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

0:01 This is Pete Moore on Halo Talks NYC. I have the pleasure of bringing a close friend of mine back from 15th Street circa 2003, I would say. Jeff Roseman, Vice Chairman, Newmark, also from Podcast 151 of Halo Talks. Jeffrey, good to see you again. Likewise, Pete. Always great to see you, pal. Yeah, so we've been, uh, we've been running around this industry for, uh, for several decades. You're looking good and looking spry and continuing to make waves in the New York market. You had a stat that you referenced right before. You want to lead with that from where we are?

0:42 I do. We just finished our end of '25 report, retail report, and fitness and wellness tenants surged by 40% from the previous year. 40%. Now, I mean, I've seen it in the industry. I've seen, you know, each space. Every time you hear a deal, it's like a new name. What do they do? Oh, they're Pilates, they're, they're infrared, they're, you know, uh, you know, high intensity or fitness. And it's just, there are so many names now running around the city and so many types of fitness brand. So, so would you say that the halo sector may have saved the retail, commercial, and residential? Well, I think it's industry. It's been, you know, what it, what it has, you know, really helped is the office market, right?

1:37 So, you know, to return to landlords want people to come back to work and, you know, coming back to work, you don't necessarily want to come back to an office building that has a Chase Bank or a drugstore in it, you know, but if it has a cool fitness juice and a, you know, a tea guy or a coffee guy. I mean, it really does make a big difference in where you're going to be sort of spending every day of the week. Yeah. So, you know, as you take a look at what's happened in New York City and some of the players that, you know, have been growing, you know, you got Planet Fitness, you got Crunch, you know, New York Sports Clubs hasn't really, you know, added new locations. You've seen a lot of new brands out there that may or may not be fully capitalized. Like Club Pilates seems like it's very well capitalized. So it's Solidcore, Barry's Bootcamp. But what— how are you seeing the receptivity of landlords with new names that they might not have heard of or that don't really have a long track record, yet they're willing to take a bet on that either with TI dollars or long-term leases? That's a good question. I mean, look, that's always a struggle. Landlords always need to sort of understand who the tenant is. Obviously, if they have a track record, it's, it's good. You know, if it's a track record from overseas, sometimes it's looked at a little bit closer, but not, not necessarily a bad thing. But, you know, look, every tenant— anytime you're leasing space in an

3:09 office building or residential building or a mall, you know, landlord's gonna pretty much give you a colonoscopy to find out, you know, where the money's coming from and, you know, any debt, who the partners are, etc., etc. And what do you see in— or obviously every deal is different, but what do you see from, you know, tenant improvement dollars? I did a deal with one of my clients with Crunch a couple of years ago where it's like 6 months security deposit on a letter of credit, which I thought was kind of onerous. Personal guarantees or, you know, these good guy clause. Maybe you can explain the good guy clause after just giving us like some tops and waves. Look, here's the reality. The reality is if an owner wants the use and thinks it's a good use for the building, he's going to be a little bit more flexible. Not going to, you know, still going to want to securitize the lease somehow. But if it's a small one-story taxpayer where it's know, a, you a family that relies on the income of the tenant, they're going to really make sure that it's, it's protected. If it's an office building and they say, wow, there's a great use for all the people in the building, they'll be a little bit less. Um, yeah, and a good guy guarantee is just, you know, you're, you're guaranteeing that you're going to stay in the space, you're guaranteeing that you're going to pay rent while you're in the space, and if business is terrible and you got to leave, you just hand back the keys because getting the keys back from a delinquent tenant

4:40 can take a year, if not longer. And that really screws everything up. Is that just typical to the New York market? Because I see across the country, like LA Fitness, let's say. Nothing to say anything bad about LA Fitness, but let's just use them as an example. They're expanding in a huge way in the city, all over. With club? I their mean, all over the country. With Club Studio. Yeah, yeah, yeah. So, so question there is, you know, they might have signed a 10-year, you know, $90,000 a month lease back in, you know, 5 years ago, and they're trying to offload those. They don't have a good guy guarantee that, that is outside the city. So what made, what made New York City unique to like allowing tenants out of leases where typically if I've got a 10-year lease, you know, like I got to pay that lease unless I go bankrupt, right? Well, look, LA Fitness is a good example. They have great credit. They're a terrific tenant. So when they're signing the lease, you're getting the benefit of that whole corporation behind this, right? So, you know, the chances of them going out of business, it means that the whole chain has to go out of business and you'll take that risk.

