Strawberry Fields REIT Announces 2023 Year-End Operating Results
- Strong financial performance for Strawberry Fields REIT, Inc. in 2023.
- FFO and AFFO increased to $49.5 million and $52.7 million, respectively.
- Net income rose to $20.2 million, with rental income reaching $99.8 million.
- Moishe Gubin, Chairman & CEO, highlighted the Company's growth and acquisitions.
- A cash dividend of $0.12 per share was declared on March 8, 2024.
- 2024 Annual Meeting of Stockholders to be held on May 30, 2024.
- Rental revenues increased by $7.3 million in 2023 compared to 2022.
- Loss on real estate investment impairment due to a closed facility in Southern Illinois.
- General and administrative expenses decreased by $(0.4) million in 2023.
- Increase in property taxes by $1.3 million primarily due to the acquisition of Indiana Facilities.
- Interest expense rose by $3.9 million in 2023, mainly related to Series D Bonds.
- Foreign currency transaction loss recorded in 2022 but a gain in 2023.
- Other (loss) income increased by $1.0 million due to a fee paid to an investment banking firm.
- Net income increased from $16.4 million in 2022 to $20.2 million in 2023.
- Loss on real estate investment impairment affecting the Company's financials.
- Increase in interest expenses by $3.9 million could impact profitability.
- Foreign currency transaction losses may pose a risk due to currency fluctuations.
Insights
The reported increase in funds from operations (FFO) and adjusted funds from operations (AFFO) for Strawberry Fields REIT indicates a positive trend in the company's operational efficiency and profitability. FFO, a key metric in the REIT industry, reflects the company's ability to generate cash flow from its core business activities. The growth in FFO from $45.0 million to $49.5 million suggests that the company has effectively managed its properties and leases, translating into better financial performance.
AFFO, which adjusts FFO for rent increases and capital expenditures, among other factors, also saw an uptick from $51.1 million to $52.7 million. This metric is often considered a more accurate representation of a REIT's operational performance and its ability to sustain and grow dividends. The reported dividend of $0.12 per share, coupled with the AFFO increase, could reassure investors about the company's commitment to shareholder returns.
However, the rise in net interest expense by 19.2% due to new debt acquisition for property investments and the increase in property taxes by 10.1%, are areas of concern. These expenses could impact the company's net income and cash flow in the future, potentially affecting dividend sustainability. Investors would benefit from monitoring the company's debt levels and tax obligations closely, as these could influence future financial flexibility and profitability.
The acquisition of 24 buildings in Indiana for $102 million represents a significant expansion for Strawberry Fields REIT and suggests a strategic move to strengthen its portfolio in a specific geographic area. The real estate market dynamics in Indiana, including demand for rental properties, economic growth and demographic trends, would be critical in evaluating the potential long-term benefits of this investment. The 7.8% increase in rental revenue signifies successful integration of the new properties and indicates a positive reception in the market.
The company's approach to growing 'in a calculated and controlled manner' reflects a risk-averse strategy that could appeal to conservative investors. By maintaining a robust pipeline and seeking opportunities that are accretive to shareholders, the company is positioning itself for sustainable growth. This strategy, if executed well, could lead to increased market share and enhanced competitive advantage within the REIT sector.
Lastly, the company's ability to maintain REIT status by distributing more than $20 million to shareholders, which represents only 44% of AFFO, demonstrates financial prudence. This conservative payout ratio leaves room for reinvestment in the business and could buffer against potential downturns in the real estate market, thereby protecting shareholder value in the long run.
The increase in property and franchise taxes following the acquisition of the Indiana facilities is a critical factor to consider. Real estate taxes can significantly impact a REIT's bottom line and, consequently, its ability to distribute dividends. The 10.1% increase in taxes, while substantial, seems to be offset by the overall growth in rental income. However, investors should consider the potential variability in tax rates and assessments, which could affect future profitability.
The company's handling of the closure of a facility in Southern Illinois also demonstrates an effective risk management strategy. By maintaining the aggregate rent from the master lease, the company mitigated the potential negative impact on revenue. The decision to sell the non-operational property could further alleviate any financial strain from holding an unproductive asset.
Lastly, the recovery of a written off asset in 2022 and the subsequent decrease in credit for doubtful accounts in 2023 highlight the company's proactive approach to managing its receivables. This is indicative of robust financial controls and could be a positive signal to investors regarding the management's competency in handling the company's financial affairs.
SOUTH BEND, IN / ACCESSWIRE / March 19, 2024 / Strawberry Fields REIT, Inc. (NYSE AMERICAN:STRW) (the "Company") reported today its operating results for the year ended December 31, 2023.
