California Fitness

Liquidators look to sell chain's 3 gyms

Shutters are down for the California Fitness branch at Velocity.
Shutters are down for the California Fitness branch at Velocity. ST PHOTO: AZMI ATHNI

Experts say buyers may not be keen as chain's main asset - its client list - is also a liability

The appointed provisional liquidators for California Fitness are seeking buyers for the chain's three gyms, which are now closed.

In a statement yesterday, Ferrier Hodgson said their representatives had met the landlords in the hope of securing agreements to market the gyms for sale.

Business experts, such as SIM University's School of Business senior lecturer Walter Theseira, however, cautioned that buyers might not be interested in the troubled business .

"The main asset of California Fitness is its client list but it is also a liability, because of the services owed to them. No company would want to take over the client list along with the liabilities," he said.

Slightly more optimistic was Dr Craig Brown, assistant professor of finance at NUS Business School: "It could be an attractive deal for fitness companies that want to expand their business, unless there is great liability that comes with it. Ultimately it comes down to the price. Its selling price has to account for its liabilities."

When asked if it would be interested in buying the premises, Fitness First Singapore's managing director Andrew Phillips said: "Our expansion strategy is based on developing and strengthening the network for our members, making it more convenient for them to exercise at any time of the day.

EXTENT OF LIABILITY CRITICAL

It could be an attractive deal for fitness companies that want to expand their business, unless there is great liability that comes with it.

DR CRAIG BROWN, assistant professor of finance at NUS Business School, who was slightly more optimistic about a deal.

"We will review their locations using the same criteria we use to evaluate all other potential venues."

City Developments, the landlord for the Republic Plaza outlet, could not be reached for comment, while Velocity's landlord UOL and Bugis Junction's landlord Keppel Reit declined to comment.

California Fitness closed all three of its outlets unexpectedly in the past week, leaving members high and dry, after having paid upfront thousands in membership fees. It has also closed all its 12 outlets in Hong Kong.

Despite the moves to find a buyer, some members like Ms Louise Teo, 34, would rather have their money back.

"I guess it depends on what the deal with the new owners would be like. If I have to pay a lot to continue, I would stay away for now," said the retail executive, who has been with the gym for three years and stands to lose about $2,000.

A hearing is scheduled on Aug 12 and the provisional liquidators will report their findings to the High Court and the creditors upon completing their assessment.

Meanwhile, some members are trying to get their bank to stop payment to the company, though this is mainly an option for members who pay monthly fees to the gym, and not those who paid for memberships upfront.

A version of this article appeared in the print edition of The Straits Times on July 22, 2016, with the headline 'Liquidators look to sell chain's 3 gyms '. Print Edition | Subscribe