10-K: Strawberry Fields REIT Reports Strong 2025 Growth

Strawberry Fields REIT, Inc. reported significant revenue and net income growth in 2025, driven by strategic acquisitions and increased rental income, despite rising interest and operating expenses.

Summary

• The company's portfolio consisted of 133 healthcare properties (143 facilities) with an aggregate of 15,602 licensed beds across 10 U.S. states as of December 31, 2025.
• Rental revenues increased by $37.9 million, or 32.4%, to $154.999 million for the year ended December 31, 2025.
• Net income increased by $6.8 million, or 26%, to $33.306 million for the year ended December 31, 2025.
• Funds From Operations (FFO) increased to $79.567 million in 2025 from $60.193 million in 2024.
• The company acquired 19 skilled nursing and 1 assisted living facilities in 2025 for a total cost of $112.1 million, expected to generate initial annual cash revenues of approximately $12.1 million.
• Total indebtedness stood at approximately $794.5 million as of December 31, 2025.
• Approximately 48.5% of the company's annualized base rent is received from related-party tenants, who are affiliates of Moishe Gubin (Chairman and CEO) and Michael Blisko (Director).
• A significant legal proceeding filed in April 2024 was dismissed with prejudice on March 10, 2026, barring plaintiffs from refiling these claims, subject to any appeal.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a positive report, highlighting strong revenue and net income growth driven by strategic acquisitions, though tempered by rising expenses and significant related-party exposure. The resolution of a key legal proceeding further strengthens the outlook.

Positives

• Rental revenues increased by $37.9 million (32.4%) to $154.999 million in 2025, primarily driven by re-tenanting and recent property acquisitions.
• Net income increased by $6.8 million (26%) to $33.306 million in 2025.
• Funds From Operations (FFO) increased to $79.567 million in 2025 from $60.193 million in 2024.
• Adjusted Funds From Operations (AFFO) increased to $72.465 million in 2025 from $55.825 million in 2024.
• Acquired 19 skilled nursing and 1 assisted living facilities in 2025 for $112.1 million, expected to generate $12.1 million in initial annual cash revenues.
• Annualized average base rent for the expected life of the leases grew at an approximate 13.4% CAGR from $75.3 million in fiscal year 2019 to $142.7 million as of December 31, 2025.
• Adjusted EBITDA and FFO grew at an approximate 13.5% and 13.3% CAGR, respectively, from 2020 to 2025.
• Maintained compliance with all financial and administrative debt covenants as of December 31, 2025.
• The portfolio is diversified by geographic location across ten U.S. states and by tenant composition, with no single tenant accounting for more than 4.0% of annualized base rent.
• Benefits from Certificate of Need (CON) laws in nine of the ten states of operation, which act as significant barriers to entry and limit competition.
• Management team possesses extensive experience in healthcare real estate, operations, and finance, enabling identification of off-market acquisition opportunities.
• Well-structured, long-term, triple-net leases with an average remaining lease term of 7.2 years and average annual rent escalators of 2.8%.
• Approximately 89.4% of total annualized rental revenue is generated through 16 master leases with cross-default and cross-collateralization provisions.
• A significant legal proceeding (fourth complaint in Arkansas) was dismissed with prejudice on March 10, 2026, resolving a long-standing litigation matter.

Negatives

• Amortization expense increased significantly by $5.8 million, or 124.9%, in 2025, primarily due to the amortization of an asset associated with a new note payable related to the Kentucky Master Lease re-tenanting.
• General and administrative expenses increased by $1.8 million (25.6%) in 2025, mainly due to higher payroll expenses, including increased executive compensation and employee bonus costs.
• Interest expense, net, increased by $16.0 million (49.1%) in 2025, driven by higher bond interest from new bond series issuances, additional interest from a new note payable, and increased mortgage interest from a commercial bank loan facility.
• Foreign currency translation resulted in a loss of $34.837 million in 2025, a significant negative swing from a gain of $431 thousand in 2024.
• Dependence on related party tenants remains high, with 66 facilities (48.5% of annualized base rent) leased to affiliates of the Chairman and CEO and a director.
• Significant balloon payment obligations are due through 2029, including $94.7 million (Series A Bonds), $77.7 million (Series C Bonds), and $55.1 million (Series D Bonds) in 2026, and $94.3 million (Series B Bonds) in 2029, along with commercial bank term loans of $56.1 million (2027), $36.6 million (2028), and $52.3 million (2029).
• Cash flows from financing activities decreased by $138.4 million in 2025, primarily due to lower proceeds from debt and equity issuances and increased debt principal repayments and distributions.

