Good morning. My name is Holly, and I will be your conference operator today. I would like to welcome everyone to the Strawberry Fields REIT First Quarter 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I would now like to turn the conference over to Jeffrey Bajtner, Chief Investment Officer. Sir, please go ahead.
Thank you. Welcome to Strawberry Fields REIT's Q1 2025 earnings call. I am the chief investment officer, and joining me on the call today are Moishe Gubin, our Chairman and CEO, and Greg Flamion, our CFO. Earlier today, the company issued its Q1 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 Q1 2025 performance. I wanted to start by sharing some key highlights. During the quarter, the company collected 100% of its contractual rents. On January 2nd, the company closed the acquisition for the purchase of six healthcare facilities located in Kansas. The purchase price for the facilities was $24 million and were leased under a new 10-year master lease agreement. Under the master lease, the tenants will be on a triple net basis, and the tenants have two five-year options to extend the lease. The facilities are operated as five skilled nursing facilities and one assisted living facility and are comprised of 354 licensed beds.
We welcome Willie and Michelle Novotny of Aviva Living to the Strawberry Fields REIT family. We look forward to growing with them. On March 31st, the company completed the acquisition for a skilled nursing facility with 100 licensed beds near Oklahoma City. The acquisition was for $5 million, and the company funded the acquisition utilizing cash from the balance sheet. The facility was leased to an existing tenant who combined this facility with another facility they acquired in December 2024 to create a master lease. This lease included annual base rents of $500,000 with 3% annual rent increases and is for an initial term of 10 years with two five-year options to extend the lease. A few other items I wanted to point out. During the quarter, the company continued to pay its quarterly dividend and on March 31st made a payment of $0.14 a share.
We also made a couple of new hires during the quarter, an asset manager and a lawyer. These hires reflect the company's expanding footprint and the need to grow the team accordingly. The only other hire we anticipate in the near future is another asset manager. Subsequent to quarter end, the company purchased a 112-bed facility near Houston, Texas, comprised of 102 skilled nursing beds and 10 assisted living beds. The acquisition was for $11.5 million, and the company funded the acquisition utilizing cash from the balance sheet. The property will be added to an existing master lease in Texas. As a result of this acquisition, the annual rents for this master lease increased by $1.278 million, and this master lease is subject to 3% annual rent increases. With this acquisition in Houston, the company has completed over $40 million in acquisitions to date in 2025.
We are working diligently on some deals and expect that number to be closer to $100 million by the end of Q2. I would now like to have Greg Flamion, our Chief Financial Officer, discuss the quarter end financials.
Thank you, Jeff, welcome to the Strawberry Fields Q1 2025 earnings call. I would like to start off by looking at our financials for the first quarter of 2025. Total assets increased by $199 million, or 31.5% compared to Q1 2024. This growth was primarily driven by activity related to our 2024-2025 real estate acquisitions, as well as the re-tenanting of the Landmark master lease into the Kentucky master lease. On the liabilities and equity side, we also saw an increase largely attributable to the funding used to finance these acquisitions. Turning to the income statement, total revenue for Q1 2025 was $37.3 million, up from $27.8 million in the same period last year, representing a 34.1% year-over-year increase.
This growth was fueled by the timing of our key acquisitions over the past 12 months, including the Missouri master lease, which closed in December 2024, as well as the re-tenanting of existing leases, most notably the Landmark to Kentucky master lease transition, which started in January 2025. Net income for the quarter was $6.99 million, or $0.13 a share, compared to $5.99 million or $0.12 a share in Q1 2024. This increase reflects higher revenue, partially offset by increases in depreciation, amortization, and interest expenses. Moving on to financial highlights, AFFO for Q1 2025 was $16.8 million, up from $13.1 million a year ago, representing a 28% increase. Based on these results, we are projecting full year 2025 AFFO of $67.3 million, which would represent a 20% year-over-year growth.
Please note that the projection is based solely on the annualization of Q1 results and does not include any contribution from future acquisitions. With this projection, we expect our AFFO CAGR to be 13.8%. Adjusted EBITDA for Q1 2025 came in at $30.4 million compared to $21.4 million in Q1 2024, marking a 42% year-over-year increase. We are projecting a full year 2025 adjusted EBITDA of $128.8 million, again, based upon annualized Q1 results and excluding the impact of future acquisitions. Based on this forecast, we can expect an adjusted EBITDA CAGR of 12.2%. Finally, I want to touch on our dividend. As of March 31st, 2025, our dividend yield was 4.7%, with an annualized AFFO payout ratio of 46.2%. Both metrics remain below the average of peers in our sector, reflecting our commitment to retain capital in support of an active and robust acquisition pipeline.
Looking ahead, we will continue to evaluate opportunities for dividend growth and remain committed to aligning future increases with the strength of our underlying performance. Now Moishe Gubin will continue the presentation with the portfolio highlights.
