Muskegon Community College trustees voted yesterday to accept an offer of $1.17M for the college’s Fitness Center. The building, which MCC purchased in 2015, has been vacant since the trustees voted to close it last May. Trustees voted to shutter the facility after it lost an average $1M per year over five years.
The 40-year-old facility served as the Muskegon YMCA until the organization sold the building and land to MCC. Including the acquisition costs, MCC spent about $5M on the building before pulling up stakes. After MCC purchased the building, the college invested heavily in repairing the facility, but it never achieved the membership needed to sustain the building operations. As a result, the building lost about $2.5M on repairs and upgrades, and another $2.5M on operations.
The building and its operations landed on the trustees’ radar in 2019, after having racked up heavy losses in its first four years of operation. During the pandemic, health and fitness clubs in the State were closed, and the Trustees decided to close and sell the facilities.
The College issued an RFP for a temporary operator while the College prepared the facility for sale, but MCC received no responses. Since May 2020, the building has sat vacant.
Last week, a lawyer representing the prospective buyer approached the Trustees with the offer, but did not disclose the identity of the buyer. MCC had hoped to sell the building to a new owner that would operate the building as a fitness center. They received an offer from a developer who wanted to raze the building and replace it with a mixed-use development.
The prospective buyer, who remains anonymous, has stated that it would collaborate with MCC on the future use of the building. It remains unclear whether the building will remain a fitness center.
There’s no getting out from under the Fitness Center
Losing $1M a year on operations and maintenance sounds about right. So does selling the building to get out from under the maintenance costs. The situation sounds familiar in some respects, but there are a few key differences. One big one is the location of the building. The YMCA building wasn’t on MCC’s campus, so selling the property to stop the bleeding is at least an option.
Second, the MCC trustees gave up after a mere 5 years of sustained losses. They were willing to admit that their get-rich-quick scheme lacked the essential ingredients of “rich” and “quick.”
Third, they could see that a facility whose prospects were dim in 2019 was not going to make a miraculous recovery amid the pandemic.
Fourth, WCC made the classic mistake of borrowing to fund an investment. Literally, the only time one borrows to invest is when the return is high and the risk is low. Neither of those conditions applied in the case of the WCC Fitness Center. To be clear, the purpose of WCC’s Health and Fitness Center was to make money. Prior to the pandemic, fitness centers were experiencing membership growth of 3%-4% per year. That’s entirely doable. Except that staying in front of the debt and maintenance on the HFC is something akin to the Running of the Bulls at Pamplona. WCC needs about 5%-8% growth in membership to come up with bond and maintenance payments that grow each year.
Fifth, WCC doesn’t have a Board of Trustees that has any appetite for admitting that borrowing to “invest” in the Health and Fitness Center was a mistake. An expensive mistake with no neat option to sell the building to someone else. There is no exit strategy to get out from under this utter dereliction of duty. And until there is, Washtenaw County taxpayers will be stuck with the bill for this train wreck.
Photo Credit: Jim McIntosh, via Flickr