Life Time Fitness Parent Extends Disposition Streak To Reduce Debt Load as It Expands National Real Estate Footprint
The parent company behind premium health club chain Life Time Fitness is flexing its national real estate portfolio through a series of sale-leaseback arrangements aimed at reducing debt and fueling future growth.
The Chanhassen, Minnesota-based fitness operator recently closed two deals valued at$90 million in Colorado and Texas, boosting the proceeds from its disposition streak so far this year to about $130 million, Life Time Group confirmed. The properties in Golden, Colorado, and Austin, Texas, were sold as two separate transactions. The fitness center at 3501 Clear Creek Drive in the Denver suburb sold for $50 million late last month to Realty Income Corp., a San Diego-based real estate investment trust. NETSTREIT, a Dallas-based real estate investment firm that focuses on single-tenant retail properties, scooped up the Texas location at 7101 S. Mopac Expressway in late May for $40 million.
The health club operator was already “on track to deliver positive free cash flow in the second quarter even without the proceeds from these sale-leasebacks,” Life Time founder and CEO Bahram Akradi said in a statement. With the two deals, however, he said the company will hit its debt reduction goal three times faster than expected, progress that will help support Life Time as it expands its portfolio of fitness centers and continues to pursue additional sale-leaseback arrangements. The company’s “continued strong financial performance will be more than sufficient to cover the incremental rent expense from these transactions,” he added, noting that the leaseback agreements can range between 20 to 25 years and can include additional 30-year options.
In addition to the Colorado and Texas deals, as well as those that closed earlier this year, Life Time is under negotiations for similar sales that are expected to generate as much as $60 million by the end of the third quarter this year. The company’s existing real estate portfolio is valued at about $3.5 billion, Akradi told analysts on the operator’s most recent earnings call. Roughly $1 billion of that total could result in an attractive sale-leaseback arrangement depending on the age of the health club location, the company’s total capital investment and any potential tax gains. The company operates about 175 locations across the country, according to Securities and Exchange Commission filings.
News _ Luxury Health Club Operator Closes Sale-Leaseback Deals in Colorado, Texas