Strawberry Fields REIT, Inc. (STRW) Earnings Call Transcript

Good day and thank you for standing by. Welcome to the Strawberry Fields REIT third quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jeff Beitner. Sir, please go ahead.

Good afternoon and welcome to Strawberry Fields REIT's Q3 2026 earnings call. I am the Chief Investment Officer and joining me today on the call are Maish Gubin, our Chairman and CEO, and Greg Flamian, our CFO. Yesterday evening, the company issued its Q3 2026 earnings release. which are 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 the environment in 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 the explanation and reconciliation of these measures to the comparable GAAP results included on the Non-GAAP Measure Reconciliation page at the back of our investor presentation. And now, onto discussing Strawberry Fields REIT and our Q3, 2026 performance. I wanted to start by sharing some key highlights for the quarter. During the quarter, the company collected 100% of its contractual rents. On September 9, 2026, the company completed the earlier announced acquisition of a hospital campus comprising a licensed 60-bed hospital, 99-bed skilled nursing facility, and ancillary medical office buildings near Kansas City, Missouri. The purchase price was $10.4 million and the company funded the acquisition from the balance sheet. Hospital Campus was added to an existing master lease of a tenant in Missouri with initial base rent of $1.04 million and subject to 3% annual rent increases. Subsequent to quarter end on November 1st, 2026, the company entered into a purchase agreement for a 99 bed skilled nursing facility in Angola, Indiana for $15 million. The company will fund the acquisition with $14 million from the balance sheet and the seller will take $1 million in OP units. The facility will be added to an existing existing master lease for our tenant in Indiana. Initial base rents will be $1.5 million and will be subject to 3% annual increases. The acquisition is expected to close before year end. As I mentioned in last quarter's call, we have been very busy on the deal front. Our pipeline currently has 400 million of deals, of which we anticipate closing 123 million of these deals before year end. Assuming we do get these deals closed, we will have closed over 130 million of acquisitions in 2026. which falls right in the middle of our target acquisitions for the year of $100 to $150 million. Yesterday, the Board of Directors approved the Q4 2026 dividend, which will be 17 cents a share. The dividend will be paid on December 30th to shareholders of record on December 16th. I would now like to have Greg Flamian, our Chief Financial Officer, discuss the quarter-end financials.

Thank you, Jeff. And welcome, everyone, to the Strawberry Fields, the third quarter earnings call. Let's start with the Q3 balance sheet. Total assets were $844.1 million, a decrease of 41.1 million, or 4.6% compared to December 31, 2025. The year-over-year decline in assets was driven by lower fixed assets and cash balances at the end of the year. On the liabilities and equity side, lower debt balances were driven by third quarter bond redemptions. was lower year over year primarily due to a decline in accumulated comprehensive income related to foreign currency translation adjustments and offset by atm common stock sales Continuing now to the consolidated statement of income for the nine months ending September 2026. 2026 revenue was $121.20 million, up 5.1 million compared to September 30, 2025. This represents a 4.5% increase, which was driven by the timing and integration of properties acquired in 2025. While we experienced higher revenues, the income growth was offset by higher depreciation, which was driven by new property acquisitions. General and administrative expenses were also higher due to higher closing costs, corporate salaries, and other operating expenses. These increases were offset by lower amortization expense. Looking at other expenses, the company recognized a $24.6 million foreign currency transaction loss resulting from the exchange rate differences associated with redemption of its three shekel denominated bond series during the third quarter of 2026. As a result, year to date net income was $3.7 million compared to 24.5 million for the nine months ended September 30th, 2025. Excluding the foreign currency transaction loss, year-to-date net income would have been approximately 28.3 million, an increase of 3.7 or 15.2% over the comparable period in 2025. While reporting net income declined year over year, underlying earnings increased primarily due to the contributions from properties acquired during 2025. Going on to the next slide, we will now review the quarterly income statement comparison for the third quarter of 2026 versus the third quarter of 2025. Third quarter of 2026 revenue was 40 million, an increase of .3 million compared to the third quarter of 2025. expenses were point 6 million lower than prior than the prior year period. Lower amortization expense and property tax expense were partially offset by higher general administrative expenses. The company reported a net loss of $14.8 million for the quarter, primarily due to a $24.6 million foreign currency transaction loss, recognized in connection with the redemption of the Series 3 shekel denominated bond series mentioned earlier. Excluding the foreign currency transaction loss, third quarter net income would have been approximately $9.8 million, representing an increase of approximately $1 million, or 11% compared to the third quarter of 2025. Finally, I'd like to end my presentation with some financial highlights. Our 2026 projected AFFO is 74.5 million representing an 11.1% compound annual growth rate. The 2026 projected AFFO per share growth is 10.1%. The 2026 adjusted EBITDA is $129.5 million, representing a 14% compound annual growth rate. Our yield on leases is 14.3%, and the company's net debt to net asset ratio currently sits at 48%. As of September 30th, 2026, our dividend was 17 cents a share, representing a 5.3% yield and an AFFO payout of 50.2%. This concludes the financial portion of the earnings call presentation. I'll now turn it back over to Jeff Beitner, who will walk us through additional portfolio highlights.

