Strawberry Fields(STRW) - 2025 Q4 - Annual Report

Portfolio and Revenue - As of December 31, 2025, the Company’s portfolio consists of 143 healthcare facilities with an aggregate of 15,602 licensed beds, generating approximately $142.7 million in annualized average base rent [198]. - Rental revenues increased by $37.9 million, or 32%, from $117.1 million in 2024 to $155.0 million in 2025, driven by contributions from recent property acquisitions and re-tenanting efforts [212][213]. - The Company completed several acquisitions in 2025, including nine skilled nursing facilities in Missouri for $59 million, which increased annual rents by $5.5 million [205]. Financial Performance - Net income increased from $26.5 million in 2024 to $33.3 million in 2025, reflecting a 26% growth attributed to higher rental revenues [218]. - Net income for the year ended December 31, 2025, was $33,306,000, an increase from $26,505,000 in 2024, representing a growth of 25.5% [254]. - Funds from Operations (FFO) for 2025 were $79,567,000, up from $60,193,000 in 2024, indicating a year-over-year increase of 32.2% [254]. - Adjusted Funds from Operations (AFFO) for 2025 were $72,465,000, compared to $55,825,000 in 2024, reflecting a growth of 29.8% [254]. Expenses and Debt - Interest expense rose by $16.0 million, or 49%, primarily due to higher bond interest and new note payables, totaling $50.9 million [217]. - General and administrative expenses increased by $1.8 million, or 25.6%, primarily due to higher payroll expenses [215]. - The company had total fixed rate loans of $634,168 thousand and variable rate loans of $160,484 thousand as of December 31, 2025, resulting in a gross note payable and other debt of $794,652 thousand [250]. - The company’s total debt included $417.3 million in senior debt notes, with $160.5 million (20.20% of total debt) bearing a variable interest rate [279]. Cash Flow and Liquidity - Net cash provided by operating activities increased by $30.7 million to $90,037 thousand for the year ended December 31, 2025, compared to $59,330 thousand for 2024 [228]. - Cash used in investing activities decreased by $24.9 million to $111,872 thousand for the year ended December 31, 2025, primarily due to a $27.9 million decrease in cash used for property acquisitions [229]. - Cash flows generated from financing activities decreased by $138.4 million to a net cash outflow of $5,063 thousand for the year ended December 31, 2025, compared to a net inflow of $133,344 thousand for 2024 [230]. - The Company plans to maintain liquidity through operating cash flows and potential future equity or debt offerings to fund acquisitions [222][223]. Bonds and Interest Rates - The Company issued Series B Bonds worth approximately $89.5 million at a fixed interest rate of 6.70%, with repayment scheduled from 2026 to 2029 [204]. - As of December 31, 2025, the company had outstanding Series A Bonds of NIS 302.2 million ($94.7 million), Series B Bonds of $107.2 million, Series C Bonds of NIS 247.9 million ($77.7 million), and Series D Bonds of approximately NIS 175.8 million ($55.1 million) [240][243][245][249]. - The average interest rate on HUD guaranteed loans as of December 31, 2025, was 3.91% per annum, with total non-recourse mortgage loans amounting to $254.1 million [232][231]. - If one-month SOFR increases by 100 basis points, the company's annual cash flow would decrease by approximately $1.6 million [279]. Tenant Management and Risks - The company actively monitors the credit risk of its tenants, reviewing periodic financial statements and operating data [273]. - The company aims to reduce dependence on related party tenants to diversify its tenant base [272]. - The company is exposed to inflation risk, but expects most leases to include provisions that protect against inflation impacts [277]. - The company expects to generate sufficient positive cash flow from operations to meet ongoing debt service obligations and distribution requirements for maintaining REIT status [227]. - The company is in compliance with financial covenants related to its credit facilities, including a maximum indebtedness to EBITDA ratio of 8.0 to 1 [237][238]. Dividends - The company plans to maintain quarterly dividend payments in cash, with an annual dividend amount no less than 90% of its annual REIT taxable income [254].