Strawberry Fields Reit Inc (STRW) 2025 Q3 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Strawberry Fields REIT Q3 2025 earnings conference call. (Operator Instructions) As a reminder, this conference call is being recorded.

At this time, I would like to turn the conference over to Mr. Jeff Bajtner, Chief Investment Officer. Sir, please begin.

Thank you, and welcome to Strawberry Fields REIT's Q3 2025 Earnings Call. I am the Chief Investment Officer, and joining me today on the call are Moishe Gubin, our Chairman and CEO; and Greg Flamion, our CFO. Yesterday evening, the company issued its Q3 2025 earnings results, which are available on the company's Investor Relations website. Participants should be aware that this call is being recorded, and listeners are advised that any forward-looking statements made on today's call are based on management's current expectations, assumptions and beliefs about Strawberry Fields REIT's business and the environment in which it operates. These statements may include projections regarding future financial performance, dividends, acquisitions, investments, returns, financings and may or may not reference other matters affecting the company's business or the businesses of its tenants, including factors that are beyond its control.

Additionally, references will be made during this call to non-GAAP financial results. Investors are encouraged to review these non-GAAP financial measures, as well as the explanation and reconciliation of these measures to the comparable GAAP results included on the non-GAAP measure reconciliation page in our investor presentation. Now on to discussing Strawberry Fields REIT and our Q3 2025 performance. I want to start by sharing some key highlights. During the quarter, the company collected 100% of its contractual rents.

As we discussed in last quarter's conference call, on July 1, 2025, the company completed the acquisition of 9 skilled nursing facilities comprised of 686 beds, located in Missouri. The acquisition was for $59 million. On August 5, 2025, the company completed the acquisition for a skilled nursing facility with 80 licensed beds near McLoud, Oklahoma. The acquisition was for $4.25 million. The company funded the acquisition utilizing working capital.

The initial annual base rents are $425,000 and are subject to 3% annual rent increases. On August 29, the company completed the acquisition for a health care facility comprised of 108 skilled nursing beds and 16 assisted living beds near Poplar Bluff, Missouri. The acquisition was for $5.3 million. The company funded the acquisition utilizing working capital and the initial annual base rents are $530,000 and subject to 3% annual rent increases. A couple of other items I wanted to mention.

During Q3, the Board of Directors approved increasing the dividend to $0.16 a share. This increase represented a 14% increase over previous quarters. Yesterday, the Board of Directors approved the Q4 2024 dividend, which will also be $0.16 a share and will be paid on December 30, to shareholders of record on December 16. On the acquisition front, we continue to see deals coming from around the country. As we have discussed in previous investor presentations, we are a big fan of the master lease structure and currently, 89% of our facilities are in master leases.

With our disciplined approach, if there is a deal in an existing state, our current operators are looking to grow, and we can simply add the new facility to an existing master lease. If we were to enter and grow in a new state, we would be looking to acquire a sizable portfolio of at least 500 beds. As a final point, I'd like to point out that Strawberry Fields REIT is currently the closest pure-play skilled nursing REIT in the market with 91.5% of our facilities being skilled nursing facilities.

I would now like to have Greg Flamion, our Chief Financial Officer, to discuss the quarter-end financials.

Thank you, Jeff, and welcome, everyone, to Strawberry Fields REIT Third Quarter 2025 Earnings Call. Let's begin with the balance sheet. Total assets reached $880 million, which is a 33.1% increase compared to Q3 of 2024. This growth is primarily driven by our acquisition strategy and the successful retenanting of specific leasing. On the liabilities and equity side, we saw increases aligned with our financing activities and some foreign currency exchange losses, which impacted other comprehensive income.

Overall, the balance sheet reflects our continued investment in long-term growth. Turning to our income statement. Year-to-date revenue through September was $114.9 million, up $28.3 million versus September of last year. This increase is largely due to the timing and integration of properties acquired over the past year, as well as the retenanting activity that began in January. While revenue is up, we've also seen higher expenses, mostly driven by depreciation, amortization and interest.

These higher expenses are a result of the acquisitions discussed earlier in the presentation. Net income year-to-date is $24.5 million or $0.44 a share compared to $19.9 million or $0.40 a share last year. Looking at our quarterly performance, the drivers are similar to our year-to-date results. Revenue increased by $10.2 million, again, due to the acquisitions and lease transitions. Expenses rose as well, driven by higher depreciation, amortization and interest from new assets.