Thank you, Greg. Looking at our portfolio highlights, our portfolio currently has 145 facilities located in 10 states. These facilities are comprised of 15,655 licensed beds. Our total asset value at acquisition is $1.1 billion, Currently, our portfolio has 16 consultants advising the operators. The weighted average lease term is 6.8 years. And as we're proud to report, our tenants continue to do better and better each quarter and our rent coverage is currently at 2.24x. Our net debt to adjusted EBITDA is 5.4. Our portfolio, on the portfolio, we continue to collect 100% of our rent. And as I mentioned earlier, we have an acquisition pipeline of $400 million, of which $123 million we expect to close before year-end. And with that, I'll hand it over to Mark Rubin, our Chairman and CEO, to talk about the portfolio.

to continue with the presentation. All right, thank you. Thank you, Jeff. I wanna start before I present the rest of the slide deck. I wanna just go back to slide four and just talk about, like if you look at our quarter year over year, our numbers are good. It's relatively flat and we're still And our net income would have beat last year's third quarter by about $1 million if it wasn't for the foreign currency transaction loss. And I want to add a little color because I'm sure the folks that are out there are going to want to ask about it. So might as well just talk about it now. The foreign currency transaction loss was an accumulation that for the last year those that are good at accounting here, we accumulated OCI over the years and the actual expense already found its way into interest expense throughout the years as we had, because we quarter over every quarter, we mark our balance sheet to spot price to the shekel to dollar, And when this quarter ended, during that quarter, we had paid off three bond issuances. And the reason we paid off the three bond issuances is because the bond market, you price at the day of the market, and we just had the bad luck of the days that we went to price the market immediately. you know, a bomb hit or something in Israel or whatever occurred, which ended up causing the interest rate to be too high of a rate on the bond. So as a good custodian of our company, we had a backup plan all along, and we ended up taking, instead of the rate that was being quoted in Israel, even though we would have saved 24 million of interest of a currency exchange the interest rate in Israel is about a point or a point and a half higher than what we ended up taking which i think our at the at september 30th was 6.66 was the interest rate um i believe on that money versus eight and a half in Israel and so So we basically saved the two points on the interest expense and had to then realize this currency loss, which was already in our retained earnings. That's why if you go to the balance sheet, the equity didn't change. It's just, it moves it into from an OCI, which would have been expensed as other comprehensive loss to now be on our regular income statement above the line. And that's what this is. So to anybody concerned about it, it's a one-time event. In the grand scheme of things, the way I'm looking at it is, you know, We replaced it with five-year money at SOFR 275, which was two points cheaper almost than what we would have been in a fixed product, which would have had a prepayment penalty. And so we amortized it over five years, this 24 million turns out to be less than 1%. We ended up ahead of the game. I'm going to go on with slide six, and I'll also start by saying thank you, everybody, for joining us today. Happy with where we are, happy to present that we're going to be, which Jeff brought up already, that we should end this year Ahead of budget as far as buying, it happens to be unfortunately, it's at the end of the year as opposed to the beginning of the year. So the full financial results next year should be killer compared to this year and previous year. That being said, if you look over the last six years, our AFFO, our growth rate is over 11%. And you see it went from 43 million to 74 million. And we like that. That hopefully should continue to grow. The next slide after that is just talks about our portfolio growth. Again, this is based on what we, is our 10 cap value on our rents is really what it is. It's still a 13% growth rate, which is good. Reality is we probably are doing ourselves a disservice and it's probably more value than we're saying. And that's we'll look at the non-GAAP spreadsheet at the end of the presentation. But even so, being conservative at a 13 percent growth rate over the last six years is still pretty good. Our stock price is holding up. Unfortunately, yesterday there was a stock crash, which wasn't great. I think we ended the day, you know, close to 