5:58 You know, so they would never sign, you know, any sort of Good Guy. They don't need to, nor does, you know, in the retail world, you know, an H&M or a Starbucks, you know, I mean, you're getting the credit, which is the holy grail, getting credit. But if they want to leave after 5 years and they were in New York, they could exercise Good Guy lease and leave. Unless they have a termination, they can't leave. They're responsible. They can leave, but they're responsible for paying the rent and replacing the tenant. They have to either sublease it or sign it. So the good guy clause— so if I sign a 10-year lease in New York, Pete Moore, and I set up Halo Fitness, and after 5 years I say, hey, look, this isn't working out, and I give you back the keys. You'Re off the hook. So I'm not paying the extra 5 years? No, but you're Pete Moore. As opposed to LA Fitness, who has, you know, billion of billion dollars. So the landlord's not giving them the good guy clause out is what you're telling me? They don't, they don't need to. Yeah, they're not going to be giving, uh, that type of guarantee. They're not giving that type of security because you're getting their guarantee, their corporate guarantee on the hook. So they can't go out of business. That's why you want that. But I could leave as like a single tenant. You can leave. You're gonna, you're gonna get back the keys. You're gonna forfeit security. You're going to forfeit everything you, you put into the space, right? Okay. And you're going to be

7:31 current. You're going to be 100% current. So the good guy guarantee, just to be clear, because I think it's a very important point for people to understand in New York, the good guy guarantee— the landlord is giving the tenant a good guy guarantee out because if you're an independent operator, and I think you might not succeed and I don't have the benefit of your credit behind it, I just want you out so I can release the correct. Whereas if I'm working with a Walgreens, though, it's probably not a good example. Walgreens is a great example. There's 20 closed Walgreens in the city right now. And what's happened to them? They're still paying rent. They're paying rent every month. So you don't have a good guy out? Well, it's not about a good guy out. They have the corporate entity on the hook. There's nothing you can do. They can't get off the hook. They get off. can't So they don't have a good guy out, basically. Yes, you like that term, but yes, that's correct. I'm just trying to figure out, like, the landlord still has the ability to collect the rent until they go bankrupt. No one ever wants to exercise, you know, a landlord doesn't, they give it as a God forbid, right? They're making a 10-year lease with you hoping that you're gonna stay for 10 years. I understand. And they're gonna, you know, now more and more we're seeing penalties on top of the good guy. So you can't just, know, Hey, you I gave it a shot. I'm, I'm getting out. Right. You know, they may want, they may want, uh, an extra sort of 6-month penalty that you're gonna pay.

9:04 So you can't just make a quick decision like, oh, this sucks, I gotta get out. This is Pete Moore. I wanna let you in on a little secret. There's this company called Promotion Vault, and what they do is they give out rewards from retailers that allow you to incentivize your members without having to do zero down and one month free or giving away shakes or giving away t-shirts. What you wanna do is build a rewards program that lasts, that people value, and that doesn't discount your own products and services. So here's the deal. There's something called Rewards Vault. The Rewards Vault is going to allow a member to set up their own profile. They are going to answer questions. You are gonna get those answers. You're gonna be able to target those. Members and you're gonna reward them inside your club, inside your spa, and outside of the club and outside of the spa to get them to become loyal, to get them to pay their monthly dues and to be rewarded properly for the actions. A lot of companies are cutting back on rewards. You shouldn't Promotion be. Vault's your answer. Trust me, this is real.

