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Unlocking Shareholder Value Through REIT Conversion

September 26, 2014


Luis Sanchez
luisvsanchez@gmail.com
Capitalization Trading Multiples Equity Returns
Market Cap $1,996 EV/LTM EBITDA 8.9x 1 Year (0.4%)
Enterprise Value $3,106 EV/LTM Sales 2.5x 3 Years 35.9%
Net Debt $1,109 Adj. FCF Yield
1
9.1% 5 Years 79.2%
20
30
40
50
60
Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14
1
Adj. FCF Yield = (Cash from Operations Maintenance Capex) / Market Cap
Source: Company Filings, Capital IQ
Situation Overview
2
Life Time Fitness (NYSE:LTM) (LTM or the Company) is a
national operator of resort style gyms and sports facilities
Operates 112 24-hour gyms in 29 markets
Average gym size ~100,000 sq. ft., excluding pool areas
823,021 gym members
Employs 22,500 people, including 15,000 part-time
Founded in 1992 by current CEO Bahram Akradi
8/25/14 LTM announced it would explore a REIT conversion,
hired financial advisors and adopted a shareholder rights plan
to ensure it will meet REIT ownership requirements
The announcement surprised the market because CEO Akradi
has viewed the real estate ownership as a key strategic asset
Analysts see a high probability of the conversion occurring as a
spin-off of the real estate into a public REIT which would lease
the space to the gym business in an OpCo/PropCo structure
Company Overview REIT Conversion
Equity Trading History Key Statistics
LTM announces it is
exploring a REIT conversion
($ in Millions) 2009 2010 2011 2012 2013 LTM
Revenue $837 $913 $1,014 $1,127 $1,206 $1,246
Growth 8.8% 9.1% 11.0% 11.2% 7.0% 6.5%
EBIT $149 $161 $173 $208 $225 $223
% Margin 17.8% 17.6% 17.1% 18.5% 18.6% 17.9%
EBITDA $240 $253 $272 $323 $344 $349
% Margin 28.6% 27.7% 26.8% 28.7% 28.5% 28.1%
Capex $147 $132 $165 $224 $349 $465
% Sales 17.5% 14.4% 16.3% 19.9% 28.9% 37.3%
Gym Count 84 89 101 105 108 112
Sales / Gym 10.0 10.3 10.0 10.7 11.2 11.1
Members 628,938 682,858 768,860 787,003 789,490 823,021
Members / Gym 7,487 7,673 7,612 7,495 7,310 7,348
Bear Base Bull
Value of OpCo $38.65 $32.00 $42.06
Value of PropCo N/A $37.98 $44.95
Sum-of-the-Parts $38.65 $69.98 $87.01
Current Share Price $51.06 $51.06 $51.06
Upside / (downside) (24%) 37% 70%
Probability 20% 60% 20%
Investment Thesis
3
LTM shares have risen 20% since the REIT exploration
announcement. Despite this rise, there would still be 37% - 70%
of upside remaining if the REIT spin occurs. Given the estimated
80% likelihood of a REIT spin, returns to shareholders at this
point are asymmetric
1. REIT spin-off unlocks trapped real estate worth $2.5 - $3
billion on a NAV basis, currently not being properly valued
2. Added operating leverage in the core business and financial
leverage in the overall enterprise would accrue to
shareholders
Annual tax savings of over $50 million by 2015
Higher overall leverage capacity, lower cost of debt
Lower cost of equity capital, could be used for growth
$80 - $100 million in annual dividends (~5.7% yield) by
2015 funded by tax savings and additional leverage
3. The core business is a unique and attractive health club
management company which generates strong predictable
and growing cash flows and is well run by an owner-
operator. At todays valuation, after backing out the
estimated value of the real estate, investors are able to buy
core business at a 50% - 75% discount to its intrinsic value
A lack of details and uncertainty of the REIT spin-off
Details can be gleaned from past REIT conversions
Hiring of advisors, adopting a rights plan and positive
market reaction, support the conversion going through
The difficulty in valuing the REIT and how it will create value
Property level analysis reveals potential portfolio value
Real tax savings and capital returns to shareholders
The recent poor performance of the core gym business
Value Creation From REIT Spin-off The Market Discounts
Upside Opportunity
Bear case assumes REIT spin does not occur and a discounted trading multiple
Base case assumes REIT spin occurs and core business continues to deteriorate
Bull case assumes REIT spin occurs and core business stabilizes in 2015
A Brief Overview Of REITs
4
Life Time Athletic
Boca Raton, FL
Whats Underlying A Real Estate Investment Trust?
5
REITs were formed in 1960 by Congress to enable individual
investors to invest in commercial real estate
Taxed at the investor level (not corporate level)
The return profile has characteristics of both bonds and
equities. The long term nature of leases provides income
visibility (like bonds), while the mark-to-market of assets
allows REITs to take part in the economic cycle (like equities)
Net Operating Income (NOI) = property level cash flow
Funds from Operations (FFO) = operating cash flow
Adjusted Funds from Operations (AFFO) = FFO less
maintenance capex less normalized rent less FAS
141/142/143 accounting adjustments
Net Asset Value (NAV) = fair market value of real estate
Cap Rate = cash flow yield (NOI/NAV)
REIT Overview Key Terminology
Requirements Of REITs
Distribute at least 90% of taxable net income as dividends to
shareholders
Have at least 75% of assets in real estate and derive at least
75% of gross income from real estate
Have a minimum of 100 shareholders and no more than 50%
of shares held by 5 or fewer individuals
Have no more than 25% of assets invested in stocks of
taxable REIT subsidiaries (TRS)
Source: NAREIT
U.S. REITs By Sector
Regional Mall
13%
Health Care
12%
Apartment 12%
Mortgage 11%
Office 9%
Shopping
Center 7%
Diversified 7%
Lodging Resort
5%
Timber 5%
Self Storage 5%
Infrastructure
5%
Other 9%
REITs Vs. S&P 500
REITs Have Outperformed The Broader Stock Markets Over The Past 20 Years
6
611%
795%
100%
200%
300%
400%
500%
600%
700%
800%
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
S&P 500 Total Return Index MSCI US REIT Total Return Index
Source: Capital IQ
Non-traditional REITs Are Increasingly Being Formed
7
Over the past five years, several companies in diverse
industries have opted to utilize the REIT structure in order to
take advantage of the following benefits:
o Tax efficiency - the pass-through mechanism of REITs
allows companies to avoid double taxation
o Monetize trapped assets - spin-offs can value assets
which previously did not generate income
o Lower cost of capital - REITs have strong access to
equity and debt capital markets. Investors are attracted
to the dividend yield, stability of cash flows,
transparency in capital allocation and downside
protection from ownership of real estate. REITs also
have access to low-rate secured debt
o Transparent capital allocation - the high payout ratio
has limited managements flexibility to surprise the
investor base with wasteful spending
o Broaden investor base - incremental investors include
REIT-focused and income investors
o Improve valuation - REITs trade at elevated multiples of
earnings and cash flow due to the above reasons,
serving as positive reinforcement
Rationale Investor Reception
Source: NAREIT
Wall Street rates the average non-traditional REIT a buy
REIT conversions typically take 6 to 12 months to complete
once announced and the median IRR for an equity investor
during a REIT conversion in the last 5 years has been 54%
This return includes the value of spin-off companies and
accumulated dividends
Investors have increasingly called on management teams to
assess conversions or spins
Elliot Management called on Iron Mountain to convert
to a REIT to achieve tax savings and improved cap rates
Corvex Capital & Marcato Capital encouraged
Corrections Corp of America to convert to a REIT to
lower its cost of capital and improve its valuation
Marcato Capital is the largest shareholder of Life Time
Fitness and has encouraged the spin-off of the real
estate assets
Ticker Company Assets REIT Structure
1
Date
Announced
Date
Completed
Period
Length (Yrs)
Equity Total
Returns
2
Period IRR
Total Returns
to Date
NasdaqGS:LAMR Lamar Advertising Co. Billboards QRS / TRS 8/8/2012 4/23/2014 1.7 62% 33% 69%
NYSE:CXW Corrections Corporation of America Prisons QRS / TRS 5/23/2012 2/7/2013 0.7 52% 80% 82%
NYSE:GEO The GEO Group, Inc. Prisons QRS / TRS 8/8/2012 1/18/2013 0.4 68% 219% 115%
NYSE:IRM Iron Mountain Inc. Document Storage QRS / TRS 4/20/2011 6/25/2014 3.2 7% 2% 29%
NasdaqGS:EQIX Equinix, Inc. Data Centers QRS / TRS 9/13/2012 N/A NA NA NA 17%
NasdaqGS:GLPI Gaming and Leisure Properties, Inc Casinos REIT Spin-off 11/16/2012 11/1/2013 1.0 57% 60% 27%
NYSE:CBSO CBS Outdoor Americas Inc. Billboards REIT Spin-off 1/16/2013 4/2/2014 1.2 68% 54% 58%
NYSE:AMT American Tower Corporation Wireless Towers QRS / TRS 5/19/2011 1/3/2012 0.6 13% 22% 97%
NYSE:WY Weyerhaeuser Co. Forestlands QRS / TRS 5/15/2009 4/16/2010 0.9 52% 57% 228%
NYSE:CCI Crown Castle International Corp. Wireless Towers QRS / TRS 9/9/2013 1/6/2014 0.3 1% 3% 14%
NasdaqGS:CONE Cyrusone Inc. Data Centers REIT Spin-off 5/3/2012 1/24/2013 0.7 38% 55% 2%
Median 0.8 52% 54% 58%
Average 1.1 42% 58% 67%
Recent REIT Conversions / Spin-offs
Investors Have Cheered REIT Conversions And REIT Spin-offs
8
1
QRS = Qualified REIT Subsidiaries, TRS = Taxable REIT Subsidiaries
2
Equity total returns from conversion announcement date to announced date completed
Source: Public Filings, Capital IQ
9
Value Of The REIT Spin-off
Life Time Athletic
Montvale, NJ
Mechanics Of A Tax-free REIT Spin-off For Life Time Fitness
10
No details have been released by LTM; however, the OpCo / PropCo
structure is the only viable solution due to REIT rules
The real estate assets are spun-off as a public REIT
Property is leased back to OpCo at a negotiated rate under a
triple net lease where tenant is responsible for property
expenses and maintenance
The PropCo manages the construction and acquisition of new
gyms; can and should diversify from LTM as a single tenant
The remaining operating company focuses on managing gyms
Business is capital light, focused on efficiently operating gyms,
acquisition and retention of customers and maintenance of
facilities
Earnings are reduced by new rent payments which reduce taxes
and increase operating leverage
OpCo / PropCo Structure Penn National Gaming Case Study
1
Total return adjusted for stock splits, dividends, rights offerings and spin-offs
2
Regional Gaming Peers include: BYD, CHDN, CZR, ISLE, MCRI
Source: Company Filings, Capital IQ, Equity Research
Public
Shareholders
Public
Shareholders
Operating
Company
Property
Company
Gym Business
Leasehold
Assets
Real Estate
Assets
Dividends
Lease
Payments
11/15/12 - Penn National Gaming (PENN) announced it would convert
to OpCo/PropCo structure, spinning-off real estate into a REIT (GLPI)
Rent set at $450m (~15% sales) with annual escalators
15 year triple net lease with four 5-year extension options
Minimum EBITDAR coverage 1.8x
GLPI responsible for developing/acquiring new properties
PENN monetized real estate tax-free and improved capital allocation
GLPI, first casino REIT, marketed to consolidate industry property
ownership; over 250 casino facilities owned by 140 public companies
Pre-spin Capitalization Current Capitalization Pre-spin Valuation Current Valuation
PENN: PENN: PENN: PENN:
Marketcap $2,845 Marketcap $929 EV/NTM EBITDA 5.3x EV/NTM EBITDA 6.4x
TEV $4,807 TEV $1,741 EV/NTM Sal es 1.4x EV/NTM Sal es 0.7x
GLPI: GLPI:
Marketcap $3,540 EV/NTM EBITDA 14.3x
TEV $6,024 EV/NTM Sal es 9.5x
$4.00
$8.00
$12.00
$16.00
Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14
PENN Total Return Regional Gaming Peers
57% PENN total return at transaction close
33% PENN total return since announcement
+33%
+16%
Transaction Closed
Transaction Announced
1 2
At 12/31/13, the gross fixed asset
book value of land and buildings
was $2.3 billion. This excludes gym
equipment and office fixtures as
well as 2014 additions
1
See appendix for property-level rent analysis
Source: Company Filings, Equity Research
What Is Life Times Real Estate Worth?