1260, 1270, something like that. But otherwise we're holding our own. We feel we're really undervalued. At some point we hope that we get recognized and the stock price goes up. We're going to keep doing what we're doing though. Most of the long-time shareholders that exist are holders, not sellers, and they're happy with the growth and happy with what we're doing, get a lot of compliments and I'll keep doing what we're doing and hopefully that's succeeding. Slide nine just basically talks about the difference between us and them. We're trading at a nine and a half multiple. Meanwhile, our closest peer is trading almost double, which is painful for us every time I see this. We're going to keep pushing and we're going to bring in better yields. We're going to bring in better returns. We're going to keep doing what we're doing. We're committed to the discipline growth, the discipline, you know, how we buy, um, As we've spoken to a lot of you folks, it's pretty a wash, rinse, repeat how we do business here. And as Jeff said earlier, again, we have all of our rents being collected. So our portfolio is performing. Our dividend, like we announced, is staying flat for this quarter. But we're proving that we're consistent, a consistent return for our shareholders, which And we expect that to continue. On the next slide, we just talk about our stock performance, but even more important really is our true return at over 10%. I mean, I think that kind of follows the value of the AFFO per share as well. like meaning the market is discounting us at a multiple, but at the end of the day, it's staying consistent with what the stock price is growing at that same 10% clip, because at least our AFFO is growing the same 10% clip. So from that point of view, at least that's good. and the stock price performance as you see over here. We're above where we started, but hopefully, hopefully on a bigger chart, you'll see the growth rates been good in the stock and hopefully it continues to improve. Again, we're going to be at meet week. whatever it's called, in two weeks from now in Atlanta. And last year we were at that. It was when people were screaming out our name in the hallways and people were telling us we're a unicorn, keep doing what we're doing. I was actually very positively feeling about that. So now when we talk to people, I'm not – I always – proud of what we have, but you know, the fact is we're 90 over 90% skilled nursing and exactly what we're still doing and continually growing in the skilled nursing space. You know, oddly enough, the one deal that we made came with a nursing home, a hospital and an MOB. Um, But all the next deals that we're going to close by the end of the year are all SNFs. The next slide, just the same thing, pure comparison, our AFFO payout still remains way below everybody else. And that's giving us, I mean, we're doing all these deals without raising any equity. So we're going to close, like Jeff said, I think 120, 120, 130 million, probably at $120 million or $130 million in the next two months. And we're using our own cash. We're not raising any equity. We can't dilute our shareholders when the stock price is down. So anyone owning our shares today is just going to make more money tomorrow. without us diluting anybody. So the per share growth was going to be good. And again, that's why our AFFO per share growth rate is higher than all of our peers, which is the slide to the right. On the next slide, Again, this payout ratio, as Greg said earlier, is right around 50%. And we announced that it's going to stay that way at this point for this quarter. The AFFO share growth again is over 10%. And again, that matches almost exactly what the stock appreciated over the last 12 months with the same 10.1 growth rate. So again, we're at least a marketplace. is not lowering our multiple. So that's a positive. I've always been the optimist for good or bad. Next slide just talks about our debt. We're past this now at this point, so maybe we'll take this slide out of this. the slide out of this deck because at one point we were worried about the bullet. But at this point now, 26 ends the year, quiet, 27, 28, very little. It's the same amortization. It's about 20 million of principal being paid down a year, maybe a drop more. 29 is the next bullet. bullet which has two one-year renewals and it has bond renewal at this point you know the Israeli market wasn't good in the last couple of deals even though they like to claim that they did good by me because everyone else would have been even worse but to my point of view is I'm stronger than everybody else we should have gotten treated a little better so when this thing renews most likely we probably just pay it off often move towards an exit of the Israeli market. But we'll