Strawberry Fields REIT Q3 2026 Earnings Call Transcript

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Provided by Quartr
November 6, 2026

Key Takeaways

  • Positive Sentiment: The REIT collected 100% of contractual rent, with portfolio rent coverage at 2.24x. Management reported projected 2026 AFFO of $74.5 million and AFFO-per-share growth of 10.1%.
  • Positive Sentiment: The company expects to close about $123 million of acquisitions before year-end, putting 2026 purchases near the middle of its $100 million–$150 million target. Management cited a $400 million pipeline and said it expects leverage to remain below 50% after planned closings, though a larger potential 2027 deal may require a capital raise.
  • Negative Sentiment: Q3 net loss was $14.8 million and nine-month net income fell to $3.7 million, primarily because bond redemptions triggered a $24.6 million foreign-currency transaction loss. Management characterized the charge as a one-time accounting event and said earnings excluding it increased year over year.
  • Neutral Sentiment: The board maintained the quarterly dividend at $0.17 per share, equivalent to a 50.2% AFFO payout ratio. Management said it will continue prioritizing acquisitions funded with cash and debt rather than issuing shares at the current stock price.
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Earnings Conference Call
Strawberry Fields REIT Q3 2026
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Operator

Good day, and thank you for standing by. Welcome to the Strawberry Fields REIT third quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jeff Bajtner. Sir, please go ahead.

Jeff Bajtner
Jeff Bajtner
Chief Investment Officer at Strawberry Fields REIT

Good afternoon, and welcome to Strawberry Fields REIT's Q3 2026 earnings call. I am the Chief Investment Officer, and joining me today on the call are Moishe Gubin, our Chairman and CEO, and Greg Flamion, our CFO. Yesterday evening, the company issued its Q3 2026 earnings results, which are available on the company's investor relations website. Participants should be aware that this call is being recorded, and listeners are advised that any forward-looking statements made on today's call are based on management's current expectations, assumptions, and beliefs about Strawberry Fields REIT's business and the environment in which it operates. These statements may include projections regarding future financial performance, dividends, acquisitions, investments, returns, financings, and may or may not reference other matters affecting the company's business or the businesses of its tenants, including factors that are beyond its control. Additionally, references will be made during this call to non-GAAP financial results.

Jeff Bajtner
Jeff Bajtner
Chief Investment Officer at Strawberry Fields REIT

Investors are encouraged to review these non-GAAP financial measures, as well as the explanation and reconciliation of these measures to the comparable GAAP results included on the non-GAAP measure reconciliation page at the back of our investor presentation. And now, on to discussing Strawberry Fields REIT and our Q3 2026 performance. I wanted to start by sharing some key highlights for the quarter. During the quarter, the company collected 100% of its contractual rents. On September 9th, 2026, the company completed the earlier announced acquisition of a hospital campus comprising a licensed 60-bed hospital, 99-bed skilled nursing facility, and ancillary medical office buildings near Kansas City, Missouri. The purchase price was $10.4 million, and the company funded the acquisition from the balance sheet.

Jeff Bajtner
Jeff Bajtner
Chief Investment Officer at Strawberry Fields REIT

The hospital campus was added to an existing master lease of a tenant in Missouri with initial base rents of $1.04 million and subject to 3% annual rent increases. Subsequent to quarter end, on November 1st, 2026, the company entered into a purchase agreement for a 99-bed skilled nursing facility in Angola, Indiana for $15 million. The company will fund the acquisition with $14 million from the balance sheet, and the seller will take $1 million in OP Units. The facility will be added to an existing master lease for our tenant in Indiana. Initial base rents will be $1.5 million and will be subject to 3% annual increases. The acquisition is expected to close before year-end. As I mentioned in last quarter's call, we have been very busy on the deal front.

Jeff Bajtner
Jeff Bajtner
Chief Investment Officer at Strawberry Fields REIT

Our pipeline currently has $400 million of deals, of which we anticipate closing $123 million of these deals before year-end. Assuming we do get these deals closed, we will have closed over $130 million of acquisitions in 2026, which falls right in the middle of our target acquisitions for the year of $100 million-$150 million. Yesterday, the board of directors approved the Q4 2026 dividend, which will be $0.17 a share. The dividend will be paid on December 30th to shareholders of record on December 16th. I would now like to have Greg Flamion, our Chief Financial Officer, discuss the quarter-end financials.

Greg Flamion
Greg Flamion
CFO at Strawberry Fields REIT

Thank you, Jeff. Welcome, everyone, to the Strawberry Fields third quarter earnings call. Let's start with the Q3 balance sheet. Total assets were $844.1 million, a decrease of $41.1 million, or 4.6%, compared to December 31st, 2025. The year-over-year decline in assets was driven by lower fixed assets and cash balances at the end of the year. On the liabilities and equity side, lower debt balances were driven by third-quarter bond redemptions. Equity was lower year-over-year, primarily due to a decline in accumulated comprehensive income related to foreign currency translation adjustments and offset by ATM common stock sales. Continuing now to the consolidated statement of income for the nine months ending September 2026. 2026 revenue was $120 million, up $5.1 million compared to September 30th, 2025. This represents a 4.5% increase, which was driven by the timely integration of properties acquired in 2025.

