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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2023

or

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File No. 001-41628

STRAWBERRY FIELDS REIT, INC.

(Exact name of registrant as specified in its charter)

Maryland |  | 84-2336054
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

6101 Nimtz Parkway, South Bend, IN 46628

(Address of principal executive offices, including Zip Code)

Registrant’s telephone number, including area code: (574) 807-0800

Securities registered pursuant to Section 12(b) of the Act:

Title of each class |  | Trading Symbol(s) |  | Name of each exchange on which registered
Common stock Par value $0.0001 per share |  | STRW |  | NYSE American LLC

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer | ☐ | Accelerated filer | ☐
Non-accelerated filer | ☒ | Smaller reporting company | ☒
|  | Emerging growth company | ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act.) Yes ☐ No ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter:$38,040,290

As of March 19, 2024, there were 6,474,175 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Definitive Proxy Statement for the 2023 Annual Meeting of Shareholders (to be filed with the Securities and Exchange Commission no later than 120 days after the end of the registrant’s fiscal year end) are incorporated by reference in this Annual Report on Form 10-K in response to Part II, Item 5 and Part III, Items 10, 11, 12, 13 and 14.

TABLE OF CONTENTS

| PART I |
Item 1. | Business | 7
Item 1A. | Risk Factors | 31
Item 1B. | Unresolved Staff Comments | 31
Item 1C. | Cybersecurity | 31
Item 2. | Properties | 31
Item 3. | Legal Proceedings | 32
Item 4. | Mine Safety Disclosures | 32
| PART II |
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 33
Item 6. | [Reserved] | 33
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 34
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 46
Item 8. | Financial Statements and Supplementary Data | 46
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosures | 47
Item 9A. | Controls and Procedures | 47
Item 9B. | Other Information | 47
Item 9C. | Disclosure Regarding Foreign Jurisdictions That Prevent Inspections | 47
| PART III |
Item 10. | Directors, Executive Officers and Corporate Governance | 48
Item 11. | Executive Compensation | 48
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 48
Item 13. | Certain Relationships and Related Transactions, and Director Independence | 48
Item 14. | Principal Accountant Fees and Services | 48
| PART IV |
Item 15. | Exhibit and Financial Statement Schedules | 49
Item 16. | Form 10-K Summary | 50

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Annual Report on Form 10-K are “forward-looking statements” within the meaning of the U.S. federal securities laws. Forward-looking statements provide our current expectations or forecasts of future events and are not statements of historical fact. This Form 10-K also contains forward-looking statements by third parties relating to market and industry data and forecasts; forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and uncertainties as the other forward-looking statements contained in this Form 10-K. These forward-looking statements include information about possible or assumed future events, including, among other things, discussion and analysis of our future financial condition, results of operations, Funds From Operations (“FFO”), our strategic plans and objectives, cost management, potential property acquisitions, anticipated capital expenditures (and access to capital), amounts of anticipated cash distributions to our stockholders in the future and other matters. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates” and variations of these words and other similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and/or could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements.

Forward-looking statements involve inherent uncertainty and may ultimately prove to be incorrect or false. Readers are cautioned to not place undue reliance on forward-looking statements. Except as otherwise may be required by law, we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or actual operating results. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to:

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

● availability and terms of capital and financing;

● the impact of existing and future healthcare reform legislation on our tenants, borrowers and guarantors;

● adverse trends in the healthcare industry, including, but not limited to, changes relating to reimbursements available to our tenants by government or private payors;

● competition in long-term healthcare industry and shifts in the perception of various types of long-term care facilities, including skilled nursing facilities;

● the impact of COVID-19 on our business and the business of our tenants and operators, including without limitation, increased costs and decreased occupancy levels experienced by operators of skilled nursing facilities;

● our tenants’ ability to make rent payments;

● our dependence upon key personnel whose continued service is not guaranteed;

● availability of appropriate acquisition opportunities and the failure to integrate successfully;

● ability to source target-marketed deal flow;

● ability to dispose of assets held for sale for the anticipated proceeds or on a timely basis, or to deploy the proceeds therefrom on favorable terms;

● fluctuations in mortgage and interest rates;

● changes in the ratings of our debt securities;

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● risks and uncertainties associated with property ownership and development;

● the potential need to fund improvements or other capital expenditures out of operating cash flow;

● potential liability for uninsured losses and environmental liabilities;

● the outcome of pending or future legal proceedings;

● changes in tax laws and regulations affecting REITs;

● our ability to maintain our qualification as a REIT; and

● the effect of other factors affecting our business or the businesses of our operators that are beyond our or their control, including natural disasters, other health crises or pandemics and governmental action; particularly in the healthcare industry.

This list of risks and uncertainties, however, is only a summary of some of the most important factors and is not intended to be exhaustive. New risks and uncertainties may also emerge from time to time that could materially and adversely affect us.

GLOSSARY OF CERTAIN TERMS

The following is a glossary of certain terms used in this Form 10-K:

“ADA” means the Americans with Disabilities Act of 1990, as amended.

“ALF” means assisted living facility.

“Affordable Care Act” means the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010.

“BVI Company” means Strawberry Fields REIT, Ltd., a company organized under the laws of the British Virgin Islands. Upon the consummation of the formation transactions, the BVI Company became a wholly-owned subsidiary of the Operating Partnership.

“CAGR” means compound annual growth rate.

“Capitalization rate” means the ratio of a property’s operating income to its purchase price.

“CMS” means the Centers for Medicare and Medicaid Services, which administers Medicare, Medicaid and the State Children’s Health Insurance Program.

“Company” means Strawberry Fields REIT, Inc., a Maryland corporation.

“Dollars” or “$” means United States dollars.

“EBITDA” means earnings before interest, taxes, depreciation and amortization.

“EBITDAR” means earnings before interest, taxes, depreciation, amortization and rent.

“EBITDARM” means earnings before interest, taxes, depreciation, amortization, rent and management fees.

“GLA” or “gross leasable area” or means the area in any building that may be leased to tenants.

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“HHS” means the U.S. Department of Health and Human Services.

“HIPAA” means the Health Insurance Portability and Accountability Act of 1996, as amended.

“HITECH Act” means the Health Information Technology for Economic and Clinical Health Act.

“HUD” means the U.S. Department of Housing and Urban Development, the federal government agency for housing and urban development.

“long-term acute care hospital” or “LTACH” means medical institutions in which patients requiring prolonged hospitalization (but who are stable) are given medical care and rehabilitation for several weeks. The operation of these institutions is subject to receipt of a suitable license.

“NIS” means New Israeli Shekels.

“Operating Partnership” means Strawberry Fields Realty LP, a Delaware limited partnership.

“OP units” means the units of limited partnership interests in the Operating Partnership.

“Predecessor Company” means Strawberry Fields REIT, LLC, an Indiana limited liability company. Prior to the consummation of the formation transactions, the Predecessor Company was the indirect owner of 73 of our properties.

“SNF” means a skilled nursing facility.

“Series A Bonds” means the Series A Bonds issued by the BVI Company, which were first offered to the public in Israel in 2015. The Series A Bonds were repaid in full during the year ended December 31, 2023.

“Series C Bonds” means the Series C Bonds issued by the BVI Company, which were first offered to the public in Israel on July 28, 2021. As of December 31, 2023, the Series C Bonds had an outstanding principal balance of approximately $60.8 million.

“Series D Bonds” means the Series D Bonds issued by the BVI Company, which were first offered to the public in Israel on June 19, 2023. In July 2023, the BVI Company issued an additional NIS 70.0 million ($19.2 million) in Series D Bonds. As of December 31, 2023, the Series D Bonds had an outstanding principal balance of approximately $42.2 million.

“TASE” means the Tel Aviv Stock Exchange Ltd.

“TRS” means taxable REIT subsidiary.

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TENANT INFORMATION

This Annual Report on Form 10-K includes information regarding certain of our tenants that lease properties from us and are not subject to SEC reporting requirements.

The information related to our tenants contained or referred to in this Annual Report on Form 10-K was provided to us by such tenants. We have not verified this information through an independent investigation or otherwise. We have no reason to believe that this information is inaccurate in any material respect, but we cannot provide any assurance of its accuracy. We are providing this data for informational purposes only.

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PART I

References in this Annual Report on Form 10-K to “we,” “our,” “us” and “the Company” refer to Strawberry Fields REIT, Inc., a Maryland corporation, together with its consolidated subsidiaries, Strawberry Fields Realty LP, a Delaware limited partnership, which we refer to in this Form 10-K as our Operating Partnership. We are the sole general partner of our Operating Partnership.

ITEM 1. Business

We are a self-managed and self-administered real estate company that specializes in the acquisition, ownership and triple-net leasing of skilled nursing facilities and other post-acute healthcare properties. As of the date of this Form 10-K, our portfolio consisted of 100 healthcare properties with an aggregate of 12,449 licensed beds. We hold fee title to 97 of these properties and hold three properties under long-term leases. These properties are located across Arkansas, Illinois, Indiana, Kentucky, Michigan, Ohio, Oklahoma, Tennessee and Texas. Our 100 properties comprise 109 healthcare facilities, consisting of 99 skilled nursing facilities, 8 assisted living facilities and 2 long-term acute care hospitals.

We generate substantially all of 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. Our properties are currently leased to 109 tenants under 32 lease agreements. Approximately 80.7% of our properties are held under a master lease which provides for cross default provisions, cross collateralization and diversification of risk. As of the date of this Form 10-K, our average remaining initial lease term is 6.4 years with average annual rent escalators of 2.7%. Most of our leases include two 5-year renewal options to extend the term.

We are entitled to monthly rent paid by the tenants and we do not receive any income or bear any expenses from the operation of such facilities. As of the date of this Form 10-K, the aggregate annualized average base rent for the expected life of the leases for our properties was approximately $102.3 million.

Each healthcare facility located at our properties is managed by a qualified operator with an experienced management team. As of the date of this Form 10-K, 64 facilities representing 67.3% of our annualized base rent are leased to and operated by related parties that are affiliates of Moishe Gubin, who is our Chairman and Chief Executive Officer and Michael Blisko, who is one of our directors. These properties are operated by affiliates of Infinity Healthcare Management (“Infinity Healthcare”), a healthcare consulting business, beneficially owned by Mr. Gubin and Mr. Blisko/. Infinity Healthcare and its affiliates are one of the largest groups of operators of skilled nursing facilities in the Midwest with over 10,000 beds. Our relationship with Infinity Healthcare provides us with unmatched insight into operating trends and industry developments. Additionally, our relationship with Infinity Healthcare provides us with operating flexibility with regard to evaluating potential new acquisitions or better understanding of operational issues pertaining to underperforming tenants.

Since January 2017 we have grown significantly through acquisitions, having purchased 52 properties, with an aggregate purchase price of approximately $335.1 million and weighted average lease yield of 15.0%. The weighted average lease yield is calculated as the annualized average annual base rent for the expected life of the leases divided by total purchase price. Since 2017, our aggregate annualized average base rent for the expected life of the leases for our properties has grown at an approximate 10.2% CAGR from $57.1 million in fiscal year 2017 to $102.3 million as of the date of this Form 10-K. In addition, our Adjusted EBITDA and FFO from 2018 to 2023 grew at an approximate 10.4% and 18.6% CAGR, respectively. During that period, we expanded our geographic footprint from six states to nine states.

From January 1, 2023, through March 19, 2024, we acquired 25 skilled nursing and assisted living facilities for a total cost of $108.0 million (including finder fees and leasehold improvements), which includes capitalized acquisition costs. In addition to these acquisitions, we leased two facilities which we expect to acquire in Q2 2024. These acquisitions and leases are expected to generate initial annual cash revenues of approximately $0.45 million.

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Our management team has extensive experience in acquiring, owning, financing, operating and leasing skilled nursing facilities and other types of healthcare properties. The team is led by Moishe Gubin, our Chief Executive Officer and Chairman of our Board of Directors, Greg Flamion, our Chief Financial Officer, and Jeffrey Bajtner who serves as our Chief Investment Officer. Combined, this team has over 50 years of experience investing in real estate and particularly in healthcare related real estate and operating companies. Mr. Gubin began his career working at a skilled nursing operator in 1998 and developed in-depth knowledge of the business before purchasing his first skilled nursing facility in 2003. Mr. Gubin has successfully raised equity and debt capital to facilitate over 125 real estate related/healthcare related acquisitions totaling over $1.2 billion in gross investment. In addition, our management team has extensive experience as operators of, and healthcare consultants to, skilled nursing facilities, having managed and operated over 90 skilled nursing facilities, including 65 of our current tenants. We believe our management team’s unique experience across both skilled nursing operations and real estate and its extensive knowledge of the skilled nursing industry position us favorably to take advantage of healthcare investment opportunities. Additionally, our deep and broad relationships with industry operators have allowed us to identify and acquire skilled nursing facilities to which many of our competitors do not have access.

We have assembled a high quality and diversified portfolio of skilled nursing and other healthcare related facilities and we plan to continue to invest primarily in skilled nursing facilities and other healthcare facilities that primarily provide services to the elderly. We believe these asset classes provide potential for higher risk-adjusted returns compared to other forms of net-leased real estate assets due to the specialized expertise necessary to acquire, own, finance and operate these properties, which are factors that tend to limit competition among investors, owners, operators and finance companies. Additionally, our management team’s strong relationships in the industry have allowed us to acquire healthcare-related properties at valuations that achieve attractive lease yields, with the goal of generating strong returns for our stockholders over the long-term. As we continue to acquire additional properties and expand our portfolio, we expect to continue diversifying our portfolio by geography and by tenant, while also maintaining balance sheet strength and liquidity.

We elected to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ending December 31, 2022. We believe that we have been organized and have operated, and we intend to continue to operate, in a manner to qualify for taxation as a REIT. We operate through an umbrella partnership, commonly referred to as an UPREIT structure, in which substantially all of our properties and assets are held through Strawberry Fields Realty, L.P. (the “Operating Partnership”). We are the general partner of the Operating Partnership and own approximately 12.6% of the outstanding OP units. To maintain REIT status, we must meet certain organizational and operational requirements, including a requirement that we annually distribute to our stockholders at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains.

We generate revenues primarily by leasing healthcare-related properties to healthcare operators in triple-net lease arrangements, under which the tenant is solely responsible for the costs related to the property (including property taxes, insurance, maintenance and repair costs and capital expenditures). From time to time, we also extend loans to healthcare operators, generally secured by their receivables. We conduct and manage our business as one operating segment for internal reporting and internal decision-making purposes. We expect to grow our portfolio by pursuing opportunities to acquire additional properties that will be leased to a diverse group of local, regional and national healthcare providers, which may include new or existing skilled nursing operators. We also anticipate diversifying our portfolio over time, including by acquiring properties in different geographic markets, and in different asset classes. In addition, we actively monitor the clinical, regulatory, and financial operating results of our tenants, and work to identify opportunities within their operations and markets that could improve their operating results at our facilities. We communicate such observations to our tenants; however, we have no contractual obligation to do so. Moreover, our tenants have sole discretion with respect to the day-to-day operation of the facilities they lease from us, and how and whether to implement any observation we may share with them. We also actively monitor the overall occupancy, skilled mix, and other operating metrics of our tenants monthly.

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We have replaced tenants in the past, and may elect to replace tenants in the future, if they fail to meet the terms and conditions of their leases with us. The replacement tenants may include tenants with whom we have had no prior landlord-tenant relationship as well as current tenants with whom we are comfortable expanding our relationships. In addition, we periodically reassess the investments we have made and the tenant relationships we have entered, and have selectively disposed of facilities or investments, or terminated such relationships, and we expect to continue making such reassessments and, where appropriate, taking such actions.

Our Industry

The skilled nursing industry has evolved to meet the growing demand for post-acute and custodial healthcare services generated by an aging population, increasing life expectancies and the trend toward shifting patient care to lower cost settings. We believe this evolution has led to a number of favorable improvements in the industry, as described below:

| ● | Shift of Patient Care to Lower Cost Alternatives. The growth of the senior population in the United States continues to increase healthcare costs. In response, federal and state governments have adopted cost-containment measures that encourage the treatment of patients in more cost-effective settings such as SNFs, for which the staffing requirements and associated costs are often significantly lower than acute care hospitals, inpatient rehabilitation facilities and other post-acute care settings. As a result, SNFs are generally serving a larger population of higher-acuity patients than in the past. The same trend is impacting ALFs, which are now generally serving some patients who previously would have received services at SNFs.
| ● | Significant Acquisition and Consolidation Opportunities. The skilled nursing industry is large and highly fragmented, characterized predominantly by numerous local and regional providers. We believe this fragmentation provides significant acquisition and consolidation opportunities.
| ● | Widening Supply and Demand Imbalance. The number of SNFs has declined modestly over the past several years. According to the Valuation & Information Group, which provides appraisal and market reports for the industry, the nursing home industry is currently comprised of approximately 14,800 facilities, as compared with over 16,700 facilities as of December 2000. Supply of new facilities is limited due to certificate of need restrictions. 71% of states have certificate of need restrictions., We expect that the supply/demand imbalance in the skilled nursing industry will increasingly favor skilled nursing providers due to the shift of patient care to lower cost settings and an aging population to meet the growing need for post-acute healthcare.
| ● | Increased Demand Driven by Aging Populations. As seniors account for a higher percentage of the total U.S. population, we believe the overall demand for skilled nursing services will increase. At present, the primary market demographic for skilled nursing services is individuals aged 75 and older. The 2020 U.S. Census reported that there were over 56 million people in the United States in 2020 over the age of 65. The U.S. Census estimates this group to be one of the fastest growing segments of the United States population, projecting that it will almost double between 2020 and 2060. According to the Centers for Medicare & Medicaid Services, nursing home care facilities and continuing care retirement expenditures are projected to grow from approximately $196.8 billion in 2020, which includes federal expenditures in response to the COVID-19 pandemic, to approximately $266 billion in 2028. Although skilled nursing and seniors housing occupancy rates have declined during the COVID-19 pandemic, we believe that these trends in population will support an increasing demand for skilled nursing services in the long-term, which in turn will likely support an increasing demand for the services provided within our properties.

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Tenants and Operators

Our properties are currently leased to 109 tenants under 32 lease agreements. Our leases include 11 master lease agreements that cover 88 facilities leased to 88 tenants, with the remaining 21 leases each covering a single facility leased to one tenant. 65 of our tenants are related parties.

Each property is operated as a healthcare facility by a licensed operator, which may be the tenant or a separate operator. Each operator holds a license granted by state regulators to operate a specific type of facility. All the operators have experienced management teams and senior healthcare staff with substantial knowledge of their respective local markets. We target healthcare operators that are owned by principals with a history of quality care, and the demonstrated ability to successfully navigate in a changing healthcare operating environment. Certain operators are related parties.

We believe that each of the operators of our properties is primarily focused on serving the needs of the local community. Unlike operators that are part of a large national healthcare conglomerate, we believe the operators at our properties can manage their facilities more efficiently because they are not burdened by costly infrastructure and have the flexibility to rapidly adjust their cost structure to respond to changes in the reimbursement environment.

In order to operate efficiently and improve profitability, most of the operators at our facilities have engaged large consulting firms that specialize in healthcare and skilled nursing operations. These consulting firms provide advice and assistance on marketing, operating policies and procedures, billing, collections and regulatory compliance. The operators and consultants work together to develop and standardize best practices in the facilities, while operating in a cost-efficient manner. The operators at our properties primarily use one of nine principal consulting firms, including three firms that are part of Infinity Healthcare, a healthcare consulting business that is owned by the Moishe Gubin, who is our Chairman and Chief Executive Officer and Michael Blisko, who is one of our directors.

The tenants and operators of our properties have demonstrated the ability to generate consistent profitability despite the challenging markets in which they operate. In many cases, these tenants and operators have successfully optimized and stabilized underperforming skilled nursing facilities. While these tenants and operators have been successful, we expect to seek opportunities to diversify our tenant/operator mix through future acquisitions that will be leased to new operators.

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The following table contains information regarding our healthcare facility portfolio by tenant, as of March 19, 2024.

Lessor/Company Subsidiary |  | Manager/ Tenant/ Operator |  | City |  | State |  | Property type |  | Number of licensed beds |  | Tenant Lease Expiration Year (1) |  | Rentable square feet |  |  | Percent leased |  |  | Annualized Lease Income (in $) |  |  | % of total Annualized Lease Income |  |  | Annualized lease income per SQF (in $) |
Master Lease IN |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
1020 West Vine St, LLC |  | The Waters of Princeton II, LLC |  | Princeton |  | IN |  | SNF |  | 95 |  | 2025 |  |  | 32,571 |  |  |  | 100 | % |  |  | 1,045,506 |  |  |  | 1.02 | % |  |  | 32.10 |
12803 Lenover Street Realty, LLC |  | The Waters of Dillsboro - Ross II, LLC |  | Dillsboro |  | IN |  | SNF |  | 123 |  | 2025 |  |  | 67,851 |  |  |  | 100 | % |  |  | 1,353,656 |  |  |  | 1.32 | % |  |  | 19.95 |
1350 North Todd St, LLC |  | The Waters of Scottsburg II, LLC |  | Scottsburg |  | IN |  | SNF |  | 99 |  | 2025 |  |  | 28,050 |  |  |  | 100 | % |  |  | 1,089,528 |  |  |  | 1.06 | % |  |  | 38.84 |
1600 East Liberty Street Realty, LLC |  | The Waters of Covington II, LLC |  | Covington |  | IN |  | SNF |  | 119 |  | 2025 |  |  | 40,821 |  |  |  | 100 | % |  |  | 1,309,634 |  |  |  | 1.28 | % |  |  | 32.08 |
1601 Hospital Dr Realty, LLC |  | The Waters of Greencastle II, LLC |  | Greencastle |  | IN |  | SNF |  | 100 |  | 2025 |  |  | 31,245 |  |  |  | 100 | % |  |  | 1,100,533 |  |  |  | 1.08 | % |  |  | 35.22 |
1712 Leland Drive Realty, LLC |  | The Waters of Huntingburg II, LLC |  | Huntingburg |  | IN |  | SNF |  | 95 |  | 2025 |  |  | 45,156 |  |  |  | 100 | % |  |  | 1,045,506 |  |  |  | 1.02 | % |  |  | 23.15 |
2055 Heritage Dr Realty, LLC |  | The Waters of Martinsville II, LLC |  | Martinsville |  | IN |  | SNF |  | 103 |  | 2025 |  |  | 30,060 |  |  |  | 100 | % |  |  | 1,133,549 |  |  |  | 1.11 | % |  |  | 37.71 |
3895 Keystone Ave Realty, LLC |  | The Waters of Indianapolis II, LLC |  | Indianapolis |  | IN |  | SNF |  | 81 |  | 2025 |  |  | 25,469 |  |  |  | 100 | % |  |  | 891,432 |  |  |  | 0.87 | % |  |  | 35.00 |
405 Rio Vista Lane Realty, LLC |  | The Waters of Rising Sun II, LLC |  | Rising Sun |  | IN |  | SNF |  | 58 |  | 2025 |  |  | 16,140 |  |  |  | 100 | % |  |  | 638,309 |  |  |  | 0.62 | % |  |  | 39.55 |
950 Cross Ave Realty, LLC |  | The Waters of Clifty Falls II, LLC |  | Madison |  | IN |  | SNF |  | 138 |  | 2025 |  |  | 39,438 |  |  |  | 100 | % |  |  | 1,518,736 |  |  |  | 1.48 | % |  |  | 38.51 |
958 East Highway 46 Realty, LLC |  | The Water of Batesville II, LLC |  | Batesville |  | IN |  | SNF |  | 86 |  | 2025 |  |  | 59,582 |  |  |  | 100 | % |  |  | 946,458 |  |  |  | 0.92 | % |  |  | 15.88 |
2400 Chateau Drive Realty LLC |  | The Waters of Muncie II, LLC |  | Muncie |  | IN |  | SNF |  | 72 |  | 2025 |  |  | 22,350 |  |  |  | 100 | % |  |  | 792,384 |  |  |  | 0.77 | % |  |  | 35.45 |
Big H2O |  | The Waters of Newcastle II, LLC (2) |  | New Castle |  | IN |  | SNF |  | 66 |  | 2025 |  |  | 24,860 |  |  |  | 100 | % |  |  | 726,352 |  |  |  | 0.71 | % |  |  | 29.22 |
Master Lease 253, Alton, Midwest |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
253 Bradington Drive, LLC |  | Bria of Columbia |  | Columbia |  | IL |  | SNF |  | 119 |  | 2032 |  |  | 43,189 |  |  |  | 100 | % |  |  | 410,821 |  |  |  | 0.40 | % |  |  | 9.51 |
3523 Wickenhauser, LLC |  | Bria of Alton |  | Alton |  | IL |  | SNF |  | 181 |  | 2032 |  |  | 44,840 |  |  |  | 100 | % |  |  | 624,862 |  |  |  | 0.61 | % |  |  | 13.94 |
727 North 17th St, LLC |  | Bria of Belleville |  | Belleville |  | IL |  | SNF |  | 180 |  | 2032 |  |  | 50,650 |  |  |  | 100 | % |  |  | 621,410 |  |  |  | 0.61 | % |  |  | 12.27 |
107 South Lincoln Street LLC |  | Bria of Smithton |  | Smithton |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
1623 West Delmar Ave, LLC |  | Bria of Godfrey |  | Godfrey |  | IL |  | SNF |  | 68 |  | 2032 |  |  | 15,740 |  |  |  | 100 | % |  |  | 234,755 |  |  |  | 0.23 | % |  |  | 14.91 |
393 Edwardsville Road LLC |  | Bria of Wood River |  | Wood River |  | IL |  | SNF |  | 106 |  | 2032 |  |  | 29,491 |  |  |  | 100 | % |  |  | 365,941 |  |  |  | 0.36 | % |  |  | 12.41 |
Master Lease Landmark |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
8200 National Ave Realty, LLC |  | Landmark of Midwest City Nursing and Rehab |  | Midwest City |  | OK |  | SNF |  | 106 |  | 2032 |  |  | 39,789 |  |  |  | 100 | % |  |  | 1,072,382 |  |  |  | 1.05 | % |  |  | 26.95 |
8200 National Ave Realty, LLC |  | Landmark of Midwest City Hospital |  | Midwest City |  | OK |  | LTACH |  | 31 |  | 2032 |  |  | 49,319 |  |  |  | 100 | % |  |  | 313,621 |  |  |  | 0.31 | % |  |  | 6.36 |
911 South 3rd St Realty LLC |  | Chalet Of Niles |  | Niles |  | MI |  | SNF |  | 100 |  | 2032 |  |  | 31,895 |  |  |  | 100 | % |  |  | 1,011,681 |  |  |  | 0.99 | % |  |  | 31.72 |
1015 Magazine Street, LLC |  | Landmark of River City Rehabilitation and Nursing Center |  | Louisville |  | KY |  | SNF |  | 92 |  | 2032 |  |  | 36,050 |  |  |  | 100 | % |  |  | 930,747 |  |  |  | 0.91 | % |  |  | 25.82 |
900 Gagel Avenue, LLC |  | Landmark of Iroquois Park Rehabilitation and Nursing Center |  | Louisville |  | KY |  | SNF |  | 120 |  | 2032 |  |  | 36,374 |  |  |  | 100 | % |  |  | 1,214,018 |  |  |  | 1.18 | % |  |  | 33.38 |
308 West Maple Avenue, LLC |  | Landmark of Lancaster Rehabilitation and Nursing Center |  | Lancaster |  | KY |  | SNF |  | 96 |  | 2032 |  |  | 42,438 |  |  |  | 100 | % |  |  | 971,214 |  |  |  | 0.95 | % |  |  | 22.89 |
1155 Eastern Parkway, LLC |  | Landmark of Louisville Rehabilitation and Nursing Center |  | Louisville |  | KY |  | SNF |  | 252 |  | 2032 |  |  | 106,250 |  |  |  | 100 | % |  |  | 2,549,437 |  |  |  | 2.48 | % |  |  | 23.99 |
203 Bruce Court, LLC |  | Landmark of Danville Rehabilitation and Nursing Center |  | Danville |  | KY |  | SNF |  | 90 |  | 2032 |  |  | 26,000 |  |  |  | 100 | % |  |  | 910,513 |  |  |  | 0.89 | % |  |  | 35.02 |
203 Bruce Court, LLC |  | Goldenrod Village Assisted Living Center |  | Danville |  | KY |  | ALF |  | 16 |  | 2032 |  |  | 19,500 |  |  |  | 100 | % |  |  | 161,869 |  |  |  | 0.16 | % |  |  | 8.30 |
203 Bruce Court, LLC |  | Hillside Suites Independent Living Center |  | Danville |  | KY |  | Independent Living |  | 0 |  | 2032 |  |  | 1,000 |  |  |  |  |  |  |  | - |  |  |  | 0.00 | % |  |  | - |
120 Life Care Way, LLC |  | Landmark of Bardstown Rehabilitation and Nursing Center |  | Bardstown |  | KY |  | SNF |  | 100 |  | 2032 |  |  | 36,295 |  |  |  | 100 | % |  |  | 1,011,681 |  |  |  | 0.99 | % |  |  | 27.87 |
1033 North Highway 11, LLC |  | Landmark of Laurel Creek Rehabilitation and Nursing Center |  | Manchester |  | KY |  | SNF |  | 106 |  | 2032 |  |  | 32,793 |  |  |  | 100 | % |  |  | 1,072,382 |  |  |  | 1.05 | % |  |  | 32.70 |
945 West Russell Street, LLC |  | Landmark of Elkhorn City Rehabilitation and Nursing Center |  | Elkhorn City |  | KY |  | SNF |  | 106 |  | 2032 |  |  | 31,637 |  |  |  | 100 | % |  |  | 1,072,382 |  |  |  | 1.05 | % |  |  | 33.90 |
420 Jett Drive, LLC |  | Landmark of Breathitt County Rehabilitation and Nursing Center, LLC |  | Jackson |  | KY |  | SNF |  | 120 |  | 2032 |  |  | 32,581 |  |  |  | 100 | % |  |  | 1,214,018 |  |  |  | 1.19 | % |  |  | 37.26 |
1253 Lake Barkley Drive, LLC |  | Landmark of Kuttawa, A Rehabilitation & Nursing Center |  | Kuttawa |  | KY |  | SNF |  | 65 |  | 2032 |  |  | 37,892 |  |  |  | 100 | % |  |  | 657,593 |  |  |  | 0.64 | % |  |  | 17.35 |

11

Lessor/Company Subsidiary |  | Manager/ Tenant/ Operator |  | City |  | State |  | Property type |  | Number of licensed beds |  | Tenant Lease Expiration Year (1) |  | Rentable square feet |  |  | Percent leased |  |  | Annualized Lease Income (in $) |  |  | % of total Annualized Lease Income |  |  | Annualized lease income per SQF (in $) |
Master Lease Ohio |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | - |  |  |  |  |  |  |  |  |
3090 Five Points Hartford Realty, LLC |  | Continent Healthcare Co - Hartford |  | Fowler |  | OH |  | SNF |  | 54 |  | 2025 |  |  | 15,504 |  |  |  | 100 | % |  |  | 196,012 |  |  |  | 0.19 | % |  |  | 12.64 |
3121 Glanzman Rd Realty, LLC |  | Continent Healthcare Co - Toledo |  | Toledo |  | OH |  | SNF |  | 84 |  | 2025 |  |  | 24,087 |  |  |  | 100 | % |  |  | 304,908 |  |  |  | 0.30 | % |  |  | 12.66 |
620 West Strub Rd Realty, LLC |  | Continent Healthcare Co - Sandusky |  | Sandusky |  | OH |  | SNF |  | 50 |  | 2025 |  |  | 18,984 |  |  |  | 100 | % |  |  | 181,493 |  |  |  | 0.18 | % |  |  | 9.56 |
4250 Sodom Hutchings Road Realty, LLC |  | Continent Healthcare Co - Cortland |  | Cortland |  | OH |  | SNF |  | 50 |  | 2025 |  |  | 14,736 |  |  |  | 100 | % |  |  | 181,493 |  |  |  | 0.18 | % |  |  | 12.32 |
Master Lease TN 1 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
115 Woodlawn Drive, LLC |  | Lakebridge a Waters Community, LLC |  | Johnson City |  | TN |  | SNF |  | 109 |  | 2031 |  |  | 37,734 |  |  |  | 100 | % |  |  | 1,463,458 |  |  |  | 1.43 | % |  |  | 38.78 |
146 Buck Creek Road, LLC |  | Waters of Roan Highlands, LLC |  | Roan Mountain |  | TN |  | SNF |  | 80 |  | 2031 |  |  | 30,139 |  |  |  | 100 | % |  |  | 1,074,097 |  |  |  | 1.05 | % |  |  | 35.64 |
704 5th Avenue East, LLC |  | Waters of Springfield, LLC |  | Springfield |  | TN |  | SNF |  | 66 |  | 2031 |  |  | 19,900 |  |  |  | 100 | % |  |  | 886,130 |  |  |  | 0.87 | % |  |  | 44.53 |
2501 River Road, LLC |  | Waters of Cheatham, LLC |  | Ashland City |  | TN |  | SNF |  | 80 |  | 2031 |  |  | 37,953 |  |  |  | 100 | % |  |  | 1,074,097 |  |  |  | 1.05 | % |  |  | 28.30 |
202 Enon Springs East, LLC |  | Waters of Smyrna, LLC |  | Smyrna |  | TN |  | SNF |  | 91 |  | 2031 |  |  | 34,070 |  |  |  | 100 | % |  |  | 1,221,786 |  |  |  | 1.19 | % |  |  | 35.86 |
140 Technology Lane, LLC |  | Waters of Johnson City, LLC |  | Johnson City |  | TN |  | SNF |  | 84 |  | 2031 |  |  | 34,814 |  |  |  | 100 | % |  |  | 1,127,802 |  |  |  | 1.10 | % |  |  | 32.40 |
835 Union Street, LLC |  | Waters of Shelbyville, LLC |  | Shelbyville |  | TN |  | SNF |  | 96 |  | 2031 |  |  | 44,327 |  |  |  | 100 | % |  |  | 1,288,917 |  |  |  | 1.26 | % |  |  | 29.08 |
Master Lease TN 2 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
505 North Roan Street, LLC |  | Agape Rehabilitation & Nursing Center, A Water’s Community |  | Johnson City |  | TN |  | SNF |  | 84 |  | 2031 |  |  | 27,100 |  |  |  | 100 | % |  |  | 1,628,910 |  |  |  | 1.59 | % |  |  | 60.11 |
14510 Highway 79, LLC |  | Waters of McKenzie, A Rehabilitation & Nursing Center |  | McKenzie |  | TN |  | SNF |  | 66 |  | 2031 |  |  | 22,454 |  |  |  | 100 | % |  |  | 1,279,858 |  |  |  | 1.25 | % |  |  | 57.00 |
6500 Kirby Gate Boulevard, LLC |  | Waters of Memphis, A Rehabilitation & Nursing Center |  | Memphis |  | TN |  | SNF |  | 90 |  | 2031 |  |  | 51,565 |  |  |  | 100 | % |  |  | 1,745,261 |  |  |  | 1.71 | % |  |  | 33.85 |
978 Highway 11 South, LLC |  | Waters of Sweetwater, A Rehabilitation & Nursing Center |  | Sweetwater |  | TN |  | SNF |  | 90 |  | 2031 |  |  | 30,312 |  |  |  | 100 | % |  |  | 1,745,261 |  |  |  | 1.71 | % |  |  | 57.58 |
2830 Highway 394, LLC |  | Waters of Bristol, A Rehabilitation & Nursing Center |  | Bristol |  | TN |  | SNF |  | 120 |  | 2031 |  |  | 53,913 |  |  |  | 100 | % |  |  | 2,327,014 |  |  |  | 2.26 | % |  |  | 43.16 |
Master Lease AR |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
5301 Wheeler Avenue, LLC |  | The Blossoms at Fort Smith |  | Fort Smith |  | AR |  | SNF |  | 117 |  | 2028 |  |  | 41,490 |  |  |  | 100 | % |  |  | 821,950 |  |  |  | 0.80 | % |  |  | 19.81 |
414 Massey Avenue, LLC |  | The Blossoms at Mountain View Assisted Living |  | Mountain View |  | AR |  | ALF |  | 32 |  | 2028 |  |  | 12,548 |  |  |  | 100 | % |  |  | 224,807 |  |  |  | 0.22 | % |  |  | 17.92 |
706 Oak Grove Street, LLC |  | The Blossoms at Mountain View |  | Mountain View |  | AR |  | SNF |  | 97 |  | 2028 |  |  | 31,586 |  |  |  | 100 | % |  |  | 681,445 |  |  |  | 0.67 | % |  |  | 21.57 |
8701 Riley Drive, LLC |  | The Blossoms at Woodland Hills |  | Little Rock |  | AR |  | SNF |  | 140 |  | 2028 |  |  | 61,543 |  |  |  | 100 | % |  |  | 983,530 |  |  |  | 0.96 | % |  |  | 15.98 |
1516 Cumberland Street, LLC |  | The Blossoms at Cumberland |  | Little Rock |  | AR |  | SNF |  | 120 |  | 2028 |  |  | 82,328 |  |  |  | 100 | % |  |  | 843,025 |  |  |  | 0.82 | % |  |  | 10.24 |
5720 West Markham Street, LLC |  | The Blossoms at Midtown |  | Little Rock |  | AR |  | SNF |  | 154 |  | 2028 |  |  | 56,176 |  |  |  | 100 | % |  |  | 1,081,883 |  |  |  | 1.06 | % |  |  | 19.26 |
2501 John Ashley Drive, LLC |  | The Blossoms at North Little Rock |  | Little Rock |  | AR |  | SNF |  | 140 |  | 2028 |  |  | 65,149 |  |  |  | 100 | % |  |  | 983,530 |  |  |  | 0.96 | % |  |  | 15.10 |
1513 South Dixieland Road, LLC |  | The Blossoms at Rogers |  | Rogers |  | AR |  | SNF |  | 110 |  | 2028 |  |  | 32,962 |  |  |  | 100 | % |  |  | 772,773 |  |  |  | 0.76 | % |  |  | 23.44 |
826 North Street, LLC |  | The Blossoms at Stamps |  | Stamps |  | AR |  | SNF |  | 94 |  | 2028 |  |  | 30,924 |  |  |  | 100 | % |  |  | 660,370 |  |  |  | 0.65 | % |  |  | 21.35 |

