Autobiography - The Galindo Group

Recommendations

Info

Ram Galindo THE MAKING OF AN AMERICAN Page 142 With the additional investments we made and with the new management skills we brought, we were able to turn the business around. Thus, we decided to exercise the option to buy the club outright, which required full payment of the note to the owner. We also decided to exercise the option we had acquired for the adjacent tract of land, which was a heavily wooded 14.192-acre parcel in the floodplain behind the club. On July 7, 1998, I did a sophisticated multi-property like-asset exchange making the club and the floodplain lot part of the trade. In this manner Cid and I paid the seller off and traded the property to a related family partnership for a significant gain. Simultaneously with this transaction we separated the health fitness business from the real estate and thus created two separate assets. Since our capital was mostly sweat-equity, when we sold both properties our profit was very attractive. Our exit strategy proved fortunate for us and for the seller. By early 1999, Cid was consumed by his new company in Austin and I was again very focused in the real estate business. Neither of us had enough time to dedicate solid periods of attention to the fitness business. Thus, we began considering the idea of getting out of the business of health club management. While it was always possible to sell to a third party operator, we preferred to create an opportunity for our employees, who by this time also began expressing some interest in purchasing their own means of production. Cid and I had another incentive to sell to the management team – we wanted to help a new family member. While working at Aerofit as a sales agent, my daughter Lis met Ricky Soto in 1993. He was a student at A&M to whom she had sold a membership. Their friendship resulted in a job for Ricky at Aerofit Villa Maria, as we began calling this facility after we opened Aerofit clubs in other locations. By 1996, Ricky was already my son-in-law and was very involved in the business. He eventually became the head accountant for the whole system of Aerofit clubs. In mid-1999 Kathy Langlotz, Larry Isham, Ricky Soto and two other outstanding managers with shorter tenures, approached us about buying the clubs. One of the new participants was Darren Busby, manager of the Aerofit Royal Oaks facility and the other was Julie Odell, who worked at Villa Maria. Cid and I helped them set up their new corporate structure and became two of several investors they recruited. We provided subordinated capital in the form of debenture holders, not as stockholders. In addition, with a generous dose of significant owner financing that we also provided, we allowed them to get a convenient bank loan. Thus, we sold the assets of both clubs to them in a transaction that finally closed December 21,1999. With this conveyance I repeated an already familiar exit strategy of selling to my own management in a deal that was good for both parties. This was a few months after Cid and I exercised our option to buy the Royal Oaks club and its adjacent land. Immediately, we also began hatching a new project that would allow us to fund the option for the floodplain land. The Aerofit Royal Oaks purchase was Autobiography.doc 142 of 239
Ram Galindo THE MAKING OF AN AMERICAN Page 143 a complicated but totally leveraged buy-out and its later sale produced very lucrative results for Cid and me, especially when attached to the use we made of the floodplain land. This transaction, because of its unique value-creating character, is discussed in more detail in the following section, Reconstruction. An umbrella view of the financial results achieved by my incursion in the health fitness industry must combine all the offshoots of Aerofit Villa Maria. If one doesn’t integrate the Royal Oaks deal into the Aerofit Villa Maria enterprise, the financial results of the latter were spotty compared to other transactions in which I have been involved. Although the financial arrangements surrounding Aerofit’s existence have been very fluid and sophisticated, I have been able to calculate that over a period of fifteen years I comfortably beat inflation by eventually getting about 1.75 times my invested capital, which is a low but still positive result. I must clarify that this result includes the losses we sustained in our Austin venture. The main satisfactions I derived from my incursion in the health fitness business are intangible. These ventures provided my children a crucible where they were exposed to higher responsibilities and possible rewards before most other youngsters their age could dream of experiencing. It introduced me to a totally new business and a new world of activities that I would have never intimately known had I stayed aligned exclusively with my engineering background. Aerofit Villa Maria truly became a magnet for residential growth in the southwest area of Bryan, where I also lived, and significantly elevated the quality of life in the community. All my initial objectives were amply met. I would do it again in a heartbeat. While engaged in the battle for survival against Texas A&M’s Rec Center, I received the visit of Fred Brownson, a University of Chicago Ph.D. economist who owns an investment advising firm with an impressive roster of clients. One of the assets in his portfolio was a health fitness club in Kerrville, Texas. He would soon become one of the pillars of the effort we were about to undertake. He urged me to follow up with the idea of networking with other people in the business. I contacted other health fitness club owners in Texas to see if they had the same concerns about unfair competition. Seven other club owners and I held our first meeting on February 17, 1995, in Houston, and continued meeting at various locations throughout the state, including such famous venues as The Houstonian in Houston and the Cooper Aerobics Center in Dallas. After almost two years of defining our goals, getting to know each other better, understanding our modus operandi, enlarging our contacts and searching for a manager, on May 2, 1996, we officially founded the Texas Health and Racquet Sports Association (THRSA). Governance (Chapter 5) contains more elaborate information about the strategic effort of forming an industry group. THRSA was the Texas-wide group that brought together private tax-paying clubs and their vendors and which had as its purpose the establishment and improvement of the Autobiography.doc 143 of 239
Page 1 and 2:
Ram Galindo THE MAKING OF AN AMERIC
Page 3 and 4:
Page 5 and 6:
Page 7 and 8:
Page 9 and 10:
Page 11 and 12:
Page 13 and 14:
Page 15 and 16:
Page 17 and 18:
Page 19 and 20:
Page 21 and 22:
Page 23 and 24:
Page 25 and 26:
Page 27 and 28:
Page 29 and 30:
Page 31 and 32:
Page 33 and 34:
Page 35 and 36:
Page 37 and 38:
Page 39 and 40:
Page 41 and 42:
Page 43 and 44:
Page 45 and 46:
Page 47 and 48:
Page 49 and 50:
Page 51 and 52:
Page 53 and 54:
Page 55 and 56:
Page 57 and 58:
Page 59 and 60:
Page 61 and 62:
Page 63 and 64:
Page 65 and 66:
Page 67 and 68:
Page 69 and 70:
Page 71 and 72:
Page 73 and 74:
Page 75 and 76:
Page 77 and 78:
Page 79 and 80:
Page 81 and 82:
Page 83 and 84:
Page 85 and 86:
Page 87 and 88:
Page 89 and 90:
Page 91 and 92: Ram Galindo THE MAKING OF AN AMERIC
Page 141: Ram Galindo THE MAKING OF AN AMERIC
Page 193 and 194:
Page 195 and 196:
Page 197 and 198:
Page 199 and 200:
Page 201 and 202:
Page 203 and 204:
Page 205 and 206:
Page 207 and 208:
Page 209 and 210:
Page 211 and 212:
Page 213 and 214:
Page 215 and 216:
Page 217 and 218:
Page 219 and 220:
Page 221 and 222:
Page 223 and 224:
Page 225 and 226:
Page 227 and 228:
Page 229 and 230:
Page 231 and 232:
Page 233 and 234:
Page 235 and 236:
Page 237 and 238:
Page 239 and 240:
Page 241 and 242:
Bernard Bailyn, THE IDEOLOGICAL ORI
Page 243 and 244:
George Fuermann, HOUSTON LAND OF TH
Page 245:
Council for Natural Cooperation in
show all

Autobiography - The Galindo Group

Create successful ePaper yourself

Delete template?

Save as template?