Risks

• Risks and uncertainties related to the national, state, and local economies, particularly in Arkansas, Illinois, Indiana, Kansas, Kentucky, Missouri, Ohio, Oklahoma, Tennessee, and Texas, and the real estate and healthcare industries in general.
• Availability and terms of capital and financing.
• The impact of existing and future healthcare reform legislation on tenants, borrowers, and guarantors.
• Adverse trends in the healthcare industry, including changes relating to reimbursements available to tenants by government or private payors.
• Competition in the long-term healthcare industry and shifts in the perception of various types of long-term care facilities, including skilled nursing facilities.
• Tenants' ability to make rent payments.
• Dependence upon key personnel whose continued service is not guaranteed.
• Availability of appropriate acquisition opportunities and the failure to integrate successfully.
• Ability to source target-marketed deal flow.
• Ability to dispose of assets held for sale for the anticipated proceeds or on a timely basis, or to deploy the proceeds therefrom on favorable terms.
• Fluctuations in mortgage and interest rates.
• Changes in the ratings of debt securities.
• Risks and uncertainties associated with property ownership and development.
• The potential need to fund improvements or other capital expenditures out of operating cash flow.
• Potential liability for uninsured losses and environmental liabilities.
• The outcome of pending or future legal proceedings.
• Changes in tax laws and regulations affecting REITs.
• Ability to maintain qualification as a REIT.
• The effect of other factors affecting the business or the businesses of operators that are beyond control, including natural disasters, other health crises or pandemics, and governmental action, particularly in the healthcare industry.
• The failure of related-party tenants to fulfill their obligations under their leases or renew their leases upon expiration could have a material adverse effect on the business, financial condition, and results of operations.
• Tenants are subject to extensive federal, state, and local government healthcare laws and regulations, including those related to licensure, conduct of operations, prices for services, billing, and confidentiality of health information, with non-compliance potentially affecting their ability to operate or receive reimbursement.
• The healthcare industry is expected to face increased regulation and pressure in areas of fraud, waste, and abuse, cost control, healthcare management, and provision of services.
• Changes in Medicare and Medicaid program payments, including potential retroactive application and federal budget sequestration, could reduce tenant income.
• State laws similar to the federal Anti-Kickback Statute and Stark Law, which can apply regardless of the source of payment for care, may result in criminal and civil penalties, and loss of facility licensure.
• Violations of the federal False Claims Act, including those related to coding errors, billing for services not provided, or failing to report overpayments, can result in treble damages and significant civil penalties.
• The Civil Monetary Penalties law authorizes penalties for various prohibited activities, including presenting false claims or offering remuneration to federal healthcare program beneficiaries.
• Non-compliance with HIPAA Administrative Simplification and Privacy and Security Requirements, including breach notification obligations, can lead to substantial civil and criminal penalties.
• Requirements for licensure, certification, and accreditation, including Certificate of Need (CON) programs, are subject to change and may require facility alterations or approvals for ownership changes, with non-compliance resulting in penalties or loss of certification.
• Antitrust laws prohibit certain conduct deemed anti-skilled nursing facilities, with violations potentially leading to criminal and civil penalties.
• Healthcare industry investigations and audits by governmental agencies (e.g., Medicare Administrative Contractors, RACs, MICs) could result in substantial repayments or negative impacts on financial position.
• Environmental liabilities for the costs of removal or remediation of hazardous or toxic substances at properties could exceed or impair property value.
• Non-compliance with Title III of the Americans with Disabilities Act (ADA) or comparable state/local requirements could result in fines or damages.
• As an emerging growth company, the company is eligible for certain exemptions from reporting requirements, which may make common stock less attractive to some investors and lead to more volatile stock prices.
• Inflation risk exists as income from long-term leases may not re-set frequently enough to cover inflation, despite rent escalators and triple-net lease provisions.
• Exposure to foreign currency exchange rate changes between the Israeli Shekel and the U.S. Dollar due to bond issuances on the TASE.

