Lifetime Fitness 2011 Annual Report Download - page 68

LIFE TIME FITNESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands, except share and per share data)
62
On November 10, 2008, we entered into an Omnibus Amendment with TIAA with respect to the terms of the
mortgages that secure our obligations to TIAA. Pursuant to the terms of the Omnibus Amendment, the equity
interest requirement applicable to our Chief Executive Officer was amended such that he must, at all times during
the loan, retain at least 1.8 million shares of our common stock (subject to appropriate adjustment for stock splits
and similar readjustments), which shares on and after November 30, 2008 must be owned unencumbered, and the
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.
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 were due in full in July 2011, at which time we would 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 was classified as long-term debt.
On April 4, 2011, we prepaid the remaining ten mortgage notes payable to Starwood Property Mortgage Sub-1,
L.L.C. at the par amount of $69.5 million primarily using our revolving credit facility. Concurrent with the
prepayment, the mortgages were released on the remaining ten related centers.
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, 2011, $98.5 million remained outstanding on the loan.
Additionally, in connection with the purchase of six previously leased Life Time Fitness centers, on December 30,
2011, LTF Real Estate MN-FL, LLC, a wholly owned subsidiary, assumed a securitized commercial mortgage-
backed loan dated December 1, 2006 in the original principal amount of $80.0 million from the landlord. The
assumed amount of the loan was $72.1 million and matures in December 2016. Interest on the loan is 5.75% per
annum, with a constant monthly debt service payment of $0.5 million. The loan is secured by mortgages on the six
properties purchased by the subsidiary and certain other tangible and intangible property of the subsidiary.
Also in connection with the purchase and financing, LTF Real Estate MN-FL, LLC, assumed the lease agreement
previously executed in June of 2006 between the landlord and our subsidiary LTF Real Estate Company, Inc. as