11
Valuing The Trapped Assets What Does LTM Own?
Implied Real Estate Value Historical Cost
Operates 112 gyms with 7 to open in the next 15 months
Has spent 2.9 billion in capital expenditures since 2004
Has not closed any centers since 1997, has never closed
a large format center
Leased properties are generally older with smaller formats
Annual rent on leased properties of $42 million
Book value is not reliable for valuing real estate because it does
not account for appreciation of the land or cash flow
The book value should be viewed as a floor valuation as it gives
insight into the replacement value of the land and buildings
The market primarily values real estate by measuring cash
flow of a portfolio and assigning a valuation multiple
The value of LTMs real estate portfolio is currently trapped
because it does not generate rents
LTMs real estate can be valued by assessing its potential cash
flow and assigning an appropriate valuation multiple
LTMs real estate holdings can be pieced together from public
filings and the Companys existing lease rates can be used to
imply market rates for rent
1
Gross Asset Value at Year End 2013
Land 331
Buildings and fixtures 1,722
Leasehold improvements 115
Construction in progress 161
Total $2,328
Owned centers are larger format and newer constructions
and justify a premium rental rate over leased centers
$25.54 / sq. ft. is consistent with broker estimates
1
The 8.0% cap rate discounted to the average cap rate for
triple net lease REITs of 7.5%
Ownership Format Age Sq. Ft.
Own 82 Current Model 67 1- 12 Months 4 Leased 2,850,000
JV 1 Large Other 24 13 - 36 Months 19 Owned 7,863,505
Lease 29 Other Format 21 37+ Months 89
Total 112 Total 112 Total 112 Total 10,713,505
Leased Property Count Sq. Ft. Implied Rent $ Implied NAV $
Sal e/Leaseback 7 705,665 Rent on Leases $42 Rent / Sq. Ft. $21.29
Standard Lease 22 1,179,457 Less: Ground Lease 2 20% Premi um $25.54
Ground Lease 9 964,878 Adj. Rent $40 Owned Real Estate (MM) 7.86
Total 2,850,000 Net Operati ng Income $201
Less: Ground Lease (964,878) Adj. Leases (MM) 1.89 Cap Rate 8.0%
Adj. Leases 1,885,122 Rent / Sq. Ft. $21.29 Est. Real Estate Value $2,511
Owned properties to grow at 6 centers per year, as planned
Rent / Sq. Ft. conservatively estimated at $20 in order for the OpCo to
maintain EBITDAR coverage above 1.9x, annual rental rate increases of 2%
G&A is based on $14 million of current costs for the real estate team with an
added $6 million for additional overhead and financial reporting costs
Payout ratio chosen to bring dividend yield in-line with triple net lease peers
Net leverage in-line with triple net lease peers, capacity for greater leverage
Interest rate is higher than current LTM effective rate of ~5%
EV/EBITDA multiple compares to a forward multiple of 15.5x for net lease
peers, which are a blend of single and multi-tenant REITs
Source: Company Filings
Arriving At Earnings For The PropCo
12
Base Case PropCo Operating Model Assumptions
($ in Millions) 2015E 2016E 2017E 2018E
Model Drivers
Owned Gyms 61 67 73 79
Owned Sq. Ft. (MM) 9.74 10.43 11.12 11.81
Rent / Sq Ft. 20.00 20.40 20.81 21.22
Income Statement
Rental Income (NOI) $195 $213 $231 $251
G&A 20 20 20 20
EBITDA $175 $193 $211 $231
Interest Expense 53 58 64 70
Maintenance Capex 0 0 0 0
FFO $122 $134 $147 $161
70% Payout $85 $94 $103 $113
Dividend Yield 5.7% 5.7% 5.7% 5.7%
Balance Sheet
Net Leverage 5.5x 5.5x 5.5x 5.5x
Net Debt $961 $1,060 $1,162 $1,268
Interest Rate 5.5% 5.5% 5.5% 5.5%
Capitalization
EV Multiple 14.0x 14.0x 14.0x 14.0x
Enterprise Value $2,446 $2,698 $2,958 $3,228
Less: Debt (961) (1,060) (1,162) (1,268)
Equity Value $1,485 $1,638 $1,796 $1,960
Implied Valuation
Implied FFO Multiple 12.2x 12.2x 12.2x 12.2x
Implied Cap Rate 8.0% 7.9% 7.8% 7.8%
The bull case for the PropCo is identical to the base case except that it
assumes a higher rental rate
The rental rate is a negotiated rate. In the bull case, the PropCo can negotiate
a higher rental rate because the OpCo achieves better financial results
allowing it to take on a greater rental burden and maintain coverage ratios
Bull case EBITDAR coverage of ~2.1x
Source: Company Filings
Bull Case Earnings For The PropCo
13
Bull Case PropCo Operating Model Assumptions
($ in Millions) 2015E 2016E 2017E 2018E
Model Drivers
Owned Gyms 61 67 73 79
Owned Sq. Ft. (MM) 9.74 10.43 11.12 11.81
Rent / Sq Ft. 22.00 22.44 22.89 23.35
Income Statement
Rental Income (NOI) $214 $234 $254 $276
G&A 20 20 20 20
EBITDA $194 $214 $234 $256
Interest Expense 53 58 64 70
Maintenance Capex 0 0 0 0
FFO $141 $156 $171 $186
70% Payout $99 $109 $119 $130
Dividend Yield 5.6% 5.6% 5.6% 5.6%
Balance Sheet
Net Leverage 4.9x 4.9x 4.9x 4.9x
Net Debt $961 $1,059 $1,160 $1,265
Interest Rate 5.5% 5.5% 5.5% 5.5%
Capitalization
EV Multiple 14.0x 14.0x 14.0x 14.0x
Enterprise Value $2,719 $2,995 $3,282 $3,579
Less: Debt (961) (1,059) (1,160) (1,265)
Equity Value $1,758 $1,937 $2,122 $2,314
Implied Valuation
Implied FFO Multiple 12.4x 12.4x 12.4x 12.4x
Implied Cap Rate 7.9% 7.8% 7.8% 7.7%
Sector Marketcap
Enterprise
Value
Net
Leverage FFO Payout
Dividend
Yield
EV/2014E
EBITDA
EV/2015E
EBITDA
P/2014E
FFO
P/2015E
FFO
Retail $5,321 $8,593 7.1x 59% 3.7% 18.4x 16.8x 15.8x 14.7x
Residential 4,110 6,330 14.2x 66% 4.2% 20.1x 16.3x 16.2x 15.7x
Diversified 4,804 7,291 7.8x 71% 4.5% 17.7x 15.2x 19.3x 20.5x
Office 3,636 6,358 7.8x 50% 3.7% 17.3x 16.0x 14.8x 13.7x
Industrial 3,968 6,005 7.0x 67% 3.9% 19.6x 16.6x 17.7x 16.1x
Hospitality 3,048 4,496 6.1x 39% 3.0% 14.0x 12.5x 13.6x 11.6x
Health Care 5,688 8,699 5.7x 72% 5.1% 16.1x 13.3x 14.5x 13.2x
Storage 9,871 11,991 4.3x 61% 3.2% 19.7x 17.8x 18.9x 17.2x
Mean $5,056 $7,470 7.5x 61% 3.9% 17.8x 15.6x 16.4x 15.4x
Median $4,457 $6,825 7.0x 63% 3.8% 18.0x 16.2x 16.0x 15.2x
Company Ticker
Single
Tenant? Marketcap
Enterpise
Value
Net
Leverage
FFO
Payout
Dividend
Yield
EV/2014E
EBITDA
EV/2015E
EBITDA
P/2014E
FFO
P/2015E
FFO
ARC Properties Inc. ARCP No $11,161 $21,332 15.8x 115% 7.7% 17.0x 13.2x 14.9x 11.8x
Realty Income Corp. O Yes 9,223 14,456 6.0x 84% 5.3% 17.4x 15.9x 15.9x 15.2x
W. P. Carey Inc. WPC No 6,663 10,420 6.6x 74% 5.5% 16.4x 16.1x 13.5x 15.5x
Spirit Realty Capital Inc. SRC Yes 4,383 8,173 7.6x 120% 9.0% 15.4x 14.4x 13.3x 12.6x
National Retail Properties NNN Yes 4,383 6,596 4.5x 79% 4.6% 17.7x 16.1x 17.1x 16.1x
Gaming and Leisure Properties GLPI Yes 3,520 6,004 9.2x 43% 3.3% 14.4x 14.2x 12.8x 12.2x
EPR Properties EPR Primarily 2,897 4,555 5.4x 81% 6.4% 14.0x 12.1x 12.6x 11.6x
Lexington Realty Trust LXP No 2,297 4,453 5.9x 60% 6.5% 12.5x 12.3x 9.1x 9.0x
Getty Realty Corp. GTY Yes 579 705 2.5x 67% 4.6% 14.5x 13.1x 14.5x 13.4x
Mean $5,012 $8,521 7.1x 80% 5.9% 15.5x 14.2x 13.8x 13.1x
Median $4,383 $6,596 6.0x 79% 5.5% 15.4x 14.2x 13.5x 12.6x
Base Case Valuation
1
REIT sub-sector averages
Source: Company Filings, SNL Financial, Capital IQ
Assuming Conservative Multiples, The Value Of The PropCo REIT Is Very Attractive
14
Triple Net Lease REIT Comparables
Broader REIT Market Comparables
1
Cap Rate
9.0% 8.5% 8.0% 7.5% 7.0%
$18 27.96 30.89 34.46 37.92 42.19
$19 29.36 32.45 36.22 39.87 44.38
$20 30.76 34.01 37.98 41.82 46.57
$21 32.15 35.57 39.74 43.77 48.75
$22 33.55 37.13 41.50 45.72 50.94
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Bull Case Valuation
Property Company
2015E NOI $214
Operating Expenses 20
EBITDA $194
Interest Rate 5.5%
Interest Expense 53
Maintenance Capex 0
FFO $141
2015E EBITDA $194
EV/EBITDA Multiple 14.0x
Implied EV $2,719
Net Debt $961
Implied Net Leverage 4.9x
Implied Equity Value $1,758
Diluted Shares 39.099
PropCo Share Price $44.95
Implied Dividend Yield 5.6%
Implied FFO Multiple 12.4x
Implied Cap Rate 7.9%
Property Company
2015E NOI $195
Operating Expenses 20
EBITDA $175
Interest Rate 5.5%
Interest Expense 53
Maintenance Capex 0
FFO $122
2015E EBITDA $175
EV/EBITDA Multiple 14.0x
Implied EV $2,446
Net Debt $961
Implied Net Leverage 5.5x
Implied Equity Value $1,485
Diluted Shares 39.099
PropCo Share Price $37.98
Implied Dividend Yield 5.7%
Implied FFO Multiple 12.2x
Implied Cap Rate 8.0%
Cap Rate
9.0% 8.5% 7.9% 7.5% 7.0%
$20 30.76 34.01 38.63 41.82 46.57
$21 33.52 36.94 41.79 45.14 50.12