Net income for the quarter was $8.8 million or $0.16 a share, up from $6.9 million or $0.14 per share in Q3 2024. To close, I'd like to highlight some key financial metrics. Projected AFFO for 2025 is $72.7 million, a 28.2% increase over the last year with a compound annual growth rate or CAGR of 13.3% since 2020. Adjusted EBITDA is projected at $126.1 million, up 38.9% year-over-year with a 13.6% CAGR. Our net debt-to-asset ratio was 49.2%, maintaining a balanced capital structure.

As of September 30, our dividend was $0.16 a share, representing a 5.2% yield. With an AFFO payout ratio of 46.8%, we're delivering strong results while preserving capital for future growth. These results reflect our disciplined execution and commitment to long-term shareholder value.

With that, I'll turn it back over to Jeff Bajtner, who will walk us through the portfolio highlights.

Thank you, Greg. I'd now like to point out some of the Strawberry Fields REIT's portfolio highlights as of September 30. Currently, the company has 142 facilities. This is comprised of 130 skilled nursing facilities, 10 assisted living facilities and 2 long-term acute care hospitals. These facilities are in 10 states.

And as you'll see later on in the presentation, we've got a map showing their locations. In these facilities, we've got 15,542 licensed beds. The company's total asset value at acquisition or its historical cost is $1.1 billion. I would like to point out that this amount reflects facilities which have been bought over the past 20 years. If you were to look at the company's fair market value of these facilities or the portfolio, it would be in excess of this amount.

Currently, our portfolio has 17 consultants who advise operators. Our weighted average lease term is 7.3 years. Our tenants continue to do well, which is reflected by the EBITDARM rent coverage of 2.01x. Our net debt to adjusted EBITDA ratio is 5.7x. As I mentioned earlier, we're pleased that we continue to collect 100% of our rent.

And as I mentioned earlier in my prepared remarks, the company continues to have a strong pipeline. We're seeing deals from across the country. And at this time, our acquisition pipeline is in excess of $250 million.

With that, I'd like to have Moishe Gubin, our Chairman and CEO, continue with the presentation.

All right. Thank you, Jeff, and thank you, Greg. Staying on this slide, I would just reiterate what Jeff has said. We've continued to grow, as we'll talk about in a future slide with almost 15,500 -- well, the actual number, 15,542. Of course, we're going to keep growing.

On the assets, total assets, we feel that our total assets real true market value is probably closer to $1.6 billion. I would stress potential investors not to really spend time looking at our balance sheet for our equity or our assets because they are net of depreciation, which we rely on, of course, to have the surplus cash that we use to buy more assets. I would move on to the next slide and show you all our growth, super proud. As we said on the previous slides, 13.3% growth rate. It was only 5 years ago that we made $38 million of AFFO, and now we are close to double that in 5 years.

That's a good growth rate, what to be proud of. We'll hopefully break $73 million and next year, do even better. On the next slide, this is one that I don't usually really spend too much time on. It's the base rent growth. Obviously, that's going to keep growing as we continue to buy.

We're in the business of buying and leasing. We do not give options. So everything you see in looking at straight-line rent should continue to be the same or better going forward. It's very rare that we sell something, even though in third quarter, we actually did sell something. That being said, we'll go on to Slide #8.

On Slide #8, this is something that we actually ended the quarter okay, within range of last year. Obviously, with the increased AFFO, we should be trading a lot higher than last year. We're continuously working for the shareholders going to events. This week, we were in Arizona, meeting with new tenants and looking at deals. And like Jeff said, we have a very strong pipeline.

Again, our bogey that we're trying to break is 150 million to 160 million in dollar spent a year. As we get bigger, we want to spend more, obviously, but we do our deals exactly the same way. And like we've talked about quarter in, quarter out, year in, year out, we are so disciplined on how we buy things that has to fit or we don't buy it. On Page 9, you see our growth rate. We try to educate the marketplace on -- you take the AFFO share growth of 11.3%, you add that to the dividend yield, and we're steadily bringing a return of 16% to 18% a year.

That's going to continue to grow. We've maintained the payout ratio to be below 50%, and we've not been erratic at all with how we've done our dividend. In fact, we've raised our dividend, I think, now already 5x, 6x. And we will continue to do exactly what we're doing, paying out what we're paying, which this quarter, which we just announced, is 100% of our net income. And that leaves us $40 million or so from depreciation of surplus cash to go use to buy more assets.