Thank you, Greg. I'm going to continue on slide four, going over portfolio highlights. As Jeff said earlier in his comments, good quarter. Collected 100% of our rents. We've got our facilities up to 132 facilities in 11 states. We're marching towards 15,000 beds, $1.02 billion in total asset value at acquisition, which today market value of those same assets are about $1.4 billion. We're up to 16 master leases, which is about 90% of our portfolio. There's seven years remaining, what people call WALT, which is a weighted average lease term that's remaining is over seven years. We expect that number to improve with the new leases that we enter into, our brand new 10-year leases. In fact, one of the new leases we're going to be entering into should be a 15-year lease with two five-year renewals.
That being said, our EBITDA coverage has improved quarter-over-quarter. In fact, most of the metrics from our operators' first quarter, which is usually the worst quarter of the year for the operators because of February being a short month and beginning of the year, you have all the payroll taxes and 80% of the costs of our tenants are payroll. With that, we had a really nice coverage of almost a 1.9 EBITDA in coverage. We have a robust pipeline, which Jeff might have mentioned, and we expect to end the year after everything to be between $100 million and $200 million. Like Jeff said, by the end of the half of the year, we should break $100 million already. God willing, we continue on our march towards growing our company.
Slide five actually continues at the annual shareholder meeting that we had last week, where we were talking at how well we've grown and how beautiful our balance sheet and income statement look. This is actually one of them. The AFFO growth from 2019 to 2025 is almost a 14% growth rate. Really a good number. We expect this year to break $67 million in AFFO. God willing, we do even better than that because this is not taking into consideration any of the deals that we expect to get done this year. Next slide. Slide six is our base rent growth. I don't really worry too much about this, but it is nice to see that our current base rent is $135 million. That's what we expect it to be. Again, that number should be larger.
The growth rate of being 11% I think is good. It's not such an important factor to me, so we're going to gloss over it. Next slide. This slide, fortunately or unfortunately, shows actually a pretty good growth to our stock if you consider March of 2024 being at $8 and where we ended March 31st at close to $11.90. Unfortunately, the marketplace went a little crazy after April 2nd. Right now we're just battling to get to our NAV, which we believe to be way higher than where we're trading today. Next slide. This slide is something we're really proud of. The fact that to the negative is that we should be trading higher, but the positive, our return versus our peers, we have the highest return at a 57%, which we just talked about with the stock price. AFFO trading multiples, unfortunately, is below 10 times.
We've talked about in previous meetings, we just want to be treated like our peers and get to an average of 13 times, which would be a nice increase to our stock price. Next slide. This slide is one of the best slides that we have. We're just highlighting the AFFO payout ratio. It's somewhere in the middle of 46.2% and 46.3%, which is lower than everybody. We have another slide coming up to say how we, and like Jeff alluded to, we're using the rest of our free cash and using it to buy more assets, and therefore, our AFFO appreciation or accretion is larger than our peers. Our dividend yield today is 4.7%. Again, we're meeting the REIT standard. We feel that the total return for our shareholders is probably close to 17%. Next slide.
This slide 10, just highlights the fact, like we've been saying for the last few years already, where we believe we're probably the closest pure-play SNF REIT out there at over 90%, close to 91% of our portfolio. That'll continue to shrink, because we specifically don't buy other assets. They usually come along with deals when we're buying a bigger portfolio of nursing homes. That should shrink. It'll never be 100%, but it'll shrink as we continue to buy nursing homes throughout the country, and even in the Houston deal. It's one out of 20 deals that we did in a year, where we have an assisted living that went along with the nursing home, and that assisted living is 10 beds, while the nursing home is 100 beds. Yeah. Next slide. This slide 11, is what I was talking about a few minutes ago.
If you take a look at the growth rate, the chart on the right, while most of our peers had a negative growth rate, CareTrust, which is really our best comp, even though they're two or three times larger than us, they're doing great, and they're a good company as well. Our growth rate for our AFFO per share is running 10% through the last five years. We figure you take that and you add the dividend yield to that, and that's a good 15%, 16%, 17% return year-over-year. We're proud of that. As far as EBITDA coverage, 189 is a good number. We're in line with Omega, who's probably one of the biggest, and they're a good peer also, but they're really big and they're international, which we're not. We're in line with them, which is a good company to have.
We're not out of whack here. Next slide. What I've talked about already now about this slide is just evident here. The 12.1 growth rate over the last seven years or so. Take that together with the dividend yield, which I think we said was 4.7%. That's a 16.8 when you put those two together. That's really the investment, what we're trying to tell people to invest in. You got 16.8, and then you got the appreciation of our stock price that's right now undervalued and below NAV to buy the stock, and then the stock should go up and start trading the right way. Which is what we're waiting to happen. We're doing all the right moves, going to all the conferences, meeting a lot of people, talking to family offices, doing on-deal road shows. We're running around, and we enjoy doing it.
