Life Time CEO Bahram Akradi Capitalizes on How We Work, Live and Play
Blueprints cover a table in Bahram Akradi’s corner office at Life Time headquarters in Chanhassen. His windows look out on one of his 115,000-square-foot athletic clubs, where he occasionally teaches a cycling class. Across the parking lot, another office building is under construction for Life Time’s ever-growing corporate staff, which tops 1,100.
These particular blueprints show a new fitness center that will replace a mall anchor—one of several such commercial real estate puzzles Life Time’s founder and CEO has recently taken on with gusto. Currently, Life Time has at least 85 projects under construction or in the pipeline around the country—not just athletic clubs but co-working spaces and high-end apartments, too. It’s all building up to a broader impact for the $1.7 billion brand, which boasts 1.8 million members. Akradi wants to take his “healthy way of life” motto beyond the gym to encompass work, organized sports, wellness, spa, and housing.
The first three Life Work co-working spaces opened in May in Ardmore, Pa., in Houston, and locally in St. Louis Park. Many others are under construction or in development, including one in Edina that will accompany Life Time’s hotly anticipated new fitness center at Southdale, which replaces the old JCPenney store. Expected to open by year’s end, the Southdale Life Time’s list of people interested in joining has already surpassed 4,000. As Akradi plots Life Time’s expansion, he sat down with us to discuss the vision he describes as a village—one really massive village.
Q | Your current projects include residences, co-working, and mixed-use developments. It explains why you dropped “Fitness” from your company’s name in 2017. How do you define Life Time’s mission today?
A | Even though I named the company Life Time Fitness, it was really about the relationship between being fit, your time on the planet, your quality of life, and how these things are interconnected. I came up with these three words and tried my best to keep them separate.
Gradually we went with what customers wanted to say. To me, fitness was always a troubling piece. While I love fitness, love for people to be fit, I think the term “fitness” can be applicable to all kinds of things: our planet, mental capacity, soul. Healthy thinking, healthy perspective is really what I see. It’s a much bigger canvas.
Q | How does co-working fit onto that canvas?
A | Co-working is a lot like health and well-being was 25 to 30 years ago. It’s early. We know how the movie starts; we really don’t know how it’s going to end. The idea of shared workspace is as solid as any idea. The reason? The old idea of traditional offices has a lot of flaws. Whatever company you work in—and Life Time is no different, we’re constantly rejiggering our space—you lease a space for 20, and all of a sudden you have 40 employees.
“Co-working is a lot like health and well-being was 25 to 30 years ago. It’s early. We know how the movie starts; we really don’t know how it’s going to end.”
Twenty years ago, we had no email, no virtual conferencing. You needed to be in a physical place together. Today, we’re connected through technology 24/7. We don’t need to be in the same place. Co-working is a new iteration of how we need to function. People need to be flexible, to come and go. Co-working allows them to do that.
Q | It’s getting to be a crowded field—the Twin Cities has more than 1 million square feet of co-working space from at least 35 operators. Any concern that it’s getting overbuilt as you deploy Life Time Work?
A | Minneapolis, right now, is actually a little bit behind other markets. Only a couple percent of the total workforce is co-working; the rest is traditional office. I don’t know that co-working is going to end up being 50 percent or even 30, but even if it goes from 2 to 10 percent, that’s massive growth.
Whenever a new idea becomes fleshed out and people recognize that it’s the way to go, then everybody jumps in and everybody funds it. If you look back to when the car biz started in the U.S., there were 400 car companies. Eventually, there were four. Co-working is going to make it. Not everybody who plays in it will make it.
Today, co-working is like the health club of 25 years ago: generic. In the next four to five years, it will become more fine-tuned and branded. There might be co-working focused on architecture, co-working focused on medical, or engineers. It’s early. A lot of adaptation needs to continue to take place.
