Episode #586: How Fitness and Wellness Tenants are Transforming New York's Real Estate Landscape with Jeff Roseman

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This is Pete Moore on Halo Talks NYC. I have the pleasure of bringing a

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close friend of mine back from 15th Street

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circa 2003, I would say.

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Jeff Roseman, Vice Chairman, Newmark,

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also from Podcast 151 of Halo Talks. Jeffrey, good

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to see you again. Likewise, Pete. Always great to see you, pal. Yeah, so

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we've been, uh, we've been running around this industry for, uh, for several

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decades. You're looking good and looking spry

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and continuing to make waves

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in the New York market. You had a stat that

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you referenced right before. You want to lead with that from where we are?

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I do. We just finished our end of

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'25 report, retail

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report, and fitness and wellness

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tenants surged by 40% from the

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previous year. 40%. Now, I mean, I've seen it in the

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industry. I've seen, you know, each space. Every time you hear a deal, it's

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like a new name. What do they do? Oh, they're Pilates, they're, they're

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infrared, they're, you know, uh, you know,

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high intensity or fitness. And it's just, there are so

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many names now running around the city and so many types

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of fitness brand. So, so

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would you say that the halo sector may have saved the retail,

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commercial, and residential? Well, I think it's

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industry. It's been, you know, what it, what it has, you

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know, really helped is the office market, right?

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So, you know, to return to landlords want people

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to come back to work and, you know, coming back to work, you

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don't necessarily want to come back to an office building that has a Chase Bank

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or a drugstore in it, you know, but if it has a cool

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fitness juice and a, you know, a tea guy or a

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coffee guy. I mean, it really does make a big difference in where you're going

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to be sort of spending every day of the week.

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Yeah. So, you know, as you take a look at what's happened in New

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York City and some of the players that,

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you know, have been growing, you know, you got Planet Fitness, you

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got Crunch, you know, New York Sports Clubs hasn't really, you know, added new

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locations. You've seen a lot of new brands out there

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that may or may not be fully

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capitalized. Like Club Pilates seems like it's very well capitalized. So it's Solidcore,

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Barry's Bootcamp. But what— how are

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you seeing the receptivity of landlords with

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new names that they might not have heard of or that don't really have a

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long track record, yet they're willing to take a bet on that either

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with TI dollars or long-term leases? That's a good question. I mean,

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look, that's always a struggle. Landlords always need to

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sort of understand who the tenant is. Obviously, if they have a

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track record, it's, it's good. You know,

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if it's a track record from overseas, sometimes it's looked at a little

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bit closer, but not, not necessarily a bad thing. But, you

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know, look, every tenant— anytime you're leasing space in an

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office building or residential building or a mall, you know, landlord's gonna

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pretty much give you a colonoscopy to find out, you know, where the money's

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coming from and, you know, any debt, who the partners are, etc.,

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etc. And what do you see in— or obviously every deal is

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different, but what do you see from, you know, tenant improvement dollars?

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I did a deal with one of my clients with Crunch a couple of years

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ago where it's like 6 months security deposit on a letter of

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credit, which I thought was kind of onerous. Personal

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guarantees or, you know, these good guy clause. Maybe you can explain the good guy

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clause after just giving us like some tops and waves. Look,

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here's the reality. The reality is if an owner wants the

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use and thinks it's a good use for the building, he's going to be a

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little bit more flexible. Not going to, you know, still going to want to

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securitize the lease somehow. But if it's

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a small one-story taxpayer where it's know, a,

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you a family that relies on the income of the tenant, they're going to

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really make sure that it's, it's protected. If it's an

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office building and they say, wow, there's a great use for all the people in

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the building, they'll be a little bit less. Um, yeah, and a good

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guy guarantee is just, you know, you're, you're

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guaranteeing that you're going to stay in the space, you're guaranteeing

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that you're going to pay rent while you're in the space, and if business

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is terrible and you got to leave, you just hand back the keys

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because getting the keys back from a delinquent tenant

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can take a year, if not longer. And that really

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screws everything up. Is that just

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typical to the New York market? Because

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I see across the country, like LA

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Fitness, let's say. Nothing to say anything bad about LA Fitness, but let's just use

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them as an example. They're expanding in a huge way in the city, all over.

