I am excited to introduce to you Moishe Gubin, Chairman, CEO, and founder of Strawberry Fields. Take it away.
Thank you. Let's start with how many people in this room are shareholders of my company? Nobody. Perfect. My Chief Operating Officer. So far, every meeting we've had is with people that are already shareholders, so it's been peaceful. I'm not trying to sell, so I guess this is the first time I'm trying to sell. My name is Moishe Gubin, like she said.
I am the CEO, Chairman, and founder of Strawberry Fields. We're listed on the New York Stock Exchange on the ticker STRW. Our company, I'm hoping you guys know the REIT space, but just basically the REIT space versus regular stocks. They're taxed differently, where it's based on your tax rate, not on a corporate tax rate, so there's no double taxation. Simple. REITs, we have to distribute 90% of our net income.
Fortunately, since it's real estate, we have a lot of depreciation, so there's a lot of leftover cash outside of paying the dividend. A REIT is not allowed to have more than five. Actually, anyone wants to know more about REITs, talk to me afterwards. I could give you all the rules. I'm a CPA. Jeff, who's here, is also a CPA.
Our company basically starts with my background, which is my first job out of college was working at a nursing home in 1998. I started in an accounts payroll, bookkeeping role. Worked my way through the financial end of the business and found myself moving to the Midwest, right after September 11th, with my family. I was running 17 nursing homes in the Midwest for an organization as a Director of Budgeting. My background is basically the financial end of the business.
I found my partner while I was doing that, and together we bought our first nursing home October 31st, 2003. I'll go through the slide deck, and then all of this will somehow come together, as long as you stay awake for the next 25 minutes or so. Our company, really strong cash flows. All of our leases are 10-year leases with two five-year renewals, 3% annual escalators.
We've collected 100% of our rents year in, year out for the last eight years. If you understand the REIT space, which I'm not sure everyone does, but once you understand that everybody's on an even playing field of what a REIT is, then you have to pick which industry you want to kind of be, or you want to blend a portfolio to be different industries. Our industry is one of the only industries where it's a needs-based business.
Everything else is want-based. Something happens, you want to have this, you want to have that. You want to go into that technology, so you need that space for that want. So outside prison, nursing homes, really it's not good to put those two together, but the nursing home space is something that's a need. God forbid someone gets sick, they've got to be put in a nursing home. It's not where anyone wants to be, per se, but it's where you have to put them there.
Our whole business is premised on the baby boomers, and the need for a nursing home to take care of them, and for a real estate company that owns the real estate to lease to these nursing home operators. That's what this is all premised about. The cash flows that the operators get.
We're triple net leases, so we don't suffer any of the risk of all the regulatory stuff and all that. The residents themselves are coming in. They're being paid for. Majority, like 90% of the revenue is coming from the government between Medicare and Medicaid. Built into the law of the Social Security Act in the '70s is the reimbursement model for the nursing home.
As long as they're running well, they are geared to be always profitable because that's the way the program was created. My background, I started working in the nursing homes. I fell in love with the business. I fell in love with actually, I used to roll the residents out myself to get cigarettes. It's either you really belong in that business, you like people, and you take care of people. The people that just do it to make a living, really, it's not really meant for them.
Our track record, like I said, bought the first building in 2003. From there, we got up to about 33 buildings in 2015, and since then we're up to 142 buildings. We're growing at about a growth rate of about 8% - 9% of assets by buildings and gross dollars. On $1.6 billion of real estate, we're spending about between $100 million and about $150 million a year.
That's been the way it goes. I'm under the gun as far as time to speak, but if anyone wanted to go through it, the math really, it's all math. We make X amount of money. From that money, we have to distribute out about 50%, so our payout ratio is one of the lowest in the industry.
With the leftover money, we use that. We lever it up at lower than 50% leverage, and we're able to grow about $100 million a year. Wash, rinse, repeat, doing this for 20-something years, and that's how it kind of goes. We feel that this is an industry, of course, that's going to continue to be strong and actually continue to strengthen.
