Ethema Health Corporation (OTCQB: GRST) has agreed to buy Kentucky-based alcohol and substance use disorder (SUD) provider Edgewater Recovery Center. The terms of the deal were not disclosed.
Florida-based Ethema had previously set a target of expanding to 500 beds by the end of 2025. The deal significantly exceeds that goal, boosting the provider’s capacity to almost 600 beds between the two states.
“To say that this opportunity is massive is an understatement,” Shawn Leon, CEO of Ethema, said in a statement. “This will propel us to the 500-bed target much sooner than we anticipated. We know this is big growth, but we will be sure to stick to our principles in developing this opportunity.”
Ethema’s subsidiary, Addiction Recovery Institute of America, provides SUD care, including medication-assisted treatment (MAT), residential treatment, medical detox, intensive outpatient (IOP) and partial hospitalization programs (PHPs) in West Palm Beach, Florida. It operates women- and men-specific programming.
The deal includes the purchase of ERC and three real estate holding companies that own some of the properties where ERC operates. Ethema is set to take over management today and will continue to manage the company until the purchase is complete or by Jan. 31, 2025, whichever comes first.
Kentucky-based ERC operates at least five locations offering alcohol and SUD treatment through gender-specific facilities. The provider’s services include intensive residential treatment, a long-term treatment program that utilizes the 12-step philosophy as well as outpatient care.
ERC primarily cares for Medicaid beneficiaries, which will add to Ethema’s in-network portfolio.
Ethema plans to eventually pursue a sale-leaseback transaction with its newly acquired real estate to “generate healthy working capital.” The company employed a similar sale-leaseback strategy in its West Palm Beach location.
Investors often prefer to offload real estate to get the best return on their investment, and providers say this allows them to best address patient needs. Autism providers specifically are turning to sale-leasebacks to accelerate growth.
“We look forward to bringing this company to the attention of many more investors with our plan to up-list,” Leon said.