EX-99.2 3 ex99-2.htm

 

Exhibit 99.2

 

Unaudited Pro Forma Condensed Combined Financial Information

 

On December 20, 2024, the Company entered into a Purchase and Sale Agreement (the “Purchase Agreement”), with Bonner Springs Realco, LLC, Clearwater SNF Realco, LLC, Clearwater AL Realco, LLC, Fountainview Realco, LLC, Legacy on 10th Realco, LLC, 1600 South Woodlawn Realty, LLC,, (collectively, the “Sellers”) with respect to the purchase of six healthcare Facilities located in Kansas (the “Facilities”). The Sellers are not affiliates of the Company. The Company assigned the right to acquire the Facilities to newly organized indirect subsidiaries of the Strawberry Fields Realty, LP, the Company’s operating partnership. The Company closed on the acquisition of the Facilities on January 2, 2025.

 

The purchase price for the Facilities was $24,000,000. The Company made a deposit of $750,000 under the Purchase Agreement, which was applied to pay a portion of the purchase price at the closing. The Company paid the balance of the purchase price utilizing the Company’s working capital.

 

The Facilities will be leased under a new 10-year master lease agreement to a group of third-party tenants. Under the master lease, (i) the tenants will be on a triple net basis (ii) the tenants have 2 five-year options to extend the lease. The tenants operate the Facilities as five skilled nursing facilities and one assisted living facility.

 

The six Facilities are comprised of 354 licensed beds.

 

The unaudited pro forma condensed combined balance sheet as of December 31, 2024 is presented as if the acquisition was completed on December 31, 2024. The unaudited pro forma condensed combined statements of income for the years ended December 31, 2024 and 2023 as if the acquisition was completed on January 1, 2023.

 

The following unaudited pro forma condensed combined financial information has been prepared to comply with Article 11 of Regulation S-X, as promulgated by the SEC. The unaudited pro forma condensed combined financial information should be read in conjunction with the consolidated financial statements of the Company and notes thereto presented elsewhere in this prospectus for the years ended December 31, 2024 and 2023 of the Kansas Portfolio Group. The unaudited pro forma condensed combined balance sheet and condensed combined statements of income are not necessarily indicative of what the actual financial position and operating results would have been had the acquisition had occurred on the dates indicated nor are they indicative of future operating results of the Company.

 

F-1

 

 

Unaudited Pro Forma Condensed Combined Balance Sheet

As of December 31, 2024

(In thousands)

 

   Strawberry Fields REIT Inc.   Kansas Property Acquisition     Proforma Combined 
               
Assets                 
Real estate investments, net  $609,058   $24,000 (a)  $633,058 
Cash and cash equivalents   48,373    (24,000) (b)   24,373 
Restricted cash and equivalents   45,283           45,283 
Straight-line rent receivable, net   27,702    -      27,702 
Right of use lease asset   1,204    -      1,204 
Goodwill, other intangible assets and lease rights   27,947    -      27,947 
Deferred financing expenses   6,162    -      6,162 
Notes receivable, net   16,585    -      16,585 
Other assets   5,275    -      5,275 
Total Assets   787,589    -      787,589 
Liabilities                 
Accounts payable and accrued liabilities   18,718    -      18,718 
Bonds, net   209,944    -      209,944 
Notes payable and other debt   460,591    -      460,591 
Operating lease liability   1,204    -      1,204 
Other liabilities   13,561    -      13,561 
Total Liabilities   704,018    -      704,018 
Equity                 
Additional paid in capital   16,536    -      16,536 
Accumulated other comprehensive income   340    -      340 
Retained earnings   1,292    -      1,292 
Total Stockholders’ Equity   18,168    -      18,168 
Non-controlling interest   65,403    -      65,403 
Total Equity   83,571    -      83,571 
Total Liabilities and Equity  $787,589   $-     $787,589 

 

See accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Information

 

F-2

 

 

Unaudited Pro Forma Condensed Combined Statements of Income

FOR THE YEAR ENDED DECEMBER 31, 2024

(In thousands)

 

   Strawberry Fields REIT Inc.   Kansas Property Acquisition     Proforma Adjustments     Proforma Combined 
                     
