Strawberry Fields REIT, Inc.

Good day and thank you for standing by. Welcome to the Strawberry Fields REIT Q2 2026 earnings call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speaker's presentation, there will be a question and answer session. To ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. I would now like to hand the conference over to your speaker today, Jeff Bajtner, Chief Investment Officer.

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 Moishe 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 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, 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 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. and now onto 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 and 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 and 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 and existing in 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 and financials.

Thank you, Jeff, and welcome everyone to the Strawberry Field 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% to 2.1% compared to June 30th, 2025. The year-over-year decline in assets is driven by 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 sixth 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 33 cents a share, compared to 15.7 or 29 cents 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 aligned, 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 from the prior year quarter. Finally, 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 70 cents a share, representing a 4.9% yield and an AFFO payout of 50.6%. This concludes the financial portion of the Earnings Club 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 adjusted EBITDA is 5.7. We've continued to collect 100% of our rents. And as a final point, as I mentioned earlier, our pipeline remains strong and we're seeing deals in existing states and new states. And currently we're looking at deals in excess of $225 million. And 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 yesterday. and so the slides I'm gonna go through are just giving you basically the graphs and a couple other pieces of information. So the first slide shows you our AFFO growth for the last five years or five and a half years. And again, it's an 11% growth rate, beautiful from 44 million to almost $74 million. Again, this will change Hopefully, we'll have a nice – 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. And so this year is a quieter year. But like Jeff said, we're collecting all our rent still and bringing in the money, and we're making a good living. So that's this slide. On the next slide, we talk about the portfolio growth. We changed this slide to try to show – a straight line at a 10 cap to try to show what the values are. So 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 a 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 and a quarter million. The next slide just talks about our stock price over the last 12 months. It seems to be that this quarter we ended off good. Currently, our stock price is performing better than this, which is good. And 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 pure average AFFA multiple, a 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%. And we have the lowest payout ratio, 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 a 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 um and hopefully hopefully the stock will uh will vindicate us and show show us a good good light on the next slide again we talked about this already you know this is this is how big of a difference we have we're at 91 and a half percent and sniffs and and and these are our true peers and now and now they're the largest one is 63 percent and the smallest one is 36 percent um that's really uh I think it's good for us because somebody who recognizes the value of the baby boomers and the value of the need for SNF care in America and how you can rely on the return. No, it's not erratic. It's not based on performance of the operations. They pay us our rent, which is absolute. So with that, I think in the long run, the shareholders or the marketplace should – should flock to us knowing full well that we're going to continue to have a steady, slow and steady return that you could rely on. And the next slide, pure comparison, again, just to show how we compare. Again, 50% payout ratio, and then you have the largest distributing 87% of their cash. And so that means for every time they want to buy stuff, they have to sell more equity, which dilutes the shareholders and their share of the profits. And that's a hard way to go. In our case, everything we're doing is accretive. And even though we do sell stock in the ATM or we continue to extend our shareholder base, we're still mainly using cash from our balance sheet to grow. And then we're able to add debt to stay at a 50% leverage ratio for us to be able to meet what our payout ratio continues to be. And then on the other slide to the right of that is our growth rate. And again, it's just basically because of that simple math. Since we're using our own cash and we're not selling more equity to be able to grow the portfolio, that makes it that we have AFFO share growth because each share is earning more and more money every year. as opposed to