After more than two decades in downtown Palo Alto, Form Fitness now appears to be entering its final stretch.
The gym, which is located at 445 Bryant St., has fallen behind in rent since the COVID-19 pandemic forced it to temporarily shutter in March 2020 and then reopen with new restrictions, including a mask requirement that prompted some users to stay away, gym owner Sassan Golafshan said. Business has never fully recovered, he said.
Form Fitness is hardly the only business that saw its revenues dwindle during the pandemic. Numerous establishments, including The Old Pro and Dan Gordon's in downtown and Antonio's Nut House and The Counter on California Avenue, closed during the pandemic. The gym is, however, in a unique situation. The gym's landlord is the city, which developed the two-story building next to the public garage in 2001 with the intention of using rent proceeds to support youth programs.
In 2004, the council selected Form Fitness as the tenant to occupy the building, bowing to popular demand and overruling a recommendation from city staff to select a restaurant called Saffron Club Restaurant, according to meeting minutes from that time. The gym, which at the time was occupying a smaller location on Forest Avenue, moved to Bryant Street shortly thereafter.
But the longstanding partnership between the city and Form Fitness turned acrimonious over the past year, as Golafshan repeatedly failed to make his rent payments and the balance grew to more than $1.3 million, according to Golafshan and the city. The City Council met numerous times this year in closed session to discuss the lease situation. It did not take any formal actions nor reach any resolutions that could preserve the agreement.
Things escalated last week, when the city issued Golafshan a 28-day notice to "pay or quit." The Nov. 17 notice, issued by the city's real property manager Sunny Tong, advised Golafshan that if he fails to pay $500,000 or vacate the premises, the city will commence legal proceedings against the gym, declare forfeiture of the lease and recover damages for each day that the gym remains occupied, as well as costs of lawsuit.
The notice pertains only to rent that has been due since December 2021, which totals $504,646 (the monthly rent went up from $41,163 per month to $43,301 in July). Of that amount, the gym paid a total of $13,350, leaving it with a balance of $491,296, according to the letter.
Golafshan does not dispute the charges, but he has argued both publicly and in a recent interview that the gym should not be blamed for the recent loss of revenue, which he maintains was caused by the pandemic and subsequent restrictions.
"The city is my landlord. The city is also my executioner," Golafshan said in an interview. "I don't understand how the city manager, the city attorney and everyone involved actually thinks this is something they can do to a Palo Alto resident and successful business owner."
Before the pandemic, he noted, he had never been late on any payments nor reneged on any commitments.
"Now, they're basically coming after me for money that I'm supposed to miraculously find," Golafshan said.
He is not the only person who wants Form Fitness to stick around in its downtown location. In recent weeks, resident Jaclyn Schrier has been circulating an online petition calling for the council to "save Form Fitness." The petition, which had accumulated 565 signatures as of Wednesday afternoon, urges the council to forgive Form Fitness all past due rent, fees and assessments. In exchange, the gym would provide 20% discounts to all city residents and employees as a public benefit. Going forward, the gym would pay the city rent totaling 15% of its gross sales rather than a fixed monthly amount under this arrangement.
Supporters also formed a group called Friends of Form Fitness and took out an ad seeking to get more signatures.
"With the imminent closing of Form, downtown Palo Alto will no longer have a full-service fitness facility with membership open to the public to meet our community's wellness needs during this time of great health concern," the petition states. "We, residents of Palo Alto and our closest neighbors, urge you to work with Mr. Golafshan to maintain Form as part of our community."
Earlier this year, Golafshan appealed to the council to give him time to recover before collecting the due rent. Before council went into a closed session on Jan. 10 to discuss the lease, he told the council that many restaurants and other businesses in the downtown area are benefitting from federal loans and deferred rent. Council members, he said, have been urging landlords they know to work with tenants who cannot afford to pay rent.
Golafshan asked the city to forgive past due rent and offered at that time to pay 10% of gross sales, which he acknowledged were "piss poor at best" because of health concerns. He said he would like to remain in the Bryant Street location for at least the next four years, which is the remaining term of his 10-year lease.
"Because as the city shutters down, as all these businesses go up for lease, it only ... accelerates the destruction of the city and the community at large," Golafshan told the council.