12

Lessor/Company Subsidiary |  | Manager/ Tenant/ Operator |  | City |  | State |  | Property type |  | Number of licensed beds |  | Tenant Lease Expiration Year (1) |  | Rentable square feet |  |  | Percent leased |  |  | Annualized Lease Income (in $) |  |  | % of total Annualized Lease Income |  |  | Annualized lease income per SQF (in $) |
Master Lease AR SF LLC |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
326 Lindley Lane, LLC |  | The Blossoms at Newport |  | Newport |  | AR |  | SNF |  | 120 |  | 2029 |  |  | 49,675 |  |  |  | 100 | % |  |  | 850,639 |  |  |  | 0.83 | % |  |  | 17.12 |
2821 West Dixon Road, LLC |  | The Blossoms at West Dixon |  | Little Rock |  | AR |  | SNF |  | 140 |  | 2029 |  |  | 42,825 |  |  |  | 100 | % |  |  | 992,412 |  |  |  | 0.97 | % |  |  | 23.17 |
2821 West Dixon Road, LLC |  | The Blossoms at West Dixon Assisted Living |  | Little Rock |  | AR |  | ALF |  | 32 |  | 2029 |  |  | 7,557 |  |  |  | 100 | % |  |  | 226,837 |  |  |  | 0.22 | % |  |  | 30.02 |
552 Golf Links Road, LLC |  | The Blossoms at Hot Springs |  | Hot Springs |  | AR |  | SNF |  | 152 |  | 2029 |  |  | 30,372 |  |  |  | 100 | % |  |  | 1,077,476 |  |  |  | 1.05 | % |  |  | 35.48 |
Master Lease IN 2 SF LLC |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
8400 Clearvista Place LLC |  | The Waters of Castleton SNF, LLC |  | Indianapolis |  | IN |  | SNF |  | 114 |  | 2029 |  |  | 41,400 |  |  |  | 100 | % |  |  | 1,023,207 |  |  |  | 1.00 | % |  |  | 24.72 |
524 Anderson Road LLC |  | The Waters of Chesterfield SNF, LLC |  | Chesterfield |  | IN |  | SNF |  | 60 |  | 2029 |  |  | 21,900 |  |  |  | 100 | % |  |  | 538,530 |  |  |  | 0.53 | % |  |  | 24.59 |
640 West Ellsworth Street LLC |  | The Waters of Columbia City SNF, LLC |  | Columbia City |  | IN |  | SNF |  | 84 |  | 2029 |  |  | 30,462 |  |  |  | 100 | % |  |  | 753,942 |  |  |  | 0.74 | % |  |  | 24.75 |
11563 West 300 South LLC |  | The Waters of Dunkirk SNF, LLC |  | Dunkirk |  | IN |  | SNF |  | 46 |  | 2029 |  |  | 19,800 |  |  |  | 100 | % |  |  | 412,873 |  |  |  | 0.40 | % |  |  | 20.85 |
5544 East State Boulevard LLC |  | The Waters of Fort Wayne SNF, LLC |  | Ft. Wayne |  | IN |  | SNF |  | 77 |  | 2029 |  |  | 31,500 |  |  |  | 100 | % |  |  | 691,113 |  |  |  | 0.68 | % |  |  | 21.94 |
548 South 100 West LLC |  | The Waters of Hartford City SNF, LLC |  | Hartford City |  | IN |  | SNF |  | 65 |  | 2029 |  |  | 22,400 |  |  |  | 100 | % |  |  | 583,407 |  |  |  | 0.57 | % |  |  | 26.04 |
2901 West 37th Avenue LLC |  | The Waters of Hobart SNF, LLC |  | Hobart |  | IN |  | SNF |  | 110 |  | 2029 |  |  | 43,854 |  |  |  | 100 | % |  |  | 987,305 |  |  |  | 0.96 | % |  |  | 22.51 |
1500 Grant Street LLC |  | The Waters of Huntington SNF, LLC |  | Huntington |  | IN |  | SNF |  | 85 |  | 2029 |  |  | 44,957 |  |  |  | 100 | % |  |  | 762,917 |  |  |  | 0.75 | % |  |  | 16.97 |
787 North Detroit Street LLC |  | The Waters of LaGrange SNF, LLC |  | Lagrange |  | IN |  | SNF |  | 100 |  | 2029 |  |  | 31,133 |  |  |  | 100 | % |  |  | 897,550 |  |  |  | 0.88 | % |  |  | 28.83 |
981 Beechwood Avenue LLC |  | The Waters of Middletown SNF, LLC |  | Middletown |  | IN |  | SNF |  | 60 |  | 2029 |  |  | 18,500 |  |  |  | 100 | % |  |  | 538,530 |  |  |  | 0.53 | % |  |  | 29.11 |
317 Blair Pike LLC |  | The Waters of Peru SNF, LLC |  | Peru |  | IN |  | SNF |  | 130 |  | 2029 |  |  | 60,230 |  |  |  | 100 | % |  |  | 1,166,815 |  |  |  | 1.14 | % |  |  | 19.37 |
815 West Washington Street LLC |  | The Waters of Rockport SNF |  | Rockport |  | IN |  | SNF |  | 60 |  | 2029 |  |  | 25,000 |  |  |  | 100 | % |  |  | 538,530 |  |  |  | 0.53 | % |  |  | 21.54 |
612 East 11th Street LLC |  | The Waters of Rushville SNF |  | Rushville |  | IN |  | SNF |  | 98 |  | 2029 |  |  | 16,572 |  |  |  | 100 | % |  |  | 879,599 |  |  |  | 0.86 | % |  |  | 53.08 |
505 West Wolfe Street LLC |  | The Waters of Sullivan SNF |  | Sullivan |  | IN |  | SNF |  | 93 |  | 2029 |  |  | 15,600 |  |  |  | 100 | % |  |  | 834,721 |  |  |  | 0.82 | % |  |  | 53.51 |
500 East Pickwick Drive LLC |  | The Waters of Syracuse SNF |  | Syracuse |  | IN |  | SNF |  | 66 |  | 2029 |  |  | 26,000 |  |  |  | 100 | % |  |  | 592,383 |  |  |  | 0.58 | % |  |  | 22.78 |
300 Fairgrounds Road LLC |  | The Waters of Tipton SNF |  | Tipton |  | IN |  | SNF |  | 150 |  | 2029 |  |  | 30,970 |  |  |  | 100 | % |  |  | 1,346,325 |  |  |  | 1.32 | % |  |  | 43.47 |
1900 Alber Street LLC |  | The Waters of Wabash SNF East |  | Wabash |  | IN |  | SNF |  | 84 |  | 2029 |  |  | 29,762 |  |  |  | 100 | % |  |  | 753,942 |  |  |  | 0.74 | % |  |  | 25.33 |
1720 Alber Street LLC |  | The Waters of Wabash SNF West |  | Wabash |  | IN |  | SNF |  | 44 |  | 2029 |  |  | 12,956 |  |  |  | 100 | % |  |  | 394,922 |  |  |  | 0.39 | % |  |  | 30.48 |
300 North Washington Street LLC |  | The Waters of Wakarusa SNF |  | Wakarusa |  | IN |  | SNF |  | 133 |  | 2029 |  |  | 48,000 |  |  |  | 100 | % |  |  | 1,193,741 |  |  |  | 1.17 | % |  |  | 24.87 |
8400 Clearvista Place LLC |  | The Waters of Castleton ALF, LLC |  | Indianapolis |  | IN |  | ALF |  | 54 |  | 2029 |  |  | 43,900 |  |  |  | 100 | % |  |  | 484,677 |  |  |  | 0.47 | % |  |  | 11.04 |
787 North Detroit Street LLC |  | The Waters of LaGrange ALF, LLC |  | Lagrange |  | IN |  | ALF |  | 17 |  | 2029 |  |  | 20,756 |  |  |  | 100 | % |  |  | 152,583 |  |  |  | 0.15 | % |  |  | 7.35 |
612 East 11th Street LLC |  | The Waters of Rushville ALF, LLC |  | Rushville |  | IN |  | ALF |  | 29 |  | 2029 |  |  | 11,048 |  |  |  | 100 | % |  |  | 260,289 |  |  |  | 0.25 | % |  |  | 23.56 |
505 West Wolfe Street LLC |  | The Waters of Sullivan ALF, LLC |  | Sullivan |  | IN |  | ALF |  | 32 |  | 2029 |  |  | 10,400 |  |  |  | 100 | % |  |  | 287,216 |  |  |  | 0.28 | % |  |  | 27.62 |
300 North Washington Street LLC |  | The Waters of Wakarusa ALF, LLC |  | Wakarusa |  | IN |  | ALF |  | 61 |  | 2029 |  |  | 48,630 |  |  |  | 100 | % |  |  | 547,505 |  |  |  | 0.54 | % |  |  | 11.26 |
Master Lease TX |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
1621 Coit Road Realty, LLC |  | Landmark of Plano Nursing and Rehab |  | Plano |  | TX |  | SNF |  | 160 |  | 2033 |  |  | 74,718 |  |  |  | 100 | % |  |  | 723,520 |  |  |  | 0.71 | % |  |  | 9.68 |
5601 Plum Creek Drive Realty, LLC |  | Landmark of Amarillo Nursing and Rehab |  | Amarillo |  | TX |  | SNF |  | 99 |  | 2033 |  |  | 90,046 |  |  |  | 100 | % |  |  | 447,678 |  |  |  | 0.44 | % |  |  | 4.97 |
2301 North Oregon Realty, LLC |  | Grace Point Wellness Center |  | El Paso |  | TX |  | SNF |  | 182 |  | 2033 |  |  | 19,895 |  |  |  | 100 | % |  |  | 823,004 |  |  |  | 0.80 | % |  |  | 41.37 |

13

Lessor/Company Subsidiary |  | Manager/ Tenant/ Operator |  | City |  | State |  | Property type |  | Number of licensed beds |  | Tenant Lease Expiration Year (1) |  | Rentable square feet |  |  | Percent leased |  |  | Annualized Lease Income (in $) |  |  | % of total Annualized Lease Income |  |  | Annualized lease income per SQF (in $) |
Individual Leases |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ambassador Nursing Realty, LLC |  | Ambassador Nursing and Rehab, LLC |  | Chicago |  | IL |  | SNF |  | 190 |  | 2026 |  |  | 37,100 |  |  |  | 100 | % |  |  | 1,005,313 |  |  |  | 0.98 | % |  |  | 27.10 |
Momence Meadows Realty, LLC |  | Momence Meadows Nursing & Rehab Center, LLC |  | Momence |  | IL |  | SNF |  | 140 |  | 2025 |  |  | 37,139 |  |  |  | 100 | % |  |  | 1,038,000 |  |  |  | 1.01 | % |  |  | 27.95 |
Oak Lawn Nursing Realty, LLC |  | Oak Lawn Respiratory and Rehab center, LLC |  | Oak Lawn |  | IL |  | SNF |  | 143 |  | 2028 |  |  | 37,854 |  |  |  | 100 | % |  |  | 1,083,048 |  |  |  | 1.06 | % |  |  | 28.61 |
Forest View Nursing Realty, LLC |  | Forest View Rehab and Nursing center, LLC |  | Itasca |  | IL |  | SNF |  | 144 |  | 2024 |  |  | 34,152 |  |  |  | 100 | % |  |  | 1,215,483 |  |  |  | 1.19 | % |  |  | 35.59 |
Lincoln Park Holdings, LLC |  | Lakeview Rehab and Nursing center, LLC |  | Chicago |  | IL |  | SNF |  | 178 |  | 2031 |  |  | 34,362 |  |  |  | 100 | % |  |  | 1,260,000 |  |  |  | 1.23 | % |  |  | 36.67 |
Continental Realty, LLC |  | Continental Nursing and Rehab, LLC |  | Chicago |  | IL |  | SNF |  | 208 |  | 2031 |  |  | 53,653 |  |  |  | 100 | % |  |  | 1,575,348 |  |  |  | 1.54 | % |  |  | 29.36 |
Westshire Realty, LLC |  | City View Multi care Center LLC |  | Cicero |  | IL |  | SNF |  | 485 |  | 2025 |  |  | 124,020 |  |  |  | 100 | % |  |  | 1,788,365 |  |  |  | 1.75 | % |  |  | 14.42 |
Belhaven Realty, LLC |  | Belhaven Nursing and Rehab, LLC |  | Chicago |  | IL |  | SNF |  | 221 |  | 2026 |  |  | 60,000 |  |  |  | 100 | % |  |  | 2,134,570 |  |  |  | 2.08 | % |  |  | 35.58 |
West Suburban Nursing Realty, LLC |  | West Suburban Nursing & Rehab Center, LLC |  | Bloomingdale |  | IL |  | SNF |  | 259 |  | 2027 |  |  | 70,314 |  |  |  | 100 | % |  |  | 1,961,604 |  |  |  | 1.92 | % |  |  | 27.90 |
Niles Nursing Realty, LLC |  | Niles Nursing & Rehab, LLC |  | Niles |  | IL |  | SNF |  | 304 |  | 2026 |  |  | 46,480 |  |  |  | 100 | % |  |  | 2,409,998 |  |  |  | 2.35 | % |  |  | 51.85 |
Parkshore Estates Nursing Realty, LLC |  | Parkshore Estates Nursing & Rehab Center, LLC |  | Chicago |  | IL |  | SNF |  | 318 |  | 2024 |  |  | 94,018 |  |  |  | 100 | % |  |  | 2,454,187 |  |  |  | 2.40 | % |  |  | 26.10 |
Midway Neurological and Rehab Realty, LLC |  | Midway Neurological and Rehab Center, LLC |  | Bridgeview |  | IL |  | SNF |  | 404 |  | 2026 |  |  | 120,000 |  |  |  | 100 | % |  |  | 2,547,713 |  |  |  | 2.49 | % |  |  | 21.23 |
516 West Frech St, LLC |  | Parker Nursing and Rehab, LLC |  | Streator |  | IL |  | SNF |  | 102 |  | 2031 |  |  | 24,979 |  |  |  | 100 | % |  |  | 498,351 |  |  |  | 0.49 | % |  |  | 19.95 |
4343 Kennedy Drive, LLC |  | Hope Creek Nursing and Rehabilitation Center, LLC |  | East Moline |  | IL |  | SNF |  | 245 |  | 2030 |  |  | 104,000 |  |  |  | 100 | % |  |  | 478,959 |  |  |  | 0.47 | % |  |  | 4.61 |
1316 North Tibbs Avenue Realty LLC |  | West Park a water community |  | Indianapolis |  | IN |  | SNF |  | 89 |  | 2024 |  |  | 26,572 |  |  |  | 100 | % |  |  | 549,885 |  |  |  | 0.54 | % |  |  | 20.69 |
1585 Perry Worth Rd, LLC |  | Waters of Lebanon LLC |  | Lebanon |  | IN |  | SNF |  | 64 |  | 2027 |  |  | 32,650 |  |  |  | 100 | % |  |  | 116,678 |  |  |  | 0.11 | % |  |  | 3.57 |
2301 North Oregon Realty, LLC |  | Specialty Hospital Management |  | El Paso |  | TX |  | LTACH |  | 32 |  | 2029 |  |  | 24,660 |  |  |  | 100 | % |  |  | 1,050,853 |  |  |  | 1.03 | % |  |  | 42.61 |
9209 Dollarway Road, LLC |  | The Blossoms at White Hall |  | White Hall |  | AR |  | SNF |  | 120 |  | 2029 |  |  | 45,771 |  |  |  | 100 | % |  |  | 843,022 |  |  |  | 0.82 | % |  |  | 18.42 |
9300 Ballard Rd Realty, LLC |  | Zahav of DesPlaines |  | Des Plaines |  | IL |  | SNF |  | 231 |  | 2033 |  |  | 70,556 |  |  |  | 100 | % |  |  | 1,302,479 |  |  |  | 1.26 | % |  |  | 18.46 |
100 Netherland Lane, LLC |  | Waters of Kingsport |  | Kingsport |  | TN |  | SNF |  | 67 |  | 2033 |  |  | 28,140 |  |  |  | 100 | % |  |  | 151,323 |  |  |  | 0.15 | % |  |  | 5.38 |
2648 Sevierville Road, LLC |  | Asbury Inc - Maryville |  | Maryville |  | TN |  | SNF |  | 181 |  | 2033 |  |  | 49,810 |  |  |  | 100 | % |  |  | 302,647 |  |  |  | 0.30 | % |  |  | 6.08 |
Total/Average |  |  |  |  |  |  |  |  |  | 12,449 |  | 2029 |  |  | 4,296,662 |  |  |  | 100.00 | % |  |  | 102,324,734 |  |  |  | 100.00 | % |  |  | 23.82 |

(1) The tenant and the operator are the same for each facility other than the 32 SNFs leased under the two Indiana master lease agreements and one SNF in Amarillo, Texas. In the case of these other facilities, the tenants are county hospitals which have entered into management agreements with the operators listed in the table. These arrangements permit the facilities to participate in a CMS program that pays higher Medicaid reimbursement rates for facilities associated with hospitals in underserved areas.

(2) The expiration dates do not reflect the exercise of any renewable options.

Related Party Tenants

As of March 19, 2024, we leased 65 of our facilities to tenants that are affiliates of: (i) Moishe Gubin who serves as Chairman of the Board and our Chief Executive Officer, (ii) Michael Blisko, who serves as one of our directors, and (iii) Ted Lerman, one of the controlling members of the Predecessor Company. As of March 19, 2024, approximately 67.3% of our annualized base rent is received from such related-party tenants. The failure of these tenants to fulfill their obligations under their leases or renew their leases upon expiration could have a material adverse effect on our business, financial condition and results of operations. In January 2023, affiliates of Moishe Gubin and Michael Blisko acquired the membership interests held by the affiliate of Ted Lerman in all of the related party tenants.

Rental income from leases with these related party tenants represented 67.3% of all rental income for the year ended December 31, 2023. We believe these affiliated relationships provide a strong alignment of interests between us and our tenants and offers us increased operating flexibility with regards to potentially replacing underperforming tenants or evaluating acquisitions in new states. As we continue to grow and expand our portfolio, we intend to develop new relationships with unrelated party tenants and operators in order to diversify our tenant base and reduce our dependence on related party and operators.

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The following table contains information regarding tenant/operators that are related parties of the Company as March 19, 2024:

Manager/Tenant/Operators that are Related Parties |  |  |
Lessor/Company Subsidiary |  | Manager/Tenant/Operator |  | Beneficial Owner Percentage in Tenant/Operator by Related Party |
|  |  |  |  | Moishe Gubin/Gubin Enterprises LP |  |  |  | Michael Blisko/Blisko Enterprises LP |
Master Lease Indiana |  |  |  |  |  |  |  |  |  |
1020 West Vine Street Realty, LLC |  | The Waters of Princeton II LLC |  |  | 49.49 | % |  |  | 50.1 | %
12803 Lenover Street Realty LLC |  | The Waters of Dillsboro – Ross Manor II LLC |  |  | 49.49 | % |  |  | 50.51 | %
1350 North Todd Drive Realty, LLC |  | The Waters of Scottsburg II LLC |  |  | 49.49 | % |  |  | 50.1 | %
1600 East Liberty Street Realty LLC |  | The Waters of Covington II, LLC |  |  | 49.49 | % |  |  | 50.51 | %
1601 Hospital Drive Realty LLC |  | The Waters of Greencastle II LLC |  |  | 49.49 | % |  |  | 50.51 | %
1712 Leland Drive Realty, LLC |  | The Waters of Huntingburg II LLC |  |  | 49.49 | % |  |  | 50.1 | %
2055 Heritage Drive Realty LLC |  | The Waters of Martinsville II LLC |  |  | 49.49 | % |  |  | 50.51 | %
3895 South Keystone Avenue Realty LLC |  | The Waters of Indianapolis II LLC |  |  | 49.49 | % |  |  | 50.51 | %
405 Rio Vista Lane Realty LLC |  | The Waters of Rising Sun II LLC |  |  | 49.49 | % |  |  | 50.51 | %
950 Cross Avenue Realty LLC |  | The Waters of Clifty Falls II LLC |  |  | 49.49 | % |  |  | 50.51 | %
958 East Highway 46 Realty LLC |  | The Water of Batesville II LLC |  |  | 49.24 | % |  |  | 50.51 | %
2400 Chateau Drive Realty, LLC |  | The Waters of Muncie II LLC |  |  | 49.49 | % |  |  | 50.51 | %
The Big H2O, LLC |  | The Waters of New Castle II LLC |  |  | 49.49 | % |  |  | 50.51 | %
Master Lease Tennessee |  |  |  |  |  |  |  |  |  |
115 Woodlawn Drive, LLC |  | Lakebridge, a Waters Community, LLC |  |  | 50.00 | % |  |  | 50.00 | %
146 Buck Creek Road, LLC |  | The Waters of Roan Highlands, LLC |  |  | 50.00 | % |  |  | 50.00 | %
704 5TH Avenue East, LLC |  | The Waters of Springfield, LLC |  |  | 50.00 | % |  |  | 50.00 | %
2501 River Road, LLC |  | The Waters of Cheatham, LLC |  |  | 50.00 | % |  |  | 50.00 | %
202 Enon Springs Road East, LLC |  | The Waters of Smyrna, LLC |  |  | 50.00 | % |  |  | 50.00 | %
140 Technology Lane, LLC |  | The Waters of Johnson City, LLC |  |  | 50.00 | % |  |  | 50.00 | %
835 Union Street, LLC |  | The Waters of Shelbyville, LLC |  |  | 50.00 | % |  |  | 50.00 | %
Master Lease Tennessee 2 |  |  |  |  |  |  |  |  |  |
505 North Roan Street, LLC |  | Agape Rehabilitation & Nursing Center, A Water’s Community, LLC |  |  | 50.00 | % |  |  | 50.00 | %
14510 Highway 79, LLC |  | Waters of McKenzie, A Rehabilitation & Nursing Center, LLC |  |  | 50.00 | % |  |  | 50.00 | %
6500 Kirby Gate Boulevard, LLC |  | Waters of Memphis, A Rehabilitation & Nursing Center, LLC |  |  | 50.00 | % |  |  | 50.00 | %
978 Highway 11 South, LLC |  | Waters of Sweetwater, A Rehabilitation & Nursing Center, LLC |  |  | 50.00 | % |  |  | 50.00 | %
2830 Highway 394, LLC |  | Waters of Bristol, A Rehabilitation & Nursing Center, LLC |  |  | 50.00 | % |  |  | 50.00 | %
Master Lease Indiana 2 |  |  |  |  |  |  |  |  |  |
8400 Clearvista Place LLC |  | The Waters of Castleton SNF, LLC |  |  | 50.00 | % |  |  | 50.00 | %
524 Anderson Road LLC |  | The Waters of Chesterfield SNF, LLC |  |  | 50.00 | % |  |  | 50.00 | %
640 West Ellsworth Street LLC |  | The Waters of Columbia City SNF, LLC |  |  | 50.00 | % |  |  | 50.00 | %
11563 West 300 South LLC |  | The Waters of Dunkirk SNF, LLC |  |  | 50.00 | % |  |  | 50.00 | %
5544 East State Boulevard LLC |  | The Waters of Fort Wayne SNF, LLC |  |  | 50.00 | % |  |  | 50.00 | %
548 South 100 West LLC |  | The Waters of Hartford City SNF, LLC |  |  | 50.00 | % |  |  | 50.00 | %
2901 West 37th Avenue LLC |  | The Waters of Hobart SNF, LLC |  |  | 50.00 | % |  |  | 50.00 | %
1500 Grant Street LLC |  | The Waters of Huntington SNF, LLC |  |  | 50.00 | % |  |  | 50.00 | %
787 North Detroit Street LLC |  | The Waters of LaGrange SNF, LLC |  |  | 50.00 | % |  |  | 50.00 | %
981 Beechwood Avenue LLC |  | The Waters of Middletown SNF, LLC |  |  | 50.00 | % |  |  | 50.00 | %
317 Blair Pike LLC |  | The Waters of Peru SNF, LLC |  |  | 50.00 | % |  |  | 50.00 | %
815 West Washington Street LLC |  | The Waters of Rockport SNF |  |  | 50.00 | % |  |  | 50.00 | %
612 East 11th Street LLC |  | The Waters of Rushville SNF |  |  | 50.00 | % |  |  | 50.00 | %
505 West Wolfe Street LLC |  | The Waters of Sullivan SNF |  |  | 50.00 | % |  |  | 50.00 | %
500 East Pickwick Drive LLC |  | The Waters of Syracuse SNF |  |  | 50.00 | % |  |  | 50.00 | %
300 Fairgrounds Road LLC |  | The Waters of Tipton SNF |  |  | 50.00 | % |  |  | 50.00 | %
1900 Alber Street LLC |  | The Waters of Wabash SNF East |  |  | 50.00 | % |  |  | 50.00 | %
1720 Alber Street LLC |  | The Waters of Wabash SNF West |  |  | 50.00 | % |  |  | 50.00 | %
300 North Washington Street LLC |  | The Waters of Wakarusa SNF |  |  | 50.00 | % |  |  | 50.00 | %
8400 Clearvista Place LLC |  | The Waters of Castleton ALF, LLC |  |  | 50.00 | % |  |  | 50.00 | %
787 North Detroit Street LLC |  | The Waters of LaGrange ALF, LLC |  |  | 50.00 | % |  |  | 50.00 | %
612 East 11th Street LLC |  | The Waters of Rushville ALF, LLC |  |  | 50.00 | % |  |  | 50.00 | %
505 West Wolfe Street LLC |  | The Waters of Sullivan ALF, LLC |  |  | 50.00 | % |  |  | 50.00 | %
300 North Washington Street LLC |  | The Waters of Wakarusa ALF, LLC |  |  | 50.00 | % |  |  | 50.00 | %
Individual Leases |  |  |  |  |  |  |  |  |  |
Ambassador Nursing Realty, LLC |  | Ambassador Nursing and Rehabilitation Center II, LLC |  |  | 40.00 | % |  |  | 40.00 | %
Momence Meadows Realty, LLC |  | Momence Meadows Nursing and Rehabilitation Center, LLC |  |  | 50.00 | % |  |  | 50.00 | %
Oak Lawn Nursing Realty, LLC |  | Oak Lawn Respiratory and Rehabilitation Center, LLC |  |  | 50.00 | % |  |  | 50.00 | %
Forest View Nursing Realty, LLC |  | Forest View Rehabilitation and Nursing Center, LLC |  |  | 50.00 | % |  |  | 50.00 | %
Lincoln Park Holdings, LLC |  | Lakeview Rehabilitation and Nursing Center, LLC |  |  | 40.00 | % |  |  | 40.00 | %
Continental Nursing Realty, LLC |  | Continental Nursing and Rehabilitation Center, LLC |  |  | 40.00 | % |  |  | 40.00 | %
Westshire Nursing Realty, LLC |  | City View Multicare Center LLC |  |  | 50.00 | % |  |  | 50.00 | %
Belhaven Realty, LLC |  | Belhaven Nursing and Rehabilitation Center, LLC |  |  | 50.00 | % |  |  | 50.00 | %
West Suburban Nursing Realty, LLC |  | West Suburban Nursing and Rehabilitation Center, LLC |  |  | 40.00 | % |  |  | 40.00 | %
Niles Nursing Realty LLC |  | Niles Nursing & Rehabilitation Center, LLC |  |  | 50.00 | % |  |  | 50.00 | %
Parkshore Estates Nursing Realty, LLC |  | Parkshore Estates Nursing and Rehabilitation Center, LLC |  |  | 50.00 | % |  |  | 50.00 | %
Midway Neurological and Rehabilitation Realty, LLC |  | Midway Neurological and Rehabilitation Center, LLC |  |  | 50.00 | % |  |  | 50.00 | %
516 West Frech Street, LLC |  | Parker Rehab & Nursing Center, LLC |  |  | 50.00 | % |  |  | 50.00 | %
1316 North Tibbs Avenue Realty LLC |  | Westpark A Waters Community, LLC |  |  | 50.00 | % |  |  | 50.00 | %
1585 Perry Worth Road LLC |  | The Waters of Lebanon LLC |  |  | 50.00 | % |  |  | 50.00 | %
100 Netherland Lance LLC |  | The Waters of Kingsport LLC |  |  | 50.00 | % |  |  | 50.00 | %

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We monitor the creditworthiness of our tenants by evaluating the ability of the tenants to meet their lease obligations to us based on the tenants’ financial performance, including the evaluation of any guarantees of tenant lease obligations. The primary basis for our evaluation of the credit quality of our tenants (and more specifically the tenants’ ability to pay their rent obligations to us) is the tenants’ lease coverage ratios. These coverage ratios compare (i) earnings before interest, income taxes, depreciation, amortization and rent (“EBITDAR”) to rent coverage, and (ii) earnings before interest, income taxes, depreciation, amortization, rent and management fees (“EBITDARM”) to rent coverage. We utilize a standardized 5% management fee when we calculate lease coverage ratios. We obtain various financial and operational information from our tenants each month. We regularly review this information to calculate the above-described coverage metrics, to identify operational trends, to assess the operational and financial impact of the changes in the broader industry environment (including the potential impact of government reimbursement and regulatory changes), and to evaluate the management and performance of the tenants’ operations. These metrics help us identify potential areas of concern relative to our tenants’ credit quality and ultimately the tenants’ ability to generate sufficient liquidity to meet their ongoing obligations, including their obligations to continue paying contractual rents due to us and satisfying other financial obligations to third parties, as prescribed by our triple-net leases.

Geographic Diversification

As of March 19, 2024, our portfolio of 100 properties is broadly diversified by geographic location across nine U.S. states, comprising Arkansas, Illinois, Indiana, Kentucky, Michigan, Ohio, Oklahoma, Tennessee and Texas.

The following table contains information regarding our healthcare facility portfolio by geography, as of March 19, 2024:

State |  | Number of Properties |  |  | Facility Type |  | Licensed Bed Count |  |  | Annualized Average Base Rent (Amounts in $000s) |  |  | % of Total Annualized Average Base Rent |
Indiana |  | 34 |  |  | 34 SNFs 5 ALFs |  |  | 3,240 |  |  |  | 30,881 |  |  |  | 30.2 | %
Illinois |  | 20 |  |  | 20 SNFs |  |  | 4,226 |  |  | $ | 25,011 |  |  |  | 24.4 | %
Tennessee |  | 14 |  |  | 14 SNFs |  |  | 1,304 |  |  |  | 17,317 |  |  |  | 16.9 | %
Arkansas |  | 13 |  |  | 12 SNFs 2 ALFs |  |  | 1,568 |  |  |  | 11,044 |  |  |  | 10.8 | %
Kentucky |  | 10 |  |  | 10 SNFs 1 ALF |  |  | 1,163 |  |  |  | 11,766 |  |  |  | 11.5 | %
Texas |  | 3 |  |  | 3 SNFs 1 LTACH |  |  | 473 |  |  |  | 3,045 |  |  |  | 3.0 | %
Oklahoma |  | 1 |  |  | 1 SNFs 1 LTACH |  |  | 137 |  |  |  | 1,386 |  |  |  | 1.4 | %
Ohio |  | 4 |  |  | 4 SNFs |  |  | 238 |  |  |  | 864 |  |  |  | 0.8 | %
Michigan |  | 1 |  |  | 1 SNF |  |  | 100 |  |  |  | 1,012 |  |  |  | 1.0 | %
Totals |  | 100 |  |  | 99 SNFs 2 LTACHs 8 ALFs |  |  | 12,449 |  |  | $ | 102,326 |  |  |  | 100.0 | %

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Competitive Strengths

We believe that the following competitive strengths provide a solid foundation for the sustained growth of our business and successful execution of our business strategies:

Diversified Portfolio. We have a portfolio that is diversified in terms of both geography and tenant composition. As of March 19, 2024, our portfolio is comprised of 100 healthcare-related properties with a total of 12,449 licensed beds located throughout Arkansas, Illinois, Indiana, Kentucky, Michigan, Ohio, Oklahoma, Tennessee and Texas. We believe that our geographic diversification limits the potential impact of any regulatory, reimbursement, competitive dynamic or other changes in any single market on the overall performance of our portfolio. We lease our properties to 109 tenants, with no single tenant accounting for more than 2.5% of our annualized base rent. This diversification limits our exposure for any single tenant that encounters financial or operational difficulties.

Protected Markets. In eight of the nine states in which we operate, we benefit from CON laws that require state approval for the construction and expansion of certain types of healthcare facilities. These laws represent significant barriers to entry and limit competition in these markets.

Demonstrated Ability to Identify and Structure Accretive Acquisition Opportunities. Our management team has long-standing relationships in the skilled nursing and post-acute industries. Through their experience in acquiring these types of facilities, we have the proven ability to identify and complete complex and accretive transactions. Additionally, because many of our acquisitions are off-market opportunities sourced through our management team’s network of industry relationships, we believe we do not typically compete with larger healthcare-focused real estate companies for acquisitions as they tend to focus on larger, platform acquisition opportunities. As a result, we have consistently acquired assets at attractive valuations and believe we can continue to identify these types of opportunities to expand our portfolio.

Significant Experience Acquiring Underperforming Assets. Although we primarily seek to acquire properties that have had consistent profitability, we may also acquire underperforming properties if we believe that the underlying facilities can become successful through better management. Our management team’s prior experience as operators gives it the ability to evaluate these types of facilities and their potential for improved revenue enhancement and increased operating efficiencies. We will consider the acquisition of underperforming properties if they are available at attractive valuations and provide us with significant upside potential once their new operators have successfully stabilized and optimized their operations. If we acquire underperforming properties, we would expect to lease them to tenants and operators that have significant turnaround experience and support from experienced consultants.

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Experienced and Adept Operators. We have strong and long-standing relationships with operators and their principals who have significant experience in operating successful skilled nursing facilities. These operators and their principals have a strong track record of operating in challenging markets where operators are subject to increased regulatory issues and significant competition. Additionally, these operators and their principals have learned to successfully operate facilities in which most of the revenue is earned from providing services to patients covered by Medicaid which are subject to lower reimbursement rates than other revenue sources.

Consulting Firms Provide Additional Resources for the Operators of our Facilities. Most of the operators of our facilities utilize the services of experienced healthcare consulting firms to provide them with expert advice and assistance with their operations. We believe these consulting firms provide the operators with additional expertise and resources that materially enhance their ability to operate efficiently and to meet applicable regulatory requirements.

Close Relationships with Tenants, Operators and Consultants Provide Enhanced Oversight, Market Intelligence and Strong Alignment of Interests. The nature of our close relationships with the tenants and operators of our properties and their consulting firms allows us to maintain close communication and obtain early knowledge of potential issues faced by our tenants, enabling us to address those issues that affect us as the lessor. These relationships also provide us with intelligence on the markets in which we own properties and assistance in locating new and replacement tenants. Additionally, the consulting firms assist us without charge in evaluating potential acquisitions and operators. This assistance provides us with insight into local market trends, which is particularly valuable for new markets. These relationships also provide a strong alignment of interests between our interests as a property owner and our tenants’ interests.

Well-Structured, Long-Term, Triple-Net Leases Generate Predictable and Growing Rental Income Streams. Most of our owned properties are leased to tenants under long-term, non-cancellable, triple-net leases, pursuant to which the tenants are responsible for all maintenance and repairs, insurance and taxes associated with the leased properties and the business conducted at the properties. As of December 31, 2023, 100% of the gross leasable area of our facilities was leased with an average remaining lease term of 6.4 years. Our leases generally have terms that range from 10 to 20 years with two five-year extensions, and annual rent escalators of 1% to 3% per year, which provides us with a steady and growing cash rental stream. Additionally, our leases are structured to provide us with key credit support and have credit enhancement provisions that may include non-refundable security deposits of up to 6 months, personal and corporate guarantees and cross-default provisions under our master leases. Approximately 72.9% of our total annualized rental revenue is generated through our 11 master leases that have cross-default and cross-collateralization provisions.

Seasoned Management Team with Significant Experience. Moishe Gubin, our Chairman and Chief Executive Officer, has over 25 years of operating and real estate experience in the skilled nursing and long-term care industries. Prior to founding the Predecessor Company, Mr. Gubin worked as an operator of skilled nursing facilities and built a strong operational knowledge base that has been incorporated into the day-to-day management of our current portfolio. Additionally, Mr. Gubin has significant acquisition experience having completed over 125 healthcare-related facilities with an aggregate investment amount of over $1.2 billion since 2003. Mr. Gubin also has significant experience accessing debt capital markets to fund growth, having raised over $310 million of publicly traded bonds that are listed on the Tel Aviv Stock Exchange. We believe that the diverse operational and financial background and expertise of our management team gives us the ability to successfully manage our portfolio and sustain our growth.

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Our Business and Growth Strategies

Our objective is to generate attractive returns for our stockholders over the long term through dividends and capital appreciation. Key elements of our strategy include the following:

Acquire Additional Healthcare Properties in Concentrated Geographic Areas. We plan to invest primarily in real estate used as skilled nursing facilities and other healthcare facilities that provide services to the elderly, where our management team has substantial experience and relationships. We believe these facilities have the potential to provide higher risk-adjusted returns compared to other forms of net-leased real estate assets due to the specialized expertise necessary to acquire, own, finance and manage these properties, which are factors that tend to limit competition among investors, owners, operators and finance companies. We will seek to acquire properties in states where we believe we can build regional density in order to create competitive advantages and drive operational and cost efficiencies.

Negotiate Well-Structured Net Leases. Our primary ownership structure is a facility purchase with a long-term triple-net lease with the healthcare operator. We seek to structure our leases with lease terms of 10 years with tenant options to extend the lease for an additional period of 5 to 10 years and rent escalators that provide a steadily growing cash rental stream. Our lease structures are designed to provide us with credit support for our rents, including, in certain cases, lease deposits, covenants regarding liquidity, and various provisions for cross-default. We believe these features help insulate us from variability in operator cash flows and enable us to minimize our expenses while we continue to build our portfolio.

Leverage Existing and Develop New Operator Relationships. relationships in the healthcare industry through which we have sourced our existing portfolio, and we intend to continue to expand our portfolio by leveraging these existing relationships. Sixty-five of our properties are leased to related parties. One of our goals is to reduce our dependence on related party tenants in order to diversify our tenant base. Although we expect to continue to lease properties to related party tenants in markets in which the related party tenants have substantial experience and operations, we intend to lease properties in other markets to unrelated tenants if we are able to identify qualified operators. Additionally, we will consider leasing properties to unrelated parties in markets in which related parties operate if we are able to identify qualified operators that are willing to lease properties on terms that are no less favorable than those available from related parties.

Utilize Prudent Investment Underwriting Criteria. We have adopted what we believe to be a thorough investment underwriting process based on careful analysis and due diligence with respect to both the healthcare real estate and the healthcare service operations. We seek to make investments in healthcare properties that have the following attributes: well-located, visible to traffic, in good physical condition with predictable future capital improvement needs and with attractive prospects for future profitability.

Monitor the Performance of our Facilities and Industry Trends. We carefully monitor the financial and operational performance of our tenants and of the specific facilities in which we invest through a variety of methods, such as reviews of periodic financial statements, and regular meetings with the facility operators. Pursuant to the terms of our leases, our tenants are required to provide us with certain periodic financial statements and operating data.

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Utilize Targeted Leverage in Our Investing Activities. We seek to utilize a targeted level of leverage that is appropriate in light of market conditions, future cash flows, the creditworthiness of tenants and future rental rates. We will seek to achieve a ratio of debt to asset fair market value in the range of 45% to 55%. However, our charter and bylaws do not limit the amount of debt that we may incur and our board of directors has not adopted a policy limiting the total amount of our borrowings.

