Annual report pursuant to Section 13 and 15(d)

Leases

v3.24.0.1
Leases
 12 Months Ended
Dec. 31, 2023
Leases [Abstract]  
Leases Leases
Lease Cost
Lease cost included in our consolidated statements of operations for the years ended December 31, 2023, 2022 and 2021 consisted of the following:
Year Ended December 31,
2023 2022 2021
Classification in Consolidated
Statements of Operations
Lease cost:
Operating lease cost
 $ 261,144  $ 237,499  $ 204,165  Rent
Short-term lease cost
 4,105  2,113  1,049  Rent
Variable lease cost
 9,873  5,614  4,609  Rent
Variable lease cost
 66,007  60,352  56,716 
Center operations
Finance lease cost:
Amortization of right-of-use assets
 1,024  1,372  1,493  Depreciation and amortization
Interest on lease liabilities
 98  99  177  Interest expense, net of interest income
Interest on financing obligations
 2,401  —  — 
Interest expense, net of interest income
Total lease cost
 $ 344,652  $ 307,049  $ 268,209 
Sale-Leaseback Transactions
Sale-Leaseback Transactions with Unrelated Third Parties
During the year ended December 31, 2023, we entered into and consummated sale-leaseback transactions with unrelated third parties. Under these transactions, we sold three properties for $124.0 million, which was reduced by transaction costs of $0.7 million, for net cash proceeds of $123.3 million. The estimated fair value of the property sold was $128.4 million. Accordingly, the aggregate sales price associated with these arrangements was increased by $4.4 million, of which $5.9 million was associated with a property sale in which the sales price was less than the fair value of the property sold, which was recognized as an increase in the aggregate sales price associated with this property and an increase in the related operating lease right-of-use asset, and $1.5 million was associated with a property sale in which the sales price was greater than the fair value of the property sold, which was recognized as a reduction in the aggregate sales price associated with this property and as a financing obligation separate from the related operating lease liability. For cash flow purposes, the $1.5 million of proceeds we received from this financing obligation are reported within financing activities on our consolidated statement of cash flows. During the year ended December 31, 2023, we recognized a loss of $13.6 million on sale-leaseback transactions. This loss is included in Other operating expense (income) in our consolidated statement of operations.
During the year ended December 31, 2022, we entered into and consummated sale-leaseback transactions with unrelated third parties. Under these transactions, we sold nine properties for $375.0 million, which was reduced by transaction costs of $1.8 million, for net cash proceeds of $373.2 million. The estimated fair value of the properties sold was $385.1 million. Accordingly, the aggregate sales price associated with these arrangements was increased by a total of $10.1 million, which resulted in the recognition of a gain of $97.5 million on these transactions. This gain is included in Other operating expense (income) in our consolidated statement of operations for the year ended December 31, 2022. Of the $10.1 million net sales price increase recognized in connection with these transactions, $31.5 million was associated with property sales in which the sales price was less than the fair value of the properties sold, which was recognized as an increase in the aggregate sales price associated with these properties and an increase in the related operating lease right-of-use assets, and $21.4 million was associated with property sales in which the sales price was greater than the fair value of the properties sold, which was recognized as a reduction in the aggregate sales price associated with these properties and as financing obligations separate from the related operating lease liabilities. For cash flow purposes, the $21.4 million of proceeds we received from these financing obligations during the year ended December 31, 2022 are reported within financing activities on our consolidated statement of cash flows.
During the year ended December 31, 2021, we entered into and consummated sale-leaseback transactions with unrelated third parties. Under these transactions, we sold two properties for $76.0 million, which was reduced by transaction costs of $2.0 million, for net cash proceeds of $74.0 million. The estimated fair value of the properties sold was $85.5 million. Accordingly, the aggregate sales price associated with these arrangements was increased by a total of $9.5 million, which resulted in the recognition of a gain of $2.3 million on these transactions, which is included in Other operating expense (income) in our consolidated statement of operations for the year ended December 31, 2021.
Related Party Sale-Leaseback Transactions and Leases
For information on sale-leaseback transactions with related parties, as well as other related party leases not associated with sale-leaseback transactions, see Note 13, Related Party Transactions.