Future Outlook

The company expects to grow its portfolio by pursuing opportunities to acquire additional healthcare properties, primarily skilled nursing facilities and seniors housing, including assisted living facilities. It may also expand investments to include medical office buildings, long-term acute care hospitals, and inpatient rehabilitation facilities. The strategy includes diversifying investments by tenant, facility type, and geography, and reducing dependence on related party tenants by developing new relationships with unrelated parties. The company aims to generate attractive returns for stockholders over the long term through dividends and capital appreciation, while maintaining balance sheet strength and liquidity. It anticipates generating sufficient positive cash flow from operations to meet ongoing debt service obligations and REIT distribution requirements.

Management Comments

• Our relationship with Infinity Healthcare provides us with unmatched insight into operating trends and industry developments.
• Additionally, our relationship with Infinity Healthcare provides us with operating flexibility with regard to evaluating potential new acquisitions or better understanding of operational issues pertaining to underperforming tenants.
• We believe our management team's unique experience across both skilled nursing operations and real estate and its extensive knowledge of the skilled nursing industry position us favorably to take advantage of healthcare investment opportunities.
• Additionally, our deep and broad relationships with industry operators have allowed us to identify and acquire skilled nursing facilities to which many of our competitors do not have access.
• We believe our management team's depth of experience in healthcare real estate, operations and finance provides us with unique perspective in underwriting potential investments.
• We believe the performance targets are reasonable, but readers should keep in mind that this investment involves a high degree of risk and they should purchase these securities only if they can afford a complete loss of their investment.
• The Company believes that its overall level of indebtedness is appropriate for the Company's business in light of its cash flow from operations and value of its properties and is generally typical for owners of multiple healthcare properties.
• The Company expects to generate sufficient positive cash flow from operations to meet its ongoing debt service obligations and the distribution requirements for maintaining REIT status.

Industry Context

StockSavvy.ai notes that the skilled nursing industry is experiencing increased demand due to an aging population and a shift towards lower-cost care settings, with a widening supply and demand imbalance. The industry's fragmented nature presents significant acquisition and consolidation opportunities, which Strawberry Fields REIT appears to be capitalizing on through its off-market deal sourcing and specialized expertise. However, the industry remains highly regulated, with ongoing pressures from healthcare reform and reimbursement changes, which could impact tenant profitability. The company's strategy to diversify its portfolio and tenant base aligns with broader industry trends seeking to mitigate concentration risks.

Comparison to Industry Standards

• The company's weighted average lease yield of 13.9% on acquisitions since January 2020 suggests a strategy of acquiring assets at attractive valuations, potentially outperforming typical healthcare REIT acquisition yields which often range from 5-8% for stabilized properties, especially in competitive markets.
• The company's FFO and Adjusted EBITDA CAGR of approximately 13.3% and 13.5% respectively from 2020-2025 demonstrates strong growth, which compares favorably to the broader healthcare REIT sector that has seen more modest growth rates, often in the mid-single digits, over similar periods, particularly given the challenges of the pandemic era.
• The company's reliance on related-party tenants for 48.5% of its annualized base rent is higher than typical for diversified public REITs, which generally aim for lower concentrations to mitigate tenant-specific risk and enhance corporate governance transparency, such as Ventas or Welltower which have highly diversified tenant bases.
• The average remaining initial lease term of 7.2 years with average annual rent escalators of 2.8% is generally in line with or slightly below the longer lease terms (10-15+ years) and similar escalator structures seen in other triple-net lease REITs, providing predictable cash flows but also exposing the company to inflation risk if escalators do not keep pace.

Management Changes

Corporate Governance

Legal Proceedings

• Joseph Schwartz, Rosie Schwartz, and certain companies owned by them filed a complaint in the U.S. District Court for the Northern District of Illinois in March 2020, related to property acquisitions. This complaint was dismissed on jurisdictional grounds in 2020, and no appeal was filed.
• Joseph Schwartz, Rosie Schwartz, and several companies controlled by them filed a second complaint in the Circuit Court in Pulaski County, Arkansas in August 2020, with nearly identical claims limited to Arkansas properties. This case was dismissed without prejudice.
• Joseph Schwartz, Rosie Schwartz, and certain companies owned by them filed a third complaint in Illinois state court in Cook County, Illinois in January 2021, with nearly identical claims limited to Kentucky and Massachusetts properties. Service of process was quashed on January 11, 2023. A new complaint filed in March 2023 was dismissed for want of prosecution and is currently under appeal.
• Joseph Schwartz, Rosie Schwartz, and several companies controlled by them filed a fourth complaint in the Circuit Court in Pulaski County, Arkansas in April 2024, with nearly identical claims. The court dismissed all rescission claims in November 2024 and, on March 10, 2026, dismissed the second amended complaint with prejudice, barring plaintiffs from refiling these claims, subject to any appeal. No appeal has been filed as of the filing date.
• The company intends to institute legal proceedings to collect outstanding amounts on loans related to five Massachusetts properties (purchased for $7.74 million with $3.1 million in advances) after the planned acquisition was not consummated. Four properties were foreclosed and sold for $4.4 million in July 2022, and the company took title on the fifth property with an estimated fair value of $1.2 million in December 2022.

