As Life Time Fitness grows its portfolio nationally, Lifestyle Family Fitness is drastically cutting back its operations, focusing its efforts instead in its home state of Florida.
Last month, in a deal that involved two top 10 club companies on Club Industry’s Top 100 Clubs list, Life Time acquired four Lifestyle clubs, two each in the Indianapolis and Columbus, OH, areas. Before the deal is finalized, though, Life Time could acquire more Lifestyle clubs, including up to five of the six Lifestyle clubs in North Carolina, says Jason Thunstrom, vice president of public relations and corporate communications for Chanhassen, MN-based Life Time. (Update: As of Dec. 1, Life Time is operating a total of nine former Lifestyle clubs, Thunstrom says.)
With the sale and club closures, St. Petersburg, FL-based Lifestyle is leaving the Ohio, Indiana and North Carolina markets entirely. It closed six clubs in Ohio, two clubs in Indianapolis and, according to Thunstrom, is closing the remaining club in North Carolina (Cary). The company, which had 55 clubs before the sale, now has 33 clubs—all in Florida—where it plans to make investments and upgrades. (Lifestyle closed two Florida clubs this month.)
Lifestyle made its first foray into Columbus in 2005 when it purchased eight former California Fitness Clubs.
“A lot of club companies grew at the height of the market—2005, 2006, 2007,” says Geoff Dyer, founder and former CEO of Lifestyle Family Fitness. “We developed clubs when rents were high and the economy was at a very high level as far as economic growth and employment. Subsequent to that time, we’ve seen continuous increases in unemployment levels, and there’s been a lot of rent reductions that other businesses have been able to enjoy and grow with. We didn’t have those privileges.
“We had clubs that we had built that hadn’t fully matured, some that had. Some of those markets were doing extremely well. It was really a great opportunity for us to do something with Life Time that made us elect not to continue our growth in those states.”
The terms of the deal were not disclosed. Although Life Time is a public company, the company is not compelled to disclose the terms of each deal individually and instead reports all acquisition investments in an aggregated manner each quarter, Thunstrom says.
In a statement, Bahram Akradi, Life Time’s chairman, president and CEO, said that once the company absorbs the integration costs in the deal, it expects the acquisition “to be neutral to slightly accretive” to its 2012 earnings.
“Consistent with our long-held strategy, the acquisition and operation of these clubs, which are similar to our existing, smaller format Life Time centers, brings an infill opportunity to markets in which we already operate large Life Time destinations,” Akradi said in the statement. “We are excited to extend our Healthy Way of Life programs, services and certified experts to a new base of members as we further expand in these current Life Time markets via this agreement.”
Life Time already operates a large-format club in Indianapolis and two large-format clubs in the Columbus area. It also operates a large-format club in Cary, NC, where Lifestyle had also operated.
Thunstrom says that since 1995, the company has strategically placed smaller-format clubs in areas in which Life Time operates large-format clubs in order to “extend our Life Time–Healthy Way of Life presence in those markets.” Examples of the smaller-format clubs include five in Minnesota (Apple Valley, Bloomington, Highland Park, New Hope and Roseville) and three in Texas (North Dallas, Premiere Place and Kingwood).
“Regardless of square footage, however, all of our centers bring the Life Time look, finish and brand consistency consumers have come to expect,” Thunstrom says.
Dyer says Life Time and Akradi have shown an interest in Lifestyle for quite some time.
“We’ve always had a great relationship with Life Time, and I’ve always had a good relationship with Bahram Akradi,” Dyer says. “We’ve talked about this being a possibility as many as three or four years ago. This wasn’t something that just happened in 90 days. It was something that I think in the back of his mind, he has probably always considered this to be an option for Life Time. In many respects, [Lifestyle] is very similar to [Life Time’s] model—month-to-month memberships, mid-price-level price points, not dissimilar operationally. I don’t consider this to be an unusual outcome. It was a matter of time anyway.”
Life Time is No. 3 on the Top 100 Clubs list this year with a reported $912.8 million in 2010 revenue. Prior to the announcement of the acquisition, Life Time operated 92 clubs in 21 states, so the deal could potentially put Life Time over the 100 clubs mark. The company grew revenue by 11.4 percent in third quarter 2011 and by 10.7 percent for the first nine months of 2011. It expects to generate at least $1 billion this year. Next year, the company plans to open three new clubs, including one in Mississauga, Ontario, Canada, and another in Tulsa, OK.
Lifestyle is No. 10 on the Top 100 Clubs list with a reported $102.4 million in 2010 revenue.
Dyer, who will operate the two remaining clubs in Ohio as well as remain a member of Lifestyle’s board, says Life Time’s acquisition is a good one overall for the industry.
“It’s going to create a lot of opportunities,” he says. “[Life Time is] a high-value proposition, and I think when you’ve got so many low-price clubs opening, it’s good to see someone investing with confidence in that area.”