$22 36.29 39.87 44.95 48.46 53.68
$23 39.06 42.80 48.11 51.78 57.24
$24 41.82 45.73 51.27 55.10 60.79
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2015 Financial Comparison
($ in Thousands) LTM Status Quo OpCo Base Case PropCo Base Case A - (B + C) Commentary
EBITDA 403,111 222,376 174,709 6,026 Status quo EBITDA $6 million higher due to additional overhead and report costs
D&A 141,441 91,936 49,504 0
Net Interest 5,826 5,826 52,849 (52,849) Higher leverage is permissible in REIT structures, creating a larger tax shield
Other Expense (1,143) (1,143) 0 0
Pre-tax Income 256,988 125,757 72,355 58,876
Tax Rate 40% 40% 0%
Tax Expense 102,795 50,303 0 52,492 $52 million in tax savings achieved
Dividends 0 0 85,302 (85,302) $85 million of annual shareholder returns created from tax savings and leverage
1
LTMs Bloomberg calculated WACC = 6.6%
Source: Company Filings
The Value Created From The REIT Spin Is More Than Just Valuation Arbitrage
15
How Would A REIT Spin-off Impact The Overall Financials?
Additional Perceived Benefits Theoretical Value Of Tax Savings
A 2015E tax savings $85
B Estimated WACC
1
8.0%
C Terminal growth rate 2.0%
A/(B-C) Implied value to the firm $1,422
Less: additional debt 30
Implied value to equity $1,392
Diluted shares 39.099
Value per share $35.59
More focused operations / simplified business models
More disciplined capital allocation
Capital returns to shareholders (a bird in the hand)
Stifles wasteful spending such as management pet projects (i.e. mobile phone fitness
apps, corporate health and wellness analytics?!?)
Creates transparency for investors
Over time, finds the most productive use for the real estate, even if its not a gym
Easier to value the core business
16
The Core Business
Life Time Athletic and Tennis
Centennial, CO
Locations by State
AL 1 MO 3
AZ 5 NC 6
CA 1 NE 1
CO 5 NJ 3
FL 2 NV 1
GA 6 NY 2
IA 1 OH 6
IL 9 OK 1
IN 3 TN 1
MD 2 TX 18
MI 7 UT 1
MN 24 VA 4
Canada 1
Core Business Is An Ultra-premium Gym And A Healthy Lifestyle Brand
17
The Healthy Way Of Life Company Operations
Premium fitness club catering to fitness tastes, targeting family
memberships and affluent customers (avg. household income $100k+)
Boasts the most amenities & fitness class programming
Amenities include: spa, cafes, indoor & outdoor pools, rock climbing,
basketball, racquetball, childcare and more
18 centers feature tennis courts with professional instruction
Organizes athletic events, mostly running, cycling and triathlons. In
2013, over 100 events were organized with 150,000 participants
Launched health analytics services for individuals and businesses
112 mega-gyms in 29 suburban markets, opening 7 in next 15 months
Average gym size ~100,000 sq. ft., excluding pool areas
Mature gyms (37+ months) target 9k access members (10k capacity,
80% - 90% utilization), currently 80% of gyms considered mature
Currently 712,296 access members, 110,724 non-access members
~23,000 total employees, including 15,000 part-time
Large format gyms employ ~250 staff, 10 managerial
CEO Bahram Akradi, 52, is a hands-on operator and owns 6.5% of LTM
Geographic Footprint
Sales generated from membership dues, in-center sales (restaurant,
spa, personal training) and athletic events
Monthly dues $50 - $200+ for access members (varies by gym), $10 -
$20 for non-access members for web services/media subscription and
the ability to restart access membership without enrollment fees
Athletic event sales generated from registration fees and sponsorships
Costs are mostly fixed and profitability is highest at peak utilization
Attracts members with a highly differentiated fitness experience and
maintains members through pristine facility maintenance and
fostering a community around events and the healthy lifestyle brand
Large runway for growth no presence in several markets, low
penetration in several major markets
Business Model
Source: Company Filings
Life Time Fitness gyms are large capital projects which require significant planning,
construction and financing
Triple net lease Gym Renter start-up costs include property taxes, insurance,
personalized fixtures, equipment outlays and elevated sales and advertising
expenses
Working capital is ignored, but would be a source of financing because of
subscription revenue and lack of inventory
EBITDA ramps significantly at higher member capacity utilization, operating
leverage is even greater for the renter because of additional rental overhead
Future growth and profitability of the events/services business could significantly
improve margins and improve business quality
GAAP earnings mask free cash flow generation for the Gym Owner, but show a
more accurate picture for the Gym Renter, suggesting the Gym Owners business is
potentially more complex and more difficult to value
The Gym Owners ROIC is lower than LTMs 6.6% WACC (Bloomberg), even before
corporate overhead, illustrating that capital has been mis-allocated
Taking the real estate out of the business would yield a mid to high teens
ROIC for the OpCo, after adjusting for overhead and realistic gym utilization
levels (closer to 80%)
Unit Economics Are Attractive; However, ROIC Under-earns Cost Of Capital
18
Mature Center Unit Economics
1
Based on last-twelve-months EBITDAR margins, excluding corporate overhead
2
D&A = Greenfield Costs depreciated over 30 years + Maintenance Capex
3
Levered FCF = EBITDA Interest Taxes Maintenance Capex; ROIC = (EBIT x (1 40%)) / (Greenfield Costs + Maintenance Capex)
Source: Company Filings
Commentary
($ i n Thousands) Gym Owner Gym Renter
Assumptions:
Greenfi el d Gym Costs $45,000 $6,750
Project Fi nance (50% L-T-V, 5% Rate) $22,500 $3,375
Gym Sq. Ft. 115,000 115,000
Rent/Sq. Ft. $0.00 $20.00
Mai ntenance ($8 / Sq. Ft.) $920 $920
Member Capaci ty 10,000 10,000
Members / Gym (90% Uti l i zati on) 9,000 9,000
Total Sal es / Member $1,749 $1,749
EBITDAR Build:
1
Contribution Margin
Member Dues 64% 55%
In-Center 31% 15%
Events/servi ces 4% 0%
4-Wal l EBITDAR Margi n 40%
Income Statement:
Annual Sal es $15,738 $15,738
EBITDAR 6,302 6,302
Rent Expense 0 2,300
EBITDA $6,302 $4,002
D&A
2
2,420 1,145
Interest Expense 1,125 169
Taxes @ 40% 1,103 1,075
GAAP Earni ngs $1,654 $1,613
Earnings Margin 10.5% 10.2%
Levered FCF
3
$3,154 $1,838
Levered FCF Margin 20.0% 11.7%
ROIC
3
5.1% 22.3%
Long-term Fundamental Remain Intact, But Recent Operating Metrics Have Disappointed
19
Historical Financial Summary Operating Metrics
1
Broader = SSS for gyms open 13+ months, Mature = SSS for gyms open 37+ months
2
ROIC = (EBIT x (1-40%) / (Net Operating Assets))
Source: Company Filings
Commentary
Long-term fundamentals remain intact
Steady sales growth from new gyms and price increases
Stable profitability and growing operating cash flows
Working capital is a source of financing
Recent operating metrics have disappointed
Weak SSS trends, 17 positive SSS quarters followed by 2 negative
Highest member attrition in 5 years, compares to 50% attrition at Town
Sports (NASDAQGM:CLUB)
Access member growth has stagnated, members per gym has declined
Reacceleration of growth with 7 centers to open next 15 months
$465m in capex spend tied up in unopened and immature centers
Margins will temporarily be constrained by newer centers
($ in Millions) 2009 2010 2011 2012 2013 LTM
Membershi p dues $565 $603 $663 $728 $767 $788
Enrol l ment fees 26 24 18 15 14 13
In-center revenue 233 266 308 348 376 389
Other revenue 13 19 23 36 50 56
Total Revenue $837 $913 $1,014 $1,127 $1,206 $1,246
Growth 8.8% 9.1% 11.0% 11.2% 7.0% 6.5%
Operating Expenses:
Center Operati ons $466 $519 $572 $617 $656 $685
% Sales 55.7% 56.8% 56.4% 54.8% 54.4% 55.0%
Other Operati ng $22 $24 $36 $52 $64 $67
% Sales 2.6% 2.6% 3.5% 4.6% 5.3% 5.4%
Sal es & Marketi ng $26 $27 $36 $40 $43 $44
% Sales 3.1% 3.0% 3.6% 3.5% 3.5% 3.5%
General & Admi n. $43 $48 $55 $56 $59 $58
% Sales 5.1% 5.3% 5.4% 4.9% 4.9% 4.7%
Profitability & Cash Flow:
EBIT $149 $161 $173 $208 $225 $223
% Margin 17.8% 17.6% 17.1% 18.5% 18.6% 17.9%
EBITDAR $280 $296 $315 $362 $384 $391
% Margin 33.4% 32.4% 31.1% 32.1% 31.8% 31.4%
Cash Fl ow from Ops. $186 $192 $228 $256 $258 $268
% Sales 22.2% 21.1% 22.5% 22.7% 21.4% 21.5%
Capex $147 $132 $165 $224 $349 $465
