Form 8-K - Current report

 

 

 

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 15, 2023 (August 10, 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)

 

[phone]

(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 2.02 Results of Operations and Financial Condition

 

On August 15, 2023, the Company issued a press release regarding its financial results for the quarter ended June 30, 2023. The Company’s press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and incorporated by reference herein.

 

In accordance with General Instruction B.2 of Form 8-K, the information set forth herein and in the press release is deemed to be “furnished” and shall not be deemed to be “filed” for purposes of the Securities Exchange Act of 1934, as amended (the “Exchange Act), or the Securities Act of 1933, as amended (the “Securities Act”), and shall not be incorporated by reference into any filing by the Company under the Exchange Act or the Securities Act, regardless of any general incorporation language in such filing except as shall be expressly set forth by specific reference in any such filing.

 

Item 8.01 Other Events.

 

On August 10, 2023, our Board of Directors declared a cash dividend of $0.11 per share. The dividend will be paid on September 29, 2023 to common shareholders of record as of the close of business on September 15, 2023.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits

 

Exhibit No.		Description of Exhibit
99.1		Press Release dated August 15, 2023
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

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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 15, 2023	By:	/s/ Moishe Gubin
		Moishe Gubin
		Chief Executive Officer and Chairman

 

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Exhibit 99.1

 

STRAWBERRY FIELDS REIT ANNOUNCES

SECOND QUARTER 2023 OPERATING RESULTS

 

South Bend, IN. August 15, 2023 (ACCESSWIRE) –Strawberry Fields REIT, Inc. (NYSE AMERICAN: STRW) (the “Company”), yesterday, reported its operating results for the quarter ended June 30, 2023.

 

FINANCIAL HIGHLIGHTS

 

●

100% of contractual rents collected.

 

●

On June 8, 2023, the Company entered into a Purchase and Sale Agreement with respect to the purchase of 24 healthcare facilities located in Indiana for $102.0 million. The 24 Facilities are comprised of 19 skilled nursing facilities with 1,659 licensed beds and 5 assisted living facilities with 193 beds, of which 29 beds are licensed.

 

●

On June 19, 2023, the Company completed an initial offering in Israel of Series D Bonds with a par value of NIS 82.9 million ($22.9 million). The Series D Bonds were issued at par and the interest rate is 9.1%. In July 2023, the Company issued additional Series D Bonds with a par value of NIS 70.0 million and raised a gross amount of $19.2 million (NIS 69.8 million). The Bonds were issued at a price of 99.7%.

 

●

For the quarters ended June 30, 2023, and June 30, 2022:

 

	●	FFO was $12.7 million and $12.6 million, respectively.
	●	AFFO was $13.4 million and $13.3 million, respectively.
	●	Net income was $5.7 million and $5.3 million, respectively.
	●	Rental income was $24.3 million and $21.8 million, respectively.

 

●

For the six months ended June 30, 2023, and June 30, 2022:

 

	●	FFO was $23.8 million and $14.6 million, respectively.
	●	AFFO was $26.5 million and $24.8 million, respectively.
	●	Net income was $9.8 million and $0.02 million, respectively.
	●	Rental income was $48.6 million and $44.7 million, respectively.

 

Moishe Gubin, Chairman & CEO noted: “It has been a busy second quarter. We went into contract for the Indiana portfolio of 24 facilities and we will hopefully complete the acquisition before the end of the current quarter. We also issued another series of bonds in Israel on the Tel-Aviv Stock Exchange, which is our fourth offering that we have successfully completed in Israel. As I anticipated last quarter, the deal market has been strong and hopefully we will be able to close on a few more deals before year-end. Lastly, as we have been doing, since we started the Company almost 20 years ago, we will continue to search for deals utilizing our disciplined approach; with the ultimate goal of providing strong shareholder value.”

 

 

 

Quarterly Results of Operations (Q2 2023 vs. Q2 2022)

 

Rental revenues: The increase in rental revenues of $2.5 million or 11.6% was due to annual lease escalations, lease renewals and increased property taxes collected from tenants.

 

Depreciation and Amortization: The decrease in depreciation of $0.30 million or 4.5% was primarily due to certain equipment and personal property having been fully depreciated between the quarters ended June 30, 2023 and June 30, 2022, offset by certain site improvements.

 

General and administrative expenses: The increase in general and administrative expenses of $0.1 million or 14.3% reflects corporate salaries and expenses.

 

Property and other taxes: The increase in property taxes of $1 million or 38.9% is primarily due to increases in property taxes due.

 

Provision for credit losses: The decrease in the provision for credit losses of $0.4 million or 100.0% was related to write-offs of receivables related to certain defaulted leases and defaulted loan interest in 2022.

 

Interest expense, net: The increase in interest expense of $0.8 million or 16.7% was primarily due to an increase in the floating rate on the Company’s commercial bank loan facility and additional interest on Series C Bonds and Series D Bonds issuances that occurred in 2023.

