Executive Summary / Key Takeaways

• Strawberry Fields REIT ($STRW) is a specialized, self-administered real estate investment trust focused predominantly on triple-net leased skilled nursing facilities (SNFs), comprising over 91.5% of its portfolio. This pure-play focus positions the company to capitalize on the demographic tailwinds of an aging population and the essential, government-backed nature of SNF care.
• The company demonstrates robust financial growth, with projected 2025 Adjusted Funds From Operations (AFFO) of $72.7 million, a 28.2% year-over-year increase, and a 13.3% CAGR since 2020. This growth is fueled by a disciplined acquisition strategy, targeting a 10% unlevered return and 1.25x rent coverage on new deals.
• STRW maintains a strong liquidity profile and flexible capital allocation, utilizing operating cash flow, ATM programs, and diverse debt sources, including HUD-guaranteed loans and Israeli bonds. The company adheres to a conservative leverage target of 45-55% debt to market cap and consistently collects 100% of contractual rents.
• While not relying on proprietary technological differentiators in the traditional sense, STRW's competitive moat is built on its self-managed operational model, deep industry expertise, and strong, localized tenant relationships, which enable efficient asset management and disciplined growth.
• The company's dividend policy emphasizes consistency and growth, with a recent 14% increase to $0.16 per share in Q3 2025 and a low AFFO payout ratio of 46.8%, allowing substantial capital retention for future acquisitions and long-term shareholder value creation.

The Enduring Harvest: STRW's Strategic Foundation in Skilled Nursing

Strawberry Fields REIT, Inc. ($STRW) has meticulously cultivated a specialized niche within the healthcare real estate sector, establishing itself as a leading pure-play owner of skilled nursing facilities (SNFs). The company's journey began over two decades ago, rooted in the operational expertise of its founders, Moishe Gubin and Michael Blisko, who acquired their first SNF in Indiana around 2004. This hands-on experience in facility operations, which expanded to 33 properties by 2015, laid the groundwork for the formation of Strawberry Fields REIT. Since commencing operations as an UPREIT structure in June 2021 and becoming publicly traded in September 2022, STRW has consistently demonstrated a disciplined, long-term growth strategy centered on the ownership, acquisition, financing, and triple-net leasing of these essential healthcare properties.

STRW's overarching strategy is to capitalize on the resilient demand for skilled nursing care, driven by the undeniable demographic tailwind of an aging baby boomer population. This sector is characterized by its essential nature, often government-funded through Medicare and Medicaid, which provides a degree of insulation from economic cycles and inflation. The company's portfolio, as of September 30, 2025, comprises 142 healthcare facilities across 10 states, with a dominant 91.5% concentration in skilled nursing facilities. This focused approach differentiates STRW within the broader healthcare REIT landscape, where some larger peers are increasingly diversifying into assisted living or other healthcare property types.

The company's competitive positioning is largely defined by its operational model and disciplined acquisition strategy, which collectively serve as its primary differentiators rather than proprietary technology. Unlike some competitors that might leverage advanced property tech for tenant experience, STRW's strength lies in its deep understanding of the SNF business, forged from its founders' operational background. This allows for a highly selective acquisition process, where every deal must fit a strict underwriting "box" requiring a minimum 10% unlevered return and a 1.25x rent coverage on day one. This rigorous approach, coupled with a strong preference for master lease structures (89% of facilities are under master leases), provides stability and predictable revenue streams.

STRW's self-managed structure also offers tangible benefits, enabling faster decision-making and fostering strong, localized relationships with its tenant-operators. This direct engagement, including a nurse consultant who reviews every facility survey and regular calls with operators about care quality, enhances asset management and contributes to the company's consistent 100% rent collection. While the company does not detail specific technological differentiators in the traditional sense, its operational model and data-driven approach to real estate management, informed by decades of industry experience, function as its competitive moat. This allows STRW to identify and execute on opportunities that might be overlooked by larger, less specialized competitors, particularly in the $20 million to $50 million deal range and smaller, off-market transactions.

Cultivating Financial Strength: Performance and Growth

STRW's strategic focus has translated into compelling financial performance. For the nine months ended September 30, 2025, total rental revenues surged to $114.9 million, marking a substantial 33% increase from $86.6 million in the prior year. This growth was primarily driven by the net acquisition of 27 properties and the successful renegotiation of key master leases, including the Kentucky Master Lease, which commenced in January 2025 and significantly boosted top-line revenue. Net income for the same period increased by 23% to $24.5 million, reflecting the expanded portfolio and enhanced rental income.

The company's profitability metrics underscore its operational effectiveness. For the three months ended September 30, 2025, net income rose to $8.8 million, a 29% increase over the $6.9 million reported in Q3 2024. This was achieved despite a 51% increase in net interest expense to $13.0 million, primarily due to additional interest from new commercial bank loans and bond issuances. Depreciation and amortization also increased by 42% to $9.2 million, reflecting the growing asset base.