It’s not necessarily the co-working that makes me jump out of my bed, or the Life Time Living. It’s the village—the Life Time Village is what I’m crazy about. (The first 11-acre village is being built in the Houston area, with Chicago and Dallas to follow.) I want to build the big 500,000-square-foot village, or 1 million square feet, where you get all of these things (housing, offices, athletic club) plus some small shops, and it’s got the quality, the brand, and all the components you want. You say, “I want to live there. I want to work there. I want to exercise there.”
Q | You’re becoming something of a mall savior, building health clubs in vacant department store spots across the country, like the Edina Life Time opening at Southdale Center. Is it about a new vision for the American shopping mall, or simply a good deal on prime property?
A | There’s a lot of transition of real estate happening in the U.S. right now. I love geometry, love space, love designing, love creating, love solving problems. To me, taking a mall like Southdale, and reimagining what you could do with that amazing real estate is exciting. It was the first enclosed mall—it’s paid its dues. The idea of having an enclosed center worked fabulously for maybe 40 years. Now, it’s past its time. You can look at it as a liability, or a huge opportunity to reinvent this real estate.
“To me, taking a mall like Southdale, and reimagining what you could do with that amazing real estate is exciting.”
The typical mall is sitting on roughly 100 acres, with lots of access and great zoning. Lots of obvious assets and some obvious liabilities: old leases with old anchors. There are some obstacles to overcome to get the ultimate solution. Gyms aren’t going to save the mall. It needs to become a combination of uses.
Q | To that point—you can turn an old department store into a fancy new health club, but aren’t you at the mercy of the mall owner to realize the rest of the vision?
A | We have a great partnership with Simon Properties [owner of Southdale Center and the largest mall operator in the U.S.]. Together with them, we think, “What are the ways you can think out of the box and make these things become a real benefit to the community and the owner at the same time?” We are always aware of the ultimate plan. In some cases, it doesn’t matter—we might buy a chunk of land, 10 to 15 acres. In some cases, we’re so close to the rest of the infrastructure, you really want to know what is going to be there five, 10 years from now. We partner with the developer so we know the transition plan. Every situation is different. Every mall is different. That’s what’s fun—to get into each one, analyze the problems, look at opportunities, look at how you can turn it around.
Q | With more than 85 development projects underway, Life Time has its own construction division. Why not outsource that work?
A | We have over 100 architects, CAD techs, 20 to 30 engineers, a total of 400-plus people working on our real estate and development. I’ve always wanted to have a vertically integrated company so I can deliver the best experience to the customer at the lowest possible cost, entirely under our control. We started Life Time’s construction division in 1996. It just doesn’t pencil out when we have to pay market rates for architects, engineers, general contractors, [and] millwork.
That’s on the cost side. On the experience side, I want to be able to control the entire experience. I want a homogenous thought process so when you walk into the space, it needs to be designed right—the right geometry, right air, right feel, right colors. It’s a lot easier for me to teach, educate, and contain that knowledge with an in-house team. Then we have to have touch and feel, from the way it’s finished so that it’s comfortable to the customer. Then we have to have employee experience that accommodates all the customers’ needs. So we spend at least $20 million a year right now in Life Time Academy for certification and training; millions more to create the branded programs, like TCX [strength and cardio training].
Q | A lot of the new fitness programs you’ve rolled out in recent years seem to be designed to compete with the boutique fitness options that continue to proliferate such as Orange Theory and Soul Cycle.
A | What we’re doing is delivering 30 small experiences inside of a large Life Time resort. The customer is looking for one of two things: “How do I save money at the place that brings the cheapest product?” or the customer is looking to save time and wants quality, convenience, and the right experience, regardless of what it costs. You have to really be deliberate as a business owner about which group you want to serve. You either build a Hampton Inn and create a nice experience for people to get a night’s sleep in a room and focus on delivering that at the lowest possible cost to the market—and there’s nothing wrong with Hampton Inn, they’re a great company, they’re clearheaded in what they do and who they serve. Or you do a Four Seasons and it’s the perfect experience for a different customer who doesn’t check cost at all.
Q | So which one are you? I think of Life Time as somewhere in the middle.
