Item 1.01Entry into a Material Definitive Agreement.
As previously reported, Regional Health Properties, Inc. (together with its
subsidiaries, "Regional") entered into an Agreement Regarding Leases, dated
December 1, 2020, to terminate the subleases for its Tara and Powder Springs
facilities (the "Agreement"). For additional information, see Regional's Current
Report on Form 8-K filed on December 7, 2020.
Under the Agreement, possession, control and operation of the Tara and Powder
Springs facilities transitioned from the then-current tenants to Regional at
12:01 a.m. on January 1, 2021. Effective January 1, 2021, Regional leased the
Powder Springs facility to a new tenant and operator, PS Operator LLC ("PS
Operator"), pursuant to a Lease between Regional and PS Operator executed
December 31, 2020 (the "PS Sublease"). Regional will continue to operate the
Tara facility and has entered into a Management Consulting Services Agreement
(the "Management Agreement") with Vero Health Management, LLC ("Vero") under
which Vero will provide management consulting services for the Tara facility. An
affiliate of Vero operates Regional's Mountain Trace facility pursuant to a
Lease between Regional and the affiliate dated February 28, 2019.
The PS Sublease will expire on August 31, 2027, subject to two five-year
optional extensions. For the first six months, the base rent under the PS
Sublease will equal the Adjusted EBITDAR (as defined in the PS Sublease) of PS
Operator to the extent derived from the Powder Springs facility. For months
seven through twenty-four, the base rent will equal 80% of the Adjusted EBITDAR;
however, beginning with month thirteen the base rent may not exceed $150,000 per
month. Beginning with month twenty-five, the base rent will be $140,000 per
month.
For the first three months, the PS Sublease will not be a "triple net" lease and
PS Operator will only be obligated to pay the base rent, with Regional paying
all taxes, utility charges, operating expenses, insurance premiums and all other
expenses with respect to the Powder Springs facility (collectively, the
"Expenses"). Beginning with the fourth month and thereafter, the PS Sublease
will be a "triple net" lease with PS Operator responsible for payment of all
Expenses in addition to rent.
If the monthly average adjusted cash flows of PS Operator (as described in the
PS Sublease) is less than $100,000 for any consecutive three-month period after
the sixth month of the PS Sublease, then Regional may terminate the PS Sublease
subject to the conditions set forth in the PS Sublease. The PS Sublease also
includes customary covenants, events of default and indemnification obligations.
Under the Management Agreement, Regional will pay Vero a monthly management fee
equal to 5% of the Adjusted Gross Revenues (as defined in the Management
Agreement) of the Tara facility. The Management Agreement also includes
customary covenants, termination provisions and indemnification obligations.
The above summaries of the PS Sublease and the Management Agreement are
qualified in their entirety by reference to the full text of the PS Sublease and
the Management Agreement, which are filed as Exhibit 99.1 and Exhibit 99.2,
respectively, to this Current Report on Form 8-K.
Item 9.01Financial Statements and Exhibits.
(d) Exhibits.
Exhibit Lease, dated as of January 1, 2021, by and between ADK Georgia, LLC
99.1 and PS Operator, LLC.
Exhibit Management Consulting Services Agreement, dated as of January 1,
99.2 2021 by and between Vero Health Management, LLC, and Tara Operator,
LLC.
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