Strawberry Fields REIT reports Q3 2025 earnings with 100% rent collection and 14% dividend increase, projecting strong growth amid strategic acquisitions.

Good day ladies and gentlemen and thank you for standing by. Welcome to the Strawberry Fields REIT Q3 2025 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, you will need to press Star 1, 1 on your telephone keypad. As a reminder, this conference call is being recorded at this time. I would like to turn the conference over to Mr. Jeff Beettner, Chief Investment Officer. Sir, please begin.

Thank you and welcome to Strawberry Fields REIT's Q3 2025 earnings call. I am the Chief Investment Officer and joining me today on the call are Marsh Gubin, Chairman and CEO, our chairman and CEO, and Greg Flamian, our CFO. Yesterday evening, the company issued its Q3 2025 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, and 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. 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 in our investor presentation. And now on to discussing Strawberry Fields REIT and our Q3 2025 performance. I wanted to start by sharing some key highlights. During the quarter, the company collected 100% of its contractual rents. As we discussed in the last in last quarter's conference call, on July 1, 2025, the Company completed the acquisition of nine skilled nursing facilities comprised of 686 beds located in Missouri. The acquisition was for $59 million. On August 5, 2025, the Company completed the acquisition for a skilled nursing facility with 80 licensed beds near McLeod, Oklahoma. The acquisition was for $4.25 million. The company funded the acquisition utilizing working capital. The Initial the initial annual base rents are $425,000 and are subject to 3% annual rent increases. On August 29, the company completed the acquisition for a healthcare facility comprised of 108 skilled nursing beds and 16 assisted living beds near Poplar Bluff, Missouri. The acquisition was for $5.3 million. The company funded the acquisition utilizing working capital and the initial annual base rents are $530,000 and subject to 3% annual rent increases. A couple other items I wanted to mention. During Q3, the Board of Directors approved increasing the dividend to 16 cents a share. This increase represented a 14% increase over previous quarters. Yesterday, the Board of directors approved the Q4 2024 dividend, which will also be $0.16 a share and will be paid on December 30 to shareholders December 16. On the acquisition front, we continue to see deals coming from around the country. As we have discussed in previous investor presentations, we are a big fan of the master lease structure and currently 89% of our facilities are in master leases. With our disciplined approach, if there is a deal in an existing state, our current operators are looking to grow and we can simply add the new facility to an existing master lease. If we were to enter and grow in a new state, we would be looking to acquire a sizable portfolio of at least 500 beds. As a final point, I'd like to point out that Strawberry Fields REIT is currently the closest pure play skilled nursing REIT in the market with 91.5% of our facilities being skilled nursing facilities. I would now like to have Greg Flamian, our Chief Financial Officer, discuss the quarterly the Quarter end financials.

Thank you Jeff and welcome everyone to Strawberry Fields REIT Third Quarter 2025 Earnings Call let's begin with the balance sheet. Total assets reached 880 million, which is a 33.1% increase compared to Q3 of 2025. This growth is primarily driven by our acquisition strategy and the successful retention of specific leases. On the liabilities and equity side, we saw increases aligned with our financing activities and some foreign currency exchange losses which impacted other comprehensive income. Overall, the balance sheet reflects our continued investment in long term growth. Turning to our income statement year to date, revenue through September was $114.9 million, up 28.3 million versus September of last year. This increase is largely due to the timing and integration of properties acquired over the past year, as well as the retention of activity that began in January. While revenue is up, we've also seen higher expenses, mostly driven by depreciation, amortization and interest. These higher expenses are a result of the acquisitions discussed earlier in the presentation. Net income year to date is $24.5 million or $0.44 a share, compared to 19.9 million or $0.40 a share last year. Looking at our quarterly performance, the drivers are similar to our year to date Results revenue increased by 10.2 million again due to the acquisitions and lease transitions. Expenses rose as well, driven by higher depreciation, amortization and interest from new assets. Net income for the quarter was 8.8 million or 16 cents a share, up from $6.9 million or 14 cents per share in Q3 2024 to close like to highlight some key financial metrics. Projected AFFO for 2025 is 72.7 million, a 28.2% increase over the last year with a compound annual growth rate or CAGR of 13.3% since 2020. Adjusting EBITDA is projected at $126.1 million with 38.9% year over year with a 13.6 CAGR. Our net debt to asset ratio is 49.2%, maintaining a balanced capital structure. As of September 30th our dividend was 16 cents a share, representing a 5.2% yield with an AFFO payout ratio of 46.8%. We're delivering strong results while preserving capital for future growth. These results reflect our disciplined execution and commitment to long term shareholder data. With that, I'll turn it back over to Jeff Beettner who will walk us through the portfolio highlights.