having more shares, earning more money as a group, but having more shares to share it with. So that's the math, and we're proud of that. On the next slide, we just reiterate the total return. When you take the growth of the AFFO per share over the last, if you include 26 whole year as a projection, it's a 10% growth rate. You take that together with the 5% dividend yield, You're at a 16% total return. And the math is really, really simple. You could see it in the chart here. $74 million of AFFO. We pay out half of it, the remaining amount of money. We take that. We buy more assets. And that gives us the return. The next slide just talks about our debt structure. This ended up being the year of the debt restructure because we're spending all of our time. And even though we're looking at deals, and it's been a weird year as far as how the deals come, Thank you for joining us. It's going to end up being towards the end of the year, and so next year will be a solid year. And this year is also a solid year, just not a growth year from that point of view. But we spent a lot of time on debt, like Jeff and Greg mentioned earlier. Earlier in the year, we refinanced, and subsequent to quarter end, we've actually paid off one of our bonds. We used cash from the balance sheet. We raised a little bit of money in May. and now we have a line of credit which has $140 million of availability on it right now. We still have some debt maturing in September. We're going to take a road trip to Israel and by the time we get back from Israel or shortly thereafter somehow we'll have the bonds paid off and without adding to our debt load as far as 50% leverage. We're right now right about 50% or a little bit below 50%. So we should be able to get everything done, and then we don't have to worry about any bond or any real financing that's maturing for a bit. So this slide is actually real nice. I like it. I look forward till third quarters when we change this slide around. It's actually going to be nice and smooth across a few years. And so... This slide is pretty self-explanatory. Lended interest rate below 6%, 20-year plus HUD debt maturity below 50% leverage, like we said, and 5.7 times net debt to EBITDA. The corporate bonds, like I said, we paid off bond C. We now have A and D that are going to get paid off in third quarter. We redid our line of credit, which we talked about. So that bank debt basically turns into one loan. That's a five-year loan. It was really a three-year or two one-year renewals. And we still basically have one regular conventional loan at like 6% at a small bank in Tennessee. God bless them. On the next slide, we talk about the diversity of our portfolio. That hasn't really changed from last quarter. And you see also the base rent by related consultants. We're pretty diversified. We don't really have too much exposure or concentration in any one place except for Indiana, which is our best state. So that's positive. And we expect before the year's out to add at least one more state, hopefully, to our mix. One of the deals that's hopefully going to close third or fourth quarter. is a pretty sizable deal in a new state, which is good. All right, on the next slide, this is the Rich Anderson slide, which I really, he's the only reason for this slide to be in this presentation. God bless him. The occupancy for the facilities, right around 77%, which is a high, but again, it doesn't really matter to me. You know, our tenants, we look at their financials and they're an efficiency business. So sometimes a lower occupancy will make them more money than a higher occupancy. It's contribution margins, if any of you remember from accounting school. That being said, it's a metric we're telling the folks. Average facility size of 108, and they're running 83 out of 108. Like most facilities in America, majority of the facility is being paid for by Medicaid, and then everything else is between Medicare, private pay, insurance, and... hospice care, which usually falls under Medicaid or private as well. On the next slide, it just shows you our map. That hasn't changed from quarter to quarter. I'm happy when we add the new state. It won't fill in the middle, but it'll grow our perimeter of the current operators. Again, pure play. We talked about it. Less than 92% of our portfolio is nursing homes. And again, we've maintained exactly the way we buy things year in, year out. That hasn't changed. Most of you that are listening to this call probably already know it. We buy everything to a 10 cap. We start with, once we do that 10 cap, it's a 10-year lease or two five-year renewals, 3% annual increases for most of our portfolio. And again, we have a projected ROE of 12%. That's basically considering keeping 50% leverage and then paying interest on the other half and earning a 10 cap, so it gives us a little bit more yield. We typically love the master lease structure, and so we continue to buy. I think right now we're buying hopefully something in Tennessee that's going to add to a master lease, buying something in Missouri that's going to add to a master lease, and then a new deal, which is multiple facilities under a master lease. and that's how we've done it historically and that's how we continue to do it. Most likely that's how we're gonna do it going forward as well.