Policy for the Acquisition and Sale of Properties

In considering these performance targets, readers should bear in mind that targeted performance for each acquisition is not a guarantee, projection, forecast or prediction and is not necessarily indicative of future results. These performance targets are as of the date hereof and may change in the future. The performance targets are based on an assumption that economic, market and other conditions will not deteriorate and, in some cases, will improve. These performance targets are also based on estimates and assumptions about performance believed to be reasonable under the circumstances, but actual realized returns of our investments will depend on, among other factors, the ability to consummate attractive investments, future operating results, the value of the assets and market conditions at the time of disposition, any related transaction costs and the timing and manner of sale, all of which may differ from the assumptions and circumstances on which targeted returns are based. We believe the performance targets are reasonable, but readers should keep in mind that this investment involves a high degree of risk and they should purchase these securities only if they can afford a complete loss of their investment.

We believe our management team’s depth of experience in healthcare real estate, operations and finance provides us with unique perspective in underwriting potential investments. Our real estate underwriting process focuses on both real estate and healthcare operations. The process includes a detailed analysis of the facility and the financial strength and experience of the tenant and its management. Key factors that we consider in the underwriting process include the following:

● the current, historical and projected cash flow and operating margins of each tenant and at each facility;

● the ratio of our tenants’ operating earnings both to facility rent and to facility rent plus other fixed costs, including debt costs;

● the quality and experience of the tenant and its management team;

● construction quality, condition, design and projected capital needs of the facility and property condition assessments;

● competitive landscape;

● drivers of healthcare-related needs;

● the location of the facility;

● local economic and demographic factors and the competitive landscape of the market;

● licensure and accreditation;

● the effect of evolving healthcare legislation and other existing and future regulations and compliance with such regulations on our tenants’ profitability and liquidity; and

● the payor mix of private, Medicare and Medicaid patients at the facility.

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We also require tenants to furnish property and operator-level financials, among other data, on a monthly basis; we evaluate individual and portfolio property performance, liquidity metrics, lease and debt coverage, occupancy, planned capital expenditures, and other measures; and we conduct in- person visits to each facility in the portfolio at least two times per year. We believe our underwriting process enables us to acquire desirable properties with strong tenants that will support our ability to deliver attractive risk-adjusted returns to our stockholders.

The policy does not limit the authority of our board of directors to change or deviate from the policy as it sees fit from time to time. Changes to the policy do not require stockholder approval.

Our management does not have a fixed policy relating to the sale of properties. Accordingly, each potential sale opportunity will be examined on its merits in view of the business opportunity involved.

Our Leases

As of March 19, 2024, all of our healthcare properties were subject to lease agreements. Our leases have a weighted-average annualized lease income per leased square foot of $23.81, and a weighted-average remaining lease term of approximately 6.4 years.

To our knowledge, except as noted below, none of our current tenants are in default under any of the leases.

Each of our properties is leased under a separate lease agreement, although 11 groups of properties, covering a total of 88 facilities, are subject to 11 master lease agreements. Each master lease agreement provides that the tenants under the master lease are jointly and severally liable for the obligations of all of the other tenants under such master lease. We entered into these master lease agreements in order to facilitate financing the underlying properties. Rental income under these master leases represents a substantial portion of our rental income.

The following table summarizes information concerning the master lease agreements as of March 19, 2024 (dollars in thousands):

Master Lease Agreements
Master Lease Name |  | States |  |  | Facilities Count |  |  | GLA |  |  | Annualized Average Base Rent ($000s) |  |  | % of Total Annualized Average Base Rent |
Master Lease Indiana 1 (1) |  | IN |  |  |  | 13 |  |  |  | 463,593 |  |  | $ | 13,592 |  |  |  | 13.3 | %
Master Lease Indiana 2 (1) IN |  |  |  |  |  | 24 |  |  |  | 705,730 |  |  | $ | 16,623 |  |  |  | 16.2 | %
Master Lease Central Illinois 1 |  | IL |  |  |  | 3 |  |  |  | 205,060 |  |  | $ | 1,657 |  |  |  | 1.6 | %
Master Lease Central Illinois 2 |  | IL |  |  |  | 2 |  |  |  | 45,231 |  |  |  | 601 |  |  |  | .6 | %
Master Lease Landmark |  | TX/OK/ MI/IL/KY |  |  |  | 14 |  |  |  | 740,212 |  |  | $ | 14,164 |  |  |  | 13.8 | %
Master Lease Ohio |  | OH |  |  |  | 4 |  |  |  | 73,311 |  |  | $ | 864 |  |  |  | .8 | %
Master Lease Tennessee 1 (1) |  | TN |  |  |  | 7 |  |  |  | 238,937 |  |  | $ | 8,136 |  |  |  | 8.0 | %
Master Lease Tennessee 2 (1) |  | TN |  |  |  | 5 |  |  |  | 185,344 |  |  | $ | 8,726 |  |  |  | 8.5 | %
Master Lease Arkansas 1 |  | AR |  |  |  | 9 |  |  |  | 414,706 |  |  | $ | 7,053 |  |  |  | 6.9 | %
Master Lease Arkansas 2 |  | AR |  |  |  | 4 |  |  |  | 130,429 |  |  | $ | 3,147 |  |  |  | 3.1 | %
Master Lease Texas |  | TX |  |  |  | 3 |  |  |  | 184,659 |  |  | $ | 1,994 |  |  |  | 1.95 | %
Total (11) |  |  |  |  |  | 88 |  |  |  | 3,387,212 |  |  | $ | 76,557 |  |  |  | 74.8 | %

(1) The tenants under the two master leases in Indiana and the two Tennessee master leases are affiliated with Moishe Gubin, who is our Chairman and Chief Executive Officer and Michael Blisko, who is one of our directors. See “Item 1. Business—Our Leases.”

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The following table summarizes information concerning the lease agreements that are not subject to a master lease agreement as of March 19, 2024 (dollars in thousands):

Individual Leases
Lessor |  | State |  |  | Facility Type |  |  | Rentable Sq. Ft. |  |  | Annualized Average Base Rent ($000s) |  |  | % of Total Annualized Average Base Rent |
Ambassador Nursing Realty, LLC |  | Illinois |  |  | SNF |  |  |  | 37,100 |  |  | $ | 1,005 |  |  |  | 1.0 | %
Momence Meadows Realty, LLC |  | Illinois |  |  | SNF |  |  |  | 37,139 |  |  | $ | 1,038 |  |  |  | 1.0 | %
Oak Lawn Nursing Realty, LLC |  | Illinois |  |  | SNF |  |  |  | 37,854 |  |  | $ | 1,083 |  |  |  | 1.1 | %
Forest View Nursing Realty, LLC |  | Illinois |  |  | SNF |  |  |  | 34,152 |  |  | $ | 1,215 |  |  |  | 1.2 | %
Lincoln Park Holdings, LLC |  | Illinois |  |  | SNF |  |  |  | 34,362 |  |  | $ | 1,260 |  |  |  | 1.2 | %
Continental Nursing Realty, LLC |  | Illinois |  |  | SNF |  |  |  | 53,653 |  |  | $ | 1,575 |  |  |  | 1.5 | %
Westshire Nursing Realty, LLC |  | Illinois |  |  | SNF |  |  |  | 124,020 |  |  | $ | 1,788 |  |  |  | 1.7 | %
Belhaven Realty, LLC |  | Illinois |  |  | SNF |  |  |  | 60,000 |  |  | $ | 2,135 |  |  |  | 2.1 | %
West Suburban Nursing Realty, LLC |  | Illinois |  |  | SNF |  |  |  | 70,314 |  |  | $ | 1,962 |  |  |  | 1.9 | %
Niles Nursing Realty LLC |  | Illinois |  |  | SNF |  |  |  | 46,480 |  |  | $ | 2,410 |  |  |  | 2.4 | %
Parkshore Estates Nursing Realty, LLC |  | Illinois |  |  | SNF |  |  |  | 94,018 |  |  | $ | 2,454 |  |  |  | 2.4 | %
Midway Neurological and Rehabilitation Realty, LLC |  | Illinois |  |  | SNF |  |  |  | 120,000 |  |  | $ | 2,548 |  |  |  | 2.5 | %
516 West Frech Street, LLC |  | Illinois |  |  | SNF |  |  |  | 24,979 |  |  | $ | 498 |  |  |  | 0.5 | %
4343 Kennedy Drive, LLC |  | Illinois |  |  | SNF |  |  |  | 104,000 |  |  | $ | 479 |  |  |  | 0.5 | %
1316 North Tibbs Avenue Realty, LLC |  | Indiana |  |  | SNF |  |  |  | 26,572 |  |  | $ | 550 |  |  |  | 0.5 | %
1585 Perry Worth Rd, LLC |  | Indiana |  |  | SNF |  |  |  | 32,650 |  |  | $ | 117 |  |  |  | 0.1 | %
9300 Ballard Rd Realty, LLC |  | Illinois |  |  | SNF |  |  |  | 70,556 |  |  | $ | 1,302 |  |  |  | 1.3 | %
2301 North Oregon Realty, LLC |  | Texas |  |  | LTACH |  |  |  | 24,660 |  |  | $ | 1,050 |  |  |  | 1.0 | %
9209 Dollarway Road, LLC |  | Arkansas |  |  | SNF |  |  |  | 45,771 |  |  | $ | 843 |  |  |  | 0.8 | %
100 Netherland Lane LLC |  | Tennessee |  |  | SNF |  |  |  | 28,140 |  |  |  | 151 |  |  |  | 0.2 | %
2648 Sevierville Road LLC |  | Tennessee |  |  | SNF |  |  |  | 49,810 |  |  |  | 303 |  |  |  | 0.3 | %
Total (21) |  |  |  |  |  |  |  |  | 1,156,230 |  |  | $ | 25,766 |  |  |  | 25.2 | %

Investment and Financing Policies

Our properties are located in 9 states and we intend to continue to acquire properties in other states throughout the United States. Our investment objectives are to increase cash flow, provide quarterly cash dividends, maximize the value of our properties and acquire properties with cash flow growth potential. We intend to invest primarily in SNFs and seniors housing, including ALFs and we may determine in the future to expand our investments to include medical office buildings, long-term acute care hospitals and inpatient rehabilitation facilities. Although our portfolio currently consists primarily of owned real property, future investments may include first mortgages, mezzanine debt and other securities issued by, or joint ventures with, REITs or other entities that own real estate consistent with our investment objectives.

Competition

The market for making investments in healthcare properties is highly fragmented, and increased competition makes it more challenging for us to identify and successfully capitalize on opportunities that meet our investment objectives. In acquiring and leasing healthcare properties, we compete with private equity funds, real estate developers, REITs, other public and private real estate companies and private real estate investors, many of whom have greater financial resources than we have. We also face competition in leasing or subleasing available facilities to prospective tenants.

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Regulation

Healthcare Regulatory Matters

The following discussion describes certain material healthcare laws and regulations that may affect our operations and those of our tenants/operators. Although there is presently no Federal regulation on the lessor itself from Federal government agencies that regulate and inspect the operators and no regulation of the lessor in the States in which we own real property, our tenants (the operators of skilled nursing facilities, long-term acute care hospitals and other healthcare providers) are subject to extensive federal, state and local government healthcare laws and regulations. These laws and regulations include requirements related to licensure, conduct of operations, ownership of the facilities operation, addition or expansion of facilities and services, prices for services, billing for services and the confidentiality and security of health-related information. Different properties within our portfolio may be more or less subject to certain types of regulation, some of which are specific to the type of facility or provider. These laws and regulations are wide-ranging and complex, may vary or overlap from jurisdiction to jurisdiction, and are subject frequently to change. Compliance with these regulatory requirements can increase operating costs and, thereby, adversely affect the financial viability of our tenants/operators’ businesses. Our tenants/operators’ failure to comply with these laws and regulations could adversely affect their ability to successfully operate our properties, or receive reimbursement for services rendered within them, which could negatively impact their ability to satisfy their contractual obligations to us. Our leases will require the tenants/operators to comply with all applicable laws, including healthcare laws.

Our tenants are subject directly to healthcare laws and regulations, because of the broad nature of some of these restrictions, such as the Anti-Kickback Statute discussed below. We intend for all of our business activities and operations to conform in all material respects with all applicable laws and regulations, including healthcare laws and regulations. We expect that the healthcare industry will continue to face increased regulation and pressure in the areas of fraud, waste and abuse, cost control, healthcare management and provision of services.

Healthcare Reform Measures. The Affordable Care Act changed how healthcare services are covered, delivered and reimbursed through expanded coverage of uninsured individuals, reduced growth in Medicare program spending, reductions in Medicare and Medicaid reimbursement, including but not limited to, Disproportionate Share Hospital, or DSH payments, and expanding efforts by governmental and private third party payors to tie reimbursement to quality and efficiency. In addition, the law reformed certain aspects of health insurance, contains provisions intended to strengthen fraud and abuse enforcement, and encourage the development of new payment models, including the creation of Accountable Care Organizations, or ACOs. The status of the Affordable Care Act is subject to substantial uncertainty due to proposals to terminate or modify its provisions. We are not able to predict the effect of such changes on our business since the nature of any changes is undetermined. However, any changes that result in a decrease in payments made on behalf of patients are likely to reduce the income that our tenants receive from the operation of facilities at our properties.

Sources of Revenue and Reimbursement. Our tenants and operators receive payments for patient services from the federal government under the Medicare program, state governments under their respective Medicaid or similar programs, managed care plans, private insurers and directly from patients. Medicare is a federal program that provides certain hospital and medical insurance benefits to persons age 65 and over, some disabled persons, persons with end-stage renal disease and persons with Lou Gehrig’s Disease. Medicaid is a federal-state program, administered by the states pursuant to certain conditions imposed by the Federal government, which provides hospital and medical benefits to qualifying individuals who are unable to afford healthcare. Generally, revenues for services rendered to Medicare patients are determined under a prospective payment system, or PPS. CMS annually establishes payment rates for the PPS for each applicable facility type and level of care provided.

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Amounts received under Medicare and Medicaid programs are generally significantly less than established facility gross charges for the services provided and may not reflect the provider’s costs. Healthcare providers generally offer discounts from established charges to certain group purchasers of healthcare services, including private insurance companies, employers, health maintenance organizations, or HMOs, preferred provider organizations, or PPOs and other managed care plans. These discount programs generally limit a provider’s ability to increase revenues in response to increasing costs. Patients are generally not responsible for the total difference between established provider gross charges and amounts reimbursed for such services under Medicare, Medicaid, HMOs, PPOs and other managed care plans, but are responsible to the extent of any exclusions, deductibles or coinsurance features of their coverage. The amount of such exclusions, deductibles and coinsurance continues to increase. Collection of amounts due from individuals is typically more difficult than from governmental or third-party payers takes considerably longer and often requires the involvement of, and payment to, third parties to collect.

Payments to providers are being increasingly tied to quality and efficiency. These initiatives include requirements to report clinical data and patient satisfaction scores, reduced Medicare payments to hospitals based on “excess” readmission rates as determined by CMS, denial of payments under Medicare, Medicaid and some private payors for services resulting from a hospital or facility-acquired condition, or HAC, and reduced Medicare payments to hospitals with high risk-adjusted HAC rates. Certain provider types, including, but not limited to, inpatient rehabilitation facilities and long-term acute care hospitals, are subject to specific limits and restrictions on eligibility for admissions which, in turn, affect reimbursement at these facilities.

The amounts of program payments received by our tenants/operators can be changed from time to time by legislative or regulatory actions and by determinations by agents for the programs. Level of payment has also been impacted by the Federal budget sequestration which automatically reduces payments as a result of funding limitations. The Medicare and Medicaid statutory framework is subject to administrative rulings, interpretations and discretion that affect the amount and timing of reimbursement made under Medicare and Medicaid. Federal healthcare program reimbursement changes may be applied retroactively under certain circumstances. In recent years, the federal government has enacted various measures to reduce spending under federal healthcare programs. In April 2018, CMS announced as part of its patient driven payment model (“PDPM”) a skilled-nursing preferred payor system (“SNF-PPS”) intended to reduce administrative burden, and foster innovation to improve care and quality for patients. CMS estimates the program of payment redesign and policy changes would increase Medicare payments to SNFs by 2.4% ($850 million) during 2019.

In addition, many states have enacted, or are considering enacting, measures designed to reduce their Medicaid expenditures and change private healthcare insurance, and states continue to face significant challenges in maintaining appropriate levels of Medicaid funding due to state budget shortfalls. Many States have also sought to control costs by implementing a variety of alternative care and payment models authorized under Federal Medicaid waivers and such models often impose new or enhanced administrative requirements on health care providers as a condition of payment. Further, non-government payers may reduce their reimbursement rates in accordance with payment reductions by government programs or for other reasons. Healthcare provider operating margins may continue to be under significant pressure due to the deterioration in pricing flexibility and payor mix, as well as increases in operating expenses that exceed increases in payments under the Medicare and Medicaid programs.

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Anti-Kickback Statute. A section of the Social Security Act known as the “Anti-Kickback Statute” prohibits, among other things, the offer, payment, solicitation or acceptance of remuneration, directly or indirectly, in return for referring an individual to a provider of services for which payment may be made in whole or in part under a federal healthcare program, including the Medicare or Medicaid programs. Courts have interpreted this statute broadly and held that the Anti-Kickback Statute is violated if just one purpose of the remuneration is to generate referrals, even if there are other lawful purposes. The Affordable Care Act provides that knowledge of the Anti-Kickback Statute or specific intent to violate the statute is not required in order to violate the Anti-Kickback Statute. Violation of the Anti-Kickback Statute is a crime, punishable by fines of up to $25,000 per violation, five years imprisonment, or both. Violations may also result in civil and administrative liability and sanctions, including civil penalties of up to $50,000 per violation, liability under the False Claims Act, exclusion from participation in federal and state healthcare programs, including Medicare and Medicaid, and additional monetary penalties in amounts treble to the underlying remuneration.

There are a limited number of statutory exceptions and regulatory safe harbors for categories of activities deemed protected from prosecution under the Anti-Kickback Statute. Currently, there are statutory exceptions and safe harbors for various activities, including the following: certain investment interests, space rental, equipment rental, practitioner recruitment, personnel services and management contracts, sale of practice, referral services, warranties, discounts, employees, managed care arrangements, investments in group practices, freestanding surgery centers, ambulance replenishing and referral agreements for specialty services. The safe harbor for space rental arrangements requires, among other things, that the aggregate rental payments be set in advance, be consistent with fair market value and not be determined in a manner that takes into account the volume or value of any referrals. The fact that conduct or a business arrangement does not fall within a safe harbor does not necessarily render the conduct or business arrangement illegal under the Anti-Kickback Statute. However, such conduct and business arrangements may lead to increased scrutiny by government enforcement authorities.

Many states have laws similar to the Anti-Kickback Statute that regulate the exchange of remuneration in connection with the provision of healthcare services, including prohibiting payments to physicians for patient referrals. The scope of these state laws is broad because they can often apply regardless of the source of payment for care. These statutes typically provide for criminal and civil penalties, as well as potential loss of facility licensure and eligibility for reimbursement by government payors.

We intend to use commercially reasonable efforts to structure our arrangements, including any lease/operating arrangements involving facilities in which local physicians are investors, so as to satisfy, or meet as closely as possible, safe harbor requirements. The safe harbors are narrowly structured, and there are not safe harbors available for every type of financial arrangement that we or our tenants/operators may enter. Although it is our intention to fully comply with the Anti-Kickback Statue, as well as all other applicable state and federal laws, we cannot assure you that all of our arrangements or the arrangements of our tenants/operators will meet all the conditions for a safe harbor. There can be no assurance regulatory authorities enforcing these laws will determine our financial arrangements or the financial relationships of our tenants/operators comply with the Anti-Kickback Statute or other similar laws and such regulatory authorities or private qui tam relators bringing actions on behalf of government entities in exchange for a portion of any recovery may allege non-compliance and seek financial or other penalties.

Stark Law. The Social Security Act also includes a provision commonly known as the “Stark Law.” The Stark Law is a strict liability statute that prohibits a physician from making a referral to an entity furnishing “designated health services” paid by Medicare or Medicaid if the physician or a member of the physician’s immediate family has a financial relationship with that entity unless an exception to the law is met. Designated health services include, among other services, inpatient and outpatient hospital services, clinical laboratory services, physical therapy services and radiology services. The Stark Law also prohibits entities that provide designated health services from billing the Medicare and Medicaid programs for any items or services that result from a prohibited referral and requires the entities to refund amounts received for items or services provided pursuant to the prohibited referral. Sanctions for violating the Stark Law are imposed without consideration to intent and include denial of payment, civil monetary penalties of up to $15,000 per prohibited service provided for failure to return amounts received in a timely manner, and exclusion from the Medicare and Medicaid programs. The statute also provides for a penalty of up to $100,000 for a circumvention scheme. Failure to refund amounts received pursuant to a prohibited referral may also constitute a false claim and result in additional penalties under the False Claims Act, which is discussed in greater detail below.

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There are exceptions to the self-referral prohibition for many of the customary financial arrangements between physicians and providers, including employment contracts, leases and recruitment agreements. There is also an exception for a physician’s ownership interest in an entire hospital, as opposed to an ownership interest in a hospital department if such ownership interests and capacity were in place as of March 23, 2010. Unlike safe harbors under the Anti-Kickback Statute, an arrangement must comply with every requirement of a Stark Law exception, or the arrangement will be in violation of the Stark Law. Through a series of rulemakings, CMS has issued final regulations implementing the Stark Law. While these regulations were intended to clarify the requirements of the exceptions to the Stark Law, it is unclear how the government will interpret many of these exceptions for enforcement purposes and even an inadvertent failure to comply with the strict requirements, such as assuring a signature, can result in imposition of penalties under certain circumstances.

Although there is an exception for a physician’s ownership interest in an entire hospital, the Affordable Care Act prohibits newly created physician-owned hospitals from billing for Medicare patients referred by their physician owners. As a result, the law effectively prevents the formation after December 31, 2010 of new physician-owned hospitals that participate in Medicare and Medicaid. While the Affordable Care Act grandfathers existing physician-owned hospitals, it does not allow these hospitals to increase the percentage of physician ownership and significantly restricts their ability to expand services.

Many states also have laws similar to the Stark Law that prohibit certain self-referrals. The scope of these state laws is broad because they can often apply regardless of the source of payment for care, and little precedent exists for their interpretation or enforcement. These statutes typically provide for criminal and civil penalties, as well as loss of facility licensure.

Although our lease agreements will require tenants to comply with the Stark Law, we cannot offer assurance that the arrangements entered into by us or by our tenants/operators will be found to be in compliance with the Stark Law or similar state laws.

The False Claims Act. The federal False Claims Act prohibits knowingly making or presenting any false claim for payment to the federal government. The government may use the False Claims Act to prosecute Medicare and other government program fraud in areas such as coding errors, billing for services not provided, submitting false cost reports and failing to report and repay an overpayment within 60 days of identifying the overpayment or by the date a corresponding cost report is due, whichever is later. The False Claims Act defines the term “knowingly” broadly. Although simple negligence will not give rise to liability under the False Claims Act, submitting a claim with reckless disregard to its truth or falsity or failing to correct an error within specified period of time constitutes a “knowing” submission.

The False Claims Act contains qui tam, or whistleblower, provisions that allow private individuals to bring actions on behalf of the government alleging that the defendant has defrauded the federal government. Whistleblowers under the False Claims Act may collect a portion of the government’s recovery, which serves as an incentive to bring claims which then must be defended whether or not they have merit. Every entity that receives at least $5 million annually in Medicaid payments must have written policies for all employees, contractors or agents, providing detailed information about false claims, false statements and whistleblower protections under certain federal laws, including the False Claims Act, and similar state laws.

In some cases, whistleblowers and the federal government have taken the position, and some courts have held, that providers who allegedly have violated other statutes, such as the Anti-Kickback Statute and the Stark Law, have thereby submitted false claims under the False Claims Act. The Affordable Care Act clarifies this issue with respect to the Anti-Kickback Statute by providing that submission of claims for services or items generated in violation of the Anti-Kickback Statute constitutes a false or fraudulent claim under the False Claims Act. If a defendant is found liable under the False Claims Act, the defendant may be required to pay three times the actual damages sustained by the government, additional civil penalties of up to $10,000 per false claim, plus reimbursement of the fees of counsel for the whistleblower.

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Many states have enacted similar statutes preventing the presentation of a false claim to a state government, and we expect more to do so because the Social Security Act provides a financial incentive for states to enact statutes establishing state level liability.

Other Fraud & Abuse Laws. There are various other fraud and abuse laws at both the federal and state levels that cover false claims and false statements and these may impact our business. For example, the Civil Monetary Penalties law authorizes the imposition of monetary penalties against an entity that engages in a number of prohibited activities. The penalties vary by the prohibited conduct, but include penalties of $10,000 for each item or service, $15,000 for each individual with respect to whom false or misleading information was given, and treble damages for the total amount of remuneration claimed. The prohibited actions include, but are not limited to, the following:

● knowingly presenting or causing to be presented, a claim for services not provided as claimed or which is otherwise false or fraudulent in any way;

● knowingly giving or causing to be giving false or misleading information reasonably expected to influence the decision to discharge a patient;

● offering or giving remuneration to any beneficiary of a federal healthcare program likely to influence the receipt of reimbursable items or services; arranging for reimbursable services with an entity which is excluded from participation from a federal healthcare program; or knowingly or willfully soliciting or receiving remuneration for a referral of a federal healthcare program beneficiary.

Any violations of the Civil Monetary Penalties Law by management or our tenants/operators could result in substantial fines and penalties and could have an adverse effect on our business.

HIPAA Administrative Simplification and Privacy and Security Requirements. HIPAA, as amended by the HITECH Act, and its implementing regulations create a national standard for protecting the privacy and security of individually identifiable health information (called “protected health information”). Compliance with HIPAA is mandatory for covered entities, which include healthcare providers such as tenants/operators of our facilities. Compliance is also required for entities that create, receive, maintain or transmit protected health information on behalf of healthcare providers or that perform services for healthcare providers that involve the disclosure of protected health information, called “business associates.”

Covered entities must report a breach of protected health information that has not been secured through encryption or destruction to all affected individuals without unreasonable delay, but in any case, no more than 60 days after the breach is discovered. Notification must also be made to HHS and, in the case of a breach involving more than 500 individuals, to the media. In the final rule issued in January, 2013, HHS modified the standard for determining whether a breach has occurred by creating a presumption that any non-permitted acquisition, access, use or disclosure of protected health information is a breach unless the covered entity or business associate can demonstrate that there is a low probability that the information has been compromised, based on a risk assessment.

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Covered entities and business associates are subject to civil penalties for violations of HIPAA of up to $1.5 million per year for violations of the same requirement. In addition, criminal penalties can be imposed not only against covered entities and business associates, but also against individual employees who obtain or disclose protected health information without authorization. The criminal penalties range up to $250,000 and up to 10 years imprisonment. In addition, state Attorneys General may bring civil actions for HIPAA violations, HHS must conduct periodic HIPAA compliance audits of covered entities and business associates. If any of our tenants/operators are subject to an investigation or audit and found to be in violation of HIPAA, such tenants/operators could incur substantial penalties, which could have a negative impact on their financial condition. Our tenants/operators may also be subject to more stringent state law privacy, security and breach notification obligations. Enforcement of HIPAA and the Health Information Technology for Economic and Clinical Health (HITECH) Act, which substantially augmented the requirements under HIPAA have become increasingly stringent and the penalties for non-compliance have become increasingly harsh.

Licensure, Certification and Accreditation. Healthcare property construction and operation are subject to numerous federal, state and local regulations relating to the adequacy of medical care, equipment, personnel, operating policies and procedures, maintenance of adequate records, fire prevention, rate-setting and compliance with building codes and environmental protection laws. The requirements for licensure, certification and accreditation are subject to change and, in order to remain qualified, it may become necessary for our tenants/operators to make changes in their facilities, equipment, personnel and services.

Facilities in our portfolio will be subject to periodic inspection by governmental and other authorities to assure continued compliance with the various standards necessary for licensing and accreditation. We will require our healthcare properties to be properly licensed under applicable state laws. Except for provider types not eligible for participation in Medicare and Medicaid, we expect our tenant/operators to participate in the Medicare and Medicaid programs and, where applicable, to be accredited by an approved accrediting organization which is also often a requirement for Medicare certification. The loss of Medicare or Medicaid certification would result in our tenants/operators that operate Medicare/Medicaid-eligible providers from receiving reimbursement from federal healthcare programs. The loss of accreditation, where applicable, would result in increased scrutiny by CMS and likely the loss of payment from non-government payers which often condition participation and payment on participation in the Medicare program.

In some states, the construction or expansion of healthcare properties, the acquisition of existing facilities, the transfer or change of ownership and the addition of new beds or services may be subject to review by and prior approval of, or notifications to, state regulatory agencies under a Certificate of Need, or CON program. Such laws generally require the reviewing state agency to determine the public need for additional or expanded healthcare properties and services and have begun to expect some level of revenue from enforcement action in their budget planning. Some states in which we operate have also adopted limitations on the opening of new skilled nursing facilities. See “Item 1. Business – Skilled nursing facility industry Business in the United States.” The requirements for licensure, certification and accreditation also include notification or approval in the event of the transfer or change of ownership or certain other changes. Further, federal programs, including Medicare, must be notified in the event of a change of ownership or change of information at a participating provider. Failure by our tenants/operators to provide required federal and state notifications, obtain necessary state licensure and CON approvals could result in significant penalties as well as prevent the completion of an acquisition or effort to expand services or facilities. We may be required to provide ownership information or otherwise participate in certain of these approvals and notifications.

Antitrust Laws. The federal government and most states have enacted antitrust laws that prohibit certain types of conduct deemed to be anti-skilled nursing facilities. These laws prohibit price fixing, concerted refusal to deal, market allocation, monopolization, attempts to monopolize, price discrimination, tying arrangements, exclusive dealing, acquisitions of competitors and other practices that have, or may have, an adverse effect on competition. Violations of federal or state antitrust laws can result in various sanctions, including criminal and civil penalties. Antitrust enforcement in the healthcare industry is currently a priority of the Federal Trade Commission and the Antitrust Division of the Department of Justice. We intend to operate so that we and our tenants/operators are in compliance with such federal and state laws, but future review by courts or regulatory authorities could result in a determination that could adversely affect the operations of our tenants/operators and, consequently, our operations. In addition to enforcement by Federal and State agencies, in an effort to control health care costs, private payors such as employee welfare benefit plans administered by or for employers or unions have become increasing aggressive in bringing actions against providers alleging violations of antitrust laws.

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Healthcare Industry Investigations. Significant media and public attention has focused in recent years on the healthcare industry. The federal government is dedicated to funding additional federal enforcement activities related to healthcare providers and preventing fraud and abuse. Our tenants/operators will engage in many routine healthcare operations and other activities that could be the subject of governmental investigations or inquiries. For example, our tenants/operators will likely have significant Medicare and Medicaid billings, numerous financial arrangements with physicians who are referral sources, and joint venture arrangements involving physician investors. In recent years, Congress and the States have increased the level of funding for fraud and abuse enforcement activities. It is possible that governmental entities could initiate investigations or litigation in the future and that such proceedings could result in significant costs and penalties, as well as adverse publicity. It is also possible that our executives could be included in governmental investigations or litigation or named as defendants in private litigation.

Governmental agencies and their agents, such as the Medicare Administrative Contractors, fiscal intermediaries and carriers, as well as the HHS-OIG, CMS and state Medicaid programs, may conduct audits of our tenants/operator’s operations. Private payers may conduct similar post-payment audits, and our tenants/operators may also perform internal audits and monitoring. Many of these audits employ the use of statistical sampling and extrapolation whereby a small number of claims are reviewed but adverse results are applied against a provider’s claims for long periods of time. Depending on the nature of the conduct found in such audits and whether the underlying conduct could be considered systemic such that results are extrapolated, the resolution of these audits which can often require substantial repayments could have a material, adverse effect on our portfolio’s financial position, results of operations and liquidity.

Under the Recovery Audit Contractor, or RAC program, CMS contracts with RACs on a contingency basis to conduct post-payment reviews to detect and correct improper payments in the fee-for-service Medicare program, to managed Medicare plans and in the Medicaid program. CMS has also initiated a RAC prepayment demonstration program in 11 states. CMS also employs Medicaid Integrity Contractors, or MICs to perform post-payment audits of Medicaid claims and identify overpayments. In addition to RACs and MICs, the state Medicaid agencies and other contractors have increased their review activities. Aside from the costs associated with responding to a myriad of requests for substantiation of services, should any of our tenants/operators be found out of compliance with any of these laws, regulations or programs, our business, our financial position and our results of operations could be negatively impacted.

Environmental Matters

A wide variety of federal, state and local environmental and occupational health and safety laws and regulations affect healthcare property operations. These complex federal and state statutes, and their enforcement, involve a myriad of regulations, many of which involve strict liability on the part of the potential offender. Some of these federal and state statutes may directly impact us. Under various federal, state and local environmental laws, ordinances and regulations, an owner of real property or a secured lender, such as us, may be liable for the costs of removal or remediation of hazardous or toxic substances at, under or disposed of in connection with such property, as well as other potential costs relating to hazardous or toxic substances (including government fines and damages for injuries to persons and adjacent property). The cost of any required remediation, removal, fines or personal or property damages and the owner’s or secured lender’s liability therefore could exceed or impair the value of the property, and/or the assets of the owner or secured lender. In addition, the presence of such substances, or the failure to properly dispose of or remediate such substances, may adversely affect the owner’s ability to sell or rent such property or to borrow using such property as collateral which, in turn, could reduce our revenues.

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Prior to closing any property acquisition or loan, we ordinarily obtain Phase I environmental assessments in order to attempt to identify potential environmental concerns at the facilities. These assessments will be carried out in accordance with an appropriate level of due diligence and will generally include a physical site inspection, a review of relevant federal, state and local environmental and health agency database records, one or more interviews with appropriate site-related personnel, review of the property’s chain of title and review of historic aerial photographs and other information on past uses of the property. We may also conduct limited subsurface investigations and test for substances of concern where the results of the Phase I environmental assessments or other information indicates possible contamination or where our consultants recommend such procedures.

Americans with Disabilities Act

Our properties must comply with Title III of the ADA to the extent that such properties are “public accommodations” as defined by the ADA. The ADA may require removal of structural barriers to access by persons with disabilities in certain public areas of our properties where such removal is readily achievable. Many States and localities have similar requirements that are in addition to, and sometime more stringent than, Federal requirements. We believe the existing properties are in substantial compliance with the ADA and that we will not be required to make substantial capital expenditures to address the requirements of the ADA. However, noncompliance with the ADA or a comparable State or local requirement could result in imposition of fines or an award of damages to private litigants. The obligation to make readily achievable accommodations is an ongoing one, and we will continue to assess our properties and to make alterations as appropriate in this respect.

Emerging Growth Company Status

We are an “emerging growth company,” as defined in the JOBS Act, and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We have not yet made a decision as to whether we will take advantage of any or all of these exemptions. If we do take advantage of any of these exemptions, we do not know if some investors will find common stock less attractive as a result. The result may be a less active trading market for common stock and our stock price may be more volatile.

In addition, the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of the extended transition period for adopting new or revised accounting standards available to emerging growth companies.

We will remain an “emerging growth company” until the earliest to occur of (i) the last day of the fiscal year during which our total annual revenue equals or exceeds $1.07 billion (subject to adjustment for inflation), (ii) the last day of the fiscal year following the fifth anniversary of the first sale of shares pursuant to a registration statement filed under the Securities Act, (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt or (iv) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act.

Human Capital Resource Management

As of December 31, 2023, we had 9 full-time employees. Our employees are primarily located at our corporate office in Chicago. Our employees are not members of any labor union, and we consider our relations with our employees to be satisfactory.

We endeavor to maintain workplaces that are free from discrimination or harassment on the basis of color, race, sex, national origin, ethnicity, religion, age, disability, sexual orientation, gender identification or expression or any other status protected by applicable law. The basis for recruitment, hiring, development, training, compensation and advancement at the Company is qualifications, performance, skills and experience. We believe our employees are fairly compensated, and compensation and promotion decisions are made without regard to gender, race and ethnicity. Employees are routinely recognized for outstanding performance.

Insurance

We require our tenants to maintain general liability, professional liability, all risks and other insurance coverages and to name us as an additional insured under these policies. We believe that the policy specifications and insured limits are appropriate given the relative risk of loss, the cost of the coverage and industry practice.

Available Information

We file annual, quarterly and current reports, proxy statements and other information with SEC. The SEC maintains an internet site that contains these reports, and other information about issuers, like us, which file electronically with the SEC. The address of that site is http://www.sec.gov. We make available our reports on Form 10-K, 10-Q, and 8-K (as well as all amendments to these reports), and other information, free of charge, on the Investor Relations section of our website at www.strawberryfieldsreit.com. The information found on, or otherwise accessible through, our website is not incorporated by reference into, nor does it form a part of, this report or any other document that we file with the SEC.

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ITEM 1A. Risk Factors

Not applicable.

ITEM 1B. Unresolved Staff Comments

Not applicable.

ITEM 1C. Cybersecurity

Our management recognizes the critical importance of addressing cybersecurity threats and risks to our business and operations. Therefore, we have established a comprehensive framework to assess and manage material risks arising from cybersecurity threats.

Our Information Security Officer (“ISO”) and the Cybersecurity Incident Response Team (“IRT”) are responsible for assessing and managing cybersecurity risks. The IRT is comprised of individuals with expertise in information security, technology, legal and risk management. The IRT monitors cybersecurity incidents and potential threats. It liaises with external cybersecurity experts and industry partners to stay current on emerging threats and best practices. The diverse expertise of the IRT members enables comprehensive risk assessment and swift responses to mitigate the potential impact of breaches or other cybersecurity incidents.

We actively engage consultants, outside counsel and other technology experts to enhance our cybersecurity risk management processes. We perform regular assessments and evaluations of the effectiveness of our cybersecurity measures. In addition to third party engagements, we maintain rigorous oversight of cybersecurity risks associated with our use of third party service providers. Vendor management processes are employed to evaluate vendors’ cybersecurity practices, assess risk position and implement measures to mitigate potential threats arising from these external relationships.

The Board of Directors has been designated to oversee cybersecurity risk management. Its members possess diverse expertise, which enables them to effectively evaluate the adequacy of our cybersecurity measures and challenge management’s approach when necessary. The Information Security Officer provides regular updates to our chief executive officer and Board of Directors on cybersecurity risks, ongoing initiatives, incidents, response activities and strategies. The Board of Directors acknowledges cybersecurity as a strategic risk and a priority for the Company. The Board of Directors is actively involved in the oversight of our cybersecurity risk management efforts, ensuring alignment with our overall business objectives.

