Strawberry Fields REIT, Inc. (STRW) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call indicates strong financial performance with increased revenue, net income, and dividend growth. The company has a balanced capital structure and plans for further acquisition growth. The Q&A section reveals proactive management strategies, including refinancing plans and strategic divestitures. Despite some unclear responses, the overall sentiment from the earnings and Q&A is positive, bolstered by dividend increases and acquisition plans. The lack of negative sentiment in analyst questions and management's optimistic outlook suggest a positive stock price movement in the short term.
Key Financial Performance
Total Assets $880 million, a 33.1% increase compared to Q3 2024. This growth is primarily driven by acquisition strategy and successful retenanting of specific leasing.
Year-to-date Revenue $114.9 million, up $28.3 million versus September of last year. This increase is largely due to the timing and integration of properties acquired over the past year, as well as retenanting activity.
Net Income (Year-to-date) $24.5 million or $0.44 a share, compared to $19.9 million or $0.40 a share last year. The increase is attributed to acquisitions and lease transitions.
Quarterly Revenue Increased by $10.2 million year-over-year, driven by acquisitions and lease transitions.
Quarterly Net Income $8.8 million or $0.16 a share, up from $6.9 million or $0.14 per share in Q3 2024. The increase is due to acquisitions and lease transitions.
AFFO (Adjusted Funds From Operations) Projected at $72.7 million for 2025, a 28.2% increase over the last year, with a compound annual growth rate (CAGR) of 13.3% since 2020.
Adjusted EBITDA Projected at $126.1 million, up 38.9% year-over-year, with a CAGR of 13.6%.
Net Debt-to-Asset Ratio 49.2%, maintaining a balanced capital structure.
Dividend $0.16 a share, representing a 5.2% yield. This is a 14% increase over previous quarters.
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Operating Highlights
Acquisition of 9 skilled nursing facilities: Completed acquisition of 9 skilled nursing facilities with 686 beds in Missouri for $59 million on July 1, 2025.
Acquisition of skilled nursing facility in Oklahoma: Acquired a skilled nursing facility with 80 licensed beds near McLoud, Oklahoma, for $4.25 million on August 5, 2025. Initial annual base rents are $425,000 with 3% annual rent increases.
Acquisition of healthcare facility in Missouri: Acquired a healthcare facility with 108 skilled nursing beds and 16 assisted living beds near Poplar Bluff, Missouri, for $5.3 million on August 29, 2025. Initial annual base rents are $530,000 with 3% annual rent increases.
Expansion into new states: Company is exploring expansion into new states like Georgia, Mississippi, and Alabama, focusing on sizable portfolios of at least 500 beds.
Diversification: Portfolio is diversified across 10 states, with no single state or tenant exceeding 25% of the portfolio.
Dividend increase: Board approved a 14% increase in dividend to $0.16 per share for Q3 2025, maintaining a payout ratio of 46.8%.
Revenue growth: Year-to-date revenue through September 2025 was $114.9 million, up $28.3 million from the previous year, driven by acquisitions and retenanting activities.
AFFO and EBITDA growth: Projected AFFO for 2025 is $72.7 million, a 28.2% increase year-over-year. Adjusted EBITDA is projected at $126.1 million, up 38.9% year-over-year.
Focus on skilled nursing facilities: 91.5% of the portfolio consists of skilled nursing facilities, making it the closest pure-play skilled nursing REIT in the market.
Master lease structure: 89% of facilities are under master leases, allowing for streamlined operations and potential for growth in existing states.
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Risk or Challenges
Acquisition Strategy: The company’s aggressive acquisition strategy, while driving growth, has led to higher expenses, including depreciation, amortization, and interest. This could strain financial resources and impact profitability if not managed carefully.
Debt Management: The company’s net debt-to-asset ratio is 49.2%, and 23% of its debt is variable rate. Rising interest rates could increase financing costs, impacting cash flow and profitability.
Tenant Concentration: Although diversified across 10 states, Indiana represents 25% of the portfolio, creating potential risks if market conditions or regulations in that state change unfavorably.