Related Party Transactions

• 66 of the company's 143 facilities (48.5% of annualized base rent) are leased to tenants affiliated with Moishe Gubin (Chairman and CEO) and Michael Blisko (Director).
• Moishe Gubin and Michael Blisko hold beneficial ownership interests, typically around 50% each, in many of the related-party tenants.
• A new, replacement master lease was entered into on February 20, 2024, for properties affiliated with Moishe Gubin and Michael Blisko, with an initial annual base rent of $14.5 million and 3% annual increases.
• The company purchased an $8 million note held by Infinity Healthcare Management, a company controlled by Mr. Blisko and Mr. Gubin, on June 14, 2022.
• The company leases its office spaces from a related party, incurring rental expense of $218,000 for the year ended December 31, 2025.
• As of December 31, 2025, approximately $0.8 million was on deposit with OptimumBank, where Mr. Gubin is the Chairman of the Board.
• Straight-line rent receivable from related parties was $16.324 million as of December 31, 2025.
• Tenant portion of replacement reserve from related parties was $8.759 million as of December 31, 2025.
• Notes receivable from related parties totaled $5.823 million as of December 31, 2025.
• Rental income received from related parties amounted to $70.020 million for the year ended December 31, 2025.

Stakeholder Impact

• Shareholders: Potential for attractive returns through dividends and capital appreciation due to strategic growth and REIT status. Risk of dilution from equity issuances (ATM program, OP unit conversions). Positive impact from the resolution of significant legal proceedings.
• Employees: Increased payroll expenses and employee bonus costs. The CEO received a compensation adjustment in the form of OP Units, aligning interests with company performance.
• Tenants/Operators: Subject to extensive healthcare regulations, reimbursement changes, and competition, which can affect their profitability and ability to meet lease obligations. Close relationships with management provide enhanced oversight and market intelligence.
• Creditors/Bondholders: Debt is secured by properties and subject to financial covenants. Balloon payment obligations present refinancing risk, but the company has maintained compliance with covenants.
• Regulatory Authorities: The company and its tenants are subject to extensive federal and state healthcare regulations, with ongoing monitoring and compliance efforts.

Next Steps

• Acquire additional healthcare properties in concentrated geographic areas, primarily skilled nursing facilities and other healthcare facilities providing services to the elderly.
• Negotiate well-structured net leases with initial terms of 10 years, tenant options for 5 to 10-year extensions, and rent escalators.
• Leverage existing and develop new operator relationships, with a goal to reduce dependence on related party tenants.
• Utilize prudent investment underwriting criteria based on detailed analysis of real estate and healthcare operations.
• Monitor the financial and operational performance of tenants and industry trends.
• Utilize targeted leverage in investing activities, aiming for a ratio of debt to asset fair market value in the range of 45% to 55%.
• Institute legal proceedings to collect outstanding amounts on loans related to the Massachusetts properties and assert related claims against sellers and principals.
• Make regular quarterly dividends to common stockholders from cash flow from operating activities, with the annual dividend amount no less than 90% of REIT taxable income.

Key Dates

Recommendation

The company demonstrates robust financial performance with significant year-over-year increases in rental revenues, net income, FFO, and AFFO. Its aggressive acquisition strategy, coupled with a diversified portfolio and strong management expertise in a growing healthcare sector, positions it for continued expansion. While there are notable risks, including high related-party tenant concentration and substantial debt maturities, the company's consistent compliance with covenants, strategic growth, and the recent dismissal of a significant legal proceeding suggest a favorable outlook for long-term investors seeking exposure to the healthcare REIT sector.

Keywords

REIT, Skilled Nursing Facilities, Healthcare Real Estate, Post-Acute Care, Assisted Living Facilities, Triple-Net Lease, SEC Filing, Real Estate Investment, Healthcare Industry, Acquisitions, Financial Performance, Debt, Corporate Governance, Risk Management, Dividend, Tel Aviv Stock Exchange, Medicare, Medicaid, Related Party Transactions