Leases

9 Months Ended

Sep. 30, 2024

Leases

Leases

NOTE 6. Leases

As of September 30, 2024, and December 31, 2023, the Company had leased 114 facilities (104 properties) and 107 facilities (97 properties), respectively, to tenant/operators in the States of Arkansas, Illinois, Indiana, Kentucky, Michigan, Ohio, Oklahoma, Tennessee and Texas. As of September 30, 2024, and December 31, 2023, all of the Company’s 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 by the Company for the periods indicated:

	September 30,			December 31,
	2024			2023
Cumulative number of facilities (properties)		114 (104	)		107 (97	)
Cumulative number of licensed beds		12,889			12,201

The following table provides additional information regarding the facilities leased by the Company as of September 30, 2024:

State	Number of Operational Beds/Units		Owned by Company		Leased by Company		Total
Arkansas		1,568		14		-		14
Illinois		4,226		20		-		20
Indiana		3,318		39		1		40
Kentucky		1,163		11		-		11
Michigan		100		1		-		1
Ohio		238		4		-		4
Oklahoma		137		2		-		2
Tennessee		1,412		16		-		16
Texas		727		6		-		6
Total Facilities		12,889		113		1		114
Facility Type
Skilled Nursing Facilities		12,528		102		1		103
Long-Term Acute Care Hospitals		63		2		-		2
Assisted Living Facility		298		9		-		9
Total facilities		12,889		113		1		114

As of September 30, 2024, total future minimum rental revenues for the Company’s tenants are as follows:

Year	Amount
(Amounts in $000s)
2024 (three month period)	$	25,068
2025		98,251
2026		89,264
2027		90,569
2028		87,446
Thereafter		342,614
Total	$	733,212

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONDENSED 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:

	September 30,		December 31,
	2024		2023
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 condensed consolidated balance sheets and are valued based on the present value of the future minimum lease payments at the 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 in Indiana. The Indiana lease has an initial term that 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 Company leased two other facilities in Tennessee starting in January 2024. However, The Company acquired these facilities on August 31, 2024 and the Tennessee facilities are now fully owned by The Company.

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

	Nine Month Period ended September 30,				Three Month Period ended September 30,
	2024		2023		2024		2023
Operating lease cost	$	564		296		180		99

	September30, 2024			December 31, 2023
Operating lease right of use asset	$	1,290		$	1,542
Operating lease liability	$	1,290		$	1,542
Weighted average remaining lease term-operating leases (in years)		3.3			4.25
Weighted average discount rate		4.1	%		4.1	%

Future minimum operating lease payments under non-cancellable leases as of September 30, 2024, reconciled to the Company’s operating lease liability presented on the condensed consolidated balance sheets are:

	(Amounts in $’000s)
2024 (three month period)	$	99
2025		397
2026		397
2027		397
2028		100
Total	$	1,390
Less Interest		(100	)
Total operating lease liability	$	1,290

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 nine-month periods ended September 30, 2024 and 2023, was $160,000 and $157,000, respectively. Rental expense under the leases for the three-month periods ended September 30, 2024 and 2023, were $53,000 and $52,000, respectively.

STRAWBERRY FIELDS REIT, INC. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS