STRW 10-K & 10-Q changes, risk factors and insider trading

Strawberry Fields REIT, Inc. (the “Company”) is engaged in the ownership, acquisition, financing and triple-net leasing of skilled nursing facilities and other post-acute healthcare properties. As of theDecember date31, of this Form 10-K,2025, our portfolio consists of 130143 healthcare facilities with an aggregate of 14,54015,602 licensed beds. We hold fee title to 119132 of these properties and hold one property under a long-term lease. These properties are located in Arkansas, Illinois, Indiana, Kansas, Kentucky, Michigan, Missouri, Ohio, Oklahoma, Tennessee and Texas. We generate substantially all our revenues by leasing our properties to tenants under long-term leases primarily on a triple-net basis, under which the tenant pays the cost of real estate taxes, insurance and other operating costs of the facility and capital expenditures. Each healthcare facility located at our properties is managed by a qualified operator with an experienced management team.

On OctoberJanuary 11,2, 20242025, the Company acquired an6 86-bedfacilities skilledconsisting nursingof facility354 beds in Indianapolis, Indiana.Kansas. The acquisition was for $6.0$24.0 million and the Company funded the acquisition utilizing cash from itsthe consolidated balance sheet.sheets. The facilityCompany wasformed addeda to an existingnew master lease withfor an initial Infinity10-year ofperiod Indiana.that included two 5-year extension options on a triple-net basis. Additionally, the lease will increase the Company’s annual rents by $2.4 million and is subject to 3% annual increases.

Depreciation and Amortization: IncreaseDepreciation inexpense depreciationincreased of$6.7 $2.8 millionmillion, or 10.8%23.2%, from fiscal year 2023compared to fiscal year 20242024. isThe primarilyresults duewere todriven by year over yearyear-over-year depreciation from the Indiana 2 Master Lease and $119.8 million of new real estate investments inplaced 2024.into Thisservice wasduring the 2024 and 2025. These increases were partially offset by otherassets that became fully depreciated assets in 2024.2025. Amortization expense increased $1.6 million$5.8 million, or 53.8%124.9%, primarily due to the $24 million in acquisitionsamortization of purchasean asset associated with the note payable related to the re-tenanting of the optionsproperties inunder 2024.the Kentucky Master Lease.

General and Administrative Expense: The decrease in generalGeneral and administrative expenses ofincreased $1.2$1.8 million or 21.0% during fiscal year 2024 compared to fiscal year 20232024, isor 25.6%, primarily thedue resultto $1.7 million of higher insurance,payroll higherexpenses legal,driven higherby corporateincreased executive salariescompensation and otheremployee expenses.bonus costs.

Interest expense, net: The increase in interestInterest expense ofincreased $8.1$16.0 millionmillion, or 33.4%49.1%, from fiscal year 20232024 to fiscal year 20242025. isThe increase was primarily driven by $9.3 million of higher bond interest expense associated with the issuance of a new bond series, $4.5 million of additional interest expense related to larger bonda balancesnew note payable entered into during 2025, and $1.5 million of increased mortgage interest expense from a secondthird commercial bank loan facility obtainedused into connection withfinance the acquisition of the IndianaMissouri Facilities.facilities.

Net Income: The increase in net income from $20.2$26.5 million during the year ended December 31, 20232024 to $26.5$33.3 million in the year ended December 31, 20242025 is primarily due to increases in rental revenue (net of increase in real estate taxes), lower losses on real estate and other losses,is offset by higher depreciation, amortization, amortization,property taxes, general and administrative and interest expenses.

As of December 31, 2024,2025, we had cash and cash equivalents and restricted cash and equivalents of $93.7$66.8 million. We also had the ability to offer additional Series A Bonds from the current outstanding of $88.5$94.7 million up to $150.8$172.4 million. Series C Bonds from the current outstanding outstanding of $73.3$77.7 million up to $172.7$197.5 million and the ability to offer additional Series D Bonds from the current outstanding of $51.5$55.1 million up to $123.4 million$141.1 million. is subject to compliance with covenants and market conditions. Bond B does not have a ceiling for additional issuances; however, the series is subject to compliance with covenants and market conditions.

We may utilize various types of debt to finance a portion of our acquisition activities, including long-term, fixed-rate mortgage loans, loans, variable-rate term loans and secured revolving lines of credit. As of December 31, 2024,2025, on a consolidated basis, we had total indebtedness of approximately $673.9 $794.5 million, consisting of $262.2$254.1 million in HUD guaranteed debt, $213.3$334.7 million in gross Series A, B, C, and D bonds outstanding and $198.4$163.1 million in commercial mortgages. We also have a Note Payable with an outstanding mortgages.balance of $42.6 million. Under our Bonds and our commercial mortgages, we are subject to continuing covenants, and future indebtedness that we may incur, may contain similar provisions. In the event of a default, the lenders could accelerate the timing of payments under the debt obligations, and we may be required to repay such debt with capital from other sources, which may not be available on attractive terms, or at all, which would have a material adverse effect on our liquidity, financial condition, results of operations and ability to make distributions to our stockholders.

Through 20272029 there are six balloon payment obligations consisting of three payments of $83.0$94.7 million, $68.2$77.7 millionmillion, and $48.4$55.1 millionmillion, due under the Series A Bonds, Series C BondsBonds, and Series D bonds in 2026, respectively, and $94.3 million due under Bond B in 2029, respectively, and payments of $86.1$56.1 million, $36.6 million and $52.5$52.3 million due under our three commercial bank term loans due in 2027, 2028, and 2029, 2029. respectively. We may also obtain additional financing that contains balloon payment obligations. These types of obligations may materially adversely adversely affect us, including our cash flows, financial condition and ability to make distributions.

Net cash provided by operating activities increased $4.4$30.7 million for the year ended December 31, 2024 compared to the year ended December 31, 2023,2025 compared to the year ended December 31, 2024, primarily due to an increase of $6.3 million in net income and $4.5$12.6 million increase in depreciation and amortization, offseta $8.7 million increase in accounts payable and accrued liabilities and other liabilities and a $6.8 million increase in net income. The increases in Depreciation, Amortization is driven by aacquisitions smallermade in 2024 and 2025 as well as the re-tenanting of the Landmark and Kentucky master leases. The increase in accounts payable and other liabilities is due to increased deposits related to the recent property acquisitions, as well as an increase in receivables. prepaid rent.

Cash used in investing activities increaseddecreased by $30.4$24.9 million for the year ended December 31, 20242025 compared December 31, 2024, primarily due to a $29.8$27.9 million increase decrease in cash used for property acquisitions in real estate and lease rights. NotesThis difference was offset by a net $3.0 million increase in notes receivable decrease was also $0.6 million lower than 2023.balances.

As of December 31, 2024,2025, the Company had outstanding Series A, Series B, Series C Bonds and Series D Bonds.

TheSeries Series A Bonds are traded on the TASE.

In June 2023, the BVI Company completed an initial offering of Series D Bonds with a par value of NIS 82.9 million ($22.9 million). The Series D Bonds were issued at par. During August 2023, the BVI Company issued additional Series D Bonds in the face amount of NIS 70.0 million ($19.2 million). and raised a net amount of NIS 152.9 million ($42.1 million). These Series D Bonds were issued at a price of 99.7%. On February 8, 2024, the BVI Company issued additional NIS 98.2 million ($25.7 million) Series D Bonds. These Series D Bonds were issued at a price of 106.3%.

In September 2024 the Company made an exchange tender offer of outstanding Series D Bonds for Series A Bonds. The interest rate on Series D Bonds is 9.1% per annum. The exchange offer rate was 1.069964 Series A Bonds per Series D Bonds. As a result of this offer, 47,245,16147.3 million NIS Series D Bonds ($12.7 million) were exchanged for 50,550,62150.6 million NIS Series A Bonds ($13.6 million).

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, we excluded as non-recurring items a gain in the amount of $0.5 million in reclassification of foreign currency transactions the Company recorded with respect to foreign currency fluctuations that the Company realized at the time of bond principal payment. We believe that the use of FFO, combined with the required GAAP presentations, improves the understanding of our operating results among investors and makes comparisons of operating results among REITs more meaningful. We consider FFO and AFFO to be useful measures for reviewing comparative operating and financial performance because, by excluding the applicable items listed above, FFO and AFFO can help investors compare our operating performance between periods or as compared to other companies.

