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.