Strawberry Fields(STRW) - 2025 Q2 - Quarterly Report

PART I Item 1. Condensed Financial Statements This section presents the unaudited condensed consolidated financial statements for Strawberry Fields REIT, Inc. as of June 30, 2025, with detailed notes Condensed Consolidated Balance Sheets Total assets increased to $897.3 million by June 30, 2025, from $787.6 million at year-end 2024, with liabilities rising Condensed Consolidated Balance Sheet Highlights (in $000s) | Account | June 30, 2025 (unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $897,254 | $787,589 | | Real estate investments, net | $636,424 | $609,058 | | Cash and cash equivalents | $96,319 | $48,373 | | Goodwill, other intangible assets | $73,610 | $27,947 | | Total Liabilities | $830,634 | $704,018 | | Bonds, net | $318,135 | $209,944 | | Senior debt | $423,998 | $460,591 | | Note Payable | $46,854 | $- | | Total Equity | $66,620 | $83,571 | Condensed Consolidated Statements of Income and Comprehensive (Loss) Income H1 2025 rental revenues grew 31.7% to $75.2 million, with net income attributable to common stockholders up 110.2% Key Income Statement Data (in $000s, except per share data) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Rental Revenues | $75,193 | $57,106 | +31.7% | | Income from Operations | $40,824 | $29,584 | +38.0% | | Net Income | $15,653 | $13,032 | +20.1% | | Net Income Attributable to Common Stockholders | $3,540 | $1,684 | +110.2% | | Basic and Diluted EPS | $0.28 | $0.26 | +7.7% | | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | YoY Change | | Rental Revenues | $37,861 | $29,272 | +29.3% | | Income from Operations | $20,616 | $15,298 | +34.8% | | Net Income | $8,662 | $7,040 | +23.0% | | Net Income Attributable to Common Stockholders | $1,956 | $938 | +108.5% | | Basic and Diluted EPS | $0.16 | $0.14 | +14.3% | Condensed Consolidated Statements of Cash Flows Net cash from operating activities more than doubled to $48.8 million in H1 2025, driven by higher net income Cash Flow Summary (in $000s) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $48,781 | $22,694 | | Net cash used in investing activities | ($40,423) | ($23,261) | | Net cash provided by financing activities | $29,430 | $4,927 | | Increase in cash and cash equivalents | $37,788 | $4,360 | - A significant non-cash investing and financing activity in H1 2025 was the issuance of a $50.9 million note payable in exchange for the acquisition of an intangible asset (lease rights)[19] Notes to Condensed Consolidated Financial Statements These notes detail business operations, accounting policies, property acquisitions, debt, leases, and subsequent events - The company is a REIT focused on owning, acquiring, and triple-net leasing skilled nursing and other post-acute healthcare properties[23] - As of June 30, 2025, the company's portfolio grew to 121 owned healthcare properties and one leased property, up from 113 owned properties at year-end 2024[23] - During the first half of 2025, the company acquired eight facilities for a total of $40.5 million and entered into a new master lease for 10 Kentucky properties, which involved issuing a $50.9 million note payable to the former tenant's parent company[74][75][76] - Total gross debt increased to $794.1 million as of June 30, 2025, from $673.9 million at year-end 2024, primarily due to new bond issuances and a new note payable, with the company in compliance with all financial covenants[88][89] - Subsequent to the quarter end, in July 2025, the company acquired nine skilled nursing facilities in Missouri for $59 million, sold one property in Michigan for $2.7 million, and agreed to purchase another facility in Oklahoma for $4.25 million[207][208][209] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, H1 2025 rental revenue growth, liquidity, and FFO/AFFO reconciliation Results of Operations Q2 2025 rental revenues increased 29% to $37.9 million, driving net income up 23% Q2 2025 vs Q2 2024 Performance (in $000s) | Metric | Q2 2025 | Q2 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Rental Revenues | $37,861 | $29,272 | +29% | | Total Expenses | $17,245 | $13,974 | +23% | | Interest Expense, net | $11,365 | $7,706 | +48% | | Net Income | $8,662 | $7,040 | +23% | H1 2025 vs H1 2024 Performance (in $000s) | Metric | H1 2025 | H1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Rental Revenues | $75,193 | $57,106 | +32% | | Total Expenses | $34,369 | $27,522 | +25% | | Interest Expense, net | $24,001 | $15,438 | +55% | | Net Income | $15,653 | $13,032 | +20% | - The primary drivers for increased revenue were income from newly purchased properties and lease renewals/renegotiations[226][231] - The significant increase in interest expense was due to new commercial bank loans and bond issuances (Series A and B) since the second quarter of 2024[229][233] Liquidity and Capital Resources As of June 30, 2025, the company had $131.4 million in cash and $794.1 million in debt, with future balloon payments - Primary sources of cash include operating cash flows, stock sales, and borrowings, while primary uses are property acquisitions, debt service, and distributions[237] - The company has significant balloon payment obligations totaling over $450 million due between 2026 and 2029 across its various bond series and commercial mortgage facilities[241] - The company has the ability to offer an additional $67 million in Series A Bonds, $107.7 million in Series C Bonds, and $77.3 million in Series D Bonds, subject to market conditions and covenants[236] Funds From Operations (FFO) For H1 2025, FFO increased 30.3% to $38.2 million, and AFFO grew 28.5% FFO and AFFO Reconciliation (in $000s) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Net Income | $15,653 | $13,032 | +20.1% | | Depreciation and amortization | $22,594 | $16,324 | +38.4% | | Funds from Operations (FFO) | $38,247 | $29,356 | +30.3% | | Straight-line rent adjustment | ($3,022) | ($1,935) | - | | Adjusted FFO (AFFO) | $35,225 | $27,421 | +28.5% | | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | YoY Change | | Net Income | $8,662 | $7,040 | +23.0% | | Depreciation and amortization | $11,324 | $8,228 | +37.6% | | Funds from Operations (FFO) | $19,986 | $15,268 | +30.9% | | Straight-line rent adjustment | ($1,087) | ($967) | - | | Adjusted FFO (AFFO) | $18,899 | $14,301 | +32.2% | Quantitative and Qualitative Disclosures About Market Risk The company faces interest rate risk on $163.1 million of variable-rate debt and foreign currency risk - The company's main market risk exposure is to interest rate changes on its variable-rate debt[276] - As of June 30, 2025, 20.5% of total debt ($163.1 million) was at a variable interest rate, where a 1% (100 basis points) increase in one-month SOFR would decrease annual cash flow by approximately $1.6 million[277] - The company is also exposed to foreign currency risk due to its bonds being denominated in Israeli Shekels (NIS) while its operations are in U.S. Dollars[278] Controls and Procedures Management concluded disclosure controls were effective as of June 30, 2025, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the quarter[280] - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[281] PART II Legal Proceedings The company is defending against legal proceedings by Joseph Schwartz and affiliates, expecting no material adverse effect - The company is defending against multiple complaints filed by Joseph Schwartz and affiliates concerning property acquisitions completed between 2018 and 2019[283][284][285] - Claims include fraud, breach of contract, and rescission, which the company believes are without merit and expects to resolve without a material adverse effect[287] Unregistered Sales of Equity Securities There were no unregistered sales of equity securities or redemptions during the first half of 2025 - No redemptions of equity securities occurred in the first half of 2025[290] Other Information There is no other information to report for this period - None[291] Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, CEO and CFO certifications, and XBRL data files