Strawberry Fields REIT, Inc.

Good morning. My name is Holly, and I will be your conference operator today. I would like to welcome everyone to the Strawberry Fields REIT first quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I would now like to turn the conference over to Jeff Beitner, Chief Investment Officer. Sir, please go ahead.

Thank you and welcome to Strawberry Field's REITs Q1 2025 earnings call. I am the Chief Investment Officer and joining me on the call today are Maish Gubin, our Chairman and CEO, and Greg Flamian, our CFO. Earlier today, the company issued its Q1 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 Field's REITs 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 page in our investor presentation. And now, on to discussing Strawberry Fields REIT and our Q1 2025 performance. I wanted to start by sharing some key highlights. During the quarter, the company collected 100% of its contractual rents. On January 2nd, the company closed the acquisition for the purchase of six healthcare facilities located in Kansas. The purchase price for the facilities was $24 million and released under a new 10-year master lease agreement. Under the master lease, the tenants will be on a triple net basis and the tenants have two five-year options to extend the lease. The facilities are operated as five skilled nursing facilities and one assisted living facility and are comprised of 354 licensed beds. We welcome Willie and Michelle Novotny of Adveno Living to the Strawberry Field Treat family, and we look forward to growing with them. On March 31st, the company completed the acquisition for a skilled nursing facility with 100 licensed beds near Oklahoma City. The acquisition was for $5 million, and the company funded the acquisition utilizing cash from the balance sheet. The facility was leased to an existing tenant who combined this facility with another facility they acquired in December 2024 to create a master lease. This lease included annual base rents of $500,000 with 3% annual rent increases and is for an initial term of 10 years with two five-year options to extend the lease. A few other items I wanted to point out. During the quarter, the company continued to pay its quarterly dividend and on March 31st made a payment of $0.14 a share. We also made a couple of new hires during the quarter, an asset manager and a lawyer. These hires reflect the company's expanding footprint and the need to grow the team accordingly. The only other hire we anticipate in the near future is another asset manager. Subsequent to quarter-end, the company purchased a 112-bed facility near Houston, Texas, comprised of 102 skilled nursing beds and 10 assisted living beds. The acquisition was for $11.5 million, and the company funded the acquisition utilizing cash from the balance sheet. The property will be added to an existing master lease in Texas. As a result of this acquisition, the annual rents for this master lease increase by $1.278 million, and this master lease is subject to 3% annual rent increases. With this acquisition in Houston, the company has completed over $40 million in acquisitions to date in 2025. We are working diligently on some deals and expect that number to be closer to $100 million by the end of Q2. I would now like to have Greg Flamian, our Chief Financial Officer, discuss the quarter-end financials.

Thank you, Jeff, and welcome to the Strawberry Field's Q1 2025 earnings call. I would like to start off by looking at our financials for the first quarter of 2025. Total assets increased by $199 million, or 31.5%, compared to Q1 2024. This growth was primarily driven by activity related to our 2024-2025 real estate acquisitions, as well as the retenanting of the Landmark Master Lease into the Kentucky Master Lease. On the liabilities and equity side, we also saw an increase largely attributable to the funding used to finance these acquisitions. Turning to the income statement, total revenue for Q1 2025 was $37.3 million, up from $27.8 million in the same period last year. representing a 34.1% year-over-year increase. This growth was fueled by the timing of our key acquisitions over the past 12 months, including the Missouri master lease, which closed in December 2024, as well as the retention of existing leases, most notably the landmark to Kentucky master lease, which transitioned, which started in January 2025. Net income for the quarter was 6.99 million or 13 cents a share compared to 5.99 million or 12 cents a share in Q1 2024. This increase reflects higher revenue partially offset by increases in depreciation, amortization and interest expenses. Now moving on to financial highlights, AFFO for Q1 2025 was $16.8 million up from 13.1 million a year ago, representing a 28% increase. Based on these results, we are projecting full year 2025 AFFO of 67.3 million, which would represent a 20% year-over-year growth. Please note that the projection is based solely on the annualization of Q1 results and does not include any contribution from future acquisitions. With this projection, we expect our AFFO CAGR to be 13.8%. Adjusted EBITDA for Q1 2025 came in at $30.4 million compared to $21.4 million in Q1 2024, marking a 42% year-over-year increase. We are projecting a full year 2025 adjusted EBITDA of $128.8 million, again, based on analyzed Q1 results and excluding the impact of future acquisitions. Based on this forecast, we can expect an adjusted EBITDA CAGR of 12.2%. Finally, I want to touch on our dividend. As of March 31st, 2025, our dividend yield was 4.7% with an annualized AFFO payout ratio of 46.2%. Both metrics remain below the average of peers in our sector, reflecting our commitment to retain capital in support of an active and robust acquisition pipeline. Looking ahead, we will continue to evaluate opportunities for dividend growth and remain committed to aligning future increases with the strength of our underlying performance. And now Moesh Gubin will continue the presentation with the portfolio highlights.