Greg Flamion
Greg Flamion
CFO at Strawberry Fields REIT

While we experienced higher revenues, the income growth was offset by higher depreciation, which was driven by new property acquisitions. General administrative expenses were also higher due to higher closing costs, corporate salaries, and other operating expenses. These increases were offset by lower amortization expense. Looking at other expenses, the company recognized a $24.6 million foreign currency transaction loss resulting from the exchange rate differences associated with the redemption of its ILS 3 denominated bond series during the third quarter of 2026. As a result, year-to-date net income was $3.7 million compared to $24.5 million for the nine months ended September 30th, 2025. Excluding the foreign currency transaction loss, year-to-date net income would have been approximately $28.3 million, an increase of $3.7, or 15.2%, over the comparable period in 2025.

Greg Flamion
Greg Flamion
CFO at Strawberry Fields REIT

While reporting net income declined year-over-year, underlying earnings increased primarily due to the contributions from properties acquired during 2025. Going now to the next slide, we will now review the quarterly income statement comparison for the third quarter of 2026 versus the third quarter of 2025. Third quarter 2026 revenue was $40 million, an increase of $0.3 million compared to the third quarter of 2025. Operating expenses were $0.6 million lower than the prior year period. Lower amortization expense and property tax expense were partially offset by higher general and administrative expenses. The company reported a net loss of $14.8 million for the quarter, primarily due to a $24.6 million foreign currency transaction loss, recognized in connection with the redemption of the ILS 3 denominated bond series mentioned earlier.

Greg Flamion
Greg Flamion
CFO at Strawberry Fields REIT

Excluding the foreign currency transaction loss, third quarter net income would have been approximately $9.8 million, representing an increase of approximately $1 million, or 11%, compared to the third quarter of 2025. Finally, I'd like to end my presentation with some financial highlights. Our 2026 projected AFFO is $74.5 million, representing an 11.1% compound annual growth rate. The 2026 projected AFFO per share growth is 10.1%. The 2026 adjusted EBITDA is $129.5 million, representing a 14% compound annual growth rate. Our yield on leases is 14.3%, and the company's net debt to net asset ratio currently sits at 48%. As of September 30th, 2026, our dividend was $0.17 a share, representing a 5.3% yield and an AFFO payout of 50.2%. This concludes the financial portion of the earnings call presentation. I'll now turn it back over to Jeff Bajtner, who will walk us through additional portfolio highlights.

Jeff Bajtner
Jeff Bajtner
Chief Investment Officer at Strawberry Fields REIT

Thank you, Greg. Looking at our portfolio highlights, our portfolio currently has 145 facilities located in 10 states. These facilities are comprised of 15,655 licensed beds. Our total asset value at acquisition is $1.1 billion. Currently, our portfolio has 16 consultants advising the operators. The weighted average lease term is 6.8 years, and as we're proud to report, our tenants continue to do better and better each quarter, and our rent coverage is currently at 2.24x. Our net debt to adjusted EBITDA is 5.4%. The portfolio, we continue to collect 100% of our rent. As I mentioned earlier, we have an acquisition pipeline of $400 million, of which $123 million we expect to close before year-end. With that, I'll hand it over to Moishe Gubin, our Chairman and CEO, to continue with the presentation.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

Thank you, Jeff. I want to start, before I present the rest of the slide deck, I want to just go back to slide four and just talk about, if you look at our quarter year-over-year, our numbers are good. It's relatively flat, and our net income would have beat last year's third quarter by about $1 million if it wasn't for the foreign currency transaction loss. I want to add a little color because I'm sure the folks that are out there are going to want to ask about it, so might as well just talk about it now.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

The foreign currency transaction loss was an accumulation that, for those that are good at accounting here, we accumulated OCI over the years, and the actual expense already found its way into interest expense throughout the years as we had because over every quarter, we mark our balance sheet to spot price of the ILS to USD. When this quarter ended, during that quarter, we had paid off three bond issuances. The reason we paid off the three bond issuances is because the bond market, you know, you price at the day of the market, and we just had the bad luck of the days that we went to price, the market, you know, a bomb hit or something in Israel or whatever occurred, which ended up causing the interest rate to be too high of a rate on the bond.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

As a good custodian of our company, we had a backup plan all along, and we ended up taking, instead of the rate that was being quoted in Israel, even though we would have saved this $24 million of currency exchange, the interest rate in Israel was about a point or a point and a half higher than what we ended up taking, which I think at September 30th, 6.66% was the interest rate, I believe, on that money versus 8.5% in Israel. We basically saved the two points on the interest expense, and had to then realize this currency loss, which was already in our retained earnings. That is why if you go to the balance sheet, the equity didn't change.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

It moves it into, from an OCI, which would have been expensed, those other comprehensive loss, to now be on our regular income statement above the line. That is what this is. To anybody concerned about it is a one-time event. In the grand scheme of things, the way I am looking at it is, you know, we replace it with five-year money at SOFR 275, which was two points cheaper almost than what we would have been in a fixed product, which would have had a prepayment penalty. We amortized it over five years. This $24 million turns out to be less than 1%. We end up ahead of the game. That being said, I am going to go on with slide six, and I will also start by saying thank you everybody for joining us today. Happy with where we are.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

Happy to present that we are going to be, which Jeff brought up already, that we should end this year ahead of budget as far as buying. It happens to be, unfortunately, it is at the end of the year as opposed to the beginning of the year. The full financial results next year should be killer compared to this year and previous year. That being said, if you look over the last six years, our AFFO, our growth rate is over 11%, and you see it went from $43 million to $74 million, and we like that. That hopefully should continue to grow. The next slide after that just talks about our portfolio growth. Again, this is based on what we is our 10% cap value on our rents is really what it is. It is still a 13% growth rate, which is good.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