% Sales 17.5% 14.4% 16.3% 19.9% 28.9% 37.3%
Mai ntenance Capex $32 $34 $51 $81 $85 $85
% Sales 3.9% 3.8% 5.0% 7.2% 7.0% 6.8%
Worki ng Capi tal ($57) ($61) ($56) ($72) ($88) ($96)
% Sales (6.8%) (6.7%) (5.5%) (6.4%) (7.3%) (7.7%)
Worki ng Capi tal $51 ($5) $5 ($16) ($16) $26
2009 2010 2011 2012 2013 LTM
Broader Gym SSS
1
(3.1%) 5.0% 5.1% 4.3% 4.0% 2.2%
Mature Gym SSS
1
(7.5%) 2.3% 4.3% 3.7% 3.2% 1.6%
Attri ti on 40.6% 33.3% 31.3% 33.5% 35.8% 35.8%
ROIC
2
6.6% 7.0% 6.6% 7.5% 7.1% 6.4%
Gym Count 84 89 101 105 108 112
Sales / Gym 10.0 10.3 10.0 10.7 11.2 11.1
Access Members 578,937 612,556 676,054 682,621 678,619 712,296
Access Members / Gym 6,892 6,883 6,694 6,501 6,284 6,360
Sales / Access Member $1,446 $1,490 $1,499 $1,651 $1,777 $1,749
% Gyms Mature 71.4% 77.5% 79.2% 79.0% 82.4% 79.5%
Base case assumes REIT spin occurs at year-end 2014
Base case projections are in-line with Wall Street analyst projections which
assume continued deterioration in the core gym business
Run rate of 6 greenfield gyms starting in 2015
Access membership continues to grow below gym count growth
Gyms continue to increase sales per member through price increases and in-
center sales growth
Margins decline in 2015 due to incremental rent expense and remain flat to
down through 2018
Rent payments per PropCo base case schedule, initial rent is $20 per sq. ft.
and increases 2% per year, 1.9x EBITDAR coverage
Free cash flow positive due to low growth capex after 2014
Modest leverage taken out, consistent with capital-light businesses
Source: Company Filings
Base Case Assumes Continued Deterioration In The Core Gym Business
20
Base Case OpCo Operating Model Assumptions
($ in Millions) 2014E 2015E 2016E 2017E 2018E
Model Drivers:
Gym Count 113 119 125 131 137
Growth 4.6% 5.3% 5.0% 4.8% 4.6%
Access Members 692,191 706,035 727,216 749,033 771,504
Growth 2.0% 2.0% 3.0% 3.0% 3.0%
Total Members 808,606 828,270 855,563 883,797 913,006
Sales / Member $1,617 $1,684 $1,729 $1,767 $1,807
Income Statement:
Total Revenue $1,307 $1,395 $1,479 $1,562 $1,650
Operating Expenses 894 936 996 1,048 1,108
EBITDAR $413 $459 $483 $514 $542
3rd Party Rent 41 42 43 44 44
PropCo Rent 0 195 213 231 251
EBITDA $372 $222 $228 $239 $247
D&A 133 92 97 103 109
Interest Expense 30 6 6 6 6
Taxes @ 40% 84 50 50 52 53
Working Capital 0 (14) (15) (16) (17)
SBC 14 14 14 14 14
Other 1 1 1 1 1
Operating Cash Flows $273 $195 $202 $211 $219
Capex 402 100 100 100 100
Free Cash Flow ($129) $95 $102 $111 $119
Balance Sheet:
Net Leverage 3.0x 0.9x 0.9x 0.8x 0.8x
Net Debt 1,125 194 194 194 194
Interest Rate 2.6% 3.0% 3.0% 3.0% 3.0%
Capitalization:
EV Multiple 6.5x 6.5x 6.5x 6.5x 6.5x
Enterprise Value 2,416 1,445 1,482 1,551 1,603
Less: Net Debt (1,125) (194) (194) (194) (194)
Equity Value 1,291 1,251 1,288 1,357 1,409
Bull case assumes REIT spin occurs at year-end 2014
Bull case projections assume the business stabilizes in 2015 and tailwinds
from improving center utilization drive operating metrics higher
Run rate of 6 greenfield gyms starting in 2015
Access membership growth catches up to gym count growth by 2016 and
exceeds gym count growth in outer years
Gyms continue to increase sales per member through price increases and in-
center sales growth
Margins decline in 2015 due to incremental rent expense but ramp up from
2015 to 2018
Rent payments per PropCo bull case schedule, initial rent is $22 per sq. ft. and
increases 2% per year, 2.1x EBITDAR coverage
Free cash flow positive due to low growth capex after 2014 and strong cash
earnings
Modest leverage taken out, consistent with capital-light businesses
Source: Company Filings
Bull Case Assumes Gym Business Stabilizes In 2015
21
Bull Case OpCo Operating Model Assumptions
($ in Millions) 2014E 2015E 2016E 2017E 2018E
Model Drivers:
Gym Count 113 119 125 131 137
Growth 4.6% 5.3% 5.0% 4.8% 4.6%
Access Members 698,978 733,926 770,623 809,154 849,612
Growth 3.0% 5.0% 5.0% 5.0% 5.0%
Total Members 815,392 856,162 898,970 943,918 991,114
Sales / Member $1,633 $1,726 $1,809 $1,890 $1,966
Income Statement:
Total Revenue $1,331 $1,478 $1,627 $1,784 $1,949
Operating Expenses 895 939 1,001 1,056 1,119
EBITDAR $436 $539 $626 $728 $830
3rd Party Rent 41 42 43 44 44
PropCo Rent 0 214 234 254 276
EBITDA $395 $283 $349 $430 $510
D&A 135 97 107 118 128
Interest Expense 30 6 6 6 6
Taxes @ 40% 93 72 95 123 151
Working Capital 0 (15) (16) (18) (19)
SBC 14 14 14 14 14
Other 1 1 1 1 1
Operating Cash Flows $288 $235 $280 $334 $388
Capex 402 100 100 100 100
Free Cash Flow ($114) $135 $180 $234 $288
Balance Sheet:
Net Leverage 2.8x 0.7x 0.6x 0.5x 0.4x
Net Debt 1,125 194 194 194 194
Interest Rate 2.6% 3.0% 3.0% 3.0% 3.0%
Capitalization:
EV Multiple 6.5x 6.5x 6.5x 6.5x 6.5x
Enterprise Value 2,568 1,839 2,269 2,793 3,313
Less: Net Debt (1,125) (194) (194) (194) (194)
Equity Value 1,443 1,644 2,075 2,599 3,119
Operating Company
2015E Sales $1,478
Operating Expenses 939
Rent 256
EBITDA $283
FCF $135
2015E EBITDA $283
EV/EBITDA Multiple 6.5x
Implied EV $1,839
Net Debt $194
Implied Net Leverage 0.7x
Implied Equity Value $1,644
Diluted Shares 39.099
OpCo Share Price $42.06
Metrics:
Implied EV/2015E Sales 1.2x
'15/'14 Sales Growth 11.0%
2015E EBITDA Margin 19.1%
2015E FCF Margin 9.1%
Implied 2015 FCF Yield 8.2%
Operating Company
2015E Sales $1,395
Operating Expenses 936
Rent 237
EBITDA $222
FCF $95
2015E EBITDA $222
EV/EBITDA Multiple 6.5x
Implied EV $1,445
Net Debt $194
Implied Net Leverage 0.9x
Implied Equity Value $1,251
Diluted Shares 39.099
OpCo Share Price $32.00
Metrics:
Implied EV/2015E Sales 1.0x
'15/'14 Sales Growth 6.7%
2015E EBITDA Margin 15.9%
2015E FCF Margin 6.8%
Implied 2015 FCF Yield 7.6%
Company Ticker Marketcap
Enterpise
Value
Net
Leverage 2015E Sales
'15/'14 Sales
Growth
EV / 2015E
Sales
2015E EBITDA
Margin
EV/2015E
EBITDA
LTMFCF
Margin
LTMFCF
Yield
Canadi an Ti re TSX:CTC.A 8,264 10,801 2.1x 11,336 2.5% 1.0x 10.7% 8.9x N/A N/A
Penn Nati onal Gami ng PENN 913 1,725 2.1x 2,655 4.2% 0.6x 10.8% 6.0x 1.9% 5.6%
The Ensi gn Group ENSG 772 745 (0.2x) 1,114 10.5% 0.7x 10.9% 6.2x N/A N/A
Mean $3,316 $4,424 1.3x $5,035 5.7% 0.8x 10.8% 7.0x 1.9% 5.6%
Median $913 $1,725 2.1x $2,655 4.2% 0.7x 10.8% 6.2x 1.9% 5.6%
Company Ticker Marketcap
Enterpise
Value
Net
Leverage 2015E Sales
'15/'14 Sales
Growth
EV / 2015E
Sales
2015E EBITDA
Margin
EV/2015E
EBITDA
LTMFCF
Margin
LTMFCF
Yield
GNC GNC $3,524 $4,750 2.4x $2,776 5.4% 1.7x 19.7% 8.7x 7.9% 5.9%
Town Sports CLUB 162 400 3.6x 446 (2.9%) 0.9x 13.8% 6.5x 5.5% 15.7%
Vi tami n Shoppe VSI 1,424 1,409 (0.1x) 1,372 12.0% 1.0x 12.6% 8.2x 1.3% 1.1%
Jamba JMBA 246 214 (3.0x) 217 (0.4%) 1.0x 11.6% 8.5x N/A N/A
Nauti l us NLS 395 338 (2.1x) 278 8.9% 1.2x 12.2% 9.9x 8.1% 5.0%
Nutri system NTRI 446 406 (1.6x) 435 8.1% 0.9x 10.5% 8.9x 7.3% 6.4%
Wei ght Watchers WTW 1,535 3,681 4.9x 1,381 (5.1%) 2.7x 22.6% 11.8x 13.8% 14.1%
Li fe Ti me Fi tness LTM 1,982 3,092 3.2x 1,399 8.1% 2.2x 28.6% 7.7x N/A N/A
Mean $1,214 $1,786 0.9x $1,038 4.3% 1.5x 16.5% 8.8x 7.3% 8.0%
Median $935 $908 1.1x $909 6.7% 1.1x 13.2% 8.6x 7.6% 6.1%
Base Case
Source: Company Filings, Capital IQ
Core Business Valuation Is Supportive Of The Proposed Transaction
22
Healthy Lifestyle Comparables
Real Estate Operating Company Comparables
Bull Case
LTMs historic multiple has been 7.0x 9.0x EV / NTM EBITDA
A 6.5x 2015E EBITDA multiple is in-line with OpCo comparables,
well-below healthy lifestyle comparables and discounted to
LTMs historic range
Selected Gym Business Multiple
2015 Access Member Growth
0.0% 1.0% 2.0% 3.0% 4.0%
5.5x 22.82 24.57 26.31 28.06 29.81
6.0x 25.34 27.25 29.16 31.07 32.97
6.5x 27.87 29.94 32.00 34.07 36.13
7.0x 30.40 32.62 34.85 37.07 39.30
7.5x 32.92 35.31 37.69 40.07 42.46 E
B
I
T
D
A

M
u
l
t
i
p
l
e
2015 Access Member Growth
3.0% 4.0% 5.0% 6.0% 7.0%
5.5x 31.26 33.04 34.82 36.60 38.38
6.0x 34.56 36.50 38.44 40.38 42.32
6.5x 37.85 39.95 42.06 44.16 46.26
7.0x 41.14 43.41 45.67 47.94 50.20
7.5x 44.44 46.86 49.29 51.72 54.14 E
B
I
T
D
A

M
u
l
t
i
p
l
e
LTM Multiple Last 4 Years
EV / NTM EBITDA
High 9.1x
Low 6.7x
Median 7.8x
Average 7.8x
1. Industry competition has intensified due to the popularity of capital-light studio-model fitness programs (i.e. cross-fit, yoga, ect.)