We monitor the liquidity and creditworthiness of our tenants and operators on a continuous basis to determine the need for an allowance for doubtfulcredit accounts,loss, including an allowance for operating lease straight-line rent receivables, for estimated losses resulting from from tenant defaults or the inability of tenants to make contractual rent and tenant recovery payments. This evaluation considers industry industry and economic conditions, property performance, credit enhancements and other factors. For straight-line rent amounts, our assessment assessment is based on income recoverable over the term of the lease. We exercise judgment in establishing allowances and consider payment history and current credit status in developing these estimates. These estimates may differ from actual results, which could be material to our consolidated financial statements. As of December 31, 20242025 and 20232024 we determined that no allowance was necessary to cover the potential loss of rent from our tenants.

● risks and uncertainties related to the national, state and local economies, particularly the economies of Arkansas, Illinois, Indiana, Kansas, Kentucky, Missouri, Ohio, Oklahoma, Tennessee and Texas, and the real estate and healthcare industries in general;

Strawberry Fields REIT, Inc. (the “Company”) is engaged in the ownership, acquisition, financing and triple-net leasing of skilled nursing nursing facilities and other post-acute healthcare properties. Currently, our portfolio consists of 133 healthcare properties with an aggregate of 15,60215,496 licensed beds. We hold fee title to 132 of these properties and hold one property under a long-term leases. lease. These properties are located in Arkansas, Illinois, Indiana, Kansas, Kentucky, Missouri, Ohio, Oklahoma, Tennessee and Texas. We generate substantially all our revenues by leasing our properties to tenants under long-term leases primarily on a triple-net basis, under which the tenant pays the cost of real estate taxes, insurance and other operating costs of the facility and capital expenditures. Each healthcare facility located at our properties is managed by a qualified operator with an experienced management team.

We are entitled to monthly rent paid by the tenants and we do not receive any income or bear any expenses from the operations of such facilities. As of MarchJune 31,30, 2026, the aggregate annualized average base rent under the leases for our properties was approximately $142.7$142.4 million.

We elected a REIT status for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2022. We are organized in an UPREIT structure in which we own substantially all of our assets and conduct substantially all of our business through the Operating Partnership. We are the general partner of the Operating Partnership and as of the date of the report own approximately 24.2%25.3% of theoutstanding outstanding OP units.

Three Months Ended MarchJune 31,30, 2026 Compared to Three Months Ended MarchJune 31,30, 2025:

Rental revenues: The increase in rental revenues of $2.7$2.2 million or 7.1%, compared to the March 31, 2025,6% is primarily due to rentalhigher income received from the newpurchase acquisitionsof toadditional the Texas properties and Missourilease master leases.renewals.

As of MarchJune 31,30, 2026, we had cash and cash equivalents and restricted cash and equivalents of $69.7$77.6 million. We also had the ability to offer an additional $83.2 million in Series A BondsBonds, from the current outstanding of $95.5$130.0 million upin toseries $173.8C-Bonds million.(Inc); $177.5 million in Series C Bonds from(BVI) and thean current outstandingadditional of $78.3$92.1 million up to $199.1 million and the ability to offer additionalin Series D Bonds from the current outstanding of $55.5 million upsubject to $142.2compliance million.with Bondcovenants and market conditions. The Series B doesBonds do not have a ceiling for additional issuances; however, the series is subject to compliance with covenants and market conditions.

We may utilize various types of debt to finance a portion of our acquisition activities, including long-term, fixed-rate mortgage loans, loans, variable-rate term loans and secured revolving lines of credit. As of MarchJune 31,30, 2026, on a condensed consolidated basis, we had total indebtedness of approximately $791.4$810.2 million, consisting of $252.0$250 million in HUD guaranteed debt, $337.4$359.5 million in netSeries A, Series A, Series B, Series C Bonds (Inc), Series C Bonds (BVI) and Series D bondsBonds outstanding, $161.6and $162.6 million in commercial mortgages loans and $40.4 million note payable. loans. Under our Bondsbonds and our commercial mortgages loans, we are subject to continuing covenants.covenants, Futureand future indebtedness that the Company may incur may contain similar provisions. In the event of a default, the lenders could accelerate the timing of payments under the debt obligations, and we may be required to repay such debt with capital from other sources, which may not be available on attractive terms, or at all, which would have a material adverse effect on our liquidity, financial condition, results of operations and ability to make distributions to our stockholders.

