By Sarah Danckert,Sophie Aubrey

Copyright brisbanetimes

At the same time, the business has cycled through numerous finance staff at head office in the past two years and its longstanding chief executive Ash Owen – a confidant of Solomos – recently stepped away.

Finance sources say millions have been pulled from the business over the past few years for Solomos’ personal withdrawals including a $5000-a-week allowance, mortgage repayments and household bills. Payments to his ex-wife, with whom he has a young son, equate to about $1.5 million over a year, which includes a $30,000 weekly payment. These huge expenses have been recorded as loans.

Three sources have estimated that to settle his tax debts, Solomos will require about $15 million, and at least another $15 million to clear tardy debts owed to creditors for the three main entities, including landlords, electricity suppliers, equipment providers and financing groups.

Accounts for the main operating company within Solomos’ gym empire – known both as the Solomos Family Trust and Derrimut Health & Fitness – show it is battling insolvency and burning through cash at a fast rate.

On paper, the overall group of businesses – which includes the South Australian business, as well as other private companies that sell protein powders and apparel – has produced good revenues of more than $200 million over the past four years.

But the success in some pockets of Solomos’ business empire is dampened by pressure from high-interest business loans, building new sites and large personal payments.

At the same time, Solomos has built a $40 million property portfolio, which includes his head office, venues where his barn-like gyms are located and a clutch of residential properties including his modern $2 million townhouse in Port Melbourne.

The business and Solomos have borrowed heavily against those properties, some of which have multiple mortgages and business debts registered over them. Sources suggested the properties would return $11 million if sold over time, and in a fire sale as little as $5 million.

Solomos’ businesses have also spent large sums financing high-performance cars for him and senior staff, including a Bentley, a Lamborghini, top-end BMWs and Fords, a Dodge Coupe and a bright-green Mustang.

The spending spree has come at an inopportune time for Derrimut, which this year switched to focus on super-cheap annual memberships amid declining revenues. In July, just after The Age revealed his tax issues, Derrimut slashed its yearly memberships from $328 to $99.

As one finance source said: “The idea was: sell those cheap memberships to get cash in the door and try and pay down debt and fund new gyms.”

Solomos told a podcast that his gyms were both affordable and open 24/7 to make them highly accessible, while extras such as nutrition bars would make the cash. “Get the volume [of members] in, and the money will come, right?”

Derrimut has received lease-breach warnings and power-disconnection threats over unpaid rents and bills at many of its sites. The Age has seen evidence of unpaid electricity bills stretching into the hundreds of thousands of dollars, while three finance sources estimate that as much as $3 million is owed in rent across the company’s sites.

The company has been evicted from the coveted former site of Virgin Active on Bourke Street, where it had begun construction works to open a “platinum” centre. Ainsworth Property has been appointed to find a new tenant.

Branches in Shepparton, in northern Victoria, and South Australia’s Angle Vale have also abruptly closed, with shut-out members still seeking refunds.

Other Victorian landlords and property managers confirmed they have had to issue breach notices due to unpaid rent. Some are weighing up lockouts.

But developer Ross Pelligra, whose company owns the gym site in Derrimut itself, defended Solomos.

“We’ve never had any issues as far as I’m concerned. We’re going to keep supporting him,” he said. “Everyone goes through a tough time. It’s a hump in his business … If landlords manage their tenant properly, there shouldn’t be issues.”

Three sources have also confirmed there are hundreds of business suppliers and contractors to Derrimut that are owed vast sums, putting significant pressure on many of those enterprises.

According to the sources, the company has been regularly late in paying invoices, often breaching payment plans that have been brokered with suppliers after not paying earlier bills. The sources said the company would regularly receive legal threats and final notices, with small businesses sometimes seeking tens of thousands of dollars.

Suppliers, who asked not to be named for legal reasons, said it would be a miracle if the business could pull through given the weight of the debts to businesses and the fractured relationship they now had with Derrimut. Though some noted that Solomos had been through hard times before and pulled through.

A small business owner who had done fit-out works for a Derrimut venue said he was still owed more than $10,000 but he was being largely ignored.

“It’s pretty hard to swallow. The stress and anxiety that goes with chasing money and probably making poor decisions, that’s probably what affects me,” he said.

Another business owner said that after several years of doing work for Derrimut – including instances of demand letters – he had to carefully manage it.

“It’s always been very difficult to get paid. We’ve learnt to be very, very careful in terms of extending any credit to them.”

While court documents show the Tax Office is pursuing Derrimut for less than $400,000 in missed superannuation payments, two finance sources estimate the true figure to be between $2 million and $4 million.

The Age has spoken to staff members who say they are owed almost $10,000, which a former employee said had become a running joke at the company.

“I know a lot of people are owed a lot of money … while they [the executives] are driving around with their Bentleys and Lamborghinis.”

In an attempt to balance the books, insiders say, Derrimut this year slashed some of its gyms’ staffed hours, group fitness classes and cleaning shifts. Some employees have also been made redundant.

Gym-goers regularly complain on social media and in online reviews about overcrowding, badly maintained facilities and poor bathroom hygiene.

Insiders say the company struggles to keep up with bills for toilet paper and hand towels, which WorkSafe has flagged as a concern.

A former employee said Derrimut had a tainted financial reputation, and they recalled being accosted by a stranger over unpaid debts while wearing a company uniform in public. They recounted another incident where a supplier threatened in person to repossess its stock.

“It felt really unsafe being there. I think that was the biggest thing for all of us … When people are angry and are owed money, they don’t really care about who’s in the firing line.”

They described the company as a “ticking time bomb” and they were saddened by the number of staff, business owners and gym members who had put their trust in Solomos and Derrimut.

“It leaves a really bad taste in your mouth knowing that a lot of good people got hurt,” they said. “And it sucks, because I think the gym itself is a really positive thing.”

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