Reality is, we probably are doing ourselves a disservice, and it's probably more value than we're saying, and that's, we'll look at the non-GAAP spreadsheet at the end of the presentation. Even so, being conservative at a 13% growth rate over the last six years is still pretty good. Our stock price is holding up. Unfortunately, yesterday there was a stock crash, which wasn't great. I think we ended the day close to $12.60, $12.70, something like that. Otherwise, we're holding our own. We feel we're really undervalued. At some point, we hope that we get recognized and the stock price goes up. We're going to keep doing what we're doing, though. Most of the longtime shareholders that exist are holders, not sellers, and they're happy with the growth and happy with what we're doing.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

Get a lot of compliments, and I'll keep doing what we're doing, and hopefully that's succeeding. Slide nine just basically talks about the difference between us and them, and we're trading at a 9.5x multiple. Meanwhile, our closest peer is trading almost double, which is painful for us every time I see this. We're going to keep pushing, and we're going to bring in better yields. We're going to bring in better returns. We're going to keep doing what we're doing. We're committed to the disciplined growth, the discipline, how we buy. As we've spoken to a lot of you folks, it's pretty wash, rinse, repeat how we do business here. As Jeff said earlier, again, we have all of our rents being collected, so our portfolio is performing.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

Our dividend, like we announced, is staying flat for this quarter, but we're proving that we're a consistent return for our shareholders, and we expect that to continue. On the next slide, we just talk about our stock performance, but even more important really is our true return at over 10%. I think that kind of follows the value of the AFFO per share as well. At least we're not lagging behind that, meaning the market is discounting us at a multiple, but at the end of the day, it's staying consistent with what the stock price is growing at that same 10% clip because at least our AFFO is growing the same 10% clip. From that point of view, at least that's good.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

The stock price performance, as you see over here, we're above where we started, but hopefully on a bigger chart, you'll see the growth rate's been good in the stock, and hopefully it continues to improve. Again, we're going to be at REITworld in two weeks from now in Atlanta. Last year, we were at that, it was when people were screaming out our name in the hallways, and people were telling us we're the unicorn, keep doing what we're doing. I was actually very positively feeling about that. Now when we talk to people, I always was proud of what we have, but the fact is we're over 90% skilled nursing, and exactly what we're still doing and continually growing in the skilled nursing space.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

Oddly enough, the one deal that we made came with a nursing home, a hospital, and an MOB. All the next deals that we are going to close by the end of the year are all SNFs. On the next slide, just the same thing, pure comparison. Our AFFO payout still remains way below everybody else, and that is giving us. We are doing all these deals without raising any equity. We are going to close, like Jeff said, I think $120 million, $130 million, probably at $120 million or $130 million in the next two months, and we are using our own cash. We are not raising any equity, as we cannot dilute our shareholders when the stock price is down. Anyone owning our shares today is just going to make more money tomorrow without us diluting anybody. The per-share growth is going to be good.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

Again, that is why our AFFO share growth rate is higher than all of our peers, which is the slide to the right. On the next slide, again, this payout ratio, as Greg said earlier, is right around 50%, and we announced that it is going to stay that way at this point for this quarter. The AFFO share growth, again, is over 10%, and again, that matches almost exactly what the stock appreciated over the last 12 months with the same 10.1% growth rate. Again, at least the marketplace is not lowering our multiple. That is a positive. I have always been the optimist, for good or bad. Next slide just talks about our debt. We are past this now at this point, so maybe we will take this slide out of this deck, because at one point we were worried about the bullet.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

At this point now, 2026 ends the year quiet, 2027, 2028, very little. It is the same amortization. It is about $20 million of principal being paid down a year, maybe a drop more. 2029 is the next bullet, which has two one-year renewals, and it has bond renewal. At this point, the Israeli market was not good in the last couple deals, even though they like to claim that they did good by me because everyone else would have been even worse. To my point of view is I am stronger than everybody else. We should have gotten treated a little better. When this thing renews, most likely, we probably just pay it off and move towards an exit of the Israeli market. We will see what happens. It could be the market gets super strong, and whatever I just said, I will have to eat my words.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

That being said, there is a slide later that talks about what valuation you want to put as a net assets. Based on a 10 cap, net assets were at 48% leverage with a net debt to EBITDA of 5.4%. Those are good numbers. Blended interest rate of 5.8%. Super strong. We still like HUD. We are working our way still through the HUD world to be able to take a bunch of our buildings to HUD. At this point, we have a little throughput issue that we have to work ourselves through, and God willing, that will happen in the next few quarters. In which case, hopefully by the end of 2027, we should be able to have maybe another $100 million sitting in HUD debt as opposed to conventional or Israeli debt.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

On the next slide, as I've been saying the last few years, it's become one of my favorite slides, where it just shows you how diversified we are with our rents and we're diversified by states. That's going to continue. The deals that we're doing now, two of the deals that we have are going to be two new states. I think we've announced one of them is Florida, and the other one we didn't announce yet. Everything else is going to be Indiana, the state we're already in, of course, and Texas, which we're already in. All good. All of the deals that we're doing now are going to be third-party operators. That, I think we were at 42% once this transaction is done, and sometime first quarter, I think that number's going to drop pretty good.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

Next slide 16, just giving statistics of the facilities, averaging 77%. I've talked about how that doesn't really matter. I'll just gloss over this slide and go to 17. On 17, we're just basically talking about what our map looks like and percentages of facility types. Good. It hasn't changed really quarter-over-quarter, and it remains the same. The way we buy, like we've talked about over the years, is 10% cash on cash return day one before leverage. Then we add a little leverage, which increases our return. All the deals that we're doing today are all the 10 cap purchases. All the math is exactly what we've told everybody. Anybody modeling our financials, you can model the $130 million or so that fully next year will add up to about $13 million of rent increase.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

