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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): May 14, 2024
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 check mark 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
2.02 Results of Operations and Financial Condition.
On
May 14, 2024, the Company issued a press release regarding its financial results for the quarter ended March 31, 2024. The Company’s
press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.
Item
9.01 Financial Statements and Exhibits.
(d)
Exhibits
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:
May 14, 2024 |
By:
|
/s/
Moishe Gubin |
|
|
Moishe
Gubin
Chief
Executive Officer and Chairman |
|
|
Exhibit 99.1
STRAWBERRY
FIELDS REIT ANNOUNCES FIRST
QUARTER
2024 OPERATING RESULTS
South
Bend, IN. May 14, 2024 (NEWSWIRE) –Strawberry Fields REIT, Inc. (NYSE AMERICAN: STRW) (the “Company”)
reported today its operating results for the quarter ended March 31, 2024.
FINANCIAL
HIGHLIGHTS
|
● |
100% of contractual rents collected. |
|
|
|
|
● |
On January 1, 2024 the Company commenced its lease for two
skilled nursing facilities with 226 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 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. |
|
|
|
|
●
|
On March 25, 2024 the Company entered into a purchase agreement
for a property comprised of an 68-bed skilled nursing facility and 10 bed assisted living facility near Georgetown, Indiana. The acquisition
is for $5.85 million and the Company expects to fund the acquisition utilizing cash from the balance sheet. The Company anticipates closing
on this acquisition on June 1, 2024. |
|
|
|
|
●
|
For the quarters ended March 31, 2024,
and March 31, 2023: |
|
●
|
FFO was $14.1 million and $11.1 million, respectively. |
|
|
|
|
●
|
AFFO
was $13.1 million and $13.1 million, respectively. |
|
|
|
|
● |
Net
income was $6.0 million and $4.1 million, respectively. |
|
|
|
|
● |
Rental
income received was $27.8 million and $24.2 million, respectively. |
Moishe
Gubin, the Company’s Chairman & CEO, noted: “It’s been an active start to 2024. The Company replaced the master
lease which was associated with the August 2023 Indiana acquisition; the new lease includes higher rents and the term is for 10 years
ensuring steady rents from these facilities into 2034. The master lease for the original Indiana facilities was also renewed, effective
April 1st, for another 10 years. Deal-wise the Company entered into a few smaller deals which were closed with cash from the
balance sheet. The Company continues to search for accretive deals that will bring strong shareholder returns in both our stock price
and dividends. Lastly, the Company remains disciplined and is using its excess cash to pay down debt.”
Q1
2024 Quarterly Results of Operations:
Three
Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023:
Rental
revenues: The increase in Rental Revenues of $3.6 million or 14.8% is primarily due to rental income received from the new Indiana and
Texas master leases. These increases were offset by lower revenue from the Landmark master lease.
Depreciation
and Amortization: The increase in depreciation of $1.0 million or 15.5% relates to the depreciation associated with the August 2023 acquisition
of the Indiana Facilities and which was offset by certain equipment and personal property having been fully depreciated between the quarters
ended March 31, 2023, and March 31, 2024. The amortization increase is due to the February 2024 purchase of the new master lease for
the properties included in the Indiana acquisition completed in August of 2023.
Loss
on real estate investment impairment: In February 2023, one facility under one of our Southern Illinois master leases was closed. The
closure was made at the request of the tenant and was mainly for efficiency reasons. This facility was leased under a master lease with
two other facilities. The closure did not result in any reduction in the rent received under the master lease, which has been paid without
interruption. As a result of the closure, the Company is seeking to sell the property. Since the facility is no longer licensed to operate
as a skilled nursing facility, the Company wrote off its remaining book value.
Interest
expense, net: The increase in interest expense of $2.9 million or 60.8% is primarily related to additional interest payments for Series
D Bonds, a second commercial bank loan facility obtained in connection with the August 2023 acquisition of the Indiana Facilities and
increases in the floating rate on the Company’s commercial bank loan facilities.
Net
Income: The increase in net income from $4.1 million during the quarter ended March 31, 2023 to $5.9 million for the three months ended
March 31, 2024 is primarily due to increases in rental revenue (net of increase in real estate taxes) and the decline in real estate
impairment losses offset by higher depreciation and interest expense.
Dividend
On May 8, 2024, our Board of Directors declared
a cash dividend of $0.13 per share. The dividend will be paid on June 28, 2024 to common shareholders of record as of the close of business
on June 17, 2024.
Safe
Harbor Statement
Certain
statements in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform
Act of 1995. Those forward-looking statements include all statements that are not historical statements of fact and those regarding our
intent, belief or expectations, including, but not limited to, statements regarding: future financing plans, business strategies, growth
prospects and operating and financial performance; expectations regarding the making of distributions and the payment of dividends; and
compliance with and changes in governmental regulations.
