do what they wish, but they seem to be arrogant."
    There was no immediate response from Kimco Realty representatives in Portland.
    Riley said he plans to retain four Spokane Oz locations, which were not part of the bankruptcy proceedings, He has listed his Billings, Mont., gym for sale. Although the Medford case hasn't moved to Chapter 7 liquidation, Ryan indicated that was the next step, with liquidation by a court trustee to follow closing.
    Monthly, corporate and lifetime members paid varying amounts, generally ranging from $30 to $40 a month, he said.
    "The clientele is reluctant to spend any more in their quest for fitness," he said. "You would probably spend more for dinner in one night than here in a month."
    Reach reporter Greg Stiles at 541-776-4463 or business@mailtribune.com. Follow him on Twitter @GregMTBusiness, friend him on Facebook and read his blog at www.mailtribune.com/Economic Edge.
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