All right, thank you, Greg. I'm going to continue on slide four, going over portfolio highlights. As Jeff said earlier in his comments, Good Quarter collected 100% of our rents. We got our facilities up to 132 facilities in 11 states. We're marching towards 15,000 beds. $1.02 billion in total asset value at acquisition, which today market value of those same assets are about $1.04 billion. We're up to 16 master leases, which is about 90% of our portfolio. There's seven years remaining, what people call WALT, which is the weighted average lease term. That's remaining is over seven years. We expect that number to improve with the new leases that we enter into, our brand new 10-year leases. And in fact, one of the new leases we're going to be entering into should be a 15-year lease or two five-year annulls. That being said, our EBITDARM coverage has improved quarter over quarter. In fact, most of the metrics from our operators first quarter, which is usually the worst quarter of the year for the operators because of February being a short month and beginning of the year, you have all the payroll taxes and, you know, 80% of the costs of our tenants are payroll. And so, but with that, we had a really nice coverage of almost a 1.9 EBITDARM coverage. We have a robust pipeline, what Jeff might have mentioned, and we expect to end the year after everything to be between 100 million, 200 million. And like Jeff said, by the end of half of the year, we should break 100 million already. So God willing, we continue on our march towards growing our company. Slide five actually continues at the annual shareholder meeting that we had last week, where we were talking at how well we've grown and how beautiful our balance sheet and income statement look. This is actually one of them. The AFFO growth from 2019 to 2025 is almost a 14% growth rate. Really, really a good number. We expect this year to break $67 million in AFFO. God willing, we do even better than that because this is not taking into consideration any of the deals that we expect to get done this year. Next slide. Slide six is our base rent growth. I don't really worry too much about this, but it is nice to see that our current base rent is $135 million. That's what we expect it to be. Again, that number should be larger. The growth rate of being 11%, I think, is good, but it's not such an important factor to me. So we're going to gloss over it. Next slide. This slide, fortunately or unfortunately, shows actually a pretty good growth to our stock if you consider March of 24 being at $8 and where we ended March 31st at close to $11.90. Unfortunately, the marketplace went a little crazy after April 2nd, and right now we're just battling to get to our NAB, which we believe to be way higher than where we're trading today. Next slide. This slide is something we're really proud of. The fact that, I mean, to the negative is that we should be trading higher, but to the positive, our return versus our peers, we have the highest return at a 57%, which we just talked about with the stock price. AFO trading multiples, unfortunately, is below 10 times. And we've talked about in previous meetings, we just want to be treated like our peers and get to an average of 13 times, which would be a nice increase to our stock price. Next slide. This slide is one of the best slides that we have where just highlighting the AFFO payout ratio. It's somewhere in the middle of 46.2 and 46.3%, which is lower than everybody, which we have another slide coming up to say how We, unlike Jeff alluded to, we're using the rest of our free cash and using it to buy more assets, and therefore our AFFO appreciation or accretion is larger than our peers. Our dividend yield today is 4.7%. Again, we're meeting the REIT standard, and we feel that the total return for our shareholders is probably close to 17%. Next slide. This slide, slide 10, just highlights the fact, like we've been saying for the last few years already, where we believe we're probably the closest pure play sniff out there at over 90%, close to 91% of our portfolio. And that'll continue to shrink because we specifically don't buy other assets. They usually come along with deals when we're buying a bigger portfolio of nursing homes. So that should shrink. It'll never be 100%, but it'll shrink as we continue to buy nursing homes throughout the country and even like on the Houston deal. So it's one out of 20 deals that we did in a year where we have an assisted living that went along with a nursing home and that assisted living is 10 beds while the nursing home is 100 beds. Yeah, next slide. This slide, slide 11, is what I was talking about a few minutes ago. If you take a look at the growth rate, the chart on the right, while most of our peers had a negative growth rate, Care Trust, which is really our best comp, even though they're two or three times larger than us, they're doing great and they're a good company as well. But our growth rate for our AFFO per share is running 10% through the last five years. And we figure you take that and you add your dividend yield to that, and that's a good 15%, 16%, 17% return year over year. And we're proud of that. As far as EBITDA coverage, no. 189 is a good number. We're in line with Omega, who's probably one of the biggest, and they're a good peer also, but they're really big in their international, if we're not. So we're in line with them, which is a good company to have. We're not out of whack here. Next slide. What I've talked about already now about the slide is just evident here. The 12.1 growth rate over the last, you know, seven years or so, take that together with the dividend yield, which I think we said was 4.7%. That's a 16.8 when you put those two together. That's really the investment, what we're trying to tell people to invest in. You got 16.8, and then you got the appreciation of our stock price that's right now undervalued at below NAV to buy the stock. And then, you know, stocks go up and start trading the right way, which is what we're waiting to happen. You know, we're doing all the right moves, going to all the conferences, meeting a lot of people, looking, you know, talking to family offices, doing non-deal roadshows. We're running around and we enjoy doing it. We meet a lot of good people, you know, and