Strawberry Fields REIT, Inc. 2026 Q2 Earnings Call

Thank you and welcome to Strawberry Fields REIT's Q2 2026 earnings call. I am the Chief Investment Officer, and joining me today on the call are Moshe Gubin, our Chairman and CEO, and Greg Flamion, our CFO. Yesterday evening, the company issued its Q2 2026 earnings results, which are available on the company's investor relations website. Participants should be aware that this call is being recorded, 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.

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 pages at the back of our investor presentation. Now, on to discussing Strawberry Fields REIT and our Q2 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 June 18th, the company closed on its Corporate Credit Facility with availability up to $300 million. The credit facility is comprised of a $100 million term loan and a $200 million revolving line of credit, both having initial three-year terms and two one-year extension options. Proceeds from the credit facility were used to refinance existing secured bank debt, the remainder will be available to support acquisition growth.

The rate on the credit facility is SOFR plus 275. On April 21st, the company entered into a contract for the acquisition of a hospital campus comprised of a licensed 60-bed hospital, licensed 99-bed skilled nursing facility, and ancillary medical office buildings near Kansas City, Missouri. The purchase price will be $10.4 million, the company expects to fund the acquisition from the balance sheet. The hospital campus will be added to an existing master lease of a tenant in Missouri with annual base rents of $1.04 million and subject to 3% annual rent increases. The company expects to close on this acquisition during Q3. Deal-wise, we have been very busy looking at deals in existing and new states.

After a little bit of a lull, beginning with the above-mentioned hospital, it seems that deals are starting to make sense again, and we are hopeful that Q4 is going to be a busy quarter closing some of these deals. Yesterday, the board of directors approved the Q3 2026 dividend, which will be $0.17 a share. The dividend will be paid on September 30th to shareholders of record on September 16th. I would now like to have Greg Flamion, our chief financial officer, discuss the quarter-end financials.

Thank you, Jeff, and welcome everyone to the Strawberry Fields second quarter earnings call. Let's begin with a look at our balance sheet. Total assets are $878.5 million, an increase of $18.8 million or 2.1% compared to June 30th, 2025. The year-over-year decline in assets is driven by an elevated cash balances at the end of the second quarter of 2025. These funds were used to acquire property later in that fiscal year. On the liability side, higher debt balances were driven by financing associated with our acquisitions, together with foreign currency translation effects. Equity was lower year-over-year, primarily due to the decline in accumulated other comprehensive income related to foreign currency translation adjustments. Continuing now with the consolidated statement of income for the six-month ended July 2026. 2026 revenue was $80 million, up $4.8 million compared to June 30th, 2025.

This represents a 6.4% increase, which was driven by the timing and integration of properties acquired in 2025. While we experienced higher revenues, the income growth was offset by higher depreciation, which was driven by the new property acquisitions. General and administrative expenses were also higher due to higher closing costs, corporate salaries, and other operating expenses. These increases were offset by lower amortization. The results in a year-to-date income of $18.4 million, or $0.33 a share, compared to $15.7 million or $0.29 a share for the six-month ended Q2 2025. Going to the next slide, we're now going to look at a quarterly income statement comparison of Q2 2026 to Q2 2025. The second quarter revenues were $40 million, which is $2.2 million higher than Q2 2025. Expenses were mostly in line, however, quarterly increases were driven by higher G&A expenses.

Q2 net income was $8.9 million, which is marginally higher than the net income for the prior year quarter. I'd like to end my presentation with some financial highlights. Our 2026 AFFO is $73.9 million, representing an 11% compound annual growth rate. The 2026 projected AFFO per share growth is 10.1%. The 2026 adjusted EBITDA is $135.7 million, representing a 15% compound annual growth rate. Our yield on leases is 14.4%. The company's net debt to net asset ratio currently sits at 49.8%, and as of June 30th, 2026, our dividend is $0.70 a share, representing a 4.9% yield and an AFFO payout of 50.6%. 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.

Thank you, Greg. Looking at the portfolio highlights, currently our portfolio has 142 facilities located in 10 states. In these facilities, we have 15,496 licensed beds. The total property value of our portfolio is in excess of $1.4 billion. This amount is calculated by taking our annualized base rents of $143 million and multiplying it by a conservative cap rate of 10%. With the current healthcare real estate market being very strong and looking at comps, we believe that our portfolio should be valued at a lower cap rate than a 10%. Included in our most recent investor deck that we filed yesterday, and is on the company's website, there is a sensitivity table at the back showing that as the cap rates go down, the values go up. Currently, our portfolio has 16 consultants advising operators. The remaining average lease term of the portfolio is 6.9 years.

We are pleased to report that our tenants continue to do well, and the EBITDA on rent coverage for May 31st is 2.17. The net debt to adjusted EBITDA is 5.7. We've continued to collect 100% of our rents. As a final point, as I mentioned earlier, our pipeline remains strong, and we're seeing deals in existing states and new states. Currently, we're looking at deals in excess of $225 million. With that, I'd like to hand it over to Moishe Gubin, our Chairman and CEO, to continue the presentation.

All right. Thank you, Jeff. As Jeff and Greg already alluded to, we had a pretty quiet quarter. The slides I'm going to go through are just giving you basically the graphs and a couple of other pieces of information. The first slide shows you our AFFO growth for the last five years, or five and a half years. Again, it's an 11% growth rate. Beautiful, from $44 million to almost $74 million. Again, this will change. Hopefully, we'll end the year hitting our targets, just hitting the targets towards the end of the year instead of the beginning of the year, which is what we wanted. Unfortunately, it's just how it goes, this year's a quieter year. Like Jeff said, we're collecting all our rent still and bringing in the money, and we're making a good living. That's this slide. On the next slide, we talk about the portfolio growth.

We've changed this slide to try to show a straight line at a 10 cap to try to show what the values are. You see we're sitting at-- the other slide of how we had this previously was just showing you historical cost. Now this is showing you basically market value or 10 cap value on our rents that we're collecting. These are lease fee appraisals, so about a 13% growth rate here from 2021, having a value of about $777 million to now $14.25 million. The next slide just talks about our stock price over the last 12 months. Seems to be this quarter we ended off good. Currently, our stock price is performing better than this, which is good. As things continue, we expect to get closer to our peers as far as valuation.

On our next slide, we talk about our valuation gap, which we're hoping to continue to close in on and catch up to our peers. We're still trading at a 40% discount to our peer average AFFO multiple, at 10.5. We feel that we should be able to catch up, hopefully sooner than later. We're pushing, having good results quarter in, quarter out, dividend that's reliable, going to all these conferences, meeting a lot of people. Again, we're sticking with the fact that we're the most SNF-focused portfolio, with almost 92% of our portfolio being nursing homes. We have a very quick, very fast AFFO share growth, which is beating all of our peers at around 11%. We have the lowest dividend payout ratio at right around 50%. We feel all these things should catch up, and we'll be more in line, hopefully sooner than later.

On the next slide, you just look at our market performance over the last year. Our stock actually has held its own, and we're proud of that. We expect for it to continue on the rise. Right now, we're still collecting 100% of our rents, which Jeff said earlier. Our metrics are all good. Slow growth year, hopefully it doesn't affect us to the marketplace. Actually, I'm a little embarrassed by it, even though I keep bringing it up on this call. That being said, we expect things to just continue what we're doing, and hopefully the stock will vindicate us and show us in a good light. On the next slide. Again, we talked about the Seretti. This is how big of a difference we have. We're at 91.5% in SNFs, and these are our true peers.