Such a move would essentially split Life Time in two, with one company operating fitness centers and the other invested in the underlying real estate assets.
"We think the net effect is a more efficient capital structure," said
The company said it hired financial and legal advisers to explore the REIT conversion option and made the disclosure Monday to inform shareholders of the process. If approved by the board, a REIT conversion option would take nine to 12 months to complete.
The company said it also adopted a shareholder rights plan to preserve a financial maneuver necessary to conduct the conversion and to protect the company against a hostile takeover during the process. The shareholder rights plan expires on
At several companies, activist shareholders have pressed management and directors to unlock shareholder value by selling their real estate. In May,
Naughton said the company has explored this option in the past, but the announcement to shareholders Monday and the filing of a shareholder rights plan is an indication to him that Life Time will proceed with the plan.
"It is more likely now than it has been in the past," Naughton said.
More recently, the company's stock came under pressure when its second-quarter results, announced late last month, missed expectations. Life Time shares hit a 52-week low of
Life Time shares closed at
Thunstrom said the decision to explore a REIT came from Life Time's board. "It was very much driven by the board and not by a shareholder or group of shareholders," he said.
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