A | That’s true; we started by building the 100,000-square-foot clubs like [the one in] Plymouth and doing it very inexpensively. [But] I couldn’t deliver the experience I wanted to. Or when we opened in Troy, Mich., the first 100,000-square-foot club outside of Minnesota, it was [too crowded]. No matter how hard I pushed the team, the experience wasn’t what I hoped for. Since 2000, we’ve been inching the price up. We have a commitment to our existing members who were there from the beginning—you don’t want to say last year it was $39, this year it’s $139. That’s not the right relationship. So you have to keep reinvesting in the business and move prices up gradually and find a way to charge the lowest amount we can charge for an extraordinary experience.
Q | Who is your biggest competition?
A | Our challenge to our company isn’t an outside force. The challenge is our recipe. Our recipe is really, really complex. One of these clubs takes 270 to 350 certified employees to deliver 30 polished, different programs for our customers, and that doesn’t even include Living or Work. We have athletics, spa, outdoor pool, kids (child care), the cafÃ©, physical therapy. We don’t have a competitor that does what we do with the breadth, worldwide. Lots of people compete with segments of what we do, and that’s just fine.
“Our challenge to our company isn’t an outside force. The challenge is our recipe. Our recipe is really, really complex.”
Q | Speaking of those segments, the competition is now virtual as well as physical. Peloton seems to threaten not only your cardio classes, but the very notion of going to the gym, when expert instruction is available on demand at home.
A | Peloton has its very specific market. Whether or not that market is big enough for them to have the valuation people are throwing at the company, I’m not smart enough to know. But what we do know is people aren’t coming to Life Time just to run on a treadmill. They can run at home, they can run outside. It’s everything else—the social environment, the experience. We are social creatures. Today’s technology is actually making us less social to the point of breaking. We’re so isolated, we’re lonely. If you go to a cycle class, it’s not just about the class. It’s about 40 or 50 of us in the same room, having that experience. If I’m rich enough, I may have a Peloton bike for when I can’t get to the club. [For] people who are deciding to only do one, I think the club will win. Besides, no one should do one modality of exercise as their only exercise; you really want to mix it up.
Q | You seem to be dipping a toe into health care with the LT Proactive Care Clinic in St. Louis Park, and chiropractic and physical therapy centers in select locations. As you get further along in the development of multiuse “villages,” will there eventually be a Life Time Medical division?
A | Health care is overregulated. We’ll develop our own proactive care, running a health care model the way I believe it should be. Our St. Louis Park clinic is run by a dear friend of mine [Dr. Kambiz Farbakhsh]—I trust him, he trusts me. Do I want to replicate that to hundreds of locations? No. It’s too difficult to work with all the regulation around that.
Q | Life Time is widely recognized as the family-friendly fitness club option, because you offer child care, and have pools and programming for kids. Is there a demographic you’re underserving?
A | Actually, more than 50 percent of our memberships are singles. But we don’t do a great job with the tweeners—12- to 15-year-olds. They’re too young for adult classes, too old to enjoy the Kids Academy. You can have a 12-year-old that acts 15, or 9. It makes it challenging to crack.
Q | Is that the motivation behind Life Time Sport, the new drop-in centers for recreational team sports like soccer and basketball?
A | It’s an answer for any age group. It’s really focused around freedom. When I grew up, we came home, dropped our books on the counter, went outside and played pick-up games. With my son, it’s practice at this hour, game at this time—I think about how much time is spent taking him to hockey and soccer. At the end of the day, there are some benefits to that structure. What I don’t like is how cumbersome and inconvenient it is, and the expense. My family can afford it. But I wonder how many families can afford the time or money.
Q | Had you remained a publicly traded company and not gone back to being private in 2015, would you be venturing into as many different types of projects and developments as you are today?
A | We would be doing the same things we are doing right now with all forms of our growth and extensions at Life Time, including real estate, residential, work, shopping centers, but it would be much more difficult to get it all done. With our current structure, we know our partners, we talk to three or four groups, and make things happen.
Allison Kaplan is TCB’s editor in chief.