Life Time Fitness has a sustainable competitive advantage deriving from its unique gym assets ($2.9 billion in capex spent since 2004), its brand name ($200 million
in marketing spend since 2008) and the expertise of its gym operators, real estate managers, and executive management team developed over the past 20 years
The Company directly competes with studio-model clubs by offering studio-style classes on top of its existing platform. Management has discussed introducing
alternative membership plans which could offer access to certain services such as studio-style classes, locker rooms and spa without full access to gym and pool
2. Gym memberships are discretionary purchases sensitive to the economic cycle
Life Times scale and capital resources provide it sufficient financial strength to endure economic downturns
After the 2008 recession, the Company curtailed growth to become free cash flow positive and de-lever its balance sheet. Despite reduced investment, LTM grew
its operating cash flows by 11% per year from 2009 to 2011 and reduced membership churn from a 2009 peak
3. High membership costs limit Life Times total addressable market
Life Times stated target demographic is households earning over $100k. According to the Census Bureau, 24 million (~20%) U.S. households make over $100k per
year. Given that there are currently <1 million access members, there continues to be a large addressable market to tap into
4. Membership churn has sequentially increased since 2011; at 36% attrition, LTM will exhaust its customer base
Churn is related to all the above listed factors (competition, macro-environment, membership costs) as well as facility condition, seasonality and overall experience
Facility upkeep is essential to member retention. LTM spends ~100 million a year or ~8.00 per sq. ft. maintaining its facilities. Anecdotal evidence (conversations
with people familiar with the gyms, online reviews) suggest facilities, even old ones, are kept in pristine condition
Monthly membership cost ($50 - $200+) is at the upper-end of industry pricing and, according to management and online reviews, is the number one reason for
high attrition. Many people sign up only to realize they cannot afford or justify a membership. However, the most common form of membership is the family
member which is much stickier. Families get more utility from the mega-gym format because there is something for all ages and fitness routines
Seasonality is an artificial contributor to attrition. It is well known that people sign up for gyms in January only to give up several months in. LTM is also has
seasonal interest in its amenities. In winter, people sign up to use indoor tennis courts, pools, ect. In summer, a driver of membership is access to outdoor pools
Life Times Management has a deep understanding of membership attrition and has a team dedicated to improving retention. LTM is best in class when compared
to Town Sports current attrition level of 42% and legacy Bally Total Fitness levels of over 50%. Management has been able to reduce attrition in the past, reducing
attrition from 41% in 2009 to 31% in 2011
Core Business Challenges Are Serious, But Manageable
23
Key Business Risks And Mitigating Factors
24
Conclusion
Life Time Fitness Tennis Facility
Lakeville, MN
Life Time Fitness Status Quo Operating Company Property Company
Marketcap $1,996 2015E Sales $1,395 2015E NOI $195
Debt 1,125 Operating Expenses 936 Operating Expenses 20
Cash 16 EBITDAR $459 EBITDA $175
Minority Interest 0 3rd Party Rent 42 Interest Rate 5.5%
Enterprise Value $3,106 PropCo Rent 195 Interest Expense 53
EBITDA $222 Maintenance Capex 0
Diluted Shares 39.099 FFO $122
Implied Share Price $51.06 Operating Cash Flow 195
Capex 100 Payout Ratio 70.0%
2015E EBITDA $403 Free Cash Flow $95 Dividends $85
EV / 2015E EBITDA Multiple 7.7x Dividend Yield 5.7%
Net Debt / LTM EBITDA 3.2x
2015E EBITDA $222 2015E EBITDA $175
EV/EBITDA Multiple 6.5x EV/EBITDA Multiple 14.0x
Implied EV $1,445 Implied EV $2,446
Net Debt $194 Net Debt $961
Implied Net Leverage 0.9x Implied Net Leverage 5.5x
Implied Equity Value $1,251 Implied Equity Value $1,485
Current Implied Share Price $51.06
Sum-Of-The-Parts $69.98 Diluted Shares 39.099 Diluted Shares 39.099
Base Case Upside 37.1% OpCo Share Price $32.00 PropCo Share Price $37.98
Bear Case Downside (24.3%) Implied EV / Sales 1.0x Implied FFO Multiple 12.2x
Bull Case Upside 70.4% EBITDAR Coverage 1.9x Implied Cap Rate 8.0%
The Sum-Of-The-Parts Valuation Implies Significant Upside
25
Valuation Summary
Indicates Model Assumption
Because Life Time has only indicated that it is exploring a
REIT spin-off transaction and has not provided any technical
details, the market discounts the uncertainty
If the REIT spin-off does not occur, shares are likely to fall
20% - 30% due to the market penalizing it to a discounted
multiple on poor fundamentals and lack of catalysts
However, in conjunction with the initial announcement, LTM
indicated that it has hired financial and legal advisors to
review the potential conversion. The Company has also put in
place a shareholder rights plan to ensure that it will meet the
ownership requirements of a REIT conversion. These
circumstantial facts in addition to market and shareholder
support indicate that a REIT spin-off is very highly likely
If a REIT spin-off does occur, the analysis presented in this
report indicate that shareholders stand to gain under any
reasonable, even unreasonable, valuation sensitivity
Therefore, the risk vs. reward dynamic is positively skewed
given that there is a highly likely scenario where investors can
gain 37% - 70% and an unlikely outcome where investor can
lose 20% - 30%
Today, an investment in Life Time Fitness represents the
opportunity to own a world-class fitness center operator
with valuable assets on the cusp of unlocking value for
shareholders
Despite the recent appreciation in share price, LTM is trading
at a significant discount to its intrinsic value with the
opportunity for shares to appreciate 37% - 70% over the next
12 months in anticipation of the likely REIT spin-off
A REIT spin-off could unlock the value of real estate worth as
much as $2.5 - $3 billion, on a NAV basis, and worth as much
as $45 per share to shareholders as a publically traded REIT
The REIT spin-off would be praised by investors and would
enhance the financial characteristics of the two separated
entities
The core gym business is a valuable, capital-light asset that
generates consistent and growing cash flows
Given that the current market value of LTM is $2 billion, an
investor today can buy LTM for the real estate and after
adjusting for net debt, receive the remaining core gym
business at a 50% - 75% discount to its intrinsic value
Conclusion: Life Time Fitness Is On The Cusp Of Being Re-valued
26
Investment Highlights Risk Vs. Reward
27
Appendix
Life Time Fitness
Alpharetta, GA
Executive Management Team:
($ i n Thousands)
Name Position
Years at
LTM
2013 Cash
Comp.
2013 Equity
Comp.
LTM Stock
Ownership
Unvested
Stock Value
Bahram Akradi Chai rman & CEO 22 $2,178 $4,180 $128,668 $22,839
Eri c Buss Chi ef Fi nanci al Offi cer 15 436 836 7,551 4,700
Jeffrey Zwi efel Chi ef Operati ng Offi cer 15 532 836 6,888 4,700
Tami Kozi kowski EVP of Real Estate 2 436 501 6,382 1,857
John Hugo Pri nci pal Accounti ng Offi cer 12 N/A N/A 1,328 N/A
Jess El mqui st EVP of Human Resources 15 N/A N/A 1,434 N/A
Average 14 $895 $1,588 $25,375 $8,524
Board of Directors:
Name Position
Years at
LTM
2013 Total
Comp.