Okay, with that, that ends my comments and my remarks on this presentation.

Thank you all for joining us. We will now turn it over to the operator for any questions and answers anyone has and we'll be glad to provide.

Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. One moment for questions. And our first question comes from Richard Anderson with Cantor Fitzgerald. You may proceed.

Hey, thanks, and I'm honored to have my own slide, so thank you for that. So when you think about, it kind of looked like you're projecting AFFO of $1.33 for this year. To what degree does that take into account any activity that you might close for the back half of this year, if at all? Or is it because it'd be closing so late that it probably doesn't have much of an impact on the numbers?

So typically I would answer this question, but Jeff, why don't you try to answer this question?

The $1.33 is annualizing. our current FFO for the year, AFFO for the year. The acquisition in Missouri that we're going to be closing hopefully during this quarter should move it up incrementally. But realistically, these new deals that we're looking at are going to be towards later in Q4. And I don't expect it to have the biggest effect on our AFFO per share.

I think, Rich, if you're modeling out or any of the other analysts that are modeling out You should be modeling out for probably an AFFO of an additional $12 million or so, so maybe $155 to $160 for next year. Maybe a little higher than that. Jeff, that make sense to you? Greg? Yeah. $155 to $160.

If everything we're working on were to come to fruition and work out, yes, that would make sense.

$155 to $160 would be top line, and the bottom line would be from $70 74.5 or so to probably closer to 80, 82 or something like that, 81, 82.

Okay, so there's a little potential life to that $1.33 based on whatever might happen back half of this year.

Yeah, yeah, it's a drop. It's unfortunate. The way this year has played out has been, I've never seen it in my, I'm doing this now for 20, I started in 1998. I don't know.

All right, second question for me. You know, the KC deal that it's going to close in the third quarter has a hospital element to it. I think we kind of talked about this last quarter, but how open are you to sort of opportunities like that that are, you know, are largely sniffed but have some other stuff associated with them? Is that, you know, something that you feel is, you know, adds to the Any kind of color you can provide around investment opportunities that have a little bit more of a diversified component to them?

Well, the starting point is for every deal we look at, there has to be a reasonable sense on who's going to manage the asset, who's going to be our operator if they have the financial wherewithal to make sure that our rent is bulletproof, that we're going to get paid. This deal specifically is almost a perfect deal for this operator. They own a physician practice already. They are a master lessee of ours. And so this fits right into their geography where they are. Their operational experience fits perfectly in running a hospital with the physician practices that they already have. So this work, I mean, I would say going forward, and it's been like that in the past, like we're open-minded. You know, we typically have only really bought nursing homes and anything connected to nursing homes. But we do now have people in our world that are assisted living operators. And if a deal would come in that's a CCRC, like we did in Maryville and we, and, and, and, and, huh? Kingsport. Kingsport, Maryville, those same deal for me, you know, two different places. We have relationships with now other people that we are looking at CCRC stuff where we can either separate out the two sides with two different guys and make sure that the two operators have an agreement between them, that they play nicely in the sandbox. One deal, I act as an HOA president between the two sides of the property where I've got two different people that are are operating two different ones running a hospital and one's running a nursing home. And I play referee. If those two can't get along, I'm HOA president, if you can imagine. That's just what I need in my life. But it makes the deal work. And the two sides deal nicely with each other. And so far, so good. So look, we're open-minded. It comes down to fitting our box. Asset-wise, These things all fit in our box. It's all healthcare and it's all real estate. The one reason I try to avoid that stuff as buying it by itself is because historically we tell the marketplace that if, God forbid, something went wrong in our portfolio, I'm going to be the guy hopping on a plane and I'm going to go there to stabilize it, make sure we don't have a major loss, and I'll be the one sitting there operating until until I'm able to stabilize it and turn it to the next operator. And I personally don't know how to run a hospital. So I wouldn't be able to make that same representation to the marketplace. Right now, we go to investor meetings and we tell people, look, we have such a good bulletproof income stream. And on top of all that is that, God forbid, something goes wrong, I could go there and fix it. I could deal with it. I still have the operational experience. I have partnerships where I could get people to help that are part of our world. I'm not part of that world today, but I'm still an owner that I can ask people to pitch in and help me out, and I can send nurses across the country, and I can do stuff. So that's been the reason why we kind of shied away from it. But a deal like this, perfect deal for our current tenant that we have, very easy to add to the master lease. I think we're closing next week. And it's just a good deal. And if there's more of these that fit Missouri, certainly this same tenant would take it and absorb it. So that's the story there.

Okay. I just wanted to ask, back half of this here, Jeff, what's the most that could be completed in that pipeline that you mentioned? You associated $12 million of FFO to it, but I mean, what is that number? Is it $50 million less, more? No.

