Good morning. My name is Ali and I will be your conference Operator today. At this time, I would like to welcome everyone to the Strawberry Fields REIT third quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. If you would like to ask a question during this time, you have to press the star key followed by the number one on your telephone keypad. I would now like to turn the conference over to Jeff Bajtner, our Chief Investment Officer. Sir, please go ahead.

Thank you and welcome to Strawberry Fields REIT’s third quarter 2024 earnings call. I am the Chief Investment Officer of the company and I focus on acquisitions and new deals, growing our operator base, and investor relations. On the call with me today are Moishe Gubin, our Chairman and CEO, and Greg Flamion, our CFO. On Friday, the company issued its 2024 third quarter results, which is 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 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 an explanation and reconciliation of these measures to the comparable GAAP results included on the non-GAAP measure reconciliation page in our investment presentation. Now onto discussing Strawberry Fields REIT. While there are many current shareholders on the call, we also have new and prospective shareholders, and I’d like to share a little bit of background about the company. The story began 21 years ago when Moishe Gubin, our Chairman and CEO, and Michael Blisko, one of our directors, purchased their first skilled nursing facility in Indiana. Once they found success with that first facility, they quickly bought a second and a third. Over the next nine years, they grew from that one facility to 33 facilities in Illinois and Indiana. In…

Thank you Jeff. Good morning and welcome again to the Strawberry Fields third quarter earnings call. Starting off, we will discuss the quarterly comparison of the balance sheet as of September 30, 2024 versus the balance sheet as of the prior quarter at June 30, 2024. Total assets are $661.5 million, which is $25.7 million or 4% higher than June 30, 2024. This increase is driven by real estate investments from the five properties we acquired during the quarter, as well as higher cash balances from the Series A bond raise that occurred in August 2024. This was offset by lower right of use assets, as well as lower restricted cash and equivalents. Liabilities are $606.3 million, which is an increase of $21.1 million or 3.6% from the prior quarter. The increase is due to the Series A bond raise that was mentioned earlier. The liability increase was offset by a lower accounts payable and lower operating lease liabilities. Equity for the quarter was $55.2 million, $4.6 million or 9.4% higher than the previous quarter. The increase is due to the higher third quarter net income and the sale of additional common stock, offset by third quarter dividend distributions. Moving to our next comparison, we are reviewing an analysis of the balance sheet as of September ’24 versus September ’23. Total assets are $31.7 million or 5% higher than the prior year. This increase is due to the cash and cash equivalents as well as higher goodwill, other intangible assets and lease rights. The lease right increase is due to the purchase of the Indiana master lease two lease rights in February of this year. Liabilities increased $30.4 million or 5.3% from September 30, 2023. The higher liability balance is driven by an increase of 46.6% in net bonds offset…

Well, actually it’s Moishe - thank you everybody for joining us today. This being our second time doing this earnings call, we’re still working out our kinks. We’re meat and potatoes folks, as most of you that know us know about us, and so I’ll just--this presentation that we put on our website would have been sent out to everybody, that you guys would have been following along on a screen, so I just want to walk everybody through the presentation that you can find on our site, and we’re probably going to publish it today. The one thing to note, our financial statements are in GAAP financials, and on the GAAP financials you’re at lower historical cost of the product or market, which undervalues--it doesn’t put our assets at the proper value. Our enterprise value today is probably about $1.2 billion. Like Greg said, our assets on GAAP at about 661 - that’s after depreciation and everything. We expect that in the fourth quarter to close on about another $110 million of assets, and that should bring us to about $1.3 billion in enterprise value. Right now, we have a lot of cash and we continue to do the ATM and bring in more cash from that, and that actually helps bring in more shareholders and helps the institutions get a little bit more shares, and I’m thinking in the long run for managing the stock price, the ATM is going to be a useful tool for us with the help of the investment bankers that are part of our world. The next slide I want to go to is talking about the financial statements of the revenue. Our revenue was basically the same, and that makes sense - we have straight-line rents. Under straight-line rents, you take the…

Thank you. Ladies and gentlemen, the floor is open for questions. [Operator instructions] Thank you. Our first question is coming from Barry Oxford with Colliers. Your line is live.