Thank you Greg. I now like to point out some of The Strawberry Fields REIT's portfolio highlights as of September 30th. Currently the company has 142 facilities. This is comprised of 130 skilled nursing facilities, 10 assisted living facilities and 2 long term care acute care hospitals. These facilities are in 10 states and as you'll see later on in the presentation, we've got a map showing their locations in these facilities. We've got 15,542 licensed beds. The company's total asset value at acquisition or its historical cost is 1.1 billion. I would like to point out that this amount reflects facilities which have been bought over the past 20 years. If you were to look at the company's fair market value of these facilities or the portfolio, it would be in excess of this amount. Currently our portfolio has 17 consultants who advise operators. Our weighted average lease term is 7.3 years. Our tenants continue to do well, which is reflected by the EBITDAR rent coverage of 2.01. Our net debt-to-adjusted EBITDA ratio is 5.7. As I mentioned earlier, we're pleased that we continue to collect 100% of our rent and as I mentioned earlier in my prepared remarks, the company continues to have a strong pipeline. We're seeing deals from across the country at this time, our acquisition pipeline is in excess of $250 million. And with that, I'd like to have my Schuben, our chairman and CEO, continue with the presentation.

All right, thank you, Jeff, and thank you, Greg. Staying on this slide, I would just reiterate what Jeff has said. We've continued to grow as we'll talk about in a future slide, with almost 15,500. Well, the actual number is 15,542. Of course, we're going to keep growing on the assets. Total assets. We feel that our total assets, real market value is probably closer to 1.6 billion. I would, I would stress potential investors not to, not to really spend time looking at our balance sheet for our equity or our assets them because they are net of depreciation, which we rely on, of course, to, to have the extra surplus cash that we use to buy more assets. I would move on to the next slide and show you all our growth. Super proud, as we said on the previous slides, 13.3% growth rate. It was only, it was only five years ago that we made $38 million of AFFO and now we are close to double that in five years. That's a good growth rate. What to be proud of. We'll hopefully break 73 million and next year do even better on the next slide. This is one that I don't usually really spend too much time on. It's the base rank growth, obviously, that's going to keep growing as we continue to buy. We're in the business of buying and leasing. We do not give options. So everything you see in looking at straight line rent should continue to be the same or better going forward. It's very rare that we sell something even though in third quarter we actually did sell something. That being said, we'll go on to slide number eight. On slide number eight, this is something that we actually ended the quarter okay within range of last year. Obviously, with the increased affo, we should be trading a lot higher than last year. We continuously working for the shareholders, going to events. This week we were in Arizona meeting with new tenants and looking at deals. And like Jeff said, we have a very strong pipeline. Again, our bogey that we're trying to break is 150 to 160 in dollars spent a year. As we get bigger, we want to spend more, obviously, but we do our deals exactly the same way. Like we've talked about, you know, quarter in, quarter out, year in, year out. We are so disciplined on how we buy things. It has to fit or we don't Buy it. On page nine, you see our growth rate. We try to educate the marketplace on. You take the, the AFFO per share growth of 11.3%, you add that to the dividend yield, and we're steadily bringing a return of 16 to 18% a year. That's going to continue to grow. We've maintained the payout ratio to be below 50%, and we've not been erratic at all with how we've done our dividend. In fact, we've raised our dividend, I think now already five, six times. And we will continue to do exactly what we're doing, paying out what we're paying, which this quarter, which we just announced, is 100% of our net income for the quarter. And that leaves us 40 million or or so from depreciation of surplus cash to go use to buy more assets. So that's just funding our future growth. Love this. I love this. Slide, slide 10. You could see our stock is undervalued. Our AFFO trading multiples on the right side, we are the lowest by far. And I believe our profitability is better than most, if not all of our peers. That being said, we're going to keep working it. We're going to keep meeting investors, we're going to keep doing what we can. We're going to manage the marketplace, continue. We're going to be doing a capital raise at some point, and when we do that, hopefully that'll help bring in more institutional investors and bring more liquidity to the stock price. On the next slide, page 11, you could see our payout ratio. Like I said, we're at 46.8%. Everybody else is in the 70s or higher. Our dividend yield is middle of the road at 5.2. I would expect as our profitability grows, that dividend yield will grow. And because every time we raise a penny, if we're at 16 cents, we go to 17 cents, that's 1 16th, that's close to 10% growth. And that puts the dividend yield at a higher number. And that should happen on slide 12. Again, this reflects