Strawberry Fields REIT (STRW) S-11Registration of securities for real estate companies

As filed with the Securities and Exchange Commission on March 28, 2022

REGISTRATION NO. 333-       

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-11

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

OF SECURITIES OF CERTAIN REAL ESTATE COMPANIES

STRAWBERRY FIELDS REIT, INC.

(Exact name of registrant as specified in its charter)

6101 Nimtz Parkway

South Bend, IN 46628

(574) 807-0800

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

David M. Gross, Esq.

Strawberry Fields REIT, Inc.

5683 North Lincoln Ave.

Chicago IL 60659

(574) 807-0800

(Name, address, including zip code, and telephone number, including area code, of agent for service)

With Copies to:

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, please check the following box. ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

CALCULATION OF REGISTRATION FEE

⁽¹⁾ Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(a) of the Securities Act. Given that there is no proposed maximum offering price per share of common stock, the Registrant calculated the proposed maximum aggregate offering price by analogy to Rule 457(f)(2), based on the book value of $0.37 per share of the common stock the Registrant registered, which was calculated from its consolidated balance sheet as of December 31, 2021. Given that the Registrant’s common stock is not traded on an exchange or over-the-counter on a recent or sustained basis, the Registrant did not use the market prices of its common stock in accordance with Rule 457(c).

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. The securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

STRAWBERRY FIELDS REIT, INC.

Subject to Completion,

Preliminary Prospectus dated                 , 2022

Common Stock

This prospectus relates to the registration of the resale of up to 1,516,286 shares of our common stock by our stockholders identified in this prospectus (the “Registered Stockholders”). Unlike an initial public offering, the resale by the Registered Stockholders is not being underwritten by any investment bank. The Registered Stockholders may, or may not, elect to sell their shares of common stock covered by this prospectus, as and to the extent they may determine. Such sales, if any, will be made through ordinary brokerage transactions on the Nasdaq Capital Market at prevailing market prices. See “Plan of Distribution.” If the Registered Stockholders choose to sell their shares of common stock, we will not receive any proceeds from the sale of shares of common stock by the Registered Stockholders. As of the date of this prospectus, the Registered Stockholders held 25.9% of our outstanding capital stock. None of the Registered Stockholders are affiliates of the Company.

No public market for our common stock currently exists, and shares of our common stock have no history of trading in private transactions. The listing of our common stock on the Nasdaq Capital Market without underwriters is a novel method for commencing public trading in shares of our common stock, and consequently, the trading volume and price of shares of our common stock may be more volatile than if shares of our common stock were initially listed in connection with an underwritten initial public offering.

On the day that shares of our common stock are initially listed on the Nasdaq Capital Market, the Nasdaq Stock Market LLC, or Nasdaq, will begin accepting, but not executing, pre-opening buy and sell orders and will begin to continuously generate the indicative Current Reference Price (as defined below) on the basis of such accepted orders. During a 10-minute “Display Only” period, market participants may enter quotes and orders in shares of our common stock in Nasdaq’s systems and such information is disseminated, along with other indicative imbalance information, to Cantor Fitzgerald & Co., or Cantor, and other market participants by Nasdaq on its NOII and BookViewer tools. Following the “Display Only” period, a “Pre-Launch” period begins, during which Cantor, in its capacity as our designated financial advisor to perform the functions under Nasdaq Rule 4120(c)(8), must notify Nasdaq that our shares are “ready to trade.” Once Cantor has notified Nasdaq that shares of our common stock are ready to trade, Nasdaq will calculate the Current Reference Price (as defined below) for shares of our common stock, in accordance with the Nasdaq’s rules. If Cantor then approves proceeding at the Current Reference Price, Nasdaq will conduct price validation checks in accordance with Nasdaq rules. As part of conducting its price validation checks, Nasdaq may consult with Cantor and other market participants. Upon completion of such price validation checks, the applicable orders that have been entered will then be executed at such price and regular trading of shares of our common stock on the Nasdaq Capital Market will commence. Under the Nasdaq rules, the “Current Reference Price” means: (i) the single price at which the maximum number of orders to buy or sell shares of our common stock can be matched; (ii) if more than one price exists under clause (i), then the price that minimizes the number of shares of our common stock for which orders cannot be matched; (iii) if more than one price exists under clause (ii), then the entered price (i.e. the specified price entered in an order by a customer to buy or sell) at which shares of our common stock will remain unmatched (i.e. will not be bought or sold); and (iv) if more than one price exists under clause (iii), a price determined by Nasdaq after consultation with Cantor, in its capacity as our financial advisor, Cantor will exercise any consultation rights only to the extent that it may do so consistent with the anti-manipulation provisions of the federal securities laws, including Regulation M (to the extent applicable), or applicable relief granted thereunder. The Registered Stockholders will not be involved in Nasdaq’s price-setting mechanism, including any decision to delay or proceed with trading, nor will they control or influence Cantor in carrying out its role as financial advisor. Cantor will determine when shares of our common stock are ready to trade and approve proceeding at the Current Reference Price primarily based on consideration of volume, timing, and price. In particular, Cantor will determine, based primarily on pre-opening buy and sell orders, when a reasonable amount of volume will cross on the opening trade such that sufficient price discovery has been made to open trading at the Current Reference Price. For more information, see the section titled “Plan of Distribution.”

