Strawberry Fields (STRW) LD Micro 20th Annual Main Event Conference summary

Business model and lease profile

• Pure-play skilled nursing REIT with triple-net leases; lease terms are 10 years with two five-year renewals and 3% annual rent escalators.

• Rent collections were 100% for eight consecutive years; annualized rent was $143 million, with over 15,000 licensed beds.

• About 90% of nursing home operator revenue comes from Medicare and Medicaid; the speaker described skilled nursing as a needs-based business with reimbursement established under the Social Security Act.

• REIT rules require distribution of 90% of net income; depreciation leaves cash available beyond dividends, and the stated payout ratio was about 50%.

Portfolio and growth strategy

• Portfolio grew from 33 buildings in 2015 to 142; assets total $1.6 billion, with annual investment spending of $100 million to $150 million and stated asset growth of 8% to 9%.

• Growth combines 3% annual lease increases with acquisitions, which are underwritten for tenant credit and typically added to master leases; single assets are generally pursued where they can join a larger portfolio.

• Weighted average lease term is seven to eight years; management prioritizes longer lease duration and rent stability over waiting to renegotiate nearer expiry.

• No operator exceeds 25% of revenue; tenants are monitored monthly and properties visited twice yearly, with attention to financial performance and required CapEx.

• Management cited aging baby boomers, limited new nursing home construction and state certificate-of-need requirements as demand tailwinds and barriers to entry.

Financial performance and capital allocation

• AFFO rose from $43.9 million in 2021 to $74 million in 2026, representing a stated 11% growth rate; 2026 rent coverage was over 2x, and adjusted EBITDA exceeded $127 million.

• Management said a 2026 funding model could support at least $100 million of annual acquisitions without issuing shares, using retained cash and debt paydown while targeting leverage below 50%.

• A $200 million credit line supports acquisition funding and subsequent repayment or permanent refinancing; its rate is SOFR + 275 bps, and management said surplus cash can be used to pay it down between deals.

• Net debt to EBITDA was below 6x; debt-to-total leverage was stated below 50%, with management estimating about 43% based on its asset valuation assumptions.

• Debt was refinanced, leaving no major maturities until 2029; the 2029 debt has two one-year renewal options. Management said it prefers avoiding equity issuance when acquisitions can be funded without dilution.