Lifetime Fitness 2007 Annual Report Download - page 41

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We have financed 13 of our centers with Teachers Insurance and Annuity Association of America pursuant to the
terms of individual notes. The obligations under these notes are due in full in September 2011, and are secured by
mortgages on each of the centers specifically financed, and we maintain a letter of credit in the amount of $5.0
million in favor of the lender. The obligations related to 10 of the notes are being amortized over a 20-year period,
while the obligations related to the other three notes are being amortized over a 15-year period. The interest rate
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, 2007, $117.6 million remained outstanding on the notes.
On April 15, 2005, we entered into a Credit Agreement, with U.S. Bank National Association, as administrative
agent and lead arranger, J.P. Morgan Securities, Inc., as syndication agent, and the banks party thereto from time to
time (the “U.S. Bank Facility”). On May 31, 2007, we entered into a Second Amended and Restated Credit
Agreement effective May 31, 2007 to amend and restate our U.S. Bank Facility. The material changes to the U.S.
Bank Facility increase the amount of the facility from $300.0 million to $400.0 million, which may be increased by
an additional $25.0 million upon the exercise of an accordion feature, and extend the term of the facility by a little
over one year to May 31, 2012. Interest on the amounts borrowed under the U.S. Bank Facility continues to be based
on (i) a base rate, which is the greater of (a) U.S. Bank’s prime rate and (b) the federal funds rate plus 50 basis
points, or (ii) an adjusted Eurodollar rate, plus, in either case (i) or (ii), the applicable margin within a range based
on our consolidated leverage ratio. In connection with the amendment and restatement of the U.S. Bank Facility, the
applicable margin ranges were reduced to zero at all times (from zero to 25 basis points) for base rate borrowings
and decreased to 62.5 to 150 basis points (from 75 to 175 basis points) for Eurodollar borrowings. As of December
31, 2007, $312.8 million was outstanding on the U.S. Bank Facility, plus $20.5 million related to letters of credit.
The weighted average interest rate and debt outstanding under the revolving credit facility for the year ended
December 31, 2007 was 6.7% and $230.2 million, respectively. The weighted average interest rate and debt
outstanding under the revolving credit facility for the year ended December 31, 2006 was 6.8% and $140.0 million,
respectively.
On January 24, 2008, we amended the facility to increase the amount of the accordion feature from $25.0 million to
$200.0 million and increase the senior secured operating company leverage ratio from not more than 2.50 to 1.00 to
not more than 3.25 to 1.00. The amendment also allows for the issuance of additional senior debt and sharing of
related collateral with lenders other than the existing bank syndicate.
In June 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
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. At December 31, 2007, $1.7 million
was outstanding under this note, including $0.5 million of imputed interest.
In November 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, which occurred in January 2008. 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. At December 31, 2007, $0.6 million was outstanding under
this note, including less than $0.1 million of imputed interest.
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.