Jeff's comments about us being the closest pure play REIT. You see, we're still almost 92% and our peers are actually decreasing and percentage. And so again, this is, this is a marketplace which, which whenever I have investor calls, we'd like to say, you know, it's relatively bulletproof where, where the, where the clientele that comes to us, they have to come to, like they have to go to our tenant, they have, because they need to be cared for a certain way and with the baby boomers pushing, which we'll talk about in a future slide. The reality is that we think that we're in a good spot because it's a business that's government paid for, so inflation really doesn't affect it. And we feel that this and we keep going out to give in the story. We feel that the investor public should be happy with us and things should pick up. On slide 13 you see what our AFFO by share growth, the growth rate over, over, over the last five years we're at 11.3 as our growth rate. There's only two other of our peers that are, that are positive. The other three are negative. Which basically tells you that what do they do? They, they. They don't have enough FFO to cover their dividends and they have to sell equity to use the cash to be able to make pay dividends. In our case we're paying dividends and we have twice the amount of money so we could go use to buy more deals so that we can make the AFO per share grow because we're not increasing the amount of shares outstanding, but yet we're increasing the amount of money we're making. EBITDarm coverage above 2 is acceptable at any level and I'm happy with where it is. But it's going to continue to go higher now because our investment is formulaic. Every time we do a new deal and every deal is priced to a one and a quarter, we're fighting that EBITDA coverage because of that. Because we're our worst enemy. We want to grow and everything we bring in is a one and a quarter, which lowers our EBITDARM coverage. If we would stop buying, which nobody wants us to do and we're not going to. But let's say if we did stop growing, then that EBITDARM coverage would go a lot higher because everybody, we give it to them and everybody's always trying to improve and succeed again. We're only leasing out to seasoned operators that know their marketplaces that are local and they continue to thrive and do better. And that's why the EBITDARM coverage would go up again. The fact that we grow, it makes it go down anyway. Slide 14. This used to be one of my favorite slides. Not so much anymore. Our debt leverage is below 50% as we said. And our debt has turned into basically a third, a third, A third between HUD debt, bond debt and bank debt. Interesting to note really that out of all of that debt there's only, it's the bank debt, which is, which is basically 23% of the debt. That's the only debt that's variable rate. Everything else is with balloons that are at fixed rates. Like we talked about last quarter, the Israeli public done the last raise and there's a lot of demand they wanted to give us. We were over subscribed by twice, two times. We could have taken even more. So going forward, we have a lot of arrows in our clippers, whatever the word is. We have a lot of different choices on what to do to raise debt. If we need debt, I'd like to see the stock price go up so that we could also sell equity at some point, though I think debt is cheaper than equity at this point. Next slide, slide 15. This has become my favorite slide. This is as diversified as we've ever been. And we continue to get diversified where not a single state or a single tenant is over 25%. And in our case, the 25% is the best state, which is Indiana. So we're in 10 states, like Jeff said earlier. And, and God willing, and like Jeff said earlier, we're only willing to go to new states if it's a sizable portfolio, as we are a fan of the master lease, like you said as well. And so we're looking at other states now and we're looking to grow our relationships. All of our tenant relationships today are good. Like you said earlier, we're getting 100% of our rent and our relationships with the tenants are good. They're doing well, they're paying their rent. Things seem to be the buildings being taken care of. So we have the ability to grow in other places and we're going to try to do that. Slide 16 shows the map and you could see how we're finding our way left and right. We really like the idea of southeast Mississippi, Alabama, Georgia. These are all places we'd like to go. Deals are hard to come by over there. Georgia seems to be. That's picking up that we'll be able to find something in Georgia. Again, pure play. You look at the, you look at the pie graph on the bottom, you see, you see 91.5% skilled nursing facilities. And that's, that's what we do. So with that, with that, I'd like to turn it over to the operator for questions or comments from our analysts and for those on the call.

Once again, ladies and gentlemen, if you have a question or comment at this time, please press Star 1, 1 on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, Simply press Star 1, 1 again. Again, if you have a question or comment at this time, please press Star 1, 1 on your telephone keypad. Please stand by while we compile the Q and A roster. Our first question or comment comes from the line of Rob Stevenson from Janney, Montgomery Scott. Your line is open.

Good morning, guys. Did I hear correctly that you guys sold something in the third quarter?

