Item
1.01 Entry into a Material Definitive Agreement.
On
June 8, 2023, the Company entered into a Purchase and Sale Agreement (the “Purchase Agreement”), with WC-Castleton LLC, WC-Chesterfield
LLC, WC-Columbia City LLC, WC-Dunkirk LLC, WC-Fort Wayne LLC, WC-Hartford City LLC, WC-Hobart LLC, WC-Huntington LLC, WC-Lagrange LLC,
WC-Middletown LLC, WC-Peru LLC, WC-Rockport LLC, WC-Rushville LLC, WC-Sullivan LLC, WC-Syracuse LLC, WC-Tipton LLC, WC-Wabash LLC and
WC-Wakarusa LLC (collectively, the “Sellers”) with respect to the purchase of 24 healthcare Facilities located in Indiana
(the “Facilities”). The Sellers are not affiliates of the Company. The Company will assign the right to acquire the Facilities
to newly organized indirect subsidiaries of the Strawberry Fields Realty, LP, the Company’s operating partnership.
The
purchase price for the Facilities is $102,000,000, payable at the closing. The Company has made a deposit of $4,000,000 under the Purchase
Agreement, which will be applied to pay a portion of the purchase price at the closing. The Company plans to pay the balance of the purchase
price utilizing funds provided by a third-party lender and the Company’s current working capital.
Under
the Purchase Agreement, the Company will also make a loan of approximately $6,500,000 to the Sellers, which will be scheduled to be repaid
e within 60 days of the closing.
The
Facilities are currently leased under an initial seven-year master lease agreement to a group of tenants affiliated with two of the Company’s
directors, Moishe Gubin and Michael Blisko. Under the master lease, (i) the tenants are paying annual first year rent of $9,500,000,
on a triple net basis (ii) the tenants have 3 options to extend the lease. The first option is for 3 years, the two remaining options
are for 5 years each, and (iii) the tenants have an option to buy the properties after 6 years for $127 million. The material terms of
the master lease will not be modified as a result of the purchase of the Properties. The tenants operate the Facilities as skilled nursing
and assisted living facilities.
The
24 Facilities are comprised of nineteen skilled nursing facilities with 1,659 licensed beds and five assisted living facilities with
193 beds, of which 29 beds are licensed.
The
material terms of the Purchase Agreement include: (i) a deposit of $4,000,000 made at the signing of the Purchase Agreement, which is
non-refundable except as otherwise specifically provided in the Purchase Agreement; (ii) a due diligence period through July 10, 2023
(which may be extended by the Company for an additional 15 days with an additional deposit of $1,000,000); (iii) a closing date that
is 30 days following the expiration of the due diligence period; (iv) the right of the Company to terminate the Purchase Agreement in
the event that (A) the Company’s due diligence investigation identifies items that would have a material adverse effect on the
value, use or operation of any facility and such item is not otherwise a permitted exception, and (B) the Sellers elect not to correct
the item, in which event, the deposit will be returned to the Company; (v) as a condition precedent to the Company’s obligation
to close, Sellers’ performance of and satisfaction of covenants, representations and warranties, title commitments and other obligations
detailed in the Purchase Agreement; (vi) as a condition precedent to Sellers’ obligation to close, the Company’s performance
of and satisfaction of covenants and representations and warranties as detailed in the Purchase Agreement; (vii) as the Company’s
sole and exclusive remedy in the event of Sellers’ material breach of failure to perform any of its covenants under the Purchase
Agreement, the Company’s right to either file an action for specific performance of Sellers’ obligation to perform under
the Purchase Agreement or to declare the Purchase Agreement terminated and have the deposit returned to the Company, as liquidated damages;
(viii) as Sellers’ sole and exclusive remedy in the event of the Company’s material breach or failure to perform any of its
covenants under the Purchase Agreement, Sellers’ right to terminate the Purchase Agreement in its entirety and retain the deposit
as liquidated damages; and (ix) the Company’s agreement that the Facilities are being purchased “as-is”, except for
the limited representations and covenants of the Sellers under the Purchase Agreement.
The
Company anticipates closing the acquisition in August 2023; however, we can give no assurance that the closing will occur within this
timeframe, or at all. The potential acquisition of these Facilities is subject to substantial conditions to closing.