We got a couple other deals that won't really hit the tape, but we did a couple deals where we increased the rent and then paid something out to our tenants. That'll increase revenue. We got a couple other smaller things, just cleaning up the portfolio a little bit to the positive. That'll increase our revenue. On our last two slides, the first one is just basically showing nine months ended AFFO or net income through FFO to AFFO. Look at the net income, it's really down. Depreciation and amortization, but it gets you to FFO. Again, that's because of the foreign currency, but then once the straight line rent and the loss of foreign currency, your AFFO gets to be $55,879,000, which is $2.5 million higher than 2025.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

EBITDA, again, net income adding back the depreciation and interest expense keeps you below, but when you want to add back the foreign currency and the straight line rent, you end up with an adjusted EBITDA that's $3.5 million higher than it was last year, nine months ended. That's pretty good. The next slide, or the last slide, which I like that we put this in here, because if you guys are following skilled nursing at all, you see that a lot of the deals from the other guys are at 8.5 caps or 8.75 caps. Basically what this is telling you that we're marking our whole balance sheet to Not our balance sheet, we're marking all these presentations to a 10 cap, and we're showing net assets at $1,467,000, let's say. Then we're saying that our net debt to net asset is 48%.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

But really, we could be using the low end of this and saying, really, our net assets is really $1.673 billion, and therefore our net debt to net asset is 42%. So, to the folks that are out there that are looking for a lower net debt to net asset, really, you can hang your hat on saying that a cap rate of 8.75 is not unreasonable, especially when you see all these other deals, CareTrust and the other guys are doing that are at 8.5 caps or even lower. So with that, I want to thank everybody for joining us, and I want to pass it back to the operator.

Operator

Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. One moment while we compile our Q&A roster. Our first question is going to come from the line of Gaurav Mehta with Alliance Global Partners. Your line is open. Please go ahead.

Gaurav Mehta
Gaurav Mehta
Analyst at Alliance Global Partners

Thank you. I wanted to go back to your comments around the $120 million portfolio that you're looking to acquire in the next couple of months. Can you maybe talk about where you expect your leverage to be after closing that portfolio, and how should we think about capacity to make more acquisitions in 2027 after that portfolio?

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

Yeah. Hi, Gaurav. Thank you for joining us, and thank you as always for That's a good question you're asking. We model out to be below 50% in our portfolio once all of these deals close, using current cash and raising our debt a little bit to be able to fund everything. So we should, when all these deals close, hopefully by 12/31, we should still be below the 50%. And just to remind you, like we've always gave guidance to say that we're looking, our policy is between 45% and 55%, and so 50% is fine. And again, if we really look to lower cap rate, and like the last thing I said in the presentation, right, we're probably closer to 40%-45% at 8.75 cap.

Gaurav Mehta
Gaurav Mehta
Analyst at Alliance Global Partners

Thanks for that color. The second question I have is on the pipeline. You mentioned $400 million of the pipeline. Can you maybe provide a breakdown on what's in that pipeline? Are you looking at more portfolios? What kind of impact have you seen of higher rates on your pipeline?

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

I really should let Jeff answer that, but I'll just take away some of his thunder. The biggest part of that portfolio of the pipeline, we have a deal that's very, very likely to get done, and it's going to be a really sizable deal. Assuming we can work, we can get that deal on the contract, then you're talking about first quarter, a first quarter deal that will meet majority of our, or more than our budget for the year, and then everything the rest of the year will be gravy. I don't want to make anyone crazy today, but the reality is, assuming we go on the contract, you'd have to base an assumption on where our stock price goes to see whether or not we're going to end up doing a capital raise for a portion of it.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

It would seem like most likely we would do a capital raise because of the leverage, but that's kind of what's coming down the pike. When we speak next, or maybe some of you individually, we'll have conversations with as soon as we get something on the contract, because that would be one that we would have to announce, and it has to do the regular traditional audit because it's a bigger portfolio acquisition. That's the gist of the first bigger deal that that's a next, and that's pretty likely that it'll occur. With that, I'll give it to Jeff for him to talk further about the pipeline, and the deals that we're working on.

Jeff Bajtner
Jeff Bajtner
Chief Investment Officer at Strawberry Fields REIT

Thank you, Moishe. As we're heading towards year end, we're working on three or four deals. One of them is, we announced it's the skilled nursing facility in Angola. One of them also, Moishe announced, or Moishe mentioned in his comments that it's going to be down in Florida. Then there's another portfolio, a sizable portfolio that we're looking at as well. These have all been deals that, well, a few of them have been deals that we've been working on since the beginning of the year, but it's just a matter of the deals play themselves out, and they have a life of their own, but we are working very hard and diligently to get them closed before year end. Total, as I mentioned in my remarks, it's roughly about $123 million of deals that we're aiming for to close before 12/31.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

Yeah. Likely though, for first quarter of 2027, I mean, maybe I am getting ahead of ourselves, and I thought that is what Gaurav was asking, is I think for first quarter of 2027, based on that total pipeline, there is a likelihood that, I know we have one deal that is like near Houston, a smaller deal, and then we have a couple of other things, but then we have this big deal. If we pull off this big deal, that should be a nice change. It will bring us over $2 billion in assets based on market value, and it should be, I do not know about a game changer, because everything is a 10 cap, basically a 10.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

This one is going to have a different, little bit of a different of a metric, a longer lease, a smaller cap rate, and then when you blend it out over the life of the, it is a 10 cap minimum. That being said, it should be an exciting first quarter, and it will change us just by making us a little bit larger. Hopefully that happens. I am excited about that.