10:15 So let me, let me pivot the conversation to— you've been in the industry for a long time. You've got tenants that come in, you become their exclusive tenant rep at Newmark to find them locations, and you've helped roll out a lot of different brands. What, what kind of support do you give to new tenants that are coming into the market where they might have some, you know, rosy projections about— no pun intended, rosy projections. I just thought that look, I got this pickleball concept that I want to sign a million-dollar lease on the Upper East Side. You're like, hey, let's just— let's kind of check your projections and what you think is going to happen before you start put $10 million down on and pay a million bucks a year in rent. You know, what kind of lens are you— do you help people look through? That's a good question because I have burst many bubbles over the years of people who come in full of vim and vigor and, you know, going to take over. And you, you run through the economics with them, know, you is from as simple as, you know, okay, this is the rent, this is what your, your build-out is going to cost, this is what the landlord is going to look for from you in terms of security, in terms of, you know, first month's rent, in terms of how much money you're going to have in the bank to even start the business. So, you know, first off, making sure that they have obviously the right amount of capital for this because, you know, you're not going to open the doors and start doing business, right? We all know that there's a ramp-up and, and so

11:46 And then learning the city, learning, you know, I'm a huge proponent. I want people to really understand the market that they go into, whether it's the city, whether it's the boroughs, whether it's Long Island, Westchester, anywhere. You know, you really have to understand the landscape of that market. Who's the competition? Who's doing what I do? What are their prices, et cetera? Yeah. And one of the things that I think is beneficial, you know, some people go around and say, oh, I don't need a rep. know, You I'm gonna go and like shop locations myself. A lot of them end up overpaying on rent. They don't get the terms upfront that they should get, you know, that are market at the time. And the market obviously shifts around with. TI dollars and length of leases. I see groups that come to me and have, you know, assignment clauses that they forgot to, like, focus on. And the landlord's got, like, you know, could extract a significant amount of value or block their sale of their business or ask for information rights. So, you know, what's the current market right now? From a— is it a good time to be a landlord? Is it a good time to be a tenant? What are some of the terms maybe that you see that are like, hey, it's kind of like a new, you know, landlords are giving on this or tenants are getting this that maybe is like a little bit like atypical or off market? You know, it's— look, every— it's the country and the city specifically is vibrant again.

13:15 You know, there's people back at the office 5 days a week. People are going out to dinner. And so the streets are busy. You know, there's been a lot of bloodshed in the office building world. So a lot of people have lost buildings that were overleveraged. So it's an interesting time for tenants now because buildings have gotten reset. So rents have sort of, you know, plateaued in some areas. It's an interesting time to get involved with a building that is coming out of bankruptcy. Somebody purchased it. They have different basis, they have a, you know, different sort of ideas as to what to do with it. So, you know, it's always a good time for tenants to find space. And it's, again, it's finding the property owner that gets, understands your sort of what you're doing and says, you know what, yeah, I see this is a great complement to my other retail in the building or my other tenants in the building. Could you take a minute and just explain to everyone when, you know, if I buy a building for $100 million, and I've got $10 million of net operating income that's coming in from these— for these retailers.

14:29 And then a couple of retailers go out of business. I'm underwater. I got to give back my property. Now the property is, you know, bought by some, you know, investor for $50 million. What does that reset do to the landlord's desire or ability to say, okay, like, I know it was like $100 a square foot before, but I don't have to actually ascribe to that because I'm not trying to keep my $10 million kind of like alive in NOI. We're talking about the new, the new. Owner, the new owner, like, like kind of like reset like what the rent per square foot is because they're not wed to like this cap rate of like what it was worth and what the debt is.

15:10 Correct. They can reset it, but chances are they probably have to put a lot of money into upgrading the building. That's, that's the thing, you know, Nobody wants to be— or a lot of office tenants don't want to be in these sort of tired office buildings now, right? You know, the, the new buildings that came up in Hudson Yards, and I mean, they're spectacular buildings. You go to work there, you feel good. You know, a couple of these buildings up and down 3rd or Lexington Avenue in the '50s, you know, are tired and dreary. And so, so someone comes in and it was a shit show and they had to take over the building, chances are they're going to spend a lot of money upgrading it, maybe even turning it into residential. So it's not like they're just, you know, being able to come in and sort of just reset the— they are able to reset it, but it's, you know, they're still going to spend a decent amount of money even though they only paid $50 million for it. They're probably going to put another $30 or $40 into it to fix it up. Got it. Okay. So, so that— so, so they might get in, someone be like, oh, they got into this building at a, at a low price. Like, yeah, well, it's indicative of the condition and the CapEx, deferred or like the improvements I need to make in order to get this building up to the place where I can actually get good rents and market and make it viable for people to come back to. Gotcha. Yes. And then what are some of the health, fitness, wellness, workout recovery companies either that you're working with or that you're seeing and be like, wow, like, that's really, you know,