Yeah, we had an outlier in our portfolio, one facility in Michigan that we owned for over 10 years. So we basically doubled our money on the property to begin with. And it was an outlier. We were never able to grow that region we wanted. This was before. This was really an asset that's been with us a long, long, long time. And we were never able to grow into a normal master lease where this could have fit into and grow the region we haven't had. Good luck buying in Michigan. So we had an opportunity to get out of the asset. The tenant that was there ended up. The math worked itself out where we raised rent elsewhere so that we stayed budget neutral as far as rent being collected. And the inverse of that is, you know, getting cash, you know, at a 10 cap for the portion of rent we're not gonna, we're not getting. And so, yeah, so we peer, we pared down. That's why I went down from 11 states to 10 states. And we feel, we feel good about that transaction. We're usually never a seller. We don't give options to anybody. But this was an asset that really, we should have moved this asset a long time ago. That had the operator that was operating it, they were sending in a nurse consultant from Indiana. They were sending in a marketing team from Illinois, and they were really struggling with, on the ground. And the facility had good care. I mean, the survey results were fine, but they just weren't able to move that building forward. And they were always marginally making like maybe A1 coverage, maybe even a drop lower. And so finally got an ability to sell it. And they're happy, we're happy. But that's a one off kind of deal for us, Rob.

And what were the proceeds from that? How meaningful was that?

It's immaterial. We sold it for, I think, 2.6 or so, and we gave them a note, or we took a note at 10% interest, which is our 10 cap. So they have a couple of years to pay it off with a balloon and they're actually operating well there already. And we're good with this transaction.

Okay, and then what does your acquisition pipeline look like today, how are you guys thinking about, you know, the end of the year and into 26 at this point?

So end of the year, at this point, we had a couple of hot deals that would have been great to end the year. We would have had to do a capital raise. Would have been a beautiful ending to the year. And now, and now it seems like there's going to be, we should have, we should have some good volume in the first quarter. 26. And if 26 will be like 25 and 24, hopefully we break the 150, $200 million mark for next year for growth.

Okay, and then the comments around the dividend increase. Were you guys at sort of your minimum payout and was the increase from 14 to 16 basically something that you had to do, or is that something that the board wanted to do at this point in time?

Yeah, that's a great question. So, like, we sit here at the board meeting and we lay out. I act as. I'm the CEO, so I sit there and I basically lay out, here's the deal. For us to stay in REIT compliance, to distribute 90%, not be erratic with our dividend, satisfy our requirements, move our dividend yield up a little, and keep the investors happy. We debate the topic. I mean, we have the capacity to distribute a lot more, as you know, because our payout ratio is so low. The 16 cents is exactly 100% of our net income for the quarter. The year end number, when we end the year, there will be an adjustment somewhere that will include a little bit of capital gains which you have to do 100% of. So, so when, when it all comes, when it all comes down to it, the, the, they don't get a K1, the investors, I forgot the actual tax form that they get. There'll be a portion of this that'll be a, like a, that'll be a return of capital, which is not taxable, actually. But it's a 1099. But it's not a regular 1099. I don't think, I don't know. I don't know exactly what the form is. But regardless, the, this, the conversation in the room is we want, we know we're going to move every year, you know, because the way our model is, it's status quo and going higher. It's never, we don't have the choppiness of going up and down. It's flat or higher. So we know that we're going to have at least 1, 1 raise of a dividend a year, at least that's what we expect. And so we had just raised last, last quarter to 16. We could have made this one 17, but we left it at 16. For now we'll see what fourth quarter brings and then either and most probably we'll end up doing the next bump will probably be either, probably not be the fourth quarter either, probably the first quarter of 2026. But yeah, that's basically the conversations that we have in the boardroom about the, we have a few board members that want us to distribute more and, and I'm basically arguing that we have this 11 to 13% growth rate of AFFO because we're able to take this and spend it and do good with the money and continue the model and grow the model. And so right now that's the prevailing argument in the boardroom to keep the dividend higher than the requirements and constantly growing annually at least once a year to go up. And that's basically all the color on that topic. Rob.

Okay, that's helpful. And then can you remind me when the series D bond matures? I think that's by far and away your highest cost of debt and when you basically get an opportunity there to refinance that.

Yeah, we have our bond debt expiring September of 26 on this topic. I guess most people wouldn't air their dirty laundry, but I'm an honest, straight up guy. One of the flaws of the bond which we're fixing going forward is that there's a prepayment penalty up to the last day of the bond maturity. So we're holding out because the prepayment penalty today because the bond is traded at such a premium, because it's such a high coupon, it costs us way too much money to refinance today. But, but come September time there'll be a nice savings because we know that our, we know that we're going to get repriced out probably, you know, three points lower, you know, maybe, you know, give or take a little higher, a little lower, but we'll save a ton of money going forward and that, and that reprices in September of 26.

