# Strawberry Fields REIT, Inc.: Form 10-Q for the period ended Sep 30, 2024

- Company: [Strawberry Fields REIT, Inc.](/companies/strw.md) (CIK 1782430)
- Form: 10-Q
- Filed: 2024-11-08
- Accepted by EDGAR: Nov 8, 2024, 21:05 ET
- Period: 2024-09-30
- Accession: 0001493152-24-044262
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1782430/000149315224044262/form10-q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1782430/000149315224044262/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $29.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $86.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | $16.0m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | $45.6m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-07-01 to 2024-09-30 | $9.1m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2024-01-01 to 2024-09-30 | $25.7m | us-gaap:InterestExpense |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | $944.0k | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | $2.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.14 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | $0.40 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.14 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | $0.40 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 6,950,305 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 6,636,699 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | $34.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Share repurchases | 9 months, 2024-01-01 to 2024-09-30 | $873.0k | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-09-30 | $29.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2024-09-30 | $661.5m | us-gaap:Assets |
| Total liabilities | at 2024-09-30 | $606.3m | us-gaap:Liabilities |
| Long-term debt | at 2024-09-30 | $584.5m | us-gaap:LongTermDebt |
| Shareholders' equity | at 2024-09-30 | $12.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 7,975 characters.

### Overview (continued)

We employ a disciplined approach in our investment strategy by investing in healthcare real estate assets. We seek to invest in assets that will provide attractive opportunities for dividend growth and appreciation in asset value, while maintaining balance sheet strength and liquidity, thereby creating long-term stockholder value. We expect to grow our portfolio by diversifying our investments by tenant, facility type and geography.

We are entitled to monthly rent paid by the tenants and we do not receive any income or bear any expenses from the operations of such facilities. As of September 30, 2024, the aggregate annualized average base rent under the leases for our properties was approximately $109.2 million.

We elected a REIT status for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2022. We are organized in an UPREIT structure in which we own substantially all of our assets and conduct substantially all of our business through the Operating Partnership. We are the general partner of the Operating Partnership and as of the date of the report own approximately 14.2% of outstanding OP units.

### Recent Developments

On January 1, 2024, the Company commenced its lease for two skilled nursing facilities with 248 licensed beds near Johnson City, Tennessee. The lease includes a purchase option which the Company intends to exercise once certain conditions precedent are met. On August 30, 2024, the Company exercised its purchase option. The acquisition was for $4.0 million, and the Company funded the acquisition utilizing cash from the balance sheet. The properties were leased to Infinity, a related party operator. The rent for the properties did not change ($400 thousand per year) and the properties will be added to the Tennessee Master Lease 1.

On February 8, 2024, the BVI Company issued additional Series D Bonds with a par value of NIS 100.0 million and raised a gross amount of $26.7 million (NIS 98.2 million). The Bonds were issued at a price of 106.3%; which equates to a coupon of approximately 7.7%.

On February 20, 2024 the Company entered into a new, replacement master lease for the properties included in the Indiana acquisition completed in August of 2023. The tenants remain a group affiliated with two of the Company’s directors, Moishe Gubin and Michael Blisko. The new master lease has an initial term of ten years and is subject to 2 five-year extensions. The initial annual base rent for the properties is $14.5 million dollars and is subject to annual increases of 3%. In connection with the new master lease, the existing purchase option held by the tenant, which was granted by the prior owner of the properties, of $127.0 million was terminated. Consideration for the termination of the purchase option and inducement for entering into the new, replacement master lease was $18.0 million paid to the tenants. The $18.0 million payment was funded by cash and the proceeds from the additional Series D Bond issuance in February 2024.

On March 25, 2024, the Company entered into a purchase agreement for a property comprised of a 68-bed skilled nursing facility and 10 bed assisted living facility near Georgetown, Indiana. The Company closed on the property May 31, 2024, for $5.83 million in an all cash transaction. The facility was leased to Infinity, a related party operator. On June 1st, 2024, the facility was added to the IN Master Lease in the second amendment to the master lease.

On April 1, 2024, the Company renewed the IN Master Lease (original expiration date July 31, 2025) for 10 years with two 5 years options and added to the lease one more entity that was not part of the original lease. The base rent for the first year is $15.5 million with 3% annual escalations. On June 1, 2024, a second amendment was filed with this Master Lease to include the new property purchased in Georgetown, Indiana.

On April 30, 2024, the company sold a property 107 South Lincoln Street to The Village of Smithton, a municipality in Illinois and paid off the existing mortgage. The building was sold to the municipality for $1. The Company paid $1.2 million in related debt and closing fees for this transaction.