Operating and Finance Lease Right-of-Use Assets and Lease-Related Liabilities
Operating and finance lease right-of-use assets and lease-related liabilities were as follows:
December 31,
Classification on Consolidated
Balance Sheets
2023 2022
Lease right-of-use assets:
Operating leases
 $ 2,202,601  $ 2,116,761  Operating lease right-of-use assets
Finance leases (1)
1,406  1,083  Other assets
Total lease right-of-use assets
 $ 2,204,007  $ 2,117,844 
Lease-related liabilities:
Current
Operating leases
 $ 58,764  $ 51,892  Current maturities of operating lease liabilities
Finance leases
 633  796  Accrued expenses and other current liabilities
Non-current
Operating leases
 2,268,863  2,162,424  Operating lease liabilities, net of current portion
Finance leases
 783  312  Other liabilities
Financing obligations
 23,151  21,557 
Other liabilities
Total lease-related liabilities
 $ 2,352,194  $ 2,236,981 
(1)Finance lease right-of-use assets were reported net of accumulated amortization of $0.8 million and $1.8 million at December 31, 2023 and 2022, respectively.
Remaining Lease Terms and Discount Rates
The weighted-average remaining lease terms and discount rates associated with our lease-related liabilities at December 31, 2023 were as follows:
December 31, 2023
Weighted-average remaining lease term (1)
Operating leases
 17.2 years
Finance leases
 2.7 years
Financing obligations 23.7 years
Weighted-average discount rate
Operating leases
 8.59  %
Finance leases
 8.42  %
Financing obligations 11.00  %
(1)    The weighted-average remaining lease term associated with our operating and finance lease liabilities does not include all of the optional renewal periods available to us under our current lease arrangements. Rather, the weighted-average remaining lease term only includes periods covered by an option to extend a lease if we are reasonably certain to exercise that option.
Supplemental Cash Flow Information
Supplemental cash flow information associated with our leases is as follows:
Year Ended December 31,
2023 2022 2021
Cash paid for amounts included in the measurement of lease-related liabilities:
Operating cash flows from operating leases
 $ 226,896  $ 199,762  $ 182,644 
Operating cash flows from finance leases
 98  99  177 
Financing cash flows from finance leases
 1,031  1,404  1,514 
Operating cash flows from financing obligations
 2,307  —  — 
Non-cash information:
Right-of-use assets obtained in exchange for initial lease liabilities:
Operating leases
 140,614  294,722  210,541 
Finance leases
 1,347  391  1,272 
Right-of-use asset adjustments recognized as a result of the remeasurement of existing lease liabilities:
Operating leases
 17,364  (6,551) (6,345)
Non-cash increase in operating lease right-of-use assets associated with below-market sale-leaseback transactions
 5,900  31,440  9,500 
Non-cash increase in financing obligations as a result of interest accretion
 94  —  — 
Maturities of Operating Lease Liabilities, Finance Lease Liabilities and Financing Obligations
The maturities associated with our lease-related liabilities at December 31, 2023 are as follows:
Operating
Leases		 Finance
Leases
Financing
Obligations
 Total
2024 $ 245,039  $ 830  $ 2,451  $ 248,320 
2025 253,965  589  2,487  257,041 
2026 256,420  247  2,525  259,192 
2027 258,077  1  2,562  260,640 
2028 260,030  —  2,601  262,631 
Thereafter
 3,360,443  —  56,907  3,417,350 
Total lease payments
 4,633,974  1,667  69,533  4,705,174 
Less: Imputed interest
 2,306,347  251  46,382  2,352,980 
Present value of lease-related liabilities
 $ 2,327,627  $ 1,416  $ 23,151  $ 2,352,194 
Leases Not Yet Commenced
As of December 31, 2023, we had entered into several leases associated with future centers and Life Time Work locations that were executed, but for which we did not yet have control of the underlying assets. Accordingly, as of December 31, 2023, we did not recognize any right-of-use assets or lease liabilities associated with these leased locations on our consolidated balance sheet. These arrangements contain undiscounted lease payments that are payable during the initial lease terms, which range from 20 to 25 years, totaling approximately $414.6 million.