Financial Highlights
For the year ended December 31, 2023, and December 31, 2022:
- FFO was
$49.5 million and$45.0 million , respectively. - AFFO was
$52.7 million and$51.1 million , respectively. - Net income was
$20.2 million and$16.4 million , respectively. - Rental income received was
$99.8 million and$92.5 million , respectively.
Moishe Gubin, Chairman & CEO noted: "Today we are pleased to be reporting another strong year for the Company. 2023 was a banner year, beginning with the uplisting to the New York Stock Exchange and continuing the with acquisition of the 24 buildings in Indiana for
Dividend
On March 8, 2024, our Board of Directors declared a cash dividend of
Annual Meeting
The Company's 2024 Annual Meeting of Stockholders will be held on Thursday, May 30, 2024, at 10:00 a.m. local time. Stockholders of record as of the close of business on Tuesday, April 16, 2024 will be entitled to receive notice of and to participate at the 2024 Annual Meeting of Stockholders. The meeting will be held at 2477 E. Commercial Dr. Ft. Lauderdale FL 23308.
2023 Annual Results
Rental revenues: Rental revenues during 2023 increased by
Depreciation and Amortization: Increase in depreciation of
Loss on real estate investment impairment: In February 2023, one facility under one of our Southern Illinois master leases was closed. The closure was made at the request of the tenant and was mainly for efficiency reasons. This facility was leased under a master lease with two other facilities. The closure did not result in any reduction in the aggregate rent payable under the master lease, which has been paid without interruption. As a result of the closure, the Company is seeking to sell the property. Since the facility is no longer licensed to operate as a skilled nursing facility, the Company wrote off its remaining book value.
General and Administrative Expense: The decrease in general and administrative expenses of
Property and other Taxes: The increase in property taxes of
Credit for Doubtful Accounts: During 2022, the Company recognized
Interest expense, net: The increase in interest expense of
Foreign Currency Transaction Loss: Our bond indebtedness is denominated in NIS. As a result, we are subject to potential foreign currency transaction loss due to changes in the value of the U.S. dollar relative to the New Israel Shekel. In 2022, we recorded a foreign currency transaction loss of
Other (loss) income: The increase in other loss of
Net Income: The increase in net income from
About Strawberry Fields REIT
Strawberry Fields REIT, Inc., is a self-administered real estate investment trust engaged in the ownership, acquisition, development and leasing of skilled nursing and certain other healthcare-related properties. The Company's portfolio includes 109 healthcare facilities with an aggregate of 12,449 bed, located throughout the states of Arkansas, Illinois, Indiana, Kentucky, Michigan, Ohio, Oklahoma, Tennessee and Texas. The 109 healthcare facilities comprise 99 skilled nursing facilities, eight assisted living facilities, and two long-term acute care hospitals.
Safe Harbor Statement
Certain statements in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Those forward-looking statements include all statements that are not historical statements of fact and those regarding our intent, belief or expectations, including, but not limited to, statements regarding: future financing plans, business strategies, growth prospects and operating and financial performance; expectations regarding the making of distributions and the payment of dividends; and compliance with and changes in governmental regulations.
Words such as "anticipate(s)," "expect(s)," "intend(s)," "plan(s)," "believe(s)," "may," "will," "would," "could," "should," "seek(s)" and similar expressions, or the negative of these terms, are intended to identify such forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties that could lead to actual results differing materially from those projected, forecasted or expected. Although we believe that the assumptions underlying the forward-looking statements are reasonable, we can give no assurance that our expectations will be attained. Factors which could have a material adverse effect on our operations and future prospects or which could cause actual results to differ materially from our expectations include, but are not limited to: (i) the COVID-19 pandemic and the measures taken to prevent its spread and the related impact on our business or the businesses of our tenants; (ii) the ability and willingness of our tenants to meet and/or perform their obligations under the triple-net leases we have entered into with them, including, without limitation, their respective obligations to indemnify, defend and hold us harmless from and against various claims, litigation and liabilities; (iii) the ability of our tenants to comply with applicable laws, rules and regulations in the operation of the properties we lease to them; (iv) the ability and willingness of our tenants to renew their leases with us upon their expiration, and the ability to reposition our properties on the same or better terms in the event of nonrenewal or in the event we replace an existing tenant, as well as any obligations, including indemnification obligations, we may incur in connection with the replacement of an existing tenant; (v) the availability of and the ability to identify (a) tenants who meet our credit and operating standards, and (b) suitable acquisition opportunities, and the ability to acquire and lease the respective properties to such tenants on favorable terms; (vi) the ability to generate sufficient cash flows to service our outstanding indebtedness; (vii) access to debt and equity capital markets; (viii) fluctuating interest rates; (ix) the ability to retain our key management personnel; (x) the ability to maintain our status as a real estate investment trust ("REIT"); (xi) changes in the U.S. tax law and other state, federal or local laws, whether or not specific to REITs; (xii) other risks inherent in the real estate business, including potential liability relating to environmental matters and illiquidity of real estate investments; and (xiii) any additional factors included under "Risk Factors" in our Annual Report Form 10-K dated March 19, 2024, including in the section entitled "Risk Factors" in Item 1A of Part I of such report, as such risk factors may be amended, supplemented or superseded from time to time by other reports we file with the SEC.