we've come to realize that really our company belongs, can fit into anyone's portfolio. Just a question of what larger percentage in someone's portfolio we should be. you know, depending on someone's, you know, how conservative, because we feel at a, at a relatively low risk basis for our business being that when we're insulated bulletproof from, you know, we have headwind, you know, you know, tailwinds in the, in the nursing home world from, from the baby boomers and the fact that you got long-term debt and not so much, this is not a, an economic decision. If someone needs to be in a nursing home, they go to a nursing home. So you have all those positives. And yeah, Well, regardless, we feel that it's a low risk because of those positives. And because of that lower risk, to be able to get 16%, 17% return on that, we feel that that's a really strong argument for people to invest in our stock. Next slide. This slide, slide 13, has just been part of our deck for so long. At this point, you know, we used to push the fact that HUD debt was a big percentage of our debt. At this point, you know, HUD is only about 39% of our debt load. And then the other two parts are Israeli bond debt and then conventional debt with Banco Popular or Popular Bank. We think we're in a good spot. I've talked about at the annual shareholder meeting, our next move at some point is to create a line of credit with a bank unsecured to be able to just use that cash when we want to buy something and then hopefully backfill it with using the ATM or our availability and doing a placement of stock. Of course, we need the share price to go up because we're not going to dilute current shareholders below NAV. So at this point, we're going to probably, until the stock goes up, we'll probably just increase debt a little bit. But again, our debt, we have so much capacity and we're sitting today at 51% leverage. We want to be between 45 and 55. So we have a little bit of room in our own policy to get to 55 if need be. If the stock starts trading the right way, we'll sell stock and get that number down. But that's our current plan. And, again, you know, the simple thought here is we're going to keep buying the way we buy, which is very disciplined. And then to fund that is nothing permanent there. So if we – if the equity market is – is not trading well, and it's not open for us because we're not going to sell, we're not going to dilute ourselves like other REITs do. We're not going to do that. Then we'll just take a little debt and we'll increase our leverage a little bit. And then once the stock is trading, we'll then issue, we'll issue equity and then pay it down. Alternatively, if we have excess cash and the stock doesn't trade well, we will buy back more stock. We have availability in our stock. two years ago. Next slide. This slide 14 has become one of my favorite slides. And we talk about it all the time. The people that know our story well know that when our company started, Michael and I, for those who don't know, Michael Blisco is my founder, co-founder with me. When we started Strawberry a couple iterations ago, we were the only tenants and we were only in two states. And now you're looking at, we've been partners almost 22 years. And now I run Strawberry. He runs 50% of our tenants or something that Michael runs. But I just stole my own thunder is that basically 50% of our total tenants are now related party down from 100% a bunch of years ago. And these two pie graphs are the fact that we've diversified our portfolio to be that there's no single state That has that has more than twenty seven, twenty eight percent of our twenty eight percent of our rents and twenty seven percent of our consultants by each day. So there's no there's basically basically we've totally diversified our portfolio. In fact, having Indiana being the largest percentage, that's a good thing because Indiana is a great state and our tenants do real well there. And God willing, God willing, we'll continue to grow there. And and that's fine. And, you know, at this point, we're going to be adding more in the next, you know, the next two or three quarters. We'll be adding more to Missouri. We'll be adding more to we'll be adding more to Michigan. Kansas, Missouri, Oklahoma, Texas, and then who knows what comes along. We've talked about before, we're big into master leases. So if we're able to enter into a new state, it'll be a big enough portfolio that's a master lease. Otherwise, we'll be staying in the states where we are. We'll just keep adding to the master leases we have in the states that we have. Next slide. Slide 15 is just our map. As you can see, the way it's bunched up, it's bunched up on purpose because that's, you know, when we underwrite a deal, we're looking at the deal that it makes sense really to me and the folks that work for me that we've taught to be like me in some regard. Um, is that, is that we're thinking about that if we're the operator, which we're never going to be, we don't do, we're not doing idea or idea, however you want to pronounce that. And we're not, we don't plan on ever being an operator. We're going to stay straight, straight landlord, um, We don't even expect most likely to ever go into, you know, doing mortgages an hour a week because that's an acceptable asset. We're probably going to stay away from that as well. But that being said, I look at each one of these deals and whether it makes logistical sense that, you know, the operator should be able to get to these buildings and be able to run them well. And so that's why you look at this map, which is really pretty to me, is it's all bunched up. where you have guys in each place, and it gives them a knowledge of the locals and, you know, the way the demographics are of the local people that are, you know, living in the facilities and gets them to know the local regulators and the way things are. And it's been a good model for us, and that's probably why we're collecting 100% of our rents. And that being said, we talked about earlier about the pure play sniff. You can see in the pie graph there, that 90.9 that's, that's, that's our sniff versus the smaller little segments there. And with that, I'll just thank everybody for joining us today and we'll entertain whatever questions there are out there.