We continuously strive to strengthen our cybersecurity measures to protect our systems and data from evolving threats. To date, cybersecurity incidents and risks have not materially affected us, including our business strategy, results of operations, or financial condition.

ITEM 2. Properties

We hold fee title to 97 of these properties and hold three property under a long-term lease. These properties are located across Arkansas, Illinois, Indiana, Kentucky, Michigan, Ohio, Oklahoma, Tennessee and Texas. Our 100 properties comprise 109 healthcare facilities, consisting of the following:

● 99 stand-alone skilled nursing facilities;

● two dual-purpose facilities used as both skilled nursing facilities and long-term acute care hospitals; and

● eight assisted living facilities.

Information regarding our properties as of December 31, 2023, are included in Item 15. “Exhibits and Financial Statement Schedules—Schedule III. Real Estate and Accumulated Depreciation” of this Annual Report on Form 10-K.

As of December 31, 2023, almost all of our properties are leased under long-term, triple-net leases. The following table displays the expiration of the annualized contractual cash rental income under our lease agreements as of December 31, 2023:

Lease Expirations
Year of Lease Expiration (1) |  | Number of Leases Facilities |  |  | GLA of Leases Expiring |  |  | Percent of Portfolio GLA |  |  | Annualized Base Rent |  |  | Percentage of Total Annualized Base Rent |  |  | Annualized Base Rent Per Sq. Ft. |
2024 |  | 3 |  |  |  | 154,742 |  |  |  | 3.67 | % |  |  | 4,219,554 |  |  |  | 4.31 | % |  | $ | 27.27 |
2025 |  | 19 |  |  |  | 698,063 |  |  |  | 16.55 | % |  |  | 17,281,846 |  |  |  | 17.64 | % |  | $ | 24.76 |
2026 |  | 4 |  |  |  | 263,580 |  |  |  | 6.25 | % |  |  | 8,097,593 |  |  |  | 8.26 | % |  | $ | 30.72 |
2027 |  | 3 |  |  |  | 102,964 |  |  |  | 2.44 | % |  |  | 2,078,281 |  |  |  | 2.12 | % |  | $ | 20.18 |
2028 |  | 9 |  |  |  | 414,706 |  |  |  | 9.83 | % |  |  | 7,053,312 |  |  |  | 7.20 | % |  | $ | 17.01 |
Thereafter |  | 69 |  |  |  | 2,584,657 |  |  |  | 61.26 | % |  |  | 59,262,131 |  |  |  | 60.48 | % |  | $ | 22.93 |
Total |  | 107 |  |  |  | 4,218,712 |  |  |  | 100.0 | % |  | $ | 97,992,717 |  |  |  | 100.0 | % |  | $ | 23.23 |

(1) The year of each lease expiration is based on current contract terms.

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ITEM 3. Legal Proceedings

We are not currently a party to any material legal proceedings, that are not covered by insurance and expected to be resolved within policy limits, other than the following:

In March 2020, Joseph Schwartz, Rosie Schwartz and certain companies owned by them filed a complaint in the U.S. District Court for the Northern District of Illinois against Moishe Gubin, Michael Blisko, the Predecessor Company and 21 of its subsidiaries, as well as the operators of 17 of the facilities operated at our properties. The complaint was related to the Predecessor Company’s acquisition of 16 properties located in Arkansas and Kentucky that were completed between May 2018 and April 2019 and the attempt to purchase an additional five properties located in Massachusetts. The complaint was dismissed by the Court in 2020 on jurisdictional grounds. The plaintiffs did not file an appeal with respect to this action, and the time for an appeal has expired.

In August 2020, Joseph Schwartz, Rosie Schwartz and several companies controlled by them filed a second complaint in the Circuit Court in Pulaski County, Arkansas. The second complaint had nearly identical claims as the federal case, but was limited to matters related to the Predecessor Company’s acquisition of properties located in Arkansas. The sellers, which were affiliates of Skyline Health Care, had encountered financial difficulties and requested the Predecessor Company to acquire these properties. The defendants have filed an answer denying the plaintiffs’ claims and asserting counterclaims based on breach of contract. This case has been dismissed without prejudice.

In January 2021, Joseph Schwartz, Rosie Schwartz and certain companies owned by them filed a third complaint in Illinois state court in Cook County, Illinois, which has nearly identical claims to the initial federal case, but was limited to claims related to the Kentucky and Massachusetts properties. The complaint has not been properly served on any of the defendants, and, accordingly, the defendants did not responded to the complaint. Instead, the defendants filed a motion to quash service of process. On January 11, 2023, the Cook County Circuit Court entered an order granting such motion, quashing service of process on all defendants. In March 2023, the plaintiffs filed a new complaint and again attempted to serve it on the defendants. It is the defendants’ position that service was (once again, potentially) defective and sought a dismissal of the matter for want of prosecution by Joseph Schwartz, Rosie Schwartz and certain companies owned by them. The dismissal was granted, but has been appealed to the Illinois Appellate Court, with no substantive movement on the matter to date.

In each of these complaints, the plaintiffs asserted claims for fraud, breach of contract and rescission arising out of the defendants alleged failure to perform certain post-closing obligations under the purchase contracts. We have potential direct exposure for these claims because the subsidiaries of the Predecessor Company that were named as defendants are now subsidiaries of the Operating Partnership. Additionally, the Operating Partnership is potentially liable for the claims made against Moishe Gubin, Michael Blisko and the Predecessor Company pursuant to the provisions of the contribution agreement, under which the Operating Partnership assumed all of the liabilities of the Predecessor Company and agreed to indemnify the Predecessor Company and its affiliates for such liabilities. We and the named defendants believe that the claims set forth in the complaints are without merit. The named defendants intend to vigorously defend the litigation and to assert counterclaims against the plaintiffs based on their failure to fulfill their obligations under the purchase contracts, interim management agreement, and operations transfer agreements. We believe this matter will be resolved without a material adverse effect to the Company.

As noted above, the March 2020 and January 2021 complaints also related to the Predecessor Company’s planned acquisition of five properties located in Massachusetts. A subsidiary of the Predecessor Company purchased loans related to these properties in 2018 for a price of $7.74 million with the expectation that the subsidiaries would acquire title to the properties and the loans would be retired. The subsidiary subsequently advanced $3.1 million under the loans to satisfy other liabilities related to the properties. The planned acquisition/settlement with the sellers/owners and/borrowers was not consummated because the underlying tenants of the properties surrendered their licenses to operate healthcare facilities on these properties.

The Predecessor Company intends to institute legal proceedings to collect the outstanding amount of these loans and to assert related claims against the sellers and their principals for the unpaid principal balances as well as protective advances and collection costs. In connection with enforcing their rights, in July 2022, the Company foreclosed, and (as lender) sold four of the five properties at auction for the total amount of $4.4 million. In December 2022, the Company took title on the fifth property with an estimated fair value of $1.2 million.

ITEM 4. Mine Safety Disclosures

Not applicable.

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PART II

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Common Equity

On September 23, 2022, our common stock commenced trading on the OTCQX market operated by the OTC Markets Group, Inc., under the symbol “STRW”. On February 22, 2023, our common stock commenced trading on the NYSE American market, also under the symbol “STRW”.

The following table sets forth, for the periods indicated, the high and low sales prices for our common stock as reported for each quarter of 2023. This information reflects inter-dealer prices, without retail mark-up, markdown or commission and may not represent actual transactions.

|  | High |  |  | Low |
Quarter Ended March 31, 2023 |  | $ | 9.25 |  |  | $ | 5.79 |
Quarter Ended June 30, 2023 |  | $ | 7.89 |  |  | $ | 5.79 |
Quarter Ended September 30, 2023 |  | $ | 7.41 |  |  | $ | 6.09 |
Quarter Ended December 31, 2023 |  | $ | 7.99 |  |  | $ | 5.93 |

As of March 19, 2024, 812 stockholders of record owned 6,474,175 issued and outstanding shares of common stock. This number of stockholders of record does not represent the actual number of beneficial owners of our common stock because shares of our common stock are also held in “street name” by securities brokers and others for the benefit of beneficial owners who may vote the shares.

In addition, as of March 19, 2024, the Operating Partnership had 45,373,615 outstanding OP Units held by 10 limited partners other than the Company. No public trading market exists for the OP Units.

To maintain REIT status, we are required each year to distribute to stockholders at least 90% of our annual REIT taxable income after certain adjustments. All distributions will be made by us at the discretion of our board of directors and will depend on our financial position, results of operations, cash flows, capital requirements, debt covenants (which include limits on distributions by us), applicable law, and other factors as our board of directors deems relevant.

Distributions with respect to our common stock can be characterized for federal income tax purposes as taxable ordinary dividends, non-dividend distributions or a combination thereof. Following is the characterization of our annual cash dividends on common stock for 2023:

(dollars in thousands) |  |  |
Common Stock |  |  |
Ordinary dividend |  | $ | 2,572 |
Non-dividend distributions |  | $ | 265 |
Capital Gain Distribution |  | $ | 35 |
Total taxable distribution |  | $ | 2,872 |

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

During 2023, affiliates of the Company purchased 9,176 shares of our common stock in the open market at an average price per share of $6.95 and an aggregate repurchase cost of $63,751.

During 2023, the Company converted 127,953 OP Units into shares of common stock.

On November 9, 2023 the Board of Directors authorized the repurchase of up to $5 million of the Company’s common stock. As of December 31st, 2023 the Company purchased 5,953 shares of common stock at an average price per share of $7.84 and an aggregate repurchase priced of $46,000. All common shares repurchased in the program have been retired and are now held as unissued shares available for use and reissuance for purpose as and when determined by the Board.

The following table sets forth information regarding the Company’s repurchase of shares of its outstanding common stock during the three months ended December 31, 2023.

Period |  | Number of Shares |  |  | Average Price Paid Per Share |  |  | Cumulative Number of Shares Purchased as Part of Publicly Announced Plans or Programs |  |  | Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs |
October 1-31, 2023 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
November 1-30, 2023 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
December 1-31, 2023 |  |  | 5,953 |  |  | $ | 7.84 |  |  |  | 5,953 |  |  | $ | 4,954,000 |
Total |  |  | 5,953 |  |  | $ | 7.84 |  |  |  | 5,953 |  |  | $ | 4,954,000 |

Securities Authorized for Issuance under Equity Compensation Plans

The information required by Item 5 is incorporated by reference to our Definitive Proxy Statement for our 2024 annual stockholders’ meeting.

ITEM 6. [Reserved]

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ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The discussion below contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those which are discussed in the section titled “Risk Factors.” Also see “Statement Regarding Forward-Looking Statements” preceding Part I.

The following discussion and analysis should be read in conjunction with our accompanying consolidated financial statements and the notes thereto.

Overview

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. Currently, our portfolio consists of 100 healthcare properties with an aggregate of 12,449 licensed beds. We hold fee title to 97 of these properties and hold three properties under long-term leases. These properties are located in Arkansas, Illinois, Indiana, Kentucky, Michigan, 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 employ a disciplined approach in our investment strategy by investing in healthcare real estate assets. We seek to invest in assets that will provide attractive opportunities for dividend growth and appreciation in asset value, while maintaining balance sheet strength and liquidity, thereby creating long-term stockholder value. We expect to grow our portfolio by diversifying our investments by tenant, facility type and geography.

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 the date of this report, the aggregate annualized average base rent under the leases for our properties was approximately $102.3 million.

We elect to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ending 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 12.6% of the outstanding OP units.

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Recent Developments

On May 1, 2023, the Operating Partnership paid $15.6 million to redeem 1,454,308 OP units granted to the sellers of five properties in Tennessee and one in Kentucky the Company acquired in 2021. In connection with this payment, the Company contributed $0.7 million to the Operating Partnership and was issued 65,455 OP units.

On June 19, 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 and the interest rate is 9.1%. During July 2023, the BVI Company issued additional Series D Bonds with a par value of NIS 70.0 million and raised a gross amount of $19.2 million (NIS 69.8 million). The Bonds were issued at a price of 99.7%.

On August 25, 2023, the Company acquired 24 healthcare facilities (19 properties) located in Indiana (the “Indiana Facilities”) for $102.0 million. The Indiana Facilities are comprised of 19 skilled nursing facilities with 1,659 licensed beds and five assisted living facilities with 193 beds, of which 29 beds are licensed. Annualized straight line rent for the facilities is expected to equal $12.7 million representing a weighted average lease yield of 12.4%.

On October 30, 2023 the Company entered into a lease agreement to re-tenant the three skilled nursing facilities located in Texas. The lease is for 10 years with annual escalations of 2.5%. The lease commenced on December 1, 2023.

On November 8, 2023, the Company paid off the remaining balance of the Series A Bonds, subject to a $900 prepayment penalty because the Bonds were repaid before the scheduled maturity date of July 2024.

On December 12, 2023 the Company entered into a lease for two skilled nursing facilities with 226 licensed beds near Johnson City, Tennessee. The lease includes a purchase option which the Company intends to exercise once certain conditions precedent are met. The lease commenced on January 1, 2024.

On February 8 2024, the BVI Company issued additional Series D Bonds with a par value of NIS 100.0 million and raised a gross amount of $26.7 million (NIS 98.0 million). The Bonds were issued at a price of 106.3%.

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On February 20, 2024 the Company entered into a new, replacement master lease for the properties included in the Indiana acquisition completed in August of 2023. The tenant remains a group of tenants affiliated with two of the Company’s directors, Moishe Gubin and Michael Blisko. The new master lease has an initial term of ten years and is subject to 2 five-year extensions. The initial annual base rent for the properties is $14.5 million dollars and is subject to annual increases of 3%. In connection with the new master lease, the existing purchase option held by the tenant, which was granted by the prior owner of the properties, of $127.0 million was terminated. Consideration for the termination of the purchase option and inducement for entering into the new, replacement master lease was $18.0 million paid to the tenants. The $18.0 million payment was funded by cash and the proceeds from the additional Series D Bond issuance in February 2024.

As of the date of this report, none of the Company’s tenants are delinquent on the payment of rent, and there have been no requests to amend the terms of their respective leases to reduce current or future lease payments.

Related Party Tenants

As a landlord, the Company does not control the operations of its tenants, including related party tenants, and is not able to cause its tenants to take any specific actions to address trends in occupancy at the facilities operated by its tenants, other than to monitor occupancy and income of its tenants, discuss trends in occupancy with tenants and possible responses, and, in the event of a default, to exercise its rights as a landlord. However, Moishe Gubin, our Chairman and Chief Executive Officer, and Michael Blisko, one of our directors, as the controlling members of 64 of our tenants and related operators, have the ability to obtain information regarding these tenants and related operators and cause the tenants and operators to take actions, including with respect to occupancy.

Results of Operations

Operating Results

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022:

|  | Year Ended December 31, |  |  | Increase / |  |  | Percentage |
(dollars in thousands) |  | 2023 |  |  | 2022 |  |  | (Decrease) |  |  | Difference |
Revenues: |  |  |  |  |  |  |  |  |  |  |  |
Rental revenues |  | $ | 99,805 |  |  | $ | 92,543 |  |  | $ | 7,262 |  |  |  | 7.8 | %
Expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Depreciation |  |  | 26,207 |  |  |  | 25,530 |  |  |  | 677 |  |  |  | 2.7 | %
Amortization |  |  | 3,028 |  |  |  | 3,028 |  |  |  | - |  |  |  | - |
Loss on real estate investment impairment |  |  | 2,451 |  |  |  | - |  |  |  | 2,451 |  |  |  | 100 | %
General and administrative expenses |  |  | 5,662 |  |  |  | 6,012 |  |  |  | (350 | ) |  |  | (5.8 | )%
Property and other taxes |  |  | 14,459 |  |  |  | 13,131 |  |  |  | 1,328 |  |  |  | 10.1 | %
Facility rent expenses |  |  | 559 |  |  |  | 532 |  |  |  | 27 |  |  |  | 5.1 | %
Credit for doubtful accounts |  |  | - |  |  |  | (5,636 | ) |  |  | 5,636 |  |  |  | 100 | %
Total Expenses |  |  | 52,366 |  |  |  | 42,597 |  |  |  | 9,769 |  |  |  | 22.9 | %
Interest expense, net |  |  | 24,443 |  |  |  | 20,507 |  |  |  | 3.936 |  |  |  | 19.2 | %
Amortization of interest expense |  |  | 560 |  |  |  | 504 |  |  |  | 56 |  |  |  | 11.1 | %
Mortgage Insurance Premium |  |  | 1,671 |  |  |  | 1,704 |  |  |  | 33 |  |  |  | 1.9 | %
Total Interest Expenses |  |  | 26,674 |  |  |  | 22,715 |  |  |  | 3,959 |  |  |  | 17.4 | %
Other (loss) income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other (loss) income |  |  | (983 | ) |  |  | 120 |  |  |  | (1,103 | ) |  |  | (919.2 | )%
Foreign currency transaction gain (loss) |  |  | 462 |  |  |  | (10,932 | ) |  |  | 11,394 |  |  |  | 104.2 | %
Net Income |  |  | 20,244 |  |  |  | 16,419 |  |  |  | 3,825 |  |  |  | 23.3 | %
Net income attributable to non-controlling interest |  |  | (17,748 | ) |  |  | (14,567 | ) |  |  | 3,181 |  |  |  | 21.8 | %
Net Income attributable to common stockholders |  |  | 2,496 |  |  |  | 1,852 |  |  |  | 644 |  |  |  | 34.8 | %
Basic and diluted income per common share |  | $ | 0.39 |  |  | $ | 0.31 |  |  |  | - |  |  |  | - |

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Rental revenues: Rental revenues during 2023 increased by $7.3 million or 7.8% compared to fiscal year 2022, The additional rental income arising from the renegotiation of certain leases, the receipt of rent from the acquisition of 24 facilities and additional property taxes being reimbursed by the tenants.

Depreciation and Amortization: Increase in depreciation of $0.7 million or 2.7% from fiscal year 2022 to fiscal year 2023 is primarily due to $102.0 million of new real estate investments in the third quarter of 2023.

Loss on real estate investment impairment: In February 2023, one facility under one of our Southern Illinois master leases was closed. The closure was made at the request of the tenant and was mainly for efficiency reasons. This facility was leased under a master lease with two other facilities. The closure did not result in any reduction in the aggregate rent payable under the master lease, which has been paid without interruption. As a result of the closure, the Company is seeking to sell the property. Since the facility is no longer licensed to operate as a skilled nursing facility, the Company wrote off its remaining book value.

General and Administrative Expense: The decrease in general and administrative expenses of $(0.4) million or 5.8% during fiscal year 2023 compared to fiscal year 2022 is primarily due to lower operating expenses incurred in the year ended December 31, 2023

Property and other Taxes: The increase in property taxes of $1.3 million or 10.1% during fiscal year 2023 compared to fiscal year 2022 is primarily due was primarily due to increases in real estate taxes and franchise taxes partially as a result of the acquisition of the Indiana Facilities.

Credit for Doubtful Accounts: During 2022, the Company recognized $5.6 million in income from the recovery of a written off asset relating to the successful foreclosure of mortgages held by the Company on properties located in Massachusetts.

Interest expense, net: The increase in interest expense of $3.9 million or 19.2% from Fiscal year 2022 to fiscal year 2023 is primarily related to additional interest payments for Series D Bonds, a second commercial bank loan facility obtained in connection with the acquisition of the Indiana Facilities, increases in the floating rate on the Company’s commercial bank loan facilities and additional interest on Series C Bonds that were issued in 2023.

Foreign Currency Transaction Gain (Loss): Our bond indebtedness is denominated in NIS. As a result, we are subject to potential foreign currency transaction loss due to changes in the value of the U.S. dollar relative to the New Israel Shekel. In 2022, we recorded a foreign currency transaction loss of $10.9 million in connection with the repayment of the Series B Bonds in 2022. There was a gain of $0.5 million in foreign currency transactions for 2023.

Other (loss) income: The increase in other loss of $1.0 million was the result of a fee paid to an investment banking firm in connection with the cancellation of an agreement with respect to a proposed financing transaction.

Net Income: The increase in net income from $16.4 million during the year ended December 31, 2022 to $20.2 million in the year ended December 31, 2023 is primarily due to increases in rental revenue (net of increase in real estate taxes) and the decline in foreign currency losses offset by an impairment loss, the decline in credit for doubtful accounts, and an increase in interest expense

Liquidity and Capital Resources

To qualify as a REIT for federal income tax purposes, we are required to distribute at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains, to our stockholders on an annual basis. Accordingly, we intend to make, but are not contractually bound to make, regular quarterly dividends to common stockholders from cash flow from operating activities. All such dividends are at the discretion of our board of directors.

As of December 31, 2023, we had cash and cash equivalents and restricted cash and equivalents of $37.8 million. We also had the ability to offer additional Series C Bonds from the current outstanding of $60.8 loan up to $170.6 million and the ability to offer additional Series D Bonds from the current outstanding of $42.2 million up to $121.9 million is subject to compliance with covenants and market conditions.

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Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain our assets and operations, make distributions to our stockholders and other general business needs. Our primary sources of cash include operating cash flows and borrowings. Our primary uses of cash include funding acquisitions and investments consistent with our investment strategy, repaying principal and interest on any outstanding borrowings, making distributions to our equity holders, funding our operations and paying accrued expenses.

Our long-term liquidity needs consist primarily of funds necessary to pay for the costs of acquiring additional healthcare properties and principal and interest payments on our debt. We expect to meet our long-term liquidity requirements through various sources of capital, including future equity issuances or debt offerings, net cash provided by operations, long-term mortgage indebtedness and other secured and unsecured borrowings.

We may utilize various types of debt to finance a portion of our acquisition activities, including long-term, fixed-rate mortgage loans, variable-rate term loans and secured revolving lines of credit. As of December 31, 2023, on a consolidated basis, we had total indebtedness of approximately $539.1 million, consisting of $271.4 million in HUD guaranteed debt, $102.9 million in net Series C Bonds and Series D Bonds outstanding and $164.8 million in commercial mortgages. 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.

Our debt arrangements may require us to make a lump-sum or “balloon” payment at maturity. Our ability to make the balloon payments due under our existing and future indebtedness will depend on our working capital at the time of repayment, our ability to obtain additional financing or our ability to sell any property securing such indebtedness. At the time the balloon payment is due, we may or may not be able to refinance the existing financing on terms as favorable as the original bond or loan or sell any related property at a price sufficient to make the balloon payment. In addition, balloon payments and payments of principal and interest on our indebtedness may leave us with insufficient cash to pay the distributions that we are required to pay to qualify and maintain our qualification as a REIT.

Through 2027 there are four balloon payment obligations consisting of two payments of $52.6 million and $37.1 million due under the Series C Bonds and Series D bond in 2026, respectively and payments of $86.0 million and $60.7 million due under our two commercial bank term loans due in 2027 and 2028. We may also obtain additional financing that contains balloon payment obligations. These types of obligations may materially 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 ongoing debt service obligations and the distribution requirements for maintaining REIT status.

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Cash Flows

The following table presents selected data from our consolidated statements of cash flows:

|  | Years Ended December 31, |
|  | 2023 |  |  | 2022 |
(dollars in thousands) |  |  |  |  |  |
Net cash provided by operating activities |  | $ | 54,944 |  |  | $ | 50,926 |
Net cash used in investing activities |  |  | (106,348 | ) |  |  | (10,101 | )
Net cash provided by (used in) financing activities |  |  | 43,458 |  |  |  | (47,249 | )
Net decrease in cash and cash equivalents and restricted cash and cash equivalents |  |  | (7,946 | ) |  |  | (6,424 | )
Cash and cash equivalents, and restricted cash and cash equivalents beginning of year |  |  | 45,704 |  |  |  | 52,128 |
Cash and cash equivalents and restricted cash and cash equivalents, end of year |  | $ | 37,758 |  |  | $ | 45,704 |

Net cash provided by operating activities increased $4.0 million for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to an increase of $6.9 million increase in accounts payable and accrued liabilities.

Cash used in investing activities for the year ended December 31, 2023, primarily consisted of a net increase in investment properties in the amount of $108.1 million and a decrease in notes receivable of $1.7 million. The decrease of $10.1 million during the year ended December 31, 2022 is due to an increase in note receivable of $9.6 million..

Cash flows generated from financing activities for the year ended December 31, 2023 were primarily comprised of $52.4 million in new bond proceeds, REIT dividends of $2.9 million, a $20.6 million in distributions to the non-controlling interest holders and $69.2 million new borrowings under a mortgage loan facility. These amounts were offset by $24.0 million in principal bond payments, and $14.0 million of repayment of senior debt. Cash flows used in financing activities for the year ended December 31, 2022 were primarily comprised of $106 million in principal bond payments, REIT dividends of $0.6 million, a $10.9 million in distributions to the non-controlling interest holders and a decrease of $33.2 million in senior debt offset by a $105.0 million new borrowings under a mortgage loan facility.

Indebtedness

Mortgage Loans Guaranteed by HUD

As of December 31, 2023, we had non-recourse mortgage loans of $271.4 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 December 31, 2023, was 3.97% per annum (including the mortgage insurance payments). The loans have an average maturity of 22 years.

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Commercial Bank Term Loan

On March 21, 2022, the Company closed a mortgage loan facility with a commercial bank pursuant to which the Company borrowed approximately $105 million. The facility provides for monthly payments of principal based on a 20-year amortization with a balloon payment due in March 2027. The rate is based on the one-month Secured Overnight Financing Rate (“SOFR”) plus a margin of 3.5% and a floor 4% (as of the December 31, 2023 the rate was 8.84%). As of December 31, 2023, total outstanding principal amount was $98.8 million. This loan is collateralized by 21 properties owned by the Company. The loan proceeds were used to repay the Series B Bonds and prepay commercial loans not secured by HUD guarantees. The Company recognized a foreign currency transaction loss of approximately $10.1 million in connection with the repayment of the Series B Bonds during the year ended December 31, 2022.

On August 25, 2023, the Company closed a mortgage loan facility with a commercial bank pursuant to which the Company borrowed approximately $66 million. The facility provides for monthly payments of interest and payment of principal will start on August 2024 based on a 20-year amortization with a balloon payment due in August 2028. The rate is based on the one-month Secured Overnight Financing Rate (“SOFR”) plus a margin of 3.5% and a floor of 4% (as of the December 31, 2023, the rate was 8.84%). As of December 31, 2023, total outstanding principal amount was $66 million. This loan is collateralized by 19 properties owned by the Company. The loan proceeds were used to acquire the Indiana facilities.

Both credit facilities are subject to financial covenants which are 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 1.20 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 $20,000,000. As of December 31, 2023, the Company was in compliance with the loan covenants.

Outstanding Bond Debt

As of December 31, 2023, the Company had outstanding Series C Bonds and Series D Bonds.

Series A Bonds

In November 2015, the Company, through a subsidiary, issued Series A Bonds in the face amount of NIS 265.2 million ($68 million) and received the net amount after issuance costs of NIS 251.2 million ($64.3 million). Since then the Company extended the series amount twice in September 2016 and May 2017 and received a combined net amount of $30.1 million. The Series A Bonds had an original interest rate of 6.4% per annum. The Series A Bonds were paid off on November 8, 2023.

Series C Bonds

In July 2021, the BVI Company completed an initial offering of Series C Bonds with a par value of NIS 208.0 million ($64.7 million). The Series C Bonds were issued at par. During February 2023, the BVI Company issued additional Series C Bonds in the face amount of NIS 40.0 million ($11.2 million) and raised a net amount of NIS 38.1 million ($10.7 million). These Series C Bonds were issued at a price of 95.25%.

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As of December 31, 2023, the outstanding principal amount of the Series C Bonds was NIS 220.5 million ($60.7 million).

The Series C Bonds are traded on the TASE.

Series D Bonds

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 ($19.3 million) and raised a net amount of NIS 152.9 million ($42.2 million). These Series D Bonds were issued at a price of 99.7%. As of December 31, 2023, the Series D Bonds had an outstanding principal balance of approximately NIS 152.9 ($42.2 million).

Summary of fixed and variable loans:

|  | December 31, |
|  | 2023 |  |  | 2022 |
|  | (Amounts in $000s) |
Fixed rate loans |  | $ | 374,335 |  |  | $ | 351,566 |
Variable rate loans |  |  | 164,810 |  |  |  | 105,225 |
Gross Notes Payable and other Debt |  | $ | 539,145 |  |  | $ | 456,791 |

Funds From Operations (“FFO”)

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 and 2022, we excluded as non-recurring items a gain in the amount of $0.5 million and a loss of $10.9 million, respectively, 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.

While FFO and AFFO are relevant and widely used measures of operating performance of REITs, they do not represent cash flows from operations or net income as defined by GAAP and should not be considered an alternative to those measures in evaluating our liquidity or operating performance. FFO and AFFO also do not consider the costs associated with capital expenditures related to our real estate assets nor do they purport to be indicative of cash available to fund our future cash requirements. Further, our computation of FFO and AFFO may not be comparable to FFO and AFFO reported by other REITs that do not define FFO in accordance with the current NAREIT definition or that interpret the current NAREIT definition or define AFFO differently than we do.

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The following table reconciles our calculations of FFO and AFFO for the years ended December 31, 2023 and 2022, to net income, the most directly comparable GAAP financial measure (in thousands):

FFO and AFFO:

|  | Year Ended December 31, |
|  | 2023 |  |  | 2022 |
Net income |  | $ | 20,244 |  |  | $ | 16,419 |
Depreciation and amortization |  |  | 29,235 |  |  |  | 28,558 |
Funds from Operations |  |  | 49,479 |  |  |  | 44,977 |
Adjustments to FFO: |  |  |  |  |  |  |  |
Credit for doubtful accounts(1) |  |  | - |  |  |  | (5,636 | )
Straight-line rent |  |  | (30 | ) |  |  | (272 | )
Straight-line rent receivable write-off(2) |  |  | 230 |  |  |  | 1,075 |
Contact cancellation expense for proposed financing(3) |  |  | 1,000 |  |  |  | - |
Loss on real estate impairment (4) |  |  | 2,451 |  |  |  | - |
Foreign currency transaction (gain) loss |  |  | (462 | ) |  |  | 10,932 |
Funds from Operations, as Adjusted |  | $ | 52,668 |  |  | $ | 51,076 |

(1) During the year ended December 31, 2022, the Company recovered $4.4 million in cash with respect to foreclosure sales of assets in Massachusetts. In addition, the Company recognized $1.2 million with respect to a foreclosed property in Massachusetts.

(2) The Company recognized a loss of $1,075,000 in the second quarter of 2022 due to the write-off of straight-line rent receivables related to the Southern Illinois facilities

(3) The Company incurred a non-recurring expense of $1.0 million in the second quarter of 2023 in connection with the cancellation of a contract with an investment banking firm related to a proposed financing.

(4) Loss on real estate investment impairment: In February 2023, one facility under one of our Southern Illinois master leases was closed. The closure was made at the request of the tenant and was mainly for efficiency reasons. This facility was leased under a master lease with two other facilities. The closure did not result in any reduction in the aggregate rent payable under the master lease, which was paid without interruption. As a result of the closure, the Company is seeking to sell the property. Since the facility is no longer licensed to operate as a skilled nursing facility, the Company wrote off its remaining book value.

Dividend Plans

We are required to pay dividends in order to maintain our REIT status and we expect to make quarterly dividend payments in cash with the annual dividend amount no less than 90% of our annual REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains.

Critical Accounting Policies

The preparation of consolidated financial statements in conformity with generally accepted accounting principles, or GAAP, in the United States requires management to make estimates and assumptions 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 period. Management considers accounting estimates or assumptions critical in either of the following cases:

● the nature of the estimates or assumptions is material because of the levels of subjectivity and judgment needed to account for matters that are highly uncertain and susceptible to change; and

● the effect of the estimates and assumptions is material to the consolidated financial statements.

Management believes the current assumptions used to make estimates in the preparation of the consolidated financial statements are appropriate and not likely to change in the future. However, actual experience could differ from the assumptions used to make estimates, resulting in changes that could have a material adverse effect on our consolidated results of operations, financial position and/or liquidity. These estimates will be made and evaluated on an on-going basis using information that is available as well as various other assumptions believed to be reasonable under the circumstances.

The following presents information about our critical accounting policies including the material assumptions used to develop significant estimates. Since the Company was recently formed and just completed the formation transactions, certain of these critical accounting policies contain discussion of judgments and estimates that have not yet been required by management but that it believes may be reasonably required of it to make in the future.

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Principles of Consolidation

The consolidated financial statements include the accounts of our Operating Partnership and its wholly owned subsidiaries, and all material intercompany transactions and balances are eliminated in consolidation.

From inception, we continually evaluate all of our transactions and investments to determine if they represent variable interests subject to the variable interest entity, or VIE, consolidation model and then determine which business enterprise is the primary beneficiary of its operations. We make judgments about which entities are VIEs based on an assessment of whether (i) the equity investors as a group, if any, do not have a controlling financial interest, or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support. We consolidate investments in VIEs when we are determined to be the primary beneficiary. This evaluation is based on our ability to direct and influence the activities of a VIE that most significantly impact that entity’s economic performance.

For investments not subject to the variable interest entity consolidation model, we will evaluate the type of rights held by the limited partner(s) or other member(s), which may preclude consolidation in circumstances in which the sole general partner or managing member would otherwise consolidate the limited partnership. The assessment of limited partners’ or members’ rights and their impact on the presumption of control over a limited partnership or limited liability corporation by the sole general partner or managing member should be made when an investor becomes the sole general partner or managing member and should be reassessed if (i) there is a change to the terms or in the exercisability of the rights of the limited partners or members, (ii) the sole general partner or member increases or decreases its ownership in the limited partnership or corporation, or (iii) there is an increase or decrease in the number of outstanding limited partnership or membership interests.

Our ability to assess correctly our influence or control over an entity at inception of our involvement or on a continuous basis when determining the primary beneficiary of a VIE affects the presentation of these entities in our consolidated financial statements. Subsequent evaluations of the primary beneficiary of a VIE may require the use of different assumptions that could lead to identification of a different primary beneficiary, resulting in a different consolidation conclusion than what was determined at inception of the arrangement.

Revenue Recognition

We recognize rental revenue for operating leases on a straight-line basis over the lease term when collectability is reasonably assured and the tenant has taken possession or controls the physical use of a leased asset. For assets acquired subject to leases, we recognize revenue upon acquisition of the asset provided the tenant has taken possession or control of the physical use of the leased asset. If the lease provides for tenant improvements, we determine whether the tenant improvements, for accounting purposes, are owned by the tenant or us. When we are the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical leased asset until the tenant improvements are substantially completed.

When the tenant is the owner of the tenant improvements, any tenant improvement allowance funded is treated as a lease incentive and amortized as a reduction of revenue over the lease term. The determination of ownership of the tenant improvements is subject to significant judgment. If our assessment of the owner of the tenant improvements for accounting purposes were different, the timing and amount of our revenue recognized would be impacted.

We monitor the liquidity and creditworthiness of our tenants and operators on a continuous basis to determine the need for an allowance for doubtful accounts, including an allowance for operating lease straight-line rent receivables, for estimated losses resulting from tenant defaults or the inability of tenants to make contractual rent and tenant recovery payments. This evaluation considers industry and economic conditions, property performance, credit enhancements and other factors. For straight-line rent amounts, our 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, 2023 and 2022 we determined that no allowance was necessary to cover the potential loss of rent from our tenants.

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Real Estate Investments

We make estimates as part of our allocation of the purchase price of acquisitions (whether an asset acquisition acquired via purchase/leaseback or a business combination via an asset acquired from the current lessor) to the various components of the acquisition based upon the relative fair value of each component for asset acquisitions and at fair value of each component for business combinations. In making estimates of fair values for purposes of allocating purchase prices of acquired real estate, we utilize a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data. We also consider information obtained about each property as a result of our pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired. The most significant components of our allocations are typically the allocation of fair value to land and buildings and, for certain of our acquisitions, in-place leases and other intangible assets. In the case of the fair value of buildings and the allocation of value to land and other intangibles, the estimates of the values of these components will affect the amount of depreciation and amortization we record over the estimated useful life of the property acquired or the remaining lease term. In the case of the value of in-place leases, including the assessment as to the existence of any above-or below-market in-place leases, our management makes its best estimates based on the evaluation of the specific characteristics of each tenant’s lease. Factors considered include estimates of carrying costs during hypothetical expected lease-up periods, market conditions and costs to execute similar leases. These assumptions affect the amount of future revenue that we will recognize over the remaining lease term for the acquired in-place leases. The values of any identified above-or below-market in-place leases are based on the present value of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease, or for below-market in-place leases including any bargain renewal option terms. Above-market lease values are recorded as a reduction of rental income over the lease term while below-market lease values are recorded as an increase to rental income over the lease term. The recorded values of in-place lease intangibles are recognized in amortization expense over the initial term of the respective leases.

We evaluate each purchase transaction to determine whether the acquired assets meet the definition of a business. Transaction costs related to acquisitions that are not deemed to be businesses are included in the cost basis of the acquired assets, while transaction costs related to acquisitions that are deemed to be businesses are expensed as incurred.

Asset Impairment

Real estate asset impairment losses are recorded when events or changes in circumstances indicate the asset is impaired and the estimated undiscounted cash flows to be generated by the asset are less than its carrying amount. Management assesses the impairment of properties individually and impairment losses are calculated as the excess of the carrying amount over the fair value of assets to be held and used, and carrying amount over the fair value less cost to sell in instances where management has determined that we will dispose of the property. In determining fair value, we use current appraisals or other third-party opinions of value and other estimates of fair value such as estimated discounted future cash flows.

Factors That May Influence Future Results of Operations

Our revenues are primarily derived from rents we earn pursuant to the lease agreements we enter into with our tenants. Our tenants operate in the healthcare industry, generally providing nursing and medical care to patients. The capacity of our tenants to pay our rents is dependent upon their ability to conduct their operations at profitable levels. We believe that the business environment of the industry segments in which our tenants operate is generally positive for efficient operators. However, our tenants’ operations are subject to economic, regulatory and market conditions that may affect their profitability, which could impact our results of operations. Accordingly, we actively monitor certain key factors, including changes in those factors that we believe may provide early indications of conditions that may affect the level of risk in our lease portfolio.

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Key factors that we consider in underwriting prospective tenants and borrowers and in monitoring the performance of existing tenants include, but are not limited to, the following:

● the current, historical and projected cash flow and operating margins of each tenant and at each facility;

● the ratio of our tenants’ operating earnings both to facility rent and to facility rent plus other fixed costs, including debt costs;

● the quality and experience of the tenant and its management team;

● construction quality, condition, design and projected capital needs of the facility;

● the location of the facility;

● local economic and demographic factors and the competitive landscape of the market;

● the effect of evolving healthcare legislation and other regulations on our tenants’ profitability and liquidity;

● the payor mix of private, Medicare and Medicaid patients at the facility; and

● whether such tenants are related parties.