LTM Stock
Ownership Area of Expertise
Gi l es Bateman Fi nance Commi ttee Chai r 8 $173 $1,271 Pri ce Cl ub Founder
Jack Eugster Di rector 5 163 1,699 Experti se i n retai l
Guy Jackson Audi t Commi ttee Chai r 10 178 1,355 Ernst & Young Partner
John Ll oyd Di rector 5 163 1,071 Meri di an Heal th Presi dent
Martha Morfi tt Di rector 6 163 1,059 CNS CEO
John Ri chards Nomi nati ng Commi ttee Chai r 8 173 563 Experti se i n heal th servi ces
Joseph Vassal l uzzo Comp. Commi ttee Chai r 8 293 4,147 Experti se i n real estate
Average 7 $187 $1,595
Management & Board own $163 million in equity or 8.2% of company
Akradi serves as board chairman, all other directors are independent
Management is required to own stock worth 3x 5x their base salary
In 2013, total executive management compensation was down 13%
1
2014 Incentive compensation targets: 12% total shareholder return,
10% diluted EPS growth, 10% revenue growth, 10% EBITDA growth
and long-term ROIC target of 9.0%
1
Adjusted for Management turnover
Source: Company Filings
Management Has An Ownership Mentality And Is Aligned With Shareholders
28
Mr. Akradi founded Life Time Fitness in 1992 using
proceeds received from selling a very successful
regional gym chain to Bally Total Fitness
Bahramis the archetype of an owner-operator. He
is known to be a deeply involved, hands-on
operator who has a final say as to every major
decision from financing to gym locations
Akradi is the most visible figure on investor calls
and is a straight shooter. He gives direct answers to
questions and is not afraid to come off as stubborn
Braham is by all accounts a health nut, known to
run a spinning class when dropping in on a gym
Starting Life Time from scratch (after selling his
company) and growing the concept aggressively
shows that Akradi is a shrewd risk-taker
CEO Bahram Akradi Key Decision Makers And Governance
Akradi is the Companys founder and cares
deeply about its reputation
Akradis 2013 cash compensation was $2.2
million and total comp. was 2/3 equity-
based. With ~$129 million in held equity
(~6.5% LTMs market cap), Akradi gains the
most from increasing shareholder value
($ in Millions) Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
Sales:
Membershi p dues $145.2 $152.9 $155.3 $149.9 $158.0 $167.0 $171.5 $166.9 $175.5 $184.9 $187.6 $179.7 $186.4 $194.8 $195.7 $190.0 $196.8 $205.2
Enrol l ment fees 6.3 6.2 6.1 5.8 5.2 4.7 4.4 4.2 4.0 3.9 3.9 3.6 3.4 3.6 3.6 3.4 3.1 3.0
I n-center revenue 65.5 68.5 69.5 63.0 73.7 80.3 80.7 73.7 84.6 90.1 90.5 83.0 92.0 97.3 97.2 89.0 98.4 104.4
Other revenue 2.8 3.6 7.5 4.9 3.7 4.7 8.8 6.1 4.4 9.4 12.9 9.1 9.0 12.4 19.5 8.6 13.6 14.0
Total revenue $219.8 $231.1 $238.3 $223.7 $240.6 $256.7 $265.4 $250.9 $268.4 $288.3 $294.9 $275.3 $290.7 $308.1 $316.0 $291.0 $312.0 $326.6
Y/Y Growth % 6.5% 8.7% 11.2% 9.8% 9.5% 11.1% 11.4% 12.2% 11.6% 12.3% 11.1% 9.7% 8.3% 6.9% 7.2% 5.7% 7.3% 6.0%
Operating Expenses:
Center operati ons 137.6 142.2 145.2 136.1 149.6 156.7 159.3 149.4 160.7 166.6 169.5 159.1 170.0 176.8 180.4 169.0 183.1 194.0
Adverti si ng and marketi ng 6.8 5.9 6.3 8.2 8.6 9.0 8.9 9.8 10.4 9.7 8.8 11.1 11.0 9.6 9.8 12.4 12.3 9.7
General and admi n. 10.7 11.3 10.6 15.5 12.7 12.1 12.5 17.4 13.7 13.9 13.6 14.5 15.4 15.7 14.5 13.4 15.9 14.5
Other operati ng 4.3 5.5 7.3 6.4 6.0 8.0 9.4 12.2 8.4 12.8 14.1 16.9 12.8 15.2 18.5 17.9 14.4 16.4
EBITDA $59.70 $65.5 $68.3 $56.8 $63.2 $70.2 $74.6 $61.4 $74.6 $84.8 $88.2 $73.0 $81.0 $90.1 $92.2 $77.7 $85.5 $91.3
EBITDA Margin % 27.2% 28.3% 28.7% 25.4% 26.3% 27.4% 28.1% 24.5% 27.8% 29.4% 29.9% 26.5% 27.8% 29.2% 29.2% 26.7% 27.4% 28.0%
D&A 22.8 46.0 69.4 92.3 23.6 48.3 73.6 98.8 27.0 55.8 85.2 115.0 29.3 59.3 89.2 119.0 32.1 66.6
EBI T $36.94 $19.5 ($1.1) ($35.5) $39.6 $21.9 $0.9 ($37.5) $47.6 $29.0 $2.9 ($42.0) $51.7 $30.8 $2.9 ($41.2) $53.4 $24.7
EBIT Margin % 16.8% 8.4% (0.5%) (15.9%) 16.4% 8.5% 0.3% (14.9%) 17.7% 10.0% 1.0% (15.2%) 17.8% 10.0% 0.9% (14.2%) 17.1% 7.6%
Cash Flow:
Operati ng Cash Fl ow 53.9 100.7 146.1 192.3 60.1 118.5 177.3 227.9 73.9 142.2 202.9 255.7 76.2 124.5 190.8 258.4 77.7 133.7
Capex 23.0 48.2 86.1 131.7 38.4 83.0 122.1 165.3 38.5 106.1 164.6 224.2 59.1 137.4 224.5 348.9 82.8 253.4
% of Sales 10.5% 20.8% 36.1% 58.9% 15.9% 32.3% 46.0% 65.9% 14.3% 36.8% 55.8% 81.4% 20.3% 44.6% 71.1% 119.9% 26.6% 77.6%
FCF $30.8 $52.5 $60.0 $60.6 $21.8 $35.5 $55.2 $62.6 $35.4 $36.1 $38.3 $31.6 $17.1 ($13.0) ($33.8) ($90.5) ($5.2) ($119.7)
FCF Margin % 14.0% 22.7% 25.2% 27.1% 9.0% 13.8% 20.8% 25.0% 13.2% 12.5% 13.0% 11.5% 5.9% (4.2%) (10.7%) (31.1%) (1.7%) (36.7%)
Share Repurchases 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 19.1 19.3 28.2 40.3 62.0 60.5 140.0
Operating Metrics:
Broader Same Store Sal es 2.6% 4.8% 6.6% 5.9% 5.3% 5.4% 4.7% 5.0% 5.4% 4.2% 4.6% 4.3% 3.5% 4.8% 4.2% 3.6% 1.5% (0.6%)
Mature Same Store Sal es (1.2%) 1.8% 4.0% 4.0% 3.8% 4.5% 4.1% 4.9% 5.0% 3.6% 3.9% 3.7% 3.0% 3.8% 3.4% 2.7% 1.1% (0.9%)
Access Members 650,784 631,862 622,698 612,556 650,784 664,307 653,300 676,054 704,467 708,585 695,271 682,621 708,563 713,138 695,923 678,619 702,011 712,296
Other Members 50,001 56,768 63,535 70,302 81,554 87,180 89,993 92,806 93,173 94,304 100,831 104,382 101,250 99,728 105,928 110,871 110,000 110,725
Total Members 700,785 688,630 686,233 682,858 732,338 751,487 743,293 768,860 797,640 802,889 796,102 787,003 809,813 812,866 801,851 789,490 812,011 823,021
Center Sal es / Access Member 232.8 251.7 259.1 254.3 250.8 258.5 269.3 253.0 254.7 266.5 275.3 268.5 267.8 278.2 286.3 285.0 284.8 292.3
I n-center Sal es / Access Member 100.7 108.3 111.5 102.8 113.2 120.9 123.6 109.1 120.1 127.2 130.2 121.6 129.8 136.4 139.7 131.2 140.2 146.5
Gym Count 86 88 89 89 90 92 92 101 103 105 105 105 105 106 107 108 108 112
Annual i zed Quarterl y Attri ti on 39.3% 38.2% 37.1% 36.3% 36.1% 35.8% 35.3% 35.0% 31.7% 31.9% 32.9% 33.5% 33.9% 34.5% 35.0% 35.8% 35.7% 35.8%
Quarterl y Attri ti on 10.8% 8.5% 8.4% 9.9% 8.4% 8.1% 9.0% 9.6% 7.9% 7.6% 9.0% 9.1% 8.2% 8.2% 9.5% 9.8% 8.2% 8.3%
Historical Quarterly Financials
29
Source: Company Filings
($ in Actuals) Average Net Lease Average Full Lease
Property Type Property Count Asking TI Rent Expenses Rent LTM Sq. Ft Rent (A) Rent (A+E) Rent (A+E+Tl)
JV Interest 1 $12.07 $16.05 $28.12 $4.24 $32.36 108,890 $1,314,302 $1,775,996 $3,090,298
Leased 22 12.60 12.49 25.10 4.89 29.99 1,179,457 15,289,208 21,628,387 36,917,595
Mortgage 32 11.42 12.93 24.36 4.96 29.32 3,553,625 40,273,000 57,905,146 98,178,146
Sale/Leaseback 7 12.36 12.72 25.09 4.63 29.72 754,176 9,448,203 12,881,548 22,329,751
Owned 41 12.39 15.12 27.51 5.13 32.64 4,237,606 52,515,669 74,064,006 126,579,675
Ground Leased 9 14.54 13.32 27.86 6.20 34.07 964,878 14,310,134 20,265,653 34,575,787
Tennis 2 12.29 18.12 30.41 6.59 37.00 91,090 1,109,927 1,646,811 2,756,738