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. If you are listening through the webcast and would like to ask a question, please click on the Ask Question box on the left side of your screen, type in your question, and hit Submit. Please hold while we poll for questions. Your first question for today is from Rob Stevenson with Jannie.

Good afternoon, guys. Can you just dive into the landmark lease and sort of talk about what's going on there and what prompted that? in a little bit detail?

Sure. Thanks, Rob. Good to hear your voice. Yeah, I'm just gonna talk in roundabout numbers. We, and Greg or Jeff can add the actual numbers, but basically what happened was the facilities were doing well and it was an opportunity for us to recast a new lease with a new operator. And so what we did was we struck a deal with our previous tenant for them to surrender their lease so that we would have the ability to enter into a new 10-year lease with two five-year renewals. And we recast it at a one-and-a-quarter coverage to what the previous tenant was doing. And with that, we had a nice increase to our top line. And our deal with the predecessor was that we would pay them about a million dollars. The owner of the previous company would pay them about a million dollars a month for the next five years, which is right around the increase in rent for the first year. And and and that the and that strawberry would win because we'd have a brand new lease with a new tenant that we that that we could grow with, which we had before also. But this is just diversifies the pool a little further. And and strawberry gets the benefit of the three percent increases on the higher rent number. Meanwhile, the other operator leaves having made, you know, gotten getting paid out over five years. And so we net out to for the first year. It nets out to be to be around the same number as we were making before with an increase of top line and an increase. And an increase in the expenses on the bottom line. But after year one, we get the 3% increases at Strawberry. And then after year five, we get the full benefit of the higher rent amount. So we felt it was good for us at Strawberry. We end up in the same position or better. Thank you. The tenant leaving leaves happy and the tenant incoming starts happy. And I think we already had their first their first month or two months of operation. And they actually have a rent coverage and like one and three quarters, even though we we built it out at one and a quarter. They end up they end up they end up beating that by by a nice number. So that's that's the general story. If you need exact numbers, Greg or Jeff, I'm sure able to walk you through the exact numbers if you want them. Just let me know.

So the so the landmark lease was somewhere, call it about 11 million. And so the new lease is twenty three three. And so that's, you know. Plus or minus a little bit, that's essentially what's happening here.

Exactly.

The level of the increase.

Exactly. And in the long run, we make out more money with a new operator that's hungry and we're able to grow with them. And I think it's very positive for us.

Okay. And then the $1 million a month is just going to be coming out of the rental expense number, which was like $3.8 million in the first quarter?

You would think so, but under GAAP accounting, the way this gets recorded is actually we created a debt on the books. And then as that debt gets paid down, the debt goes lower. And on the other side, we amortize... we amortize the payments being made, and therefore you end up netting out. So it's not netted in the top. What you're thinking is exactly how I would have done it, but that doesn't conform to GAAP accounting, unfortunately. And so basically, you're going to see a higher top line number. And by the way, this is similar to Like three, four years ago when the gap rule changed with regards to how to record property taxes that are collected from tenants. So property taxes come in and we pay it out for them. It comes in as a top line revenue number and it goes out as an expense. They net out again to the same amount. you know, to the same rent number that's supposed to be the real rent number. But over here, so that's, I hope I answered what you said. That's basically how it plays out.

Okay. And then I guess the other ones for me, anything non-recurring in either revenues or expenses in the first quarter income statement that we should be aware of?

Yeah. I don't think so. Greg, is there anything that you could think of that's non-recurring?

Nothing comes to mind. No, it was a pretty clean quarter.

Okay. And then last one for me. Did you guys issue any shares under the ATM in the quarter?

I'm going to defer to Greg to that also. I know we haven't been doing anything because the stock price is down because our limit at some point was $12 a share. Greg, did we sell anything under the ATM in the first quarter? It would have been January or February.

Yeah, we did sell some shares. Actually, it was $190,000, give or take. It was about $2.2 million.

What did we issue? It was out to $1,175 a share. $1,175 a share.

Yes, thank you. So 190,000 shares at 1175 a share. Yeah. But then we also, we also 2.2 million, you said.

Yeah. But we also bought back shares when the stock went down. What was our stock repurchase for the quarter? That was in Q2. Oh, that already happened in the second quarter. All right. Nevermind.

Oh, well, I guess the question, cause I saw that the, the, the 2.5 million remained the same from the K as of December 31st. How many shares have you bought back thus far in the second quarter?

I don't have the exact number from you, unfortunately, but it's about, I think about, it's about over around a hundred thousand shares, I believe.

Yeah. And we bought it at, and we bought it around $10 a share. So theoretically we made a profit on our own stock.

Okay. All right. Thanks guys. Appreciate the time and have a great weekend.

All right. Thanks Rob. Have a good weekend.

Your next question for today is from Rich Anderson with Wedbush.

Hey, thanks. Good afternoon, morning, wherever you are. So just a question on the map, the beautiful map, Moshe, you referred to with all the nice colors. It is. There's one color, yellow. I'd like to ask about the miscellaneous operators. I'm just curious if you have a plan there to – to kind of blend them in with other existing operators, what that strategy looks like for you going forward?

So that's a good question and good hearing your voice as well, Rich. Yeah, the way the way. So you've got to look at it by state. So Oklahoma, Oklahoma is just the first one that caught my eye as I opened up the map here to be able to answer your question. So Oklahoma, we're growing a master lease there. And so the short to your the short answer to your question is. we're not, we're not going to consolidate individuals to make the, all the yellows to be one guy, but what we are looking to do and we are doing is that each one of the little groups of yellows that are, that are individuals, we're looking to grow their master leases so that they could be a standalone color, I guess, on the map. So Oklahoma, we have a deal for another, another facility. Um, and then we have another facility after that, and that'll end up bringing it to, I think four with that, with that operator, um, Texas, um, We have two different master leases in Texas. One of those master leases, we are actually growing that master lease as well. That one's a little bit anti to what we typically do because we're bringing them to a whole new state with a bigger portfolio. But it's going to be still in one big master lease, which will make that relationship go up to, I think, 11 facilities. And that'll be good. And then Illinois, we've been slowly but surely taking out the single operated facilities, which are our real legacy facilities. And we've been slowly transitioning them out of mom and pop and into a new operator that has a master lease with us already. I think we have, I think, three... Maybe we're already up four or five facilities with them, and then we'll be able to grow that. So what you should see, assuming everything happens the way we expect it to happen in 2025, that at the end of the year, we'll see that... Oklahoma will be their own color because they'll have a bunch of properties there and then you'll get rid of a couple of the Texas and then we'll add another state and that'll be a different color. We'll be narrowed down to very few uh, very few, um, singles basically is what we want to get rid of. We want everything on the master leases. Like I said earlier, um, I think we're about 90, 90% of our facilities are master leased. And if we could get the last 10%, uh, into master leases, you know, at a minimum of, you know, four or five facilities, then, then that'll be, that'll be, uh, getting to where we want to be.