Every week, Moishe and I and Greg, we go over our pipeline and we've always, I think Moishe has spoken about this in past earnings calls where we say we've got high, medium, and low, like the likelihood that they could work out and the deal will close. And recently, we were in one of our meetings, I actually said, this is the first time that our pipeline is filled with deals that a majority of it is medium to high. So there's a very good likelihood, and we were talking about earlier, I mean, I think Realistically, we could have about $130 million of real estate at least closed towards your end, and then there's other deals that we're still looking at that could potentially close. So we've still got about four and a half months until your end, so we're going to keep on working towards it. Thanks very much, everyone.

Have a good weekend, Rich. Thank you for joining.

Thank you. Our next question comes from Mark Smith with Lake Street. You may proceed.

Hi, guys. First off, I just wanted to ask a little bit about SG&A. I don't know if you guys can quantify maybe how much of the SG&A step up was one time in nature versus kind of a new hire run, right?

So it's not new hire. We have right now, we're fully staffed. When we do this next deal, we're probably going to have to hire an asset manager just to add one person to our I'm going to let Greg answer about the SG&A because truthfully, the number that's in there that's an increase is because of me. And I don't even know what it is because I wasn't part of the conversations. I don't even know what compensation committee granted me. It's all in stock that I never see. So I get it and I don't even notice it's part of my pool of shares that I own. So I don't even know how much I'm getting paid, truthfully, Mark. So I'll let Greg answer, and we'll go from there. Hey, Mark. How you doing?

So regarding your question, the first part about the one-time items, we had about a little less than $800,000 worth of closing costs that were associated with some of the loans we closed in G&A. So that's a one-time item that I think you can disregard going forward. As for the salary, it's running about maybe $250,000 to $300,000 extra a quarter. So that's something that will be, I guess, continuing going forward. So that kind of answers your question as to what's the one-timers versus the things that we expect, the increases that we see going forward.

That's helpful. And then I just want to ask a big picture. If you guys have seen much, many changes or anything different as you look at kind of the deal pipeline, it sounds like maybe you're seeing some bigger deals come available in negotiating and looking at, but curious kind of what you're seeing out there in the market.

Yeah, Jeff, you can answer that. I think it's more similar or the same. It's just a matter of there's always this REIT, Inc., Greg Flamion, There have been some bigger ones. There have been many smaller ones. But if the deal is a 10 cap acquisition and we get that 125 coverage on day one, we've been putting our offers out there. And as Moishe mentioned in his prepared remarks, it's an acquisition strategy that we've gone with until now and we plan on sticking to. So to your question, the deals, we keep on putting offers out. And as I said, there's... We've actually been signing some of them up, so we're very excited to see where it leads towards your end.

So on the three deals that were signed up for that we expect to close this year, actually it's really four deals. So without going to location, one of them goes into a master lease. another one goes into a master lease. Another one is the biggest deal of the year right now, which would be its own master lease in a new state. And then we have a one-off new deal in a new state that we expect to get done. All of these deals open up for us new states and continue to grow master leases. We have deals out there now that have been worked on for Outside of these three, four deals that we expect to get through before the end of the year, we actually have a bunch of other stuff that's been, you know, constant conversation for maybe a year or two years with people that, you know, a lot of the guys that are contemporaries or students, I call them disciples in my world, people that I've helped earlier in their careers, you know, a lot of them say, well, Moishe, you did good with Strawberry. We want to do the same thing. And then my response back to them says, why would you want to do all the stuff that I did? This was, you know, you know, nail biting and as anxiety laden, you know, process and, you know, dealing what we're doing, you know, to make friends with all you guys that are on this call, you know, took how many years? Did we bang it down a door and then we have one meeting and then we sit down with somebody and then this, that, I mean, it just takes forever. So I tell them, why don't you just merge yourself into me and we'll give you a board seat. You can be part of the team. And so we have like three things out there that's been going on for like a year or two. that's festering that are three big groups potentially. I don't know the timing of it, but I would say that if I was giving you a 10-year picture, there's easily, we're gonna be able to go from where we are today and most likely add like $4 billion worth of property at some point absorbing friends that want to be public also and that I'm trying to convince and they are sitting with me on a regular basis that you don't want to go through the process of going public yourself. We already are now known, we have 6,000 shareholders or more, and people know who we are, and the stock's trading finally, and the stock is up. It's still a major discount. And so to answer your question as far as pipeline or what kind of deals, there are some big, big deals that at some point are going to hit. We have some other deals that, a $250 million deal, a standalone that came in the last few weeks, that there's easily a 50-50 coin flip that that deal happens. There's some other mid-sized deals. And everything else is what Jeff told you has been the same as usual, dribs and drabs of smaller stuff, middle things, just what comes in. And we jump on every single thing that makes sense for us. It's based on logistics. If it makes sense for us that we can add it to a master lease or it's big enough for us to add a stake.