Great guys, thanks for taking my question. You guys had mentioned a 10% cap rate. I was wondering if there’s any spread differential in cap rates versus the region, i.e. midwest versus the sunbelt region. Is there a difference in cap rate or are the cap rates pretty close to each other, regardless of whether it’s a midwest or sunbelt?

Thank you Barry, I appreciate you. Thanks for joining us today, and appreciate the question. This is Moishe - I’ll answer that. I guess one of the things that differentiates us from our peers is I’m the founder, my partner Michael founded the company with me 21 years ago, and because of that, I’ve been relatively, I won’t say risk averse because we’ve grown consistently, but we’ve been very regimented and disciplined on how we buy. Our 10 cap purchase, and it’s either feast or famine - some years we don’t do any deals, some years we do plenty of deals, our math is the same. We’re basically looking at last three years financials with certain add-backs being--our background is nursing home operators, and no matter where the home is, whether it’s in the sunbelt or whether it’s in the rust belt or anywhere else in the country, we’re looking at the math to make sure that we’re coming in day one with the tenant making a 1.25 coverage of the rent, and where we’re making 10% on our money unlevered, and then we add leverage and we manage our balance sheet. So yes, we don’t see a difference because we don’t do--what we generally--you know, we run this company similar to the way I run my bank, OPHC, and that is I don’t--we don’t make many policy exceptions. We treat this like loan committee when we come in front of investment committee, and it’s presented--you know, 20, 30, 40 pages of material, and we don’t make policy exceptions. Our policies dictate that on day one, tenants making money and we’re making our 10%, and--you know, the clean deal and all the boxes are checked, and we’ve been consistent with that. You might ask a better question, should we change it? That question was good, maybe a year or two ago when the interest rates were on the rise and where someone said to me, you know, are you getting squeezed, and my answer was, well, I don’t worry about that because we’re a long game. Even if day one the 10% margin unlevered is what we get, and then we’re not able to lever at such a great rate because of interest rates, it doesn’t matter because we’re in this--you know, we plan on holding that asset for minimum 10, 20, 30 years, and we should be able to get it refinanced at some point with the HUD debt or--and we manage our balance sheet effectively, and that’s--so that’s what we do, and we’ve been consistent in how we do that.

Perfect, appreciate the color on that. Fundamentals also within the industry seem to be fairly robust. You guys had gains in occupancy at 70.4. How do you see that in ’25? Can you continue to push occupancy much above this level, or--look, Barry, there’s a point where frictional vacancy starts to happen.

No, I think our portfolio, there’s two sides to our portfolio. You have the big cities, like Chicago and to a lesser extent Indianapolis, Louisville, Little Rock, and those homes after corona, they bounced back because they had the volume of patients and people don’t want to care for people at home, in the bigger cities it’s harder to find the nice licensed home to take care of your mother - not to judge anybody in the world. But that being said, in our portfolio, a lot of our stuff is in farmlands. We’re in the middle of--you know, it’s beautiful, it’s Smoky Mountains or somewhere that when corona came along and you had long term people that were living in the facilities for many years, and you lost that population, that has been slower to come back. If you look at our occupancy, in the city our occupancy is higher than it was before corona, and that’s almost near probably somewhere--you know, blended is probably 80% to 90% everywhere else, and then you’ve got farmland that’s probably stuck at 60-something, that the buildings are making money but they’re still slowly, slowly building, because they don’t have the amount of volume of admits and discharges, and so the answer to you is yes. I think that the census occupancy hitting operators’ financials are going to continue to do better, and now with the new administration, one of the first things that happened after the president-elect became elected is CMS eliminated their--they pushed it off again, it’s going to get eliminated, a staffing mandate that was going to totally clobber the nursing home business, I mean subject to the state giving more revenue. But yes, I mean, occupancy totally could go up. I mean, the tailwinds in our tenants’ business are…

Perfect, all of that makes sense. Going to the dividend, 47% payout, you alluded to that it’s 100% of net income. Is it fair to say that going forward, you’re going to have to move the dividend basically at growth rate of the FFO, or not necessarily?