see what happens. It could be the market gets super strong and whatever I just said, I'll have to eat my words. That being said, There's a slide later that talks about what valuation you want to put it as a net assets, but based on a 10 cap, net assets were at 48% leverage with a net debt to EBITDA of 5.4%. Those are good numbers. Blended interest rate of 5.8%. So super strong. We still like HUD. We're working our way still through the HUD world to be be able to take a bunch of our buildings to HUD. At this point, we have a little throughput issue that we have to work ourselves through, and God willing, that'll happen in the next few quarters, which case hopefully by the end of 27, we should be able to have maybe another $100 million sitting in the HUD debt as opposed to conventional or Israeli debt. On the next slide, as I've been saying the last few years, it's become one of my favorite slides, where it just shows you how diversified we are with our rents and diversified by states. That's going to continue the deals that we're doing now. Two of the deals that we have are going to be two new states. I think we've announced one of them is Florida and the other one we didn't announce yet. And then everything else is going to be, um, is going to be Indiana, the state we're ready to get in, of course, and Texas, which we're ready in. So all good, and all of the deals that we're doing now are going to be third-party operators, nothing. So that, I think we were at 42% once this transaction is done, and sometimes first quarter, I think that number is going to drop pretty good. Next slide. Slide 16, just given statistics of the facilities averaging a 77%, I've talked about how that doesn't really matter. And I'll just gloss over this slide and go to 17. And then on 17, we're just basically talking about what our map looks like and percentages of facility types. So good, it hasn't changed really quarter over quarter and it remains the same. You know, the way we buy that we've talked about over the years is 10% cash on cash return day one before leverage, then we add a little leverage, which increases our return, And all the deals that we're doing today are all the 10 cap purchases. All the math is exactly what we've told everybody. So anybody modeling our financials, we can model, you know, the 130 million or so that fully next year will add up to about $13 million of rent. And we got a couple of other deals that are, that won't really hit the tape, but we did a couple of deals where we had We increased the rent and then paid something out to our tenants so that will increase revenue and And we got a couple other smaller things, just cleaning up the portfolio a little bit to the positive. That'll increase our revenue. On our last two slides, the first one is just basically showing nine months ended AFFO or FFO to AFFO. So look at the net income, it's really down. Depreciation and amortization, but get you to FFO. Again, that's because of the foreign currency. But then once the straight line rent and the reversal of foreign currency, your AFFO gets to be 55 million 879, which is $two and a half million higher than 25. And EBITDA, Again, net income, adding back the depreciation and interest expense keeps you below, but when you want to add back the foreign currency and the straight line rent, you end up with an adjusted EBITDA that's $3.5 million higher than it was last year. last year nine months ended so that's pretty good um the next slide or the last slide um which I like that we put this in here because if you guys are following skilled nursing at all, you see that a lot of the deals from the other guys are at eight and a half caps or eight and three quarter caps. And basically what this is telling you that we're marking our whole balance sheet to, not a balance sheet, we're marking like all these presentations to a 10 cap. And we're showing net assets at a million, or 67, let's say, and then we're saying that our net debt to net asset is 48%. But really we could be using the low end of this and saying really our net assets is really a billion, 673, and therefore our net debt to net asset is 42%. So to the folks that are out there that are looking for a lower net debt to net asset, Really, you can hang your hat on saying that a cap rate of 875 is not unreasonable, especially when you see all these other deals, you know, CareTrust and the other guys are doing that are at eight and a half caps or even lower. So with that, I want to thank everybody for joining us. I don't want to pass it back to the operator.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment while we compile our Q&A roster. Our first question is going to come from the line of Gaurav Mehta with Alliance Global Partners. Your line is open. Please go ahead.