As the baby boomers age in America, everyone knows, at some point, there's a percentage that need to be taken care of in a facility, and there's no new facilities because the cost of construction is too high. Because there's not an ability to grow the supply, and the demand is going to continue to increase, usually for those economics majors, supply and demand meet over there, and it takes up capacity, and usually, that's a good return.
Again, we're on the New York Stock Exchange as well as the Tel Aviv Stock Exchange. We've been traded publicly now for over four years on the New York Exchange. We have an active pipeline Company snapshot. Like I said, I started it in 2003. I was there day one. I've bought every single asset myself. I've been there since the beginning, and until the shareholders decide that they don't want me anymore, I'll continue to work.
I'm happy to go to work every single day. We realized recently on a family trip that really my natural habitat is behind a desk somewhere working. I really have no other hobbies, unfortunately. That being said, Pure Play SNF, we have today about annualized rent of about $143 million. We have over 15,000 licensed beds. We've collected our rents year in, year out.
Really that goes to how we run business. Everything is done in a very personalized, friendly way. We're not cutthroat like a lot of the other REITs that are out there, which were started by investment bankers and lawyers. We're actually accountants that started working in nursing homes and dealing with residents, and this is what we do.
That same way of doing business and why we're in the business is really why I think we're so successful in how we do it, is because everybody that we deal with is done in a friendly way. Even if somebody has an issue, I deal with them personally. We're able to usually resolve anything that goes on, and that's why we're able to collect 100% of our rents the last eight, nine years straight.
Most recently, a big deal for us as part of our evolution of how we grow our company is we closed on a $200 million line of credit. That basically is going to make it that going forward, whenever we need to do a deal, we're able to draw on the line. It used to be that I have to stockpile cash, spend the cash, and then find the way to refinance it.
Now we're just able to use the line of credit and then pay back the line, find permanent financing, or at some point, depending on how our stock trades, use the ATM or do an equity offering to go and lower our debt. Right now, our total debt, if you look on the chart here, we're under 6x for a net debt to EBITDA.
On a debt to total leverage for us, depending on what cap rate you want to assign to the assets, we're below 50%. I think we're closer to 43% because the peers that are out there are buying things on an eight cap, eight and a half cap. We're putting everything on our books at a 10 cap. It's basically lowering the value by a couple of hundred million dollars of embedded equity that we're not recording.
Again, we're at lower of cost or market, which is GAAP accounting. We're recording everything on our-- If you've read our balance sheet, you wouldn't know that we have over a billion dollars of value on top of what we have it on our books for, because we're showing a net depreciated value. With that, we have just under $74 million of AFFO.
For those of you that don't know that term, that's basically free cash flow. In the REIT world, real estate stuff, they use FFO. We don't really use NOI. We don't really use EBITDA. We use AFFO, and that's also the metric that all the REITs that are out there, if you guys are REIT people, the average REIT today is trading at 15.9 x your AFFO.
We're traded at 10 .5 , which unfortunately, I don't have a catalyst to tell you of why you should buy it today because it's going to get to the 15.9. I just believe in my heart that at some point the market's going to catch up because we're running a very clean business year in, year out. We're going to celebrate 23 years, which is the group.
We're only on the, like I said, in this iteration since 2015, and on the market for four or five years. Our rent coverage is over 2x . The adjusted EBITDA, again, that's not a metric that matters, but it's over $127 million. Interesting to note, since I started this company and I grew up in a poor family, this is my legacy asset. This is the asset that we want to continue generationally in my family.
Because of that, we've been very disciplined on how we buy. We haven't changed our methodology over the years. We haven't changed how we buy. We haven't changed what our criteria is on what we look for in tenants. All of that's the same, okay? Which means to say is that it's worked for us for a long time. We expect it to continue to work.
Am I leaving money on the table potentially somewhere? Maybe. But at the same token, the trade-off is stability. I gave the example to someone we met with today . It's a 10-year lease with two five-year renewals as an example, and let's say we lease 10 buildings to a person. In year eight, two years into it, eight years left on the lease, we find another deal that fits into that master lease. We go back to that tenant. He's already making 2x coverage, 2.5x coverage.