We meet a lot of good people. We've come to realize that really our company can fit into anyone's portfolio. Just a question of what larger percentage in someone's portfolio we should be, depending on how conservative. Because we feel at a relatively low risk basis for our business being that we're insulated, bulletproof. We have tailwinds in the nursing home world from the baby boomers and the fact that you got long-term debt and this is not an economic decision. If someone needs to be in a nursing home, they go to a nursing home. You have all those positives. Well, regardless, we feel that it's a low risk because of those positives, and because of that low risk, to be able to get 16%, 17% return on that, we feel that that's a really strong argument for people to invest in our stock. Next slide.
This slide 13, has just been part of our deck for so long. At this point, we used to push the fact that HUD debt was a big percentage of our debt. At this point, HUD is only about 39% of our debt load. The other two parts are Israeli bond debt and then conventional debt with Banco Popular or Popular Bank. We think we're in a good spot. I've talked about at the annual shareholder meeting, our next move at some point is to create a line of credit with a bank, unsecured, to be able to just use that cash when we want to buy something, and then hopefully backfill it with using the ATM or our availability and doing a placement of stock. Of course, we need the share price to go up because we're not going to dilute current shareholders below NAV.
At this point, until the stock goes up, we'll probably just increase debt a little bit. Again, our debt, we have so much capacity, and we're sitting today at 51% leverage. We want to be between 45% and 55%, so we have a little bit of room in our own policy to get to 55% if need be. If the stock starts trading the right way, we'll sell stock and get that number down. That's our current plan. Again, the simple thought here is we're going to keep buying the way we buy, which is very disciplined. To fund that, there's nothing permanent there. If the equity market is not trading well, and it's not open for us because we're not going to dilute ourselves like other REITs do. We're not going to do that.
We'll just take a little debt, we'll increase our leverage a little bit, then once the stock is trading, we'll then issue equity and then pay it down. Alternatively, if we have excess cash and the stock doesn't trade well, we will buy back more stock. We have availability in our stock repurchase plan that we published, whatever it was, two years ago. Next slide. This slide 14 has become one of my favorite slides, we talk about it all the time. The people that know our story well know that when our company started, Michael and I, for those who don't know, Michael Blisko is my co-founder with me. When we started Strawberry a couple iterations ago, we were the only tenants, and we were only in two states. Now you're looking at, we've been partners almost 22 years, now I run Strawberry.
50% of our tenants are something that Michael runs. I just stole my own thunder, is that basically 50% of our total tenants are now a related party, down from 100% a bunch of years ago. These two pie graphs are the fact that we've diversified our portfolio to be that there's no single state that has more than 28% of our rents and 27% of our [inaudible] by each state. Basically, we've totally diversified our portfolio. In fact, having Indiana being the largest percentage, that's a good thing because Indiana is a great state, our tenants do real well there, God willing, we'll continue to grow there, that's fine. At this point, we're going to be adding more in the next two or three quarters. We'll be adding more to Kansas, Missouri, Oklahoma, Texas, then who knows what comes along.
We've talked about it before. We're big into master leases, if we're able to enter into a new state, it'll be a big enough portfolio that it's a master lease. Otherwise, we'll be staying in the states where we are, we'll just keep adding to the master leases we have in the states that we have. Next slide. Slide 15 is just our map. As you can see, the way it's bunched up, it's bunched up on purpose because when we underwrite a deal, we're looking at the deal that it makes sense really to me and the folks that work for me that we've taught to be like me in some regard, is that we're thinking about that if we're the operator, which we're never going to be.
We're not doing RIDEA or RIDEA, however you want to pronounce that, we don't plan on ever being an operator. We're going to stay a straight landlord. We don't even expect, most likely, to ever go into doing mortgages in our REIT because that's an acceptable asset. We're probably going to stay away from that as well. That being said, I look at each one of these deals and whether it makes logistical sense that the operator should be able to get to these buildings and be able to run them well. That's why you look at this map, which is really pretty to me. It's all bunched up.
We have guys in each place, it gives them a knowledge of the locals and the way the demographics are of the local people that are living in the facilities and gets them to know the local regulators and the way things are. It's been a good model for us, that's probably why we're collecting 100% of our rents. That being said, we talked about it earlier, about the pure play, SNF, you can see in the pie graph there, that 90.9%. That's our SNF versus the smaller little segments there. With that, I'll just thank everybody for joining us today, and we'll entertain whatever questions there are out there.
Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. If you are listening through the webcast and would like to ask a question, please click on the "Ask question" box on the left side of your screen, type in your question, and hit submit. Please hold while we poll for questions. Your first question for today is from Rob Stevenson with Janney.
Good afternoon, guys. Can you just dive into the Landmark lease and sort of talk about what's going on there and what prompted that in a little bit of detail?
