Strawberry Fields REIT (OTCQX: STRW) has officially gone public this week as it sets its sights on building upon its growing skilled nursing portfolio.
The shares began trading on Sept. 21 on the OTCQX Best Market under the ticker symbol “STRW.”
Strawberry Fields REIT is a self-administered real estate investment trust with a growing portfolio that includes ownership, acquisition, development and leasing of skilled nursing and other health care-related properties.
“We’re a big enough company now as a real estate company that we want to be on the public platform so that we can have the benefits of corporate bonds, raising equity … It should be relatively easier than me trying to get somebody to invest in a deal or me going to a bank to try to raise money when your corporate structure is a little bit more complicated,” Chairman, CEO and Founder Moishe Gubin told Skilled Nursing News.
In addition to its 74 standalone skilled nursing facilities, the REIT’s portfolio consists of four dual-purpose facilities, used as both SNFs and long-term acute care hospitals, and three assisted living facilities.
Strawberry Fields REIT properties are located across Arkansas, Illinois, Indiana, Kentucky, Michigan, Ohio, Oklahoma, Tennessee and Texas.
Looking ahead, Gubin expects to see at least 10% asset growth next year as it looks to continue its expansion within a regional footprint.
“We look at a lot of deals and we don’t dilly dally, we jump on the things that make sense for us and we continue to do that,” Gubin told SNN.
Breaking down the history and the numbers
Gubin, along with other partners, acquired 33 SNF properties in Indiana and Illinois over the course of nine years between 2005 and 2014.
Strawberry Fields was officially founded in 2015 when Gubin and his operating partner, Michael Blisko, CEO of Infinity Health Care Management — and others — took on the portfolio.
It was then that the REIT continued growing in various states and went from 33 properties to where it stands today at 74 standalone facilities. Strawberry Fields created an UPREIT structure in 2021 ahead of its move to go public — which it announced back in March of this year.
The REIT primarily leases properties on a triple-net, long-term basis with annual rent escalations of 1% to 3%, according to an investor presentation. Covid-19 has not had a material impact on rent collection, as 100% of rent has been collected through 2Q of this year.
Due to what Gubin described as a “very stable portfolio” the company is not experiencing the same level of headwinds compared to some of the other providers in the industry.
“Our tenants today are not doing as good as they were doing two years ago, three years ago, but that doesn’t change anything. In the grand scheme of things we’re big fans of the master lease concept so we have good coverage,” he told SNN.
Average facility occupancy currently stands at 65.1% as of June. That compares to the company’s pre-pandemic occupancy of 72.5%. As for payor mix, the buildings operate on roughly 73% Medicaid, 13% Medicare, 8% insurance and 6% private.
The average facility size is roughly 130 beds, according to the REIT.
The 79 standalone and dual-purpose facilities are leased to 78 operators that receive consulting services from nine consulting groups across nine different states, according to the REIT.
“I mean from the point of view of in the long run, there should be plenty of residents to be taken care of. It’s a hard business … I’m not afraid because I’m a big picture thinker. If I make decisions all the time on immediate things that showed up, I would’ve changed courses 100 times in my career already,” he added.
Regional density remains key to investment strategy
As Strawberry Fields looks at future deals and aims to grow, staying within a regional footprint will remain key for two main reasons, according to Gubin.
First off, a management team will do a better job when they know their market because they are locally based and are not flying in from somewhere else. Secondly, knowing the market in which someone operates allows them to get to know the actual facility and the overall community.
“You’re much better off when you have a local crew that becomes friendly with the local regulators and they’re running 10 homes and they understand the rules and they can implement the rules and the sister facilities, they can help out the other facilities— there’s a benefit in that,” Gubin told SNN.
It’s part of the reason Gubin believes “Mom and Pop” operations and companies that have one or two buildings in multiple states have struggled in the current environment.
“I understand you want to grow and growing is important in life, but I would be way more controlled in the growth of rent, the growth of product and stick to a certain geography. Even across state lines makes a big difference,” he said.
Strawberry Fields generally focuses on smaller deals that are typically off-market and not typically sought by larger REITs, according to the REIT.
Most recently the REIT acquired six facilities in Tennessee and Kentucky with a combined 515 beds for $81 million back in 2021.
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