STRW's non-GAAP metrics further highlight its robust financial health. Projected Adjusted Funds From Operations (AFFO) for 2025 is $72.7 million, representing a significant 28.2% year-over-year increase and a compound annual growth rate (CAGR) of 13.3% since 2020. Adjusted EBITDA is projected at $126.1 million for 2025, up 38.9% year-over-year, with a 13.6% CAGR. These figures demonstrate STRW's ability to generate substantial cash flow from its expanding portfolio, which is critical for funding future growth and shareholder distributions.

Sowing Capital: Liquidity and Funding Strategy

Strawberry Fields REIT maintains a flexible and diversified capital allocation strategy designed to support its aggressive acquisition pipeline while managing its debt profile. As of September 30, 2025, the company held $55.9 million in cash and equivalents. Total indebtedness stood at approximately $779.4 million, comprising a mix of Series A, B, C, and D Bonds ($313.9 million), HUD-guaranteed debt ($256.1 million), commercial mortgage loans ($164.5 million), and a note payable ($44.8 million). The company was in compliance with all financial covenants as of this date.

STRW's approach to financing is opportunistic, leveraging various sources depending on market conditions. The Israeli public bond market has proven to be a strong funding avenue, with recent issuances being oversubscribed. While the company acknowledges that debt is currently cheaper than equity, it aims to maintain a conservative debt-to-market cap ratio between 45% and 55%. Management has expressed a desire to establish an unsecured line of credit, potentially ranging from $200 million to $500 million, to enhance flexibility and absorb existing bank debt. This would further diversify its funding sources and reduce reliance on secured debt.

The company's dividend policy is a testament to its financial discipline and long-term shareholder focus. In Q3 2025, the Board of Directors approved a 14% increase in the quarterly dividend to $0.16 per share. This dividend represented 100% of the net income for the quarter and is supported by a low AFFO payout ratio of 46.8%. This conservative payout allows STRW to retain significant capital, which, combined with the surplus cash generated from depreciation, is strategically reinvested into new acquisitions. This approach fuels the company's AFFO growth, which management believes ultimately provides a superior total return for shareholders.

Weeding Out Risks and Cultivating Future Opportunities

Despite its robust growth and disciplined strategy, STRW faces inherent risks common to the healthcare real estate sector. The company is indirectly exposed to changes in federal and state regulatory policies, particularly those related to Medicare and Medicaid reimbursement, which can impact tenant profitability and, by extension, rent coverage. While management believes the SNF sector is "relatively bulletproof" due to its essential nature and government funding, shifts in administrative directives or budgetary processes could pose challenges. The company's exposure to floating-rate debt, which constituted 20.8% of its total debt ($161.8 million) as of September 30, 2025, presents interest rate risk, with a 100 basis point increase in SOFR potentially decreasing annual cash flow by $1.6 million.

Geographic and tenant concentration also presents a risk, although STRW has made significant strides in diversification. While no single state accounts for more than 28% of its rents, certain markets, such as Illinois, remain "laggards" due to price-based Medicaid reimbursement systems and labor challenges. The company is actively addressing this by gradually transitioning out of some single-operated facilities in such areas. Furthermore, ongoing legal proceedings related to past property acquisitions, though deemed without merit by management, represent a potential distraction and financial exposure.

Looking ahead, STRW's outlook remains highly positive, underpinned by a strong acquisition pipeline exceeding $250 million. The company aims to deploy $150 million to $160 million in acquisitions annually, focusing on expanding within its existing states and master lease structures, or entering new states with sizable portfolios (at least 500 beds). Recent acquisitions in 2025, including 10 Kentucky properties, 6 Kansas facilities, and 9 Missouri SNFs, demonstrate this commitment to growth. The company also notes a trend towards more sale-leaseback opportunities, which aligns with its strategy. Management expects to close an additional $3 million acquisition in Oklahoma before year-end 2025. The aging U.S. population, with those aged 65 and older projected to exceed 72 million by 2030, provides a powerful demographic tailwind for the skilled nursing sector.

Conclusion

Strawberry Fields REIT stands as a compelling investment opportunity, rooted in the stable and growing skilled nursing facility market. Its journey from an operational venture to a publicly traded REIT highlights a deep understanding of its core business, enabling a disciplined acquisition strategy that consistently delivers strong unlevered returns and robust rent coverage. The company's financial performance, characterized by significant AFFO and EBITDA growth, is a direct reflection of its strategic execution and efficient capital allocation.

While STRW does not rely on traditional technological differentiators, its self-managed operational model, extensive industry expertise, and strong tenant relationships form a formidable competitive moat. This allows the company to navigate market complexities, maintain high rent collection rates, and strategically expand its portfolio. With a conservative balance sheet, flexible funding options, and a commitment to consistent dividend growth, Strawberry Fields REIT is well-positioned to continue cultivating value for its shareholders amidst the enduring demand for skilled nursing care. The company's focus on operational excellence and strategic growth in a resilient sector makes it a noteworthy consideration for discerning investors.