Gaurav Mehta
Gaurav Mehta
Analyst at Alliance Global Partners

All right. Thank you. That is all I had.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

Thank you. Be well.

Operator

Thank you. Our next question is going to come from the line of Richard Anderson with Cantor Fitzgerald. Your line is open. Please go ahead.

Richard Anderson
Richard Anderson
Analyst at Cantor Fitzgerald

Hi, thanks. Good morning or afternoon, wherever you are. I am curious, Moishe, if you have any thoughts about midterm elections' impact on kind of oversight from politicians in the skilled nursing space. You all want the same thing, good quality care for your residents, but they could be needling for property owners like yourselves. I am just curious if you have got your antennas up at all with a new political landscape in front of us now.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

Yeah. Hi, Rich.

Richard Anderson
Richard Anderson
Analyst at Cantor Fitzgerald

By the way, let me just finish the thought, and how that might change. You got a lot of stuff in front of you potentially, but how that might change the pipeline going forward. Sorry. Thank you.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

Yeah, you're welcome. I appreciate the question. I could tell you that right away, one of I don't want to give away what we didn't announce yet, but one of our portfolios that we're buying, this is a bigger deal that, God willing, we close before the end of the year, is in a state that the blue person, the blue one on that deal, and they've already announced that they're going to raise the Medicaid rate for nursing homes for that state. Right away, there's a boon financially. There's a boon, which is not unusual. Over the years, when blue states or when it's Democrat-led government in that state, typically the trade-off's been more money to pay to the nursing homes, and the trade-off to that is a lot more regulation. Not in the sense of more regulation, but in more supervision of that regulation.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

Historically, Illinois, or at least the city of Chicagoland, where it's blue and the rest of the state is actually red, but city of Chicago, the revenue is usually there, or yeah, basically. But the way they regulate has been aggressive, really aggressive to the operator, and very quick to fine. It's been like that. I've seen that. I'm a historian. I study This is the main business I've been in since my career started as an accounts payable bookkeeper in a nursing home in 1990, right around the beginning of 1998. This is the way it's always been. The Republicans will leave you alone, but try to lower your rates, and the Democrats will raise your rates, but not leave you alone.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

A good operator really doesn't care much either way, would prefer more revenue, but really wants to take care of the residents, and which is the way I was as an operator, and now as a landlord, I'm trying to find tenants and push for the tenants to give good care, though I don't have control over the care they give. This was a midterm election that I think, to some benefits, Collins losing in Maine, she was a huge proponent with Elizabeth Warren that they wanted to attack REITs, healthcare REITs, and owning nursing homes. With her being out of the picture, that should also improve a little bit of the gusto from the Senate to go attack REITs or equity funds that own the real estate in the nursing home world, and the hospital world. That should be an improvement.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

For us, fundamentally, the way I ended up being where we are in Strawberry is I found myself graduating college and taking a job in the bookkeeping at a nursing home, not knowing I would fall in love with wanting to take care of people. I was always in hospitality before that with the catering business in New York and all. But from that minute on of where I started working at the nursing home and caring for people, it's always been anyway, philosophically, we're doing, and similar also at my bank, we're doing good by the world. At the same time, we're making money doing it, but we're not looking to not do good and try to find money by not Hopefully you guys understand me. I may not too articulate today.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

But at the end of the day, I'm a big, big. In our case, we're a big fan of when we find the tenants and do what we do, care is number one anyway. I don't really think, Rich, at the end of the day, if you sum it all up, I think the benefits are already coming in that's going to be good stuff. We know already the negatives are going to be where it's going to be more regulation and more enforcement of the regulation and more fines. God willing, they say the more things change, the more things stay the same. That's probably one of the quotes you could use for one of your articles you write. That's basically what ends up happening, right? The person who gives good care is going to be fine.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

We're not avoiding any states more than we've already been avoiding, meaning I don't look at deals in Massachusetts, Connecticut, New York, California. We still avoid states where there's not enough population. We're not going to buy in Alaska. We're not going to buy in Hawaii. We're not going to buy in Wyoming if there's only X amount of facilities in a state. We're limited to where we could have a big enough portfolio. I hope I answered you. I'm sorry I didn't.

Richard Anderson
Richard Anderson
Analyst at Cantor Fitzgerald

Just give those politicians some soup and you'll be fine. The other question I have is just looking at the map of all the different assets on page 17 of your deck, and you're moving into Florida. I'm just looking at the cluster in the Midwest, but then you have some stuff on the outskirts. Is there any kind of asset recycling opportunities here, and maybe with one intention being to build a greater presence in Florida? I'm just curious how you're thinking about all that on a go-forward basis. Thanks.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

That's a good question, and it's a point that I should have made and I didn't. Our portfolio that we're buying, that we didn't announce exactly, hopefully in the fourth quarter, in the next month or two, is in the Midwest in a state that we're not in, and it's a new operator, so that'll fill in the cluster in the middle. In the Florida deal, it's a sale-leaseback, and the guy who's selling has been in the nursing home business for 30, 40 years. Part of this arrangement is once we close this transaction, it's expected that they have six other buildings in Florida, or they have an ability to buy six more buildings in Florida, where we would buy it and then lease it to them in a master lease. We didn't expect it to be a one-off.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

The reason why we were able to do a one-off as a starting point before getting to a bigger is because Infinity, which is, as you guys know, as I am a related party to in ownership, at least not in operations, is now based in Florida, been there for between five and 10 years. The corporate nursing and the corporate operation team, they are all Floridians. A bunch of them are from Tampa area, and the others live South Florida, Fort Lauderdale, and Miami.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

This as a one-off, it was basically a hedge bet because I went to Michael, and I said, "Michael, we have this deal. It is basically something we would not even look at." He says, "Well, do the deal. If the numbers work, and worst-case scenario, the team here can manage it because we live here, and everyone knows Florida. Even though we do not operate in Florida today, we know the Florida landscape." That was why we are willing to do this. This would be our first real one-off, but it is a hedge bet. That is how we look at it, but I am really hoping that this ends up being a master lease of seven facilities in the next 18 months.