So that's just funding our future growth. I love this. I love this slide. Slide 10. You can see our stock is undervalued.

Our AFFO trading multiples on the right side, we are the lowest by far. And I believe our profitability is better than most, if not all, of our peers. That being said, we're going to keep working it. We're going to keep meeting investors. We're going to keep doing what we can.

We're going to manage the marketplace, continue. We're going to be doing a capital raise at some point. And when we do that, hopefully, that will help bring in more institutional investors and bring more liquidity to the stock price. On the next slide, Page 11, you can see our payout ratio, like I said, we're at 46.8%. Everybody else is in the 70s or higher.

Our dividend yield is middle of the road at 5.2%. I would expect as our profitability grows, that dividend yield will grow. And because every time we raise a $0.01, right, if we're at $0.16, we go to $0.17, that's 1/16. That's close to 10% growth, and that puts the dividend yield at a nicer number, and that should happen. On Slide 12, again, this reflects Jeff's comments about us being the closest pure-play REIT.

You see we're still 92% -- almost 92%, and our peers are actually decreasing in percentage. And so again, this is a marketplace, which we never have investor calls, we'd like to say it's relatively bulletproof where the clientele that comes to us, they have to come to -- they have to go to our tenant because they need to be cared for a certain way. And with the baby boomers pushing, which we'll talk about in a future slide, the reality is, is that we think that we're in a good spot because it's a business that's government paid for. So it doesn't -- inflation really doesn't affect it. And we keep going out to giving the story.

We feel that the investor public should be happy with us and things should pick up. On Slide 13, you see what our AFFO share growth, the growth rate over the last 5 years. We're at 11.3% as our growth rate. There's only 2 other of our peers that are positive. The other 3 are negative, which basically tells you that what do they do?

They don't have enough AFFO to cover their dividends, and they have to sell equity to use the cash to be able to pay dividends. In our case, we're paying dividends, we have twice the amount of money so we can go use to buy more deals so that we break the -- so that we can make the AFFO per share grow because we're not increasing the amount of shares outstanding, but yet we're increasing the amount of money we're making. EBITDARM coverage, we're above 2x is acceptable at any level. And I'm happy with where it is, but it's going to continue to go higher. Now because our investment is formulaic, every time we do a new deal and every deal is priced to 1.25x, we're fighting that EBITDARM coverage because of that, because we're our worst end.

We want to grow and everything we bring in is 1.25x, which lowers our EBITDARM coverage. So if we would stop buying, which nobody wants us to do, and we're not going to. But let's say, if we did stop growing, then that EBITDARM coverage would go a lot higher because everybody -- we give it to them and everybody is always trying to improve and succeed. Again, we're only leasing out to seasoned operators that know their marketplaces that are local, and they continue to thrive and do better, and that's why the EBITDARM coverage would go up. Again, the fact that we grow, it makes it go down.

Anyway, Slide 14. This used to be one of my favorite slides, not so much anymore. Our debt is below 50% leverage, like we said. And our debt has turned into basically 1/3, 1/3, 1/3 between HUD debt, bond debt, and bank debt. Interesting to note really that out of all of that debt, there's only -- it's the bank debt, which is basically 23% of the debt.

That's the only debt that's variable rate. Everything else is with balloons that are at fixed rates. Like we talked about last quarter, the Israeli public on the last raise and there's a lot of demand they -- they wanted to give us. We were oversubscribed by twice 2x, we could have taken even more. So going forward, we have a lot of arrows in our quiver, whatever the word is.

We have a lot of different choice on what to do to raise debt. If we need debt, I'd like to see the stock price go up, so that we could also sell equity at some point. But I think debt is cheaper than equity at this point. Next slide, Slide 15. This has become my favorite slide.

This is as diversified as we've ever been, and we continue to get diversified where not a single state or a single tenant is over 25%. And in our case, the 25% is the best state, which is Indiana. So we're in 10 states, like Jeff said earlier, and God willing, and like Jeff said earlier, we're only willing to go to new states if it's a sizable portfolio, as we are a fan of the master lease, like he said as well. And so we're looking at other states now, and we're looking to grow our relationships. All of our tenant relationships today are good.