 

Miscellaneous expense: The increase in miscellaneous expense of $1.0 million was a result of a fee paid to an investment banking firm to cancel an agreement with respect to a proposed financing transaction

 

Net Income: The increase in net income from $5.3 million during the second quarter of 2023, to $5.7 million income during the second quarter of 2023 was primarily a result of higher rental income in the second quarter of 2023 offset by higher general and administrative expenses due to one-time consulting fees, higher property taxes, and an increase in interest expense.

 

Six Months Results of Operations (First Six Months or 2023 vs. First Six Months of 2022)

 

Rental revenues: The increase in rental revenue of $3.8 million or 8.5% was due to renegotiation of certain leases, acquisition of a new property and additional property taxes being reimbursed by the tenants.

 

Depreciation and Amortization: The decrease in depreciation of $0.6 million or 4.5% was primarily due to certain equipment and personal property having been fully depreciated.

 

Loss on real estate investment impairment: In February 2023, one facility leased by us 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 continues to be leased under a master lease with two other facilities. The closure did not result in any reduction in the aggregate rent payable 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, we wrote off its remaining book value.

 

General and administrative: The decrease in general and administrative of $1.0 million or 29.5% was primarily a result of certain executive compensation expenses incurred in the period ended June 30, 2022 that was not incurred in the 2023 period.

 

Property and other taxes: The increase in property taxes of $1.8 million or 32.3% was primarily due to increases in real estate taxes and franchise taxes.

 

 

 

Provision for credit losses: The decrease in the provision for credit losses of $0.6 million or 100% was primarily related to write-offs of receivables related to certain defaulted leases and defaulted loan interest during the six month period ended June 30, 2022.

 

Interest expense, net: The increase in interest expense of $1.1 million or 11.9% was primarily related to increases in the floating rate on the commercial bank loan facility and additional interest on Series C Bonds and Series D Bonds issuances that occurred during 2023.

 

Miscellaneous Expense: The increase in miscellaneous expense of $1.0 million is the result of a fee paid to an investment banking firm in connection with the cancellation of an agreement with respect to a proposed financing transaction.

 

Foreign Currency Transaction Loss: The decrease in foreign currency transaction loss of $10.1 million related to losses incurred in 2022 resulting from the repayment of the Series B Bonds. These losses were the result of changes in the value of the U.S. dollar relative to the New Israeli Shekel (NIS).

 

Net Income: The increase in net income of $9.8 million in 2023 was primarily due to the absence of the foreign currency transaction losses realized in 2022.

 

Dividend

 

On August 10, 2023, our Board of Directors declared a cash dividend of $0.11 per share. The dividend will be paid on September 29, 2023 to common shareholders of record as of the close of business on September 15, 2023.

 

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 27, 2023, 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 79 healthcare properties, of which 78 are owned, located throughout the states of Arkansas, Illinois, Indiana, Kentucky, Michigan, Ohio, Oklahoma, Tennessee and Texas. The properties comprise 83 healthcare facilities, consisting of 76 stand-alone skilled nursing facilities, two dual-purpose facilities used as both skilled nursing facilities and long-term acute care hospitals, and three assisted living facilities.

 

Investor Relations:

Strawberry Fields REIT, Inc.

[e-mail]

 

[phone] 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 six and three months ended June 30, 2023 and 2022, to net income (loss), the most directly comparable GAAP financial measure, for the same periods:

 

FFO and AFFO

 

		Six Months Ended June 30,								Three Months Ended June 30,
		2023				2022				2023				2022
(dollars in $1,000s)
Net income		$	9,821			$	22			$	5,682			$	5,338
Depreciation and amortization			13,975				14,565				6,987				7,281
Funds from Operations			23,796				14,587				12,669				12,619
Adjustments to FFO:
Straight-line rent			(787	)			(917	)			(296	)			(423	)
Straight-line rent receivable write-off			-				1,075				-				1,075
Foreign currency transaction loss			-				10,100				-				-
Loss on real estate investment impairment			2,451				-				-				-
Contract cancellation expense for proposed financing			1,000				-				1,000				-
Funds from Operations, as Adjusted		$	26,460			$	24,845			$	13,373			$	13,271

 

 

 

Cover	Aug. 15, 2023
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Aug. 15, 2023
Entity File Number	001-41628
Entity Registrant Name	Strawberry Fields REIT, Inc.
Entity Central Index Key	0001782430
Entity Tax Identification Number	84-2336054
Entity Incorporation, State or Country Code	MD
Entity Address, Address Line One	6101 Nimtz Parkway
Entity Address, City or Town	South Bend
Entity Address, State or Province	IN
Entity Address, Postal Zip Code	46628
City Area Code	(574)
Local Phone Number	807-0800
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common stock, $0.00001 par value
Trading Symbol	STRW
Security Exchange Name	NYSE
Entity Emerging Growth Company	true
Elected Not To Use the Extended Transition Period	false

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