Strawberry Fields REIT's Q3 2025: Contradictions Emerge on Dividend Policy, Competition, Acquisition Strategy, and Government Shutdown Impact

Date of Call: November 7, 2025

Financials Results

• Revenue: $114.9M year-to-date through September, up $28.3M YOY; Q3 revenue increased by $10.2M vs Q3 2024.
• EPS: $0.16 per share in Q3 2025 (net income $8.8M), up from $0.14 in Q3 2024; YTD EPS $0.44 vs $0.40 prior year.

Guidance:

• Projected 2025 AFFO $72.7M (+28.2% YOY) and Adjusted EBITDA $126.1M (+38.9% YOY).
• Acquisition pipeline >$250M; company expects strong Q1 2026 deal flow and targets $150–$200M deployment in 2026.
• Dividend maintained at $0.16/share for Q4; Board expects at least annual increases while keeping AFFO payout conservative (<50%).
• Series D bond repricing expected Sept 2026 with meaningful interest savings anticipated.

Business Commentary:

* Revenue Growth and Acquisitions: - Strawberry Fields REIT reported year-to-date revenue of $114.9 million for Q3 2025, up $28.3 million over the same period last year. - The increase was largely due to the integration of properties acquired over the past year and retenanting activities.

• Profitability and Financial Metrics:
• Net income year-to-date was $24.5 million or $0.44 per share, compared to $19.9 million or $0.40 per share last year.

• The improvement was mainly due to increased acquisitions and lease transitions, although higher expenses were noted due to depreciation, amortization, and interest from new assets.

• Dividend and Shareholder Returns:

• The Board approved a 14% increase in the dividend to $0.16 per share, representing a significant growth.

• The increase reflects the company's strong financial performance and disciplined approach to capital allocation, aiming to meet shareholder expectations.

• Portfolio Expansion and Strategy:

• Strawberry Fields REIT expanded its portfolio by acquiring skilled nursing facilities, adding facilities in Missouri and Oklahoma, with a combined total of 686 beds.
• This expansion is aligned with the company's strategy to focus on skilled nursing facilities and master lease structures, driven by disciplined investment criteria and opportunities to grow through acquisitions.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted 100% collection of contractual rents; total assets $880M (+33.1% YOY); YTD revenue $114.9M (+$28.3M YOY); Q3 net income $8.8M ($0.16/sh) vs $6.9M ($0.14/sh) prior year; projected AFFO $72.7M (+28.2% YOY) and Adjusted EBITDA $126.1M (+38.9% YOY); pipeline >$250M and dividend raised to $0.16.

Q&A:

• Question from Robert Stevenson (Janney Montgomery Scott LLC): Did I hear correctly that you guys sold something in the third quarter?
  Response: Yes — sold one outlier Michigan facility; decision was strategic and the sale removed an underperforming outlier from the portfolio.

• Question from Robert Stevenson (Janney Montgomery Scott LLC): What were the proceeds from that? How meaningful was that?
  Response: Proceeds were immaterial — approximately $2.6M structured with a seller note at ~10% interest.

• Question from Robert Stevenson (Janney Montgomery Scott LLC): What do your acquisition pipeline look like today? How are you guys thinking about the end of the year and into '26 at this point?
  Response: Pipeline remains strong (> $250M); expect meaningful deal volume in Q1 2026 and aim to deploy roughly $150–$200M in 2026.

• Question from Robert Stevenson (Janney Montgomery Scott LLC): The comments around the dividend increase, were you guys at sort of your minimum payout? And was the increase from $0.14 to $0.16 basically something that you had to do? Or is that something that the Board wanted to do at this point in time?
  Response: Board raised the dividend to $0.16 primarily as a deliberate decision: it equals Q3 net income and aligns with a policy of stable, at-least-annual increases while maintaining a conservative payout ratio.

• Question from Robert Stevenson (Janney Montgomery Scott LLC): Can you remind me when the Series D bond matures? I think that's by far and away, your highest cost of debt and when you basically get an opportunity there to refinance that?
  Response: Series D matures September 2026; management expects to reprice and realize significant interest savings at that time.

• Question from Robert Stevenson (Janney Montgomery Scott LLC): So at this point, you think that if you had to access the debt markets today, you're probably pricing somewhere plus or minus around the sub-6%?
  Response: Yes — management believes they could access financing at roughly sub-6% in the current market.

• Question from Barry Oxford (Colliers Securities LLC): The pipeline was $300M last quarter, now $250M — is that more a function of definition rather than availability?
  Response: Pipeline is a moving target — $250M reflects deals the company views as actionable (mix of LOIs and contracts) rather than all inbound opportunities.

• Question from Barry Oxford (Colliers Securities LLC): Given property type interest, are you seeing more competition at bid processes and peers adding SNF exposure?
  Response: Competition is mixed — peers are often favoring assisted living; Strawberry Fields competes effectively in the $20–$50M sweet spot and on direct-owner deals where it can close reliably.

• Question from Barry Oxford (Colliers Securities LLC): G&A was lower by ~$500–$600k — is that a sustainable run rate or will it move back closer to $2M?
  Response: Expect Q4 G&A to tick up toward ~$2M; otherwise run-rate is relatively stable absent transactional legal or financing activity.

