Strawberry Fields REIT, Inc.: Form 10-Q for the period ended Jun 30, 2026

Cash Flows (continued)

Net cash provided by operating activities was $41.7 million for the six months ended June 30, 2026 and primarily consisted of net earnings of $18.4 million adjusted by depreciation and amortization of $22.6 million and foreign currency translation adjustments of $3.1 million. This was offset by an increase in straight-line rent receivables of $4.1 million. Net cash provided by operating activities was $48.8 million for the six months ended June 30, 2025 and primarily consisted of net earnings of $15.7 million adjusted by depreciation and amortization of $22.6 million offset by an increase in other assets of $0.7 million and a decrease in other accrued liabilities of $8.3 million.

Cash received from investing activities was $0.9 million for the six months ended June 30, 2026 and comprised of the sale of a property in Oklahoma for $4.2 million. This was offset by an increase in notes receivable of $3.4 million. Cash used in investing activities for the six months ended June 30, 2025 was comprised of $40.5 million for the acquisition of properties for Kansas Master Lease, a property in Oklahoma as well as a property in Texas. This was offset by $0.1 million in principal payments on notes receivable.

Cash used by financing activities for the six months ended June 30, 2026 was comprised of ATM sales of $1.7 million and proceeds from the issuance of Series C Bonds (Inc) of $52.2 million offset by bond repayments of $56.7 million, repayments of senior debt $4.7 million, dividend payments of $4.4 million, $4.4 million in repayments of the note payable and non-controlling interest distributions of $14 million. Cash provided by financing activities for the six months ended June 30, 2025 was comprised of proceeds from the issuance of Series B Bonds $86 million offset by Non-controlling interest distributions of $12.0 million, repayments of senior debt $36.6 million, dividend payments of $3.5 million and $4.0 million in repayments of the note payable.

Indebtedness

Mortgage Loans Guaranteed by HUD

As of June 30, 2026, we had non-recourse mortgage loans of $250.0 million from third party lenders that were guaranteed by HUD.

Each loan is secured by first mortgages on certain specified properties, interests in the leases for these properties and second liens on the operator’s assets. In the event of default on any single loan, the loan agreement provides that the applicable lender may require the tenants for the property securing the loan to make all rental payments directly to the lender. In exchange for the HUD guarantee, we pay HUD, on an annual basis, 0.65% of the principal balance of each loan as mortgage insurance premium, in addition to the interest rate denominated in each loan agreement. As a result, the overall average interest rate paid with respect to the HUD guaranteed loans as of June 30, 2026, was 3.91% per annum (including the mortgage insurance payments). The loans have an average maturity of 21 years.

Commercial Bank Term Loans

On June 18, 2026, the Company closed two mortgage loan facilities with a commercial bank consisting of a $100.0 million term loan facility and a Revolving Line of Credit (“RLOC”) facility with commitments of up to $200.0 million. At closing, the Company refinanced approximately $160.0 million of existing bank indebtedness, consisting of $100.0 million under the term loan facility and $60.0 million under the RLOC facility.

The term loan facility provides for monthly payments of principal and interest based on a 20-year amortization schedule with a balloon payment due in June 2029. The RLOC facility provides for monthly interest-only payments with all outstanding principal due in June 2029. The rate on both facilities is based on the one-month Secured Overnight Financing Rate (“SOFR”) plus a margin of 2.75% and is subject to a floor of 5.50% (as of June 30, 2026, the rate was 6.40%). As of June 30, 2026, the outstanding balances under the term loan facility and revolving line of credit facility were $100.0 million and $60.0 million, respectively. The term loan facility is collateralized by 14 properties owned by the Company, while the RLOC facility is collateralized by 36 properties owned by the Company.

The two credit facilities that closed in June 18, 2026 are subject to financial covenants which consist of (i) a covenant that the ratio of the Company’s indebtedness to its EBITDA cannot exceed 8.0 to 1, (ii) a covenant that the ratio of the Company’s net operating income to its debt service before dividend distribution is at least 1.25 to 1.00 for each fiscal quarter as measured pursuant to the terms of the loan agreement (iii) a covenant that the Company’s GAAP equity is at least $30 million. As of June 30, 2026, the Company was in compliance with the loan covenants.

On September 25, 2024, the Company acquired a property, located in Tennessee. As part of the acquisition of the property the Company assumed a $2.8 million loan that previously existed on the property. The loan had an interest rate of 6.25% and matured in April 2026. On April 6, 2026, the company refinanced the loan with the same bank. The loan balance at refinancing was $2.7 million and the company received an interest rate of 6.0%. The loan term ends on March 2031. The loan balance as of June 30, 2026 is $2.6 million

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 June 30, 2026, we had $101.5 million outstanding under our Series A Bonds, which bear interest at a fixed 6.97% per annum, we had $110.2 million outstanding under our Series B Bonds, which bear interest at a fixed rate of 6.70% per annum, we had $54.7 million outstanding under our Series C Bonds (Inc), which bear interest at a fixed rate of 6.85% per annum , we had $34.1 million outstanding under our Series C Bonds (BVI), which bear interest at a fixed rate of 5.7% per annum, $59.0 million outstanding under our Series D Bonds, which bear interest at a fixed rate of 9.1% per annum, and $412.6 million in senior debt notes, of which $162.6 million (19.7% of total debt) are floating rate debt, which bears interest at a variable rate equal to one-month SOFR plus a margin. At June 30, 2026, one month SOFR was 3.65%. 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.

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 June 30, 2026, 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 June 30, 2026.

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 June 30, 2026 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

In addition to the other information contained in this report, investors should carefully consider the risk factors discussed in Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 15, 2026. There have been no material changes to those risk factors. Any of these risks could materially and adversely affect the Company’s business, financial condition, liquidity, results of operations, and prospects, and could cause actual results to differ materially from those expressed in or implied by the forward-looking statements contained in this report.