Perfect. That's helpful. Thank you, guys.

Welcome. Thank you.

Thank you. Our next question comes from Gaurav Mehta with Alliance Global Partners. You may proceed.

Thank you. I want to go back to your comments around the transaction market where you mentioned that you worked on some deals that didn't close. Just want to get some more color on those deals that didn't close. Did those deals go at a lower cap rate to your competitors, or why do you think those deals didn't go through?

No, the math was still the same math. It's still the same temp cap. We haven't made an offer below our disciplined number how we do things. You know, it's an interesting business. You know, the nursing homes... When there's a change of ownership on the PropCo side, but the operator stays the same, it's peaceful. But when the operator is changing to a new tenant that we're bringing in, there's potential turmoil. That period of time between a deal getting made and the change occurring, the seller is deathly afraid that his staff's going to walk out on him. And the common conception, I don't know if this is in the regular corporate world also, But the common conception in a nursing home is they think if the place is getting sold, everyone thinks they're getting fired. And so they go and they go find, start looking for new nursing, new places to work. And they bail on the nursing homes. And it's, it's, it's, it's, this has been the way it's been for 20 years that I, you know, 20 years or more that I've been involved with this. And so the seller is definitely afraid of, of, of the employees finding out that there's a sale. So like, you know, when we go there, Strawberry Fields became an appraisal firm. We're not, we're not a nursing home group that's buying nursing homes. or REIT that's buying nursing homes. We're either bankers or we're appraisers or we're some other farce so that the employees that meet us don't get smart thinking that the place is being sold. So you put that in perspective, you got more neurotic sellers and rightfully so. They're worried. They have a good business. They're making good money today. And they're exiting with a good multiple. And they're happy to sell. And they're happy with the price. And they're happy to take stock in strawberries sometimes. But they live in fear. And so you have to have a good... The guy on the other end says, don't worry. You're giving it to me. I'll do what I can. I'll keep the secret safe. I won't blow the cover. And they'll act a certain way. And so you have You have where the deal falls apart because somewhere in the middle, somebody finds something out and the guy has to go tell his employees, look, I'm not selling. And so this is what we deal with. And, you know, I play psychiatrist on the side with, you know, telling a seller, you know, just it'll be fine. This will work out. OK, let's not take a tour or let's not do this. Or why don't you send me that and work around, you know, somebody finding out. And and so I don't know if this helps the people listening, but like It's such a delicate, delicate act of transitioning when you're transitioning a new operator. And so and so we sit there and this year, for some reason, that's happened more. We had a deal in Tennessee that that that spent months on the deal in Tennessee. And then at the end, one person said, no, I just I'm not dealing with this. And and we tried to make it work. and it was literally months of our life that just whenever getting back. And then we had this other deal in another state, which is a deal that came back to us, went away, went back. They were difficult, but now we're marching towards a closing. And then last one we had was one where we had a deal that we're buying something in a set bankruptcy deal and so some guy from out of left field started arguing that the price is wrong and that the bankruptcy court should ask us for more money or sell it to somebody else and so we end up in a fight with some random guy that shows up and we end up paying a couple million dollars more on a deal that we made with the seller long before so the seller made a little bit more money this other guy walks away and I end up paying more money now my tenant was fine paying him more rent so we still got the 10 cap rent But this is like the strangest year of dealing with this stuff. And this has nothing to do with, you know, pricing, valuation, cap rates, none of that. This is just wonky stuff that's just been a weird year. So hopefully, you know, you have a year like this where you deal with it, you come out strong, everything is good, still collecting all my rents, and then God said, okay, I gave you the curveball this year so that you're going to have a little bit of trouble in your life even though everything worked out fine. And so next year will be smooth sailing, and hopefully we'll continue to do that you know, 100, 150 million annual growth minimum. I mean, we, you know, the larger we get, that becomes a smaller growth and we want to then make that growth number higher. So, you know, that bogey goes to 200 million at some point. So, all right, Gaurav, I hope, hopefully that answered your question.