Sure. Thanks, Rob. Good to hear your voice. Yeah. I'm just going to talk in roundabout numbers. We, Greg or Jeff can add the actual numbers, but basically what happened was the facilities were doing well, and there was an opportunity for us to recast a new lease with a new operator. What we did was we struck a deal with our previous tenant for them to surrender their lease so that we would have the ability to enter into a new 10-year lease with two five-year renewals, and we recast it at a one and a quarter coverage, to what the previous tenant was doing. With that, we had a nice increase to our top line. Our deal with the predecessor was that we would pay them about $1 million.
The owner of the previous company, we pay them about $1 million a month for the next five years, which is right around the increase in rent for the first year. That Strawberry would win because we have a brand-new lease with a new tenant that we could grow with, which we had before also, but this just diversifies the pool a little further. Strawberry gets the benefit of the 3% increases on the higher rent number. Meanwhile, the other operator leaves, getting paid out over five years. For the first year, it nets out to be around the same number as we were making before, with an increase in the top line and an increase in the expenses on the bottom line. After year one, we get the 3% increases at Strawberry.
After year five, we get the full benefit of the higher rent amount. We felt it was good for us at Strawberry. We end up in the same position or better. The tenant leaving leaves happy, and the tenant incoming starts happy. I think we already had their first month or two months of operation, and they actually have a rent coverage in one and three quarters, even though we built it out at one and a quarter. They end up beating that by a nice number. That's the general story. If you need exact numbers, Greg or Jeff, I'm sure, are able to walk you through the exact numbers if you want them, just let me know.
The Landmark lease was somewhere, call it about $11 million. The new lease is $23.3. That's plus or minus a little bit, that's essentially what's happening here?
Exactly.
The level of the increase?
Exactly. In the long run, we make out more money with a new operator that's hungry, and we're able to grow with them. I think it's very positive for us.
Okay. The $1 million a month is just going to be coming out of the rental expense number, which was like $3.8 million in the first quarter?
You would think so. Under GAAP accounting, the way this gets recorded is actually, we created a debt on the books. Okay? As that debt gets paid down, the debt goes lower, and on the other side, we amortize the payments being made, and therefore you end up netting out. It's not netted on the top. What you're thinking is exactly how I would've done it, but that doesn't conform to GAAP accounting, unfortunately. Basically, you're going to see a higher top-line number. By the way, this is similar to three, four years ago when the GAAP rule changed with regards to how to record property taxes that are collected from tenants. Property taxes come in, and we pay it out for them. It comes in as a top-line revenue number, and it goes out as an expense.
They net out again to the same rent number that's supposed to be the real rent number. Over here, I hope I answered what you said. That's basically how it plays out.
Okay. Then I guess the other ones for me, anything non-recurring in either revenues or expenses in the first quarter income statement that we should be aware of?
I don't think so. Greg, is there anything that you could think of that's non-recurring?
Nothing comes to mind. No. It was a pretty clean quarter.
Okay. Last one for me, did you guys issue any shares under the ATM in the quarter?
I'm going to defer to Greg to that also. I know we haven't been doing anything because the stock price is down, because our limit at some point was $12 a share. Greg, did we sell anything under the ATM in the first quarter? It would've been January or February.
Yeah. We did sell some shares. Actually, it was 190,000, give or take. It was about $2.2 million.
At what did we execute that, if I have that?
Okay.
It was out to $11.75 a share.
$11.75 a share. Yes. Thank you.
190,000 shares at $11.75 a share?
Yeah.
Correct.
We also-
2.2 million you said?
Yeah. We also bought back shares when the stock went down. What was our stock repurchase for the quarter?
That was in Q2.
Oh, that already happened in the second quarter. All right, never mind.
I guess the question, because I saw that the $2.5 million remained the same from the K as of December 31st. How many shares have you bought back thus far in the second quarter?
I don't have the exact number in front of me, unfortunately, but it's around 100,000 shares, I believe.
We bought it.
Okay
We bought it around $10 a share. Theoretically, we made a profit on our own stock.
Okay. All right. Thanks, guys. Appreciate the time, and have a great weekend.
All right. Thanks, Rob. Have a good weekend.
Your next question for today is from Rich Anderson with Wedbush Securities.
Hey, thanks. Good afternoon, morning, wherever you are. Just a question on the map, the beautiful map, Moishe, you referred to with all the nice colors.
It is.
There's one color yellow I'd like to ask about the miscellaneous operators. I'm just curious if you have a plan there to kind of blend them in with other existing operators. What that strategy looks like for you going forward.
That's a good question, and good hearing your voice as well, Rich. You got to look at it by state. Oklahoma is just the first one that caught my eye as I opened up the map here to be able to answer your question. Oklahoma, we're growing a master lease there. The short answer to your question is, we're not going to consolidate individuals to make all the yellows to be one guy. What we are looking to do and we are doing, is that each one of the little groups of yellows that are individuals, we're looking to grow their master leases so that they can be a standalone color, I guess, on the map.
