They got net $2.3 million from this leaseback deal. Effectively rolled the debt into a $8.5 million deal worth mote than $19 million over 20 years. Some of the lease will be passed onto the treatment center but the reality is that they repacked debt that they weren't even paying on, lost the cash flow from the Canadian property and now must start making payments on the repacked debt. The new lease for the treatment center is $24K a month or $288K per annum. Lease paymetn for Ethema Health is $748K a year or net $460K in new debt payments. Existing property tax for the treatment center is 29K a year, new tax according to the tax calculator on the property card for $8.5 million sale is a bit over $190K. The net new property tax per month for the treatment center went from $2.4 to $13.4K. So where is future cash flow coming from? Especially considering that they didn't have much to begin with.This real estate deal has eliminated a lot of debt, including all variable rate convertible debt and the Company is now free to focus on growth."
e·lim·i·nate verb past tense: eliminated; past participle: eliminated completely remove or get rid of (something). "a policy that would eliminate inflation"
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an O?-Balance Sheet Arrangement of a Registrant.
On August 4, 2023 the Company entered into a long term lease for 950 with an initial term of twenty years, and two ten year extension options. The lessor is Pontus EHC Palm Beach, LLC , a Delaware limited liability company and a portfolio company of Pontus Net Lease Advisors, LLC. The lease is absolutely net and the lease cost for the initial year is $748,000 paid monthly. The lease increases at a rate of 2.75% per year for a total term lease obligation of $19,595,653 over the initial twenty-year term. The Lease is personally guaranteed by the Company President and the guarantee may be released after 5 years based on certain financial and performance metrics being met. The lease is attached hereto as Exhibit 10.6
On August 4, 2023 the Company replaced the original lease between Evernia and Evernia Station Limited Partners with a new lease mirroring the previous lease but between Evernia and the Company. A copy of the new Lease is attached hereto as Exhibit 10.7.
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