Like you said earlier, we're getting 100% of our rents and our relationships with the tenants are good where they're doing well. They're paying the rent. Things seem to be -- the building is being taken care of. So we have the ability to grow in other places, and we're going to try to do that. Slide 16 shows the map.

And you could see how we're finding our way left and right. We really like the idea of Southeast, Mississippi, Alabama, Georgia. These are all places we'd like to go. Deals are hard to come by over there. Georgia seems to be picking up that we'll be able to find something in Georgia. Again, pure play, you look at the pie graph on the bottom, you see 91.5% SNF, and that's what we do.

So with that, I'd like to turn it over to the operator for questions and comments from our analysts and for those on the call.

(Operator Instructions) Rob Stevenson, Janney Montgomery Scott.

Did I hear correctly that you guys sold something in the third quarter?

Yes. We had an outlier in our portfolio, one facility in Michigan, that we owned for over 10 years. So we basically doubled our money on the property to begin with. And it was an outlier. We were never able to grow that region.

We wanted -- this is really an asset that's been with us a long, long, long time. And we were never able to grow into a normal master lease where this could have fit into and grow the region. We haven't had good luck buying in Michigan. So we had an opportunity to get out of the asset, the tenant that was there ended up, the math worked itself out where we raised rent elsewhere. So we stayed budget neutral as far as rent being collected or rent being collected and the inverse of that is getting cash out of 10 cap for the portion of rent we're not getting.

So yes, so we pared down. That's why we went down from 11 states to 10 states. And we feel good about that transaction. We're usually never a seller. We don't give options to anybody, but this was an asset that really -- we should have moved this asset a long time ago.

The operator that was operating it, they were sending in a nurse consultant from Indiana. They were sending in a marketing team from Illinois, and they were really struggling with on the ground. And the facility had good care. I mean the survey results were fine, but they just weren't able to move that building forward, and they were always marginally making like maybe a one coverage, maybe even drop lower. And so finally got an ability to sell it, and they're happy, we're happy.

But that's a one-off kind of deal for us, Rob.

What were the proceeds from that? How meaningful was that?

It's immaterial. We sold it for, I think, $2.6 million or so, and we gave them a note or we took a note at 10% interest, which is our 10% cap. So it's -- and so they have a couple of years to pay it off with a balloon, and they're actually operating well there already. And we're good with this transaction.

What do your acquisition pipeline look like today? How are you guys thinking about the end of the year and into '26 at this point?

So end of the year at this point, we had a couple of hot deals that would have been great to end the year. We would have to do a capital raise. It would have been a beautiful ending to the year. And now it seems like there's going to be -- we should have some good volume in the first quarter '26. And if '26 will be like '25 and '24, hopefully, we break the $150 million, $200 million mark for next year for growth.

The comments around the dividend increase, were you guys at sort of your minimum payout? And was the increase from $0.14 to $0.16 basically something that you had to do? Or is that something that the Board wanted to do at this point in time?

Yes, that's a great question. So like we sit here at the Board meeting and we lay out -- I act as -- I'm the CEO. So I sit there and I basically lay out here's the deal for us to stay in REIT compliance to distribute 90%, for us to not be erratic with our dividend, for us to satisfy to move our dividend yield up a little bit and for us to keep the investors happy. We debate the topic. I mean we have the capacity to distribute a lot more, as you know, because our payout ratio is so low.

The $0.16 is exactly 100% of our net income for the quarter. The year-end number, when we end the year, there will be an adjustment somewhere that will include a little bit of capital gains, which you have to do 100% of. So when it all comes down to it, the -- they don't get a K-1 to the investors. I forgot the actual tax form that they get. There will be a portion of this that will be like -- that will be a return of capital, which is not taxable actually.

1099.

It's 1099, but it's not a regular 1099, I don't think, I don't exactly what the form is. But regardless, this -- the conversation in the room is we want to -- we know we're going to move every year because the way our model is, it's status quo and going higher. It's never -- we don't have the choppiness of going up and down. It's flat or higher. So we know that we're going to have at least one raise of a dividend a year, at least that's what we expect.

And so we had just raised last quarter to $0.16. We could have made this one $0.17, but we left it at $0.16 for now. We'll see what fourth quarter brings and then either -- and most probably the next bump will probably be either -- probably not be the fourth quarter, probably the first quarter of 2026. But yes, that's basically the conversations that we have in the boardroom about the -- we have a few Board members that want us to distribute more. And I'm basically arguing that we have this 13% -- this 11% to 13% growth rate of AFFO because we're able to take this and spend it and do good with the money and continue the model and grow the model.