Oklahoma, we have a deal for another facility, and then we have another facility after that, and that'll end up bringing it to, I think, four with that operator. Texas, we have two different master leases in Texas. One of those master leases, we are actually growing that master lease as well. That one's a little bit anti to what we typically do because we're bringing them to a whole new state with a bigger portfolio. It's going to be still in one big master lease, which will make that relationship go up to, I think, 11 facilities. That'll be good. Illinois, we've been slowly but surely taking out the single operated facilities, which are our real legacy facilities, and we've been slowly transitioning them out of mom and pop and into a new operator, that has a master lease with us already.
I think we have three. No, maybe we're already up four or five facilities with them, then we'll be able to grow that. What you should see, assuming everything happens the way we expect it to happen in 2025, that at the end of the year, we'll see that Oklahoma will be their own color because they'll have a bunch of properties there. Then you'll get rid of a couple of the Texas, then we'll add another state, that'll be a different color. We'll be narrowed down to very few singles, basically, is what we want to get rid of. We want everything under master leases. Like I said earlier, I think we're about 90% of our facilities are master leased.
If we could get the last 10% into master leases at a minimum of four or five facilities, then that'll be getting to where we want to be.
Okay. I'm intrigued by the expectation to be at $100 million by the end of the second quarter. You mentioned not using equity at this level. What is the game plan if everything sort of holds constant right now? Is it just more debt, cash?
Yes.
How much cash do you have to use right now? I'm just curious, what the funding strategy would be to get to that incremental $60 million.
That deal, that is right around $60 million. We are going to take $20 million of cash from our balance sheet, and then we are going to take $30 million in a conventional loan with a bank. Then the last $10 million, we will most likely just draw on our bond debt in Israel, to be able to just meet our cash needs for the second quarter.
Okay. Last from me, are you having any sort of issues trying to underwrite deals going forward with some questions around Medicaid, the Congressional budgetary process? Is that getting in the way at all in your conversations? Are you changing your underwriting to kind of protect yourself a little bit? I am just curious what is going on there in your mind.
Two points there. First of all, our underwriting has not changed in many, many years, and we have talked about that. I am sure, Rich, you have already heard me say at least three or four times of how disciplined we are and how we underwrite. That has not changed. The factors that we need our tenants to come into the deal, their experience and their financial strength, and I always talk about their integrity, right? Those are the three, basically the pillars that hold up our world. From that point of view, nothing has changed. We have not changed our bogey as far as what return we want and our debt service coverage ratio we want on day one and rent coverage that we want on day one. That all stays exactly what it has been for many years.
In fact, our board is really adamant and at the same time really strong and pushing and proud that we remain stable and consistent and over the years, they have told me if we cannot find deals that meet our box, just do not do deals. That is not a problem that we have had, but nevertheless, that is a philosophy that we have. As far as the Medicaid conversation, that is a very, very common conversation that I have, both with investors, with bankers as well. Keep in mind, our balance sheet today, really the way our debt is structured, the tranches that we have, we do not talk to HUD about any of this stuff, so they are out of the contention. Conventional lenders are healthcare lenders because that is the space, but you have to find a lender that knows healthcare then.
They all know what's going on, and that's really just a conversation. It's not an inquisition or any trouble. I guess the biggest topic at the water cooler would be the Israelis and the Israeli bond market because they read this stuff and they believe everything they hear. It's a little bit of an aggravation because first I have to have the same conversation over and over. We don't ever have groups call. Like on this call, we have a group of people calling. Over there, it's one by one by one meetings, and that's the respect that they want and they deserve, at least in their mind. You have to have the same conversation over and over.
They also don't understand really the starting point culturally in America versus Israel or other countries is that other countries, people take care of their elderly at home, and it's more understood in the culture to do that. In America, that's more of a minority of the people. Most of the time, somebody needs a nursing home, they just put them in a nursing home, and they don't consider taking care of mom or dad at home. Good or bad, I'm not judging anybody. Culturally, the way that works in America, obviously, is that we're not going to turn our back on the elderly. I have the conversations, but none of it affects business. It just affects just the conversation I have with. It could be it turns away an investor when I talk to somebody that they're worried about this or that.
It hasn't affected our business, and it's not going to change our model of us going out there, being transparent, talking to people, and doing what we do. I expect business to be able to continue as it is, which has been very good, and I don't see where any of this stuff really hurts us. It gives me a little bit more work and a little aggravation, but other than that, it's fine.
Okay. Sounds good. Thanks.
Thank you.
Your next question is from Gaurav Mehta with Alliance Global Partners.
Thank you. Good afternoon.
Yeah.
I wanted to go back to your comments around $60 million of acquisitions expected in 2Q and on the funding portion coming from debt. Can you provide some color on what's the cost of debt for you guys today to fund that acquisition?
