Business Context and Reporting Period
Company: Strawberry Fields REIT, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: June 14, 2023 (Earliest event reported: June 8, 2023)
Context: The Company entered into a Material Definitive Agreement to acquire 24 healthcare facilities located in Indiana. The transaction involves a purchase price of $102,000,000 and includes a related loan to the sellers.
Key Financial Metrics and Transaction Terms
- Purchase Price: $102,000,000 payable at closing.
- Deposit Paid: $4,000,000 (non-refundable except under specific termination conditions).
- Related Loan: Approximately $6,500,000 to be made to the Sellers, repayable within 60 days of closing.
- Financing Plan: Balance of purchase price to be funded by a third-party lender and current working capital.
- Asset Details: 24 facilities comprising 19 skilled nursing facilities (1,659 licensed beds) and 5 assisted living facilities (193 beds, 29 licensed).
- Lease Terms: Facilities leased to tenants affiliated with directors Moishe Gubin and Michael Blisko under a 7-year master lease with 3 extension options (3 years, then two 5-year terms).
- Rent: Annual first-year rent of $9,500,000 on a triple-net basis.
- Buyout Option: Tenants have an option to purchase the properties after 6 years for $127 million.
Material Changes and Transaction Timeline
This filing represents a significant expansion of the Company's portfolio through the acquisition of 24 new facilities. The transaction is not yet closed.
- Due Diligence Period: Through July 10, 2023 (extendable by 15 days with an additional $1,000,000 deposit).
- Expected Closing: 30 days following the expiration of the due diligence period (anticipated August 2023).
- Conditions: Closing is subject to substantial conditions, including satisfaction of covenants, representations, and warranties by both parties.
Guidance, Risks, and Contingencies
Management Commentary: The Company anticipates closing in August 2023 but provides no assurance that the closing will occur within this timeframe or at all.
Risks and Contingencies:
- Termination Rights: The Company may terminate if due diligence reveals material adverse effects not corrected by Sellers. In such cases, the deposit is returned. If the Company materially breaches, Sellers may retain the deposit as liquidated damages.
- Related Party Transaction: The tenants are affiliated with two Company directors, creating a related-party dynamic.
- Forward-Looking Statements: The filing includes standard disclaimers regarding risks and uncertainties affecting projected growth and cash flow.
- Asset Condition: Facilities are purchased "as-is" with limited seller representations.
Investor Verification Checklist
- Verify the status of the third-party lender financing required to fund the balance of the purchase price.
- Confirm the outcome of the due diligence period ending July 10, 2023, and whether the extension option is exercised.
- Review the specific terms of the related-party lease agreement with tenants affiliated to directors Moishe Gubin and Michael Blisko.
- Monitor the Company's liquidity position to ensure it can cover the $4,000,000 deposit and potential additional $1,000,000 extension deposit.
- Assess the impact of the $6,500,000 loan to Sellers on the Company's short-term cash flow.