Forward-looking statements speak only as of the date of this press release. Except in the normal course of our public disclosure obligations, we expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations or any change in events, conditions or circumstances on which any statement is based.
Non-GAAP Financial Measures
Reconciliations, definitions and important discussions regarding the usefulness and limitations of the Non-GAAP Financial Measures used in this release can be found below.
Investor Relations:
Strawberry Fields REIT, Inc.
IR@sfreit.com
+1 (773) 747-4100 x422
STRAWBERRY FIELDS REIT, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Amounts in
| December 31, | ||||||||
| 2023 | 2022 | |||||||
Assets | ||||||||
Real estate investments, net | $ | 518,314 | $ | 438,911 | ||||
Cash and cash equivalents | 12,173 | 20,197 | ||||||
Restricted cash and equivalents | 25,585 | 25,507 | ||||||
Straight-line rent receivable, net | 23,334 | 23,534 | ||||||
Right of use lease asset | 1,542 | 1,833 | ||||||
Goodwill, other intangible assets and lease rights | 8,604 | 11,632 | ||||||
Deferred financing expenses | 6,035 | 5,791 | ||||||
Notes receivable, net | 17,706 | 19,419 | ||||||
Other assets | 3,502 | 176 | ||||||
Total Assets | $ | 616,795 | $ | 547,000 | ||||
Liabilities | ||||||||
Accounts payable and accrued liabilities | $ | 16,907 | $ | 13,723 | ||||
Bonds, net | 100,294 | 74,412 | ||||||
Notes payable and other debt | 436,192 | 381,003 | ||||||
Operating lease liability | 1,542 | 1,833 | ||||||
Other liabilities | 14,587 | 10,892 | ||||||
Non-controlling interest redemption liability | - | 15,753 | ||||||
Total Liabilities | $ | 569,522 | $ | 497,616 | ||||
Commitments and Contingencies (Notes 8 and 14) | ||||||||
Equity | ||||||||
Common stock, $.0001 par value, 500,000,000 shares authorized, 6,487,856 and 6,365,856 shares issued and outstanding in 2023 and 2022 | - | - | ||||||
Preferred stock, $.0001 par value, 100,000,000 shares authorized, no shares issued and outstanding | - | - | ||||||
Additional paid in capital | $ | 5,746 | $ | 5,792 | ||||
Accumulated other comprehensive income | 529 | 386 | ||||||
Retained earnings | 1,232 | 1,608 | ||||||
Total Stockholders' Equity | $ | 7,507 | $ | 7,786 | ||||
Non-controlling interest | $ | 39,766 | $ | 41,598 | ||||
Total Equity | $ | 47,273 | $ | 49,384 | ||||
Total Liabilities and Equity | $ | 616,795 | $ | 547,000 | ||||
STRAWBERRY FIELDS REIT, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Amounts in
| Year Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
Revenues | ||||||||
Rental revenues | $ | 99,805 | $ | 92,543 | ||||
Expenses: | ||||||||
Depreciation | $ | 26,207 | 25,530 | |||||
Amortization | 3,028 | 3,028 | ||||||
Loss on real estate investment impairment | 2,451 | - | ||||||
General and administrative expenses | 5,662 | 6,012 | ||||||
Property taxes | 14,459 | 13,131 | ||||||
Facility rent expenses | 559 | 532 | ||||||
Credit for doubtful accounts | - | (5,636 | ) | |||||
Total expenses | $ | 52,366 | $ | 42,597 | ||||
Income from operations | 47,439 | 49,946 | ||||||
Interest expense, net | $ | (24,443 | ) | $ | (20,507 | ) | ||
Amortization of deferred financing costs | (560 | ) | (504 | ) | ||||
Mortgage insurance premium | (1,671 | ) | (1,704 | ) | ||||
Total interest expense | $ | (26,674 | ) | $ | (22,715 | ) | ||
Other income (loss): | ||||||||
Foreign currency transaction gain (loss) | 462 | (10,932 | ) | |||||
Other (loss) income | (983 | ) | 120 | |||||
Total other loss | (521 | ) | (10,812 | ) | ||||
Net income | $ | 20,244 | $ | 16,419 | ||||
Less: | ||||||||
Net income attributable to non-controlling interest | (17,748 | ) | (14,567 | ) | ||||
Net income attributable to common shareholders | 2,496 | 1,852 | ||||||
Other comprehensive income: | ||||||||
Gain due to foreign currency translation | 1,624 | 14,256 | ||||||
Reclassification of foreign currency transaction (gains) losses | (462 | ) | 10,932 | |||||
Comprehensive income attributable to non-controlling interest | (1,019 | ) | (22,347 | ) | ||||
Comprehensive income | $ | 2,639 | $ | 4,693 | ||||
Net income attributable to common stockholders | $ | 2,496 | $ | 1,852 | ||||