Words
such as “anticipate(s),” “expect(s),” “intend(s),” “plan(s),” “believe(s),”
“may,” “will,” “would,” “could,” “should,” “seek(s)” and similar
expressions, or the negative of these terms, are intended to identify such forward-looking statements. These statements are based on
management’s current expectations and beliefs and are subject to a number of risks and uncertainties that could lead to actual
results differing materially from those projected, forecasted or expected. Although we believe that the assumptions underlying the forward-looking
statements are reasonable, we can give no assurance that our expectations will be attained. Factors which could have a material adverse
effect on our operations and future prospects or which could cause actual results to differ materially from our expectations include,
but are not limited to: (i) the COVID-19 pandemic and the measures taken to prevent its spread and the related impact on our business
or the businesses of our tenants; (ii) the ability and willingness of our tenants to meet and/or perform their obligations under the
triple-net leases we have entered into with them, including, without limitation, their respective obligations to indemnify, defend and
hold us harmless from and against various claims, litigation and liabilities; (iii) the ability of our tenants to comply with applicable
laws, rules and regulations in the operation of the properties we lease to them; (iv) the ability and willingness of our tenants to renew
their leases with us upon their expiration, and the ability to reposition our properties on the same or better terms in the event of
nonrenewal or in the event we replace an existing tenant, as well as any obligations, including indemnification obligations, we may incur
in connection with the replacement of an existing tenant; (v) the availability of and the ability to identify (a) tenants who meet our
credit and operating standards, and (b) suitable acquisition opportunities, and the ability to acquire and lease the respective properties
to such tenants on favorable terms; (vi) the ability to generate sufficient cash flows to service our outstanding indebtedness; (vii)
access to debt and equity capital markets; (viii) fluctuating interest rates; (ix) the ability to retain our key management personnel;
(x) the ability to maintain our status as a real estate investment trust (“REIT”); (xi) changes in the U.S. tax law and other
state, federal or local laws, whether or not specific to REITs; (xii) other risks inherent in the real estate business, including potential
liability relating to environmental matters and illiquidity of real estate investments; and (xiii) any additional factors included under
“Risk Factors” in our Annual Report Form 10-K dated March 19, 2024, including in the section entitled “Risk Factors”
in Item 1A of Part I of such report, as such risk factors may be amended, supplemented or superseded from time to time by other reports
we file with the SEC.
Forward-looking
statements speak only as of the date of this press release. Except in the normal course of our public disclosure obligations, we expressly
disclaim any obligation to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations
or any change in events, conditions or circumstances on which any statement is based.
Non-GAAP
Financial Measures
Reconciliations,
definitions and important discussions regarding the usefulness and limitations of the Non-GAAP Financial Measures used in this release
can be found below.
About
Strawberry Fields REIT
Strawberry
Fields REIT, Inc., is a self-administered real estate investment trust engaged in the ownership, acquisition, development and leasing
of skilled nursing and certain other healthcare-related properties. The Company’s portfolio includes 109 healthcare facilities
with an aggregate of 12,449 beds, located throughout the states of Arkansas, Illinois, Indiana, Kentucky, Michigan, Ohio, Oklahoma, Tennessee
and Texas. The 109 healthcare facilities comprise 99 skilled nursing facilities, eight assisted living facilities, and two long-term
acute care hospitals.
Investor
Relations:
Strawberry
Fields REIT, Inc.
IR@sfreit.com
+1
(773) 747-4100 x422
Funds
From Operations (“FFO”)
The
Company believes that funds from operations (“FFO”), as defined in accordance with the definition used by the National Association
of Real Estate Investment Trusts (“NAREIT”), and adjusted funds from operations (“AFFO”) are important non-GAAP
supplemental measures of our operating performance. Because the historical cost accounting convention used for real estate assets requires
straight-line depreciation (except on land), such accounting presentation implies that the value of real estate assets diminishes predictably
over time. However, since real estate values have historically risen or fallen with market and other conditions, presentations of operating
results for a REIT that uses historical cost accounting for depreciation could be less informative. Thus, NAREIT created FFO as a supplemental
measure of operating performance for REITs that excludes historical cost depreciation and amortization, among other items, from net income,
as defined by GAAP. FFO is defined as net income, computed in accordance with GAAP, excluding gains or losses from real estate dispositions,
plus real estate depreciation and amortization. AFFO is defined as FFO excluding the impact of straight-line rent, above-/below-market
leases, non-cash compensation and certain non-recurring items. We believe that the use of FFO, combined with the required GAAP presentations,
improves the understanding of our operating results among investors and makes comparisons of operating results among REITs more meaningful.
We consider FFO and AFFO to be useful measures for reviewing comparative operating and financial performance because, by excluding the
applicable items listed above, FFO and AFFO can help investors compare our operating performance between periods or as compared to other
companies.
While
FFO and AFFO are relevant and widely used measures of operating performance of REITs, they do not represent cash flows from operations
or net income as defined by GAAP and should not be considered an alternative to those measures in evaluating our liquidity or operating
performance. FFO and AFFO also do not consider the costs associated with capital expenditures related to our real estate assets nor do
they purport to be indicative of cash available to fund our future cash requirements. Further, our computation of FFO and AFFO may not
be comparable to FFO and AFFO reported by other REITs that do not define FFO in accordance with the current NAREIT definition or that
interpret the current NAREIT definition or define AFFO differently than we do.
The
following table reconciles our calculations of FFO and AFFO for the three months ended March 31, 2024 and 2023, to net income the most
directly comparable GAAP financial measure, for the same periods:
FFO
and AFFO
| |
Three Months Ended March 31, | |
| |
2024 | | |
2023 | |
(dollars in $000s) | |
| | | |
| | |
Net income | |
$ | 5,992 | | |
$ | 4,139 | |
Depreciation and amortization | |
| 8,098 | | |
| 6,988 | |
Funds from Operations | |
| 14,090 | | |
| 11,127 | |
Adjustments to FFO: | |
| | | |
| | |
Straight-line rent | |
| (968 | ) | |
| (491 | ) |
Loss on real estate investment impairment | |
| - | | |
| 2,451 | |
Funds from Operations, as Adjusted | |
$ | 13,122 | | |
$ | 13,087 | |
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