One of our goals is to reduce our dependence on related party tenants in order to diversify our tenant base. Although we expect to continue to lease properties to related party tenants in markets in which the related party tenants have substantial experience and operations, we intend to lease properties in other markets to unrelated tenants if we are able to identify qualified operators. Additionally, we will consider leasing properties to unrelated parties in markets in which related parties operate if we are able to identify qualified operators that are willing to lease properties on terms that are no less favorable than those available from related parties.

We also actively monitor the credit risk of our tenants. The methods we use to evaluate a tenant’s liquidity and creditworthiness include reviewing certain periodic financial statements, operating data and clinical outcomes data of the tenant. Over the course of a lease, we also have regular meetings with the facility management teams. Through these means we are able to monitor a tenant’s credit quality.

Certain business factors, in addition to those described above that directly affect our tenants, which in turn will likely materially influence our future results of operations:

● the financial and operational performance of our tenants;

● trends in the cost and availability of capital, including market interest rates, which our prospective tenants may use for their working capital financing;

● reductions in reimbursements from Medicare, state healthcare programs and commercial insurance providers that may reduce our tenants’ profitability and our lease rates; and

● competition from other financing sources.

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Inflation

We are exposed to inflation risk as income from long-term leases are a main source of our cash flows from operations. For our leased properties, we expect there to be provisions in the majority of our leases that will protect us from the impact of inflation. These provisions may include rent escalators, and leases that are triple-net. However, due to the long-term nature of the anticipated leases, among other factors, the leases may not re-set frequently enough to cover inflation.

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk

Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. In pursuing our business and investment objectives, we expect that the primary market risk to which we will be exposed is interest rate risk.

We may be exposed to the effects of interest rate changes primarily as a result of long-term debt used to acquire properties. As of December 31, 2023, we had $60.8 million net outstanding under our Series C Bonds, which bear interest at a fixed rate of 5.7% per annum, $42.2 million outstanding under our Series D Bonds, which bear interest at a fixed rate of 9.1% per annum, and $436.2 million in senior debt notes, of which $164.8 million (37.78% of total debt) bear interest at variable rate equal to one month SOFR plus a margin. At December 31, 2023, one month SOFR was 5.34%. Assuming no increase in the amount of our variable interest rate debt, if one-month SOFR increased 100 basis points, our annual cash flow would decrease by approximately $1.6 million. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs. To achieve our objectives, we may borrow at fixed rates or variable rates. We also may enter into derivative financial instruments such as interest rate swaps and caps in order to mitigate our interest rate risk on a related financial instrument.

In addition to changes in interest rates, the value of our future investments is subject to fluctuations based on changes in local and regional economic conditions, change in currency rates between the Israeli Shekel and the U.S. Dollar and changes in the creditworthiness of tenants/operators, which may affect our ability to refinance our debt if necessary.

ITEM 8. Financial Statements and Supplementary Data

See the Index to Consolidated Financial Statements on page F-1 of this report.

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ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

None.

ITEM 9A. Controls and Procedures

Our management, under the supervision and with the participation of our principal executive and financial officer, is responsible for and has evaluated the effectiveness of our disclosure controls and procedures in ensuring that the information required to be disclosed in our filings under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including ensuring that such information is accumulated and communicated to our company’s management, as appropriate, to allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive and financial officer have concluded that such disclosure controls and procedures were effective as of December 31, 2023 (the end of the period covered by this Annual Report).

Management’s Annual Report on Internal Control Over Financial Reporting

This report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.

Limitations on Controls

Our system of internal control over financial reporting was designed to provide reasonable assurance regarding the preparation and fair presentation of published financial statements in accordance with accounting principles generally accepted in the United States. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. Other Information

During the fourth quarter of 2023, no director or officer adopted any insider trading arrangement contemplated by 17 CFR Section 229.408.

The Company has adopted a Code of Business Conduct & Ethics, which contains insider trading policies and procedures governing the purchase, sale, and/or other dispositions of the Company’s securities by directors, officers and employees, or the registrant itself, that have been designed to promote compliance with insider trading laws, rules and regulations, and the NYSE American’s listing standards.

ITEM 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections

Not applicable.

47

PART III

ITEM 10. Directors, Executive Officers and Corporate Governance

The information required under Item 10 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2023 in connection with our 2024 Annual Meeting of Stockholders.

ITEM 11. Executive Compensation

The information required under Item 11 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2023 in connection with our 2024 Annual Meeting of Stockholders.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required under Item 12 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2023 in connection with our 2024 Annual Meeting of Stockholders.

The following table discloses the number of outstanding options, warrants and rights granted to participants by the Company under the equity compensation plans, as well as the number of securities remaining available for future issuance under these plans as of December 31, 2023.

|  | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) |  |  | Weighted average exercise price of outstanding options, warrants and rights (b) |  |  | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) |
Equity compensation plans approved by security holders |  |  | - |  |  |  | - |  |  |  | 225,100 |
Equity compensation plans not approved by security holders |  |  | - |  |  |  | - |  |  |  | - |
Total |  |  | - |  |  |  | - |  |  |  | 225,100 |

ITEM 13. Certain Relationships and Related Transactions, and Director Independence

Additional information required under Item 13 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2023 in connection with our 2024 Annual Meeting of Stockholders.

ITEM 14. Principal Accountant Fees and Services

The information required under Item 14 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2023 in connection with our 2024 Annual Meeting of Stockholders.

48

PART IV

ITEM 15. Exhibit and Financial Statement Schedules

Financial Statements

(1) Consolidated Financial Statements:

See Index to Consolidated Financial Statements at page F-1.

(2) Financial Statement Schedules

Schedule III: Real Estate and Accumulated Depreciation

Note: All other schedules have been omitted because the required information is presented in the financial statements and the related notes or because the schedules are not applicable.

(3) Exhibits:

The exhibits listed in the accompanying index to exhibits are filed as part of, or incorporated by reference into, this Annual Report.

EXHIBIT INDEX

Exhibit |  | Description
3.1 |  | Articles of Amendment and Restatement of Strawberry Fields REIT, Inc., incorporated herein by reference to Exhibit 3.1 to the Registration Statement on Form 10 filed with the Securities and Exchange Commission as of July 12, 2022.
3.2 |  | Amended and Restated Bylaws of Strawberry Fields REIT, Inc., incorporated herein by reference to Exhibit to the Registration Statement on Form 10 filed with the Securities and Exchange Commission as of July 12, 2022.
4.1* |  | Description of Capital Stock
10.1 |  | Deed of Trust dated April 23, 2018, between Strawberry Fields REIT, LTD and Mishmeret Trust Services Company Ltd. .incorporated herein by reference to Exhibit 10.1 to the Registration Statement on Form 10 filed with the Securities and Exchange Commission as of July 12, 2022.
10.2 |  | Deed of Trust dated November 24, 2015, between Strawberry Fields REIT, LTD and Mishmeret Trust Services Company Ltd., incorporated herein by reference to Exhibit 10.2 to the Registration Statement on Form 10 filed with the Securities and Exchange Commission as of July 12, 2022.
10.3 |  | Deed of Trust dated July 27, 2021 between Strawberry Fields REIT, LTD and Mishmeret Trust Services Company Ltd., incorporated herein by reference to Exhibit 10.3 to the Registration Statement on Form 10 filed with the Securities and Exchange Commission as of July 12, 2022.
10.4 |  | First Amended and Restated Agreement of Limited Partnership dated June 1, 2021 of Strawberry Fields Realty LP, incorporated herein by reference to Exhibit 10.4 to the Registration Statement on Form 10 filed with the Securities and Exchange Commission as of July 12, 2022.

49

10.5 |  | Contribution Agreement dated June 8, 2021 between Strawberry Fields REIT, Inc., Strawberry Fields REIT, LLC and of Strawberry Fields Realty LP., incorporated herein by reference to Exhibit 10.5 to the Registration Statement on Form 10 filed with the Securities and Exchange Commission as of July 12, 2022.
10.6 |  | Tax Protection Agreement effective as of June 8, 2021 among Strawberry Fields Realty LP, Strawberry Fields REIT, Inc. and Strawberry Fields REIT, LLC., incorporated herein by reference to Exhibit 10.6 to the Registration Statement on Form 10 filed with the Securities and Exchange Commission as of July 12, 2022.
10.7 |  | Strawberry Fields REIT, Inc. 2021 Equity Incentive Plan, incorporated herein by reference to Exhibit 10.7 to the Registration Statement on Form 10 filed with the Securities and Exchange Commission as of July 12, 2022.
10.8 |  | Term Loan and Security Agreement dated March 18, 2022, by and among Strawberry Fields Realty LP and certain subsidiaries thereof named as Borrowers, and Popular Bank, as Agent and Lender., incorporated herein by reference to Exhibit 10.8 to the Registration Statement on Form 10 filed with the Securities and Exchange Commission as of July 12, 2022.
10.9 |  | Indemnification Agreement effective January 13, 2020 between the Company and Essel Bailey incorporated herein by reference to Exhibit 10.1 to the Form 10-Q filed with the Securities and Exchange Commission as of September 8, 2022.
10.10 |  | Indemnification Agreement effective January 13, 2020 between the Company and Jack Levine Bailey incorporated herein by reference to Exhibit 10.2 to the Form 10-Q filed with the Securities and Exchange Commission as of September 8, 2022.
10.11 |  | Indemnification Agreement effective January 13, 2020 between the Company and Michael Blisko incorporated herein by reference to Exhibit 10.3 to the Form 10-Q filed with the Securities and Exchange Commission as of September 8, 2022.
10.12 |  | Indemnification Agreement effective January 13, 2020 between the Company and Moishe Gubin incorporated herein by reference to Exhibit 10.4 to the Form 10-Q filed with the Securities and Exchange Commission as of September 8, 2022.
10.13 |  | Indemnification Agreement effective January 13, 2020 between the Company and Reid Shapiro incorporated herein by reference to Exhibit 10.5 to the Form 10-Q filed with the Securities and Exchange Commission as of September 8, 2022.
10.14 |  | Deed of Trust dated June 19, 2023, between Strawberry Fields REIT, LTD and Mishmeret Trust Services Company Ltd. .incorporated herein by reference to Exhibit 10.9 to the Registration Statement on Form 10 filed with the Securities and Exchange Commission as of July 12, 2022.
*21.1 |  | List of Subsidiaries of the Registrant
*31.1 |  | Certification of Chief Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2 |  | Certification of Chief Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
**32.1 |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS |  | Inline XBRL Instance Document
101.SCH |  | Inline XBRL Taxonomy Schema
101.CAL |  | Inline XBRL Taxonomy Calculation Linkbase
101.DEF |  | Inline XBRL Taxonomy Definition Linkbase
101.LAB |  | Inline XBRL Taxonomy Label Linkbase
101.PRE |  | Inline XBRL Taxonomy Presentation Linkbase
104 |  | Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed herewith.

** Furnished herewith.

+ Management contract or compensatory plan or arrangement.

ITEM 16. Form 10-K Summary

None.

50

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

| STRAWBERRY FIELDS REIT, INC.
| By: | /s/ Moishe Gubin
|  | Moishe Gubin
|  | Chairman and Chief Executive Officer
| Dated: March 19, 2024

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name |  | Title |  | Date
/s/ Moishe Gubin |  | Chairman and Chief Executive Officer (Principal Executive Officer) |  | March 19, 2024
Moishe Gubin |  |  |  |
/s/ Greg Flamion |  | Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |  | March 19, 2024
Greg Flamion |  |  |  |
/s/ Michael Blisko |  | Director |  | March 19, 2024
Michael Blisko |  |  |  |
/s/ Essel Bailey |  | Director |  | March 19, 2024
Essel Bailey |  |  |  |
/s/ Jack Levine |  | Director |  | March 19, 2024
Jack Levine |  |  |  |
/s/ Reid Shapiro |  | Director |  | March 19, 2024
Reid Shapiro |  |  |  |

51

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

| Page
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 400) with respect to Strawberry Fields REIT, Inc. | F-2
Consolidated Balance Sheets as of December 31, 2023 and 2022 | F-3
Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2023 and 2022 | F-4
Consolidated Statements of Equity for the years ended December 31, 2023 and 2022 | F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2023 | F-6
Notes to Consolidated Financial Statements | F-8
Schedule III: Real Estate and Accumulated Depreciation as of December 31, 2023 | F-37

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Members of Strawberry Fields REIT, INC.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Strawberry Fields REIT, Inc., (the “Company”) as of December 31, 2023 and 2022 and the related consolidated statements of income and comprehensive income, equity and cash flows, for the years then ended, and the related notes to the consolidated financial statements and financial statement schedule III (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023 and 2022, and the consolidated results of its operations and its cash flows for the years then, in conformity with accounting principles generally accepted in the United States of America.

Supplemental Information

Financial statement schedule III (“Schedule III”) has been subjected to audit procedures performed in conjunction with the audit of the Company’s consolidated financial statements. Schedule III is the responsibility of the Company’s management. Our audit procedures included determining whether Schedule III reconciles to the consolidated financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in Schedule III. In forming our opinion on Schedule III, we evaluated whether Schedule III, including its form and content, is presented in conformity with the rules and regulations of the Securities and Exchange Commission (“SEC”). In our opinion, Schedule III is fairly stated, in all material respects, in relation to the consolidated financial statements as a whole.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

(PCAOB ID: 400)

HACKER, JOHNSON & SMITH PA

We have served as the Company’s auditor since 2019.

Tampa, Florida

March 19, 2024

F-2

STRAWBERRY FIELDS REIT, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(Amounts in $000’s, except share data)

|  | 2023 |  |  | 2022 |
|  | December 31, |
|  | 2023 |  |  | 2022 |
Assets |  |  |  |  |  |  |  |
Real estate investments, net |  | $ | 518,314 |  |  | $ | 438,911 |
Cash and cash equivalents |  |  | 12,173 |  |  |  | 20,197 |
Restricted cash and equivalents |  |  | 25,585 |  |  |  | 25,507 |
Straight-line rent receivable, net |  |  | 23,334 |  |  |  | 23,534 |
Right of use lease asset |  |  | 1,542 |  |  |  | 1,833 |
Goodwill, other intangible assets and lease rights |  |  | 8,604 |  |  |  | 11,632 |
Deferred financing expenses |  |  | 6,035 |  |  |  | 5,791 |
Notes receivable, net |  |  | 17,706 |  |  |  | 19,419 |
Other assets |  |  | 3,502 |  |  |  | 176 |
Total Assets |  | $ | 616,795 |  |  | $ | 547,000 |
Liabilities |  |  |  |  |  |  |  |
Accounts payable and accrued liabilities |  | $ | 16,907 |  |  | $ | 13,723 |
Bonds, net |  |  | 100,294 |  |  |  | 74,412 |
Notes payable and other debt |  |  | 436,192 |  |  |  | 381,003 |
Operating lease liability |  |  | 1,542 |  |  |  | 1,833 |
Other liabilities |  |  | 14,587 |  |  |  | 10,892 |
Non-controlling interest redemption liability |  |  | - |  |  |  | 15,753 |
Total Liabilities |  | $ | 569,522 |  |  | $ | 497,616 |
Commitments and Contingencies (Notes 8 and 14) |  |  |  |  |  |  |  |
Equity |  |  |  |  |  |  |  |
Common stock, $.0001 par value, 500,000,000 shares authorized, 6,487,856 and 6,365,856 shares issued and outstanding in 2023 and 2022 |  |  | - |  |  |  | - |
Preferred stock, $.0001 par value, 100,000,000 shares authorized, no shares issued and outstanding |  |  | - |  |  |  | - |
Additional paid in capital |  | $ | 5,746 |  |  | $ | 5,792 |
Accumulated other comprehensive income |  |  | 529 |  |  |  | 386 |
Retained earnings |  |  | 1,232 |  |  |  | 1,608 |
Total Stockholders’ Equity |  | $ | 7,507 |  |  | $ | 7,786 |
Non-controlling interest |  | $ | 39,766 |  |  | $ | 41,598 |
Total Equity |  | $ | 47,273 |  |  | $ | 49,384 |
Total Liabilities and Equity |  | $ | 616,795 |  |  | $ | 547,000 |

See accompanying notes to consolidated financial statements.

F-3

STRAWBERRY FIELDS REIT, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Amounts in $000’s, except share data)

|  | 2023 |  |  | 2022 |
|  | Year Ended December 31, |
|  | 2023 |  |  | 2022 |
Revenues |  |  |  |  |  |  |  |
Rental revenues |  | $ | 99,805 |  |  | $ | 92,543 |
Expenses: |  |  |  |  |  |  |  |
Depreciation |  | $ | 26,207 |  |  |  | 25,530 |
Amortization |  |  | 3,028 |  |  |  | 3,028 |
Loss on real estate investment impairment |  |  | 2,451 |  |  |  | - |
General and administrative expenses |  |  | 5,662 |  |  |  | 6,012 |
Property taxes |  |  | 14,459 |  |  |  | 13,131 |
Facility rent expenses |  |  | 559 |  |  |  | 532 |
Credit for doubtful accounts |  |  | - |  |  |  | (5,636 | )
Total expenses |  | $ | 52,366 |  |  | $ | 42,597 |
Income from operations |  |  | 47,439 |  |  |  | 49,946 |
Interest expense, net |  | $ | (24,443 | ) |  | $ | (20,507 | )
Amortization of deferred financing costs |  |  | (560 | ) |  |  | (504 | )
Mortgage insurance premium |  |  | (1,671 | ) |  |  | (1,704 | )
Total interest expense |  | $ | (26,674 | ) |  | $ | (22,715 | )
Other income (loss): |  |  |  |  |  |  |  |
Foreign currency transaction gain (loss) |  |  | 462 |  |  |  | (10,932 | )
Other (loss) income |  |  | (983 | ) |  |  | 120 |
Total other loss |  |  | (521 | ) |  |  | (10,812 | )
Net income |  | $ | 20,244 |  |  | $ | 16,419 |
Less: |  |  |  |  |  |  |  |
Net income attributable to non-controlling interest |  |  | (17,748 | ) |  |  | (14,567 | )
Net income attributable to common shareholders |  |  | 2,496 |  |  |  | 1,852 |
Other comprehensive income: |  |  |  |  |  |  |  |
Gain due to foreign currency translation |  |  | 1,624 |  |  |  | 14,256 |
Reclassification of foreign currency transaction (gains) losses |  |  | (462 | ) |  |  | 10,932 |
Comprehensive income attributable to non-controlling interest |  |  | (1,019 | ) |  |  | (22,347 | )
Comprehensive income |  | $ | 2,639 |  |  | $ | 4,693 |
Net income attributable to common stockholders |  | $ | 2,496 |  |  | $ | 1,852 |
Basic and diluted income per common share |  | $ | .39 |  |  | $ | .31 |
Weighted average number of common stock outstanding |  |  | 6,365,196 |  |  |  | 6,008,953 |

See accompanying notes to consolidated financial statements.

F-4

STRAWBERRY FIELDS REIT, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF EQUITY

(Amounts in $000’s, except share data)

|  | Number of Common Shares |  |  | Additional Paid-in Capital |  |  | Accumulated other comprehensive income (loss) |  |  | Retained Earnings |  |  | Non-controlling interest |  |  | Total |
Balance, December 31, 2021 |  |  | 5,849,746 |  |  | $ | 4,327 |  |  | $ | (2,455 | ) |  | $ | 393 |  |  | $ | 32,785 |  |  | $ | 35,050 |
Issuance of common shares in exchange for OP units |  |  | 516,110 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Reallocation of non-controlling interest |  |  | - |  |  |  | 1,465 |  |  |  | - |  |  |  | - |  |  |  | (1,465 | ) |  |  | - |
Dividends |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (637 | ) |  |  | - |  |  |  | (637 | )
Non-controlling interest distributions |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (10,883 | ) |  |  | (10,883 | )
Net change in foreign currency translation |  |  | - |  |  |  | - |  |  |  | 2,841 |  |  |  | - |  |  |  | 22,347 |  |  |  | 25,188 |
Reclassification of non-controlling interest to non-controlling interest redemption liability |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (15,753 | ) |  |  | (15,753 | )
Net Income |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,852 |  |  |  | 14,567 |  |  |  | 16,419 |
Balance, December 31, 2022 |  |  | 6,365,856 |  |  | $ | 5,792 |  |  | $ | 386 |  |  | $ | 1,608 |  |  | $ | 41,598 |  |  | $ | 49,384 |
Balance |  |  | 6,365,856 |  |  | $ | 5,792 |  |  | $ | 386 |  |  | $ | 1,608 |  |  | $ | 41,598 |  |  | $ | 49,384 |
Issuance of common shares in exchange for OP units |  |  | 127,953 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Common stock retirement |  |  | (5,953 | ) |  |  | (46 | ) |  |  | - |  |  |  | - |  |  |  |  |  |  |  | (46 | )
Dividends |  |  |  |  |  |  |  |  |  |  | - |  |  |  | (2,872 | ) |  |  | - |  |  |  | (2,872 | )
Non-controlling interest distributions |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (20,599 | ) |  |  | (20,599 | )
Net change in foreign currency translation |  |  | - |  |  |  | - |  |  |  | 143 |  |  |  | - |  |  |  | 1,019 |  |  |  | 1,162 |
Net Income |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 2,496 |  |  |  | 17,748 |  |  |  | 20,244 |
Balance, December 31, 2023 |  |  | 6,487,856 |  |  | $ | 5,746 |  |  | $ | 529 |  |  | $ | 1,232 |  |  | $ | 39,766 |  |  | $ | 47,273 |
Balance |  |  | 6,487,856 |  |  |  | 5,746 |  |  |  | 529 |  |  |  | 1,232 |  |  |  | 39,766 |  |  |  | 47,273 |

See accompanying notes to consolidated financial statements.

F-5

STRAWBERRY FIELDS REIT, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in $000’s)

|  | Year Ended December 31, |
|  | 2023 |  |  | 2022 |
Cash flows from operating activities: |  |  |  |  |  |  |  |
Net income |  | $ | 20,244 |  |  | $ | 16,419 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 29,235 |  |  |  | 28,558 |
Impairment of real estate asset |  |  | 2,451 |  |  |  | - |
Amortization of bond issuance costs |  |  | 558 |  |  |  | 1,160 |
Amortization of deferred financing costs |  |  | 560 |  |  |  | 504 |
(Increase) decrease in other assets |  |  | (3,326 | ) |  |  | 289 |
Amortization of right of use asset |  |  | 291 |  |  |  | 231 |
Foreign currency transaction (gain) loss |  |  | (462 | ) |  |  | 10,932 |
Foreign currency translation adjustments |  |  | (1,395 | ) |  |  | 971 |
Credit for doubtful accounts due to recovery of foreclosed real estate |  |  | - |  |  |  | (1,200 | )
Decrease (increase) in straight-line rent receivables |  |  | 200 |  |  |  | (272 | )
Increase (decrease) increase in accounts payable and accrued liabilities and other liabilities |  |  | 6,879 |  |  |  | (6,435 | )
Repayment of operating lease liability |  |  | (291 | ) |  |  | (231 | )
Net cash provided by operating activities |  | $ | 54,944 |  |  | $ | 50,926 |
Cash flow from investing activities: |  |  |  |  |  |  |  |
Purchase of Real estate investments |  | $ | (108,061 | ) |  | $ | (513 | )
Decrease (Increase) in notes receivable |  |  | 1,713 |  |  |  | (9,588 | )
Net cash used in investing activities |  | $ | (106,348 | ) |  | $ | (10,101 | )
Cash flows from financing activities: |  |  |  |  |  |  |  |
Proceeds from senior debt, net of discount |  | $ | 69,208 |  |  | $ | 105,000 |
Deferred financing costs |  |  | (804 | ) |  |  | (1,469 | )
Proceeds from issuance of bonds, net of issuance costs |  |  | 52,381 |  |  |  | - |
Repayment of bonds |  |  | (24,038 | ) |  |  | (106,012 | )
Repayment of senior debt |  |  | (14,019 | ) |  |  | (33,248 | )
Repayment of non-controlling interest redemption liability |  |  | (15,753 | ) |  |  | - |
Non-controlling interest distributions |  |  | (20,599 | ) |  |  | (10,883 | )
Payment of dividends |  |  | (2,872 | ) |  |  | (637 | )
Common stock retirement |  |  | (46 | ) |  |  | - |
Net cash provided by (used in) financing activities |  | $ | 43,458 |  |  | $ | (47,249 | )
Decrease in cash and cash equivalent and restricted cash and equivalents |  | $ | (7,946 | ) |  | $ | (6,424 | )
Cash and cash equivalents and restricted cash and equivalents at the beginning of the year |  | $ | 45,704 |  |  | $ | 52,128 |
Cash and cash equivalents and restricted cash and equivalents at the end of the year |  | $ | 37,758 |  |  | $ | 45,704 |

F-6

STRAWBERRY FIELDS REIT, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in $000’s)

|  | Year Ended December 31, |
|  | 2023 |  |  | 2022 |
Supplemental Disclosure of Cash Flow Information: |  |  |  |  |  |  |  |
Cash paid during the year for interest |  | $ | 24,389 |  |  | $ | 21,629 |
Supplemental schedule of noncash activities: |  |  |  |  |  |  |  |
Accumulated other comprehensive income: |  |  |  |  |  |  |  |
Foreign currency translation adjustments |  | $ | 1,162 |  |  | $ | 25,188 |
Increase in real estate investments due to non-cash recovery of foreclosed real estate |  | $ | - |  |  | $ | 1,200 |
Reclassification of non-controlling interest to non-controlling interest redemption liability |  | $ | - |  |  | $ | 15,753 |

See accompanying notes to consolidated financial statements.

F-7

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. Business

Overview

The Company

STRAWBERRY FIELDS REIT Inc. (the “Company”) is a Maryland corporation formed in July 2019. The Company commenced operations on June 8, 2021, following the completion of the formation transactions described below. The Company conducts its business through a traditional UPREIT structure in which substantially all of its assets are owned by subsidiaries of Strawberry Fields Realty, LP, a Delaware limited partnership formed in July 2019 (the “Operating Partnership”). The Company is the general partner of the Operating Partnership.

The Company completed the formation transactions on June 8, 2021. In connection with the formation transaction, the Company, the Operating Partnership and Strawberry Fields REIT, LLC (the “Predecessor Company” or “Predecessor”) entered into a contribution agreement, pursuant to which the Predecessor Company contributed all of its assets to the Operating Partnership, and the Operating Partnership assumed all of its liabilities. In exchange, the Operating Partnership issued limited partnership interests designated as common units (the “OP units”) to the Predecessor Company, which immediately distributed them to its members and beneficial owners. The Company offered certain of the holders of these OP units the opportunity to exchange their OP units for shares of common stock of the Company on a one-for-one basis. The Company limited the number of OP units that could be exchanged by some of the holders so that such holders would not become beneficial owners of more than 9.8% of the outstanding shares of the Company in violation of the ownership limitations set forth in the Company’s charter. As of December 31, 2023 and 2022, the Company is the owner of approximately 12.6% and 12.0 % of the outstanding OP units, respectively. The formation transactions were accounted for at historical cost.

As the sole general partner of the Operating Partnership, the Company has the exclusive power under the partnership agreement to manage and conduct the business affairs of the Operating Partnership, subject to certain limited approval and voting rights of the limited partners. The Company may cause the Operating Partnership to issue additional OP units in connection with property acquisitions, compensation or otherwise. The Company became a publicly traded entity on September 21, 2022.

As of December 31, 2023, the Company owned 97 properties and leased one property that it in turn subleased to a tenant that operates the facility.

Basis of Presentation

The Company maintains its accounting records on an accrual basis in accordance with generally accepted accounting principles in the United States of America (“GAAP”).

These consolidated financial statements are presented in U.S. dollars.

Variable Interest Entity

The Company consolidates the Operating Partnership, a variable interest entity (“VIE”) in which the Company is considered the primary beneficiary. The primary beneficiary is the entity that has (i) the power to direct the activities that most significantly impact the entity’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE.

Non-Controlling Interest

A non-controlling interest is defined as the portion of the equity in an entity not attributable, directly or indirectly, to the primary beneficiary. Non-controlling interests are required to be presented as a separate component of equity on a consolidated balance sheet. Accordingly, the presentation of net income is modified to present the income attributed to controlling and non-controlling interests. The non-controlling interest on the Company’s consolidated balance sheets represents OP units not held by the Company and represents approximately 87.4 % and 88.0 % of the outstanding OP Units issued by the Operating Partnership as of December 31, 2023 and 2022, respectively. The holders of these OP units are entitled to share in cash distributions from the Operating Partnership in proportion to their percentage ownership of OP units. Net income is allocated to the non-controlling interest based on the weighted-average of OP units outstanding during the year.

Fiscal Year End

The Company has adopted a fiscal year end of December 31.

F-8

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. Summary of Significant Accounting Policies

Use of Estimates

Management is required to make estimates and assumptions in the preparation of the consolidated financial statements in conformity with GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from management’s estimates.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company, the Operating Partnership and its wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated upon consolidation.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and short-term investments with original maturities of three months or less when purchased.

The Company’s cash, cash equivalents and restricted cash and cash equivalents periodically exceed federally insurable limits. The Company monitors the cash balances in its operating accounts and adjusts the cash balances as appropriate; however, these cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date, the Company has experienced no loss or lack of access to the cash in its operating accounts. On December 31, 2023 and 2022, the Company had $22,727,000 and $40,652,000, respectively, on deposit in excess of federally insured limits.

Restricted Cash and Cash Equivalents

Restricted cash primarily consists of amounts held by mortgage lenders to provide for real estate tax expenditures, tenant improvements, capital expenditures and security deposits, as well as escrow accounts related to principal and interest payments on bonds.

Real Estate Depreciation

Real estate costs related to the acquisition and improvement of properties are capitalized and depreciated over the expected life of the asset on a straight-line basis. Repair and maintenance costs are charged to expense as incurred and significant replacements and betterments are capitalized. Repair and maintenance costs include all costs that do not extend the useful life of the real estate asset. The Company considers the period of future benefit of an asset to determine its appropriate useful life. Expenditures for tenant improvements are capitalized and amortized over the shorter of the tenant’s lease term or expected useful life. The Company anticipates the estimated useful lives of its assets by class to be generally as follows:

Schedule of Assets Useful Lives

Building and improvements |  | 7-45 years
Equipment and personal property |  | 2-18 years

F-9

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. Summary of Significant Accounting Policies (cont.)

Real Estate Valuation

The Company makes estimates as part of its allocation of the purchase price of acquisitions to the various components of the acquisition based upon the fair value of each component. In determining fair value, the Company uses current appraisals or other third-party valuations. The most significant components of these allocations are typically the allocation of fair value to land and buildings and, for certain of its acquisitions, in place leases and other intangible assets. In the case of the fair value of buildings and the allocation of value to land and other intangibles, the estimates of the values of these components will affect the amount of depreciation and amortization the Company records over the estimated useful life of the property acquired or the remaining lease term. In the case of the value of in place leases, the Company makes best estimates based on the evaluation of the specific characteristics of each tenant’s lease. Factors considered include estimates of carrying costs during hypothetical expected lease up periods, market conditions and costs to execute similar leases. These assumptions affect the amount of future revenue that the Company will recognize over the remaining lease term for the acquired in place leases.

The Company evaluates each purchase transaction to determine whether the acquired assets meet the definition of a business. Transaction costs related to acquisitions that are not deemed to be businesses are included in the cost basis of the acquired assets, while transaction costs related to acquisitions that are deemed to be businesses are expensed as incurred. All of the Company’s acquisitions of investment properties qualified as asset acquisitions during the years ended December 31, 2023 and 2022.

Revenue Recognition

Rental income from operating leases is generally recognized on a straight-line basis over the terms of the leases. Substantially all of the Company’s leases contain provisions for specified annual increases over the rents of the prior year and are generally computed in one of three methods depending on specific provisions of each lease as follows:

| (i) | a specified annual increase over the prior year’s rent, generally between 1.0% and 3.0%;
| (ii) | a calculation based on the Consumer Price Index; or
| (iii) | specific dollar increases.

Contingent revenue is not recognized until all possible contingencies have been eliminated. The Company considers the operating history of the lessee and the general condition of the industry when evaluating whether all possible contingencies have been eliminated and have historically, and expect in the future, to not include contingent rents as income until received. The Company follows a policy related to rental income whereby the Company considers a lease to be non-performing after 60 days of non-payment of past due amounts and does not recognize unpaid rental income from that lease until the amounts have been received.

Rental revenues relating to non-contingent leases that contain specified rental increases over the life of the lease are recognized on the straight-line basis. Recognizing income on a straight-line basis requires us to calculate the total non-contingent rent containing specified rental increases over the life of the lease and to recognize the revenue evenly over that life. This method results in rental income in the early years of a lease being higher than actual cash received, creating a straight-line rent receivable asset included in our accompanying consolidated balance sheets. At some point during the lease, depending on its terms, the cash rent payments eventually exceed the straight-line rent which results in the straight-line rent receivable asset decreasing to zero over the remainder of the lease term. The Company assesses the collectability of straight-line rent in accordance with the applicable accounting standards and reserve policy. If the lessee becomes delinquent in rent owed under the terms of the lease, the Company may provide a reserve against the recognized straight-line rent receivable asset for a portion, up to its full value, that the Company estimates may not be recoverable.

F-10

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. Summary of Significant Accounting Policies (Cont.)

Revenue Recognition (cont.)

Capitalized above-market lease values are amortized as a reduction of rental income over the remaining terms of the respective leases. Capitalized below-market leases are accreted to rental income over the remaining terms of the respective leases and expected below-market renewal option periods.

The Company reports revenues and expenses within our triple-net leased properties for real estate taxes that are escrowed and obligations of the tenants in accordance with their respective lease with us.

Gain from sale of real estate investments was recognized when control of the property is transferred, and it is probable that substantially all consideration will be collected.

Allowance for Doubtful Accounts

The Company evaluates the liquidity and creditworthiness of its tenants, operators and borrowers on a monthly and quarterly basis. The Company’s evaluation considers industry and economic conditions, individual and portfolio property performance, credit enhancements, liquidity and other factors. The Company’s tenants, borrowers and operators furnish property, portfolio and guarantor/operator-level financial statements, among other information, on a monthly or quarterly basis; the Company utilizes this financial information to calculate the lease or debt service coverages that it uses as a primary credit quality indicator. Lease and debt service coverage information is evaluated together with other property, portfolio and operator performance information, including revenue, expense, net operating income, occupancy, rental rate, reimbursement trends, capital expenditures and EBITDA (defined as earnings before interest, tax, depreciation and amortization), along with other liquidity measures. The Company evaluates, on a monthly basis or immediately upon a significant change in circumstance, its tenants’, operators’ and borrowers’ ability to service their obligations with the Company.

The Company maintains an allowance for doubtful accounts for straight-line rent receivables resulting from tenants’ inability to make contractual rent and tenant recovery payments or lease defaults. For straight-line rent receivables, the Company’s assessment is based on amounts estimated to be recoverable over the lease term.

Impairment of Long-Lived Assets and Goodwill

The Company assesses the carrying value of real estate assets and related intangibles (“real estate assets”) when events or changes in circumstances indicate that the carrying value may not be recoverable. The Company tests its real estate assets for impairment by comparing the sum of the expected future undiscounted cash flows to the carrying value of the real estate assets. The expected future undiscounted cash flows are calculated utilizing the lowest level of identifiable cash flows that are largely independent of the cash flows of other assets and liabilities. If the carrying value exceeds the expected future undiscounted cash flows, an impairment loss will be recognized to the extent that the carrying value of the real estate assets is greater than their fair value.

Goodwill is tested for impairment at least annually based on certain qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its’ carrying value. Potential impairment indicators include a significant decline in real estate values, significant restructuring plans, current macroeconomic conditions, state of the equity and capital markets or a significant decline in the Company’s market capitalization. If the Company determines that it is more likely than not that the fair value of a reporting unit is less than its’ carrying value, the Company applies the required two-step quantitative approach. The quantitative procedures of the two-step approach (i) compare the fair value of a reporting unit with its carrying value, including goodwill, and, if necessary, (ii) compare the implied fair value of reporting unit goodwill with the carrying value as if it had been acquired in a business combination at the date of the impairment test. The excess fair value of the reporting unit over the fair value of assets and liabilities, excluding goodwill, is the implied value of goodwill and is used to determine the impairment amount, if any. The Company has selected the fourth quarter of each fiscal year to perform its annual impairment test.

F-11

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. Summary of Significant Accounting Policies (Cont.)

Concentrations of Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash and cash equivalents, notes receivable and operating leases on owned properties. These financial instruments are subject to the possibility of loss of carrying value as a result of the failure of other parties to perform according to their contractual obligations or changes in market prices which may make the instrument less valuable. Cash and cash equivalents, restricted cash and equivalents are held with various financial institutions. From time to time, these balances exceed the federally insured limits. These balances are maintained with high quality financial institutions which management believes limits the risk.

With respect to notes receivable, the Company obtains various collateral and other protective rights, and continually monitor these rights, in order to reduce such possibilities of loss. In addition, the Company provides reserves for potential losses based upon management’s periodic review of our portfolio.

On December 31, 2023, the Company held four notes receivable with an outstanding balance of $17.7 million. The notes have maturities ranging from 2024 through 2046, and interest rates ranging from 2% to 11.25%. One of the notes is collateralized by tenants accounts receivable. All other notes receivable are uncollateralized as of December 31, 2023. As of December 31, 2022 the Company held five notes receivable with an outstanding balance of $19.4 million.

Market Concentration Risk

As of December 31, 2023 and 2022, the Company owned 97 and 78 properties and leases 1 property, respectively, in 9 states, and 34 facilities (15 in 2022) or 34.6% of its total properties in Indiana (which include 3,240 skilled nursing and assisted living beds or 26.6% of the Company’s total beds) and 20 facilities (20 in 2022) or 20.4% of its total properties located in Illinois (which include 4,226 skilled nursing beds or 34.6% of the Company’s total beds). Since tenant revenue is primarily generated from Medicare and Medicaid, the operations of the Company are indirectly subject to the administrative directives, rules and regulations of federal and state regulatory agencies, including, but not limited to, Centers for Medicare and Medicaid Services, and the Department of Health and Aging in all states in which the Company operates. Such administrative directives, rules and regulations, including budgetary reimbursement funding, are subject to change by an act of Congress, the passage of laws by the state regulators or an administrative change mandated by one of the executive branch agencies. Such changes may occur with little notice or inadequate funding to pay for the related costs, including the additional administrative burden, to comply with a change.

Debt and Capital Raising Issuance Costs

Costs incurred in connection with the issuance of equity interests are recorded as a reduction of additional paid-in capital. Debt issuance costs related to debt instruments, excluding line of credit arrangements, are deferred, recorded as a reduction of the related debt liability, and amortized to interest expense over the remaining term of the related debt liability utilizing the interest method. Deferred financing costs related to line of credit arrangements are deferred, recorded as an asset and amortized to interest expense over the remaining term of the related line of credit arrangement utilizing the interest method.