Richard Anderson
Richard Anderson
Analyst at Cantor Fitzgerald

Okay. Sounds good. Thanks very much.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

Welcome. Thank you.

Operator

Thank you. Our next question is going to come from the line of Mark Smith with Lake Street. Your line is open. Please go ahead.

Mark Smith
Mark Smith
Analyst at Lake Street

Hi, guys. First off, just a question on P&L. G&A came in a little lower than we'd expected this quarter. Is that sustainable, or will we see that come back up here in the coming quarters?

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

Greg can add more color, but I think if you were comparing it to, what was it, last year around this time was when the company gave me stock options. I assume there's two things in the G&A. I know there's at least two things in the G&A. One is financing costs from doing the line of credit, and that was the second quarter. So, if you look at last quarter, we had a bunch of money in there that was really a one-time event. Then if you look at against last year, you would see a compensation that was a catch-up, and it's lower now. I think Greg can probably expand on what I just said and maybe give you even more color.

Greg Flamion
Greg Flamion
CFO at Strawberry Fields REIT

Yeah. We don't expect to have, I guess, any of these one-off events in December. So, I would expect G&A to kind of be in line with where we're at right now, I guess in regard to Q3. So, that helps you out with your analysis, but again, we don't expect anything going forward that should be higher than where we're at right now. I guess in regard to the rate for next quarter.

Mark Smith
Mark Smith
Analyst at Lake Street

Okay. Then second question that I had was just curious if you guys can talk at all about this potential transaction in Arkansas, maybe selling off some of these facilities. Any insights you can give us on if that's going to go through and potential impact?

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

Yeah, that's another thing I glossed over accidentally. So that transaction was, it's an option that we gave the tenant. We usually don't give options. It's that option. We have one other option out there. I think they've been tenants right now for, I don't know, like six years, maybe a little longer at this point. So, the deal that we made at the time. So when we bought those facilities, we bought those facilities at a relatively inexpensive price, with the turnaround of me and my partner, Michael, fixing these facilities. So we were the operator at the time, and we didn't get compensated, other than the net income from the operator point of view. We took these buildings that we got a great deal on, and we worked hard, and turned them around and made them worth a lot more.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

We were able to then pass it along to the next guy, who's a current tenant, and they've done a fantastic job there. So, they've been waiting patiently for the legal issue that's been outstanding between the people who sold it to Strawberry, and we beat those guys in court. Now it's been three times. They got one last appeal for the Supreme Court or something. But they lost fair and square, and when they lost the last time, it gave the ability for our current operator to exercise their option. They lined up financing. They're cashing out between $50 million and $100 million on this transaction, so they're going to pay us off. They're going to buy it from us, and they're going to have a nice cash out, and good for them. They've worked hard. They've done a good job.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

It is partially those proceeds from that. We are doing a 1031 so that we do not have to pay, because otherwise we would have to dividend out all the capital gains. The true capital gain is around $60 million on this deal, and that $60 million we are going to parlay into using cash to buy the deals that we are closing. It is imminent. We are waiting for one last letter to come in from the government to allow the transaction, which is going to come. The question is timing. We have been waiting already two weeks for it, and there is a likelihood the deal closes next week. When the deal closes next week, I think at this point, I do not even know if we have to do an 8-K because we announced today talking about it, right? It was in the 10-Q.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

Once that deal closes, that money is going to be sitting there waiting to be spent on the new deals. When you net it all together, everything we did, we are still going to net out with a higher rent number going forward than what we have now. With all the deals coming in versus getting paid off on that deal, if you are modeling it out, you would probably take the current number and probably add, I do not know, like $3 million-$4 million of additional rent or something like that is going to be the change all in. It will be strong. Then we get rid of an option that has been haunting me that someone is going to exercise, and now, got one last option.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

I think it is like $28 million bucks or something like that in Southern Illinois, and those guys are making a lot of money, so that is probably going to happen, I assume, in 2027 sometime. We expect to buy higher than the range or the top end of the range of $150 million bucks in 2027. In the grand scheme of things, we will just, I think Rich used the word cycle through, or whatever the word was, to recycle. We will get rid of properties that we have had that have an option to go into properties that do not have an option, most likely. I cannot say that I am not going to give an option to somebody if the deal makes sense. We are poised to keep chugging along positively and to the same or better than what we have been.

Mark Smith
Mark Smith
Analyst at Lake Street

Okay. Great. Thank you.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

Thank you, Mark.

Operator

Our next question is going to come from the line of John Massocca with B. Riley Securities. Your line is open. Please go ahead.