Okay. Um, I'm intrigued by the, uh, expectation to be at $100 million by the end of the second quarter. And you mentioned not using equity at this level. So what is the game plan if everything sort of holds constant right now? Is it just more debt? How much cash do you have to use right now? I'm just curious what the funding strategy would be to get to that incremental $60 million.

So that deal, that's right around $60 million. We are going to take $20 million of cash from our balance sheet, and then we're going to take $30 million in a conventional loan with the bank. And then the last $10 million, we will most likely just draw on our bond debt in Israel to be able to just meet our cash needs for the second quarter. Okay.

And last for me, are you having any sort of issues trying to underwrite deals going forward with some questions around Medicaid, the congressional budget, budgetary process? Is that getting in the way at all in your conversations? Are you changing your underwriting to kind of protect yourself a little bit? I'm just curious what's going on there in your mind.

So two points there. First of all, our underwriting hasn't changed in many, many years. And we've talked about that. I'm sure, Rich, you've already heard me say it at least three or four times of how disciplined we are and how we underwrite. That hasn't changed. The the the factors that we need our tenants to come into the deal, you know, you know, their experience and their financial strength. And I always talk about their integrity. Right. Those are the three basically the the pillars that hold up our world. And so, yeah. So from that point of view, nothing's changed. We haven't changed our bogey as far as what return we want and debt service coverage ratio we want on day one and rent coverage that we want on day one. That all stays exactly what it's been for many years. And in fact, our boards, you know, really, really, you know, Adamant and at the same time, really strong and pushing and proud that we remain stable and consistent. And, you know, and, you know, in over the years, they've told me if if we can't find deals that meet our box, just don't do deals. And, you know, and that's not that's not a problem that we've had. But but nevertheless, that's a philosophy that we have. As far as as far as the Medicaid conversation, I mean, that's that is a very, very common conversation that I have, both with investors with bankers as well. I mean, keep in mind our balance sheet today, you know, really our debt, the way our debt is structured, you know, the tranches that we have, we don't talk to HUD about any of this stuff. So they're not, they're out of the contention. Conventional, conventional lenders are healthcare lenders. Cause that's, that's, that's the space that you have to, you have to find a lender that knows healthcare that, and so they all know what's going on and they're, that's really just a conversation. It's not a inquisition or, or any trouble. I guess the biggest thing, topic at the you know the water cooler would be the israelis in the israeli bond market because they read the stuff and they believe everything they hear um and and you know it's a little bit it's just it's a little bit of an aggravation because first i have to have this have to have the same conversation over and over and over we don't ever have groups of call like on this call where you have a group of people calling over there it's one by one by one meetings and that's the respect that they want and they deserve uh at least in their mind and um And so you have to have the same conversation over and over and over. But they also don't understand, you know, really the starting point, the starting point culturally in America versus Israel or other countries is that is that other countries, people take care of their elderly at home and they're more. It's more understood in the culture to do that. And in America, that's more of a minority of the people. Most of the time, somebody needs a nursing home, they just put them in a nursing home and they don't consider taking care of mom or dad at home. Good or bad, I'm not judging anybody. So culturally, the way that works in America, obviously, is that we're not going to turn our back on the elderly. And so and so I have the conversations, but none of it affects business. It just affects, you know, just the conversation I have with and it could be turns away an investor when I talk to somebody, you know, that they're worried about this or that. And but but it hasn't affected our business and it's not going to change our model of us, you know, going out there, being transparent, talking to people and, you know. and doing what we do. And I expect business to be able to continue as it is, which has been very good. And I don't see where any of this stuff really hurts us. It gives me a little bit more work and a little aggravation. But other than that, it's fine.

Okay. Sounds good. Thanks.

Thank you.

Your next question is from Gaurav Mehta with Alliance Global Partners.

Thank you. Good afternoon. I wanted to go back to your comments around $60 million of acquisitions expected into queue and on the funding portion coming from debt. Can you provide some color on what's the cost of that for you guys today to fund that acquisition?