Not that, thanks for that color. Second question on the balance sheet, you talked about debt maturity in third quarter, I think. Can you maybe provide some color on where you expect the cost of debt to be as you go to Israel to raise some debt?

Yeah, so that's about $160 million that's sitting on our balance sheet. Again, that's priced out to the shekel. Right now, the dollar is getting stronger again, and now it got weaker again. So our easiest, and that averages out at about an 8% interest rate. If the dollar to Shekel was better for us, we'd be better off, you know, just taking dollars in America at six. Right now, our cost is about 6.4 or so for our money in America. So, you know, we pay off the 8% money at 6.4. But because the currency is where it is, you know, the better bet. I mean, now that could change literally in a month. The rate could go back to 340. So I We have to be nimble here. But we have the Israeli market that supposedly still loves us. The interest rate, the last deal we did in May was 7%. So even if it's a little higher than the 6.4 in America, 7% is probably, it's all math. Whether that's 7%, we save a dollar, and then we don't have to eat the currency anymore. The Currency Cost of Buying Shekel with Dollars, and then we would realize the currency. Right now, we haven't realized the currency, the devaluation between the shekel and dollar. We haven't really realized it. It's an OCI. It's sitting there as a recognized but not realized loss. So to not take that true loss, which I can't stand that if I did, it would kill me personally. So most likely our move is we end up taking Shekel to pay off Shekel. And then we have four years for the dollar to bounce back, which we expect to occur. And that's a bunch of money in OCI that's going to turn around in our favor. So either way, we're going to get an improvement from eight to probably at least seven. One way gets rid of the interest rate risk. but you realize a loss in one way. He doesn't get rid of the interest rate risk but you don't realize a loss. So that's where we're at. So I'm taking my religious Gentile CFO and we're going to take him to visit Jesus and everything in Israel for him. He's never been to Israel. And then I take my religious Jewish COO, CIO and we're going to go and shake the money maker and bring in some shekels to pay off the The Bondette. And hopefully it'll be a good trip. We're leaving on August the 30th. And God willing, we succeed.

All right. Thanks for those details. That's all I had.

Thank you, Gaurav. Thank you. Our next question goes from John Moustaka with B-Riley Securities. You may proceed.

Good afternoon. So if you just kind of... The 133 projection for AFFO in 2026, and you talked about it a little bit earlier, but can you walk me through what exactly is kind of assumed in that number? Is that just... No, I misspoke.

That number I was referring to was a top line, I think, rental number. I was saying that we're going from 145 to 153 or 155. I was talking about rent. I think I misspoke. Our AFFO right now is about 74. That 74 is going to probably go to 83. I thought I said that also, but I might have misspoke somewhere in there, and I used the term AFFO versus I was talking about rental income.

But as it relates to John's question, the $1.33, I mean, that's just taking AFFO times two divided by the outstanding shares in OP units.

Okay, so is it what you've done in 1H, not like 2Q times 4?

No, it's just the first half of the year. Sorry, it's pretty stable between Q1 and Q2.

I'm off today. We just came from the bris of my fourth grandson this morning, so I'm a little off my game, sorry.