No, that’s exactly right. My intention--and again, we have good governance, so I’m not a dictator. We take into consideration cash flow, we take into consideration shareholder--you know, attracting shareholders and what we have to do for the shareholder base and the like. Yes, it’s most likely that as our FFO increases--I mean, more than most likely, I don’t know how you say it. I can’t say definite, because you never know what’s going to happen in the future, but most likely we will see as the FFO grows, so will the dividend at minimum. I mean, it also could be that at some point, we get large enough and the capital is that good, that I could raise money at a good rate, not debt but equity. At that point, I could raise--and we do similar to the other guys, and the other guys are doing a payout ratio of, like, 90%. I’ve been against that thought, but then again I’m learning as we grow new things, but I like the idea of not necessarily--I mean, I separate the fact of adding shareholders, because that’s what I want - you know, we want to be widely held, we want liquidity in the stock price, but I separate that from the financial metrics of the business. If I could get the money from cash flow and I don’t need to sell equity and not dilute the earnings per share, I’d rather not sell the stock, but if the stock price is doing that well, then it makes sense to sell the stock as long as I can put the money out to use and get a good return and have it be accretive to earnings. The earnings accretion is the hardest thing to do. Everything else is accretive to book, but book, nobody cares about - that’s not a metric that’s used really on when you’re determining to buy something. Really, when you’re determined to buy something is on the forward-looking cash flow, and if the forward-looking cash flow per share gets diluted because I sell more stock, I’m very cognizant of that and I want to make sure that my shareholders--I’m looking for adulation, I’m soft inside and I want people to like me and think I’m doing a good job, and so I need to--you know? I go out there and aim to please, and that’s what we’re doing every day.

Well, when you look at your stock price and you look at your 10% cap rate, I mean, doesn’t the math pencil out accretively?

Yes, yes, yes. We’re selling stock above NAV, but it’s not--I’m talking about in terms of EPS, accretive to EPS. If I don’t get that money out the door in a--you know, I need to put that money out the minute I get it, either by paying down debt or buying another asset with cash for--

But it’s going to be a drag on earnings by definition, right?

Yes, exactly. Exactly, and I want to make sure that the marketplace understands what I’m doing, and I’m cognizant of that because at the end of the day to attract a new shareholder, when they’re going to see what we did, they’re not necessarily--you know, everybody looks at stocks differently, but I like to think we’re a lot different because of the risk factors that we have are, I think, less than--because we don’t really suffer from economy--you know, interest rate risk and economy risk. We’re a business that’s not--that’s not a decision that you make because you want to make, you make a decision because you have to make, and this is a business--you know, people--if your mother needs a nursing home, you’re putting her in a nursing home. You not thinking, well, it’s expensive. Nobody thinks that way. They think, I’ve got to take care of my mother, and so we’re in a business that the demand is going to continue to be there, and it’s not like people are going to choose, you know, we’ll keep her at home. There may be cases of that, of course, but--so we have a business that--and there’s always financing for relatively inexpensive costs and there’s always a social need for the product, and so we like to think that a shareholder that’s going to listen to us is going to understand that, you know, this might be more risky from the thought process of you don’t understand it, but it’s not more risky when it comes to if you’re putting your money in a REIT, right, multi-family, something could happen with the rental market, office, same thing like we’ve seen. Nursing homes, you don’t see that. The nursing homes continue to chug along and they pay their rent, and we get--like we said, we’re collecting 100% of our rents and we’ve done that year-in, year-out for, I don’t know, 20 years. I tell people, if we had an accounts receivable person, it’s the easiest job in the book because we get all of our rents wired in at the first of the month. It’s not even--we’re not hounding people down to collect rent. They pay us and that’s the end of it. I don’t remember even what the question was, but I think I answered you.

You did. I appreciate the time, and I’ll go ahead and yield the floor. Thanks guys.

