Financing Liability

9 Months Ended

Sep. 30, 2023

Financing Liability [Abstract]

Financing Liability

Note 12: Financing Liability

On September 27, 2022 the Company sold the land under the Company’s Fan Engagement Zone to Twain GL XXXVI, LLC (“Twain”). Simultaneously, the Company entered into a lease agreement with Twain (the sale of the property and simultaneous leaseback is referred to as the “Sale-Leaseback”). The Sale-Leaseback is repayable over a 99-year term. Under the terms of the lease agreement, the Company’s initial base rent is approximately $307,125 per quarter, with annual increases of approximately 2% each year of the term. The Company has a right to re-purchase the land from Twain at any time on or after September 27, 2025 at a fixed price according to the lease.

On November 7, 2022, HOF Village Waterpark, LLC (“HOFV Waterpark”), sold the land under the Company’s future waterpark to Oak Street Real Estate Capital, LLC (“Oak Street”). Simultaneously, the Company entered into a lease agreement with Oak Street. The Sale-Leaseback for the waterpark is repayable over a 99-year term. Under the terms of the leaseback agreement, the Company’s initial base rent is $4,375,000 per annum, payable monthly, with customary escalations over the lease term. On November 7, 2022, Oak Street and HOFV Waterpark also entered into a Purchase Option Agreement (the “Purchase Option Agreement”), pursuant to which HOFV Waterpark is granted an option to purchase the waterpark property back from Oak Street that can be exercised during the period beginning on December 1, 2027 and ending on November 30, 2034 (the “Option Period”).

The Company accounted for the Sale-Leaseback transactions with Twain and Oak Street as financing transactions with the purchaser of the property. The Company concluded the lease agreements both met the qualifications to be classified as finance leases due to the significance of the present value of the lease payments, using a discount rate of 10.25% to reflect the Company’s incremental borrowing rate, compared to the fair value of the leased property as of the lease commencement date.

The presence of a finance-type lease in the sale-leaseback transactions indicates that control of the land under the Fan Engagement Zone and HOFV Waterpark has not transferred to the buyer/lessor and, as such, the transactions were both deemed a failed sale-leaseback and must be accounted for as a financing arrangement. As a result of this determination, the Company is viewed as having received the sales proceeds from the buyer/lessor in the form of a hypothetical loan collateralized by its leased land. The hypothetical loan is payable as principal and interest in the form of “lease payments” to the buyer/lessor. As such, the Company will not derecognize the property from its books for accounting purposes until the lease ends.

As of September 30, 2023, the carrying value of the financing liability was $61,953,243, representing $2,200,799,025 in remaining payments under the leases, net of a discount of $2,138,845,782. The lease payments are split between a reduction of principal and interest expense using the effective interest rate method.

As of December 31, 2022, the carrying value of the financing liability was $60,087,907, representing $2,204,080,276 in remaining payments under the leases, net of a discount of $2,143,992,369. The monthly lease payments are split between a reduction of principal and interest expense using the effective interest rate method.

Remaining future cash payments related to the financing liability, for the fiscal years ending December 31 are as follows:

2023 (three months)	$	738,280
2024		4,672,544
2025		5,865,396
2026		6,005,734
2027		6,149,455
Thereafter		2,177,367,616
Total Minimum Liability Payments		2,200,799,025
Imputed Interest		(2,138,845,782	)
Total	$	61,953,243