Lifetime Fitness 2006 Annual Report Download - page 40

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payable under these notes has been fixed at 8.25%. The loan documents provide that we will be in default if our
Chief Executive Officer, Mr. Akradi, ceases to be Chairman of the Board of Directors and Chief Executive Officer
for any reason other than due to his death or incapacity or as a result of his removal pursuant to our articles of
incorporation or bylaws. As of December 31, 2006, $122.5 million remained outstanding on the notes.
We have financed two of our centers in Minnesota separately. These obligations bear interest at a fixed rate of 6.0%
and are being amortized over a 15-year period. The obligations are due in full in January 2007 and August 2007. As
security for the obligations, we have granted mortgages on these two centers. At December 31, 2006, $4.7 million
was outstanding with respect to these obligations. We are in the process of refinancing the note that came due in
January 2007 with the same lender.
In May 2001, we financed one of our Minnesota centers pursuant to the terms of a sale-leaseback transaction that
qualified as a capital lease. Pursuant to the terms of the lease, we agreed to lease the center for a period of 20 years.
At December 31, 2006, the present value of the future minimum lease payments due under the lease amounted to
$6.7 million.
We have financed our purchase of some of our equipment through capital lease agreements with an agent and
lender, on behalf of itself and other lenders. The terms of such leases are typically 60 months and our interest rates
range from 7.3% to 11.3%. As security for the obligations owing under the capital lease agreements, we have
granted a security interest in the leased equipment to the lender or its assigns. At December 31, 2006, $6.2 million
was outstanding under these leases.
On June 12, 2006, through a wholly owned subsidiary, we signed a promissory note in the amount of $1.7 million in
favor of a municipality. The note is secured by a mortgage on the real property purchased from the municipality on
the same date for the purpose of constructing one of our centers. The note bears no interest and is payable in two
equal payments of $0.8 million on the third and sixth anniversary dates of the opening of the center. Those dates are
expected to be June 2010 and June 2013. We recorded a $0.5 million reduction in the purchase price to reflect
imputed interest between the accounting acquisition date and the final payment of consideration.
On November 10, 2006 we signed a promissory note in the amount of $0.5 million in favor of the seller of certain
real property we purchased on the same date for the purpose of constructing one of our centers. The note is
unsecured and bears interest at 5.6%. The note is payable in various unequal installments over a three year period
following the opening of the center, currently expected to be in December 2007. The note is due and payable in full
no later than December 2010. We recorded a $48 reduction in the purchase price to reflect imputed interest between
the accounting acquisition date and the final payment of consideration.
On January 24, 2007, LTF CMBS I, LLC, a wholly owned subsidiary, obtained a commercial mortgage-backed loan
in the original principal amount of $105.0 million from Goldman Sachs Commercial Mortgage Capital, L.P.
pursuant to a loan agreement dated January 24, 2007. The mortgage financing is secured by six properties owned by
the subsidiary and operated as Life Time Fitness centers located in Tempe, Arizona, Commerce Township,
Michigan, and Garland, Flower Mound, Willowbrook and Sugar Land, Texas. The mortgage financing matures in
February 2017.
Interest on the amounts borrowed under the mortgage financing is 6.03% per annum, with a constant monthly debt
service payment of $0.6 million. Our subsidiary LTF CMBS I, LLC, as landlord, and LTF Club Operations
Company, Inc., another wholly owned subsidiary of ours as tenant, entered into a lease agreement dated January 24,
2007 with respect to the properties. The initial term of the lease ends in February 2022, but the lease term may be
extended at the option of LTF Club Operations Company, Inc. for two additional periods of five years each. Our
subsidiaries may not transfer any of the properties except as permitted under the loan agreement. We guarantee the
obligations of our subsidiary under the lease.
As additional security for LTF CMBS I, LLC’s obligations under the mortgage financing, the subsidiary granted a
security interest in all assets owned from time to time by the subsidiary including the properties which had a net
book value of $94.2 million on January 24, 2007, the revenues from the properties and all other tangible and
intangible property, and certain bank accounts belonging to the subsidiary that the lender has required pursuant to
the mortgage financing.