Lifetime Fitness 2010 Annual Report Download - page 65

LIFE TIME FITNESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands, except share and per share data)
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equity interest requirement applicable to our other employees was amended such that our employees must, in the
aggregate, hold shares or options representing at least 3% of our outstanding common stock.
We may prepay the debt in full, but not in part, with the payment of a prepayment premium equal to the greater of
(i) 1% of the outstanding principal balance or (ii) the amount by which the sum of the discounted values of the
remaining note payments exceeds the outstanding principal balance. The discount rate for this calculation is the
yield on U.S. Treasury issues having a maturity date most closely corresponding to the maturity date of the
debt. The debt may be prepaid in full without a prepayment premium during the last 90 days of the term.
On February 23, 2010, we prepaid three of the mortgage notes payable at the par amount of $30.2 million.
Concurrent with the prepayment, the mortgages were released on three of our centers. Additionally, the loan
documents with TIAA were amended reducing the number of shares of our common stock our Chief Executive
Officer must retain from 1.8 million to 1.0 million. In March 2010, TIAA sold a portfolio of mortgages, including
ours, to Starwood Property Mortgage Sub-1, L.L.C. (“Starwood”).
The obligations under these remaining notes are due in full in July 2011, at which time we will owe approximately
$68.8 million. At December 31, 2010, $70.9 million was outstanding with respect to this obligation. As a result of
our intent and ability to refinance the Starwood notes payable with proceeds from our revolving credit facility, the
balance at December 31, 2010 is classified as long-term debt.
Commercial Mortgage-Backed Notes Financing
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. The mortgage financing matures in February 2017.
Interest on the amounts borrowed under the mortgage financing referenced above 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 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 as tenant 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 $99.1 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. As of December 31, 2010, $100.0 million remained outstanding on the loan.
Other Mortgage Notes Financing
In January 2002, we financed one Minnesota center using an obligation bearing interest at a fixed rate of 6.42%
amortized over a 10 year period. This obligation is due in full January 2012. As security for the obligation, we have
granted a mortgage on this center. As of December 31, 2010 $1.3 million was outstanding.
In August 2002, we financed one Minnesota center using an obligation bearing interest at a fixed rate of 6.39%
amortized over a 10 year period. This obligation is due in full October 2012. As security for the obligation, we have
granted a mortgage on this center. As of December 31, 2010 $2.0 million was outstanding.