Yeah. Our cost, and again, it's a 10 cap, you take roundabout a $59 million deal, right? Our rents will be $5.9. You know that side of the equation. On the other side of the equation, we have our $20 million of cash. We have $30 million, which should be, or $29 million, which should be SOFR 300 or thereabout. The bond debt, the other $10 million. Right now, that rate is about six and a quarter. It's going to probably all in cost of doing an issuance, it ends up being close to 7%, and that should be fixed for I think the bank debt is going to be fixed either three to five years.
On the bond debt, it's going to be, I think what we're going to have is a duration of probably five years, which might be a seven-year deal. You guys know how to math to figure out the duration on a seven-year money based on a 4%-6% principal paydown annually. I guess blended cost, if it's 20% is zero, I'm sorry, if $20 million, which is one-third, 33% is at zero, I guess, and then the other 40% of that is at SOFR 300, and then the other one at 7%. I think you blend it out, it's probably somewhere low sixes altogether, six and a half, six and a quarter. Somewhere around there is what our cost is.
Okay.
Does that make sense?
In your prepared remarks, you also talked about looking at line of credit. Can you maybe provide some color on the timing of such a line of credit and what kind of size are you looking at?
Yeah. Sure. I'm kind of breaking the Jewish law, or I guess it's in the Bible for Christians as well, is coveting thy neighbor's stuff. I'm coveting the neighbor of the REITs that are out there that are more mature than we are, where at this point they have a line of credit out there. We've spoken to basically three banks. The product that basically that's coming along is an unsecured line of credit, which basically eats up our current bank debt for the most part, not all of it. The current bank debt we're doing on this deal, that $30 million is going to have to sit outstanding because of the prepayment penalty.
The rest of our stuff would be absorbed, and basically our whole balance sheet, other than the HUD debt, would all be unsecured debt, which is good for business because our HUD debt today is about 39%. Having the rest of our debt be in a portfolio that only 39% is secured and the rest of it's unsecured, that works for the model. We're looking at anywhere between $200 million-$400 million or $200 million-$500 million. Pricing on that is still probably SOFR 2 to 300 range, maybe. It's not going to be less than two, definitely won't be more than three. It'll be somewhere in the middle of that, maybe 2.5, 275. That should give us the flexibility once we get that done, which hopefully that's a 2025 deal as well.
Once we get that done, then going forward, we just draw on the line when we need it and then hopefully sell equity to pay it down and then still continue with our original philosophy of taking debt and moving it to HUD when we can. You figure if things continue the way they're going, like I said, 39% would be secured debt with HUD long-term money, average rate in the threes, and then everything else basically sitting SOFR 300 or below, in mainly unsecured. Depending on where the stock trades, that'll keep us where we can keep our total leverage to be between 45 and 55. Our world would be in total balance, which is where we want to be. How that plays out, timing, we're working every day. God willing, things happen in the right time.
That's why I'm saying that hopefully this all happens by the end of 2025.
Okay, thank you. That's all I have.
All right. Thank you, Gaurav. Be well.
Your next question is from Barry Oxford with Colliers.
Great. Thanks, guys. When you guys look at acquisitions going forward, you already alluded to the 10% cap rate on the current assets, are you still seeing deals or a fair amount of them at the 10% cap rate while being able to stick to your rent coverage for the tenants? Or is that starting to get a little narrow and maybe you have to come into nine-five to kind of keep the tenant at the rent coverage where you'd like to see them?
No, absolutely not. I guess if I really wanted to compare that, I would start trending or tracking quarter-over-quarter what our pipeline has between Because we divide our pipeline between hot, warm, and cold, basically, or high, low, medium of likelihood to get done.
Right.
We haven't changed our standard at all. Everything begins at a one and a quarter minimum, and everything is a 10 cap. We haven't bought less than that. In fact, on some of these deals, we've even gotten a little bit better than the 10, maybe 10.something, maybe not up to really 11, but somewhere over there as far as our return. Today, our pipeline is easily $300 million. Out of that, we probably expect, like I said, giving the guidance of between $100 million and $200 million, knowing full well that we expect by half a year we'll have broken $100 million already. Last half of the year, we have enough in our pipeline at our exact investment protocol to be able to do the rest of hopefully another $100 million for the second half. We should be able to do that.
We don't have any problem at all. Out of the rest of that $300 million, you're probably talking about low likelihood of on maybe $100.something of it. We'll keep working. God willing, we'll find more deals and we'll keep doing what we're doing.
Would you have to access the equity markets to make the second half goals for acquisitions?
I would love to. I truly would love to.
Right.
It's the marketplace. Anyone that's willing to make an effort and do the math to figure out what our NAV is, in my mind, at a 10 cap NAV, our stock price is worth, or each share is worth close to $13 a share. I don't think it's fair to my shareholders to sell stock at a number below that because they don't deserve to be diluted. We have a great company making a lot of money doing business the right way. I'm expecting that the marketplace at some point makes that little effort and realizes how undervalued our stock price is and the stock moves.
