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Life Time Inc. founder and CEO Bahram Akradi has Life Time Construction building a new office building at the company’s headquarters at 2902 Corporate Place in Chanhassen to house the company’s growing real estate, development and construction employees. (Staff photo: Matt M. Johnson)
The new building at Life Time’s Chanhassen headquarters is needed due to the growth of the company’s real estate and construction divisions. (Staff photo: Matt M. Johnson)

Best known for its palatial health clubs, Chanhassen-based Life Time Inc. has over the past few years evolved into something that more closely resembles a commercial real estate and development company.

Much like how its CEO, Bahram Akradi, switches daily between soccer, cycling, yoga and weights workouts, variety in Life Time’s business model has made the company much more than a one-trick pony.

Life Time’s trajectory also closely mirrors Akradi’s ambitions. He founded the company in 1990 with one storefront club in Brooklyn Park. That was 12 years after a teenage Akradi immigrated to the U.S. from Tehran, Iran. He later earned a degree in electrical engineering and worked as an executive with the now-defunct U.S. Swim & Fitness.

“I’ve always had a passion to design, create, build, tinker with and solve problems,” Akradi said in an exclusive interview with Finance & Commerce. “I want to build extraordinary places that are timeless and that touch the human soul.”

There’s a white board on the wall of Akradi’s Chanhassen office filled with just some of the approximately 85 to 100 projects the company has in its construction and development pipeline for the next five years. Life Time is building not just clubs, but Life Time Living-branded luxury apartments, co-working space and resorts. Total development costs for projects this year could be $600 million to $800 million, Akradi said, not including large multi-use projects that could cost up to $250 million each.

The cost of upgrading the company’s health clubs is $100 million of that construction total, Akradi said.

Although most of Life Time’s $1.7 billion in 2018 revenue came from its 141 health clubs, Akradi is putting only about 15 hours a week of his working time running the fitness end of the company. The rest goes to development, construction and real estate.

That’s something he wants people to get their heads around.

“It’s really been my goal for people to know our capabilities as a commercial real estate company,” Akradi said.

Going big, leaving home

Life Time is building a new resort-style health club, co-working space and an indoor soccer field on the site of a former J.C. Penney store at the Southdale Center in Edina. (Staff photo: Matt M. Johnson)

Life Time will open or start construction on 18 new health clubs in the next three years, with the average club measuring between 100,000 and 150,000 square feet of interior space. One of the company’s current projects is a 70,000-square-foot expansion of its Chanhassen headquarters, which will house about 400 real estate, engineering, architecture and construction workers. Life Time Real Estate and Life Time Construction Co. function independently within the Life Time family of companies, Akradi said.

Life Time operates nearly 14 million square feet of space in 28 U.S. states and has about 1 million more square feet of space under construction. Current Minnesota projects include a 28,000-square-foot Life Time Work co-working space at the West End in St. Louis Park, and a Life Time complex at the Southdale Center regional mall in Edina that will include a resort-style health club, 24,000 square feet of co-working space and an indoor soccer field.

Future projects in the company’s home market will likely be limited because the state’s 23 Life Time athletic clubs are about as many as the population will support, Akradi said. Still, he said there might be “an opportunity” to build something at the former Ford Ranger production site in St. Paul in concert with master developer Ryan Cos. US Inc.

Akradi’s goal is to bring the Life Time brand to as many of the 50 states as possible. Texas is currently the company’s top growth market, with 23 athletic clubs and more on the way. Life Time breaks ground this mid-year on its massive Midtown project in Dallas, which will include a 183,000-square-foot athletic club, a 50,000-square-foot Life Time Work facility and 300 to 400 Life Time Living apartments.

In Florida, Life Time is lending its name to a mixed-use development in Coral Gables that will include 135,000 square feet of retail space including a Life Time athletic club, a 25,000-square-foot Life Time Work space and about 500 apartments. Wayzata-based NP International started the project as “Gables Station,” but was attracted to add the Life Time branding, Akradi said. The $350 million project, which opens in 2020, is now called “Life Time Living at Gables Station.”

Life Time is contributing to the design of the project and will manage the apartments. That level of involvement is required to get the company to hand over its brand, Akradi said.

“We would never lend the name randomly,” he said. “If we can’t control the experience, we’re not going to lend our name.”

NP International chose to extend Life Time’s branding beyond the athletic club because it is a “differentiator in the market,” said NP CEO Brent Reynolds. It’s a partnership he’d like to repeat elsewhere.

“I don’t think it’s a short-term model,” he said in an interview.

Life Time will also break ground this spring on its first Life Time Living luxury apartments this spring, a 148-unit apartment building that will be next to the company’s athletic club in Henderson, Nevada.

Out-of-state development may eventually lead the company to establish a second headquarters, potentially in Texas or Florida, Akradi said. Total buildout for the company will be 450 to 500 total locations in the next two decades, he said.

“There’s plenty of white space for Life Time to continue its journey,” he said.

Co-working a go-go

Life Time got into the co-working market to spread its “healthy way of life” ethic to the work place, and to get into a market with high upside potential, Akradi said. The company may build out a dozen new co-working spaces every year for the next several years, he said.

Life Time Work won’t incur many of the costs of a startup because Life Time Inc. already has all its administrative functions and capital in place, Akradi said, noting that most co-working companies are losing money at the corporate level. The cost of opening each location is also “minuscule” compared to Life Time’s overall real estate development footprint.

“If we’re profitable at the store level, we’re profitable at the corporate level,” Akradi said.

Life Time Work will also have an advantage in getting some of the better office space on the market, he said.

“The landlord is getting a real tenant with real assets behind it and real cash flow behind it,” Akradi said.

Real estate piggy bank

Since going private in 2015, Life Time Inc. has also been a major seller of real estate. Private equity firms purchased the company for $4 billion, then turned around and sold off 29 health clubs for about $900 million. Life Time still leases those properties.

These days, Life Time generally sells any new clubs it builds six to 12 months after completing them. Revenue from the sales go back into more real estate development.

The company has about 60 clubs it owns “free and clear” that will likely never come off the company’s books, Akradi said.

All of it may seem like a lot to track, but Akradi is at home with having a long to-do list. His work mirrors his daily workouts with its variety.

“I am not a very disciplined human being,” he said. “I’ve always worked hard in my life, but I’m a Free Willy. I need to do what I want to do when I want to do it.”

Related:

Life Time builds offices for its in-house builders Life Time adds co-working to Southdale project in Edina Building Blocks: Life Time Work West End

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Marguerite Barnes

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