Leases Leases
Lease Cost
Lease cost included in our consolidated statements of operations for the years ended December 31, 2023, 2022 and 2021 consisted of the following:
Year Ended December 31,
2023 2022 2021
Classification in Consolidated
Statements of Operations
Lease cost:
Operating lease cost
 $ 261,144  $ 237,499  $ 204,165  Rent
Short-term lease cost
 4,105  2,113  1,049  Rent
Variable lease cost
 9,873  5,614  4,609  Rent
Variable lease cost
 66,007  60,352  56,716 
Center operations
Finance lease cost:
Amortization of right-of-use assets
 1,024  1,372  1,493  Depreciation and amortization
Interest on lease liabilities
 98  99  177  Interest expense, net of interest income
Interest on financing obligations
 2,401  —  — 
Interest expense, net of interest income
Total lease cost
 $ 344,652  $ 307,049  $ 268,209 
Sale-Leaseback Transactions
Sale-Leaseback Transactions with Unrelated Third Parties
During the year ended December 31, 2023, we entered into and consummated sale-leaseback transactions with unrelated third parties. Under these transactions, we sold three properties for $124.0 million, which was reduced by transaction costs of $0.7 million, for net cash proceeds of $123.3 million. The estimated fair value of the property sold was $128.4 million. Accordingly, the aggregate sales price associated with these arrangements was increased by $4.4 million, of which $5.9 million was associated with a property sale in which the sales price was less than the fair value of the property sold, which was recognized as an increase in the aggregate sales price associated with this property and an increase in the related operating lease right-of-use asset, and $1.5 million was associated with a property sale in which the sales price was greater than the fair value of the property sold, which was recognized as a reduction in the aggregate sales price associated with this property and as a financing obligation separate from the related operating lease liability. For cash flow purposes, the $1.5 million of proceeds we received from this financing obligation are reported within financing activities on our consolidated statement of cash flows. During the year ended December 31, 2023, we recognized a loss of $13.6 million on sale-leaseback transactions. This loss is included in Other operating expense (income) in our consolidated statement of operations.
During the year ended December 31, 2022, we entered into and consummated sale-leaseback transactions with unrelated third parties. Under these transactions, we sold nine properties for $375.0 million, which was reduced by transaction costs of $1.8 million, for net cash proceeds of $373.2 million. The estimated fair value of the properties sold was $385.1 million. Accordingly, the aggregate sales price associated with these arrangements was increased by a total of $10.1 million, which resulted in the recognition of a gain of $97.5 million on these transactions. This gain is included in Other operating expense (income) in our consolidated statement of operations for the year ended December 31, 2022. Of the $10.1 million net sales price increase recognized in connection with these transactions, $31.5 million was associated with property sales in which the sales price was less than the fair value of the properties sold, which was recognized as an increase in the aggregate sales price associated with these properties and an increase in the related operating lease right-of-use assets, and $21.4 million was associated with property sales in which the sales price was greater than the fair value of the properties sold, which was recognized as a reduction in the aggregate sales price associated with these properties and as financing obligations separate from the related operating lease liabilities. For cash flow purposes, the $21.4 million of proceeds we received from these financing obligations during the year ended December 31, 2022 are reported within financing activities on our consolidated statement of cash flows.
During the year ended December 31, 2021, we entered into and consummated sale-leaseback transactions with unrelated third parties. Under these transactions, we sold two properties for $76.0 million, which was reduced by transaction costs of $2.0 million, for net cash proceeds of $74.0 million. The estimated fair value of the properties sold was $85.5 million. Accordingly, the aggregate sales price associated with these arrangements was increased by a total of $9.5 million, which resulted in the recognition of a gain of $2.3 million on these transactions, which is included in Other operating expense (income) in our consolidated statement of operations for the year ended December 31, 2021.
Related Party Sale-Leaseback Transactions and Leases
For information on sale-leaseback transactions with related parties, as well as other related party leases not associated with sale-leaseback transactions, see Note 13, Related Party Transactions.