And so right now, that's the prevailing argument in the boardroom to keep the dividend higher than the requirements and constantly growing annually, at least once a year to go up. And that's basically all the color on that topic, Rob.

Can you remind me when the Series D bond matures? I think that's by far and away, your highest cost of debt and when you basically get an opportunity there to refinance that?

Yes. We have our bond debt expiring September of '26. On this topic, I guess most people wouldn't air their dirty laundry, but I'm an honest straight-up guy. So one of the flaws of the bond, which we're fixing going forward is that there's a prepayment penalty all the way to the last day of the bond maturity. So we're holding out because the prepayment penalty today because the bond is traded at such a premium because it's such a high coupon, it would cost us way too much money to refinance today.

But come September time, there will be a nice savings because we know that our -- we know that we're going to get repriced out probably 3 points lower, maybe give or take, a little higher, a little lower, but we'll save a ton of money going forward, and that reprices in September of '26.

So at this point, you think that if you had to access the debt markets today, you're probably pricing somewhere plus or minus around the sub-6%?

Yes. Yes, 100%. We know it. It's not even a question. If I want to take the money today, I think it would be maybe sub-6%.

It's traded today at -- it was like 5% above par. So they love us. I mean, it's the actual yield. The yield on Series D today is in the 5s. So in theory, if we did a bond to replace it, the pricing would be a little bit higher because we would take 5-year money and because everyone is expecting rates to go down to lock in 5 years, they want to get a little bit of a premium.

Actually, I think maybe -- I think what I just told you is right, but I have to think it has to give you the right exact thought, but duration plays a role in the pricing up and down. So this is a short duration today, and that's why its rates a little bit. It's as low as it is. So I guess, yes, that's the story there. The market there loves us.

I love the market there. I do still really want to investigate doing similar to like a GMRE, like what their financing look like with BMO and lead and a couple of other guys. And so we're talking to our IPs to see what we can do here. But we're definitely going to keep a bunch of our debt staying in Israel.

Barry Oxford, Colliers International.

Just to build on Rob's question regarding the pipeline. It was at $300 million, I think you indicated last quarter, now at $250 million. Is that just more a function of how you define your pipeline, but not necessarily a commentary on what's available out there in the marketplace?

Yes. Our -- it's a moving target. Our pipeline -- I mean, I don't know if our competitors or peers use pipeline and stuff that's inked already the deals that are going to close. Our pipeline, we have a high, medium and low on probability of deals getting done. And so we're giving you the overall total pipeline.

Again, we're very disciplined in how we buy, as you know. And so for us to -- when we make a deal, that deal almost always closes. So we have to put in there the mix of the stuff that we've given LOIs, as well as things that are in contract. I don't know if that answer. I think that...

I'd add to that. I mean, it's almost like living and breathing. Every week, it changes. We're constantly going to conferences. We've got people reaching out.

And I mean $250 million represents deals that make sense for us, not just deals that are sitting -- I mean, in our e-mails. I mean, what's going into our pipeline is ultimately deals that we believe that if we can get the LOI in and we can get it, I mean, locked up, we could close it.

Given that your property type is doing very well, it seems to be attracting investor interest. Are you seeing more people showing up at the bidding process? And also, we've seen some REITs trying to add more to their skilled nursing?

First of all, I don't know if I agree with you, Barry. The REITs -- I was just with David Sedgwick on Tuesday, who I love, by the way. But they're not -- and a lot of the other guys, they're buying less SNF portfolios today. And it seems like the assisted living product is still the -- for some reason, that's the product of choice by a lot of the peers of ours. I don't like it at all.

But no, we're -- it's the same competition that we've had. And for us, like again, our sweet spot -- first of all, people are still willing to make a deal with us because they know we're going to close a deal. And I guess that's the same with our competitors. But the difference between us and the competitors, you don't see the competitors doing these small deals. Like we look at big deals, we look at small deals.

On the huge deals, right, CareTrust, Omega and the others are always going to beat us by pricing. It's not even close because they're willing to go 8%, 8.5% cap and we stay at the 10%. And then you have small deals like we've talked about before in the past, like we have an owner-operator kind of deal, and they're willing to overpay because for them, they're going to be the administrator there, their wife could be the dean, right, or it could be their children with them. It's like -- so for them, they don't have they have a different setup on how they operate and where their money is coming from. And if they get a less of a return on their capital, that's okay for them.

