Strawberry Fields REIT (STRW) Q2 FY26 earnings call: guidance and Q&A

To what extent does the projected $1.33 FFO per share for FY26 account for potential acquisitions in the back half of the year, or will those closures primarily impact next year's numbers?

The $1.33 FFO is based on annualizing current FFO. While the Q3 KC acquisition will incrementally help, the larger deals expected in late Q4 will primarily impact FY27 FFO per share. Management expects FY27 AFFO to increase from $74.5M to $80M-$82M.

“The $1.33 is annualizing our current FFO 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. I expect it to have the biggest effect on our FFO per share.”

asked by Richard Anderson · answered by Jeffrey Bajtner

How open is the company to acquiring diversified assets, such as the hospital component in the Kansas City deal, and what are the associated risks or benefits?

The company is open-minded to diversified assets if they fit their operational box and tenant relationships. The KC hospital deal is perfect for an existing master lessee. While historically avoiding assets like hospitals due to lack of operational expertise for stabilization, they are now looking at CCRC opportunities with new operator relationships. The key is ensuring bulletproof rent and strong operators.

“Well, the starting point is for every deal we look at, there has to be a reasonable, you know, sense on who's going to manage the asset, you know, who's going to, 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.”

asked by Richard Anderson · answered by Unknown Speaker

Can management quantify the one-time versus recurring components of the recent increase in SG&A expenses?

Approximately $800,000 of the SG&A increase was due to one-time closing costs associated with loan closures, which can be disregarded going forward. The remaining increase, about $250,000 to $300,000 per quarter, is due to higher corporate salaries and represents a new run rate.

“So regarding your question, the first part about the one time items we had about about a little less than $800,000 worth of closing costs that were associated with some of the loans we closed in GNA. 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, going forward.”

asked by Mark Smith · answered by Greg Flamian

Has the company observed any significant changes in the deal pipeline or the broader market for acquisitions?

The deal flow remains consistent, but the market has been

“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, and one of them is, is, is, um, is goes into a master lease. Another one goes into a master lease. Another one is a, is, is the bigger, 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, um, new deal in a new state, um, that we expect to, uh, expect to get done.”

asked by Mark Smith · answered by Unknown Speaker

Could management provide more color on why some deals in the transaction market did not close, specifically if it was due to lower cap rates or other factors?

Deals not closing were not due to cap rates, as the company maintains its 10-cap discipline. The issues stemmed from the delicate nature of operator transitions in nursing home sales, where fear of staff turnover or unexpected external arguments (e.g., in bankruptcy cases) caused deals to fall apart or become more expensive. This year has been unusually

“No, the math, the math, the math was still the same math. It's still the same Temcab. 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. Um, if, when, when there's a change of ownership, you know, 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, you know, that period of time between a deal getting made and, and the change occurring.”

asked by Gaurav Mehta · answered by Unknown Speaker

What is the expected cost of debt for the upcoming Israeli bond refinancing in Q3, given the current market conditions?

The $160 million Israeli bond debt currently averages 8%. The company aims to refinance at a lower rate, potentially around 7% in Israel or 6.4% in the US. The decision between markets depends on currency fluctuations and the desire to avoid realizing a foreign currency loss. The goal is an improvement from 8% to at least 7%.

“Yes, 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.”

asked by Gaurav Mehta · answered by Unknown Speaker

What is the target size for the Israeli debt raise, and how will the proceeds be used in conjunction with the existing revolver capacity for future investments?

The company needs to raise a minimum of $55 million (out of $160 million equivalent) in Israel. Depending on pricing, they could raise up to the full $160 million. Any shortfall will be covered by the $140 million available on the new revolving line of credit. The goal is to pay off the maturing bonds and maintain flexibility for future acquisitions, leveraging various financing tools including private placements.

“So, so the starting point is you'd need to take a minimum of 165 million checkout, which today comes out to like $55 million. Uh, And they do everything as in a Dutch auction. So depending on the day where things are trading and where they're at, people putting in closed bids, I don't believe that they truly, you know, it's like really secretive. They say it is, I don't believe it. But you know, you start with that number. If the bidding is good, you know, we'll take as much as we can where the pricing is good and, you know, And it saves us, like I said, on the currency.”

asked by John Moustaka · answered by Unknown Speaker

Could management clarify the comment that the 77% occupancy rate is 'high' given the context of the portfolio?

The 77% occupancy is considered high for the company's portfolio, which is concentrated in Midwest states where average occupancy is typically 50-60%. This represents an improvement from their historical 68-69% and is reflected in improved EBITDARM and rent coverage. The company emphasizes that occupancy is not the sole driver, as efficiency and contribution margins are key to tenant profitability and rent payments.

“Yes, 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 average occupancy is between 50 and 60 is good.”

asked by Kenneth Billingsley · answered by Unknown Speaker