Revenues                        
Rental revenues  $117,058   $2,358  (c)   162  (d)  $119,578 
Expenses:                        
Depreciation   29,031    -      615  (e)   29,646 
Amortization   4,657    -      -      4,657 
General and administrative expenses   6,851    212      -      7,063 
Property taxes   14,489    -      162  (d)   14,651 
Facility rent expenses   727    -      -      727 
Total expenses   55,755    212      777      56,744 
Income from operations   61,303    2,146      (615 )    62,834 
Interest expense, net   (32,603)   -      -      (32,603)
Amortization of deferred financing costs   (657)   -      -      (657)
Mortgage insurance premium   (1,548)   -      -      (1,548)
Total interest expense   (34,808)   -      -      (34,808)
Other income:                        
Other income   10    -      -      10 
Net income  $26,505   $2,146     $(615 )   $28,036 

 

See accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Information

 

F-3

 

 

Unaudited Pro Forma Condensed Combined Statements of Income

FOR THE YEAR ENDED DECEMBER 31, 2023

(In thousands)

 

   Strawberry Fields REIT Inc.   Kansas Property Acquisition     Proforma Adjustments     Proforma Combined 
                     
Revenues                        
Rental revenues  $99,805   $1,321  (c)   162 (d)   $101,288 
Expenses:                        
Depreciation   26,207    -      615 (e)    26,822 
Amortization   3,028    -      -      3,028 
Loss on real estate investment impairment   2,451    -      -      2,451 
General and administrative expenses   5,662    185      -      5,847 
Property taxes   14,459    -      162 (d)    14,621 
Facility rent expenses   559    -      -      559 
Total expenses   52,366    185      777      53,328 
Income from operations   47,439    1,136      (615)     47,960 
Interest expense, net   (24,443)   -      -      (24,443)
Amortization of deferred financing costs   (560)   -      -      (560)
Mortgage insurance premium   (1,671)   -      -      (1,671)
Total interest expense   (26,674)   -      -      (26,674)
Other income (loss):                        
Foreign currency transaction gain    462    -      -      462 
Other loss   (983)   -      -      (983)
Total other loss   (521)   -      -      (521)
Net income  $20,244   $1,136     $(615)    $20,765 

 

See accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Information

 

F-4

 

 

Notes to Unaudited Pro Forma Condensed Combined Financial Information

 

1. Basis of Presentation

 

On January 2, 2025, Strawberry Fields REIT Inc. (the “Company’) completed the acquisition with multiple sellers with respect to the purchase of six healthcare facilities located in Kansas (the “Facilities”). The sellers are not affiliates of the Company. The Company will assign the right to acquire the Facilities to newly organized indirect subsidiaries of Strawberry Fields Realty, LP, the Company’s operating partnership.

 

The historical financial statements have been adjusted in the pro forma condensed combined financial statements to give effect for (i) transaction accounting adjustments (ii) autonomous entity adjustments and (iii) management’s adjustments, as required.

 

The pro forma combined financial information does not necessarily reflect what the combined company’s financial condition or results of operations would have been if the acquisition of the Kansas Portfolio Group occurred on the dates indicated. They also may not be useful in predicting the future financial condition and results of operations of the combined company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.

 

2. Purchase Price Allocation

 

The Company intends to account for the planned acquisition as an asset acquisition. We will measure the value of the acquired physical assets (land, building and building improvements, site improvements, and furniture fixtures and equipment) by allocating the total cost of the acquisition on a relative fair value basis. The Company expects to allocate the total cost as follows (in thousands):

 

Land  $4,258 
Building and building improvements   19,742 
Total purchase price  $24,000 

 

3. Pro Forma Adjustments

 

  (a) Represents the adjustment to record the assets purchased in the acquisition of the Facilities at relative fair value based on the total cost of the acquisition.
  (b) Represents the cash and cash equivalents to be utilized to pay the purchase price for the Facilities at closing.
  (c) Represents straight-line monthly income for the period stated. The Company recognizes 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.
  (d) Represents real estate taxes for the stated period. 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 leases with us.
  (e)   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. 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:

 

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

 

F-5