Thank you. I wanted to go back to your comments around the $120 million portfolio that you're looking to acquire in next couple of months. Can you maybe talk about where you expect your leverage to be after closing that portfolio and how should we think about capacity to make more acquisitions in 27 after that portfolio. Yes, hi, Guarav. Thank you. Thank you for joining us. And thank you, as always, for that's a good question you're asking. We model out to be below 50 percent.

in our portfolio once all of these deals close, using current cash and raising our debt a little bit to be be able to fund everything. So we should, when all these deals close, hopefully by 1231, we should still be below the 50%. And just to remind you, we've always gave guidance to say that we're... And we're looking, our policy is between 45 and 55. And so, you know, 50 is fine. And again, if we really look to, you know, lower cap rate, and like the last thing I said in the presentation, right, we're probably closer to 40-50. 45% at 8.75 cap.

Thanks for that color. The second question I have is on the pipeline. You mentioned 400 million of the pipeline. Can you maybe provide a breakdown on what's in that pipeline? Are you looking at more portfolios? And then what kind of impact have you seen of higher rates on your pipeline?.

So I really, I should let Jeff answer that, but I'll just take away some of his thunder and I'll just, you know, the big thing The biggest part of that portfolio of the pipeline, we have a deal that's very, very likely to get done, and it's going to be a really sizable deal. So assuming we can work, we can get that deal on the contract, then you're talking about a first quarter deal that will meet majority of our, or more than our budget for the year. and then everything the rest of the year will be gravy. I don't wanna make anyone crazy today, but like the reality is assuming we go on the contract, you'd have to base an assumption on where our stock price goes to see whether or not we're going to end up doing a capital raise for a portion of it. It would seem like most likely we would do a capital raise because of the leverage. But that's kind of what's coming down the pike. So when we speak next, or maybe some of you individually will have conversations with as soon as we get something under contract, because that would be one that we would have to announce and it has to do the regular traditional audit because it's a bigger portfolio acquisition. So that's the gist of the. first bigger deal that that's announced and that's pretty, pretty likely that it will occur. And with that, I'll give it to Jeff for you for him to talk further about the pipeline. And I'll and the deals that we're working on.

Thank you, Mahesh. No, as we're heading towards year end, we're working on three or four deals. One of them is we announced it's the skilled nursing facility in Angola. of them also, Maish mentioned in his comments that it's going to be done in Florida. And then there's another portfolio, a sizable portfolio that we're looking at as well. And these have all been deals that, well, a few of them have been deals that we've been working on since the beginning of the year, but it's just a matter of the deals play themselves out and they have a life of their own. working very hard and diligently to get them closed before year end. So total, as I mentioned in my remarks, it's roughly about 123 million of deals that we're aiming for to close before 1231.

Yes, like, likely, though, for first quarter of 20, I mean, maybe I'm getting ahead of ourselves. And I thought that's what Gaurav was asking is, I think, for first quarter of 27, based on that total pipeline, there's a likelihood that, I know we have one deal that's like near Houston, smaller deal and then we have a couple of other things but then we have this big deal and if we pull off this big deal That should be a nice change that will bring us over $2 billion in assets, potentially based on market value. And it should be, I don't know about a game changer because everything is a 10 cap, you know, basically a 10. This one is going to have a different little bit of different of a metric, a longer lease, a smaller cap, a smaller cap rate. Um, And then when you blend it out over the life of the... It's a 10-cap minimum. But that being said... it should be an exciting first quarter and it'll change, it'll change us just be by making us a little bit, a little bit larger, but, And hopefully that happens. I'm excited about that. All right. Thank you. That's all I had. Thank you. Be well. Thank you.

Our next question is going to come from the line of Richard Anderson with Cantor Fitzgerald. Your line is open. Please go ahead.

Hey, thanks, Doug. Good morning or afternoon, wherever you are. So I'm curious, Moishe, if you have any thoughts about midterm elections impact on kind of oversight from politicians in the skilled nursing space and you all want the same thing, good quality care for your residents, but they could be needling from for property owners like yourselves. So I'm just curious if you've got your antennas up at all with a new political landscape in front of us now. And by the way, let me just finish the thought and how that might change. You got a lot of stuff in front of you potentially, but how that might change the pipeline going forward. Sorry. Yes, hi Rich.

