The landlord of the Honolulu Club is preparing to take control of the facility when a lease with its bankrupt operator expires in May.
The landlord, HNLC Inc., notified Honolulu Club members this week that it intends to replace Los Angeles-based Meridian Sports Clubs California LLC with a new operator and invest $1 million in club improvements, including new equipment and upgrades of workout areas, locker rooms and the restaurant.
HNLC Inc. is a partnership between local businessman Richard Gushman and California real estate investment trust Douglas Emmett Inc.
Meridian, which has managed the Honolulu Club for four years, filed Chapter 11 bankruptcy reorganization in October.
Gushman said Meridian has been operating the club since it purchased it "as our licensee."
"We control the name and the brand and we intend to take it back as owners," he said. "It is our absolute intention to start the club over again in mid-May."
But Meridian is disputing the plan, saying it is still in discussions with Gushman’s group for a lower cost lease that reflects current market conditions in hopes of continuing to operate the 40,000-square foot Ward Avenue fitness and social club.
Gushman contradicted Meridian’s account. "We are definitely not in lease negotiations with Meridian at this time," he said in a telephone interview.
Meridian said it has issued two cease-and-desist letters to Gushman’s attorneys, demanding his company stop correspondence to Honolulu Club members.
"We believe that statements in the letter to our current members and the attempts at distribution are unlawful," a Meridian spokeswoman said in an email to the Star-Advertiser. "It is unfortunate that our attempts at negotiation for a new lease have been rebuffed in this way."
Gushman said Meridian has stated that it cannot afford to continue to lease the club. Gushman said his last offer in November made it clear that any lease restructuring was contingent upon Meridian improving its financial situation by eliminating its debt and building its cash flow.
"Meridian has told the Bankruptcy Court that its mainland operations are currently losing well over a million dollars a year, and even after downsizing in bankruptcy Meridian will have almost $10 million in debt," Gushman said.
In the coming weeks, he said his company will be working with employees who want to remain with the club and will also provide information as to how patrons can continue their memberships. The club has between 80 and 90 workers, according to Meridian.
"We know that many members have complained that the Honolulu Club has suffered from deferred maintenance during Meridian’s cash-flow issues," Gushman said. "With top professional management under local ownership, we will return the Honolulu Club to its glory days, so that within the next few months it is again Oahu’s pre-eminent center for health and wellness, as well as the most desirable social gathering place for local residents."
Meanwhile, Meridian is preparing to open a 30,000-square-foot fitness center at the Ko‘olani condominium project in Kakaako in the next few months.