And so at this point you think that if you had to access the debt markets today, you're probably pricing somewhere plus or minus around a six.

Yeah, yeah, they, they, yeah, 100. We know it, it's not, it's not even a question if I, if I want to take the money today. I think it'll be maybe, you know, sub six. It's traded it's traded today at around 5% above par. So they, they love us. I mean it's the, the actual yield, the yield on Series D today is in the fives. So in theory if we did a bond to replace it, the pricing would be a little bit higher because we would take five year money. And because everyone's expecting rates to go down to lock in five years, they want to get a little bit of a premium. Actually, I think maybe, maybe I think what I just told you is right, but I have to think it out to give you the right, the right exact thought. But, but you know, duration, duration plays a role in, in the pricing up and down. So this is a short duration today and that's why it's rates a little bit, it's, it's as low as it is. And so I guess, yeah, that's, that's, that's the story there. The market there loves us. I love the market there. I do still really want to investigate doing similar to like with gm, like what their financing looked like with BMO and lead and a couple of other guys. And so, so we're talking to our IBS to see, you know, what we can do here. But we're definitely going to keep, we're definitely going to keep a bunch of our debt staying in, staying in Israel.

Okay, I appreciate the time guys. Have a great weekend.

God bless you. Thanks Rob.

Thank you. Our next question or comment comes from the line of Barry Oxford from Colliers International. Your line is open.

Great, thanks guys. Just to build on Rob's question regarding the pipeline, it was at 300, I think you indicated last quarter. Now it's at 250. Is that just more a function of how you define your pipeline but not necessarily a commentary on what's available out there in the marketplace?

Yeah, it's a moving target, our pipeline. I mean I don't know if our competitors or peers use pipeline of stuff that's inked already that deals that are going to close our pipeline includes high, medium, and low probability of deals getting done. And so we're giving you the overall total pipeline. Again, we're very disciplined on how we buy, as you know. And so, and so for us to trust when we make a deal, that deal always, almost always closes. So we have to put in there the mix of the stuff that we've given Lois, as well as, as well as things that are in contract. So I don't know if that answered. I think that, I think that's a good question. I'd add to that.

I mean, it's. It's almost like living and breathing. Every week it changes. I. We've constantly going to conferences, we've got people reaching out. And I mean, 250 represents deals. Makes sense for us. Not just deals that are sitting, I mean, in our emails. I mean, what's going on to our pipeline is ultimately deals that we believe that if we could get the LOI in and we could get it, I mean, locked up, we could close it.

Okay. Okay. And are you seeing, you know, given that your property type is doing very well, it seems to be attracting investor interest. Are you seeing more people showing up at the bidding process? And also we've seen some REITs trying to add more to their skilled nursing.

First of all, I don't know if I agree with you, Barry. The REITs, you know, I was just with David Sedgwick on Tuesday, who I love, by the way, but they're not. And a lot of the other guys, they're buying less SNF portfolios today. And it seems like, you know, the assisted living product is still the, is still the. For some reason, that's the product of choice with. By a lot of the peers of ours. I don't like it at all. But no, it's the same competition that we've had. And you know, for us, like again, our sweet spot, first of all, people are still willing, you know, to make a deal with us because they know we're going to close a deal. And I guess that's the same with our competitors. But the difference between us and the competitors, you don't see the competitors doing these small deals. Like we, like, like we, we look at big deals, we look at small deals on the huge deals. Right. You know, CareTrust, Omega and the others are always going to beat us by pricing. It's not even close because they're willing to go eight, eight and a half cap, and we stay at the 10. And then you have small deals like we've talked about before in the past, you know, like we have an owner, operator kind of deal, and they're willing to overpay because for them, you know, they, they're going to be the administrator there. Their wife could be the don. Right. Or it could be their children. With them, you know, it's like. So for them, they don't have. They have a different setup and how, on how, on how they operate and where their money's coming from. And if they get a less of a return on their capital, you know, that's okay for them it's a, comes a family or a legacy asset. And for us, we have the shareholders to think about and we just stay with, within our model. And with that again we, we, you know, that soft spot between or that sweet spot for us between I'd say, you know, 20 to $50 million deals. You know, that's where we have a, we have a good shot at getting those deals. And then we also have these smaller deals that people come to us and just, they don't even market it. And so that's, that's where our deals come from. Like the last few deals we did, these were all deals that, that, that they came to us. They didn't put it through a broker per se. And they said, you know, this is a deal we, that's for you guys and, and you want it. And we, and we, and we've done it includes, includes the couple deals in Oklahoma and a couple deals in Texas and, and with those same sellers, we have other deals that we, that we know we're going to end up buying from them. So it's going to, it'll be, they're creating part of our pipeline. They're happy with the way we close a deal and the way we do business that they want to do business again with us and bring us another deal.