The argument did not sway the city, which continued to seek rent payments. The uncertainty over the gym's future further limits his ability to attract new customers, Golafshan said in an interview.
"Everyone asks and I can't lie. I simply tell them the truth. I don't know where we're going to be three, or four or five months from now," he said.
While he and the Friends group were hoping that the council would agree to a revenue sharing agreement, the proposal fell well short of the city's expectations. Council member Tom DuBois said the city was and remains willing to discuss alternatives but he said Golafshan has been "inconsistent" when it comes to meeting his commitments. At one point, according to DuBois, Golafshan agreed to vacate but did not follow through.
And while a gym is a desirable amenity, the rent remains far from market rates and the business does not seem to be workable, he said.
"I think there was a willingness to try to work together, but it seemed to be coming from one side," DuBois said.
DuBois said he would be happy to discuss any plan that the Friends group can come up with to pay back some of the rent and establish a reasonable rate going forward. To date, however, the city and the gym have not gotten anywhere near an agreement.
"If Friends of Form Fitness were able to raise money and pay it off, I'd be happy to have it stay," DuBois said. "But in terms of going forward, we've not been able to come to an agreement."
The dispute over Form Fitness is also bringing to the forefront broader questions about how the city is managing its properties, many of which are rented out at well below market rate to nonprofits like LifeMoves and Avenidas, which provide social services, and to organizations and artists in studios at the Cubberley Community Center. DuBois said the council needs to discuss the question: "How do we manage these public facilities and how can we be fair to everyone that's renting?'"
Council member Greg Tanaka has repeatedly raised that question. Tanaka, who frequently challenges his colleagues on fiscal matters, argued in an interview that the city's tendency to rent out land to nonprofit organizations and small businesses for low rates is neither viable nor responsible at a time of economic uncertainty. Instead, the city should charge all of its tenants market rates, he argued. If the council believes these tenants bring value to the city, it should pay these organizations directly.
While he declined to discuss the Form Fitness dispute, citing the fact that this has been subject to closed session discussions, Tanaka suggested that the city generally could have been more flexible in dealing with its tenants. He said he supports relaxing rules for what types of businesses can operate in the city, including easing restrictions for chain stores.
"It's a little disingenuous for us to insist that commercial landlords do rent deferrals and build parklets, but we refuse to do it for our own commercial tenants," Tanaka said.
But while the city did not accept Golafshan's proposed terms, Form Fitness did benefit from the city's rent relief program, Meghan Horrigan-Taylor, the city's chief communication officer, said in an email. The city also worked with the gym to come up with a new lease structure that included sharing revenues, she said.
Horrigan-Taylor said Form Fitness had earlier informed the city that it would vacate fully by January, though it later updated that date to October. The city issued its notice to vacate because the business "has not paid rent, and they did not honor their commitment to shut down operations by the end of October or take steps to vacate," she wrote.
Despite their efforts to reach a deal, the city and the gym have each rejected the other's proposal. The city reviewed the gym's latest proposal, which was submitted in October, and found it to be "not a viable solution since it may result in rental rates similar or lower than city subsidized nonprofit rates," Horrigan-Taylor wrote. She said the city tentatively plans to engage a real estate broker to find a new tenant.
The building is located in a "planned community" zone that the council created in 2000. If Form Fitness departs, potential replacements could include retail uses, a teen center or office use, though any offices would be restricted to the second floor.
While the gym's lease remains in dispute and the end of the road appears imminent, Golafshan still hopes the city will give him a reprieve. A gym, he argued, is the ideal use for the site. He noted that the city is continuing to explore construction of a public gym, a project that appeared viable in January when philanthropist John Arrillaga offered to donate $30 million to the project. While Arrilaga's death in late January effectively scuttled that proposal, the council reaffirmed in March its desire to build a public gym.
Golafshan suggested that the easiest way for the council to make progress on this endeavor is to help him remain in downtown Palo Alto.
"This isn't just about my personal needs. This is about all the members of the community and all the residents not having a healthy option. They just don't have it. Nothing exists downtown," Golafshan said. "I encourage the City Council to take a step back, look at the big picture and look into working with me."