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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): August 29, 2023 (August 25, 2023)
Strawberry
Fields REIT, Inc.
(Exact
name of registrant as specified in its charter)
Maryland |
|
001-41628 |
|
84-2336054 |
(State
or Other Jurisdiction |
|
(Commission |
|
(I.R.S.
Employer |
of
Incorporation) |
|
File
Number) |
|
Identification
No.) |
6101
Nimtz Parkway
South
Bend, Indiana 46628
(Address
of Principal Executive Office) (Zip Code)
(574)
807-0800
(Registrant’s
telephone number, including area code)
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under
any of the following provisions:
☐ |
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|
|
☐ |
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
|
|
☐ |
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
|
|
☐ |
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities
registered pursuant to Section 12(b) of the Act:
Title
of each class |
|
Trading
Symbol(s) |
|
Name
of each exchange on which registered |
Common
stock, $0.00001 par value |
|
STRW |
|
NYSE
American |
Indicate
by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405
of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging
growth company ☒
If
an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Cautionary
Note Regarding Forward-Looking Statements
This
Current Report on Form 8-K filed by Strawberry Fields REIT, Inc. (the “Company”) includes information that may constitute
forward-looking statements. These forward-looking statements are based on the Company’s current beliefs, assumptions and expectations
regarding future events, which in turn are based on information currently available to the Company. By their nature, forward-looking
statements address matters that are subject to risks and uncertainties. Forward-looking statements include, without limitation, statements
relating to projected industry growth rates, the Company’s current growth rates and the Company’s present and future cash
flow position. A variety of factors could cause actual events and results, as well as the Company’s expectations, to differ materially
from those expressed in or contemplated by the forward-looking statements. Risk factors affecting the Company are discussed in detail
in the Company’s filings with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or
revise any forward-looking statement, whether as a result of new information, future events or otherwise, except to the extent required
by applicable securities laws.
Item
2.01. Completion of Acquisition or Disposition of Assets
Indiana
Facilities Acquisition and Financing
As
reported in the Company’s Form 8-K filed on June 14, 2023, the Company has entered into a Purchase and Sale Agreement dated June
8, 2023, with WC-Castleton LLC, WC-Chesterfield LLC, WC-Columbia City LLC, WC-Dunkirk LLC, WC-Fort Wayne LLC, WC-Hartford City LLC, WC-Hobart
LLC, WC-Huntington LLC, WC-Lagrange LLC, WC-Middletown LLC, WC-Peru LLC, WC-Rockport LLC, WC-Rushville LLC, WC-Sullivan LLC, WC-Syracuse
LLC, WC-Tipton LLC, WC-Wabash LLC and WC-Wakarusa LLC (collectively, the “Sellers”).
The
Purchase and Sale Agreement provided for the purchase of 24 healthcare facilities located in Indiana (the “Indiana Facilities”)
for $102.0 million. The Indiana Facilities are comprised of 19 skilled nursing facilities with 1,659 licensed beds and five assisted
living facilities with 193 beds, of which 29 beds are licensed.
The
Company closed on the acquisition of the Indiana Facilities on August 25, 2023.
Pursuant
to the terms of the Purchase and Sale Agreement, the Company was required to pay a purchase price of $102 million for the Indiana
Facilities and to make a loan of $6.5 million to the Sellers.
The
Company funded the payment of the purchase price and the $6.5 million loan through a combination of a $66 million mortgage loan made
to the Company by commercial bank, Popular Bank, and from the Company’s existing cash resources, as well as the application of
a deposit of $5 million previously made by the Company.
The
$66 million mortgage loan has a 5-year term bearing interest at a floating rate of SOFR plus 3.5%, subject to a 4.0% floor. The loan
is interest-only for the first 12 months and the principal amount of the loan is repayable in installments
based on a 20-year amortization, with a balloon payment of the balance due on the fifth anniversary of the loan. The remaining
cash required to close was funded through the Company’s cash reserves, which included approximately $19.2 million representing
the net proceeds from the extension of the Series D bonds completed in July 2023.
The
$6.5 loan to the Sellers is due within 60 days of the closing and bears interest at the rate of 10% commencing after the first
30 days of the loan. The loan is unsecured, but fully guaranteed.
The
Indiana Facilities are currently leased under a master lease agreement that commenced on November 1, 2022, between the Sellers and a
group of tenants affiliated with two of the Company’s directors, Moishe Gubin and Michael Blisko. Under the master lease, the tenants
are required to pay annual rent, on a triple net basis, as follows:
(a)
for the first lease year, $9,500,000 per annum;
(b)
for the second lease year, $9,500,000 per annum;
(c)
for the third lease year, $11,622,905 per annum;
(d)
for the fourth lease year, $14,276,536 per annum;
(e)
for the fifth lease year, $14,562,067 per annum;
(f)
for the sixth lease year, $14,853,308 per annum; and
(g)
for the seventh lease year, $15,150,375 per annum.
The
tenants have three options to extend the lease. The first option is for three years, the two remaining options are for five years each.
The tenants have an option to buy the properties during the sixth or seventh year of the lease for $127.0 million. The material terms
of the master lease were not modified as a result of the purchase. The tenants operate the Indiana Facilities as skilled nursing and
assisted living facilities.
Due
to the successful closing of the acquisition of the Indiana Facilities, the Company’s portfolio increased from 79 healthcare properties
to 103 properties, and its aggregate annualized average base rent for the expected life of its leases increased from $84.2 million to
$96.9 million, based on aggregate annualized average base rent as of June 30, 2023. Additionally, the number of properties leased to
tenants affiliated with Mr. Gubin and Mr. Blisko increased from 41 properties to 65 properties, and the percentage of annualized base
rent received from related party leases increased from 62.2% to 67.1 %, based on aggregate annualized average base rent over the life
of our leases as of June 30, 2023.
Annualized
straight line rent for the Indiana Facilities is equal $12.7 million representing a weighted average lease yield of 12.4%.
Item
9.01 Financial Statements and Exhibits.
(a)
Financial Statements of Properties Acquired
The
Company will file the financial statements required by Item 9.01(a) with respect to the acquisition under the cover of Form 8-K/A not
later than 71 calendar days after the deadline for filing this Form 8-K.
(b)
Pro Forma Financial Information
The
Company will file the financial statements the pro forma financial information required by Item 9.01(b) under the cover of Form 8-K/A
but not later than 71 calendar days after the latest date on which this initial Current Report on Form 8-K is required to be filed.
Exhibit
No. |
|
Description
of Exhibit |
|
|
|
104 |
|
Cover
Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, hereunto duly authorized.
|
Strawberry
Fields REIT, Inc. |
|
|
|
Dated:
August 29, 2023 |
By:
|
/s/
Moishe Gubin |
|
|
Moishe
Gubin
Chief
Executive Officer and Chairman |
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