Penalties incurred to extinguish debt and any remaining unamortized debt issuance costs, discounts and premiums are recognized as income or expense in the consolidated statements of income at the time of extinguishment.

Segment Reporting

Accounting guidance regarding disclosures about segments of an enterprise and related information establishes standards for the manner in which public business enterprises report information about operating segments. The Company’s investment decisions in health care properties, and resulting investments are managed as a single operating segment for internal reporting and for internal decision-making purposes. Therefore, the Company has concluded that it operates as a single segment.

Basic and Diluted Income Per Common Share

The Company calculates basic income per common share by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding during the year. At December 31, 2023 and 2022, there were 45,373,615 and 46,890,541 OP units, respectively, outstanding which were potentially dilutive securities. During the years ended December 31, 2023, and 2022 the assumed conversion of the OP units had no impact on basic income per share.

F-12

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. Summary of Significant Accounting Policies (Cont.)

Beds, Units, Occupancy and Other Measures

Beds, units, occupancy and other non-financial measures used to describe real estate investments included in these notes to the consolidated financial statements are presented on an unaudited basis and are not subject to audit by the Company’s independent auditors in accordance with the standards of the Public Company Accounting Oversight Board.

Foreign Currency Translation and Transactions

Assets and liabilities denominated in foreign currencies that are translated into U.S. dollars use exchange rates in effect at the end of the period, and revenues and expenses denominated in foreign currencies that are translated into U.S. dollars use average rates of exchange in effect during the related period. Gains or losses resulting from translation are included in accumulated other comprehensive income, a component of equity on the consolidated balance sheets.

Gains or losses resulting from foreign currency transactions are translated into U.S. dollars at the rates of exchange prevailing at the dates of the transactions. The effects of transaction gains or losses, if any, are included in other income (loss), in the consolidated statements of income.

Fair Value Measurement

The Company measures and discloses the fair value of nonfinancial and financial assets and liabilities utilizing a hierarchy of valuation techniques based on whether the inputs to a fair value measurement are considered to be observable or unobservable in a marketplace. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. This hierarchy requires the use of observable market data when available. These inputs have created the following fair value hierarchy:

● Level 1—quoted prices for identical instruments in active markets;

● Level 2—quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

● Level 3—fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The Company measures fair value using a set of standardized procedures that are outlined herein for all assets and liabilities which are required to be measured at fair value. When available, the Company utilizes quoted market prices from an independent third-party source to determine fair value and classifies such items in Level 1. In instances where a market price is available, but the instrument is in an inactive or over-the-counter market, the Company consistently applies the dealer (market maker) pricing estimate and classifies the asset or liability in Level 2. If quoted market prices or inputs are not available, fair value measurements are based upon valuation models that utilize current market or independently sourced market inputs, such as interest rates, option volatilities, credit spreads and/or market capitalization rates. Items valued using such internally generated valuation techniques are classified according to the lowest level input that is significant to the fair value measurement. As a result, the asset or liability could be classified in either Level 2 or Level 3 even though there may be some significant inputs that are readily observable. Internal fair value models and techniques used by the Company include discounted cash flow valuation models.

F-13

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. Summary of Significant Accounting Policies (Cont.)

Real Estate Investments – Held for Sale

At December 31, 2023 and 2022, the Company had one property included in real estate investments which was held for sale and carried at the lower of their net book value or fair value on a non-recurring basis on the consolidated balance sheets. The Company’s real estate investments held for sale were classified as Level 3 of the fair value hierarchy.

Stock-Based Compensation

The Company accounts for share-based payment awards in accordance with ASC Topic 718, Compensation – Stock Compensation (“ASC 718”). ASC 718 requires that the cost resulting from all share-based payment transactions be recognized in the consolidated financial statements. ASC 718 requires all entities to apply a fair value-based measurement method in accounting for share-based payment transactions. The Company recognizes share-based payments over the vesting period.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 is intended to improve financial reporting by requiring timelier recognition of credit losses on loans and other financial instruments held by financial institutions and other organizations. The amendments in ASU 2016-13 eliminate the “probable” initial threshold for recognition of credit losses in current accounting guidance and, instead, reflect an entity’s current estimate of all expected credit losses. Previously, when credit losses were measured under current accounting guidance, an entity generally only considered past events and current conditions in measuring the incurred loss. The amendments in ASU 2016-13 broaden the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually.

Upon adoption of ASU 2016-13, the Company is required to reassess its financing receivables, including leases and notes receivable, and expects that application of ASU 2016-13 may result in the Company recognizing credit losses at an earlier date than would otherwise be recognized under current accounting guidance. On October 16, 2019, the FASB approved ASU 2019-10 which extends the effective date of ASU 2016-13 to January 1, 2023, for smaller reporting companies. Adoption of ASU 2016-13 on January 1, 2023, was not material to the Company’s consolidated financial position and results of operations.

F-14

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3. Restricted Cash and Equivalents

The following table presents the Company’s cash and equivalents and escrow deposits:

Schedule of Restricted Cash and Equivalents and Escrow Deposits

|  | 2023 |  |  | 2022 |
|  | December 31, |
|  | 2023 |  |  | 2022 |
|  | (amounts in $000’s) |
Escrow with trustee |  | $ | - |  |  | $ | 2,287 |
MIP escrow accounts |  |  | 794 |  |  |  | 745 |
Other escrow and debt deposits |  |  | 737 |  |  |  | 781 |
Property tax and insurance escrow |  |  | 6,842 |  |  |  | 5,243 |
Interest and expense reserve bonds escrow |  |  | 3,924 |  |  |  | 2,276 |
HUD replacement reserves |  |  | 13,288 |  |  |  | 14,175 |
Total restricted cash and equivalents |  | $ | 25,585 |  |  | $ | 25,507 |

Escrow with trustee - The Company transfers funds to the trustee for its Series C Bonds and Series D bonds to cover principal and interest payments prior to the payment date.

MIP escrow accounts - The Company is required to make monthly escrow deposits for mortgage insurance premiums on the HUD guaranteed mortgage loans.

Other escrow and debt deposits – The Company funds various escrow accounts under certain of its loan agreements, primarily to cover debt service on underlying loans,

Property tax and insurance escrow - The Company funds escrows for real estate taxes and insurance under certain of its loan agreements.

Interest and expense reserve bonds escrow - The indentures for the Series C Bonds and Series D Bonds require the funding of a six-month interest reserve as well as an expense reserve. See Note 7 - Notes Payable and Other Debt.

HUD replacement reserves - The Company is required to make monthly payments into an escrow for replacement and improvement of the project assets covered by HUD guaranteed mortgage loans. A portion of the replacement reserves are required to be maintained until the applicable loan is fully paid.

NOTE 4. Real Estate Investments, net

Real estate investments consist of the following:

Schedule of Real Estate Investment

|  | Estimated |  |  |
|  | Useful Lives |  | December 31, |
|  | Useful Lives |  | 2023 |  |  | 2022 |
|  | (Years) |  | (Amounts in $000’s) |
Buildings and improvements |  | 7-45 |  | $ | 576,044 |  |  | $ | 495,215 |
Equipment and personal property |  | 2-18 |  |  | 97,359 |  |  |  | 78,524 |
Land |  | - |  |  | 64,309 |  |  |  | 60,010 |
Real estate investments, gross |  |  |  |  | 737,712 |  |  |  | 633,749 |
Less: accumulated depreciation |  |  |  |  | (219,398 | ) |  |  | (194,838 | )
Real estate investments, net |  |  |  | $ | 518,314 |  |  | $ | 438,911 |

For the years ended December 31, 2023 and 2022, total depreciation expense were $26.2 million and $25.5 million, respectively.

F-15

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4. Real Estate Investments, net (cont.)

Acquisition of Properties

On August 25, 2021, the Company acquired five properties located in Tennessee and one in Kentucky (the “Tennessee/Kentucky Properties”) for an aggregate acquisition cost of $81.0 million, which was paid through the issuance of 1,545,217 OP units valued at $16,997,000, including 90,909 of OP units paid to the broker valued at $1 million and a cash payment of $63,990,000. Moishe Gubin, our Chairman and Chief Executive Officer, agreed to purchase the OP units issued to the sellers either at cost or fair market value (whichever is higher) 12 months after the closing at the option of the sellers. The properties contain skilled nursing facilities of approximately 223,000 square feet and 515 beds. The Company financed a portion of the cash portion of the purchase price from the net proceeds received by the Company from the sale of Series C Bonds in Israel. The Company leased the five Tennessee facilities to related parties under a new Tennessee master lease, and the one Kentucky property to an unrelated third party under the existing Landmark master lease. On May 1, 2023, the Operating Partnership paid $15.6 million to redeem 1,454,308 OP units granted to the sellers of five properties in Tennessee and one in Kentucky the Company acquired in 2021. In connection with this payment, the Company contributed $0.7 million to the Operating Partnership and was issued 65,455 OP units.

On January 3, 2023, the Company acquired a property located in Kentucky for an aggregate cost of $6.0 million, including $1 million in finder fees and $0.7 million in leasehold improvements, which was paid in cash. This property contains a skilled nursing facility with 120 licensed beds and approximately 34,824 square feet. Concurrently with the closing of the acquisition, we added the property to an existing master lease with an unaffiliated third-party operator. The lease has an initial term of 10 years, with two 5-year extension options. The initial annualized base rent of the master lease was increased by $0.6 million.

On August 25, 2023, the Company acquired 24 healthcare facilities (19 properties) located in Indiana (the “Indiana Facilities”) for $102.0 million. The Indiana Facilities are comprised of 19 skilled nursing facilities with 1,659 licensed beds and five assisted living facilities with 193 beds, of which 29 beds are licensed. Annualized straight line rent for the facilities is expected to equal $12.7 million representing a weighted average lease yield of 12.4%. Effective March 1, 2023 the company commenced a new master lease for these facilities. Please refer to the section Note 14 Subsequent Events for additional details of the lease.

The Company acquired the Indiana Facilities utilizing the Company’s working capital, which included $19.2 million in proceeds from our sale of additional Series D Bonds, together with funds to be borrowed under a new $66.0 million credit facility from a commercial bank. The credit facility has a 5-year term, at a floating rate of SOFR plus 3.5% and is interest-only for the initial 12 months. The Company also made a loan of $6.5 million to the sellers, which will be payable within 60 days of the closing.

The Indiana Facilities are currently leased under a master lease agreement dated November 1, 2022, between the sellers and a group of tenants affiliated with two of the Company’s directors, Moishe Gubin and Michael Blisko. Under the master lease, the tenants are required to pay annual rent, on a triple net basis, commencing on November 1, 2022, in the amount of $9.5 million, which amount is subject to annual increases set forth in the master lease. The master lease has an initial term of seven years. The tenants have three options to extend the lease. The first option is for three years, the two remaining options are for five years each. The tenants have an option to buy the properties during the sixth or seventh year of the lease for $127.0 million. The material terms of the master lease were not modified as a result of the purchase. The tenants operate the Indiana Facilities as skilled nursing and assisted living facilities.

On December 12, 2023 the Company entered into a lease for two skilled nursing facilities with 226 licensed beds near Johnson City, Tennessee. The lease includes a purchase option which the Company intends to exercise once certain conditions precedent are met. The lease commenced on January 1, 2024.

Re-tenant of Real Estate Properties

On October 30, 2023 the Company entered into a lease agreement to re-tenant the three skilled nursing facilities located in Texas. The lease is for 10 years with annual escalations of 2.5%. The lease commenced on December 1, 2023.

Dispositions of Assets

In February 2023 one of the SNF’s owned by the Company in Southern Illinois was closed. The closure was a result of the tenant request and mainly for efficiency reasons. This SNF is under a master lease with 2 other facilities and the full amount of the rental payments under the master lease are continuing to be paid. Additionally, the operator continues to be responsible for ensuring the building is secure and paying utilities, real estate taxes and insurance bills.

F-16

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4. Real Estate Investments, net (cont.)

Other Properties

In December 2022, the Company, through one of its subsidiaries, took title on a property in Massachusetts through a foreclosure. See note 2 above. As of December 31, 2023, the property is carried at estimated fair value of $1.2 million and is included in real estate investments in the accompanying consolidated balance sheets.

NOTE 5. Intangible Assets and Goodwill

Intangible assets consist of the following goodwill, Certificate of Need (“CON”) licenses and lease rights:

Schedule of Intangible Assets and Goodwill

|  | Goodwill including CON Licenses |  |  | Lease Rights |  |  | Total |
|  | (Amounts in $000’s) |
Balances, December 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |
Gross |  | $ | 1,323 |  |  | $ | 54,577 |  |  | $ | 55,900 |
Accumulated amortization |  |  | - |  |  |  | (41,240 | ) |  |  | (41,240 | )
Net carrying amount |  | $ | 1,323 |  |  | $ | 13,337 |  |  | $ | 14,660 |
Amortization for the year ended December 31, 2022 |  |  | - |  |  |  | (3,028 | ) |  |  | (3,028 | )
Balances, December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |
Gross |  | $ | 1,323 |  |  | $ | 54,577 |  |  | $ | 55,900 |
Accumulated amortization |  |  | - |  |  |  | (44,268 | ) |  |  | (44,268 | )
Net carrying amount |  | $ | 1,323 |  |  | $ | 10,309 |  |  | $ | 11,632 |
Amortization for the year ended December 31, 2023 |  | $ | - |  |  |  | (3,028 | ) |  |  | (3,028 | )
Balances, December 31, 2023 |  |  |  |  |  |  |  |  |  |  |  |
Gross |  | $ | 1,323 |  |  | $ | 54,577 |  |  | $ | 55,900 |
Accumulated amortization |  |  | - |  |  |  | (47,296 | ) |  |  | (47,296 | )
Net carrying amount |  | $ | 1,323 |  |  | $ | 7,281 |  |  | $ | 8,604 |

Estimated amortization expense for all finite-lived intangible assets for each of the future years ending December 31, is as follows:

Schedule of Estimated Amortization Expenses

|  | Amortization of Lease Rights |
|  | (Amounts in $000’s) |
2024 |  | $ | 3,028 |
2025 |  |  | 3,028 |
2026 |  |  | 675 |
2027 |  |  | 461 |
2028 |  |  | 89 |
Total |  | $ | 7,281 |

F-17

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6. Leases

As of December 31, 2023, the Company had leased 98 properties to tenant/operators in the States of Illinois, Indiana, Michigan, Ohio, Texas, Kentucky, Tennessee, Oklahoma and Arkansas. As of December 31, 2022 the company leased 79 properties. In both December 31, 2023 and 2022 all of the Company’s healthcare facilities were leased. Most of these facilities are leased on a triple-net basis, meaning that the lessee (i.e., operator of the facility) is obligated under the lease for all expenses of the property in respect to insurance, taxes and property maintenance, as well as the lease payments.

The following table provides additional information regarding the properties owned/leased for the periods indicated:

Schedule of Properties Own and Leased Information

|  | December 31, |
|  | 2023 |  |  | 2022 |
Cumulative number of properties |  |  | 98 |  |  |  | 79 |
Cumulative number of operational beds |  |  | 12,201 |  |  |  | 10,332 |

The following table provides additional information regarding the properties/facilities leased by the Company as of December 31, 2023:

Schedule of Additional Information on Properties Facilities Leased

State |  | Number of Operational Beds/Units |  |  | Owned by Company |  |  | Leased by Company |  |  | Total |
Illinois |  |  | 4,226 |  |  |  | 20 |  |  |  | - |  |  |  | 20 |
Indiana |  |  | 3,240 |  |  |  | 33 |  |  |  | 1 |  |  |  | 34 |
Michigan |  |  | 100 |  |  |  | 1 |  |  |  | - |  |  |  | 1 |
Ohio |  |  | 238 |  |  |  | 4 |  |  |  | - |  |  |  | 4 |
Tennessee |  |  | 1,056 |  |  |  | 12 |  |  |  | - |  |  |  | 12 |
Kentucky |  |  | 1,163 |  |  |  | 10 |  |  |  | - |  |  |  | 10 |
Arkansas |  |  | 1,568 |  |  |  | 13 |  |  |  | - |  |  |  | 13 |
Oklahoma |  |  | 137 |  |  |  | 1 |  |  |  | - |  |  |  | 1 |
Texas |  |  | 473 |  |  |  | 3 |  |  |  | - |  |  |  | 3 |
Total properties |  |  | 12,201 |  |  |  | 97 |  |  |  | 1 |  |  |  | 98 |
Facility Type |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Skilled Nursing Facilities |  |  | 11,865 |  |  |  | 96 |  |  |  | 1 |  |  |  | 97 |
Long-Term Acute Care Hospitals(1) |  |  | 63 |  |  |  | 2 |  |  |  | - |  |  |  | 2 |
Assisted Living Facility |  |  | 273 |  |  |  | 8 |  |  |  | - |  |  |  | 8 |
Total facilities |  |  | 12,201 |  |  |  | 106 |  |  |  | 1 |  |  |  | 107 |

(1) | Each property is comprised of a skilled nursing facility and long-term acute care hospital.

As of December 31, 2023, total future minimum rental revenues for the Company’s tenants are as follows:

Schedule of Future Minimum Rental Revenues

Year |  | Amount |
(Amounts in $000’s) |  |  |
2024 |  | $ | 93,923 |
2025 |  |  | 86,439 |
2026 |  |  | 69,687 |
2027 |  |  | 70,250 |
2028 |  |  | 66,360 |
Thereafter |  |  | 148,589 |
Total |  | $ | 535,248 |

F-18

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6. Leases (cont.)

The following table provides summary information regarding the number of operational beds associated with a property leased by the Company and subleased to third-party operators:

Schedule of Property Leases to Third Parties

|  | December 31, |
|  | 2023 |  |  | 2022 |
Number of facilities leased and subleased to third-parties |  |  | 1 |  |  |  | 1 |
Number of operational beds |  |  | 68 |  |  |  | 68 |

Right of use assets and operating lease liabilities are disclosed as separate line items in the consolidated balance sheets and are valued based on the present value of the future minimum lease payments at lease commencement. As the Company’s leases do not provide an implicit rate, the Company used its incremental borrowing rate based on the information available at the adoption date in determining the present value of future payments. Lease expense is recognized on a straight-line basis over the lease term. The Company’s operating lease obligation is for one skilled nursing facility. The lease expires on March 1, 2028 and has two five-year renewal options. The lease is a triple net lease, which requires the Company to pay real and personal property taxes, insurance expenses and all capital improvements. The Company subleases the building as part of the Indiana master lease. Based on the sublease with the Company’s tenant, the tenant is required to pay real and personal property taxes, insurance expenses and all capital improvements.

The components of lease expense and other lease information are as follows (dollars in thousands):

Schedule of Components of Lease Expense

|  | Years ended December 31, |
|  | 2023 |  |  | 2022 |
Operating lease cost |  | $ | 405 |  |  | $ | 392 |

|  | As of December 31, |
|  | 2023 |  |  | 2022 |
Operating lease right of use asset |  | $ | 1,542 |  |  | $ | 1,833 |
Operating lease liability |  | $ | 1,542 |  |  | $ | 1,833 |
Weighted average remaining lease term-operating leases (in years) |  |  | 4.25 |  |  |  | 5.25 |
Weighted average discount rate |  |  | 4.1 | % |  |  | 4.1 | %

Future minimum operating lease payments under non-cancellable leases as of December 31, 2023, reconciled to the Company’s operating lease liability presented on the consolidated balance sheets:

Schedule of Future Minimum Lease Payments On Non-Cancellable Leases

|  | (Amounts in $000s) |
2024 |  | $ | 397 |
2025 |  |  | 397 |
2026 |  |  | 397 |
2027 |  |  | 397 |
2028 |  |  | 99 |
Total |  | $ | 1,687 |
Less Interest |  |  | (145 | )
Total operating lease liability |  | $ | 1,542 |

Other Properties leased by the Company

The Company, through one of its subsidiaries, leases its office spaces from a related party. Rental expense under the leases for the year ended December 31, 2023 and 2022, was $209,000 and $203,500, respectively.

F-19

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7. Notes Payable and Other Debt

Notes Payable and Other Debt consist of the following:

Schedule of Notes Payable and Other Debt

|  | Weighted Interest Rate at December 31, 2023 |  |  | December 31, |
|  |  |  |  | 2023 |  |  | 2022 |
|  |  | (Amounts in $000s) |
HUD guaranteed bank loans |  |  | 3.26 | % |  | $ | 271,340 |  |  | $ | 275,778 |
Bank loans |  |  | 8.84 | % |  |  | 164,810 |  |  |  | 105,225 |
Series A (2022 Only), Series C and Series D Bonds |  |  | 7.00 | % |  |  | 102,995 |  |  |  | 75,788 |
Gross Notes Payable and other Debt |  |  |  |  |  | $ | 539,145 |  |  | $ | 456,791 |
Debt issuance costs |  |  |  |  |  |  | (2,659 | ) |  |  | (1,376 | )
Net Notes Payable and other Debt |  |  |  |  |  | $ | 536,486 |  |  | $ | 455,415 |

Principal payments on the Notes Payable and Other Debt payable through maturity are as follows (amounts in $000s):

Schedule of Notes Payable and Other Debt Payables Maturity

Year Ending December 31 |  |  |
2024 |  | $ | 18,549 |
2025 |  |  | 19,929 |
2026 |  |  | 103,575 |
2027 |  |  | 97,333 |
2028 |  |  | 70,455 |
Thereafter |  |  | 229,304 |
Total Principal Payments on Notes Payable and Other Debt |  | $ | 539,145 |

Debt Covenant Compliance

As of December 31, 2023 and 2022, the Company was party to approximately 41 and 40 outstanding credit related instruments, respectively. These instruments included credit facilities, mortgage notes, bonds and other credit obligations. Some of the instruments include financial covenants. Covenant provisions include, but are not limited to, debt service coverage ratios, and minimum levels of EBITDA (defined as earnings before interest, tax, and depreciation and amortization) or EBITDAR (defined as earnings before interest, tax, depreciation and amortization and rental expense). Some covenants are based on annual financial metric measurements, and some are based on quarterly financial metric measurements. The Company routinely tracks and monitors its compliance with its covenant provisions. As of December 31, 2023, the Company was in compliance with all financial and administrative covenants.

F-20

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7. Notes Payable and Other Debt (cont.)

Senior Debt—Mortgage Loans Guaranteed by HUD

As of December 31, 2023 and 2022, the Company had HUD guaranteed mortgage loans from financial institutions of $271million and $276 million, respectively. These loans were secured by first mortgage liens on the applicable properties, assignments of rent and second liens on the operator’s assets. The Company pays HUD annual mortgage insurance premiums of 0.65% of the loan balances in addition to the interest rate. As a result, the overall interest rate paid by the Company with respect to the HUD guaranteed loans as of December 31, 2023 and 2022 was 3.93 % and 3.88%, respectively (including the mortgage insurance premium).

Bank loans/repayment of Series B Bonds

On March 21, 2022, the Company closed a mortgage loan facility with a commercial bank pursuant to which the Company borrowed approximately $105 million. The facility provides for monthly payments of principal based on a 20-year amortization with a balloon payment due in March 2027. The rate is based on the one-month Secured Overnight Financing Rate (“SOFR”) plus a margin of 3.5% and a floor of 4% (as of December 31, 2023 the rate was 8.84%). As of December 31, 2023 and December 31, 2022, total outstanding was $98.8 million and $102.4 million, respectively. This loan is collateralized by 21 properties owned by the Company. The new loan proceeds were used to repay the Series B Bonds and prepay certain bank loans not secured by HUD guaranteed mortgages. The Company recognized a foreign currency transaction loss of approximately $10.1 million in connection with the repayment of the Series B Bonds during the year ended December 31, 2022.

On August 25, 2023, the Company closed a mortgage loan facility with a commercial bank pursuant to which the Company borrowed approximately $66 million. The facility provides for monthly payments of interest only for the first 12 months and principal based on a 20-year amortization with a balloon payment due in August 2028. The rate is based on the one-month Secured Overnight Financing Rate (“SOFR”) plus a margin of 3.5% and a floor of 4% (as of the December 31, 2023, the rate was 8.84%). As of December 31, 2023, total outstanding was $66 million. This loan is collateralized by 19 properties owned by the Company. The new loan proceeds were used to acquire the Indiana Facilities.

Both credit facilities financial covenants 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 1.20 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 $20,000,000. As of December 31, 2023 the Company is in compliance with the loan covenants.

Series A Bonds

In November 2015, the Company, through a subsidiary, issued Series A Bonds in the face amount of NIS 265.2 million ($68 million) and received the net amount after issuance costs of NIS 251.2 million ($64.3 million). Since then the Company extended the series amount twice in September 2016 and May 2017 and received a combined net amount of $30.1 million. The Series A Bonds had an original interest rate of 6.4% per annum. The bond was paid off on November 8, 2023.

F-21

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7. Notes Payable and Other Debt (cont.)

Series C Bonds

In July 2021, the BVI Company completed an initial offering on the Tel Aviv Stock Exchange (“TASE”) of Series C Bonds with a par value of NIS 208.0 million ($64.7 million). These Series C Bonds were issued at par. Offering and issuance costs of approximately $1.7 million were incurred at closing. In February 2023, the BVI Company issued an additional NIS 40.0 million ($19.2 million) in Series C Bonds. At December 31, 2023 and December 31st, 2022 the total Series C Bond outstanding was $60.8 and $55.6 million, respectively.

Interest

The Series C Bonds initially bore interest at a rate of 5.7% per annum. In July 2021, Standard & Poor’s provided an initial rating for the Series C Bonds of ilA+.

Interest on the Series C Bonds is payable semi-annually in arrears on July 31 and January 31 of each year. The interest rate may increase if certain financial ratios are not achieved, as discussed below

Payment Terms

The principal amount of the Series C Bonds is payable in five annual installments due on July 31 of each of the years 2022 through 2026. The first four principal payments are equal to 6% of the original principal amount of the Series C Bonds, and the last principal payments is equal to the outstanding principal amount of the Series C Bonds.

Financial Covenants

Until the date of full repayment of the Series C Bonds, the BVI Company must comply with certain financial covenants described below. The application of the covenants is based on the financial statements of the BVI Company as prepared under the IFRS accounting method. The financial covenants are as follows:

● The stockholders’ equity of the BVI Company may not be less than $230 million.

● The ratio of the consolidated stockholders’ equity of the BVI Company to its total consolidated balance sheet may not be less than 25%.

● The ratio of the adjusted net financial debt to adjusted EBITDA of the BVI Company (for the past four quarters) may not exceed 12.

● The ratio of the outstanding amount of the Series C Bonds to the fair market value of the collateral may not exceed 75%.

Dividend Restrictions

The indenture for the Series C Bonds limits the amount of dividends that may be paid by the BVI Company to its stockholders. The BVI Company may not make any distribution unless all of the following conditions are fulfilled (with all amounts calculated under IFRS):

● The distribution amount may not exceed 80% of the net profit after tax that is recognized in the most recent consolidated financial statements of the BVI Company, less profits or losses arising from a change in accounting methods, net revaluation profits/losses (that have not yet been realized) arising from a change in the fair value of the assets with respect to the fair value in prior reporting period.

● The ratio of the consolidated stockholders’ equity of the BVI Company to its total consolidated balance sheet may not be less than 30%.

F-22

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7. Notes Payable and Other Debt (cont.)

Series C Bonds (Cont.)

Dividend Restrictions (Cont.)

● The distributable profits for which no distribution was performed in a specific year will be added to the following quarters.

● The BVI Company’s equity at the end of the last quarter, before the distribution of dividends, less the dividends distributed, may not be less than $250 million.

● The BVI Company meets the financial conditions described above, and the Company is not in violation of all and/or any of its material undertakings to the holders of the Series C Bonds.

Increase in Interest Rate

In the event that:

(i) the stockholders’ equity of BVI Company (excluding minority interests) is less than $250 million;

(ii) the ratio of the adjusted net financial debt to adjusted EBITDA (for the latest four quarters) exceeds 11;

(iii) the ratio of the consolidated equity of the BVI Company to total consolidated assets of the BVI Company is below 27%; or

(iv) the ratio of outstanding amount of the Series C Bonds to the fair market value of the collateral for the Series B Bonds exceeds 75%,

then, in each case, the interest on the Series C Bonds will increase by an additional 0.5% annually, but only once with respect to each failure to meet these requirements. Compliance with these financial covenants is measured quarterly.

Additionally, if a decline in the rating of the Series C Bonds should take place, then for each single ratings decrease, the interest will be increased by 0.25% per year, up to a maximum increment of 1.25% annually.

In any case, the total increase in the interest rate as a result of the above adjustments will not exceed 1.5% per year. The increases in the interest rate will also be reversed if the BVI Company regains compliance.

Security

The Series C Bonds are secured by first mortgage liens on eight properties. In addition, the Series C Bonds are also secured by interest and expenses reserves. The BVI Company has agreed not to pledge its assets pursuant to a general lien without obtaining the prior consent of the holders of the Series C Bonds, provided that the BVI Company is entitled to register specific liens on its properties and also to provide guarantees and its subsidiaries are entitled to register general and specific liens on their assets.

Under the terms of the indenture for the Series C Bonds, the BVI Company can take out properties from the collateral (in case of HUD refinancing) or to add properties and increase the Series C Bonds as long as the ratio of outstanding amount of the Series C Bonds to fair market value of the collateral is not more than 65%. In addition, starting from July 1, 2023, if the fair market value of the collateral is below 55%, the BVI Company can request to release collateral so the fair market value will increase to 55%.

F-23

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7. Notes Payable and Other Debt (cont.)

Series C Bonds (cont.)

Additional Bonds

The BVI Company can issue additional Series C Bonds at any time not to exceed a maximum of NIS630 million (or $192 million).

Redemption Provisions

The BVI Company may, at its discretion, call the Series C Bonds for early repayment. In the event of the redemption of all of the Series C Bonds, the BVI Company would be required to pay the highest of the following amounts:

● | the market value of the balance of the Series C Bonds in circulation which will be determined based on the average closing price of the Series B Bonds for thirty (30) trading days before the date on which the board of directors resolves to undertake the early redemption;
● | the par value of the Series C Bonds available for early redemption in circulation (i.e., the principal balance of the Series C Bonds plus accrued interest until the date of the actual early redemption); or
● | the balance of the payments under the Series C Bonds (consisting of future payments of principal and interest), when discounted to their present value based on the annual yield of the Israeli government bonds plus an “additional rate.” The additional rate will be 3.0% per annum for early repayment as of December 31, 2023.

Change of Control

The holders of a majority of the Series C Bonds may accelerate the outstanding balance of the Bonds if the control of the BVI Company is transferred, directly or indirectly, unless the transfer of control is approved by the holders of a majority of the Series C Bonds.

For the purpose of this provision, a transfer of control means a change of control of the BVI Company such that the BVI Company has a controlling stockholder that is not any of the “controlling stockholders” and/or is in the hands of any of their immediate family members (including through trusts that the controlling stockholders and/or any of their immediate family members are the beneficiaries under and/or are their managers). In this regard, “control” is defined in the Israeli Companies Law.

For purposes of the Series C Bonds, the “controlling stockholders” of the BVI Company are deemed to be Moishe Gubin and Michael Blisko.

F-24

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7. Notes Payable and Other Debt (cont.)

Series D Bonds

In June 2023, the BVI Company completed an initial offering on the Tel Aviv Stock Exchange (“TASE”) of Series D Bonds with a par value of NIS 82.9 million ($22.9 million). These Series D Bonds were issued at par. Offering and issuance costs of approximately $0.6 million were incurred at closing. In July 2023, the BVI Company issued an additional NIS70 million ($19.2 million) in Series D Bonds. Total outstanding Series D bonds as of December 31, 2023 was NIS152.9 million ($42.2 million). In February 8, 2024 the BVI Company issued an additional NIS 100 million ($27.2) in series D bond.

Interest

The Series D Bonds initially bore interest at a rate of 9.1% per annum. In June 2023, Standard & Poor’s provided an initial rating for the Series D Bonds of ilA.

Interest on the Series D Bonds is payable semi-annually in arrears on March 31 and September 30 of each year. The interest rate may increase if certain financial ratios are not achieved, as discussed below.

Payment Terms

The principal amount of the Series D Bonds is payable in three annual installments due on September 30 of each of the years 2024 through 2026. The first two principal payments are equal to 6% of the original principal amount of the Series D Bonds, and the last principal payments is equal to the outstanding principal amount of the Series D Bonds.

Financial Covenants

Until the date of full repayment of the Series D Bonds, the BVI Company must comply with certain financial covenants described below. The application of the covenants is based on the financial statements of the BVI Company as prepared under the IFRS accounting method. The financial covenants are as follows:

● The stockholders’ equity of the BVI Company may not be less than $230 million.

● The ratio of the Condensed Consolidated stockholders’ equity of the BVI Company to its total Condensed Consolidated balance sheet may not be less than 25%.

● The ratio of the adjusted net financial debt to adjusted EBITDA of the BVI Company (for the past four quarters) may not exceed 12.

Dividend Restrictions

The indenture for the Series D Bonds limits the amount of dividends that may be paid by the BVI Company to its stockholders. The BVI Company may not make any distribution unless all of the following conditions are fulfilled (with all amounts calculated under IFRS):

● The distribution amount may not exceed 80% of the net profit after tax that is recognized in the most recent Condensed Consolidated financial statements of the BVI Company, less profits or losses arising from a change in accounting methods, net of revaluation profits/losses (that have not yet been realized) arising from a change in the fair value of the assets with respect to the fair value in the prior reporting period.

● The ratio of the consolidated stockholders’ equity of the BVI Company to its total consolidated balance sheet may not be less than 30%.

● The distributable profits for which no distribution was performed in a specific year will be added to the following quarters.

● The BVI Company’s equity at the end of the last quarter, before the distribution of dividends, less the dividends distributed, may not be less than $250 million.

● The BVI Company meets the financial conditions described above, and the BVI Company is not in violation of all and/or any of its material undertakings to the holders of the Series D Bonds as of December 31, 2023.

F-25

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7. Notes Payable and Other Debt (cont.)

Series D Bonds (Cont.)

Increase in Interest Rate

In the event that:

(i) the stockholders’ equity of the BVI Company (excluding minority interests) is less than $250 million;

(ii) the ratio of the adjusted net financial debt to adjusted EBITDA (for the latest four quarters) exceeds 11;

(iii) the ratio of the consolidated equity of the BVI Company to total consolidated assets of the BVI Company is below 27%; or

then, in each case, the interest on the Series D Bonds will increase by an additional 0.5% annually, but only once with respect to each failure to meet these requirements. Compliance with these financial covenants is measured quarterly.

Additionally, if a decline in the rating of the Series D Bonds should take place, then for each single ratings decrease, the interest will be increased by 0.25% per year, up to a maximum increment of 1.25% annually.

In any case, the total increase in the interest rate as a result of the above adjustments will not exceed 1.5% per year. The increases in the interest rate will also be reversed if the BVI Company regains compliance.

Security

The BVI Company has committed not to pledge its assets under general liens without obtaining the consent in advance of the Bond holders. Nevertheless, the BVI Company is entitled to register specific liens on its properties and also to provide guarantees; and its subsidiaries are entitled to register liens, including general and specific, on their assets.

Additional Bonds

The BVI Company can issue additional Series D Bonds at any time not to exceed a maximum outstanding of NIS 450 million (or $124 million).

Redemption Provisions

The BVI Company may, at its discretion, call the Series D Bonds for early repayment. In the event of the redemption of all of the Series D Bonds, the BVI Company would be required to pay the highest of the following amounts:

● | the market value of the balance of the Series D Bonds in circulation which will be determined based on the average closing price of the Series D Bonds for thirty (30) trading days before the date on which the board of directors resolves to undertake the early redemption;
● | the par value of the Series D Bonds available for early redemption in circulation (i.e., the principal balance of the Series D Bonds plus accrued interest until the date of the actual early redemption); or
● | the balance of the payments under the Series D Bonds (consisting of future payments of principal and interest), when discounted to their present value based on the annual yield of the Israeli government bonds plus an “additional rate.” The additional rate will be 1.0% per annum for early repayment performed by September 30, 2024, and 3.0% thereafter.

Change of Control

The holders of a majority of the Series D Bonds may accelerate the outstanding balance of the Bonds if the control of the BVI Company is transferred, directly or indirectly, unless the transfer of control is approved by the holders of a majority of the Series D Bonds.

For purposes of the Series D Bonds, the “controlling stockholders” of the BVI Company are deemed to be Moishe Gubin and Michael Blisko.

For the purpose of this provision, a transfer of control means a change of control of the BVI Company such that the BVI Company has a controlling stockholder that is not any of the “controlling stockholders” and/or is in the hands of any of their immediate family members (including through trusts that the controlling stockholders and/or any of their immediate family members are the beneficiaries under and/or are their managers). In this regard, “control” is defined in the Israeli Companies Law.

F-26

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8. Commitments and Contingencies

Commitments

The Company guarantees from time-to-time obligations of its wholly-owned subsidiaries.

Contingencies

The Company’s operating results and financial condition are dependent on the ability of its tenants to meet their lease obligations to us.

We are not currently a party to any material legal proceedings, that are not covered by insurance and expected to be resolved within policy limits, other than the following:

In March 2020, Joseph Schwartz, Rosie Schwartz and certain companies owned by them filed a complaint in the U.S. District Court for the Northern District of Illinois against Moishe Gubin, Michael Blisko, the Predecessor Company and 21 of its subsidiaries, as well as the operators of 17 of the facilities operated at our properties. The complaint was related to the Predecessor Company’s acquisition of 16 properties located in Arkansas and Kentucky that were completed between May 2018 and April 2019 and the attempt to purchase an additional five properties located in Massachusetts. The complaint was dismissed by the Court in 2020 on jurisdictional grounds. The plaintiffs did not file an appeal with respect to this action, and the time for an appeal has expired.

In August 2020, Joseph Schwartz, Rosie Schwartz and several companies controlled by them filed a second complaint in the Circuit Court in Pulaski County, Arkansas. The second complaint had nearly identical claims as the federal case, but was limited to matters related to the Predecessor Company’s acquisition of properties located in Arkansas. The sellers, which were affiliates of Skyline Health Care, had encountered financial difficulties and requested the Predecessor Company to acquire these properties. The defendants have filed an answer denying the plaintiffs’ claims and asserting counterclaims based on breach of contract. This case has been dismissed without prejudice.

In January 2021, Joseph Schwartz, Rosie Schwartz and certain companies owned by them filed a third complaint in Illinois state court in Cook County, Illinois, which has nearly identical claims to the initial federal case, but was limited to claims related to the Kentucky and Massachusetts properties. The complaint has not been properly served on any of the defendants, and, accordingly, the defendants did not responded to the complaint. Instead, the defendants filed a motion to quash service of process. On January 11, 2023, the Cook County Circuit Court entered an order granting such motion, quashing service of process on all defendants. In March 2023, the plaintiffs filed a new complaint and again attempted to serve it on the defendants. It is the defendants’ position that service was (once again, potentially) defective and sought a dismissal of the matter for want of prosecution by Joseph Schwartz, Rosie Schwartz and certain companies owned by them. The dismissal was granted, but has been appealed to the Illinois Appellate Court, with no substantive movement on the matter to date.