Economic and Regulatory Risks: The business relies heavily on government-funded healthcare programs. Changes in government policies or funding levels could adversely affect tenant operations and rent collections.
Market Expansion Challenges: The company’s strategy to expand into new states requires acquiring sizable portfolios, which may limit flexibility and delay growth if suitable opportunities are not available.
Foreign Currency Exchange Losses: The company experienced foreign currency exchange losses, which could continue to impact other comprehensive income if not mitigated.
Stock Undervaluation: The company’s stock is trading at a lower AFFO multiple compared to peers, which may limit its ability to raise equity capital efficiently.
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Guidance & Outlook
Projected AFFO for 2025: $72.7 million, a 28.2% increase over the last year with a compound annual growth rate (CAGR) of 13.3% since 2020.
Adjusted EBITDA for 2025: Projected at $126.1 million, up 38.9% year-over-year with a 13.6% CAGR.
Acquisition Pipeline: Currently in excess of $250 million, with plans to spend $150 million to $160 million annually on acquisitions.
Dividend Growth: Dividend payout ratio maintained below 50%, with plans to continue raising dividends incrementally as profitability grows.
Market Expansion: Plans to expand into new states, particularly in the Southeast (e.g., Mississippi, Alabama, Georgia), with a focus on acquiring sizable portfolios of at least 500 beds.
Capital Raise: Plans to conduct a capital raise to attract institutional investors and increase stock liquidity.
Debt Management: Debt is diversified across HUD, bond, and bank debt, with only 23% variable rate. Plans to use debt strategically for growth while maintaining leverage below 50%.
Market Trends: Positioned to benefit from demographic trends, particularly the aging baby boomer population, which is expected to drive demand for skilled nursing facilities.
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Shareholder Return Plan
Dividend Increase: During Q3, the Board of Directors approved increasing the dividend to $0.16 a share, representing a 14% increase over previous quarters.
Q4 Dividend Approval: The Board of Directors approved the Q4 2024 dividend, which will also be $0.16 a share, to be paid on December 30 to shareholders of record on December 16.
Dividend Yield: As of September 30, the dividend yield was 5.2%, with an AFFO payout ratio of 46.8%.
Dividend Growth: The company has raised its dividend 5 to 6 times and plans to continue this trend, maintaining a payout ratio below 50%.
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Key Q&A
Q:Did the company sell any property in the third quarter?
A:Yes, the company sold a facility in Michigan for $2.6 million. It was an outlier in their portfolio, and they decided to sell it as they were unable to grow in that region. The sale was budget neutral as they raised rent elsewhere.
Q:What were the proceeds from the Michigan property sale?
A:The proceeds were $2.6 million. The company took a note at 10% interest, with a balloon payment due in a couple of years.
Q:What does the acquisition pipeline look like for the company?
A:The company expects good volume in the first quarter of 2026 and aims to break the $150 million to $200 million growth mark for next year.
Q:Was the dividend increase from $0.14 to $0.16 a requirement or a decision by the Board?
A:The increase was a decision by the Board to stay in REIT compliance, satisfy investors, and maintain a consistent dividend growth model. The $0.16 represents 100% of net income for the quarter.
Q:When does the Series D bond mature, and what are the refinancing plans?
A:The Series D bond matures in September 2026. The company plans to refinance it at a lower rate, potentially saving a significant amount of money.
Q:What is the current cost of debt if the company accesses the debt markets today?
A:The company estimates the cost of debt would be around sub-6% if they accessed the debt markets today.
Q:Why has the acquisition pipeline decreased from $300 million to $250 million?
A:The pipeline is a moving target and includes deals with varying probabilities of completion. The $250 million represents deals that make sense for the company and are likely to close.
Q:Are there more competitors in the bidding process for properties?
A:The competition remains the same. The company focuses on deals in the $20 million to $50 million range and smaller off-market deals.
Q:Why was G&A lower by $500,000 to $600,000, and is this a sustainable run rate?