Right. Perfect. Perfect. Then just kind of switching gears real quick. The GNA was lower by about 5 or 600, which is a good thing. But is that a good run rate or will we see it move back up closer to the 2 million level?

Greg, you know the answer to that. Sorry, I haven't really looked at it at the run rate for next quarter. I mean to be honest with you, we Q4, I would expect this to kind of take up a little bit more. So I guess if you want to answer right now, I'd say that we're probably closer to the two, but I can give you a better answer, I guess after the call if you wish.

Yeah, I could just. Barry, just from a practical.

Go ahead.

Just from a practical thought, we haven't added a new, we haven't added a new employee since I think maybe the first quarter when we added an asset manager. I think that was first quarter. We did hire a new lawyer, but we replaced a lawyer that was leaving after 14 years with us and we brought in a new lawyer and, and it was relatively budget-neutral. So from that we talked about in the past my personal compensation, that hasn't changed. And as far as board fees goes, you know that that stayed exactly the same. We haven't raised board fees in three years or four years. So that's, you know, that's, I guess another positive about us. Only other thing that's out there that maybe some, that could be some G and A is legal and that could be based on deals or financing and some other things that maybe, that maybe makes one period more wonky, you know, having an ATM which we haven't been using because the stock price isn't good, we still have to pay for comfort letters and all this and some of the work that needs to go for the ATM for between the accounts and lawyers who made professional fees. But at this point it's the same quarter over quarter. It's not, you know, we're not, we're not doing a new, something new that's going to have a bunch of fees associated with it. So I would bet you that it stays relatively flat to what you see, give or take. You know, put yourself a plus, minus, small margin of percentage difference. But you know, because there are payroll differences, some quarters have an extra payroll, others don't. So that's that. That should be the answer.

Yeah, no, no, that, that all makes sense. Appreciate the time, guys.

Oh, thank you, Barry.

Yep, thank you.

Our next question to comment comes from the line of Mark Smith from Lake Street. Mr. Smith, your line is open.

Hi guys. You've talked a bit about kind of liquidity and ability to finance additional acquisitions. I'm curious, kind of your ability or thoughts around using stock more in future deals?

See, I love this question. One thing that gets lost in the investor public is that, and I'm going different than what your question is. And I'm going to try to remember what your question is when I answer it, but is that one thing that gets forgotten is when we issue a bond series in Israel, the bond series has capacity for a couple hundred million dollars more than we closed. So when we ever needed cash, if there was ever like there's an investor public out there that might think, well, we might need cash and we're not going to get the cash in our case because we have an approved bond series that's a lot higher than what our bonds are than what we actually took. We have availability of money at the original, which actually and a private placement would be at the trading price, not at the coupon price. So in theory it's trading higher. Then we're getting paid a premium to issue more bond debt under a series that already exists in the past. That being said, as far as equity goes, I would love to Sell equity. I would love to get more shares out in the public. I would like to get more liquidity in a stock. I would love to have more institutions be able to trade larger, you know, volumes of stock. We've done a bunch of deals so far where we paid, where we've been able to do stock. The last deal was the Missouri deal where I think they took 2 million in stock or 3 million in stock and they're actually happy with it. We had an investor call with them and walk them through their return and they were happy with the stock. And I don't know if they're accumulating more at this point, but they're still holding it and they're happy to hold it. We need our stock to, to move. I don't know what the catalyst is at this point. Maybe, maybe, maybe we get it, we get into a really big deal and then we do a roadshow and sell a bunch of stock, you know, at a decent price. And then maybe that'll be the catalyst to make, you know, more trading happen and get more, get the volume up. I mean, our, our AFFO is, you know, at this point is going to be a run rate of $31.40 for the year based on an average of 13 or 14 AFFO multiple. Our stock is trading at a 40% discount or something like that. It's ridiculous. So I don't want to sell stock and dilute. The reality is our NAV is still probably at or around where the stock is trading. It's not a metric we use for anything other than me being conscientious, thinking about my shareholders and not wanting to dilute anybody. And that could be maybe a hold up that I shouldn't have. But I, I kind of still use that to, to, you know, I'm looking out for the shareholder that they shouldn't be diluted. I know my, my peers don't care about that. And that's why, like one of the slides, if you look at the deck, sees where they have a negative growth and that's because they had a, they had a, you know, sell equity so they could pay a dividend and, and that ends up hurting, hurting the shareholders. But I don't know, Mark, I don't know if I answered you, but that's, that's, that's, that's my take on it. I would love it if I, if, if somehow our stock, you know, got to be in a normal range where I could just go, then, you know, do a, do a, do an offering so that, you know, My. All my IBS can make a little money and we could bring in institutions and, and we could be off to the races. And that's what I'm hoping that happens at some point soon.