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With club? I their mean, all over the country. With Club Studio.

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Yeah, yeah, yeah. So, so question there is, you know, they might have signed

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a 10-year, you know, $90,000 a month

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lease back in, you know, 5 years ago, and they're

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trying to offload those. They don't have a good guy

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guarantee that, that is outside the city. So what made, what made

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New York City unique to like allowing

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tenants out of leases where

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typically if I've got a 10-year lease, you know, like I got to pay that

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lease unless I go bankrupt, right? Well, look, LA Fitness

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is a good example. They have great credit. They're a terrific tenant. So when

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they're signing the lease, you're getting the benefit of

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that whole corporation behind this, right? So, you know, the chances

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of them going out of business, it means that the whole chain has

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to go out of business and you'll take that risk.

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You know, so they would never sign, you know, any sort of

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Good Guy. They don't need to, nor does, you know,

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in the retail world, you know, an H&M or a

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Starbucks, you know, I mean, you're getting the credit, which

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is the holy grail, getting credit. But if they want to leave

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after 5 years and they were in New York, they could exercise Good Guy lease

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and leave. Unless they have a

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termination, they can't leave. They're responsible. They can leave, but

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they're responsible for paying the rent and replacing the

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tenant. They have to either sublease it or sign it.

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So the good guy clause— so if I sign a 10-year lease in New

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York, Pete Moore, and I set up Halo Fitness, and after

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5 years I say, hey, look, this isn't working out, and

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I give you back the keys. You'Re off the hook. So I'm not paying the

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extra 5 years? No, but you're Pete Moore. As opposed to

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LA Fitness, who has, you know, billion of billion

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dollars. So the landlord's not giving them the good guy

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clause out is what you're telling me? They don't, they don't need

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to. Yeah, they're not going to be giving, uh, that type

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of guarantee. They're not giving that type of security because you're getting their

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guarantee, their corporate guarantee on the hook. So they can't go out

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of business. That's why you want that. But I could leave as

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like a single tenant. You can leave. You're gonna, you're gonna get back the

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keys. You're gonna forfeit security. You're going to forfeit everything you,

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you put into the space, right? Okay. And you're going to be

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current. You're going to be 100% current. So the good guy

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guarantee, just to be clear, because I think it's a very important point for people

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to understand in New York, the good guy guarantee— the

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landlord is giving the tenant a

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good guy guarantee out because if you're an

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independent operator, and I think you might not succeed

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and I don't have the benefit of your credit

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behind it, I just want you out so I can release the

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correct. Whereas if I'm working with a Walgreens,

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though, it's probably not a good example. Walgreens is a great example.

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There's 20 closed Walgreens in the city right now. And what's

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happened to them? They're still paying rent. They're paying rent every month. So you

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don't have a good guy out? Well, it's not about a good guy out. They

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have the corporate entity on the hook. There's nothing you can do. They can't get

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off the hook. They get off. can't So they don't have a good guy out,

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basically. Yes, you like that term, but yes, that's

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correct. I'm just trying to figure out, like, the landlord still

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has the ability to collect the rent until they go bankrupt. No one ever

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wants to exercise, you know, a landlord doesn't, they give it as a

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God forbid, right? They're making a 10-year lease with you

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hoping that you're gonna stay for 10 years. I understand. And they're gonna,

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you know, now more and more we're seeing penalties on top of the

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good guy. So you can't just, know, Hey, you I gave it a

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shot. I'm, I'm getting out. Right. You know, they may want, they may want, uh,

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an extra sort of 6-month penalty that you're gonna pay.

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So you can't just make a quick decision like, oh, this sucks, I gotta get

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out.

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This is Pete Moore. I wanna let you in on a little secret. There's this

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company called Promotion Vault, and what they do is they give out rewards from

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retailers that allow you to incentivize your members

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without having to do zero down and one month free or

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giving away shakes or giving away t-shirts. What you wanna do is

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build a rewards program that lasts, that people value,

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and that doesn't discount your own products and services. So here's the

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deal. There's something called Rewards Vault. The Rewards Vault is going

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to allow a member to set up their own profile. They are going

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to answer questions. You are gonna get those answers. You're gonna be able to target

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those. Members and you're gonna reward them inside your club,

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inside your spa, and outside of the club and outside of the

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spa to get them to become loyal, to get them to pay their

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monthly dues and to be rewarded properly for the

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actions. A lot of companies are cutting back on rewards. You shouldn't Promotion be. Vault's

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your answer. Trust me, this is real.