It becomes a family or a legacy asset. And for us, we have the shareholders to think about, and we just stay within our model. With that, again, we -- that soft spot between -- or that sweet spot for us between, I'd say, $20 million to $50 million deals, that's where we have a good shot at getting those deals. And then we also have these smaller deals that people come to us and just -- they don't even market it. And so that's where our deals come from.

Like the last few deals we did, these were all deals that, that they came to us. They didn't put it through a broker per se, and they said, this is a deal we -- that's for you guys and you want it. And we've done it, includes a couple of deals in Oklahoma and a couple of deals in Texas. And with those same sellers, we have other deals that we know we're going to end up buying from them. So it's going to -- they're creating part of our pipeline.

They're happy with the way we close a deal and the way we do business that they want to do business again with us and bring us another deal.

Perfect. Then just kind of switching gears real quick. The G&A was lower by about $500,000 or $600,000, which is a good thing. But is that a good run rate? Or will we see it move back up closer to the $2 million level?

Greg, do you know the answer to that? I think he's on mute.

I haven't really looked at the run rate for next quarter. I mean, to be honest with you, we -- Q4, I would expect this to kind of tick up a little bit more. So I guess if you want to answer right now, I'd say that we'll probably be closer to the $2 million. But I can give you a better answer, I guess, after the call, if you wish.

I could just -- just from a practical thought, we haven't added a new employee since I think maybe the first quarter when we added an asset manager, I think that was first quarter. We did hire a new lawyer, but we replaced a lawyer that was leaving after 14 years with us, and we brought in a new lawyer and it was relatively budget neutral. So from that, we talked about in the past, my personal compensation that hasn't changed. And as far as Board fees goes, that stayed exactly the same. We haven't raised Board fees in 3 years or 4 years.

So that's, I guess, another positive about us. Only other thing that's out there that may be some -- that could be some G&A is legal, and that could be based on deals and financing and some other things that maybe makes one period more wonky. Doing -- having an ATM, which we haven't been using because the stock price isn't good, we still have to pay for comfort letters and all this and some of the work that needs to go for the ATM for the accounts and law professional fees. But at this point, it's the same quarter-over-quarter. It's not -- we're not doing something new that's going to have a bunch of fees associated with it.

So I would bet you that it stays relatively flat to what you see, give or take, put yourself plus/minus a small margin percentage difference. But because there are payroll differences, some quarters have an extra payroll and others don't. So that should be the answer.

Mark Smith, Lake Street.

You've talked a bit about kind of liquidity and ability to finance additional acquisitions. I'm curious kind of your ability or thoughts around using stock more in future deals?

I love this question. One thing that gets lost in the investor public is that -- and I'm going different than what your question is, and I'm going to try to remember what your question is when I answer it. But is that one thing that gets forgotten is when we issue a bond series in Israel, the bond series has capacity for a couple of hundred million dollars more than we closed. So when we ever needed cash, if there was ever -- there's an investor public out there that might think, well, we might need cash and we're not going to be able to get the cash. In our case, because we have an approved bond series that's a lot higher than what our bonds are than what we actually took, we have availability of money at the original -- and a private placement would be at the trading price, not at the coupon price.

So in theory, if it's trading higher, then we're getting paid a premium to issue more bond debt under a series that already exists in the past. That being said, as far as equity goes, I would love to sell equity. I would love to get more shares out in the public. I would like to get more liquidity in the stock. I would love to have more institutions be able to trade at larger volumes of stock.

We've done a bunch of deals so far where we paid -- where we've been able to do stock. The last deal was the Missouri deal, where I think they took $2 million in stock or $3 million in stock. And they're actually happy with it. We had an investor call with them and walk them through their return, and they were happy with the stock. And I don't know if they're accumulating more at this point, but they're still holding it and they're happy to hold it.

We need our stock to move. I don't know what the catalyst is at this point. Maybe we get into a really big deal and then we do a roadshow and sell a bunch of stock at a decent price and then maybe that will be the catalyst to make more trading happen and get more -- get the volume up. I mean our AFFO is at this point, it's going to be a run rate of like $1.30, $1.40 for the year. Based on an average of 13% or 14% AFFO multiple, I mean, our stock is trading at a 40% discount or something like that.