Okay. I did also want to ask just if there's any impact on you or your operators here with the government shutdown.

Zero. The only impact that we have at Strawberry is we have stuff stuck in the HUD queue that they're not working. And without, Without. Without the HUD folks being able to process changes, we have a little bit of limbo on certain things. But, you know, money makes the world go round. And in our, in our world, you know, thinking about it from that point of view, you know, business is good. We're collecting all our rents, We're. We're. We're meeting all our obligations. And so it doesn't have a real impact. But, but reality is, I have a bunch of loose ends that we'd love to tie up that, that they're not. That aren't necessarily financial things. They're. They're just things that have to get tied up so that we, you know, that we. Everything's, you know, tucked in so we could go to sleep at night, you know, so that's, that's, that's really the only thing that affects us. My tenants. I don't hear. I don't. I. I hear a little bit of, of. Of noise regarding surveys because if they're not paying for that, there's not people that could go out there and survey them. And we had that problem maybe six, seven, eight years ago, and it ended up becoming problematic because by certain regulations require the regulators to. Anytime they hear a complaint or this or that, they actually have to visit the property and inspect, you know, investigate the complaint. And if they're not working and you have a buildup of six months worth of complaints, you know, because they don't act on a day one when they were working, right. So it takes them time. You know, it ends up being they show up in a year from now about something that happened a year ago, and then they say, you did something wrong a year ago. And they say, well, but as of now, we already fixed everything. It's not. We didn't do anything wrong today. And then they say, well, we have to give you a fine retroactively to back there. And so there could be some kind of exposure there. But, you know, again, I've argued over the years, the operators are seasoned people that know what they're doing, and even more importantly is they're nimble enough to recognize that there's ups and downs in business, especially in the nursing home business. Corona is the exception of being the craziest thing that any of us have seen. Right? But like, in a regular, regular world, you have, you know, ups and downs, you know, labor disputes being one example. That's, that happens, unfortunately, time from time, you know, and, and reimbursement being down and then up and down, you know, that just happens. So like the guys that know this business and are really in it because they really care about residents, but they also want to make a living. They are a business in the end, so they recognize it's. There's going to be ups and downs. So if there's something that, that is a little negative that comes out of this, so be it. It'll be okay.

Okay, great. Thank you.

You're welcome. Thank you.

Thank you again, ladies and gentlemen. If you have a question or comment at this time, please press star one one on your telephone keypad. Our next question or comment comes from the line of Vyashalav Ababnikov from Freedom Broker. Your line is open.

Yeah, thank you very much for having my question. Can you hear me clearly?

Yes.

Great, thank you. And yeah, my question is on capital allocation strategy in the context of the current market. As you said, there is a very huge discount implying about 16 to 18% annual yield. And maybe could you walk us through how the world weighs the immediate and certain aggression from a share buyback against the returns from a new property acquisition? And at what point does the valuation get become so compelling that maybe buybacks would take precedence over even a good acquisition? Thank you, Jeff.

If you understood that, you can answer that.

He was asking, I believe he was asking if we plan on doing a share buyback program to help get our stock price.

I can rephrase, actually, like there is a kind of huge discount and it implying a huge shield for investors, about 16 to 18%. Right. And there is like another decision to invest into new interesting opportunities in the market. And maybe you could walk us through how the board thinks about those two decisions, like fightback against new acquisitions.