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So let me, let me pivot the conversation to— you've been in the industry for

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a long time. You've got tenants that come in, you become their exclusive

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tenant rep at Newmark to find them locations, and you've helped

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roll out a lot of different brands. What, what kind of support

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do you give to new tenants that are coming into

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the market where they might have some, you know, rosy

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projections about— no pun intended, rosy projections. I just

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thought that look, I got this pickleball concept that I want to sign

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a million-dollar lease on the Upper East Side. You're like, hey, let's

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just— let's kind of check your projections and what

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you think is going to happen before you start put $10 million down

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on and pay a million bucks a year in rent. You know, what kind of

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lens are you— do you help people look through? That's a good question

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because I have burst many bubbles over the years of people who come in

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full of vim and vigor and, you know, going to take over. And you,

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you run through the economics with them, know, you is from as

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simple as, you know, okay, this is the rent, this is what your, your build-out

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is going to cost, this is what the landlord is going to look

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for from you in terms of security, in terms of, you

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know, first month's rent, in terms of how much money you're going to have

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in the bank to even start the business. So, you know, first off,

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making sure that they have obviously the right amount of capital for

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this because, you know, you're not going to open the doors and start doing

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business, right? We all know that there's a ramp-up and, and so

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And then learning the city, learning, you know, I'm a huge proponent. I want people

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to really understand the market that they go into, whether

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it's the city, whether it's the boroughs, whether it's Long Island, Westchester,

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anywhere. You know, you really have to understand the landscape of

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that market. Who's the competition? Who's doing what I do?

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What are their prices, et cetera? Yeah. And one of the things

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that I think is beneficial, you know, some people go around and say,

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oh, I don't need a rep. know, You I'm gonna go and like shop locations

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myself. A lot of them end up overpaying on

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rent. They don't get the terms upfront that they

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should get, you know, that are market at the time. And the market obviously shifts

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around with. TI dollars and length of leases. I see groups

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that come to me and have, you know, assignment

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clauses that they forgot to, like, focus on. And the landlord's

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got, like, you know, could extract a significant amount of value or block their

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sale of their business or ask for information rights. So,

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you know, what's the current market

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right now? From a— is it a good time to be a landlord? Is it

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a good time to be a tenant? What are some of the terms

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maybe that you see that are like, hey, it's kind of like a new,

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you know, landlords are giving on this or tenants are getting

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this that maybe is like a little bit like atypical or off

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market? You know, it's— look, every— it's

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the country and the city specifically is vibrant again.

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You know, there's people back at the office 5 days

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a week. People are going out to dinner. And so the streets are busy. You

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know, there's been a lot of bloodshed in the

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office building world. So a lot of people have lost

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buildings that were overleveraged. So it's an

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interesting time for tenants now because buildings have gotten

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reset. So rents have sort of, you know,

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plateaued in some areas. It's an interesting time to get

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involved with a building that is coming out of bankruptcy.

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Somebody purchased it. They have different basis, they have a, you know,

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different sort of ideas as to what to do with it. So,

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you know, it's always a good time for tenants

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to find space. And it's, again, it's finding

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the property owner that gets, understands

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your sort of what you're doing and says, you know what, yeah, I see this

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is a great complement to my other retail in the building or my other

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tenants in the building. Could you take a minute and just explain to everyone

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when, you know, if I buy a building for $100 million,

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and I've got $10 million of net operating income

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that's coming in from these— for these retailers.

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And then a couple of retailers go out of business. I'm underwater.

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I got to give back my property. Now the property is, you know, bought by

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some, you know, investor for $50 million. What

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does that reset do to the landlord's

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desire or ability to say, okay, like, I know it

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was like $100 a square foot before, but I don't have to actually

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ascribe to that because I'm not trying to keep my $10 million

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kind of like alive in NOI.