John Massocca
John Massocca
Analyst at B. Riley Securities

Good afternoon. Maybe just kind of following up on the tenant purchase option. The $60 million number you quoted, is that like net proceeds ex of any kind of debt that needs to be paid off, or is that just kind of the actual gain you're making on the transaction? Just trying to think about what number to kind of use from that transaction as kind of a source of proceeds for the $123 million worth of deals you quoted earlier.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

Yeah, the purchase price, and thank you for joining us, John. The purchase price for that deal is $90 million. That's been the option since the beginning. So, out of $90 million, we have $6 million in debt on the properties altogether. So, our net cash is going to be $83 million. Out of $83 million, we're going to buy, and the deals that we announced, one deal is going to be $14 million in cash out the door, one deal is $21 million cash out the door, and then lastly, the remainder of that cash, plus a little bit of debt, is going to be for the last deal out the door.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

That should leave us with enough cash to pay our dividend in December, close all those deals, have enough money for us to end the year with ample cash and ability to still borrow against our line to do more deals in 2027.

John Massocca
John Massocca
Analyst at B. Riley Securities

I guess I've been thinking about maybe the $123 million in terms of sources for those, you know, sources of proceeds for those transactions. Do you feel that between that disposition and kind of existing debt availability, you could address those potential acquisitions, or do you think you need additional new debt?

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

No. Actually, interestingly enough, the deal that we're doing in the new state we're going into, the reimbursement for that state requires Doesn't require, that's not the right word. But for reimbursement to remain the same for the tenant, so the tenant to be, they're relying on the current revenue number based on The revenue is generated, is decided by the state and the feds through Medicare, Medicaid. Private pay, even if it's 10% or 15%, is still an immaterial number. The rest of the house is paid for either by the state or the feds. Reimbursement by state varies, and this state actually has a component, which most states do, but they usually have a flat number, in the capital component that allows for interest by landlord or tenant, to get included as an expense, an allowable expense for capital.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

The tenant-to-be said to us that they need us to put about 53% leverage on the assets that we're buying so that their reimbursement rate doesn't drop. I was glad to do it because I manage the balance sheet off of the aggregate, not off of the individual assets. It's perfectly fine to do. We're going to be borrowing about $43 million on that transaction. You got to take that $43 million plus $83 million is $126 million. $126 million is more than enough for us to meet all of these deals by end of 2026.

John Massocca
John Massocca
Analyst at B. Riley Securities

Okay. I appreciate all that math. Then maybe kind of bigger picture, as you think about where interest rates have moved, and I know you kind of traditionally have had this return threshold or this kind of day one cap rate you've targeted, it seems a little bit agnostic to moves in interest rates, but as interest rates have moved up, I mean, does that give you some power thinking about investments in 2027 to go beyond that 10% cash cap rate? Or do you think it's just-

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

You know-

John Massocca
John Massocca
Analyst at B. Riley Securities

given what you're, go ahead.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

Yeah. No, I mean, your question is good. We literally, we had a board meeting yesterday, and that came up in conversation where Right, so this has come up multiple times over the years, and I don't know all of you guys that's listening to this call, what your backgrounds are and stuff, but in life, you have a choice. You can either stick with what's working, proven over time, a model that works, or you adapt and you evolve, which So really, the answer is there's a balance between all of that, right? So in our case, because of the perm financing in HUD and the ability to have fixed financing with the bond debt, and then you have the conventional that's variable rate, when you get through everything, like if you look at slide 14, our blended interest rate for all of it is 5.8.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

For us to buy at a 10 cap, the 10% return on day one, and then when you add in the benefit of, let's say the blended is 5.8, right? You are able to I am satisfied, and again, I answer to the shareholders and the board, we work together in our directorate, but I am satisfied with that yield. That is what we have been doing over the years. The benefit from what you suggested, and you are right, is that we probably could squeeze maybe a little bit more rent, or we could squeeze a little bit lower on a price somewhere. But we are happy with the ability to close, because it is a balancing act to the seller.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

The seller says, "I want this amount of money." They do not give a damn what my cap rate is or how I am buying. They want X amount of money, right? We are happy closing, like we said, like the $100 million-$150 million mark, because doing that is non-dilutive to the shareholders. I do not have to raise equity for us to keep growing at that pace. That presents a good yield to our shareholders between that growth and our dividend. We feel it is compelling investment at 16%, when you put those two together.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

I do not need to squeeze out and I like the benefit of knowing that we are reliable, that we are going to close the $100 million, $150 million every year, and that model has been working for us. I do not know if I sound indecisive. I am really not. It just, we debate this because it is a good business philosophy or theory debate, which is, do you keep evolving? Because you should evolve. Do you keep changing and then therefore, it is not exactly sellers in the market that know how you buy, right?

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

They are not going to necessarily come to you if you are wishy-washy or you change your pricing matrix. They are not going to be They cannot trust They could call me and say, "Hey, Moishe, I got a deal for you. I know your math. It is making X, and this is how much I want. Pay me and let us close." Right? I would lose that. I would lose a little bit of the stability of how we buy and the amount of volume we are able to buy. But that is really as much color as I could give you.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

It is like, your question is something that comes up in conversation board level a couple times a year, and then conversationally just amongst people comes up more often than less often, because when rates go up, they say you should raise it, and then when rates go down, no one ever says you should lower it. We just go and do what we do. For me, being consistent and kicking off returns to the shareholders consistently at a high double digits has been why screw with the model is basically the argument that other way, right? It is like, why mess with it? It is going great. I do not know. Hopefully, I did okay with answering you.

John Massocca
John Massocca
Analyst at B. Riley Securities

I appreciate all that color. That did it for me. Thank you.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

Welcome.

Operator

Our next question is going to come from the line of Ken Billingsley with Compass Point Research & Trading. Your line is open. Please go ahead.