A:The decrease is due to no new significant hires or changes in Board fees. However, G&A may tick up slightly in the next quarter due to legal and professional fees.
Q:What are the company's thoughts on using stock for future deals?
A:The company is open to using stock for deals but prefers to avoid dilution unless the stock price improves. They aim to increase liquidity and attract institutional investors.
Q:Is there any impact from the government shutdown on the company or its operators?
A:There is no significant impact, but some HUD-related processes are delayed. Operators are seasoned and can handle minor disruptions.
Q:How does the Board weigh share buybacks against new property acquisitions?
A:The Board prefers to use cash for growth and acquisitions rather than buybacks, as they aim to maintain liquidity and avoid reducing the number of shares in the market.
Q:What is the regulatory and reimbursement environment in Illinois compared to newer states?
A:Illinois operates on a price-based reimbursement model, making it a laggard compared to cost-based states. The company is considering divesting some operations in Illinois to improve performance.
Q:Review of Unclear Management Responses
A:Management avoided providing a clear answer on the exact G&A run rate for the next quarter, stating it may tick up slightly but not providing specific details. Additionally, they were vague about the exact catalyst needed to improve the stock price and liquidity.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AFFO increase
Bajtner portfolio
Bluff Missouri
CEO CFO
CEO presentation
CFO Yesterday
COO Chief
Chairman CEO
Conference Instructions
Directors dividend
EBITDARM rent
Greg REIT
Instructions reminder
Missouri acquisition
acquisition capital
acquisition nursing
activity
amortization interest
amount
balance sheet
capital base
date
deal country
depreciation amortization
excess
facility nursing
increase acquisition
investor presentation
nursing facility
portfolio highlight
rent increase
retenanting
structure
STRW Transcript
Strawberry Fields REIT, Inc. (STRW) Q3 2025 Earnings Call Transcript
Positive11-7
The earnings call indicates strong financial performance with increased revenue, net income, and dividend growth. The company has a balanced capital structure and plans for further acquisition growth. The Q&A section reveals proactive management strategies, including refinancing plans and strategic divestitures. Despite some unclear responses, the overall sentiment from the earnings and Q&A is positive, bolstered by dividend increases and acquisition plans. The lack of negative sentiment in analyst questions and management's optimistic outlook suggest a positive stock price movement in the short term.
Strawberry Fields REIT LLC (AMEX:STRW) Q4 2024 Earnings Call Transcript
Positive3-4
The earnings call presents a positive outlook with strong revenue growth, significant dividend increases, and successful capital raising efforts. Despite the public offering, the company's strategic acquisitions and consistent dividend policy indicate stability and growth. The Q&A section reveals management's confidence in maintaining leverage and securing financing, although there is some uncertainty around Medicaid percentage increases. Overall, the financial performance and strategic initiatives suggest a positive stock price movement in the short term.
Strawberry Fields REIT (STRW) Q4 2024 Earnings Conference Call Transcript
Positive3-3
The earnings call summary reveals strong financial performance, with increased revenue, net income, and dividends, alongside strategic acquisitions. The Q&A session highlights a robust deal pipeline and confidence in leverage management. While there is uncertainty about the Medicaid payer mix, overall sentiment remains positive due to growth in assets and shareholder returns, despite the public offering potentially diluting shares. The absence of a market cap suggests a neutral to positive reaction, but given the strong financials and optimistic guidance, a 'Positive' sentiment is appropriate.
Strawberry Fields REIT (STRW) Q3 2024 Earnings Call Transcript
Positive11-11
The earnings call reveals positive financial performance, with increased assets, equity, and a higher dividend payout, indicating confidence in future growth. The Q&A section raised some concerns regarding Medicaid reimbursements, but overall sentiment remained positive, particularly with the expected FFO growth and base rent increase. The ATM program and increased liquidity are also favorable. While there are risks like regulatory issues and debt management, the optimistic guidance and shareholder return plan, coupled with a strong dividend history, suggest a positive stock price movement in the near term.
STRW Report
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