Through 2029 there are six balloon payment obligations consisting of threea paymentspayment of $95.5 million, $78.3 million, and $55.5 million, due under the Series A Bonds, Series C Bonds, and Series D bonds in 2026, and $95.1$34.1 million due under Bondthe BSeries C Bonds (BVI) in 2029,2026, a respectively,payment and payments of $56.1 million, $36.6$101.5 million anddue $52.3under the Series A Bonds in 2026, a payment of $59.0 million due under the Series D Bonds in 2026, a payment of $94.2 million due under our three commercial bank term loansmortgage loan facility due in 2027,2029, 2028,a payment of $60.0 million due under our line of credit commercial bank mortgage loan facility due in 2029, a payment of $101.1 million due under the Series B Bonds in 2029 and 2029,a respectively. payment of $48.1 million due under the Series C Bonds (Inc) in 2030. We may also obtain additional financing that contains balloon payment obligations. These types of obligations may materiallyadversely adversely affect us, including our cash flows, financial condition and ability to make distributions.

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 currentongoing debt service obligations and the distribution requirements for maintaining REIT status, and to be able to refinance itsit debt to the extent necessary to meet itsit balloon payment obligations.

Net cash provided by operating activities was $41.7 million for the threesix months ended MarchJune 31,30, 2026,2026 wasand $17.4primarily consisted of net earnings of $18.4 million adjusted by depreciation and amortization of $22.6 million and foreign currency translation adjustments of $3.1 million. This iswas a $1.6 million change from March 31, 2025, that is comprised of net earnings of $9.4 million, a $2.5 million change. Offsetoffset by aan decreaseincrease in accountsstraight-line payable,rent accrued liabilities and other liabilitiesreceivables of $4.1 million. Net cash provided by operating activities was $48.8 million for the threesix months ended MarchJune 31,30, 2025, was2025 $19and million.primarily It was comprisedconsisted of net earnings of $7.0$15.7 million andadjusted by depreciation and amortization of $11.3$22.6 million and an increase in accounts payable and accrued liabilities and other liabilities of $1.9 million. These amounts were offset by an increase in straight-line rentother assets of $1.5$0.7 million and a decrease in other accrued liabilities of $8.3 million.

As of MarchJune 31,30, 2026, we had non-recourse mortgage loans of $252.0$250.0 million from third party lenders that were guaranteed by HUD.

Each loan is secured by first mortgages on certain specified properties, interests in the leases for these properties and second liens on the operator’s assets. In the event of default on any single loan, the loan agreement provides that the applicable lender may require the tenants for the property securing the loan to make all rental payments directly to the lender. In exchange for the HUD guarantee, we pay HUD, on an annual basis, 0.65% of the principal balance of each loan as mortgage insurance premium, in addition to the interest rate denominated in each loan agreement. As a result, the overall average interest rate paid with respect to the HUD guaranteed loans as of MarchJune 31,30, 2026, was 3.91% per annum (including the mortgage insurance payments). The loans have an average maturity of 21 years.

OnThe December 19, 2024, the Company closed a mortgageterm loan facility with a commercial bank pursuant to which the Company borrowed approximately $59 million. The facility provides for monthly payments of interestprincipal and payment of principal will start on January 2026interest based on a 20-year amortization schedule with a balloon payment due in June 2029. The RLOC facility provides for monthly interest-only payments with all outstanding principal due in DecemberJune 2029. The rate andon interestboth facilities is based on the one-month Secured Overnight Financing Rate (“SOFR”) plus a margin of 3.0%2.75% and is subject to a floor of 4%5.50% (as of MarchJune 31,30, 2026, the rate was 6.68%6.40%). As of MarchJune 31,30, 2026, totalthe outstanding principal amountbalances wasunder $58.6the million. Thisterm loan facility and revolving line of credit facility were $100.0 million and $60.0 million, respectively. The term loan facility is collateralized by 14 properties owned by the Company, while the RLOC facility is collateralized by 836 properties owned by the Company. The loan proceeds were used to acquire the Missouri facilities.