Yeah. So our, our, our cost, and again, it's a 10 cap. So you take, you take roundabout a $59 million deal, right? So our rents will be 5.9, right? So, you know, the top, you know, you know, that side of the equation on the other side of the equation, we have our 20 million of cash. We have a 30 million, which should be, or 29 million, $30 million, which should be so for 300 thereabout, right? And then and then the bond debt, the other 10 million right now, that rate is about six, six and a quarter. And it's going to probably all in cost of doing an issuance or doing it's probably probably ends up being probably close to 7%. And that should be fixed for – I think the bank debt is going to be fixed either three to five – I think it's three to five years. And on the bond debt, it's going to be – I think what we're going to have is a duration of probably five years, which might be a seven-year deal. And you guys know how to math to figure out the duration on a seven-year money based on a four to six percent principal pay down annually. Okay. So I guess blended blended cost. Right. If it's 20 percent is zero. Ten percent. I'm sorry. If 20 million, which is which is one third. Thirty three percent is at zero, I guess. And then the other, you know, like 40 percent of that is is that is that so for 300 and then the other one at seven percent, I think probably you blend it out. It's probably somewhere low. Six is altogether six and a half. Six and a quarter, somewhere around there is what our cost is.

Okay. Does that make sense? In your prepared remarks, you also talked about looking at line of credit. Can you maybe provide some color on the timing of such a line of credit and what kind of size are you looking at?

Yeah, sure. I'm kind of like breaking the Jewish law, or I guess it's in the Bible for Christians as well, is coveting thy neighbor's stuff. So I'm coveting the neighbor of the reeds that are out there that are more mature than we are, where at this point they have a line of credit out there. And so we've spoken to basically three banks, And the product that basically that's coming along is an unsecured line of credit, which basically eats up our current bank debt for the most part. Not all of it. I mean, the current bank that we're doing on this deal, that $30 million is going to have to sit outstanding because of the prepayment penalty. But the rest of our stuff – Would be would be absorbed and and basically our whole balance sheet, other than the HUD debt would only would all be unsecured debt, which is good for business because our HUD debt today is about 39%. So, you know, having the rest of our debt, you know, be in a portfolio that only 39% is secured and the rest of it's unsecured. Um, that works for the model. Um, and we're looking at anywhere between 200 million to 400 million or 200 million to 500 million. And pricing on that is, is, is still probably sulfur, uh, two to 300 range. Maybe, maybe, maybe it's not going to be less than two. Definitely won't be more than three. It'll be somewhere in the middle of that. Maybe two and a half, two 75, uh, And that should give us the flexibility once we get that done, which hopefully that's a 2025 deal as well. Once we get that done, then going forward, we just draw on the line when we need it and then hopefully sell equity to pay it down. And then still continue with our original philosophy of taking debt and moving it to HUD when we can. And so, you know, you figure if things continue the way they're going, like I said, 39%. would be secured debt with HUD, long-term money, you know, average rate in the threes, and then everything else basically sitting so for 300 or below in mainly unsecured. And then... And then, you know, depending on where the stock trades, that'll keep us where we can keep our total leverage to be between 45 and 55. And our world would be in total balance, which is where we want to be. How that plays out, timing, you know, we're working every day. So God willing, things happen in the right time. And so that's why I'm saying that hopefully this all happens by the end of 2025.

Okay, thank you. That's all I have.

All right. Thank you, Guaro. Be well.

Your next question is from Barry Oxford with Colliers.

Great. Thanks, guys. When you guys look at acquisitions going forward, and you already alluded to the 10% cap rate on the current assets, are you still seeing deals or, you know, a fair amount of them at the 10% cap rate? while being able to stick to your rent coverage for the tenants, or is that starting to get a little narrow and maybe you have to come into 9-5 to kind of keep the tenant at the rent coverage where you'd like to see them?

No, no, absolutely not. We're, and I guess, I guess really, if I really wanted to compare that, I would start trending or tracking, you know, you know, quarter over quarter, what our pipeline has between, cause we divide our pipeline between hot, you know, like hot, Hot, warm, and cold, basically, or high, low, medium of likelihood to get done. And so we haven't changed our standard at all. Everything begins at a one and a quarter minimum, and everything is a 10 cap. We haven't bought less than that. In fact, on some of these deals, we've even gotten a little bit better than the 10 cap. you know, maybe 10, 10, 10 point something, you know, maybe not up to really 11, but somewhere over there as far as our return. Um, and, and today our pipeline is, you know, a couple of easily like $300 million. And out of that, we probably expect, like I said, you know, giving the guidance of between a hundred and 200 million knowing full well that we expect by half a year, we'll have broken a hundred already. So last half of the year, we have enough in our pipeline at our exact, you know, uh, investment protocol to, to be able to do the rest of, you know, you know, hopefully, hopefully another a hundred million for the second half. So we should be able to, we should be able to do that. We don't have any problem at all. And out of the rest of that 300 million, you're probably talking about, you know, low likelihood of on, on, on maybe a hundred and something of it. And so we'll keep working and God willing, we'll find more deals and we'll keep doing what we're doing.

Would you have to access the equity markets to make the second half goals for acquisitions?