• Question from Mark Smith (Lake Street Capital Markets): Thoughts around using stock more in future deals?
  Response: Management would prefer to issue equity only at healthier stock prices; until then they favor using existing bond capacity and debt access and have used stock sparingly.

• Question from Mark Smith (Lake Street Capital Markets): Any impact from the government shutdown on you or your operators?
  Response: Minimal financial impact — HUD processing delays and potential survey backlog create administrative limbo but rent collection and operations remain intact.

• Question from Viacheslav Obodnikov (Freedom Broker): How does the Board weigh share buybacks versus funding new property acquisitions given the large valuation discount?
  Response: Board prioritizes disciplined acquisitions to compound AFFO; buybacks have been used opportunistically but are not the primary capital-allocation focus due to liquidity and growth trade-offs.

• Question from Viacheslav Obodnikov (Freedom Broker): Can you contrast the regulatory/reimbursement environments in newer states you're investing in versus legacy markets like Illinois?
  Response: Illinois is a price-based laggard (limits reimbursement growth); cost-based states reimburse more and perform better — the Illinois portfolio collects rent but remains the primary reimbursement laggard until state funding changes.

Contradiction Point 1

Dividend Policy and Payout Ratio

It involves the company's dividend policy and payout ratio, which are crucial for investor expectations and financial stability.

Were you at your minimum payout with the dividend increase? - Robert Stevenson(Janney Montgomery Scott)

2025Q3: The dividend increase is not at minimum payout. The boardroom discussion is focused on maintaining a status quo of annual dividend increases to keep the payout ratio below 50% and preserve capital for future growth. - Moishe Gubin(CEO)

Do you have any tenants on a watchlist currently? Are all your tenants in good health? - Barry Paul Oxford(Colliers Securities LLC, Research Division)

2025Q2: We certainly believe that this is more than sufficient to support, you know, an annual increase of dividend to its shareholders, and we also feel good about the payout ratio, which we think is right around 50% on a trailing-over-12-month basis. - Moishe Gubin(CEO)

Contradiction Point 2

Competition and Deal Sourcing

It highlights changes in the company's competitive landscape and strategy for deal sourcing, which are important for growth and expansion.

With your property type performing well, are you seeing increased participation in the bidding process? - Barry Oxford(Colliers Securities)

2025Q3: The competition remains the same, with a focus on smaller deals between $20 million and $50 million. Strawberry Fields REIT leverages its disciplined approach and reputation for closing deals to secure acquisition opportunities. - Moishe Gubin(CEO)

Given your stock price, how do you balance cost of capital and financing future acquisitions while maintaining prudent debt metrics? - Barry Paul Oxford(Colliers Securities LLC, Research Division)

2025Q2: We don't see competition getting any easier. Obviously, we see more players in the marketplace, and with that, it becomes more of a fight for the deals that are there. - Moishe Gubin(CEO)

Contradiction Point 3

Dividend Policy and Capital Allocation

It involves the company's strategy for dividend payments and capital allocation, which are important factors for investors and stakeholders.

Was the dividend increase at your minimum payout level? What were the proceeds from the sale? - Robert Stevenson (Janney Montgomery Scott)

2025Q3: The dividend increase is not at minimum payout. The boardroom discussion is focused on maintaining a status quo of annual dividend increases to keep the payout ratio below 50% and preserve capital for future growth. - Moishe Gubin(CEO)

Are there challenges underwriting deals due to Medicaid or Congressional budget processes? - Rich Anderson (Wedbush Securities)

2025Q1: The Board believes the Company has the ability to sustain this payout ratio given the nature and quality of the assets owned. - Moishe Gubin(CEO)

Contradiction Point 4

Impact of Government Shutdown on Operations

It highlights the potential impact of government shutdowns on the company's operations and financial obligations, which are crucial for understanding risk factors.

Does the government shutdown impact your operations? - Mark Smith (Lake Street)

2025Q3: The government shutdown has not significantly impacted operations. There are delays in HUD processing, but the shutdown's direct impact on rent collections and financial obligations is minimal. - Moishe Gubin(CEO)

Are you still seeing 10% cap rate deals, and how is your pipeline progressing? - Barry Oxford (Colliers Securities)

2025Q1: We've certainly had some delays in some of our HUD business, but the shutdown hasn't impacted us as of yet. - Moishe Gubin(CEO)

Contradiction Point 5

Acquisition Strategy and Funding

It involves the company's approach to acquisitions and funding methods, which are critical for growth and financial management.

What does your acquisition pipeline look like today? - Robert Stevenson (Janney Montgomery Scott)

2025Q3: The acquisition pipeline is over $250 million and includes both hot deals that could be closed by year-end and deals expected to close in Q1 2026. - Moishe Gubin(CEO)

What is the plan to achieve the $100 million acquisition target in Q2 without using equity? What is the funding strategy? - Rich Anderson (Wedbush Securities)

2025Q1: The company plans to fund the acquisition with $20 million cash, $30 million from a conventional bank loan at SOFR 300, and $10 million from bond debt, which is expected to be around 6.25-7%. This blend should result in a total cost in the low to mid-six range. - Moishe Gubin(CEO)