Instead of waiting till his lease goes down to where it's one year left and now I could go and renegotiate a lease, I'd rather get the longer WALT and say to them, hey, let me add this to the master lease, the 10 cap on the purchase, and then we'll just extend out the lease term for another two years.
That's basically why our WALT is closer to eight years, seven and a half, somewhere between seven and eight years. That's because I'd rather trade in the stability of having that rental stream for the next eight years and instead of risking that something happens between now and year one when his lease would expire, and then I could then negotiate then.
I don't know if that makes sense to you, but WALT to us is for us the certainty that we're going to have the income stream, right? This is a math equation, right? We're doing the work to. We know the industry, we know the people. We're researching them. We're underwriting it as if it's a credit at a bank, and we're looking at them as a borrower, and we're underwriting their ability to repay us, where they learned their management knowledge and success, so on and so forth.
But that being said, I then want the consistency. I want to make sure that they're going to keep paying us long term. The more money they make, the more I know that the rent is covered. The more the rent is covered, the more certainty I have that the money's going to come in, the more certainty I have that I can tell my investors, you'll get your dividend check every quarter, rain or shine.
I can't announce that I'm going to do a dividend in the next 10 years or quarters, but reality is, you look at our history, we're paying a dividend now for four or five years running. Every quarter, I think we've raised the dividend seven times in four years. So we've continued to grow rapidly in the dividend. The reason why we haven't gone crazy with the dividend is because investors don't want an erratic nature of a dividend. They want to be able to rely on the fixed income. This is what they're going to get.
They know it's going to be at least this, and they know maybe it's going to be higher. That's what we've done, and that's been our history. I would ask you folks at some point to read this. This hasn't changed in many years, the way we do business, the way we talk to people, the way we act. They have quiet enjoyment. They can do what they want.
So we sit there, and we're not telling them what to do, but we're there involved in their business. This is our base rent. You could see how we're basically in the middle of the country, and we continue to add by state. If it's a big enough portfolio is where we're willing to grow somewhere else. If it's a single one-off, then we want to add it to a master lease.
We won't buy a one-off in Oregon or Wyoming or Maine or Vermont. We don't do that. We're looking at is, if I was going to be the operator with my background, would I want to run over here for one building and one building over there? I wouldn't want to do that. It doesn't make any sense.
It makes more sense to say, I got a pool here. If something goes wrong with my tenant, I can stabilize it, give it to the next guy, and we can just move on with our lives. So if you look at this, now interesting to note is our largest state is really the best state for us, and they have the best rent coverage. Our growth, we have a good active pipeline. Like I said, I've been in this business for a lot of years.
If you know healthcare world, specifically nursing homes or hospitals, it's a little smaller cabal of group of people that own them all. There's different events. In fact, this week, the NIC is at the Sheraton in Chicago. I'm flying from here tomorrow, and then I'll be there. It's a smaller group of people that own or operate a lot of the nursing homes in the country.
With that, being in the business a long time and having made good relationships, it helps us in our business where someone comes to us with a deal, and also it gets us to know operators so that when we find the deal, we have a tenant to be able to lease it to. That's the external growth.
Internal growth, like I said, we have 3% annual increases, collecting all of our rents. They're all triple net leases. This is how we buy. We find the deals, we underwrite the deals, we structure it as normal leases like we do, and then we put it into a master lease, and then wash, rinse, repeat, and we've been doing this for so long. This is how we've grown. You'll notice it hasn't been anything crazy. This is from 2015, so the last 11 years or so. The way we buy, and every year it's feast or famine. When you're disciplined, you can't control your growth.
If you're disciplined and you don't change and you're not a feather in the wind or a fly by night, or whatever the term is, if you hold firm, your deals come when they come, and you jump on them, and the deals don't come, then there's nothing to do.