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We're talking about the new, the new. Owner, the new owner, like, like kind of

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like reset like what the rent per square foot is because they're not wed to

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like this cap rate of like what it was worth and what the debt is.

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Correct. They can reset it, but chances are they probably have to put

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a lot of money into upgrading the building. That's, that's the thing, you know,

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Nobody wants to be— or a lot of office tenants don't want to be in

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these sort of tired office buildings now, right? You know, the, the

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new buildings that came up in Hudson Yards, and I mean, they're

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spectacular buildings. You go to work there, you feel good. You know,

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a couple of these buildings up and down 3rd or Lexington Avenue in the

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'50s, you know, are tired and dreary. And so, so

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someone comes in and it was a shit show and they had to take over

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the building, chances are they're going to spend a lot of money upgrading it,

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maybe even turning it into residential. So it's not like

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they're just, you know, being able to come in and sort of just reset

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the— they are able to reset it, but it's, you know,

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they're still going to spend a decent amount of money even though they only paid

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$50 million for it. They're probably going to put another $30 or $40 into

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it to fix it up. Got it. Okay. So, so that— so,

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so they might get in, someone be like, oh, they got into this building at

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a, at a low price. Like, yeah, well, it's indicative of the condition

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and the CapEx, deferred or like the improvements I need to make in order

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to get this building up to the place where I can actually

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get good rents and market and make it viable for people

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to come back to. Gotcha. Yes. And then what are some

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of the health, fitness, wellness, workout

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recovery companies either that you're working with or that you're

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seeing and be like, wow, like, that's really, you know,

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landlords love those concepts or. Yeah. You know, I

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think that's like where the next wave of retail, you know,

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occupancy is going. I mean, I'll give you some names of just

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some, some deals that were done recently, you know,

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so, you know, Chelsea Piers has been very active in

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the city. Equinox, we just finished a deal with Equinox over at

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Terminal Warehouse. They took a big space. Where's that? What is Terminal Warehouse?

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Terminal Warehouse is on the West Side Highway. It's the old

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Tunnel nightclub, and it's a million-square-foot office building

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above it. Um, there's a, there's a

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fitness company out of, uh, out of, I think it's

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Kazakhstan of all places, called Hero's Journey. I don't know if you've heard

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of those guys. Um, a company, a

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complete body, you know. Where where did, did, uh, Hero's

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Journey—. Hero's Journey went like on Lower Fifth

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Avenue. I think they took the old, um,

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what space, 26th and Fifth, if I'm not mistaken.

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It was a gym there on that corner. In the basement?

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Yeah. Oh, okay. Yeah, that's a nice space. Right across the street

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from the rug place or something. Yeah, near

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the, you know, right across from the toy building where Eataly

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is. Yeah, yeah. And then

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a ton of Pilates and,

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you know, high-intensity places.

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And, you know, I'll tell you what we don't see. I haven't seen

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a spin company me in many years, and

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I used to get a call a week on those. So I guess

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that's yesterday. Yeah. Well, I mean,

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my cycling studio out here in Arizona just

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closed. It used to have like 5 to 7 people in a class, which is

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unfortunate. SoulCycle hasn't put up any new locations

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in a while. No. Doing deals with ClassPass now and bringing

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in other people. To look at their growth

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trajectory. When you take a look at

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or recommending spaces that

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are ex-fitness to new fitness,

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how do you kind of gauge when someone says like,

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oh, this is awesome, I could save myself a couple hundred grand on the build-out.

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And then you also say, well, let me tell you why this studio failed.

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What's your— yeah, 100%.

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Look, the key that, that someone should always look for when they're taking over

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a new space, not necessarily the, the gym equipment inside, but

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it's the mechanicals— air conditioning, you know, the, the

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plumbing, the electricity. If that is, is done well

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and it's fairly new, I mean, that's, that's the huge you

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savings, know. Replacing equipment You know,

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fitness equipment obviously is a lot easier than putting in a whole new

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air conditioning system. Or so, so I'm always looking at the bones

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of the space. And then, yeah, you want to find out why did this place

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fail. And, and we've seen a lot of them that failed. And, you know, a

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lot of it comes down just to execution, right? It's, it's sort of similar to

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the restaurant business. You know, why do some restaurants, you know,

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just not do— and, you know, I remember when Nobu first opened

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in the city and you couldn't find Nobu with a map. You

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know, you'd take a You had to a take taxi, and all the streets went

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different directions down there. And yet, you know, it was the hottest

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restaurant on the planet because it was just such a good

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product, and the service was good. And yet, where a guy

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on the corner of 42nd and Lex, you know, can't get arrested.