I mean it's ridiculous. So I don't want to sell stock and dilute. The reality is our NAV is still probably at or around what -- where the stock is trading. It's not a metric we use for anything other than me being conscientious thinking about my shareholders and not wanting to dilute anybody. And that could be maybe a holdup that I shouldn't have, but I kindly use that to -- I'm looking out for the shareholders that they shouldn't be diluted.

I know my peers don't care about that, and that's why like one of the slides, if you look at the deck, sees where they have a negative AFFO growth, and that's because they had to sell equities so they could pay a dividend. And that ends up hurting the shareholders. But I don't know, Mark, I don't know if I answered you, but that's my take on it. I would love it if somehow our stock got to be in a normal range where I could just go then do an offering so that all my IBs can make a little money and we can bring in institutions and we could be off to the races. And that's what I'm hoping that happens at some point soon.

I did also want to ask just if there's any impact on you or your operators here with the government shutdown.

Zero. The only impact that we have at Strawberry is we have stuff stuck in the HUD queue that they're not working. And without the HUD folks being able to process changes, we have a little bit of limbo on certain things, but money makes the world go around. And in our world, thinking about it from that point of view, business is good. We're collecting all our rents.

We're meeting all our obligations. And so it doesn't have a real impact. But reality is I have a bunch of the loose ends that we'd love to tie up that aren't necessarily financial things. They're just things that have to get tied up so that we -- everything is tucked in so we can go to sleep at night. So that's really the only thing that affects us, my tenants.

I don't -- I hear a little bit of noise regarding surveys because if they're not paying for that, there's not people that could go out there and survey them. We had that problem maybe 6, 7, 8 years ago, and it ended up becoming a disaster because by certain regulations require the regulators to -- anytime they hear a complaint or this or that, they actually have to visit the property and inspect, investigate the complaint. And if they're not working and you have a buildup of 6 months' worth of complaints because they don't act on a day 1 when they were working, right? So it takes some time. It ends up being they show up in a year from now, but something that happened a year ago, and then they say you did something wrong a year ago.

And they say, well, but as of now, we already fixed everything. It's not -- they didn't do anything wrong today. And then they say, well, we have to give you a fine retroactively back there. And so there could be some kind of exposure there. But again, I've argued over the years, the operators are seasoned people that know what they're doing.

And even more importantly is they're nimble enough to recognize that there's ups and downs in business, especially in the nursing home business. Corona is the exception of being the craziest thing that any of us have seen, right? But like in a regular world, you have ups and downs, labor disputes being one example that happens, unfortunately, time from time and reimbursement being down and then up and down, that just happens. So like the guys that know this business and are really in it because they really care about residential, but they also want to make a living. They are a business in the end.

So they recognize that there's going to be ups and downs. So if there's something that is a little negative that comes out of this, so be it. It will be okay.

(Operator Instructions) Viacheslav Obodnikov, Freedom Broker.

Can you hear me clearly?

Yes.

Great. And yes, my question is on capital allocation strategy in the context of the current market. As you said, there is a very huge discount, implying about 16% to 18% annually. And maybe could you walk us through how the Board weighs the immediate and certain accretion from a share buyback against the returns from a new property acquisition? And at what point does the valuation gap become so compelling that maybe buybacks would take precedence over even a good acquisition?

Jeff, if you understood that, you can answer that.

He was asking -- I believe he was asking if we plan on doing a share buyback program to help get our stock price.

I can rephrase actually. like there is a kind of huge discount and it implying a huge for investors about 16% to 18%, right? And there is like another decision to invest into new interesting opportunities in the market. And maybe you could walk us through how the Board thinks about those 2 decisions, like buyback against new acquisitions?

So that's a really good question. The pluses and minuses of that dialogue are we recognize the need for more shares in the marketplace, not less shares in the marketplace, counterbalanced by the fact that we can buy back shares at a discount. That's true. And we've utilized it when like the stock really egregiously linked at $10 a share. We've used the buyback program that we have on file.

We've used that a little bit to prop up the stock, small. It hasn't been anything big. We still feel that -- and this is not something that comes up a lot. This comes up conversationally randomly, and it hasn't come up so recently because the stock was at more -- it was over $12 again. But our model, if we continue doing exactly what we're doing and we ignore for this conversation, we ignore the stock price and we keep returning the collective AFFO growth plus dividend yield of a 17% return, we feel at some point that should be recognized by the investor public.