I would love to. I truly would love to. Right, right, right, right. You know, it's the marketplace. I mean, anyone that's willing to make an effort and do the math to figure out what our NAV is, you know, in my mind at a 10-cap NAV, our stock price is worth, or each share is worth close to $13 a share. I don't think it's fair to my shareholders to sell stock at a number below that because they don't deserve to be diluted. We have a great company making a lot of money doing business the right way. But I'm expecting that the marketplace at some point you know, makes that little effort and realizes how undervalued our stock prices and the stock moves. And but to answer your question, you know, if if if I have it my way and the stock gets to where it should be, or at least above the NAV number, then we would do a raise most likely in the second half of the year, you know, seventy five million dollars. And then we would use all that money either on new deals or to pay down debt. And then we get through 2025. If not, we have availability on our bond debt. Like I said, it's somewhere between 6% and 7%. We have availability right now for easily a couple hundred million dollars. And the marketplace wants us there. And it'll be easy to get done. And again, the problem with the bond debt, which is what I want to avoid, is that that bond debt is more, you know, there's prepaid penalties and, you know, the investor wants a coupon long term. And so, like, it's not as flexible of being able to, you know, get in and out of that deal. And so I'm trying to avoid it as long as I can. But if I have to do, I have to do. And, you know, we're just... Because the deals make sense. It's good for our company. And the price is not expensive. I mean, it just locks me in for a longer term. And so that's something I like to avoid. But it's something that we'll have to do to be able to close a deal.

Right. Okay. That all makes sense. When I'm looking, you mentioned that you had two more hires and maybe another asset manager by the end of the year. When I think about your G&A as a percent of revenue, are you going to be able to keep that fairly constant, or will we see that rise because of the new hires, or will the revenue – will the ramp in revenue kind of keep G&A as a percent of revenue fairly static?

No, no, no. Our – when you see a full quarter, which will be the second quarter, you'll see our total payroll went up, you know. Actually, first quarter had a one-time – I think Rob asked if there was a one-time. And so first quarter of this year, unless we accrued it in fourth quarter, I gave a bonus. I gave a bonus a couple hundred thousand dollars to our employees, and we gave it to them in half stock and half cash. I don't know if that was accrued in the fourth quarter or if that was just – It wasn't good. OK, so so fine. So ignoring that comment, then you're talking about a an increase to the GNA in second quarter of, you know, maybe maybe max one hundred thousand one hundred thousand dollars a quarter. I mean, it's not a big number at all to anybody that's on this call. And then the last hire that we need to bring in is, you know, it's not a six-figure salary. So, and other than that, our cost of running our business should remain flat. Like, that's it. Yeah. unless I'm missing something, I don't, I don't see we're running real well. You know, we're timely, we're timely on producing financial statements. We're timely and we have good analytics and we have a good knowledge of our tenants operations through the asset managers. The only reason asset manager, another asset manager is needed is because we should end the second quarter with 140, over 140 facilities. And if you divide that by three people, it's a little bit stretching them thin. You know, the good news is that, you know, 50, 50 facilities or so are are are infinity. So we don't have to worry about that because nobody cares more about these facilities than Michael and I. And so, you know, but they still have an asset manager that has a job to do. But nevertheless, you don't have to be as worried than you do for like the real outside operators. And but, you know, you take 140 and divide it by three, that's an awful lot of, you know, work to be done. And when we have a rule that you got to get to the facilities at least twice a year, just travel dates alone makes it that there's not enough time to really, you know, know your buildings well as far as managing the assets. So I feel like we have to do that because I want to stay with our model, making sure... We haven't had a building get closed on us. We haven't had... You guys know our competitors and you know the issues they've all gone through. Now, they are bigger than us. That's true. But We haven't had any of that. We collect all of our rents. Our buildings are never been shut down. We have a nurse consultant that actually reviews every single survey. I don't know if other people do that, but we do that. And we have calls with their operators about the care and the buildings, even though we don't control them and do anything, but we care about our asset and we want the residents to be taken care of. That's just us going above and beyond because we care about people. But as far as costs for our company, there's no, you know, nothing coming down the pike that's big. I mean, one thing that I brought up, I think, maybe a year ago. which is still out there is, is, is my pay. My pay still hasn't changed in 10 years. And there has been conversation in the company to, to pay me, you know, what a normal CEO makes for, for, for the REITs. I've deferred it myself because I don't really care. I care about my company more than I care about me. And yeah, And so it hasn't been an important thing, but at some point down the road somewhere, I assume compensation committee will decide something and there'll be, you know, something for me. But that's, you know, that's definitely not today. I hope I answered your question.

Oh, yeah, for sure. I appreciate all the color on that. That's very helpful. Thanks, guys. Have a good weekend.

All right, Barry, be good.

Yep.

Your next question for today is from Mark Smith with Lake Street Capital.

Hi, guys. Most of my questions have been hit here, but I did want to ask just big picture, you know, with new administration, if we're seeing any changes on kind of regulatory or kind of payment for Medicare, Medicaid front.

Yeah, hi, Mark. I only know what I hear from, you know, our tenants and Michael. I think it's too early to really gauge anything. gauge how the environment's going to be. If it goes back to the way it was when it was Trump 1.0, then those were great times for the nursing homes with regards to how the regulators, you know, you know, the surveyors treated the facilities. And what the mandate was from D.C. on how to be a support and a help, as opposed to, you know, wanting to put their thumb on people and and be difficult like like like it was the last four years. Outside of that, we've already seen increases to Medicaid rates in in Illinois. In Kentucky, I don't know if there was any other specific states where there was increases because a couple of the other states are all cost-based, so they go up anyway on a regular basis from the annual cost report being filed. So I would say that it's, you know, I don't expect there to be a negative. I happen to be an optimist to begin with. So take that with a grain of salt. But I haven't heard anything bad. But I expect, like I said, the regulatory side to be an improvement. And on the financial side, no. I also, I expect it to, you know, at the end of the day, be status quo. I don't think there's any, like I touched on earlier, right, there's a social need for the nursing homes to take care of the elderly here in America, and it needs money to take care of it. So they have to come through at the end of the day, the Congress and, you know, the government.