Yes, you're welcome. I appreciate the question. I could tell you that right away, one of, I don't want to give away what we didn't announce yet, but one of our portfolios that we're buying, this is a bigger deal that God willingly closed before the end of the year. is in a state that the blue plan, the blue one on that deal, and they've already announced that they're going to raise the Medicaid rate for nursing homes for that state. So like right away, there's a boom factor. Financially, there's a boon, which is not unusual. Over the years, you know, when blue states or when it's Democrat-led government in that state, typically the tradeoff's been, you know, more money to pay to the nursing homes. And the trade-off to that is a lot more regulation, not in the sense of more regulation, but in more sort of supervision of that regulation. So, historically, Illinois, or at least the city of Chicagoland where it's blue and the rest of the country rest of the state is actually red. But the city of Chicago, you know, the revenue is usually there, you know, or yes, basically. But the way they the way they regulate has been, aggressive, really aggressive to the operator, and very quick to fine. And it's been like that. And I've seen that. I'm a historian. I study. This is the main business I've been in since my career started as an accounts payable bookkeeper in a nursing home in 1990, right around the beginning of 98. And this is the way it's always been. The Republicans will leave you alone. but try to lower your rates, and the Democrats will raise your rates, but not leave you alone. And so a good operator really doesn't care much either way, would prefer more revenue, but really wants to take care of the residents. And which is the way I was as an operator. And now as a landlord, I'm trying to find tenants and push for the tenants to give good care, though I don't have control over the care they give. Um, so yes, this was a midterm election that I think, um, To some benefits, Collins losing in Maine, She was a huge proponent with Elizabeth Warren that they wanted to attack health care REITs and owning nursing homes. And with her being out of the picture, that should also improve a little bit of the gusto from the Senate to go attack REITs REITs or equity funds that own the real estate in the nursing home world and the hospital world. So, that should be an improvement. But for us, fundamentally, the way I ended up being where we are in Strawberry is I found graduating college and taking a job as, you know, in the bookkeeping at a nursing home, not knowing I would fall in love with wanting to take care of people. And I was always in hospitality before that, you know, with, uh, with the catering business in New York and all, but, um, you know, from that minute on of where I started working at the nursing home, and like caring for people. Like it's always been anyway, philosophically, you know, we're doing, and similar also at my bank, we're doing good by the world at the same time when we get money doing it, but we're not looking to not, you know, know, do good and try to find money, you know, by not, you know, hopefully you guys understand me. I may have not too articulate today, but the, the, uh, the end of the day is I'm a big, big, you know, in our case, we're a big fan of when we, when we find the tenants and do what we do is, is care is number one anyway. Um, and. And I don't really think, Rich, at the end of the day, if you sum it all up, I think the benefits are already coming in that's going to be good stuff. But we know already the negatives are going to be where it's going to be more regulation and more enforcement of the regulation and more fines. They say the more things change, the more things stay the same. That's probably one of the quotes you could use for one of your articles you write. But that's basically what ends up happening, right? The person who gives good care is going to be fine. And yes, and we're not avoiding any states more than we've already been avoiding, meaning I don't look at deals in Massachusetts, Connecticut, New York, California. California, and we still avoid states where there's not enough population. We're not going to buy in Alaska. We're not going to buy in Hawaii. We're not going to buy in Wyoming if there's only X amount of facilities in the state. So we're limited to where we could have a big enough portfolio to... so all right I hope I answered you I'm sorry I didn't um.

Yes just give those politicians some soup and you'll be fine So the other question I have is just looking at the the map of all the different assets on page 17 of your deck. you're moving into Florida. So I'm, you know, I'm just looking at the cluster in the Midwest, but then you have to make, you know, some stuff on the outskirts. Is there any kind of asset recycling opportunities here? And maybe with one intention being to build a greater presence in Florida. I'm just curious how you're thinking about all that on a go forward basis. Thanks. Yes, so that's a good question and it's a point that I should have made and I didn't. So our.

portfolio that we're buying that we didn't announce exactly, hopefully in the fourth quarter in the next month or two, is in the Midwest in a state that we're not in and it's a new operator. So that'll fill in the cluster in the middle. And in the Florida deal, it's a sale lease back and the guy who's selling has been in the nursing home business for years and part of this arrangement is once we close this transaction it's It's expected that they have six other buildings in Florida or they have an ability to buy six more buildings in Florida where we would buy it and then lease it back under a master lease. So we didn't expect it to be a one-off. The reason why we were able to do a one-off, you know, as a starting point before getting to a bigger is because Infinity. which as you guys know, as I'm a related party to, and some in ownership, at least not in operations, is now based in Florida, been there for between five and ten years, and the corporate nursing and the corporate operation team that They're all Floridians. And so they, you know, a bunch of them are from Tampa area and the others live, you know, South Florida, Fort Lauderdale and Miami. And so, this as a one-off, it was basically a hedge bet because I went to Michael and I said, Michael, we have this deal. It's basically something we wouldn't even look at. And he says, well, do the deal. If the numbers work and worst case scenario, the team here can manage it because we live here and everyone Florida, even though we don't operate in Florida today, we know the Florida landscape. So that was why we're willing to do this. This would be our first real one off, but it's a hedge bet. So that's the plan. I'm really hoping that this ends up being a master lease of seven facilities. in the next 18 months, welcome. Sounds good. Thanks very much.