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You know, it's execution, it's management,

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it's everything that, you know, very similar in all industries.

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This is Pete Moore. Here's the last tip for you of the podcast.

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We are partnered up with a company called HigherDOSE,

332
00:20:42,560 --> 00:20:46,000
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333
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334
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335
00:20:53,600 --> 00:20:57,280
other products such as PEMF mats and sauna

336
00:20:57,280 --> 00:21:00,560
blankets. If you have not gotten on the workout

337
00:21:00,560 --> 00:21:03,960
recovery train yet, Your time and your stop

338
00:21:04,120 --> 00:21:07,640
is now. You gotta get these products in there before these workout

339
00:21:07,640 --> 00:21:10,920
recovery and spas end up saturating your market,

340
00:21:11,240 --> 00:21:14,840
having your members. Walk out of the club and going. Into one of their locations

341
00:21:14,840 --> 00:21:18,480
for $200 per month where they're paying $39 to

342
00:21:18,480 --> 00:21:22,320
you. Let's become an expert in workout recovery if we

343
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are already an authority in workouts. Higher Dose,

344
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346
00:21:33,420 --> 00:21:37,220
to meet the demands of your members. And hey, let's get people

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00:21:37,220 --> 00:21:41,060
happy, healthy, and sweating. And the recovery should be

348
00:21:41,060 --> 00:21:42,300
just as good as the workout.

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You know, as you, as you've seen, you know, you and

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I could go back and forth and say like, oh, that 26th and 5th, it

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used to be this and it used to be this before. You know, there are

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times when I'm on a call with a private equity group and

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I'll say, oh, this is like a dozen Gold's Gyms out in this market.

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I don't like Gold's Gym. I don't want to have anything to do with Gold's

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Gym. I'm like, I want to buy into a company like an EOS. And I'm

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like, well, let me just give you like, while you were in elementary school,

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the EOS actually was a Gold's Gym and they changed the sign.

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They basically run the same exact business model. So, you know, when

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you take new people through the city and

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talk about your experience and you talk about, "Hey,

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let me just give you almost like a walking tour or history."

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How does that— are they listening and do they

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get it? Do they appreciate it? Or are they in their own little time zone?

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Look, in the extreme chance that a

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space didn't work because it's on the wrong side of the

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block or the traffic doesn't stop there, but that really

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is rare. Again, it's really about execution.

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But how many businesses fail because,

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you know, it's just not run properly, or it's just, you know,

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someone took their eye off the ball? That to me is why. But yeah,

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I love— I love, especially in New York City, the history of the buildings.

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Forgetting about who the previous tenant was, I'll say, you know, Bob Dylan's first

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apartment in the city was about— you know, stuff like that. We, you know, we

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handle a building on the Upper West Side, the Ansonia, which is a

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legendary residential building. Abe Ruth used to live there.

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There's a letter from Babe Ruth to the management company.

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"Dear Joe," or whatever, "Sorry the rent was a little late

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this month. Accept this bat as my

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token of appreciation, and I'll get you next month," or something. It's funny.

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It's like, holy crap, you know? It's, um, you know,

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that's— those types of things are just incredibly,

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uh, fun. And they really We've got SLT in

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that building actually. And people

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resonate with classic buildings in the city

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for sure, somewhat due to the history. Yeah.

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So in closing here, 10 years ago, people would've said

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Amazon was gonna kill every retailer and

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the pandemic was gonna destroy the entire fitness industry. And I was obviously

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out there basically telling everyone like, this is an

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experiential, energy-based, in-person. We're

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00:24:22,650 --> 00:24:25,810
social animals. How excited are you about

392
00:24:26,370 --> 00:24:30,050
where we're at? And how bullish are you from

393
00:24:30,410 --> 00:24:34,170
an economic standpoint? It is amazing. You're right.