In those years, the benefit today with the line of credit that we have is since that line of credit is at SOFR + 275, if we don't have a deal, instead of sitting on cash that's not earning anything, we're at least earning the SOFR + 275 by paying down our line of credit. That's a better use of how we manage our money. Demographic tailwinds, I'm sure we're all Americans for the most part. You see it, the aging population, the baby boomers. It's a long story here.
The amount of Americans that are going to be getting to be 65 years old in the next 10 years, 72 million more of them, 83 million more in 20 years. It goes on and on. I would just, going back one slide, this is a big point. Unlike a lot of the other REITs, if you guys are REIT investors, ours is the only one where there's a barrier of entry.
You can't just build a new nursing home next door to a nursing home. You need permission from the state through a CON process. Every step of the way requires some kind of regulatory agreement. If you're in multifamily and business is booming and you build a big 300-unit apartment building, if that starts selling good, your competitor could build one right across the street.
There's nothing stopping them from next year when people's leases are renewing for them to go say, we got a better deal. Come to me with your lease, and I'll beat it by 50%, or something. You could compete. You can't do that in the nursing home world. That's a big point.
This is where numbers people would get a kick out of this. If you look at our growth rate is 11% growth rate of the actual AFFO. Again, really, that's our metric of net income. To regular folks, it's net income. We're using AFFO, which is how much cash are we left with after we pay everything before dividend. For us, we went from $43.9 million in 2021 to $74 million in 2026. That's 11%. Same thing with the growth rate.
The thing to be noticed about the growth rate, which is a 13% growth rate, again, that's using historical cost of what we paid for something. If we were to throw in everything mark to market, we feel our portfolio is probably closer to almost $2 billion today. You're missing something here that you'd add to your market cap, or you'd add to your equity when you were figuring out your math on where we are as far as a balance sheet goes.
Again, this slide basically talks about somewhat earlier in the presentation is basically this is the math of the deal. In 2026, $24 million is left over before doing a dividend. We dividended out about half of it, and that leaves us with $37 million.
From that $37 million, we're able to take that, and if we wanted to keep leverage below 50%, that means we can take that $37 million and multiply it times two, and that's what we could buy. We add to that whatever principal paydown we've paid down or w hatever debt we've paid down, we can add to the debt.
We're paying down about $20 million a year, $24 million a year. That $24 million, $25 million is also added back. That means, and I'll explain to the math, anyone that gets confused, that basically just says that you have $100 million of cash that I can go and buy basically without diluting a shareholder. I could just keep growing $100 million a year at the minimum, actually minimum is zero.
I could go and buy $100 million a year without selling a single share. On that $100 million, which is at a 10 cap, brings in $10 million. Our cost of debt on that is maybe $3 million - $4 million, which means every year I could grow, for the same shareholders, I could grow $6 million of free cash, which when you take the amount of shares outstanding, which is 55 million shares, add to that the $6 million bucks, that's your growth right there, that all of our other peers don't have that because they are distributing out 100% of their cash.
They have to go and sell equity for every deal that they do, which means they're diluting you on every new deal that they do. Now, mind you, they're still making a little bit more money, so incrementally it's a little bit, but it's not like us. We're 10%, 11% a year because we take that math, and that's what we do.
This just basically illustrates it. If you look at 2021 where it was $0.82, that same share that you had in 2021, in 2026 is now making $1.33. Okay? If I wasn't in such a rush, and being on the West Coast time, I'm a little bit messed up here. I would talk a little slower. I'd sit down with you and try to do it better. I'd say I'm doing the best I can. I'm not sure how good that is, but this is our debt structure.
Last quarter, if I would've been presenting to you, we would've had a bullet that hit June 30th or September 30th. We ended up refinancing everything, so now if you look at it, we don't have any real debt maturities until 2029. On that debt that's maturing in 2029, we have two one-year renewals. So we don't really have a bullet for another three, four years. So we don't have any need for cash.
People ask us, when are you going to raise equity? I say, listen, if I could buy everything without raising equity and giving my shareholders a better return, I'd rather do that than go and sell more equity and dilute people than sit on a bunch of cash. So that's kind of how I manage it.