Thank you. Thank you. And our next question is going to come from the line of Mark Smith with Lake Street. Your line is open. Please go ahead.

Hi, guys. First off, just a question on P&L. G&A came in a little lower than we'd expected this quarter. Is that sustainable, or will we see that kind of come back up here in the coming quarters?.

Greg can add more color, but I think if you were comparing it to, what was it, last year around this time was when the company gave me stock options. I assume there's two things in the G&A. Or I'm not assuming. I know there's at least two things in the G&A. One is finance. costs from doing the line of credit in the second quarter. So if you look at last quarter, we had a bunch of money in there. That was really a one-time event. And then if you look at against last year, you would see a compensation that was a catch up and it's lower now. I think Greg can probably expand on what I just said and maybe give you even more color.

Yes, we don't expect to have, I guess, any of these one-off events in December. So I would expect G&A to kind of be in line with where we're at right now, I guess, in regard to Q3. So that helps you out with your analysis. again we don't expect anything going forward that should be higher than where we're at right now.

I guess in regard to the rate for next quarter. Okay. And then second question that I have is just curious if you guys can talk at all about this potential transaction in Arkansas, maybe selling off some of these facilities, any insight you can give us on, you know, if that's going to go through and potential impact. Yes. So that's a.

Good. That's another thing I glossed over accidentally. So that transaction was, you know... It's an option that we gave the tenant. We usually don't give options. It's that option. We have one other option out there. And I think they've been tenants right now for, I don't know, like six years, maybe a little longer at this point. And so the deal that we made at the time, so when we bought those facilities, we bought those facilities. facilities, um, and at a relatively inexpensive price, um, with the turnaround of me and my partner, Michael, fixing these facilities. So we were the operator at the time and we didn't get compensated, you know, other than the net income from the operator point of view. And we took these buildings that we got a great deal on, And we worked hard and turned them around and made them worth a lot more. And we were able to then pass it along to the next guy, who was a current tenant, and they've done a fantastic job there. And so, you know, they've been waiting patiently. for the legal issue that's been outstanding between the people who sold it to Strawberry. And we beat those guys in court. now it's been three times. They got one last appeal for like the Supreme court or something, but they lost fair and square. And when they lost the last time it gave the ability for our current operator to exercise their option. They lined up financing. They're cashing out like between 50%. and $100 million on this transaction. So they're going to pay us off. They're going to buy it from us and they're going to have a nice cash out and good for them. They've worked hard, they've done a good job. And it's partially those proceeds from that. We're doing a 1031 so that we don't have to pay because otherwise we'd have to dividend out all the capital gains. the true capital gain is around $60 million on this deal. And that 60, we're going to parlay into using cash to buy the deals that we're closing. So it's imminent. We, we're waiting for one letter, one, one last letter to come in from the government to allow the transaction. which is going to come, just question is timing. We've been waiting already two weeks for it. And there's a likelihood the deal closes next week. And when the deal closes next week, I think at this point, I don't even know if we have to do an 8K because we announced today talking about it, right? But it's going to, it was in the 10Q, but it's once that deal closes, that money is going to be sitting there waiting to be spent on the new deal. and when you net it all together everything we did we're still going to net out with a higher rent number going forward than what we have now. So with all the deals coming in versus getting paid off on that deal, do you modeling it out, you'd probably take the current number and probably add, I don't know, like three, four million dollars of additional rent or something like that is going to be the change all in. so it'll be strong. I mean, it's, and, and, and then we get rid of an option that's, that's been haunting me that someone's going to exercise. And now, you know, got one last option. I think it's like 28 million bucks or something like that in Southern Illinois. And that's probably, those guys are making a lot of money. So that's probably going to happen. I, I assume in 27 sometime, but we expect to buy, you know, higher than the range or the top end of the range of 150 million bucks in 27. And in the grand scheme of things, we'll just, I think Rich used the word cycle through or whatever the word was to recycle. We'll get rid of properties that we've had that have an option to go into properties that don't have an option most likely. I can't say that I'm not going to give an option to somebody if the deal makes sense. But yes, we're poised to keep chugging along positively and to the same or better than what we've been.