Total Facilities (incl. Tennis) 114 $12.53 $14.39 $26.92 $5.24 $32.16 10,889,722 $134,260,443 $190,167,547 $324,427,990
Detailed Property Breakout And Brokerage Estimates
30
Source: Equity Research
Net Lease Total Lease
Type Metro State Submarket A/N Asking Expenses Rent TI Rent LTM Sq Ft Rent (A) Rent (A+E) Rent (A+E+TI) Club Name
Owned Birmingham AL South A $11.67 $3.80 $15.47 $13.21 $28.68 103,647 $1,209,560 $1,603,419 $2,972,596 Vestavia Hills
Sale/Leaseback Phoenix AZ NW Phoenix/Glendale A $9.51 $3.59 $13.10 $8.25 $21.35 109,775 1,043,960 1,438,053 2,343,696 Scottsdale
Owned Phoenix AZ W Phx/SW Valley A $9.09 $4.60 $13.69 $7.20 $20.89 109,775 997,855 1,502,820 2,293,200 Palm Valley
Mortgage Phoenix AZ Mesa/Chndlr./Gilbrt. A $11.60 $3.38 $14.98 $13.03 $28.01 108,890 1,263,124 1,631,172 3,050,009 Gilbert
Mortgage Phoenix AZ Tempe/S Phoenix A $9.68 $5.03 $14.71 $7.56 $22.27 108,890 1,054,055 1,601,772 2,424,980 Tempe
Leased Phoenix AZ N Sctsdle./Par. Vly. N $24.50 $5.17 $29.67 $9.11 $38.78 20,620 505,190 611,795 799,644 Lifepower Yoga at Pima Crossing
Ground Leased Orange County CA South A $22.11 $7.23 $29.34 $15.20 $44.54 127,000 2,807,970 3,726,180 5,656,580 Laguna Niguel
Tennis Denver CO South A $12.13 $5.53 $17.66 $18.68 $36.34 75,450 915,209 1,332,447 2,741,853 Centennial Tennis
Owned Denver CO South A $12.13 $5.53 $17.66 $18.68 $36.34 129,182 1,566,978 2,281,354 4,694,474 Centennial
Owned Colorado Springs CO Northeast A $10.20 $3.96 $14.16 $18.30 $32.46 112,110 1,143,522 1,587,478 3,639,091 Colorado Springs
Mortgage Denver CO Southeast A $10.05 $3.10 $13.15 $13.61 $26.76 129,155 1,298,008 1,698,388 3,456,188 Parker Aurora
Mortgage Denver CO Northeast A $9.61 $4.13 $13.74 $6.62 $20.36 112,110 1,077,377 1,540,391 2,282,560 Westminster
Mortgage Palm Beach FL Boca Raton A $14.96 $7.13 $22.09 $17.66 $39.75 73,688 1,102,372 1,627,768 2,929,098 Boca Raton
Leased Tampa-St. Petersburg FL Downtown Estimated A $9.97 $5.00 $14.97 $12.00 $26.97 60,000 598,080 898,080 1,618,080 Tampa
Sale/Leaseback Atlanta GA Sndy. Sprgs./N Fult. A $12.29 $2.74 $15.03 $5.61 $20.64 109,720 1,348,459 1,649,092 2,264,621 Alpharetta
Owned Atlanta GA Cumberland/East Cobb A $11.44 $2.15 $13.59 $7.69 $21.28 112,110 1,282,538 1,523,575 2,385,701 Woodstock-Mountain Brook
Mortgage Atlanta GA Sndy. Sprgs./N Fult. A $12.29 $2.74 $15.03 $5.61 $20.64 112,110 1,377,832 1,685,013 2,313,950 Johns Creek
Mortgage Atlanta GA P'Tree Cnrs./Norcss. A $10.60 $2.23 $12.83 $6.16 $18.99 112,110 1,188,366 1,438,371 2,128,969 Sugar Loaf
Leased Atlanta GA P'Tree Cnrs./Norcss. A $10.60 $2.23 $12.83 $6.16 $18.99 22,703 240,652 291,279 431,130 Peachtree Corners Tennis
Ground Leased Atlanta GA Sndy. Sprgs./N Fult. A $12.29 $2.74 $15.03 $5.61 $20.64 116,848 1,436,062 1,756,225 2,411,743 Atlanta
Owned Des Moines IA N/A A $8.00 $5.00 $13.00 $12.00 $25.00 175,000 1,400,000 2,275,000 4,375,000 Des Moines
Sale/Leaseback Chicago IL Far West A $11.28 $6.09 $17.37 $19.22 $36.59 110,563 1,247,151 1,920,479 4,045,500 Romeoville
Owned Chicago IL Kane A $11.84 $4.81 $16.65 $11.63 $28.28 108,890 1,289,258 1,813,019 3,079,409 Algonquin
Owned Chicago IL Far North A $13.81 $8.30 $22.11 $23.76 $45.87 108,890 1,503,771 2,407,558 4,994,784 Old Orchard
Owned Chicago IL Lake/McHenry A $12.75 $6.01 $18.76 $19.79 $38.55 140,495 1,791,311 2,635,686 5,416,082 Vernon Hills
Mortgage Chicago IL Far West A $11.28 $6.09 $17.37 $19.22 $36.59 105,562 1,190,739 1,833,612 3,862,514 Burr Ridge
Mortgage Chicago IL Southwest A $10.43 $6.10 $16.53 $10.87 $27.40 108,890 1,135,723 1,799,952 2,983,586 Orland Park
Mortgage Chicago IL Far Northwest A $10.68 $7.88 $18.56 $17.09 $35.65 108,890 1,162,945 2,020,998 3,881,929 Schaumburg
Mortgage Chicago IL Far West A $11.28 $6.09 $17.37 $19.22 $36.59 114,933 1,296,444 1,996,386 4,205,398 Warrenville
JV Interest Chicago IL Lombard/Addison A $12.07 $4.24 $16.31 $16.05 $32.36 108,890 1,314,302 1,775,996 3,523,680 Bloom in gdale
Owned Indianapolis IN Northeast A $10.91 $3.99 $14.90 $9.65 $24.55 90,956 992,330 1,355,244 2,232,970 Castle Creek
Owned Indianapolis IN North A $13.00 $4.84 $17.84 $23.77 $41.61 32,000 416,000 570,880 1,331,520 Fishers
Leased Indianapolis IN Northwest A $8.90 $4.55 $13.45 $15.11 $28.56 44,000 391,600 591,800 1,256,640 North Meridian
Sale/Leaseback Baltimore MD Howard/Carroll Cos. A $16.01 $3.61 $19.62 $14.58 $34.20 110,563 1,770,114 2,169,246 3,781,255 Columbia
Leased Suburban Maryland MD Gthsbg./Rkvle./Germ. A $19.87 $7.68 $27.55 $14.42 $41.97 66,700 1,325,329 1,837,585 2,799,399 Rockville
Owned Detroit MI North Oakland A $14.14 $5.99 $20.13 $12.92 $33.05 108,890 1,539,705 2,191,956 3,598,815 Rochester Hills
Owned Detroit MI Detroit/West Wayne A $9.26 $4.02 $13.28 $13.19 $26.47 108,890 1,008,321 1,446,059 2,882,318 Canton Township
Owned Detroit MI Detroit/West Wayne A $9.26 $4.02 $13.28 $13.19 $26.47 90,956 842,253 1,207,896 2,407,605 Novi
Net Lease Total Lease
Type Metro State Submarket A/N Asking Expenses Rent TI Rent LTM Sq Ft Rent (A) Rent (A+E) Rent (A+E+TI) Club Name
Owned Detroit MI Macomb A $10.63 $3.22 $13.85 $12.70 $26.55 101,680 1,080,858 1,408,268 2,699,604 Shelby Township
Owned Detroit MI North Oakland A $14.14 $5.99 $20.13 $12.92 $33.05 93,579 1,323,207 1,883,745 3,092,786 Troy
Mortgage Detroit MI South Oakland A $11.27 $4.03 $15.30 $13.47 $28.77 108,890 1,227,190 1,666,017 3,132,765 Commerce Township
Leased Detroit MI South Oakland A $11.27 $4.03 $15.30 $13.47 $28.77 75,000 845,250 1,147,500 2,157,750 Bloomfield
Tennis Minneapolis MN West Hennepin County A $12.45 $7.65 $20.10 $17.56 $37.66 15,640 194,718 314,364 589,002 Oakdale Village Tennis
Sale/Leaseback Minneapolis MN St. Paul A $9.82 $6.51 $16.33 $12.68 $29.01 73,050 717,351 1,192,907 2,119,181 Woodbury
Owned Minneapolis MN Dakota County A $13.27 $6.05 $19.32 $12.69 $32.01 64,415 854,787 1,244,498 2,061,924 Eagan
Owned Minneapolis MN St. Paul A $9.82 $6.51 $16.33 $12.68 $29.01 39,678 389,638 647,942 1,151,059 Highland Park
Owned Minneapolis MN Dakota County A $13.27 $6.05 $19.32 $12.69 $32.01 115,030 1,526,448 2,222,380 3,682,110 Lakeville
Owned Minneapolis MN West Hennepin County A $12.45 $7.65 $20.10 $17.56 $37.66 72,500 902,625 1,457,250 2,730,350 Maple Grove
Owned Minneapolis MN West Hennepin County A $12.45 $7.65 $20.10 $17.56 $37.66 41,000 510,450 824,100 1,544,060 Minnetonka
Owned Minneapolis MN Anoka Co/SE Sherbrne A $11.99 $5.54 $17.53 $14.10 $31.63 58,782 704,796 1,030,448 1,859,275 White Bear Lake
Mortgage Minneapolis MN E Hennepin/Mnpls. A $14.16 $6.86 $21.02 $9.46 $30.48 47,307 669,867 994,393 1,441,917 Bloomington North
Mortgage Minneapolis MN Dakota County A $13.27 $6.05 $19.32 $12.69 $32.01 95,314 1,264,817 1,841,466 3,051,001 Bloomington South
Mortgage Minneapolis MN N/A A $8.00 $5.00 $13.00 $12.00 $25.00 110,563 884,504 1,437,319 2,764,075 Chanhassen (corp.)