16:42 landlords love those concepts or. Yeah. You know, I think that's like where the next wave of retail, you know, occupancy is going. I mean, I'll give you some names of just some, some deals that were done recently, you know, so, you know, Chelsea Piers has been very active in the city. Equinox, we just finished a deal with Equinox over at Terminal Warehouse. They took a big space. Where's that? What is Terminal Warehouse? Terminal Warehouse is on the West Side Highway. It's the old Tunnel nightclub, and it's a million-square-foot office building above it. Um, there's a, there's a fitness company out of, uh, out of, I think it's Kazakhstan of all places, called Hero's Journey. I don't know if you've heard of those guys. Um, a company, a complete body, you know. Where where did, did, uh, Hero's Journey—. Hero's Journey went like on Lower Fifth Avenue. I think they took the old, um, what space, 26th and Fifth, if I'm not mistaken.

17:46 It was a gym there on that corner. In the basement? Yeah. Oh, okay. Yeah, that's a nice space. Right across the street from the rug place or something. Yeah, near the, you know, right across from the toy building where Eataly is. Yeah, yeah. And then a ton of Pilates and, you know, high-intensity places. And, you know, I'll tell you what we don't see. I haven't seen a spin company me in many years, and I used to get a call a week on those. So I guess that's yesterday. Yeah. Well, I mean, my cycling studio out here in Arizona just closed. It used to have like 5 to 7 people in a class, which is unfortunate. SoulCycle hasn't put up any new locations in a while. No. Doing deals with ClassPass now and bringing in other people. To look at their growth trajectory. When you take a look at or recommending spaces that are ex-fitness to new fitness, how do you kind of gauge when someone says like, oh, this is awesome, I could save myself a couple hundred grand on the build-out.

19:06 And then you also say, well, let me tell you why this studio failed. What's your— yeah, 100%. Look, the key that, that someone should always look for when they're taking over a new space, not necessarily the, the gym equipment inside, but it's the mechanicals— air conditioning, you know, the, the plumbing, the electricity. If that is, is done well and it's fairly new, I mean, that's, that's the huge you savings, know. Replacing equipment You know, fitness equipment obviously is a lot easier than putting in a whole new air conditioning system. Or so, so I'm always looking at the bones of the space. And then, yeah, you want to find out why did this place fail. And, and we've seen a lot of them that failed. And, you know, a lot of it comes down just to execution, right? It's, it's sort of similar to the restaurant business. You know, why do some restaurants, you know, just not do— and, you know, I remember when Nobu first opened in the city and you couldn't find Nobu with a map. You know, you'd take a You had to a take taxi, and all the streets went different directions down there. And yet, you know, it was the hottest restaurant on the planet because it was just such a good product, and the service was good. And yet, where a guy on the corner of 42nd and Lex, you know, can't get arrested.

20:24 You know, it's execution, it's management, it's everything that, you know, very similar in all industries. This is Pete Moore. Here's the last tip for you of the podcast. We are partnered up with a company called HigherDOSE, higherdose.com. They are the leader in workout recovery products, infrared technology, LED light masks, neck enhancers, and other products such as PEMF mats and sauna blankets. If you have not gotten on the workout recovery train yet, Your time and your stop is now. You gotta get these products in there before these workout recovery and spas end up saturating your market, having your members. Walk out of the club and going. Into one of their locations for $200 per month where they're paying $39 to you. Let's become an expert in workout recovery if we are already an authority in workouts. Higher Dose, check it out. There's a wholesale code. And we look forward to helping you augment your products and services to meet the demands of your members. And hey, let's get people happy, healthy, and sweating. And the recovery should be just as good as the workout.

