Life Time Closes on $90 Million Sale-Leaseback Transaction
Life Time (NYSE: LTH) has completed a $90 million sale-leaseback transaction for two properties on June 28, 2024, bringing its total gross proceeds from sale-leasebacks to $130 million for the year.
The company is negotiating additional sale-leasebacks expected to yield $40-$65 million by Q3's end. Most proceeds will reduce debt and help achieve a net debt-to-Adjusted EBITDA leverage ratio below 3 times. The strong financial performance will offset the incremental rent expense from these transactions.
CEO Bahram Akradi expects these transactions to contribute to positive free cash flow and revenue and Adjusted EBITDA growth by low double digits.
- $90 million sale-leaseback transaction completed, adding to $130 million total gross proceeds YTD.
- Future sale-leasebacks expected to yield $40-$65 million by end of Q3.
- Proceeds aimed at reducing debt and achieving a leverage ratio under 3 times.
- Strong financial performance expected to cover incremental rent expenses.
- CEO anticipates positive free cash flow and low double-digit growth in revenue and Adjusted EBITDA.
- None.
Insights
Life Time's recent sale-leaseback transaction is a notable move. Through this approach, the company sells property and subsequently leases it back, hence maintaining operational control while unlocking capital. The gross proceeds of
Investors should note the company's goal to achieve a net debt-to-Adjusted EBITDA ratio of under 3 times. Presently, this figure is important since a lower ratio indicates less financial risk and greater financial health. Additionally, Life Time forecasts low double-digit growth in revenue and Adjusted EBITDA, alongside positive free cash flow—a sign of robust ongoing business health.
However, potential risks include the incremental rent expense due to these leases, which could impact net income if not effectively managed. Life Time's confidence in covering this expense is reassuring but should be monitored closely.
Life Time's sale-leaseback transactions align with current industry trends where companies monetize their real estate assets to unlock capital for operational use. This strategy is increasingly common among firms looking to bolster liquidity without resorting to traditional financing methods, which may come with higher interest rates or additional conditions.
The market response to such transactions can be positive, reflecting confidence in the company's ability to leverage its assets efficiently. The expected additional
Nonetheless, the reliance on sale-leaseback transactions should be balanced with sustainable operational performance to avoid becoming overly dependent on this singular strategy.
CHANHASSEN, Minn., July 1, 2024 /PRNewswire/ -- Life Time Group Holdings, Inc. ("Life Time" or the "Company") (NYSE: LTH) announced that on Friday, June 28, 2024, it closed on a sale-leaseback transaction for two properties totaling
The majority of the proceeds from this transaction will be used to reduce debt and accelerate the timing for the Company to achieve its priority of a net debt-to-Adjusted EBITDA leverage ratio under 3 times. The continued strong financial performance of the Company's business will be more than sufficient to cover the incremental rent expense from these transactions.
"We are excited that we are on track to deliver positive free cash flow in the second quarter even without the proceeds from these sale-leasebacks," said Life Time Founder, Chairman, and CEO, Bahram Akradi. "These sale-leaseback transactions will additionally support the great progress we are making towards reducing our net debt-to-Adjusted EBITDA leverage ratio to under 3 times sooner than expected, and we are confident that we will grow our revenue and Adjusted EBITDA by low double digits while continuing to deliver positive free cash flow."
About Life Time
Life Time (NYSE: LTH) empowers people to live healthy, happy lives through its portfolio of more than 170 athletic country clubs across the United States and Canada. The health and wellness pioneer also delivers a range of healthy way of life programs and information via its complimentary Life Time Digital app. The Company's healthy living, healthy aging, healthy entertainment communities and ecosystem serve people 90 days to 90+ years old and is supported by a team of more than 39,000 dedicated professionals. In addition to delivering the best programs and experiences through its clubs, Life Time owns and produces nearly 30 of the most iconic athletic events in the country.
Forward-Looking Statements
This press release includes "forward-looking statements" within the meaning of federal securities regulations. Forward-looking statements in this press release include, but are not limited to, the Company's plans, strategies and prospects, both business and financial, including its priorities for 2024, growth, improvements to its balance sheet, net debt and leverage ratio, free cash flow, rent expense, and successful signings and closings of sale-leaseback transactions (including the amount, pricing and timing thereof). These statements are based on the beliefs and assumptions of the Company's management. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning the Company's possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. These statements may be preceded by, followed by or include the words "believe," "expect," "anticipate," "intend," "plan," "estimate" or similar expressions. In addition, any statements or information that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking.
Factors that could cause actual results to differ materially from those forward-looking statements included in this press release include, but are not limited to, risks relating to our business operations and competitive and economic environment, risks relating to our brand, risks relating to the growth of our business, risks relating to our technological operations, risks relating to our capital structure and lease obligations, risks relating to our human capital, risks relating to legal compliance and risk management and risks relating to ownership of our common stock and the other important factors discussed under the caption "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (the "SEC") on February 28, 2024, (File No. 001-40887), as such factors may be updated from time to time in the Company's other filings with the SEC, which are accessible on the SEC's website at www.sec.gov. These and other important factors could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release. Any forward-looking statement that the Company makes in this press release speaks only as of the date of such statement. Except as required by law, the Company does not have any obligation to update or revise, or to publicly announce any update or revision to, any of the forward-looking statements, whether as a result of new information, future events or otherwise.
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SOURCE Life Time Group Holdings, Inc.
FAQ
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