And if we take the cash that we're producing and we use that cash to be able to continue the growth the way we're growing, that meets our objective as a company to keep growing with a disciplined approach and making the high double-digit returns and building a portfolio that will continue to pay and doing it the right way, meaning we're not squeezing our tenants like a lot of other people. We have that set model and how it works, which I think is fair that we put capital out there, we take risk because this is -- it's not the simplest business to be in. And we take the risk. And for that risk, we're getting a 10% return, which we compound by doing what we do by adding debt and this and that, 10% return, I think, is fair. So -- but what you're asking is a good question because in reality is we could go and do that and then bring the stock price up.

But then if there's less shareholders, there's less liquidity. And then inevitably, if somebody sells, it will kill the stock price again at some point. So I don't know. At some point, if our model stops working because the stock is just not found favorable, we'll have to do something. And I don't know if that is a fix, but it will be something that we look at.

Just a quick follow-up about the last call. There was a discussion about Illinois remains a laggard from a reimbursement perspective. Could you please kind of contrast the regulatory and reimbursement environments in kind of newer states where you're starting to invest much more against the legacy markets?

Yes. So again, to reiterate what we said in the past, right, there's two basic types of reimbursement in the country for Medicaid. There's price-based and there's cost based. The cost base is simply put, you get reimbursed for what you spend. And in those states are typically red states.

And in those red states, you don't have any labor issues because you're able to pay people more because you get reimbursed more. It's almost every dollar you spend on a nurse or CNA, you get it back from the government. So you might as well take care of your staff easier because you have the money. Illinois is price-based. And that's basically the government gives you an allowance and says live within your means.

But at the same token, in that case, I'm using labor as an example just because -- in that case, you have the employees that need to make more money because things are costing more money. And it's like an impasse because you want to give them more money, but the state doesn't give you more money to give them, and it's tough. So our portfolio in Illinois is performing. It's just -- you have some that are doing amazing and you have a bunch that are -- an amazing I'm talking about is rent coverage. I'm not talking about anything else in that example.

Collectively, they're positive and everyone is paying rent. But you have laggards. And what's going on for our portfolio, the biggest tenant in Illinois for about almost half the portfolio is stuff that I personally have an ownership interest in. And we've announced that it's known where if we have an opportunity, we will start divesting out of not the company, but the tenant, which is related to the tenant. We will stop being in operations in some of these buildings because a mom-and-pop operator can do a better job because they don't have a corporate overhead of managing a bunch of homes.

So our Illinois portfolio as the landlord, hopefully, I didn't confuse anybody here by mixing landlord tenant kind of deal. But on the landlord side of things, we're getting our rent. The rent coverage is sufficient. It's over 1. I don't know exactly the number for Illinois, but it's something.

And it's still a laggard. Illinois is the biggest laggard. And that's because -- and that's really because the state has to catch up with the costs, and they will. At some point, they always do. And in fact, the union in Illinois actually is a help because they recognize -- for the most part, they recognize that the government has to raise the money, and they were out there lobbying and trying to push for their members, they're pushing to try to get that the reimbursement should go up so that there's more money to pay their employees -- to pay their members.

So I think I answered your question. At the end of the day, Illinois, any price-based state, which really Illinois is the only one in this example that we have is the laggard and it's always going to be a laggard because the only way that it improves is that the state legislature has to be the ones who vote to increase rates because there's no set methodology that says, okay, you spend X and therefore, we'll give you back X. We'll reimburse you that X in year 2 or year 3, whenever they do it like the other states. And in this example, they just -- the legislature has to say, okay, the nursing homes are allowed X amount of millions -- billions a year, and we have to give them more money because they have to cover their expenses and it has to happen that way. So I think I answered your question.

I'm showing no additional questions in the queue at this time. I'd like to turn the conference back over to Mr. Jeff Bajtner for any closing remarks.

Thank you so much, and I'd like to thank everybody for joining us today. On behalf of myself, Greg and Moishe and the team here, we continue to work hard on behalf of our shareholders, making disciplined acquisitions and ultimately working on getting our stock price up. So if you have any questions on all our presentations in the back, there's both my e-mail address and Moishe's e-mail address, we're always available while connecting with our shareholders and investors. Have a great weekend. Thank you.

Thank you, everybody.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.