Thank you for having me. potentially be useful as and if some of this deal flow you're talking about in the end of the year kind of comes to fruition. So how are you kind of thinking about proceeds and how much of kind of like future investment volume maybe is financed with the revolver versus how much is kind of financed with any additional capital you raise with Israeli debt?

So the starting point is you'd need to take a minimum of $165 million checkout, which today We'll see you next time. and David Gross. and that we for sure will be fine paying it off. I would like to do the most we can if the pricing is good. You know, the market loves us over there. At least, you know, they seem like they do when it comes to action on pricing and deals. Like, they're greedy like, you know, all the guys on Wall Street here are as well. You know, it's fine. You know, everyone wants to make money. But, you know, we go there, they're happy to see us and we're one of, like, are the top five strongest companies in Israel as far as cash flow and how we could pay our debt with the cash flow we have. So hopefully, like I said, minimum 55, maximum 160. It's probably somewhere in the middle. And then we'll use the line of credit for the difference.

And then that future kind of debt raising... Could that potentially have kind of a similar impact on G&A as some of the closing costs you saw in 2Q, or is it just much less expensive than what went into closing? I'm assuming most of those closing costs were tied to the credit facility, so what went into closing the new bank debt.

Yeah, it's an actually interesting accounting thing. When you're doing bond accounting, you have issuance costs that get amortized into interest expense over the life of the bond. Thank you very much. We're able to take a finance charge under FAS 91, I think it is. We're able to take that over the life of that loan. In this case, since it's written as a 3-1-1, so you're taking it over three years. But what doesn't get amortized over the life is all the title work and all the closing costs and all the other BS that goes into the number, appraisals and whatever other. And so that shit gets expensed, you know, and the period of where it was incurred. And that's what hit us. It's not, you know, if we would have taken that 700 grand or 800 grand, like 760, whatever the number is, and we would have divided that by three years, no one would even notice that there was a blip on the, even 768 is immaterial in reality. But take that over, you know, you take it over three years, you know, 200,000, you know, 250 in a year wouldn't even get noticed, you know, in a quarter, like, you know, it's nothing, right? 32 grand, whatever the number is. but because we had to take it when it occurred and that's where you see that. So in Israel, you don't notice that. So you wouldn't see a hit to the net income because there's no real, you know, the accounting fee to do the letter over there is like five grand and the law firm, we basically have on retainer and we give them a little extra. So like there's so little in doing the issuance. The other benefit of doing the bond, which is what I'd like also is, When we need money in a pinch, it takes three days to do a private placement. So if we're trading at par, then we give a guy 98 of par and we'll have the money in three days and we could do another 20, 30, 40 million. So when we have a deal, right now we have bond B that I could draw from if I wanted to on the private placement. We have bond C that we have another few months before the lockout ends and we have to draw. We have capacity where our rating doesn't change. Thank you very much. You're welcome.

Thank you, and as a reminder, to ask a question, please press star 1-1 on your telephone. Our next question comes from Kenneth Billingsley with Compass Point Research and Trading. You may proceed.

Good afternoon. I didn't want your new slide to go unloved. I just want to clarify a comment. I may have misheard it. On the occupancy, I thought Moishe had said that was high. I just wanted to clarify.

Yeah, for us, you know, The reason why I don't like that slide is because each state has their own occupancy, number one. And number two, you know, this is a business that's efficiency-based. So for us, 77% when we're in states that, you know, average occupancy is between 50 and 60, you know, is good. And it gets to that number, you know, like the Kentucky portfolio is, you know, nearing capacity. Arkansas, but Arkansas, as an example, is also somewhere, you know, in the middle of the road. But we have The Indiana and Illinois, or really Indiana, where the occupancy is like in the 60s, it's a way lower number, but they're our best tenants. We make the most money, and they have the most coverage. That's why the slide is a little bit misleading, because if you compare it against a portfolio of stuff that's in New York or California, where everyone's at 99% occupancy, you can't compare a portfolio of Midwest, where average occupancy is like 60, 70%. That's why I'm anti that slide, but that 77 isn't up for us. I think we used to run like 60, our portfolio ran like 68, 69. So 77 is an improvement in our portfolio. And you see it in our EBITDARM number going up. The coverage for the rent is over two, it's like 2.2 now, something like that. So for our point of view is someone's investing with us, they can rely on our Dividend because we have a two times coverage on our dividend and the rental income that's coming in, we have a two times coverage on the rent and we're being a good steward with the money and we're stockpiling the cash and being able to buy more stuff to make the value of each share grow up. So that's our objective. We're thinking about the shareholder and how we're good stewards and custodians of what we're doing here. And so occupancy really doesn't play a role in that, but I think I answered your question.

