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Oz fitness centers file for restructuring protection

Oz Fitness Oregon, whose lone club is in the Medford Center, has filed for Chapter 11 bankruptcy protection.

The local fitness club, one of seven operated by the Spokane, Wash.-based chain, filed in the U.S. Bankruptcy Court for the District of Oregon in late December. A Billings, Mont., Oz Fitness club filed for Chapter 11 bankruptcy in October.

At the heart of the matter, said Oz Fitness founder Ian Riley, is a long-term lease with Medford Center owner Kimco Realty Corp. of Hyde Park, N.Y.

Court documents indicate Kimco has the largest unsecured claim of $500,903 against Oz Fitness. As of Sept. 30, Kimco owned interests in 855 shopping centers comprising 125 million square feet of leasable space in 42 states, Puerto Rico, Canada, Mexico and South America.

"The fact is my rent is very high, in my opinion well over the market's true value," Riley said on Friday.

The Medford Oz Fitness will continue its normal hours of operation during the bankruptcy court proceedings.

Riley declined to disclose the monthly rate or when Oz Fitness last paid its rent. Kim Maguire, Kimco's Oregon real estate director in Portland, referred questions about the lease to a New York corporate spokesperson who didn't respond to queries Friday.

"The main reason we've filed (for bankruptcy) in two states is to guarantee the longevity of the business through restructuring," Riley said. "We've been in discussions with other people to come in and do a deal with that facility. At the end of the day, we want to make the decision that best guarantees ongoing jobs for the staff and keep the center open."

The local club, managed by Laura Danner, has about 20 employees, including eight trainers and three fitness counselors.

"The lease needs to be renegotiated," Riley said. "We're not selling a high-ticket item. When you're selling memberships for $30 or $40 (per month) you need a lot of members to make the numbers work; it just doesn't pencil out."

He declined to disclose membership figures for the club.

Attorneys handling the local and Montana bankruptcy proceedings didn't respond to multiple attempts seeking comment.

"I've reached out to the landlord and am awaiting a response to discuss what solutions might be available to us," Riley said. "I'm willing to come to an immediate resolution."

Riley acquired Medford and Springfield gyms from 24 Hour Fitness in 2004. Although the Springfield fitness center was sold in 2012, the present circumstances are muddied by a 2011 discrimination suit filed by a former manager. The second-largest credit claim on bankruptcy filing is for $300,000 associated with litigation involving Skye Preussner.

A meeting of creditors is scheduled for Feb. 6 in Eugene.

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.