I manage this like it's my own business, so it kind of is, but we're publicly traded on the New York Stock Exchange, and I answer to the shareholders. So that's how this plays out. Our three parts of debt is really sits between corporate bonds that are in Israel, HUD debt, which guaranteed by the government, which is like 40-year money, straight-line am, which is a good program, but they're the biggest pains in the asses to deal with government-wide.
Then you got regular bank debt, which is at SOFR + 275. This is how our operators are. We've divided up basically our territories into 16 groups. No single operator exceeds 25% of revenue. Master leases, again, I assume people are familiar with the term a master lease, which is basically it's a portfolio lease as opposed to one asset, it's 10 assets.
If something goes bad in one, they keep paying rent for all 10 because the portfolio itself is profitable and therefore it keeps them locked in. I have a little bit more of a risk on one side that if something goes bad, now I have a bigger problem to fix. But on the other side, I'm basically protected that they want to make the money they're making, and therefore, even if one is struggling or two are struggling, they're going to keep operating and taking care of the asset.
We're analyzing every month their financials. We're visiting the properties twice a year. We're making sure that they're spending the CapEx that they're supposed to be spending. We're keeping track. I'm going to run out of time. Before I continue, any questions that I could answer? Yes, sir.
Yeah, I just had a quick question. Just on in skilled nursing in general, there's usually tight margins, labor shortages, rising wage pressures. How are you dealing with those risks?
Well, the first point to bring up is that we're triple net leases. We don't suffer the burden of the profits and losses. Our leases are absolute. It doesn't matter if the tenant makes money or loses money. Obviously, we want them to make money, right? Because if they're struggling, there's an opportunity for something bad to happen to the resident and bad to us as the owner of the property. But we don't suffer with that.
I prefer to manage to the metric of rent coverage. So our rent coverage today is over two, closer to 2.25, and that constantly is growing. We're always fighting that because when we do a new deal on day one, our tenants, unlike a lot of other businesses, our tenants day one are making money to a 1.25 coverage. When we build out the model, the average gets lowered because all the new deals are at 1.25, and all the old deals are at two something, and that kind of fights that.
Second part, 10-year treasury's at 520. Thirty year's gone up to 535, 540. Talk to me about rates on, or the risk around rates right now.
Like I showed you on this last chart, we have $330 million. Where the hell is it? Hold on. We have $330 million at SOFR + 275. Just for the hell of it, say that the rates go up one point, that is $330 million times one is $3 million. On our company, our free cash flow is $75 million before what we have done this year. I mean, $3 million against 75 is not really a big deal for us. It is not something that keeps me up at night. Anybody else? Yes, sir.
You talk about the valuation. Your valuation is at a distinct discount to peers. Why do you think that is? You run a great operation. There is growth. What is the sweet spot there?
I will tell you, it is really simple. It comes down to liquidity. When we went on the New York Stock Exchange, it was an up listing. We only have done one offering in the last four years. Because it had, we did not have the opportunity to bring in the institutions, and we also do not have the shares in the float.
We have a total of, I think, 13 million shares in the float. If you were an institution that wanted to write a check for $25 million, you are limited based on REIT rules. You can only buy 1.3 million shares at $12 or $13 a share. Maybe you could get there if you are a smaller check, but a bigger check cannot write it.
The other thing is a lot of these guys that are stuck on a couple of days of float on what they are allowed to have in their portfolio. We are trading $600,000 a day, $700,000 a day, right? A guy who needs to be out in two days could only put in $1 million, $1.5 million. We are limited on who our investor could be.
Reality is the smaller guy, I think we are meant for family offices, right? I am looking at this really, and that is the third part, which is the last piece of it, and I think this is the end of me, is that to keep in mind, our stock is a stock that people buy and hold. We are not a stock that people trade.
When you don't have the trading, the guys who- This is a stock should be in everyone's 401(k). It's something that should be held onto long-term. Thank you for your time. I'm sorry I ran over.
Great job.