Thanks Barry.

Thank you. Our next question is coming from Gaurav Mehta with Alliance Global Partners. Your line is live.

Yes, good morning. Thanks for taking my question. I wanted to ask you on the portfolio that you have under contract, just to clarify, the portfolio is--the consultant on that portfolio, it’s not Infinity but another third party?

Correct, and Gaurav, thank you for your time, thank you for joining us today, thank you for following us. We appreciate you, we appreciate your firm. That being said, yes, this is--like, our philosophy today is every new deal that’s in new places are completely non-related party. This is no different. This is a seasoned operator that’s been running nursing homes for 30 years, he lives in Creve Coeur, and yes, completely arm’s length third party, good coverage ratios day one, strong sponsor support, but yes, it’s a good deal and it adds a new operator and a new state, completely unrelated to me.

Okay. I think in your prepared remarks, you mentioned a number, $75 million of AFFO, is that for next year 2025 that you’re expecting?

Yes.

Okay, and that includes all the 4Q acquisitions that you expect to close, right?

Yes, we have currently--we didn’t announce a bunch of deals, but we have this $87.5 million deal in Missouri, we have about a $24 million deal in Kansas, we’ve got a $5 million deal in Oklahoma, and I’m not sure - I don’t know if we have anything else, but if you add that stuff up, we should end the year strong, and the 75 is generated off of that for next year. Again, we’ll probably exceed that because we’ll probably buy--I’m sure we’ll find something to buy next year as well.

Okay, great. Maybe last one, earlier in your remarks, you talked about some of the changes you’re expecting from the new administration. I was hoping if you could maybe talk about your view on any impact you’re expecting on Medicaid reimbursements or any other reimbursements, any expected impact on your business.

Well, so over the years and as part of doing non-deal road shows for so long that I’ve been doing this, I’ve spent a lot of time trying to educate shareholders, analysts, whoever wants to listen to me on our business. The Title XVII and Title XVIII of the Social Security Act basically has the government under Medicaid having to reimburse the costs of running the nursing home, so now the thing is as time goes on--and what happened with COVID is a once in a lifetime event, hopefully it never happens again in our lifetime, but in that example, the reimbursement for some states are so far behind, and you saw in 2024 towards the end of the year, Kentucky finally improved, Ohio finally improved, and I think Tennessee--not Tennessee, but--I don’t know if there was something in Texas maybe improved. But otherwise, the cost base reimbursement has had Indiana, Tennessee, and other states--Arkansas, increase their rates a year later after the expenses occur, so as far as Medicaid goes, really that program should always be in line to what it’s doing, so I don’t have a thought on that. The Medicare side of things also has been relatively consistent over the last--you know, other than a couple of hiccups in the middle when they changed reimbursement here and there, we expect that to be relatively status quo - 3%, 4%, 5% annual increases for the nursing homes in Medicare, and that’s that. Again, the Medicaid is a little bit more of a story. Anyone that wants more color and they really want to hear about it, I’m glad to fill people in. I could go on and on about this. This is really my--this is what’s in my bones, this is what I’ve done for many years. I’m not an operator for now a bunch of years, but it’s still--I’m a study of the business and so if anyone wants some color afterwards, I’m glad to talk to anybody.

All right, that’s all I had. Thanks for taking my questions.

Thanks Gaurav.

Thank you. Once again ladies and gentlemen, if you have any further questions or comments, please press star, one on your telephone keypad at this time. Okay, as we have no further questions in queue at this time, I’d like to hand back to Mr. Gubin for any closing remarks.

Yes, I appreciate everyone taking time out of their lives, certainly at the open of the market to spend with us. In the long run, our stock will make you all proud. We’re slow and steady, doing stuff consistently and continue chugging along, making money and growing our net income and growing our FFO per share. God willing, we’ll continue to prove that quarter-in, quarter-out, so thank you for your time and have a very nice day.

Thank you. Ladies and gentlemen, this does conclude today’s call. You may disconnect your lines at this time and have a wonderful day, and we thank you for your participation.