Basic and diluted income per common share | $ | .39 | $ | .31 | ||||
Weighted average number of common shares outstanding | 6,365,196 | 6,008,953 | ||||||
Funds From Operations ("FFO")
The Company believes that net income as defined by GAAP is the most appropriate earnings measure. We also believe that funds from operations ("FFO"), as defined in accordance with the definition used by the National Association of Real Estate Investment Trusts ("NAREIT"), and adjusted funds from operations ("AFFO") are important non-GAAP supplemental measures of our operating performance. Because the historical cost accounting convention used for real estate assets requires straight-line depreciation (except on land), such accounting presentation implies that the value of real estate assets diminishes predictably over time. However, since real estate values have historically risen or fallen with market and other conditions, presentations of operating results for a REIT that use historical cost accounting for depreciation could be less informative. Thus, NAREIT created FFO as a supplemental measure of operating performance for REITs that excludes historical cost depreciation and amortization, among other items, from net income, as defined by GAAP. FFO is defined as net income, computed in accordance with GAAP, excluding gains or losses from real estate dispositions, plus real estate depreciation and amortization. AFFO is defined as FFO excluding the impact of straight-line rent, above-/below-market leases, non-cash compensation and certain non-recurring items. For the year ended December 31, 2023 and 2022, we excluded as non-recurring items a gain in the amount of
While FFO and AFFO are relevant and widely used measures of operating performance of REITs, they do not represent cash flows from operations or net income as defined by GAAP and should not be considered an alternative to those measures in evaluating our liquidity or operating performance. FFO and AFFO also do not consider the costs associated with capital expenditures related to our real estate assets nor do they purport to be indicative of cash available to fund our future cash requirements. Further, our computation of FFO and AFFO may not be comparable to FFO and AFFO reported by other REITs that do not define FFO in accordance with the current NAREIT definition or that interpret the current NAREIT definition or define AFFO differently than we do.
The following table reconciles our calculations of FFO and AFFO for the years ended December 31, 2023 and 2022, to net income, the most directly comparable GAAP financial measure (in thousands):
FFO and AFFO:
| Year Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
Net income | $ | 20,244 | $ | 16,419 | ||||
Depreciation and amortization | 29,235 | 28,558 | ||||||
Funds from Operations | 49,479 | 44,977 | ||||||
Adjustments to FFO: | ||||||||
Credit for doubtful accounts(1) | - | (5,636 | ) | |||||
Straight-line rent | (30 | ) | (272 | ) | ||||
Straight-line rent receivable write-off(2) | 230 | 1,075 | ||||||
Contact cancellation expense for proposed financing(3) | 1,000 | - | ||||||
Loss on real estate impairment (4) | 2,451 | - | ||||||
Foreign currency transaction (gain) loss | (462 | ) | 10,932 | |||||
Funds from Operations, as Adjusted | $ | 52,668 | $ | 51,076 | ||||
(1) During the year ended December 31, 2022, the Company recovered
(2) The Company recognized a loss of
(3) The Company incurred a non-recurring expense of
(4) Loss on real estate investment impairment: In February 2023, one facility under one of our Southern Illinois master leases was closed. The closure was made at the request of the tenant and was mainly for efficiency reasons. This facility was leased under a master lease with two other facilities. The closure did not result in any reduction in the aggregate rent payable under the master lease, which was paid without interruption. As a result of the closure, the Company is seeking to sell the property. Since the facility is no longer licensed to operate as a skilled nursing facility, the Company wrote off its remaining book value.
SOURCE: Strawberry Fields REIT
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FAQ
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