Ken Billingsley
Ken Billingsley
Analyst at Compass Point Research & Trading

Thank you. I wanted to follow up on the expense answer you have. I just want to clarify, when you talked about third quarter being a run rate, I know you said fourth quarter, we could extrapolate to that, but would that be like an annualized number we should be looking at on the current book of business?

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

Yeah. By the way, Greg will answer that, but I'll just We've told people before, like, we're at almost full employment. As these properties come on, we have to add one asset manager to the mix, and at some point maybe we got to add, like, a paralegal or maybe a clerical person. But you're talking about a total increase in labor costs of maybe $250 a year, maybe $300 a year. It's not big. It's not a big number. As far as the current labor, we've been sticking with, I think, what did I do last year? A 15% bonus?

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

Everyone, instead of raises, and I give raises based on market, but other than that, we are still running relatively flat as far as we make more money. We are giving 15% bonuses to everybody, and it is clean. It is clean. That probably will move up market, the people on this call, me, Jeff, Greg, at some point, those are all increases somewhere built into there. Other than that, our space where we are and all the costs of how we run our business is we run very lean, and we do not expect any of that to change. We are not looking to buy or rent in, like, an expensive office space somewhere. We are peacefully in our spaces where we are, and it is okay. Greg, you want to add to that?

Greg Flamion
Greg Flamion
CFO at Strawberry Fields REIT

Yeah. I will just be a little bit more specific. I guess last quarter, we were a little bit less than $2 million. Looking at that number for Q4, I do not see anything that is going to materially move the needle on that number. If you guys are looking for a G&A for Q4, I would look at $2 million.

Jeff Bajtner
Jeff Bajtner
Chief Investment Officer at Strawberry Fields REIT

Sorry, Greg, I would add to that. You have to add Moishe as a $700,000 bonus for Q4.

Greg Flamion
Greg Flamion
CFO at Strawberry Fields REIT

Give me a curveball.

Jeff Bajtner
Jeff Bajtner
Chief Investment Officer at Strawberry Fields REIT

Okay. Well, then maybe not. You are getting it either way.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

I did not even know. God bless you all. I will take the money. Thank you.

Ken Billingsley
Ken Billingsley
Analyst at Compass Point Research & Trading

As you are talking amongst yourselves, just to clarify, about $2 million a quarter would be a safe bet, assuming though that as you do these acquisitions, there is going to be some incremental increase, but a starting point of about $2 million would be about accurate?

Greg Flamion
Greg Flamion
CFO at Strawberry Fields REIT

Yeah, starting point of about $2 million would be about accurate. I do not see. Again, we are not planning on having new loans or anything else like that in Q4 that would necessitate the cost that we saw in Q2. I would go with the $2 million number as of right now.

Ken Billingsley
Ken Billingsley
Analyst at Compass Point Research & Trading

I know you talked a lot about the acquisition, so more of a specific question on the ones you are looking to close for fourth quarter. What are some of the risks to the closing? Is there a risk to the actual closing of the deals, or if anything, is it more of a risk of timing?

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

No, it is on the Florida deal, that is timing ready to go. On the Indiana deal, that is also timing ready to go. On the other deal, there are two things left to the diligence. One of them is me visiting the property, and I plan on going next week. The second one is a little bit more detail to the financial statements. So the financial statements have already been spread, and all the numbers work, but somebody wanted, on our tenant side, wanted a little bit more detail on some of the financial. But the expectation is that they do not expect to find anything that is going to make the deal not occur.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

But there is something on that deal that can still I mean, I could go there on Monday and find the places to be disgusting, decrepit facilities, in which case, if I do not feel good about it, we do not do the deal, no matter how good the deal is. I generally, we will not do it. I have to feel good about what we own. But that is about it.

Ken Billingsley
Ken Billingsley
Analyst at Compass Point Research & Trading

The addition of these would not likely need you to increase expense structure, at least for the closing of these, that is rolled into where you are right now?

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

No, because again, we are using the cash that we already have. The asset managers we currently have are going to absorb these properties. And there is going to be a drop of legal. There is a little bit of closing costs that go, but that is usually under FAS 91. I think we take that and we spread it over the life of the lease of 10 years. So it does not really There is not a one-time hit generally for that.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

No, you will just have an increased revenue number. A little bit increase of interest expense only because, like I said, there is that $43 million that we are going to take for that one deal, and that $43 million is going to be SOFR 265, something like that, SOFR 270, 265. But other than that, there is nothing. Other than that, it is all, top line is based on those deals, and the bottom line is not affected other than that interest on that $43 million.

Ken Billingsley
Ken Billingsley
Analyst at Compass Point Research & Trading

Great. Good luck to the end of the year.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

Thank you so much.

Ken Billingsley
Ken Billingsley
Analyst at Compass Point Research & Trading

Thank you.

Operator

Thank you. I would now like to hand the conference back over to Jeff Bajtner for closing remarks.

Jeff Bajtner
Jeff Bajtner
Chief Investment Officer at Strawberry Fields REIT

Thank you so much. I would like to thank everyone for joining us today. We appreciate all the questions. At the back of the presentation, there are our email addresses, so if you have any questions, please feel free to reach out. I wish everybody a wonderful weekend.

Moishe Gubin
Moishe Gubin
Chairman and CEO at Strawberry Fields REIT

Thank you, everybody.

Operator

This concludes today's conference call. Thank you for participating, and you may now disconnect.

Executives
    • Jeff Bajtner
      Jeff Bajtner
      Chief Investment Officer
    • Greg Flamion
      Greg Flamion
      CFO
    • Moishe Gubin
      Moishe Gubin
      Chairman and CEO
Analysts
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