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They've been calling for the death of retail the second online

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retail came on board. The bricks and mortar were done. And

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there was definitely some nervousness in the industry, but it

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00:24:47,290 --> 00:24:50,840
never happened. People don't want to sit at home. Just shop

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in their bathrobe and not go out and just order in food.

399
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And the same thing with fitness, you know, right? If fitness was dead during

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00:24:59,160 --> 00:25:02,040
COVID no one's going to want to be in a gym, you know, in a

401
00:25:02,040 --> 00:25:05,880
space with other people. But it just, you know, the pundits are wrong

402
00:25:05,880 --> 00:25:09,360
and they, you know, they're 50/50 on everything they do.

403
00:25:09,440 --> 00:25:13,200
They're right some and wrong. And the market is just—

404
00:25:13,360 --> 00:25:17,160
it's the city especially is as vibrant as

405
00:25:17,160 --> 00:25:20,660
I've ever seen it. And what I love is

406
00:25:20,900 --> 00:25:24,340
there's so many different creative new uses, and

407
00:25:24,340 --> 00:25:27,620
everybody is building a better mousetrap. So instead of

408
00:25:27,940 --> 00:25:31,700
just, you know, an eyeglass store, you've got stores like

409
00:25:31,700 --> 00:25:34,580
Warby Parker, and, you know, you've got cool, fun

410
00:25:34,740 --> 00:25:38,420
experiences, and it's all around. It's in fitness, it's in

411
00:25:38,420 --> 00:25:42,180
food, it's in clothing. So it's

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00:25:42,180 --> 00:25:45,860
very exciting times for sure. Awesome. Uh, well, for our, uh,

413
00:25:46,020 --> 00:25:49,700
for our listener base here, you know, Jeff Roseman, an authority

414
00:25:49,700 --> 00:25:53,140
on everything related to real estate, tenant rep, uh, uh,

415
00:25:54,420 --> 00:25:58,180
Halo alumni, a future and prior, uh, neighbor

416
00:25:58,180 --> 00:26:01,460
of Petey Melt. And, uh, it's good to see you as always. I

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00:26:01,700 --> 00:26:04,940
appreciate the insight, man. It's great. Likewise. Strong

418
00:26:04,940 --> 00:26:08,540
2026 for everybody here. And, uh, and the city's

419
00:26:08,540 --> 00:26:12,270
alive, so come visit or get some space. And there you go.

420
00:26:12,590 --> 00:26:15,430
Thanks, Pete. Great to see you, pal. Good to see you. Okay, all right, bye

421
00:26:15,430 --> 00:26:15,790
guys.

422
00:26:25,310 --> 00:26:29,030
This is Pete Moore on Halo Talks, your captain speaking. I am

423
00:26:29,030 --> 00:26:32,630
the founder and managing partner at Integrity Square. We've been around

424
00:26:32,630 --> 00:26:36,440
now for 15 and a half years we have been helping

425
00:26:36,440 --> 00:26:39,920
people like yourselves get capital, do mergers and

426
00:26:39,920 --> 00:26:43,560
acquisitions, consulting, strategic advice in the health,

427
00:26:43,560 --> 00:26:47,400
active lifestyle, and outdoor, Halo sector, trying to help

428
00:26:47,400 --> 00:26:50,600
as many entrepreneurs as possible get to the next level,

429
00:26:51,160 --> 00:26:54,600
take that inflection point and be the force behind your growth.

430
00:26:55,160 --> 00:26:58,760
We are helping companies that have at least $3 million of

431
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EBITDA, around $10 $100 million in revenue, and

432
00:27:02,290 --> 00:27:05,730
we are positioned to help you get institutional growth capital

433
00:27:06,370 --> 00:27:10,170
or to negotiate deals with strategic partners. If

434
00:27:10,170 --> 00:27:12,100
you go to IntegritySQ.com/ISQ.

435
00:27:13,970 --> 00:27:17,570
You can. See our capabilities deck. Happy to set up a consultation at any

436
00:27:17,570 --> 00:27:20,970
time. That is free of charge, and we look forward to

437
00:27:21,130 --> 00:27:24,850
helping solve obesity, loneliness, and diabetes.

438
00:27:25,010 --> 00:27:25,650
Go Halo!