In each of these complaints, the plaintiffs asserted claims for fraud, breach of contract and rescission arising out of the defendants alleged failure to perform certain post-closing obligations under the purchase contracts. We have potential direct exposure for these claims because the subsidiaries of the Predecessor Company that were named as defendants are now subsidiaries of the Operating Partnership. Additionally, the Operating Partnership is potentially liable for the claims made against Moishe Gubin, Michael Blisko and the Predecessor Company pursuant to the provisions of the contribution agreement, under which the Operating Partnership assumed all of the liabilities of the Predecessor Company and agreed to indemnify the Predecessor Company and its affiliates for such liabilities. We and the named defendants believe that the claims set forth in the complaints are without merit. The named defendants intend to vigorously defend the litigation and to assert counterclaims against the plaintiffs based on their failure to fulfill their obligations under the purchase contracts, interim management agreement, and operations transfer agreements. We believe this matter will be resolved without a material adverse effect to the Company.

As noted above, the March 2020 and January 2021 complaints also related to the Predecessor Company’s planned acquisition of five properties located in Massachusetts. A subsidiary of the Predecessor Company purchased loans related to these properties in 2018 for a price of $7.74 million with the expectation that the subsidiaries would acquire title to the properties and the loans would be retired. The subsidiary subsequently advanced $3.1 million under the loans to satisfy other liabilities related to the properties. The planned acquisition/settlement with the sellers/owners and/borrowers was not consummated because the underlying tenants of the properties surrendered their licenses to operate healthcare facilities on these properties.

The Predecessor Company intends to institute legal proceedings to collect the outstanding amount of these loans and to assert related claims against the sellers and their principals for the unpaid principal balances as well as protective advances and collection costs. In connection with enforcing their rights, in July 2022, the Company foreclosed, and (as lender) sold four of the five properties at auction for the total amount of $4.4 million. In December 2022, the Company took title on the fifth property with an estimated fair value of $1.2 million.

F-27

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9. Equity Incentive Plan

The Company has adopted the 2021 Equity Incentive Plan (the “Plan”). The Plan permits the grant of both options qualifying under Section 422 of the Internal Revenue Code (“incentive stock options”) and options not so qualifying, and the grant of stock appreciation rights, stock awards, incentive awards, performance units, and other equity-based awards. A total of 250,000 shares have been authorized to be granted under the Plan.

As of December 31, 2023, and 2022, 225,100 shares were available for grant. No shares were issued during the years ended December 31, 2023 and 2022.

NOTE 10. Stockholders’ Equity and Distributions

The Company elected and qualified to be treated as a REIT commencing with the taxable year ending December 31, 2022. U.S. federal income tax law requires that a REIT distribute annually at least 90% of its net taxable income, excluding net capital gains, and that it pays tax at regular corporate rates to the extent that it annually distributes less than 100% of its net taxable income, including net capital gains. In addition, a REIT is required to pay a 4% nondeductible excise tax on the amount, if any, by which the distributions that it makes in a calendar year are less than the sum of 85% of its ordinary income, 95% of its capital gain net income and 100% of its undistributed income from prior years.

On November 9, 2023 the Board of Directors authorized the repurchase of up to $5 million of the Company’s common stock. As of December 31st, 2023 the Company purchased 5,953 shares of common stock at an average price per share of $7.84 and an aggregate repurchase priced of $46,000.

As of December 31, 2023, there were a total of 6,487,856 shares of common stock issued and outstanding. The outstanding shares were held by a total of approximately 812 stockholders of record, including certain affiliates of the Company who held 938,722 of these shares.

At December 31, 2023 there were 45,373,615 OP units outstanding. Under the terms of the Operating Partnership agreement, such holders have the right to request the redemption of their OP units, in cash. If a holder requests redemption, the Company will have the option of issuing shares of common stock to the requesting holder instead of cash. In addition, OP unit holders are required to obtain Company approval prior to the sale or transfer of any or all of such OP unit holders’ interest.

In addition, the Company has reserved a total of 45,373,615 shares of common stock that may be issued, at the Company’s option, upon redemption of the OP units outstanding as of December 31, 2023.

F-28

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11. Related Party Transactions and Economic Dependence

The following entities and individuals are considered to be Related Parties:

Moishe Gubin | Chairman of the Board
Michael Blisko | Director
Nahman Eingal | Former Chief Financial Officer
Operating entities | See list below

Lease Agreements with Related Parties

As of December 31, 2023 and 2022, each of the Company’s facilities were leased and operated by separate tenants. Each tenant is an entity that leases the facility from one of the Company’s subsidiaries and operates the facility as a healthcare facility. The Company had 64 tenants out of 107 who were related parties as of December 31, 2023 and 41 tenants out of 79 who were related parties as of December 31, 2022. Most of the lease agreements are triple net leases.

On April 4, 2022, an affiliated tenant in Illinois notified the Company of its intent to default with respect to two master lease agreements. Each lease included three nursing home facilities with a combined rent of $225,000 per month, or $2.7 million annually. Default occurred on June 30, 2022, and the Company recognized a loss of $1,075,000 due to the write-offs of straight-line rent receivables during the year ended December 31, 2022. On July 1, 2022, the Company entered into new lease agreements with an unaffiliated third-party operator to lease these properties. The new leases have terms of 10 years each and provide for a combined average base rent of $180,000 per month, or $2.3 million per year, on average, over the life of the leases. In February 2023 one facility under this master lease was closed. The closure was a result of the tenant request and mainly for efficiency reasons. This facility is under a master lease with 5 other facilities and the rent payment is continuing with no interruption and at the same amount.

The following table sets forth details of the lease agreements in force between the Company and its subsidiaries and lessees that are related parties:

Schedule of Related Party Transactions

|  |  |  |  |  |  | (1)(2) |  |  |  | (1)(2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | Related Party Ownership in Manager/Tenant/ Operator (1) (2) |  |  |  |  |  |  |  |  |  |  |  |  |  |
State |  | Lessor/ Company Subsidiary |  | Tenant/ Operator |  | Moishe Gubin/Gubin Enterprises LP |  |  | Michael Blisko/Blisko Enterprises LP |  |  | Average annual rent over life of lease |  |  | Annual Escalation |  |  | % of total rent |  |  | Lease maturity |  | Extension options
|  | Master Lease Indiana |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
IN |  | 1020 West Vine Street Realty, LLC |  | The Waters of Princeton II, LLC |  |  | 49.49 | % |  |  | 50.51 | % |  | $ | 1,045,506 |  |  |  | 3.00 | % |  |  | 1.07 | % |  | 8/1/2025 |  | 2 five year
IN |  | 12803 Lenover Street Realty LLC |  | The Waters of Dillsboro – Ross Manor II LLC |  |  | 49.49 | % |  |  | 50.51 | % |  |  | 1,353,655 |  |  |  | 3.00 | % |  |  | 1.39 | % |  | 8/1/2025 |  | 2 five year
IN |  | 1350 North Todd Drive Realty, LLC |  | The Waters of Scottsburg II LLC |  |  | 49.49 | % |  |  | 50.51 | % |  |  | 1,089,527 |  |  |  | 3.00 | % |  |  | 1.12 | % |  | 8/1/2025 |  | 2 five year
IN |  | 1600 East Liberty Street Realty LLC |  | The Waters of Covington II LLC |  |  | 49.49 | % |  |  | 50.51 | % |  |  | 1,309,634 |  |  |  | 3.00 | % |  |  | 1.35 | % |  | 8/1/2025 |  | 2 five year
IN |  | 1601 Hospital Drive Realty LLC |  | The Waters of Greencastle II LLC |  |  | 49.49 | % |  |  | 50.51 | % |  |  | 1,100,532 |  |  |  | 3.00 | % |  |  | 1.13 | % |  | 8/1/2025 |  | 2 five year
IN |  | 1712 Leland Drive Realty, LLC |  | The Waters of Huntingburg II LLC |  |  | 49.49 | % |  |  | 50.51 | % |  |  | 1,045,506 |  |  |  | 3.00 | % |  |  | 1.07 | % |  | 8/1/2025 |  | 2 five year
IN |  | 2055 Heritage Drive Realty LLC |  | The Waters of Martinsville II LLC |  |  | 49.49 | % |  |  | 50.51 | % |  |  | 1,133,548 |  |  |  | 3.00 | % |  |  | 1.16 | % |  | 8/1/2025 |  | 2 five year
IN |  | 3895 South Keystone Avenue Realty LLC |  | The Waters of Indianapolis II LLC |  |  | 49.49 | % |  |  | 50.51 | % |  |  | 891,431 |  |  |  | 3.00 | % |  |  | 0.92 | % |  | 8/1/2025 |  | 2 five year
IN |  | 405 Rio Vista Lane Realty LLC |  | The Waters of Rising Sun II LLC |  |  | 49.49 | % |  |  | 50.51 | % |  |  | 638,309 |  |  |  | 3.00 | % |  |  | 0.66 | % |  | 8/1/2025 |  | 2 five year
IN |  | 950 Cross Avenue Realty LLC |  | The Waters of Clifty Falls II LLC |  |  | 49.49 | % |  |  | 50.51 | % |  |  | 1,518,735 |  |  |  | 3.00 | % |  |  | 1.56 | % |  | 8/1/2025 |  | 2 five year
IN |  | 958 East Highway 46 Realty LLC |  | The Waters of Batesville II LLC |  |  | 49.49 | % |  |  | 50.51 | % |  |  | 946,458 |  |  |  | 3.00 | % |  |  | 0.97 | % |  | 8/1/2025 |  | 2 five year
IN |  | 2400 Chateau Drive Realty, LLC |  | The Waters of Muncie II LLC |  |  | 49.49 | % |  |  | 50.51 | % |  |  | 792,383 |  |  |  | 3.00 | % |  |  | 0.81 | % |  | 8/1/2025 |  | 2 five year
IN |  | The Big H2O LLC |  | The Waters of New Castle II LLC |  |  | 49.49 | % |  |  | 50.51 | % |  |  | 726,351 |  |  |  | 3.00 | % |  |  | 0.75 | % |  | 8/1/2025 |  | 2 five year

F-29

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11. Related Party Transactions and Economic Dependence (cont.)

Lease Agreements with Related Parties (cont.)

|  |  |  |  |  |  | (1)(2) |  |  |  | (1)(2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | Related Party Ownership in Manager/Tenant/ Operator (1) (2) |  |  |  |  |  |  |  |  |  |  |  |  |  |
State |  | Lessor / Company Subsidiary |  | Tenant/ Operator |  | Moishe Gubin/Gubin Enterprises LP |  |  | Michael Blisko/Blisko Enterprises LP |  |  | Average annual rent over life of lease |  |  | Annual Escalation |  |  | % of total rent |  |  | Lease maturity |  | Extension options
|  | Master Lease Tennessee |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
TN |  | 115 Woodlawn Drive, LLC |  | Lakebridge, a Waters Community, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 1,514,820 |  |  |  | 3.00 | % |  |  | 1.55 | % |  | 8/1/2031 |  | 2 five year
TN |  | 146 Buck Creek Road, LLC |  | The Waters of Roan Highlands, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 1,111,794 |  |  |  | 3.00 | % |  |  | 1.14 | % |  | 8/1/2031 |  | 2 five year
TN |  | 704 5th Avenue East, LLC |  | The Waters of Springfield, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 917,230 |  |  |  | 3.00 | % |  |  | 0.94 | % |  | 8/1/2031 |  | 2 five year
TN |  | 2501 River Road, LLC |  | The Waters of Cheatham, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 1,111,794 |  |  |  | 3.00 | % |  |  | 1.14 | % |  | 8/1/2031 |  | 2 five year
TN |  | 202 Enon Springs Road East, LLC |  | The Waters of Smyrna, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 1,264,666 |  |  |  | 3.00 | % |  |  | 1.30 | % |  | 8/1/2031 |  | 2 five year
TN |  | 140 Technology Lane, LLC |  | The Waters of Johnson City, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 1,167,384 |  |  |  | 3.00 | % |  |  | 1.20 | % |  | 8/1/2031 |  | 2 five year
TN |  | 835 Union Street, LLC |  | The Waters of Shelbyville, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 1,334,153 |  |  |  | 3.00 | % |  |  | 1.37 | % |  | 8/1/2031 |  | 2 five year
|  | Master Lease Tennessee 2 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
TN |  | 505 North Roan, LLC |  | Agape Rehabilitation & Nursing Center, A Water’s Community LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 1,628,910 |  |  |  | 3.00 | % |  |  | 1.67 | % |  | 7/1/2031 |  | 2 five year
TN |  | 14510 Highway 79, LLC |  | Waters of McKenzie, A Rehabilitation & Nursing Center, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 1,279,858 |  |  |  | 3.00 | % |  |  | 1.31 | % |  | 7/1/2031 |  | 2 five year
TN |  | 6500 Kirby Gate Boulevard, LLC |  | Waters of Memphis, A Rehabilitation & Nursing Center, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 1,745,261 |  |  |  | 3.00 | % |  |  | 1.79 | % |  | 7/1/2031 |  | 2 five year
TN |  | 978 Highway 11 South, LLC |  | Waters of Sweetwater, A Rehabilitation & Nursing Center, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 1,745,261 |  |  |  | 3.00 | % |  |  | 1.79 | % |  | 7/1/2031 |  | 2 five year
TN |  | 2830 Highway 394, LLC |  | Waters of Bristol, A Rehabilitation & Nursing Center, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 2,327,014 |  |  |  | 3.00 | % |  |  | 2.38 | % |  | 7/1/2031 |  | 2 five year

F-30

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11. Related Party Transactions and Economic Dependence (cont.)

Lease Agreements with Related Parties (cont.)

|  |  |  |  |  |  | (1)(2) |  |  |  | (1)(2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | Related Party Ownership in Manager/Tenant/ Operator (1) (2) |  |  |  |  |  |  |  |  |  |  |  |  |  |
State |  | Lessor/ Company Subsidiary |  | Tenant/ Operator |  | Moishe Gubin/Gubin Enterprises LP |  |  | Michael Blisko/Blisko Enterprises LP |  |  | Average annual rent over life of lease |  |  | Annual Escalation |  | % of total rent |  |  | Lease maturity |  |  | Extension options
|  | Master Lease Indiana 2 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
IN |  | 8400 Clearvista Place LLC |  | The Waters of Castleton SNF, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 804,694 |  |  | Varies(3)(4) |  |  | 0.83 | % |  |  | 2029 |  |  | One 3 years and two 5 years
IN |  | 524 Anderson Road LLC |  | The Waters of Chesterfield SNF, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 423,523 |  |  | Varies(3)(4) |  |  | 0.43 | % |  |  | 2029 |  |  | One 3 years and two 5 years
IN |  | 640 West Ellsworth Street LLC |  | The Waters of Columbia City SNF, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 592,933 |  |  | Varies(3)(4) |  |  | 0.61 | % |  |  | 2029 |  |  | One 3 years and two 5 years
IN |  | 11563 West 300 South LLC |  | The Waters of Dunkirk SNF, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 324,701 |  |  | Varies(3)(4) |  |  | 0.33 | % |  |  | 2029 |  |  | One 3 years and two 5 years
IN |  | 5544 East State Boulevard LLC |  | The Waters of Fort Wayne SNF, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 543,522 |  |  | Varies(3)(4) |  |  | 0.56 | % |  |  | 2029 |  |  | One 3 years and two 5 years
IN |  | 548 South 100 West LLC |  | The Waters of Hartford City SNF, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 458,817 |  |  | Varies(3)(4) |  |  | 0.47 | % |  |  | 2029 |  |  | One 3 years and two 5 years
IN |  | 2901 West 37th Avenue LLC |  | The Waters of Hobart SNF, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 776,459 |  |  | Varies(3)(4) |  |  | 0.80 | % |  |  | 2029 |  |  | One 3 years and two 5 years
IN |  | 1500 Grant Street LLC |  | The Waters of Huntington SNF, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 599,991 |  |  | Varies(3)(4) |  |  | 0.62 | % |  |  | 2029 |  |  | One 3 years and two 5 years
IN |  | 787 North Detroit Street LLC |  | The Waters of LaGrange SNF, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 705,872 |  |  | Varies(3)(4) |  |  | 0.72 | % |  |  | 2029 |  |  | One 3 years and two 5 years
IN |  | 981 Beechwood Avenue LLC |  | The Waters of Middletown SNF, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 423,523 |  |  | Varies(3)(4) |  |  | 0.43 | % |  |  | 2029 |  |  | One 3 years and two 5 years
IN |  | 317 Blair Pike LLC |  | The Waters of Peru SNF, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 917,634 |  |  | Varies(3)(4) |  |  | 0.94 | % |  |  | 2029 |  |  | One 3 years and two 5 years
IN |  | 815 West Washington Street LLC |  | The Waters of Rockport SNF |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 423,523 |  |  | Varies(3)(4) |  |  | 0.43 | % |  |  | 2029 |  |  | One 3 years and two 5 years
IN |  | 612 East 11th Street LLC |  | The Waters of Rushville SNF |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 691,755 |  |  | Varies(3)(4) |  |  | 0.71 | % |  |  | 2029 |  |  | One 3 years and two 5 years

F-31

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11. Related Party Transactions and Economic Dependence (cont.)

Lease Agreements with Related Parties (cont.)

|  |  |  |  |  |  | (1)(2) |  |  |  | (1)(2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | Related Party Ownership in Manager/Tenant/ Operator (1) (2) |  |  |  |  |  |  |  |  |  |  |  |  |  |
State |  | Lessor/ Company Subsidiary |  | Tenant/ Operator |  | Moishe Gubin/Gubin Enterprises LP |  |  | Michael Blisko/Blisko Enterprises LP |  |  | Average annual rent over life of lease |  |  | Annual Escalation |  | % of total rent |  |  | Lease maturity |  |  | Extension options
IN |  | 505 West Wolfe Street LLC |  | The Waters of Sullivan SNF |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 656,461 |  |  | Varies(3)(4) |  |  | 0.67 | % |  |  | 2029 |  |  | One 3 years and two 5 years
IN |  | 500 East Pickwick Drive LLC |  | The Waters of Syracuse SNF |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 465,876 |  |  | Varies(3)(4) |  |  | 0.48 | % |  |  | 2029 |  |  | One 3 years and two 5 years
IN |  | 300 Fairgrounds Road LLC |  | The Waters of Tipton SNF |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 1,058,808 |  |  | Varies(3)(4) |  |  | 1.09 | % |  |  | 2029 |  |  | One 3 years and two 5 years
IN |  | 1900 Alber Street LLC |  | The Waters of Wabash SNF East |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 592,933 |  |  | Varies(3)(4) |  |  | 0.61 | % |  |  | 2029 |  |  | One 3 years and two 5 years
IN |  | 1720 Alber Street LLC |  | The Waters of Wabash SNF West |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 310,584 |  |  | Varies(3)(4) |  |  | 0.32 | % |  |  | 2029 |  |  | One 3 years and two 5 years
IN |  | 300 North Washington Street LLC |  | The Waters of Wakarusa SNF |  |  | 50.00 |  |  |  | 50.00 | % |  |  | 938,810 |  |  | Varies(3)(4) |  |  | 0.96 | % |  |  | 2029 |  |  | One 3 years and two 5 years
IN |  | 8400 Clearvista Place LLC |  | The Waters of Castleton ALF, LLC |  |  | 50.00 |  |  |  | 50.00 | % |  |  | 381,171 |  |  | Varies(3)(4) |  |  | 0.39 | % |  |  | 2029 |  |  | One 3 years and two 5 years
IN |  | 787 North Detroit Street LLC |  | The Waters of LaGrange ALF, LLC |  |  | 50.00 |  |  |  | 50.00 | % |  |  | 119,998 |  |  | Varies(3)(4) |  |  | 0.12 | % |  |  | 2029 |  |  | One 3 years and two 5 years
IN |  | 612 East 11th Street LLC |  | The Waters of Rushville ALF, LLC |  |  | 50.00 |  |  |  | 50.00 | % |  |  | 204,703 |  |  | Varies(3)(4) |  |  | 0.21 | % |  |  | 2029 |  |  | One 3 years and two 5 years
IN |  | 505 West Wolfe Street LLC |  | The Waters of Sullivan ALF, LLC |  |  | 50.00 |  |  |  | 50.00 | % |  |  | 225,879 |  |  | Varies(3)(4) |  |  | 0.23 | % |  |  | 2029 |  |  | One 3 years and two 5 years
IN |  | 300 North Washington Street LLC |  | The Waters of Wakarusa ALF, LLC |  |  | 50.00 |  |  |  | 50.00 | % |  |  | 430,582 |  |  | Varies(3)(4) |  |  | 0.44 | % |  |  | 2029 |  |  | One 3 years and two 5 years

F-32

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11. Related Party Transactions and Economic Dependence (cont.)

Lease Agreements with Related Parties (cont.)

|  |  |  |  |  |  | (1)(2) |  |  |  | (1)(2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | Related Party Ownership in Manager/Tenant/ Operator (1) (2) |  |  |  |  |  |  |  |  |  |  |  |  |  |
State |  | Lessor/ Company Subsidiary |  | Manager/ Tenant/ Operator |  | Moishe Gubin/Gubin Enterprises LP |  |  | Michael Blisko/Blisko Enterprises LP |  |  | Average Annual rent over life of lease |  |  | Annual Escalation |  |  | % of total rent |  |  | Lease maturity |  | Extension options
IL |  | 516 West Frech Street, LLC |  | Parker Rehab & Nursing Center, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 498,351 |  |  |  | Varies between $12,000 and $24,000 annually |  |  |  | 0.51 | % |  | 3/31/2031 |  | None
IN |  | 1316 North Tibbs Avenue Realty, LLC |  | Westpark A Waters Community, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 549,885 |  |  |  | 3.00 | % |  |  | 0.56 | % |  | 6/1/2024 |  | 2 five year
IL |  | Ambassador Nursing Realty, LLC |  | Ambassador Nursing and Rehabilitation Center II, LLC |  |  | 40.00 | % |  |  | 40.00 | % |  |  | 1,005,313 |  |  |  | 3.00 | % |  |  | 1.03 | % |  | 2/28/2026 |  | 2 five year
IL |  | Momence Meadows Realty, LLC |  | Momence Meadows Nursing and Rehabilitation Center, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 1,038,000 |  |  |  | None |  |  |  | 1.07 | % |  | 12/30/2025 |  | None
IL |  | Forest View Nursing Realty, LLC |  | Forest View Rehabilitation and Nursing Center, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 1,215,483 |  |  |  | 3.00 | % |  |  | 1.25 | % |  | 12/1/2024 |  | 2 five year
IL |  | Lincoln Park Holdings, LLC |  | Lakeview Rehabilitation and Nursing Center, LLC |  |  | 40.00 | % |  |  | 40.00 | % |  |  | 1,260,000 |  |  |  | None |  |  |  | 1.29 | % |  | 5/31/2031 |  | None
IL |  | Continental Nursing Realty, LLC |  | Continental Nursing and Rehabilitation Center, LLC |  |  | 40.00 | % |  |  | 40.00 | % |  |  | 1,575,348 |  |  |  | None |  |  |  | 1.62 | % |  | 3/1/2031 |  | None
IL |  | Westshire Nursing Realty, LLC |  | City View Multicare Center, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 1,788,365 |  |  |  | 3.00 | % |  |  | 1.84 | % |  | 9/1/2025 |  | 2 five year
IL |  | Belhaven Realty, LLC |  | Belhaven Nursing and Rehabilitation Center, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 2,134,570 |  |  |  | 3.00 | % |  |  | 2.19 | % |  | 2/28/2026 |  | 2 five year
IL |  | West Suburban Nursing Realty, LLC |  | West Suburban Nursing and Rehabilitation Center, LLC |  |  | 40.00 | % |  |  | 40.00 | % |  |  | 1,961,604 |  |  |  | None |  |  |  | 2.01 | % |  | 11/1/2027 |  | None
IN |  | 1585 Perry Worth Road, LLC |  | The Waters of Lebanon, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 116,678 |  |  |  | 3.00 | % |  |  | 0.12 | % |  | 6/1/2027 |  | 2 five year
IL |  | Niles Nursing Realty LLC |  | Niles Nursing & Rehabilitation Center LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 2,409,998 |  |  |  | 3.00 | % |  |  | 2.48 | % |  | 2/28/2026 |  | 2 five year
IL |  | Parkshore Estates Nursing Realty, LLC |  | Parkshore Estates Nursing and Rehabilitation Center, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 2,454,187 |  |  |  | 3.00 | % |  |  | 2.52 | % |  | 12/1/2024 |  | 2 five year
IL |  | Midway Neurological and Rehabilitation Realty, LLC |  | Midway Neurological and Rehabilitation Center, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  |  | 2,547,713 |  |  |  | 3.00 | % |  |  | 2.62 | % |  | 2/28/2026 |  | 2 five year
IL |  | Oak Lawn Nursing Realty, LLC |  | Oak Lawn Respiratory and Rehab center, LLC |  |  | 50.00 | % |  |  | 50.00 | % |  | $ | 637,092 |  |  |  | None |  |  |  | 0.65 | % |  | 6/1/2031 |  | None

F-33

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11. Related Party Transactions and Economic Dependence (cont.)

Lease Agreements with Related Parties (cont.)

(1) | The interests of the two listed related parties are not held through any commonly owned holding companies. Mr. Gubin’s interests are held directly/indirectly by Gubin Enterprises LP. Mr. Blisko’s interests are held by Blisko Enterprises LP and New York Boys Management, LLC.
(2) | Each of the tenants is a limited liability company. The percentages listed reflect the owners’ percentage ownership of the outstanding membership interests in each tenant.
(3) | For the initial two years of the lease there is no escalation, commencing with year three the escalation will be 22.3%, year four the escalation will be 22.8% and for years 5 through maturity the annual escalation will be 2%.
(4) | The tenants have an option to buy the properties after 6 years for $127 million.

Guarantees from Related Parties

As of December 31, 2023 and 2022, Mr. Gubin and Mr. Blisko were not parties to any guarantees of any debt of the Company and its subsidiaries.

Balances with Related Parties

Schedule of Balances with Related Parties

|  | 2023 |  |  | 2022 |
|  | December 31, |
|  | 2023 |  |  | 2022 |
|  | (amounts in $000s) |
Straight-line rent receivable |  | $ | 18,921 |  |  | $ | 11,591 |
Tenant portion of replacement reserve |  | $ | 9,683 |  |  | $ | 10,227 |
Notes receivable |  | $ | 7,075 |  |  | $ | 7,816 |

Payments from Related Parties

Schedule of Payments From and to Related Parties

|  | 2023 |  |  | 2022 |
|  | Years ended December 31, |
|  | 2023 |  |  | 2022 |
|  | (amounts in $000s) |
Rental income received from related parties |  | $ | 56,988 |  |  | $ | 54,386 |

F-34

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11. Related Party Transactions and Economic Dependence (cont.)

Other Related Party Relationships

On December 31, 2023 and 2022, the Company had approximately $1.2 million and $4.7 million, respectively, on deposit with OptimumBank. Mr. Gubin is the Chairman of the Board of OptimumBank.

On June 14, 2022, the Company purchased a 7% note receivable with an outstanding balance of $8 million from Infinity Healthcare Management, a company controlled by Mr. Blisko and Mr. Gubin. The note is interest only with a balloon payment due July 1, 2024. The note receivable is due from certain unaffiliated tenants.

NOTE 12. Income Taxes

The Company elected and qualified to be taxed as a REIT for federal income tax purposes.

As a REIT, the Company generally is not subject to federal income tax on its net taxable income that it distributes currently to its stockholders. Under the Code, REITs are subject to numerous organizational and operational requirements, including a requirement that they distribute each year at least 90% of their REIT taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gains. If the Company fails to qualify for taxation as a REIT in any taxable year and does not qualify for certain statutory relief provisions, the Company’s income for that year will be taxed at regular corporate rates, and the Company would be disqualified from taxation as a REIT for the four taxable years following the year during which the Company ceased to qualify as a REIT. Even if the Company qualifies as a REIT for federal income tax purposes, it may still be subject to state and local taxes on its income and assets and to federal income and excise taxes on its undistributed income.

The Company follows accounting guidance relating to accounting for uncertainty in income taxes, which sets out a consistent framework to determine the appropriate level of tax reserves to maintain for uncertain tax positions.

A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than fifty percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-than-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment. Management is not aware of any uncertain tax positions that would have material effect on the Company’s consolidated financial statements.

F-35

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13. Fair Value of Financial Instruments

The Company is required to disclose the fair value of financials instruments for which it is practicable to estimate that value. The fair value of short-term financial instruments such as cash and cash equivalents, restricted cash, accounts payable and accrued expenses approximate their carrying value on the consolidated balance sheets due to their short-term nature. The Company’s foreclosed real estate is recorded at fair value on a non-recurring basis and is included in real estate investments on the consolidated balance sheets. Estimates of fair value are determined based on a variety of information, including the use of available appraisals, estimates of market values by licensed appraisers or local real estate brokers and knowledge and experience of management. The fair values of the Company’s remaining financial instruments that are not reported at fair value on the consolidated balance sheets are reported below:

Schedule of Fair Value on the Consolidated Balance Sheets

|  |  |  |  | December 31, |
|  |  |  |  | 2023 |  |  | 2022 |
(amounts in $000s) |  | Level |  |  | Carrying Amount |  |  | Fair Value |  |  | Carrying Amount |  |  | Fair Value |
Notes payable, other debt, and bonds |  | 3 |  |  | $ | 539,145 |  |  |  | 533,055 |  |  | $ | 455,415 |  |  |  | 454,523 |
Notes receivable |  | 3 |  |  | $ | 17,706 |  |  |  | 17,460 |  |  | $ | 19,419 |  |  |  | 18,479 |

The fair value of the notes payable, other debt, bonds and notes receivable are estimated using a discounted cash flow analysis.

NOTE 14. Subsequent Events

On February 8 2024, the BVI Company issued additional Series D Bonds with a par value of NIS 100.0 million and raised a net amount of $26.7 million (NIS 98.2 million). The Bonds were issued at a price of 106.3%.

On February 20, 2024 the Company entered into a new, replacement master lease for the properties included in the Indiana acquisition completed in August of 2023. The tenant remains a group of tenants affiliated with two of the Company’s directors, Moishe Gubin and Michael Blisko. The new master lease has an initial term of ten years and is subject to 2 five-year extensions. The initial annual base rent for the properties is $14.5 million dollars and is subject to annual increases of 3%. In connection with the new master lease, the existing purchase option held by the tenant, which was granted by the prior owner of the properties, of $127.0 million was terminated. Consideration for the termination of the purchase option and inducement for entering into the new, replacement master lease was $18.0 million paid to the tenants. The $18.0 million payment was funded by cash and the proceeds from the additional Series D Bond issuance in February 2024.

NOTE 15. Financing Income (Expenses), Net

Schedule of Financing Income (Expenses), Net

|  | 2023 |  |  | 2022 |
|  | Year ended December 31, |
|  | 2023 |  |  | 2022 |
|  | (Amounts in $000’s) |
Financing expenses |  |  |  |  |  |  |  |
Interest expenses with respect to bonds |  | $ | (6,669 | ) |  | $ | (7,062 | )
Interest expenses on loans from banks and others |  |  | (18,693 | ) |  |  | (14,071 | )
Interest expenses with respect to leases |  |  | (73 | ) |  |  | (80 | )
Other financing expenses (including related parties), net |  |  | (275 | ) |  |  | (95 | )
Total financing expenses |  | $ | (25,710 | ) |  | $ | (21,308 | )
Financing income |  | $ | 1,267 |  |  | $ | 801 |
Interest Expense, Net |  | $ | (24,443 | ) |  | $ | (20,507 | )

F-36

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

STRAWBERRY FIELDS REIT, Inc. and Subsidiaries

Schedule III

Real Estate and Accumulated Depreciation

Property |  | Location |  |  | Property |  |  | Land |  |  | lease assets |  |  | SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost of Furniture Fixtures And Equipment |  |  | Land |  |  | lease assets |  |  | SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Gross Amount Of Furniture Fixtures And Equipment |  |  | Total |  |  | Depreciation |  |  | Construction |  |  | Acquired |
|  |  |  |  |  |  |  | Initial Cost to Company |  |  | Gross Amount at Which Carried at Close of Period |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  | Building and |  |  |  |  |  |  |  |  | Building and |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  | Improvements |  |  | Furniture, |  |  |  |  |  | Improvements |  |  | Furniture, |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  | and |  |  | fixtures, |  |  |  |  |  | and |  |  | fixtures, |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  | Type of |  |  |  |  |  | Intangible |  |  | and |  |  |  |  |  | Intangible |  |  | and |  |  |  |  |  | Accumulated |  |  | Date of |  |  | Date |
Property |  | Location |  |  | Property |  |  | Land |  |  | lease assets |  |  | equipment |  |  | Land |  |  | lease assets |  |  | equipment |  |  | Total |  |  | Depreciation |  |  | Construction |  |  | Acquired |
1020 West Vine St, LLC |  | IN |  |  | SNF |  |  | $ | 73,704 |  |  |  | 5,373,301 |  |  |  | 552,994 |  |  | $ | 73,704 |  |  |  | 5,373,301 |  |  |  | 552,994 |  |  |  | 5,999,999 |  |  |  | 2,014,053 |  |  |  | 1968 |  |  |  | 5/1/2015 |
12803 Lenover Street Realty, LLC |  | IN |  |  | SNF |  |  |  | 749,235 |  |  |  | 11,715,266 |  |  |  | 707,200 |  |  |  | 749,235 |  |  |  | 11,715,266 |  |  |  | 707,200 |  |  |  | 13,171,701 |  |  |  | 5,261,743 |  |  |  | 1898 |  |  |  | 12/28/2012 |
1600 East Liberty Street Realty, LLC |  | IN |  |  | SNF |  |  |  | 226,684 |  |  |  | 8,613,047 |  |  |  | 684,202 |  |  |  | 226,684 |  |  |  | 8,613,047 |  |  |  | 684,202 |  |  |  | 9,523,933 |  |  |  | 3,670,929 |  |  |  | 1973 |  |  |  | 12/28/2012 |
1601 Hospital Dr Realty, LLC |  | IN |  |  | SNF |  |  |  | 374,029 |  |  |  | 6,536,475 |  |  |  | 574,959 |  |  |  | 374,029 |  |  |  | 6,536,475 |  |  |  | 574,959 |  |  |  | 7,485,463 |  |  |  | 2,809,600 |  |  |  | 1981 |  |  |  | 12/28/2012 |
2055 Heritage Dr Realty, LLC |  | IN |  |  | SNF |  |  |  | 397,029 |  |  |  | 6,567,012 |  |  |  | 592,208 |  |  |  | 397,029 |  |  |  | 6,567,012 |  |  |  | 592,208 |  |  |  | 7,556,249 |  |  |  | 2,960,970 |  |  |  | 1978 |  |  |  | 12/28/2012 |
3895 Keystone Ave Realty, LLC |  | IN |  |  | SNF |  |  |  | 905,829 |  |  |  | 5,401,715 |  |  |  | 465,715 |  |  |  | 905,829 |  |  |  | 5,401,715 |  |  |  | 465,715 |  |  |  | 6,773,259 |  |  |  | 2,354,758 |  |  |  | 1985 |  |  |  | 12/28/2012 |
405 Rio Vista Lane Realty, LLC |  | IN |  |  | SNF |  |  |  | 851,889 |  |  |  | 3,190,949 |  |  |  | 277,894 |  |  |  | 851,889 |  |  |  | 3,190,949 |  |  |  | 277,894 |  |  |  | 4,320,732 |  |  |  | 1,845,377 |  |  |  | 1965 |  |  |  | 12/28/2012 |
950 Cross Ave Realty, LLC |  | IN |  |  | SNF |  |  |  | 1,055,229 |  |  |  | 8,223,435 |  |  |  | 793,445 |  |  |  | 1,055,229 |  |  |  | 8,223,435 |  |  |  | 793,445 |  |  |  | 10,072,109 |  |  |  | 3,733,139 |  |  |  | 1972 |  |  |  | 12/28/2012 |
958 East Highway 46 Realty, LLC |  | IN |  |  | SNF |  |  |  | 1,424,142 |  |  |  | 12,353,018 |  |  |  | 494,464 |  |  |  | 1,424,142 |  |  |  | 12,353,018 |  |  |  | 494,464 |  |  |  | 14,271,624 |  |  |  | 4,798,322 |  |  |  | 1975 |  |  |  | 12/28/2012 |
1350 North Todd St, LLC |  | IN |  |  | SNF |  |  |  | 76,959 |  |  |  | 3,151,485 |  |  |  | 371,556 |  |  |  | 76,959 |  |  |  | 3,151,485 |  |  |  | 371,556 |  |  |  | 3,600,000 |  |  |  | 1,876,239 |  |  |  | 1976 |  |  |  | 12/28/2012 |
1712 Leland Drive Realty, LLC |  | IN |  |  | SNF |  |  |  | 158,995 |  |  |  | 5,399,959 |  |  |  | 441,046 |  |  |  | 158,995 |  |  |  | 5,399,959 |  |  |  | 441,046 |  |  |  | 6,000,000 |  |  |  | 2,517,249 |  |  |  | 1977 |  |  |  | 5/1/2015 |
253 Bradington Drive, LLC |  | IL |  |  | SNF |  |  |  | 533,575 |  |  |  | 6,030,915 |  |  |  | 535,510 |  |  |  | 533,575 |  |  |  | 6,030,915 |  |  |  | 535,510 |  |  |  | 7,100,000 |  |  |  | 3,288,680 |  |  |  | 1993 |  |  |  | 4/1/2011 |
1621 Coit Road Realty, LLC |  | TX |  |  | SNF |  |  |  | 1,466,005 |  |  |  | 6,428,360 |  |  |  | 771,979 |  |  |  | 1,466,005 |  |  |  | 6,428,360 |  |  |  | 771,979 |  |  |  | 8,666,344 |  |  |  | 3,628,307 |  |  |  | 1977 |  |  |  | 7/1/2015 |
8200 National Ave Realty, LLC |  | OK |  |  | SNF/LTACH |  |  |  | 1,941,555 |  |  |  | 8,519,002 |  |  |  | 781,484 |  |  |  | 1,941,555 |  |  |  | 8,519,002 |  |  |  | 781,484 |  |  |  | 11,242,041 |  |  |  | 3,194,366 |  |  |  | 1989 |  |  |  | 7/1/2015 |
2301 North Oregon Realty, LLC |  | TX |  |  | SNF/LTACH |  |  |  | 460,109 |  |  |  | 9,224,188 |  |  |  | 1,017,263 |  |  |  | 460,109 |  |  |  | 9,224,188 |  |  |  | 1,017,263 |  |  |  | 10,701,560 |  |  |  | 3,841,287 |  |  |  | 1970 |  |  |  | 7/1/2015 |
5601 Plum Creek Drive Realty, LLC |  | TX |  |  | SNF/LTACH |  |  |  | 1,110,560 |  |  |  | 8,585,477 |  |  |  | 694,019 |  |  |  | 1,110,560 |  |  |  | 8,585,477 |  |  |  | 694,019 |  |  |  | 10,390,056 |  |  |  | 3,783,211 |  |  |  | 1985 |  |  |  | 7/1/2015 |
107 South Lincoln Street LLC |  | IL |  |  | SNF |  |  |  | 69,401 |  |  |  | 3,401,111 |  |  |  | 488,487 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1974 |  |  |  | 11/26/2014 |
1623 West Delmar Ave, LLC |  | IL |  |  | SNF |  |  |  | 369,094 |  |  |  | 2,188,077 |  |  |  | 257,828 |  |  |  | 369,094 |  |  |  | 2,188,077 |  |  |  | 257,828 |  |  |  | 2,814,999 |  |  |  | 1,220,542 |  |  |  | 1962 |  |  |  | 11/26/2014 |
393 Edwardsville Road LLC |  | IL |  |  | SNF |  |  |  | 251,415 |  |  |  | 3,426,747 |  |  |  | 387,838 |  |  |  | 251,415 |  |  |  | 3,426,747 |  |  |  | 387,838 |  |  |  | 4,066,000 |  |  |  | 1,816,879 |  |  |  | 1971 |  |  |  | 11/26/2014 |
911 South 3rd St Realty LLC |  | MI |  |  | SNF |  |  |  | 289,936 |  |  |  | 4,022,959 |  |  |  | 387,105 |  |  |  | 289,936 |  |  |  | 4,022,959 |  |  |  | 387,105 |  |  |  | 4,700,000 |  |  |  | 1,911,642 |  |  |  | 1969 |  |  |  | 5/22/2015 |
516 West Frech St, LLC |  | IL |  |  | SNF |  |  |  | 85,518 |  |  |  | 1,697,527 |  |  |  | 266,955 |  |  |  | 85,518 |  |  |  | 1,697,527 |  |  |  | 266,955 |  |  |  | 2,050,000 |  |  |  | 1,720,303 |  |  |  | 1974 |  |  |  | 9/28/2011 |
1316 North Tibbs Avenue Realty LLC |  | IN |  |  | SNF |  |  |  | 323,226 |  |  |  | 2,940,959 |  |  |  | 335,816 |  |  |  | 323,226 |  |  |  | 2,940,959 |  |  |  | 335,816 |  |  |  | 3,600,001 |  |  |  | 1,588,690 |  |  |  | 1976 |  |  |  | 6/1/2014 |