To answer your question, if I have it my way, the stock gets to where it should be, or at least above the NAV number, we would do a raise most likely in the second half of the year, $75 million. We would use all that money either on new deals or to pay down debt. We get through 2025. If not, we have availability on our bond debt. Like I said, it's somewhere between 6% and 7%. We have availability right now for easily a couple of hundred million dollars, the marketplace wants us there. It'll be easy to get done. Again, the problem with the bond debt, which is what I want to avoid, is that that bond debt is more, there's prepayment penalties and the investor wants a coupon long term.
It's not as flexible of you being able to get in and out of that deal. I'm trying to avoid it as long as I can, but if I have to do, I have to do. Because the deals make sense, it's good for our company, the price is not expensive. It just locks me in for a longer term, that's something I'd like to avoid, but it's something that we'll have to do to be able to close a deal.
Right. Okay. That all makes sense. When I'm looking, you mentioned that you had two more hires and maybe another asset manager by the end of the year. When I think about your G&A as a % of revenue, are you going to be able to keep that fairly constant, or will we see that rise, because of the new hires? Will the rampant revenue keep G&A as a % of revenue fairly static?
No. When you see a full quarter, which will be the second quarter, you'll see our total payroll went up. Actually, first quarter had a one-time. I think Rob asked if there was a one-time. First quarter of this year, unless we accrued it in fourth quarter, I gave a bonus of a couple of hundred thousand dollars to our employees, and we gave it to them in half stock and half cash. I don't know if that was accrued in the fourth quarter or if that was.
It was accrued, yeah.
It was accrued?
It was accrued.
Okay. Fine. Ignoring that comment then, you're talking about an increase to the G&A, in the second quarter of maybe max $100,000 a quarter. It's not a big number at all to anybody that's on this call.
Okay.
The last hire that we need to bring in, it's not a six-figure salary. Other than that, our cost of running our business should remain flat. That's it. Unless I'm missing something, we're running real well. We're timely on producing financial statements. We're timely, and we have good analytics, and we have a good knowledge of our tenants' operations through the asset managers. The only reason another asset manager is needed is because we should end the second quarter with over 140 facilities, and if you divide that by three people, it's a little bit stretching them thin. The good news is that 50 facilities or so are Infinity. We don't have to worry about that because nobody cares more about these facilities than Michael and I. They still have an asset manager that has a job to do.
Nevertheless, you don't have to be as worried as you do for the real outside operators. You take 140 and divide it by three, that's an awful lot of work to be done. When we have a rule that you got to get to the facilities at least twice a year, just travel dates alone makes it that there's not enough time to really know your buildings well as far as managing the asset. I feel like we have to do that because I want to stay with our model of making sure. We haven't had a building get closed on us. You guys know our competitors, and you know the issues they've all gone through. They are bigger than us, that's true, but we haven't had any of that. We collect all of our rents. Our buildings are never been shut down.
We have a nurse consultant that actually reviews every single survey. I don't know if other people do that, but we do that, and we have calls with their operators about the care in the buildings, even though we don't control them and do anything, but we care about our asset, and we want the residents to be taken care of. That's just us going above and beyond because we care about people. As far as costs for our company, there's nothing coming down the pipe that's big. One thing that I brought up, I think maybe a year ago, which is still out there, is my pay. My pay still hasn't changed in 10 years. There has been conversation in the company to pay me what a normal CEO makes for the REITs. I've deferred it myself because I don't really care.
I care about my company more than I care about me. So it hasn't been an important thing, but at some point down the road somewhere, I assume compensation committee will decide something and there'll be something for me. That's definitely not today. I hope I answered your question.
Okay. Oh, yeah. For sure. I appreciate all the color on that. That's very helpful. Thanks, guys. Have a good weekend.
Okay. All right, Barry. Be good.
Yep.
Your next question for today is from Mark Smith with Lake Street Capital.
Hi, guys. Most of my questions have been hit here, I did want to ask, just big picture, with the new administration, if we're seeing any changes on regulatory or payment from Medicare/Medicaid front.
Yeah. Hi, Mark. I only know what I hear from our tenants and Michael. I think it's too early to really gauge how the environment's going to be. If it goes back to the way it was when it was Trump 1.0, then those were great times for the nursing homes with regards to how the regulators, the surveyors, treated the facilities. What the mandate was from D.C. on how to be a support and a help as opposed to wanting to put their thumb on people and be difficult like it was the last four years. Outside of that, we've already seen increases to Medicaid rates in Illinois, in Kentucky.