Mortgage Minneapolis MN West Hennepin County A $12.45 $7.65 $20.10 $17.56 $37.66 145,896 1,816,405 2,932,510 5,494,443 Crosstown Eden Prairie
Mortgage Minneapolis MN West Hennepin County A $12.45 $7.65 $20.10 $17.56 $37.66 89,011 1,108,187 1,789,121 3,352,154 Eden Prairie Athletic
Mortgage Minneapolis MN St. Paul A $9.82 $6.51 $16.33 $12.68 $29.01 162,048 1,591,311 2,646,244 4,701,012 Fridley
Mortgage Minneapolis MN E Hennepin/Mnpls. A $14.16 $6.86 $21.02 $9.46 $30.48 189,496 2,683,263 3,983,206 5,775,838 St. Louis Park
Leased Minneapolis MN Dakota County A $13.27 $6.05 $19.32 $12.69 $32.01 10,375 137,676 200,445 332,104 Apple Vailey
Leased Minneapolis MN Anoka Co/SE Sherbrne A $11.99 $5.54 $17.53 $14.10 $31.63 90,262 1,082,241 1,582,293 2,854,987 Coon Rapids
Leased Minneapolis MN E Hennepin/Mnpls. A $14.16 $6.86 $21.02 $9.46 $30.48 71,195 1,008,121 1,496,519 2,170,024 Minneapolis Athletic Club
Leased Minneapolis MN E Hennepin/Mnpls. A $14.16 $6.86 $21.02 $9.46 $30.48 44,156 625,249 928,159 1,345,875 New Hope
Leased Minneapolis MN St. Paul A $9.82 $6.51 $16.33 $12.68 $29.01 14,000 137,480 228,620 406,140 Roseville (women only)
Leased Minneapolis MN E Hennepin/Mnpls. A $14.16 $6.86 $21.02 $9.46 $30.48 170,925 2,420,298 3,592,844 5,209,794 Target Center
Ground Leased Minneapolis MN West Hennepin County A $12.45 $7.65 $20.10 $17.56 $37.66 61,948 771,253 1,245,155 2,332,962 Champlin
Ground Leased Minneapolis MN West Hennepin County A $12.45 $7.65 $20.10 $17.56 $37.66 109,558 1,363,997 2,202,116 4,125,954 Plymouth
Ground Leased Minneapolis MN N/A A $8.00 $5.00 $13.00 $12.00 $25.00 80,583 644,664 1,047,579 2,014,575 Savage
Owned Kansas City MO Johnson County A $10.60 $3.95 $14.55 $16.63 $31.18 112,110 1,188,366 1,631,201 3,495,590 Lenexa
Owned St. Louis MO Saint Louis Central A $14.79 $3.66 $18.45 $8.37 $26.82 112,110 1,658,107 2,068,430 3,006,790 West County
Mortgage Kansas City MO Johnson County A $10.60 $3.95 $14.55 $16.63 $31.18 110,080 1,166,848 1,601,664 3,432,294 Overland Park
Ground Leased Canada N/A N/A A $8.00 $5.00 $13.00 $12.00 $25.00 146,674 1,173,392 1,906,762 3,666,850 Canada
Mortgage Raleigh-Durham NC Cary/SW Raleigh A $12.78 $2.66 $15.44 $12.55 $27.99 109,995 1,405,736 1,698,323 3,078,760 Cary
Leased Raleigh-Durham NC Cary/SW Raleigh A $12.78 $2.66 $15.44 $12.55 $27.99 35,244 450,418 544,167 986,480 Apex
Leased Charlotte NC East A $9.41 $3.56 $12.97 $23.51 $36.48 36,594 344,350 474,624 1,334,949 Matthews
Leased Raleigh-Durham NC North Raleigh A $11.55 $2.67 $14.22 $12.76 $26.98 32,000 369,600 455,040 863,360 Plantation Point
Leased Raleigh-Durham NC North Raleigh A $11.55 $2.67 $14.22 $12.76 $26.98 45,306 523,284 644,251 1,222,356 Six Forks
Leased Charlotte NC North A $12.13 $2.99 $15.12 $15.10 $30.22 35,230 427,340 532,678 1,064,651 University
Sale/Leaseback Omaha NE West A $14.07 $4.82 $18.89 $10.79 $29.68 115,030 1,618,472 2,172,917 3,414,090 Omaha
Owned Northern New Jersey NJ North Morris A $18.76 $5.58 $24.34 $19.27 $43.61 109,995 2,063,506 2,677,278 4,796,882 Florham Park
Owned Northern New Jersey NJ North Bergen A $21.84 $5.88 $27.72 $35.19 $62.91 102,563 2,239,976 2,843,046 6,452,238 Montvale
Ground Leased Northern New Jersey NJ Union N $24.32 $6.20 $30.52 $5.49 $36.01 112,110 2,726,515 3,421,597 4,037,081 Berkeley Heights
Owned Las Vegas NV Northwest A $11.59 $4.06 $15.65 $19.39 $35.04 143,286 1,660,685 2,242,426 5,020,741 Summerlin
Owned Westchester NY Central Westchester A $25.08 $12.61 $37.69 $26.91 $64.60 135,993 3,410,704 5,125,576 8,785,148 Westchester
Ground Leased Long Island NY Glen Cove A $22.71 $11.79 $34.50 $20.63 $55.13 112,110 2,546,018 3,867,795 6,180,624 Syosset
Owned Cleveland OH East Suburban A $13.03 $5.56 $18.59 $19.73 $38.32 112,110 1,460,793 2,084,125 4,296,055 Beachwood
Owned Cincinnati OH Outer Counties A $8.86 $3.56 $12.42 $13.46 $25.88 127,040 1,125,574 1,577,837 3,287,795 Deerfield Township
Detailed Property Breakout And Brokerage Estimates, Continued
31
Source: Equity Research
Detailed Property Breakout And Brokerage Estimates, Continued
32
Source: Equity Research
Net Lease Total Lease
Type Metro State Submarket A/N Asking Expenses Rent TI Rent LTM Sq Ft Rent (A) Rent (A+E) Rent (A+E+TI) Club Name
Owned Columbus OH Northwest A $9.32 $4.47 $13.79 $7.70 $21.49 109,045 1,016,299 1,503,731 2,343,377 Dublin
Leased Columbus OH Southeast A $7.64 $2.24 $9.88 $11.35 $21.23 27,000 206,280 266,760 573,210 Pickerington
Leased Columbus OH Northwest A $9.32 $4.47 $13.79 $7.70 $21.49 35,055 326,713 483,408 753,332 Upper Arlington
Ground Leased Columbus OH Northeast A $8.57 $2.57 $11.14 $13.82 $24.96 98,047 840,263 1,092,244 2,447,253 Easton
Owned Tulsa OK Southeast A $9.29 $3.57 $12.86 $14.96 $27.82 114,441 1,063,157 1,471,711 3,183,749 South Tulsa
Owned Memphis TN East Mem./Germantown A $9.36 $3.94 $13.30 $12.94 $26.24 112,110 1,049,350 1,491,063 2,941,766 Collierville
Sale/Leaseback Dallas TX Allen/Frisco/McKinny A $13.57 $5.07 $18.64 $17.94 $36.58 125,475 1,702,696 2,338,854 4,589,876 Allen
Owned Houston TX West/Katy Freeway A $11.08 $4.14 $15.22 $13.50 $28.72 108,890 1,206,501 1,657,306 3,127,321 Cinco Ranch
Owned Houston TX Northwest A $12.47 $5.11 $17.58 $10.62 $28.20 140,495 1,751,973 2,469,902 3,961,959 City Centre Houston
Owned Houston TX Northeast/Humble A $9.13 $3.32 $12.45 $10.07 $22.52 50,085 457,276 623,558 1,127,914 Kingwood
Owned Fort Worth TX Arlington A $8.89 $3.45 $12.34 $10.41 $22.75 129,155 1,148,188 1,593,773 2,938,276 Mansfield
Owned Dallas TX Allen/Frisco/McKinny A $13.57 $5.07 $18.64 $17.94 $36.58 108,890 1,477,637 2,029,710 3,983,196 Plano/Life Time Athletic Plano
Mortgage Austin TX Rnd. Rk./Wllmsn. Co. A $12.16 $4.34 $16.50 $12.92 $29.42 110,563 1,344,446 1,824,290 3,252,763 Austin
Mortgage Houston TX FM 1960/Far NW A $11.58 $2.06 $13.64 $11.45 $25.09 108,890 1,260,946 1,485,260 2,732,050 Champions
Mortgage Fort Worth TX Northeast A $11.28 $4.61 $15.89 $19.63 $35.52 108,890 1,228,279 1,730,262 3,867,773 Colleyville
Mortgage Dallas TX Carrollton/SE Denton A $9.69 $3.81 $13.50 $12.59 $26.09 108,890 1,055,144 1,470,015 2,840,940 Flower Mound
Mortgage Dallas TX Northeast A $8.61 $2.58 $11.19 $11.74 $22.93 108,890 937,543 1,218,479 2,496,848 Garland
Mortgage Houston TX Northeast/Humble A $9.13 $3.32 $12.45 $10.07 $22.52 112,110 1,023,564 1,395,770 2,524,717 Lake Houston
Mortgage San Antonio TX North/North Central A $11.83 $5.08 $16.91 $11.23 $28.14 112,110 1,326,261 1,895,780 3,154,775 Northwest San Antonio
Mortgage San Antonio TX Northeast A $9.22 $4.73 $13.95 $14.12 $28.07 110,563 1,019,391 1,542,354 3,103,503 San Antonio
Mortgage Austin TX South Austin A $13.87 $8.03 $21.90 $14.56 $36.46 109,045 1,512,454 2,388,086 3,975,781 South Austin
Mortgage Houston TX SW/Ft. Bend County A $9.30 $3.22 $12.52 $10.41 $22.93 108,890 1,012,677 1,363,303 2,496,848 Sugar Land
Leased Dallas TX Oaklawn A $14.68 $7.89 $22.57 $13.50 $36.07 62,000 910,160 1,399,340 2,236,340 Life Time Athletic Dallas
Leased Dallas TX Farmers Branch A $10.29 $5.55 $15.84 $11.72 $27.56 68,982 709,825 1,092,675 1,901,144 North Dallas
Owned Salt Lake City UT Southwest A $9.98 $4.69 $14.67 $16.27 $30.94 108,925 1,087,072 1,597,930 3,370,140 South Jordan
Owned Suburban Virginia VA Suburban Fairfiax Co. A $17.45 $5.94 $23.39 $14.39 $37.78 67,467 1,177,299 1,578,053 2,548,903 Fairfax
Owned Suburban Virginia VA Suburban Fairfiax Co. A $17.45 $5.94 $23.39 $14.39 $37.78 114,441 1,996,995 2,676,775 4,323,581 Reston
Mortgage Suburban Virginia VA Suburban Fairfiax Co. A $17.45 $5.94 $23.39 $14.39 $37.78 90,956 1,587,182 2,127,461 3,436,318 Centerville
Leased Suburban Virginia VA Loudoun County A $15.20 $5.57 $20.77 $15.80 $36.57 112,110 1,704,072 2,328,525 4,099,863 Loudoun County
Thank You!
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DISCLOSURE: I OWN SHARES OF LIFE TIME FITNESS
DISCLAIMER: THIS PRESENTATION IS NOT A RECOMMENDATION TO BUY OR SELL SECURITIES. PLEASE DO YOUR OWN RESEARCH.
EVERYTHING PRESENTED CONSISTS OF MY OWN OPINIONS AND DOES NOT REPRESENT ANY CURRENT OR FORMER EMPLOYERS.