The two credit facilityfacilities that closed onin DecemberJune 19,18, 20242026 isare subject to financial covenants which consist of (i) a covenant that the ratio of the Company’s indebtedness to its EBITDA cannot exceed 8.0 to 1, (ii) a covenant that the ratio of the Company’s net operating income to its debt service before dividend distribution is at least 1.25 to 1.00 for each fiscal quarter as measured pursuant to the terms of the loan agreement (iii) a covenant that the ratio of the Company’s net operating income to its debt service after dividend distribution is at least 1.05 to 1.00 for each fiscal quarter as measured pursuant to the terms of the loan agreement, and (iii) a covenant that the Company’s GAAP equity is at least $30,000,000.$30 million. As of MarchJune 31,30, 2026, the Company was in compliance with the loan covenants.

As of MarchJune 31,30, 2026, the Company had outstanding Series A, Series B, Series C (Inc), Series C (BVI) Bonds and Series D Bonds.

As of MarchJune 31,30, 2026, the outstanding balance of Series A Bonds was NIS 302.2 million ($95.5$101.5 million) The Series A Bonds are traded on the TASE

In June 2025, Strawberry Fields, Inc completed, directly, an initial offering on the Tel Aviv Stock Exchange (“TASE”) of Series B Bonds with a par value of NIS 312 million ($89.5 million). The series B Bonds were issued at par. Offering and issuance costs of approximately $2.5 million were incurred at closing. In December 2025, the Company issued an additional NIS 30.0 million ($9.4 million) in Series B Bonds. At MarchJune 31,30, 2026, the outstanding balance of Series B Bonds was $108.1NIS million.328.2 million ($110.2 million).

Series C Bonds (Inc)

In JulyJune 2021,2026, theStrawberry BVIFields, CompanyInc completedcompleted, directly, an initial offering on the Tel Aviv Stock Exchange (“TASE”) of Series C (Inc) Bonds with a par value of NIS 208.0162.7 million ($64.7$55.8 million). The series C Bonds (Inc) were issued at 101% of par. Offering and issuance costs of approximately $3.6 million were incurred at closing. At June 30, 2026, the outstanding balance of the Series C Bonds were(Inc) issued at par. During February 2023, the BVI Company issued additional Series C Bonds in the face amount ofwas NIS 40.0 million ($11.3 million) and raised a net amount of NIS 38.1162.7 million ($10.7$54.7 million). These Series C Bonds were issued at a price of 95.25%. In October 2024, the BVI company issued an additional NIS 62.0 million ($16.6 million) in Series C Bonds. The bonds were issued at 99.3%.

As of MarchJune 31,30, 2026, the Series D Bonds had an outstanding principal balance of approximately NIS 175.8 ($55.5$59.0 million).

The following table reconciles our calculations of FFO and AFFO for the six and three months ended MarchJune 31,30, 2026 and 2025, to net income the most directly comparable GAAP financial measure, for the same periods:

Our condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q have been prepared in accordance with GAAP for interim financial information set forth in the Accounting Standards Codification, as published by the Financial Accounting Standards Board. GAAP requires us to make estimates and assumptions regarding future events that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We base these estimates on our experience and assumptions we believe to be reasonable under the circumstances. However, if our judgment or interpretation of the facts and circumstances relating to various transactions or other matters had been different, we may have applied a different accounting treatment, resulting in a different presentation of our financial statements. We periodically reevaluate our estimates and assumptions, and in the event they prove to be different from actual results, we make adjustments in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. Please refer to “Critical Accounting Policies” in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our 2025 Annual Report on 10-K filed on March 19, 2026,2026 for further information regarding the critical accounting policies that affect our more significant estimates and judgments used in the preparation of our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. There have been no material changes in such critical accounting policies during the threesix months ended MarchJune 31,30, 2026.