So that's a really good question. The, the, the pluses and minuses of that dialogue are we, we recognize the need for more shares in the marketplace, not less shares in the marketplace, counterbalanced by the fact that we can buy back shares at a discount. That's true. And we've utilized it when like the stock really egregiously is like at $10 a share. We've used the, the buyback program that we have on file. I, we've used that a little bit to prop up the stock small. It hasn't been anything big. We, we, we still feel, we still feel that. And this is not, this is not something that comes up a lot. This comes up conversationally, randomly, and it hasn't come up so recently because the stock was at more, it was over $12 again. But you know, our, our model, if we continue doing exactly what we're doing and we ignore, for this conversation, we ignore the stock price and we keep returning the collective AFFO growth plus dividend yield of a 17% return, we feel at some point that should be recognized by the investor public. And if we take the cash that we're producing and we use that cash to be able to continue the growth the way we're growing, that's, that's, that, that meets our objective as a company to keep growing, you know, with the disciplined approach and making the high double digit returns and building, building a portfolio that'll continue to pay and doing it the right way. Meaning we're not, we're not, we're not squeezing our tenants like a lot of other people. We, we have that set model and how it works which I think is fair that we put capital out there. We take, we take risk because this is a, you know, it's not the simplest business to be in. And we take the risk and for that risk we're getting a 10% return which we compound by doing what we do by adding debt. And this and that 10% return I think is fair. But what you're asking is a good question because in reality is we could go and do that and then bring the stock price up, but then if there's less shareholders, there's less liquidity and then inevitably if somebody sells, it'll kill the stock price again at some point. So I don't know at some point, at some point if our model stops working because, because the stock is just not found favorable, we'll have to do something. And I don't, I don't know if that is the fix, but it'll be something that we look at.

Thank you very much. Yeah, it helps a lot.

Okay.

And just a quick follow up about the last call. There was a discussion about ill noise remains a laggard from a reimbursement perspective. Could you please kind of contrast the regulatory and reimbursement environments in kind of newer states where you starting to invest much more.

Yeah.

Against this legacy markets.

Yeah. So again, to reiterate what We've said in the past, right, there's two basic types of reimbursement in the country for Medicaid, there's price-based and cost-based. The cost based is, simply put, you get reimbursed for what you spend. And in those states, those states are typically red states. And in those red states, you don't have any labor issues because you're able to pay people more, because you get reimbursed more. It's almost every dollar you spend on a nurse or cna, you get it back from the government. So you might as well take care of your staff easier because you have the money. Illinois is price based and that's basically the government gives you an allowance and says live within your means. But at the same token, in that case, I'm using labor as an example just because in that case you have the employees that need to make more money because things are costing more money. And it's like an impasse because you want to give them more money, but the state doesn't give you more money to give them. And it's, it's, it's tough. So our portfolio in Illinois is performing. It's just you have some that are doing amazing and, and you have a bunch that are, that are amazing. I'm talking about is rent coverage. I'm not talking about anything else in that example. Collectively, they're positive and everyone's paying rent, but you have laggards. And what's going on for our portfolio, the biggest tenant in Illinois for about almost half the portfolio is stuff that I personally have an ownership interest in. And we've announced that it's known where if we have an opportunity, we will start divesting out of not the company, but the tenant, which is, I'm related to the tenant. We will stop being in operations in some of these buildings because a mom and pop operator can do a better job because they don't have a corporate overhead of managing a bunch of homes. And so our Illinois portfolio, as the landlord, hopefully I didn't confuse anybody here by mixing landlord, tenant kind of deal. But on the landlord side of things, you know, we're getting our rent. The rent coverage is, is sufficient. It's over one. I don't know exactly the number for Illinois, but it's one something. And it's still out of laggard. Illinois is the biggest laggard. And that's because it's, and that's really because the state has to catch up with the costs. And they will, they will at Some point, they always do. And in fact, you know, the union in Illinois actually is a help because they recognize, for the most part, they recognize that the government has to raise the money. And they were out there lobbying and trying to push, you know, for their members. They're pushing to try to get, try to get that the reimbursement should go up so that there's more money to pay their employees, to pay their members. So I think I answered your question. At the end of the day, Illinois, any price based state, which really Illinois is the only one in this example that we have is, is the laggard. And it's always going to be a laggard because the only way that, that, that it improves is that the state legislature has to be the one to vote to increase rates. Because it's, it's. There's no set methodology that says, okay, you spend X and therefore we'll give you back X, we'll reimburse you that X, you know, year in year two or year three, whenever they do it like the other states. And in this example, they just, legislature has to say, okay, the nursing homes are allotted X amount of billions a year and we have to give them more money because they have to cover their expenses and it has to happen that way. So I think I answered your question.

Yeah, sure. Thank you. That's all on my time. Sorry on my side. Thank you very much.

All right, thank you.

Thank you. I'm sure. No additional questions in the queue at this time. I'd like to turn the conference back over to Mr. Jeff Beitner for any closing remarks.

Thank you so much. And I'd like to thank everybody for joining us today on behalf of myself, Greg and Marsh and the team here. We continue to work hard on behalf of our shareholders, making disciplined acquisitions and ultimately working on getting our stock price up. So if you have any questions on all our presentations in the back, there's both my email address and Marc's email address. We're always available. We love connecting with our shareholders and investors. Have a great weekend. Thank you.

Thank you, everybody.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone. Have a wonderful day.