On July 12, 2024, the Company filed a Registration Statement on Form S-3 with the Securities and Exchange Commission (“SEC”). On August 1, 2024, the SEC declared the Registration Statement effective. In connection with the Registration Statement the Company established an at-the-market equity program (the “ATM Program”). The ATM Program will allow the Company to issue and sell to the public from time to time, at the Company’s discretion, newly issued shares of common stock. The ATM Program is expected to provide the Company with additional financing flexibility and intends to use the net proceeds from the ATM Program to increase stock liquidity and facilitate growth.

On August 5, 2024, the Company issued 145.6 million NIS in Series A Bonds on the Tel Aviv stock exchange (“TASE”), which is approximately $38.1 million. The bonds are unsecured, were issued at par and have a fixed interest rate of 6.97%. Repayment of the bond principal, at 6% of the principal, will be paid in the years 2024 and 2025, with the remaining 88% due in 2026. Interest payments will be due concurrent with the principal payments on September 30th of the years 2024, 2025 and 2026. In addition, the investors in Series D bond were offered to exchange their holdings with certificates of Series A bonds at a conversion rate of 1.069964 bond A for each certificate of bond D. As of September 30, 2024, 47.2 million NIS ($12.7 million USD) Series D bonds have been exchanged for 50.6 million NIS ($13.6 million) Series A bonds.

On August 30, 2024, the Company completed the acquisition for two skilled nursing facilities with 254 licensed beds near San Antonio, TX. The acquisition was for $15.25 million. The Company funded the acquisition utilizing cash from the balance sheet. The facilities are leased to the Tide Health Group, a 3rd party operator. The properties are leased in the Texas Master Lease 2, which includes an annual base rent of $1.5 million dollars with 3% annual rent increases and an initial term of 10 years with two options of 5 year extensions.

On September 25, 2024, the Company completed the acquisition of a property comprised of an 83-bed skilled nursing facility and 23 bed assisted living facility near Nashville, Tennessee. The acquisition was for $6.7 million and the Company funded the acquisition by assuming $2.8 million of existing debt on the facilities, $3.1 million was paid by the Company issuing common stock to the seller, and another $0.8 million by transferring other assets to the seller. The property was leased to Infinity, a related party operator. The property annual rent is $670 thousand dollars and the property will be added to the Tennessee Master Lease 1.

As of the date of this report, none of the Company’s tenants are delinquent on the payment of rent, and there have been no requests to amend the terms of their respective leases or to reduce current or future lease payments.

### Related Party Tenants

As a landlord, the Company does not control the operations of its tenants, including related party tenants, and is not able to cause its tenants to take any specific actions to address trends in occupancy at the facilities operated by its tenants, other than to monitor occupancy and income of its tenants, discuss trends in occupancy with tenants and possible responses, and, in the event of a default, exercise its rights as a landlord. However, Moishe Gubin, our Chairman and Chief Executive Officer, and Michael Blisko, one of our directors, as the controlling members of 68 of our tenants and related operators, have the ability to obtain information regarding these tenants and related operators and cause the tenants and operators to take actions, including with respect to occupancy.

## Market risk

As filed, 1,871 characters.

Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. In pursuing our business and investment objectives, we expect that the primary market risk to which we will be exposed is interest rate risk.

We may be exposed to the effects of interest rate changes primarily as a result of long-term debt used to acquire properties. As of September 30, 2024, we had $49.7 million outstanding under our Series A Bonds, which bear a fixed rate of 6.97%, $55.4 million outstanding under our Series C Bonds, which bear interest at a fixed rate of 5.7% per annum, $50.6 million outstanding under our Series D Bonds, which bear interest at a fixed rate of 9.1% per annum, and $428.8 million in notes, of which $264.1 million are HUD guaranteed debt at a fixed interest rate of 3.91%, $2.8 million is a mortgage assumed in the Mabry purchase which carries an interest rate of 6.25% and $161.9 million (29.4% of total debt) are floating rate debt, which bears interest at a variable rate equal to one-month SOFR plus a margin of 3.5% and a floor of 4% (as of September 30, 2024 the rate was 8.42%). On September 30, 2024, the one-month SOFR was 4.96%. Assuming no increase in the amount of our variable interest rate debt, if one-month SOFR increased 100 basis points, our annual cash flow would decrease by approximately $1.6 million. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs. To achieve our objectives, we may borrow at fixed rates or variable rates. We also may enter into derivative financial instruments such as interest rate swaps and caps in order to mitigate our interest rate risk on a related financial instrument.

## Controls and procedures

As filed, 1,898 characters.

### Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and regulations and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of September 30, 2024, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective, at the reasonable assurance level, as of September 30, 2024.

### Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Filed Nov 8, 2024.
Source: SEC EDGAR, the filing index for accession 0001493152-24-044262. Last ingested by Listed: Oct 24, 2026, 15:07 ET. No prices; not investment advice.