Operating and Finance Lease Right-of-Use Assets and Lease-Related Liabilities
Operating and finance lease right-of-use assets and lease-related liabilities were as follows:
December 31,
Classification on Consolidated
Balance Sheets
2023 2022
Lease right-of-use assets:
Operating leases
 $ 2,202,601  $ 2,116,761  Operating lease right-of-use assets
Finance leases (1)
1,406  1,083  Other assets
Total lease right-of-use assets
 $ 2,204,007  $ 2,117,844 
Lease-related liabilities:
Current
Operating leases
 $ 58,764  $ 51,892  Current maturities of operating lease liabilities
Finance leases
 633  796  Accrued expenses and other current liabilities
Non-current
Operating leases
 2,268,863  2,162,424  Operating lease liabilities, net of current portion
Finance leases
 783  312  Other liabilities
Financing obligations
 23,151  21,557 
Other liabilities
Total lease-related liabilities
 $ 2,352,194  $ 2,236,981 
(1)Finance lease right-of-use assets were reported net of accumulated amortization of $0.8 million and $1.8 million at December 31, 2023 and 2022, respectively.
Remaining Lease Terms and Discount Rates
The weighted-average remaining lease terms and discount rates associated with our lease-related liabilities at December 31, 2023 were as follows:
December 31, 2023
Weighted-average remaining lease term (1)
Operating leases
 17.2 years
Finance leases
 2.7 years
Financing obligations 23.7 years
Weighted-average discount rate
Operating leases
 8.59  %
Finance leases
 8.42  %
Financing obligations 11.00  %
(1)    The weighted-average remaining lease term associated with our operating and finance lease liabilities does not include all of the optional renewal periods available to us under our current lease arrangements. Rather, the weighted-average remaining lease term only includes periods covered by an option to extend a lease if we are reasonably certain to exercise that option.
Supplemental Cash Flow Information
Supplemental cash flow information associated with our leases is as follows:
Year Ended December 31,
2023 2022 2021
Cash paid for amounts included in the measurement of lease-related liabilities:
Operating cash flows from operating leases
 $ 226,896  $ 199,762  $ 182,644 
Operating cash flows from finance leases
 98  99  177 
Financing cash flows from finance leases
 1,031  1,404  1,514 
Operating cash flows from financing obligations
 2,307  —  — 
Non-cash information:
Right-of-use assets obtained in exchange for initial lease liabilities:
Operating leases
 140,614  294,722  210,541 
Finance leases
 1,347  391  1,272 
Right-of-use asset adjustments recognized as a result of the remeasurement of existing lease liabilities:
Operating leases
 17,364  (6,551) (6,345)
Non-cash increase in operating lease right-of-use assets associated with below-market sale-leaseback transactions
 5,900  31,440  9,500 
Non-cash increase in financing obligations as a result of interest accretion
 94  —  — 
Maturities of Operating Lease Liabilities, Finance Lease Liabilities and Financing Obligations
The maturities associated with our lease-related liabilities at December 31, 2023 are as follows:
Operating
Leases		 Finance
Leases
Financing
Obligations
 Total
2024 $ 245,039  $ 830  $ 2,451  $ 248,320 
2025 253,965  589  2,487  257,041 
2026 256,420  247  2,525  259,192 
2027 258,077  1  2,562  260,640 
2028 260,030  —  2,601  262,631 
Thereafter
 3,360,443  —  56,907  3,417,350 
Total lease payments
 4,633,974  1,667  69,533  4,705,174 
Less: Imputed interest
 2,306,347  251  46,382  2,352,980 
Present value of lease-related liabilities
 $ 2,327,627  $ 1,416  $ 23,151  $ 2,352,194 
Leases Not Yet Commenced
As of December 31, 2023, we had entered into several leases associated with future centers and Life Time Work locations that were executed, but for which we did not yet have control of the underlying assets. Accordingly, as of December 31, 2023, we did not recognize any right-of-use assets or lease liabilities associated with these leased locations on our consolidated balance sheet. These arrangements contain undiscounted lease payments that are payable during the initial lease terms, which range from 20 to 25 years, totaling approximately $414.6 million.