Lifetime Fitness 2012 Annual Report Download - page 69

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LIFE TIME FITNESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands, except share and per share data)
63
the revolving credit facility for the year ended December 31, 2012 was 2.6% and $390.6 million, respectively. The
maximum month-end balance during the year ended December 31, 2012 was $454.0 million.
Interest Rate Swap
In August 2011, we entered into an interest rate swap contract with J.P. Morgan Chase Bank, N.A. that effectively
fixed the rates paid on a total of $200.0 million of variable rate borrowings from our revolving credit facility at
1.32% plus the applicable spread (which depends on our EBITDAR leverage ratio) until June 2016. We pay 1.32%
and receive LIBOR on the notional amount of $200.0 million. The contract was designated a hedge against interest
rate volatility. We applied this hedge to variable rate interest debt under the U.S. Bank credit facility. In accordance
with applicable accounting guidance, changes in the fair market value of the swap contract were recorded in
accumulated other comprehensive (loss) income. As of December 31, 2012, the $3.6 million fair market value loss,
net of tax, of the swap contract was recorded as accumulated other comprehensive loss in the shareholders’ equity
section of our consolidated balance sheets and the $6.1 million gross fair market value of the swap contract was
included in long-term debt.
Commercial Mortgage-Backed Notes Financing
In January 2007, 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 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.
As additional security for the subsidiary'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, 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, 2012, $96.9 million remained
outstanding on the loan.
In connection with the purchase of six previously leased Life Time Fitness centers, in December 2011 a wholly
owned subsidiary, assumed a securitized commercial mortgage-backed loan dated December 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, our wholly owned subsidiary assumed the lease agreement
previously executed in June of 2006 between the landlord and another of our wholly owned subsidiaries as tenant of
the six properties. Our subsidiaries may not terminate the lease or transfer their interests in the properties except as
permitted under the loan and lease agreements. We guarantee the obligations of our subsidiary as tenant under the
lease. As of December 31, 2012, $70.2 million remained outstanding on the loan.
Other Mortgage Notes Financing
In November 2008, we financed one Minnesota center using an obligation bearing interest at a fixed rate of 6.54%
amortized over a 20-year period. This obligation is due in full November 2013. As security for the obligation, we
have granted a mortgage on this center. As of December 31, 2012, $5.1 million was outstanding.
In March 2009, we financed one Minnesota center using an obligation bearing interest at a fixed rate of 6.25%
amortized over a 15-year period. This obligation is due in full in March 2014. As security for the obligation, we have
granted a mortgage on this center. At December 31, 2012, $4.0 million was outstanding.