Um, the other question for me was just, just your, it sounds like a lot of confidence in the acquisitions, uh, coming up here in the pipeline, especially near term here, kind of Q2. Any other commentary you can give just on your confidence in the pipeline? And then as we look at acquisitions, you know, are you needing to expand more geographically or do you think here in 25, you can kind of hit your goals still within the states that you currently operate?

Yeah, we have enough pipeline to hit our goals in the current states, adding to the current master leases, which is great for us. So that means we'd be growing in Oklahoma. We'd be growing in Missouri. We'd be growing in Kansas. Um, we'd be growing potentially in Texas. Um, and so that'll get us to where we want to be. Um, we are looking at, um, we look at a lot of deals. Like we have been looking at a lot of deals year over year. Um, we look at literally in a, in a given year, we close, I don't know, 10 deals and, you know, on a good year, on a bad year, we close no deals. And we look at hundreds, 300, 400 deals a year, maybe more. If you count on all the MLB stuff that I'm always, um, you know, looking at, even though we never do any of those deals, but I still see it and I go, Oh, it's just like a mile down from a nursing home. This could be a great for the nursing home wound. Cause all those doctors that are there could maybe, you know, end up being a help to the nursing home. And we ended up not doing any of those, but we spent time looking at them anyway. Um, you know, attempted Indiana, you know, green, uh, green castle, uh, Indiana as well. Um, so we look at that, but I, I think, I think if a deal came in, uh, Wisconsin, Minnesota, Alabama, you know, just growing the nucleus to expand, but not go that way too far, not go this way too far. Ohio would be a great state to grow into, grow more in, but we just haven't found a deal in Ohio for whatever reason. That's been a state that I'd love to have grown for years and we haven't, we haven't grown. But yeah, to answer your question, like I said, is, within our, within our portfolio with our current master leases, we have enough volume to be able to hit this year's targets. Um, and then some, and, and, you know, and we are looking at stuff that's outside. Um, and if we find something and the deals work, we will be glad to do it again. It has to be in a master lease structure. It has to be big enough, you know, at least, you know, 500 beds, you know, more than that, 700 beds. Um, and, um, And so, yeah, that's God willing. So 25, I'm not going to disappoint anybody. 26, I'm an optimist, but who knows what happens in 26. Hopefully that answers your question.

Thank you. You're welcome. Yeah, absolutely. Thank you.

I will now hand the call back to Jeff to answer webcast questions.

Thank you very much. We have a couple of questions from the folks at Freedom Capital Markets. Their first question is, are FFO and rental revenue guidance limited to the current portfolio or do they also include future acquisitions?

So really, you can answer the own question because you're the one that did the model for that. But if I was answering that, our numbers, our numbers that we present are based off of current, you know, annualizing first quarter numbers. I think our current number we're expecting is 121. But we know that we should beat that. I think 121 is the FFO per share annualized for 25. I think we'll end up beating that anyway. Please, God. And yeah, so I think I answered their question.

Yes. And their second question is, for new acquisitions, is the company open to issuing OP units or stock in lieu of cash?

Oh, yeah, 100%. I should add that to my regular comments to begin with. I'm glad they asked the question. We love that. We did that in a Tennessee deal. We're doing that now on this $59 million. I guess I misled. Who asked me? I don't know if that was Guarev. I forgot who asked me that. But we have at least at minimum $2 million out of the $59 million as they're taking OP units, hopefully at higher than a NAV per share. number. And so we're not going to dilute anybody. But yeah, no, we love doing that. And that's actually a value add because we go out there and talk to people and say, hey, listen, you could defer a capital gain, especially if it's family money. Nursing home has been in the family for a couple of generations and you don't want to see a capital gain day one. You could defer the capital gain. You could put it in a trust. You could take it and pass it along to the to the children's trust and you could gift it to them. And until they turn it into tradable shares, it's not a taxable event. And there's the same dividend that's paid out, like as all you guys know that are on the call, it's an exchange one for one. And it's, what do you call it? It's the same dividend yield because the same dividend that's paid out to common is paid out to the OP units. So we love it. We've had a lot of interest in it, which is great. And if they would look at where we're trading at a discount to NAV, right, then they have upside of the stock, of the stock trading, if it traded appropriately as a multiple of the AFFO, like all the other peers, then even from NAV, there's a premium to be had on that where someone can make, you know, 10, 20, 30% getting the stock at NAV versus what the market price should be. So the answer is yes. The question, a long-winded yes.

That does it for my end. And I believe that does it for questions from the analysts. So I want to thank everyone for joining us today. It's been a pleasure as always. And feel free to reach out to Maj, myself, or Greg. We are available to answer any questions you've got about our performance or what our pipeline looks like. And we look forward to keeping in touch. And hopefully we'll see you all soon. Have a great weekend. Great weekend. Take care, guys.

This concludes today's event and you may disconnect your lines at this time. Thank you for your participation.