F-37

Property |  | Location |  |  | Property |  |  | Land |  |  | lease assets |  |  | SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost of Furniture Fixtures And Equipment |  |  | Land |  |  | lease assets |  |  | SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Gross Amount Of Furniture Fixtures And Equipment |  |  | Total |  |  | Depreciation |  |  | Construction |  |  | Acquired |
|  |  |  |  |  |  |  | Initial Cost to Company |  |  | Gross Amount at Which Carried at Close of Period |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  | Building and |  |  |  |  |  |  |  |  | Building and |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  | Improvements |  |  | Furniture, |  |  |  |  |  | Improvements |  |  | Furniture, |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  | and |  |  | fixtures, |  |  |  |  |  | and |  |  | fixtures, |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  | Type of |  |  |  |  |  | Intangible |  |  | and |  |  |  |  |  | Intangible |  |  | and |  |  |  |  |  | Accumulated |  |  | Date of |  |  | Date |
Property |  | Location |  |  | Property |  |  | Land |  |  | lease assets |  |  | equipment |  |  | Land |  |  | lease assets |  |  | equipment |  |  | Total |  |  | Depreciation |  |  | Construction |  |  | Acquired |
3090 Five Points Hartford Realty, LLC |  | OH |  |  | SNF |  |  |  | 114,614 |  |  |  | 1,348,246 |  |  |  | 155,890 |  |  |  | 114,614 |  |  |  | 1,348,246 |  |  |  | 155,890 |  |  |  | 1,618,750 |  |  |  | 1,286,468 |  |  |  | 1950 |  |  |  | 8/1/2015 |
3121 Glanzman Rd Realty, LLC |  | OH |  |  | SNF |  |  |  | 211,543 |  |  |  | 2,977,780 |  |  |  | 329,427 |  |  |  | 211,543 |  |  |  | 2,977,780 |  |  |  | 329,427 |  |  |  | 3,518,750 |  |  |  | 1,802,967 |  |  |  | 1959 |  |  |  | 8/1/2015 |
620 West Strub Rd Realty, LLC |  | OH |  |  | SNF |  |  |  | 140,266 |  |  |  | 2,785,910 |  |  |  | 192,574 |  |  |  | 140,266 |  |  |  | 2,785,910 |  |  |  | 192,574 |  |  |  | 3,118,750 |  |  |  | 1,655,313 |  |  |  | 1978 |  |  |  | 8/1/2015 |
4250 Sodom Hutchings Road Realty, LLC |  | OH |  |  | SNF |  |  |  | 41,548 |  |  |  | 581,176 |  |  |  | 96,026 |  |  |  | 41,548 |  |  |  | 581,176 |  |  |  | 96,026 |  |  |  | 718,750 |  |  |  | 645,233 |  |  |  | 1975 |  |  |  | 8/1/2015 |
Ambassador Nursing Realty, LLC |  | IL |  |  | SNF |  |  |  | 2,344,176 |  |  |  | 5,891,870 |  |  |  | 991,190 |  |  |  | 2,344,176 |  |  |  | 5,891,870 |  |  |  | 991,190 |  |  |  | 9,227,236 |  |  |  | 4,030,513 |  |  |  | 1976 |  |  |  | 4/1/2008 |
Momence Meadows Realty, LLC |  | IL |  |  | SNF |  |  |  | 185,405 |  |  |  | 5,861,271 |  |  |  | 703,325 |  |  |  | 185,405 |  |  |  | 5,861,271 |  |  |  | 703,325 |  |  |  | 6,750,001 |  |  |  | 3,888,263 |  |  |  | 1974 |  |  |  | 8/2/2006 |
Oak Lawn Nursing Realty, LLC |  | IL |  |  | SNF |  |  |  | 808,226 |  |  |  | 3,388,277 |  |  |  | 403,497 |  |  |  | 808,226 |  |  |  | 3,388,277 |  |  |  | 403,497 |  |  |  | 4,600,000 |  |  |  | 2,506,459 |  |  |  | 1964 |  |  |  | 4/30/2012 |
Forest View Nursing Realty, LLC |  | IL |  |  | SNF |  |  |  | 392,245 |  |  |  | 6,288,479 |  |  |  | 819,276 |  |  |  | 392,245 |  |  |  | 6,288,479 |  |  |  | 819,276 |  |  |  | 7,500,000 |  |  |  | 2,850,300 |  |  |  | 1975 |  |  |  | 11/25/2013 |
Lincoln Park Holdings, LLC |  | IL |  |  | SNF |  |  |  | 4,322,851 |  |  |  | 6,815,753 |  |  |  | 861,396 |  |  |  | 4,322,851 |  |  |  | 6,815,753 |  |  |  | 861,396 |  |  |  | 12,000,000 |  |  |  | 2,994,356 |  |  |  | 1973 |  |  |  | 11/26/2014 |
Continental Realty, LLC |  | IL |  |  | SNF |  |  |  | 3,392,263 |  |  |  | 6,659,835 |  |  |  | 720,666 |  |  |  | 3,392,263 |  |  |  | 6,659,835 |  |  |  | 720,666 |  |  |  | 10,772,764 |  |  |  | 4,960,374 |  |  |  | 1976 |  |  |  | 4/2/2008 |
Westshire Realty, LLC |  | IL |  |  | SNF |  |  |  | 356,185 |  |  |  | 22,165,811 |  |  |  | 2,253,929 |  |  |  | 356,185 |  |  |  | 22,165,811 |  |  |  | 2,253,929 |  |  |  | 24,775,925 |  |  |  | 10,001,998 |  |  |  | 1974 |  |  |  | 7/26/2013 |
Belhaven Realty, LLC |  | IL |  |  | SNF |  |  |  | 2,298,858 |  |  |  | 7,026,385 |  |  |  | 924,756 |  |  |  | 2,298,858 |  |  |  | 7,026,385 |  |  |  | 924,756 |  |  |  | 10,249,999 |  |  |  | 6,144,461 |  |  |  | 1985 |  |  |  | 6/1/2006 |
West Suburban Nursing Realty, LLC |  | IL |  |  | SNF |  |  |  | 1,061,095 |  |  |  | 11,501,970 |  |  |  | 1,336,935 |  |  |  | 1,061,095 |  |  |  | 11,501,970 |  |  |  | 1,336,935 |  |  |  | 13,900,000 |  |  |  | 6,874,212 |  |  |  | 1975 |  |  |  | 11/2/2007 |
Niles Nursing Realty, LLC |  | IL |  |  | SNF |  |  |  | 3,115,279 |  |  |  | 21,168,943 |  |  |  | 1,715,779 |  |  |  | 3,115,279 |  |  |  | 21,168,943 |  |  |  | 1,715,779 |  |  |  | 26,000,001 |  |  |  | 9,744,838 |  |  |  | 1974 |  |  |  | 8/25/2012 |
Parkshore Estates Nursing Realty, LLC |  | IL |  |  | SNF |  |  |  | 450,232 |  |  |  | 18,186,687 |  |  |  | 1,747,280 |  |  |  | 450,232 |  |  |  | 18,186,687 |  |  |  | 1,747,280 |  |  |  | 20,384,199 |  |  |  | 6,931,505 |  |  |  | 1975 |  |  |  | 2/5/2015 |
Midway Neurological and Rehab Realty, LLC |  | IL |  |  | SNF |  |  |  | 1,436,736 |  |  |  | 15,856,182 |  |  |  | 1,707,081 |  |  |  | 1,436,736 |  |  |  | 15,856,182 |  |  |  | 1,707,081 |  |  |  | 18,999,999 |  |  |  | 11,700,105 |  |  |  | 1972 |  |  |  | 4/1/2005 |
115 Woodlawn Drive, LLC |  | TN |  |  | SNF |  |  |  | 1,130,269 |  |  |  | 9,411,746 |  |  |  | 930,933 |  |  |  | 1,130,269 |  |  |  | 9,411,746 |  |  |  | 930,933 |  |  |  | 11,472,949 |  |  |  | 3,391,512 |  |  |  | 1995 |  |  |  | 8/1/2016 |
146 Buck Creek Road, LLC |  | TN |  |  | SNF |  |  |  | 829,555 |  |  |  | 6,907,704 |  |  |  | 683,254 |  |  |  | 829,555 |  |  |  | 6,907,704 |  |  |  | 683,254 |  |  |  | 8,420,513 |  |  |  | 2,489,183 |  |  |  | 1997 |  |  |  | 8/1/2016 |
704 5th Avenue East, LLC |  | TN |  |  | SNF |  |  |  | 684,383 |  |  |  | 5,698,856 |  |  |  | 563,684 |  |  |  | 684,383 |  |  |  | 5,698,856 |  |  |  | 563,684 |  |  |  | 6,946,923 |  |  |  | 2,053,576 |  |  |  | 1964 |  |  |  | 8/1/2016 |
2501 River Road, LLC |  | TN |  |  | SNF |  |  |  | 829,555 |  |  |  | 6,907,704 |  |  |  | 683,254 |  |  |  | 829,555 |  |  |  | 6,907,704 |  |  |  | 683,254 |  |  |  | 8,420,513 |  |  |  | 2,489,183 |  |  |  | 1964 |  |  |  | 8/1/2016 |
202 Enon Springs East, LLC |  | TN |  |  | SNF |  |  |  | 943,619 |  |  |  | 7,857,513 |  |  |  | 777,201 |  |  |  | 943,619 |  |  |  | 7,857,513 |  |  |  | 777,201 |  |  |  | 9,578,333 |  |  |  | 2,831,446 |  |  |  | 1974 |  |  |  | 8/1/2016 |
140 Technology Lane, LLC |  | TN |  |  | SNF |  |  |  | 871,033 |  |  |  | 7,253,089 |  |  |  | 717,416 |  |  |  | 871,033 |  |  |  | 7,253,089 |  |  |  | 717,416 |  |  |  | 8,841,538 |  |  |  | 2,613,643 |  |  |  | 2007 |  |  |  | 8/1/2016 |
835 Union Street, LLC |  | TN |  |  | SNF |  |  |  | 995,467 |  |  |  | 8,289,244 |  |  |  | 819,904 |  |  |  | 995,467 |  |  |  | 8,289,244 |  |  |  | 819,904 |  |  |  | 10,104,615 |  |  |  | 2,987,020 |  |  |  | 1962 |  |  |  | 8/1/2016 |
308 West Maple Avenue, LLC |  | KY |  |  | SNF |  |  |  | 995,467 |  |  |  | 8,289,244 |  |  |  | 819,904 |  |  |  | 995,467 |  |  |  | 8,289,244 |  |  |  | 819,904 |  |  |  | 10,104,615 |  |  |  | 2,987,020 |  |  |  | 1970 |  |  |  | 8/1/2016 |
Big H2O - Land Rising Sun |  | IN |  |  |  |  |  |  | 772,847 |  |  |  | - |  |  |  | - |  |  |  | 772,847 |  |  |  | - |  |  |  | - |  |  |  | 772,847 |  |  |  | - |  |  |  |  |  |  |  | 12/1/2012 |
1585 Perry Worth, LLC |  | IN |  |  | SNF |  |  |  | 98,516 |  |  |  | 820,342 |  |  |  | 81,142 |  |  |  | 98,516 |  |  |  | 820,342 |  |  |  | 81,142 |  |  |  | 1,000,000 |  |  |  | 252,175 |  |  |  | 1967 |  |  |  | 7/17/2017 |
1155 Eastern Parkway, LLC |  | KY |  |  | SNF |  |  |  | 1,147,712 |  |  |  | 18,894,131 |  |  |  | 1,708,157 |  |  |  | 1,147,712 |  |  |  | 18,894,131 |  |  |  | 1,708,157 |  |  |  | 21,750,000 |  |  |  | 5,314,614 |  |  |  | 1973 |  |  |  | 9/1/2017 |
1015 Magazine Street, LLC |  | KY |  |  | SNF |  |  |  | 2,750,000 |  |  |  | 3,060,000 |  |  |  | 690,000 |  |  |  | 2,750,000 |  |  |  | 3,060,000 |  |  |  | 690,000 |  |  |  | 6,500,000 |  |  |  | 3,067,130 |  |  |  | 1981 |  |  |  | 5/1/2018 |
5301 Wheeler Avenue, LLC |  | AR |  |  | SNF |  |  |  | 400,000 |  |  |  | 3,147,874 |  |  |  | 877,500 |  |  |  | 400,000 |  |  |  | 3,147,874 |  |  |  | 877,500 |  |  |  | 4,425,374 |  |  |  | 2,114,491 |  |  |  | 1967 |  |  |  | 8/29/2018 |
414 Massey Avenue, LLC |  | AR |  |  | SNF |  |  |  | 125,000 |  |  |  | 845,359 |  |  |  | 240,000 |  |  |  | 125,000 |  |  |  | 845,359 |  |  |  | 240,000 |  |  |  | 1,210,359 |  |  |  | 588,788 |  |  |  | 1994 |  |  |  | 8/29/2018 |
706 Oak Grove Street, LLC |  | AR |  |  | SNF |  |  |  | 300,000 |  |  |  | 2,641,399 |  |  |  | 727,500 |  |  |  | 300,000 |  |  |  | 2,641,399 |  |  |  | 727,500 |  |  |  | 3,668,899 |  |  |  | 1,652,599 |  |  |  | 1965 |  |  |  | 8/29/2018 |
8701 Riley Dr., LLC |  | AR |  |  | SNF |  |  |  | 950,000 |  |  |  | 3,295,319 |  |  |  | 1,050,000 |  |  |  | 950,000 |  |  |  | 3,295,319 |  |  |  | 1,050,000 |  |  |  | 5,295,319 |  |  |  | 2,924,477 |  |  |  | 1979 |  |  |  | 8/29/2018 |
1516 Cumberland Street, LLC |  | AR |  |  | SNF |  |  |  | 325,000 |  |  |  | 3,313,843 |  |  |  | 900,000 |  |  |  | 325,000 |  |  |  | 3,313,843 |  |  |  | 900,000 |  |  |  | 4,538,843 |  |  |  | 1,830,482 |  |  |  | 1971 |  |  |  | 8/29/2018 |
5720 West Markham Street, LLC |  | AR |  |  | SNF |  |  |  | 600,000 |  |  |  | 4,069,851 |  |  |  | 1,155,000 |  |  |  | 600,000 |  |  |  | 4,069,851 |  |  |  | 1,155,000 |  |  |  | 5,824,851 |  |  |  | 1,893,030 |  |  |  | 1973 |  |  |  | 8/29/2018 |
2501 John Ashley Dr.,LLC |  | AR |  |  | SNF |  |  |  | 550,000 |  |  |  | 3,695,319 |  |  |  | 1,050,000 |  |  |  | 550,000 |  |  |  | 3,695,319 |  |  |  | 1,050,000 |  |  |  | 5,295,319 |  |  |  | 3,110,291 |  |  |  | 1969 |  |  |  | 8/29/2018 |
1513 S. Dixieland Road, LLC |  | AR |  |  | SNF |  |  |  | 275,000 |  |  |  | 3,060,608 |  |  |  | 825,000 |  |  |  | 275,000 |  |  |  | 3,060,608 |  |  |  | 825,000 |  |  |  | 4,160,608 |  |  |  | 1,786,912 |  |  |  | 1968 |  |  |  | 8/29/2018 |
826 North Street, Stamps, LLC |  | AR |  |  | SNF |  |  |  | 225,000 |  |  |  | 2,625,428 |  |  |  | 705,000 |  |  |  | 225,000 |  |  |  | 2,625,428 |  |  |  | 705,000 |  |  |  | 3,555,428 |  |  |  | 1,493,959 |  |  |  | 1971 |  |  |  | 8/29/2018 |
900 Gagel Avenue, LLC |  | KY |  |  | SNF |  |  |  | 1,250,000 |  |  |  | 2,390,000 |  |  |  | 360,000 |  |  |  | 1,250,000 |  |  |  | 2,390,000 |  |  |  | 360,000 |  |  |  | 4,000,000 |  |  |  | 1,560,890 |  |  |  | 1970 |  |  |  | 8/30/2018 |
120 Life Care Way, LLC |  | KY |  |  | SNF |  |  |  | 200,000 |  |  |  | 5,863,133 |  |  |  | 750,000 |  |  |  | 200,000 |  |  |  | 5,863,133 |  |  |  | 750,000 |  |  |  | 6,813,133 |  |  |  | 2,040,178 |  |  |  | 1974 |  |  |  | 2/19/2019 |
1033 North Highway 11, LLC |  | KY |  |  | SNF |  |  |  | 450,000 |  |  |  | 5,976,921 |  |  |  | 795,000 |  |  |  | 450,000 |  |  |  | 5,976,921 |  |  |  | 795,000 |  |  |  | 7,221,921 |  |  |  | 1,997,941 |  |  |  | 1978 |  |  |  | 2/19/2019 |
945 West Russell Street, LLC |  | KY |  |  | SNF |  |  |  | 350,000 |  |  |  | 6,076,921 |  |  |  | 795,000 |  |  |  | 350,000 |  |  |  | 6,076,921 |  |  |  | 795,000 |  |  |  | 7,221,921 |  |  |  | 1,843,841 |  |  |  | 1979 |  |  |  | 2/19/2019 |
9209 Dollarway Road, LLC |  | AR |  |  | SNF |  |  |  | 500,000 |  |  |  | 5,450,000 |  |  |  | 900,000 |  |  |  | 500,000 |  |  |  | 5,450,000 |  |  |  | 900,000 |  |  |  | 6,850,000 |  |  |  | 2,611,255 |  |  |  | 2001 |  |  |  | 3/27/2019 |

F-38

Property |  | Location |  |  | Property |  |  | Land |  |  | lease assets |  |  | SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Initial Cost of Furniture Fixtures And Equipment |  |  | Land |  |  | lease assets |  |  | SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation, Gross Amount Of Furniture Fixtures And Equipment |  |  | Total |  |  | Depreciation |  |  | Construction |  |  | Acquired |
|  |  |  |  |  |  |  | Initial Cost to Company |  |  | Gross Amount at Which Carried at Close of Period |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  | Building and |  |  |  |  |  |  |  |  | Building and |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  | Improvements |  |  | Furniture, |  |  |  |  |  | Improvements |  |  | Furniture, |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  | and |  |  | fixtures, |  |  |  |  |  | and |  |  | fixtures, |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  | Type of |  |  |  |  |  | Intangible |  |  | and |  |  |  |  |  | Intangible |  |  | and |  |  |  |  |  | Accumulated |  |  | Date of |  |  | Date |
Property |  | Location |  |  | Property |  |  | Land |  |  | lease assets |  |  | equipment |  |  | Land |  |  | lease assets |  |  | equipment |  |  | Total |  |  | Depreciation |  |  | Construction |  |  | Acquired |
727 North 17th St, LLC 3523 Wickenhauser, LLC |  | IL |  |  | SNF |  |  |  | 613,116 |  |  |  | 3,856,645 |  |  |  | 663,640 |  |  |  | 613,116 |  |  |  | 3,856,645 |  |  |  | 663,640 |  |  |  | 5,133,401 |  |  |  | 1,494,310 |  |  |  | 1969, 1971 |  |  |  | 1/1/2019 |
326 Lindley Lane, LLC |  | AR |  |  | SNF |  |  |  | 250,000 |  |  |  | 2,917,353 |  |  |  | 720,000 |  |  |  | 250,000 |  |  |  | 2,917,353 |  |  |  | 720,000 |  |  |  | 3,887,353 |  |  |  | 1,393,649 |  |  |  | 2001 |  |  |  | 4/10/2019 |
2821 West Dixon Road, LLC |  | AR |  |  | SNF |  |  |  | 400,000 |  |  |  | 4,817,873 |  |  |  | 354,000 |  |  |  | 400,000 |  |  |  | 4,817,873 |  |  |  | 354,000 |  |  |  | 5,571,873 |  |  |  | 2,232,328 |  |  |  | 1950 |  |  |  | 4/10/2019 |
552 Golf Links Road, LLC |  | AR |  |  | SNF |  |  |  | 500,000 |  |  |  | 3,511,981 |  |  |  | 912,000 |  |  |  | 500,000 |  |  |  | 3,511,981 |  |  |  | 912,000 |  |  |  | 4,923,981 |  |  |  | 1,804,188 |  |  |  | 1978 |  |  |  | 4/10/2019 |
9300 Ballard Road, LLC |  | IL |  |  | SNF |  |  |  | 285,000 |  |  |  | 12,467,584 |  |  |  | 1,470,053 |  |  |  | 285,000 |  |  |  | 12,467,584 |  |  |  | 1,391,952 |  |  |  | 14,144,536 |  |  |  | 4,008,960 |  |  |  | 1974 |  |  |  | 6/28/2019 |
Land in Covington |  | KY |  |  | N/A |  |  |  | 94,922 |  |  |  | - |  |  |  | - |  |  |  | 94,922 |  |  |  | - |  |  |  | - |  |  |  | 94,922 |  |  |  | - |  |  |  | N/A |  |  |  | 11/6/2015 |
2400 Chateau Drive Realty, LLC |  | IN |  |  | SNF |  |  |  | 327,804 |  |  |  | 2,538,755 |  |  |  | 283,441 |  |  |  | 327,804 |  |  |  | 2,538,755 |  |  |  | 283,441 |  |  |  | 3,150,000 |  |  |  | 748,392 |  |  |  | 1972 |  |  |  | 11/13/2019 |
203 Bruce Court, LLC |  | KY |  |  | SNF |  |  |  | 150,000 |  |  |  | 3,755,896 |  |  |  | 477,000 |  |  |  | 150,000 |  |  |  | 3,755,896 |  |  |  | 477,000 |  |  |  | 4,382,896 |  |  |  | 1,354,433 |  |  |  | 1972 |  |  |  | 6/1/2020 |
4343 Kennedy Drive LLC |  | IL |  |  | SNF |  |  |  | 1,650,000 |  |  |  | 1,615,000 |  |  |  | 735,000 |  |  |  | 1,650,000 |  |  |  | 1,615,000 |  |  |  | 735,000 |  |  |  | 4,000,000 |  |  |  | 895,354 |  |  |  | 2009 |  |  |  | 10/1/2020 |
505 North Roan Street, LLC |  | TN |  |  | SNF |  |  |  | 650,000 |  |  |  | 10,171,216 |  |  |  | 504,000 |  |  |  | 650,000 |  |  |  | 10,171,216 |  |  |  | 504,000 |  |  |  | 11,325,216 |  |  |  | 1,031,028 |  |  |  | 2005 |  |  |  | 8/25/2021 |
14510 Highway 79, LLC |  | TN |  |  | SNF |  |  |  | 525,000 |  |  |  | 5,117,868 |  |  |  | 396,000 |  |  |  | 525,000 |  |  |  | 5,117,868 |  |  |  | 396,000 |  |  |  | 6,038,868 |  |  |  | 784,702 |  |  |  | 1969 |  |  |  | 8/25/2021 |
6500 Kirby Gate Boulevard, LLC |  | TN |  |  | SNF |  |  |  | 1,250,000 |  |  |  | 17,345,000 |  |  |  | 405,000 |  |  |  | 1,250,000 |  |  |  | 17,345,000 |  |  |  | 405,000 |  |  |  | 19,000,000 |  |  |  | 1,376,258 |  |  |  | 2015 |  |  |  | 8/25/2021 |
978 Highway 11 South, LLC |  | TN |  |  | SNF |  |  |  | 250,000 |  |  |  | 9,965,900 |  |  |  | 540,000 |  |  |  | 250,000 |  |  |  | 9,965,900 |  |  |  | 540,000 |  |  |  | 10,755,900 |  |  |  | 1,060,140 |  |  |  | 1966 |  |  |  | 8/25/2021 |
2830 Highway 394, LLC |  | TN |  |  | SNF |  |  |  | 475,000 |  |  |  | 27,625,000 |  |  |  | 900,000 |  |  |  | 475,000 |  |  |  | 27,625,000 |  |  |  | 900,000 |  |  |  | 29,000,000 |  |  |  | 2,110,678 |  |  |  | 2017 |  |  |  | 8/25/2021 |
1253 Lake Barkley Drive, LLC |  | KY |  |  | SNF |  |  |  | 175,000 |  |  |  | 4,496,940 |  |  |  | 195,000 |  |  |  | 175,000 |  |  |  | 4,496,940 |  |  |  | 195,000 |  |  |  | 4,866,940 |  |  |  | 741,121 |  |  |  | 1968 |  |  |  | 8/25/2021 |
1123 Rockdale |  | MA |  |  | Vacant |  |  |  | - |  |  |  | 1,200,000 |  |  |  | - |  |  |  | - |  |  |  | 1,200,000 |  |  |  | - |  |  |  | 1,200,000 |  |  |  | - |  |  |  |  |  |  |  |  |
420 Jett Drive, LLC |  | KY |  |  | SNF |  |  |  | 100,000 |  |  |  | 4,700,000 |  |  |  | 1,200,000 |  |  |  | 100,000 |  |  |  | 4,700,000 |  |  |  | 1,200,000 |  |  |  | 6,000,000 |  |  |  | 397,409 |  |  |  | 1971 |  |  |  | 1/5/2023 |
8400 Clearvista Place, LLC |  | IN |  |  | ALF |  |  |  | 199,550 |  |  |  | 4,939,068 |  |  |  | 1,140,000 |  |  |  | 199,550 |  |  |  | 4,939,068 |  |  |  | 1,140,000 |  |  |  | 6,278,618 |  |  |  | 128,388 |  |  |  | 1985 |  |  |  | 8/25/2023 |
8400 Clearvista Place, LLC |  | IN |  |  | SNF |  |  |  | 199,550 |  |  |  | 2,504,532 |  |  |  | 270,000 |  |  |  | 199,550 |  |  |  | 2,504,532 |  |  |  | 270,000 |  |  |  | 2,974,082 |  |  |  | 43,672 |  |  |  | 1985 |  |  |  | 8/25/2023 |
524 Anderson Road, LLC |  | IN |  |  | SNF |  |  |  | 182,300 |  |  |  | 2,522,236 |  |  |  | 600,000 |  |  |  | 182,300 |  |  |  | 2,522,236 |  |  |  | 600,000 |  |  |  | 3,304,536 |  |  |  | 76,831 |  |  |  | 1984 |  |  |  | 8/25/2023 |
640 West Ellsworth Street, LLC |  | IN |  |  | SNF |  |  |  | 36,300 |  |  |  | 3,750,050 |  |  |  | 840,000 |  |  |  | 36,300 |  |  |  | 3,750,050 |  |  |  | 840,000 |  |  |  | 4,626,350 |  |  |  | 110,609 |  |  |  | 1957 |  |  |  | 8/25/2023 |
11563 West 300 South LLC |  | IN |  |  | SNF |  |  |  | 47,200 |  |  |  | 2,026,277 |  |  |  | 460,000 |  |  |  | 47,200 |  |  |  | 2,026,277 |  |  |  | 460,000 |  |  |  | 2,533,477 |  |  |  | 55,493 |  |  |  | 1969 |  |  |  | 8/25/2023 |
5544 East State Boulevard, LLC |  | IN |  |  | SNF |  |  |  | 492,800 |  |  |  | 2,978,021 |  |  |  | 770,000 |  |  |  | 492,800 |  |  |  | 2,978,021 |  |  |  | 770,000 |  |  |  | 4,240,821 |  |  |  | 94,999 |  |  |  | 1964 |  |  |  | 8/25/2023 |
548 South 100 West, LLC |  | IN |  |  | SNF |  |  |  | 86,000 |  |  |  | 2,843,914 |  |  |  | 650,000 |  |  |  | 86,000 |  |  |  | 2,843,914 |  |  |  | 650,000 |  |  |  | 3,579,914 |  |  |  | 78,190 |  |  |  | 1973 |  |  |  | 8/25/2023 |
2901 West 37th Avenue, LLC |  | IN |  |  | SNF |  |  |  | 702,800 |  |  |  | 4,255,515 |  |  |  | 1,100,000 |  |  |  | 702,800 |  |  |  | 4,255,515 |  |  |  | 1,100,000 |  |  |  | 6,058,315 |  |  |  | 125,861 |  |  |  | 1974 |  |  |  | 8/25/2023 |
1500 Grant Street, LLC |  | IN |  |  | SNF |  |  |  | 118,700 |  |  |  | 3,712,725 |  |  |  | 850,000 |  |  |  | 118,700 |  |  |  | 3,712,725 |  |  |  | 850,000 |  |  |  | 4,681,425 |  |  |  | 110,786 |  |  |  | 1968 |  |  |  | 8/25/2023 |
787 North Detroit Street, LLC |  | IN |  |  | ALF |  |  |  | 50,400 |  |  |  | 4,457,159 |  |  |  | 1,000,000 |  |  |  | 50,400 |  |  |  | 4,457,159 |  |  |  | 1,000,000 |  |  |  | 5,507,559 |  |  |  | 121,242 |  |  |  | 1970 |  |  |  | 8/25/2023 |
787 North Detroit Street, LLC |  | IN |  |  | SNF |  |  |  | 50,400 |  |  |  | 800,885 |  |  |  | 85,000 |  |  |  | 50,400 |  |  |  | 800,885 |  |  |  | 85,000 |  |  |  | 936,285 |  |  |  | 19,841 |  |  |  | 1978 |  |  |  | 8/25/2023 |
981 Beechwood Avenue, LLC |  | IN |  |  | SNF |  |  |  | 29,600 |  |  |  | 2,674,936 |  |  |  | 600,000 |  |  |  | 29,600 |  |  |  | 2,674,936 |  |  |  | 600,000 |  |  |  | 3,304,536 |  |  |  | 72,753 |  |  |  | 1974 |  |  |  | 8/25/2023 |
317 Blair Pike, LLC |  | IN |  |  | SNF |  |  |  | 72,800 |  |  |  | 5,787,027 |  |  |  | 1,300,000 |  |  |  | 72,800 |  |  |  | 5,787,027 |  |  |  | 1,300,000 |  |  |  | 7,159,827 |  |  |  | 170,950 |  |  |  | 1966 |  |  |  | 8/25/2023 |
815 West Washington Street, LLC |  | IN |  |  | SNF |  |  |  | 44,100 |  |  |  | 2,660,436 |  |  |  | 600,000 |  |  |  | 44,100 |  |  |  | 2,660,436 |  |  |  | 600,000 |  |  |  | 3,304,536 |  |  |  | 78,754 |  |  |  | 1966 |  |  |  | 8/25/2023 |
612 East 11th Street, LLC |  | IN |  |  | ALF |  |  |  | 49,650 |  |  |  | 4,367,758 |  |  |  | 980,000 |  |  |  | 49,650 |  |  |  | 4,367,758 |  |  |  | 980,000 |  |  |  | 5,397,408 |  |  |  | 128,943 |  |  |  | 1967 |  |  |  | 8/25/2023 |
612 East 11th Street, LLC |  | IN |  |  | SNF |  |  |  | 49,650 |  |  |  | 1,402,542 |  |  |  | 145,000 |  |  |  | 49,650 |  |  |  | 1,402,542 |  |  |  | 145,000 |  |  |  | 1,597,192 |  |  |  | 34,479 |  |  |  | 1967 |  |  |  | 8/25/2023 |
505 West Wolfe Street, LLC |  | IN |  |  | ALF |  |  |  | 86,100 |  |  |  | 4,105,930 |  |  |  | 930,000 |  |  |  | 86,100 |  |  |  | 4,105,930 |  |  |  | 930,000 |  |  |  | 5,122,030 |  |  |  | 96,432 |  |  |  | 1970 |  |  |  | 8/25/2023 |
505 West Wolfe Street, LLC |  | IN |  |  | SNF |  |  |  | 110,200 |  |  |  | 1,492,219 |  |  |  | 160,000 |  |  |  | 110,200 |  |  |  | 1,492,219 |  |  |  | 160,000 |  |  |  | 1,762,419 |  |  |  | 23,790 |  |  |  | 1970 |  |  |  | 8/25/2023 |
500 East Pickwick Drive, LLC |  | IN |  |  | SNF |  |  |  | 206,500 |  |  |  | 2,768,489 |  |  |  | 660,000 |  |  |  | 206,500 |  |  |  | 2,768,489 |  |  |  | 660,000 |  |  |  | 3,634,989 |  |  |  | 73,426 |  |  |  | 1986 |  |  |  | 8/25/2023 |
300 Fairgrounds Road, LLC |  | IN |  |  | SNF |  |  |  | 94,500 |  |  |  | 6,666,839 |  |  |  | 1,500,000 |  |  |  | 94,500 |  |  |  | 6,666,839 |  |  |  | 1,500,000 |  |  |  | 8,261,339 |  |  |  | 197,104 |  |  |  | 1977 |  |  |  | 8/25/2023 |
1900 Alber Street, LLC |  | IN |  |  | SNF |  |  |  | 819,000 |  |  |  | 2,967,350 |  |  |  | 840,000 |  |  |  | 819,000 |  |  |  | 2,967,350 |  |  |  | 840,000 |  |  |  | 4,626,350 |  |  |  | 92,839 |  |  |  | 1969 |  |  |  | 8/25/2023 |
1720 Alber Street, LLC |  | IN |  |  | SNF |  |  |  | 360,000 |  |  |  | 1,623,326 |  |  |  | 440,000 |  |  |  | 360,000 |  |  |  | 1,623,326 |  |  |  | 440,000 |  |  |  | 2,423,326 |  |  |  | 49,430 |  |  |  | 1970 |  |  |  | 8/25/2023 |
300 North Washington Street, LLC |  | IN |  |  | SNF |  |  |  | 90,050 |  |  |  | 5,905,004 |  |  |  | 1,330,000 |  |  |  | 90,050 |  |  |  | 5,905,004 |  |  |  | 1,330,000 |  |  |  | 7,325,054 |  |  |  | 138,164 |  |  |  | 1984 |  |  |  | 8/25/2023 |
300 North Washington Street, LLC |  | IN |  |  | ALF |  |  |  | 90,050 |  |  |  | 2,964,561 |  |  |  | 305,000 |  |  |  | 90,050 |  |  |  | 2,964,561 |  |  |  | 305,000 |  |  |  | 3,359,611 |  |  |  | 62,463 |  |  |  | 2000 |  |  |  | 8/25/2023 |
Total |  |  |  |  |  |  |  | $ | 64,378,105 |  |  | $ | 603,616,917 |  |  | $ | 73,753,977 |  |  | $ | 64,308,704 |  |  | $ | 600,215,806 |  |  | $ | 73,187,389 |  |  | $ | 737,711,900 |  |  | $ | 219,397,676 |  |  |  |  |  |  |  |  |

F-39

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The changes in total real estate and accumulated depreciation are as follows (in thousands):

|  | 2023 |  |  | 2022 |
|  | For the year ended December 31, |
|  | 2023 |  |  | 2022 |
Cost |  |  |  |  |  |  |  |
Balance at beginning of the year |  | $ | 633,749 |  |  |  | 632,036 |
Acquisitions |  |  | 108,061 |  |  |  | 1,713 |
Disposals/other |  |  | (4,098 | ) |  |  | - |
Balance at end of the year |  | $ | 737,712 |  |  |  | 633,749 |
Accumulated Depreciation |  |  |  |  |  |  |  |
Balance at beginning of the year |  | $ | 194,838 |  |  |  | 169,308 |
Depreciation |  |  | 26,207 |  |  |  | 25,530 |
Dispositions/other |  |  | (1,647 | ) |  |  | - |
Balance at end of the year |  | $ | 219,398 |  |  |  | 194,838 |
Net Real Estate |  | $ | 518,314 |  |  |  | 438,911 |

The unaudited aggregate net tax value of real estate assets for federal income tax purposes as of December 31, 2023 is estimated to be $532,953,138.

(1) The cost of building and improvements is depreciated on a straight-line basis over the estimated useful lives of the buildings and improvements, ranging primarily from 3 to 35 years. The cost of intangible lease assets is depreciated on a straight-line basis over the initial term of the related leases, ranging primarily from 3 to 20 years. The cost of furniture, fixtures and equipment are depreciated on a straight-line basis over the estimated useful lives of the furniture, fixtures and equipment, ranging primarily from 2 to 15 years. See Note 4 to the consolidated financial statements for information on useful lives used for depreciation and amortization.

(2) LTACH — long-term acute care hospital, SNF — skilled nursing facility, and ALF — assisted living facility.

F-40