I don't know if there was any other specific states where there was increases, because a couple of the other states are all cost-based, so they go up anyway on a regular basis, from the annual cost report being filed. I would say that I don't expect there to be a negative. I happen to be an optimist to begin with, so take that with a grain of salt. I haven't heard anything bad. I expect, like I said, the regulatory side to be an improvement. On the financial side, I expect it to, at the end of the day, be status quo, like I touched on earlier. There's a social need for the nursing homes to take care of the elderly here in America, and it needs money to take care of it.
They have to come through at the end of the day, the Congress and the government.
Yeah. The other question from me was, it sounds like a lot of confidence in the acquisitions coming up here in the pipeline, especially near term here, Q2. Any other commentary you can give just on your confidence in the pipeline? As we look at acquisitions, are you needing to expand more geographically, or do you think here in 2025, you can hit your goals still within the states that you currently operate?
Yeah. We have enough pipeline to hit our goals in the current states, adding to the current master leases, which is great for us. That means we'd be growing in Oklahoma, we'd be growing in Missouri, we'd be growing in Kansas. We'd be growing potentially in Texas. That'll get us to where we want to be. We look at a lot of deals, like we have been looking at a lot of deals year-over-year. In a given year, we close, I don't know, 10 deals. On a good year, on a bad year, we close no deals, and we look at hundreds, 300, 400 deals a year, maybe more.
If you count all the MOB stuff that I'm always looking at, even though we never do any of those deals, but I still see it and I go, "Oh, this is a mile down from a nursing home. This could be great for the nursing home boom, because all those doctors that are there could maybe end up being a help to the nursing home." We end up not doing any of those. We spend time looking at them anyway, Tipton, Indiana, Greencastle, Indiana, as well. We look at that, but I think if a deal came in Wisconsin, Minnesota, Alabama, just growing the nucleus, to expand but not go that way too far, not go this way too far. Ohio would be a great state to grow into, grow more in, but we just haven't found a deal in Ohio for whatever reason.
That's been a state that I'd love to have grown for years, and we haven't grown. Yeah, to answer your question, like I said, within our portfolio, within our current master leases, we have enough volume to be able to hit this year's targets, and then some. We are looking at stuff that's outside, and if we find something and the deals work, we will be glad to do it again. It has to be in a master lease structure. It has to be big enough, at least 500 beds, more than that, 700 beds. Yeah, that's God willing. 2025, I'm not going to disappoint anybody. 2026, I'm an optimist, but who knows what happens in 2026. Hopefully, that answers your question.
Perfect. Thank you.
You're welcome.
Yeah, absolutely. Thank you.
I will now hand the call back to Jeff to answer webcast questions.
Thank you very much. We have a couple questions from the folks at Freedom Capital Markets. Their first question is, are AFFO and rental revenue guidance limited to the current portfolio, or do they also include future acquisitions?
Really, you could answer your own question because you're the one that did the model for that. If I was answering that, our numbers that we present, are based off of current annualizing first quarter numbers. I think our current number we're expecting is $1.21, but we know that we should beat that. I think $1.21 is the AFFO per share annualized for 2025. I think we'll end up beating that anyway, please, God. I think I answered that question.
Yes. Their second question is, for new acquisitions, is the company open to issuing OP units or stock in lieu of cash?
Oh, yeah, 100%. I should add that to my regular comments to begin with. I'm glad they asked the question. We love that. We did that in the Tennessee deal. We're doing that now on this $59 million. I guess I misled, who asked me? I don't know if that was Gaurav. I forgot who asked me that, but we have at least a minimum $2 million out of the $59 million is they're taking OP units, hopefully at higher than a NAV per share number. We're not going to dilute anybody. We love doing that. That's actually a value add because we go out there and talk to people and say, "Hey, listen, you could defer a capital gain," especially if it's family money.
Nursing home has been in the family for a couple of generations, you don't want to see a capital gain day one. You could defer the capital gain, you could put it in a trust, you could take it and pass it along to the children's trust, and you could gift it to them. Until they turn it into tradable shares, it's not a taxable event. There's the same dividend that's paid out, like as all you guys know that on the call, it's an exchange one for one, it's, what do you call it? It's the same dividend yield because the same dividend that's paid out to common is paid out to the OP units. We love it. We've had a lot of interest in it, which is great.
If they would look at where we're trading at a discount to NAV, then they have upside of the stock. If it traded appropriately as a multiple of the AFFO, like all the other peers, then even from NAV, there's a premium to be had on that where someone can make 10, 20, 30%, getting the stock at NAV versus what the market price should be. The answer is yes to the question, a long-winded yes.
That does it from my end, I believe that does it for questions from the analysts. I want to thank everyone for joining us today. It's been a pleasure as always, feel free to reach out to Moishe, myself, or Greg. We are available to answer any questions you've got about our performance or what our pipeline looks like, we look forward to keeping in touch, hopefully, we'll see you all soon. Have a great weekend.
Great weekend.
Take care, guys.
This concludes today's event, and you may disconnect your lines at this time. Thank you for your participation.