21:46 You know, as you, as you've seen, you know, you and I could go back and forth and say like, oh, that 26th and 5th, it used to be this and it used to be this before. You know, there are times when I'm on a call with a private equity group and I'll say, oh, this is like a dozen Gold's Gyms out in this market. I don't like Gold's Gym. I don't want to have anything to do with Gold's Gym. I'm like, I want to buy into a company like an EOS. And I'm like, well, let me just give you like, while you were in elementary school, the EOS actually was a Gold's Gym and they changed the sign. They basically run the same exact business model. So, you know, when you take new people through the city and talk about your experience and you talk about, "Hey, let me just give you almost like a walking tour or history."

22:32 How does that— are they listening and do they get it? Do they appreciate it? Or are they in their own little time zone? Look, in the extreme chance that a space didn't work because it's on the wrong side of the block or the traffic doesn't stop there, but that really is rare. Again, it's really about execution. But how many businesses fail because, you know, it's just not run properly, or it's just, you know, someone took their eye off the ball? That to me is why. But yeah, I love— I love, especially in New York City, the history of the buildings. Forgetting about who the previous tenant was, I'll say, you know, Bob Dylan's first apartment in the city was about— you know, stuff like that. We, you know, we handle a building on the Upper West Side, the Ansonia, which is a legendary residential building. Abe Ruth used to live there.

23:26 There's a letter from Babe Ruth to the management company. "Dear Joe," or whatever, "Sorry the rent was a little late this month. Accept this bat as my token of appreciation, and I'll get you next month," or something. It's funny. It's like, holy crap, you know? It's, um, you know, that's— those types of things are just incredibly, uh, fun. And they really We've got SLT in that building actually. And people resonate with classic buildings in the city for sure, somewhat due to the history. Yeah. So in closing here, 10 years ago, people would've said Amazon was gonna kill every retailer and the pandemic was gonna destroy the entire fitness industry. And I was obviously out there basically telling everyone like, this is an experiential, energy-based, in-person. We're social animals. How excited are you about where we're at? And how bullish are you from an economic standpoint? It is amazing. You're right.

24:34 They've been calling for the death of retail the second online retail came on board. The bricks and mortar were done. And there was definitely some nervousness in the industry, but it never happened. People don't want to sit at home. Just shop in their bathrobe and not go out and just order in food. And the same thing with fitness, you know, right? If fitness was dead during COVID no one's going to want to be in a gym, you know, in a space with other people. But it just, you know, the pundits are wrong and they, you know, they're 50/50 on everything they do. They're right some and wrong. And the market is just— it's the city especially is as vibrant as I've ever seen it. And what I love is there's so many different creative new uses, and everybody is building a better mousetrap. So instead of just, you know, an eyeglass store, you've got stores like Warby Parker, and, you know, you've got cool, fun experiences, and it's all around. It's in fitness, it's in food, it's in clothing. So it's very exciting times for sure. Awesome. Uh, well, for our, uh, for our listener base here, you know, Jeff Roseman, an authority on everything related to real estate, tenant rep, uh, uh, Halo alumni, a future and prior, uh, neighbor of Petey Melt. And, uh, it's good to see you as always. I appreciate the insight, man. It's great. Likewise. Strong

26:04 2026 for everybody here. And, uh, and the city's alive, so come visit or get some space. And there you go. Thanks, Pete. Great to see you, pal. Good to see you. Okay, all right, bye guys. This is Pete Moore on Halo Talks, your captain speaking. I am the founder and managing partner at Integrity Square. We've been around now for 15 and a half years we have been helping people like yourselves get capital, do mergers and acquisitions, consulting, strategic advice in the health, active lifestyle, and outdoor, Halo sector, trying to help as many entrepreneurs as possible get to the next level, take that inflection point and be the force behind your growth.

26:55 We are helping companies that have at least $3 million of EBITDA, around $10 $100 million in revenue, and we are positioned to help you get institutional growth capital or to negotiate deals with strategic partners. If you go to IntegritySQ.com/ISQ. You can. See our capabilities deck. Happy to set up a consultation at any time. That is free of charge, and we look forward to helping solve obesity, loneliness, and diabetes. Go Halo!