I think so, yep. And then on some of the comments you made about some of the new states, are these, I know you said one of them is a new master lease and another one's a one-off. Are these new partners or operators or are they people you're familiar with?

Yeah, they're, well, we're familiar with them, but they're brand new to us. One is a sale leaseback and that's a new state but we're expecting that's going to grow. They're trying for the first time and we sat down with them and we really feel that they're strong. They've been in the nursing home business for 20-something years and now they realize it's better not to own the real estate so they're doing salary specs which will give them more money for working capital and more deals. So we should have more deals with these guys. And then the other one is a brand new portfolio in a new state, new tenant for us, and we know the operator to be and we're expecting them to succeed and do well there.

Okay. You talked about the potentials for partnering up and you threw out a number and I'm just curious. If you were to be partnering up, Just with limited resources, would you focus primarily on those partnerships as opposed to acquisitions that you've sourced on your own? And the reason I ask is based on the number you gave, are these partners, do they have similar sized facilities, the debt being similar? And I'm not asking you to get into all the detail, but could this be another 280 facilities that would come onto the books if you were a partner with all these?

Yeah, yeah, let me clarify. So, right, there's two things here. There's managing the public market conversation, doing this stuff, which, you know, we're always learning. So we're still, I don't think we're great at this yet. We're, you know, we keep it real. So we talk and we're friendly with everybody. So that's a good starting point. But that's, you know, there's the business of public, the public markets, raising debt, you know, managing the relationships with the analysts and the IBs, you know, raising equity. and running a balance sheet from that perspective. But then there's also actually running the business, which is also balance sheet, but asset management. You know, these kind of deals, what the benefit that they want is what we've already created, where people know Strawberry Fields and our platform and, you know, our stock trades already and and so we're not looking for anything to change on management on the company side and then the tenants that they have they're running their own version of a REIT even though they're not a REIT they're a for-profit LLC that rolls up that we would suck it into our program and the people that work for them that are managing the asset can come work for us and we can eliminate a bunch of overhead that they have because we don't need a second CFO and we don't need maybe the accounting department needs another person or asset management needs some people, obviously. But we're looking that nothing would change. I wouldn't even call it a partnership. It would really be us absorbing them, but them joining the board so that they're part of the future. So in that sense, there's a partnership. But it's strawberry fields that gets perpetuated long term, even if current ownership gets diluted and new people come to the table. This should be a running business that can perpetuate for, you know, the next 50 years and just keep doing what it does and keep growing and, you know, not changing philosophy and not changing how we buy. And if we can absorb this stuff, this, this, this, but this is, this is, in my mind, it's 100%, you know, within 10 years, we end up absorbing a few of these guys. And for their sake, right now, they're doing all this like as a mom and pop. without the public market, but they're doing this at MomPop. And for their point of view, it's like if I could get an exit and I have Moishe who we trust and know, you know, we could just, without me having to work hard like this, I could take a board seat and still see residual, you know, net income or distribution and cash flow. Like, why would I do that deal? And so that's the light bulb that's going off with the people out there that are peer-level folks today that we've known for many years. Thank you. I would now like to turn the call back over to Jeff Bajtner for any closing remarks.

No, thank you so much. I'd like to thank everyone for joining us today. Thank you for the questions. Thank you for the continued support. If you have any questions, feel free to reach out to Moishe, Greg, or myself. Our emails are at the back of the presentation, and I'd like to wish everyone a good rest of the summer, and we'll see everyone in November.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.