We intend to elect and to qualify to be taxed as a real estate investment trust, or REIT, for U.S. federal income tax purposes, commencing with the taxable year ending December 31, 2022. To assist us in qualifying as a REIT, among other purposes, our charter generally limits any person from beneficially or constructively owning more than 9.8% in value of the aggregate outstanding shares of our common stock or more than 9.8% in value of the outstanding shares of any class or series of our preferred stock. See “Description of Capital Stock—Restrictions on Ownership and Transfer.”

We are an “emerging growth company” and a “smaller reporting company” under the federal securities laws and will be subject to reduced public company reporting requirements.

We have applied to list shares of our common stock on the Nasdaq Capital Market under the symbol “STRW”. We expect shares of our common stock to begin trading on the Nasdaq Capital Market on or about     , 2022.

Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 40 to read about factors you should consider before buying shares of our common stock.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is                 , 2022.

TABLE OF CONTENTS

You should rely only on the information contained in this document or to which we have referred you. We have not authorized anyone to provide you with information that is different. If anyone provides you with different information, you should not rely on it. These securities are not being offered in any jurisdiction where the offer or sale is not permitted. The information in this prospectus is current as of the date such information is presented. Our business, financial condition, liquidity, funds from operations, or FFO, adjusted FFO, or AFFO, results of operations and prospects may have changed since those dates.

This prospectus contains market data and industry forecasts that were obtained from industry publications. We have not independently verified any of this information. In addition, certain of the market data and industry forecasts included in this prospectus was published before or did not otherwise take into account the ongoing global COVID-19 pandemic and therefore did not reflect any impact of COVID-19 on any specific market or industry.

Presentation of Information

Except as otherwise indicated, the number of shares of common stock outstanding is based on 5,849,746 shares outstanding as of                   , 2022 and excludes 47,406,651 shares of common stock issuable upon the redemption of the outstanding OP units issued by the Operating Partnership.

Unless otherwise indicated, all information in this prospectus reflects the completion of the following formation transactions, which were completed on June 8, 2021: (i) the contribution by the Predecessor Company of all of its assets to the Operating Partnership, and the assumption by the Operating Partnership of all of the liabilities of the Predecessor Company, and (ii) the issuance of 51,686,280 OP units by the Operating Partnership to the Predecessor Company and the distribution of such OP units to the beneficial owners of the Predecessor Company. This prospectus also reflects the following additional transactions: (i) the issuance in June 2021 of 19,320 shares of the Company’s common stock to the employees of the Company and its affiliates, (ii) the issuance in June 2021 of 5,824,846 shares of the Company’s common stock in exchange for 5,824,846 of the OP units that were originally issued in the formation transactions, (iii) the purchase in August 2021 by the Operating Partnership of six properties in Tennessee and Kentucky for an aggregate acquisition cost of approximately $81 million and the related issuance by the Operating Partnership of 1,545,217 OP units valued at $16,997,000, and (iv) the issuance in October 2021 of 5,580 shares of the Company’s common stock to the employees of the Company and its affiliates.

ABOUT THIS PROSPECTUS

This prospectus is a part of a registration statement on Form S-11 that we filed with the SEC using a “shelf” registration or continuous offering process. Under this shelf process, the Registered Stockholders may, from time to time, sell the common stock covered by this prospectus in the manner described in the section titled “Plan of Distribution.” Additionally, we may provide a prospectus supplement to add information to, or update or change information contained in, this prospectus, including the section titled “Plan of Distribution.” You may obtain this information without charge by following the instructions under the section titled “Where You Can Find More Information” appearing elsewhere in this prospectus. You should read this prospectus and any prospectus supplement before deciding to invest in our common stock.

GLOSSARY OF CERTAIN TERMS

The following is a glossary of certain terms used in this prospectus:

“ADA” means the Americans with Disabilities Act of 1990, as amended.

“ALF” means assisted living facility.

“Affordable Care Act” means the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010.

“BVI Company” means Strawberry Fields REIT, Ltd., a company organized under the laws of the British Virgin Islands. Upon the consummation of the formation transactions, the BVI Company became a wholly-owned subsidiary of the Operating Partnership.

“CAGR” means compound annual growth rate.

“Capitalization rate” means the ratio of a property’s operating income to its purchase price.

“CMS” means the Centers for Medicare and Medicaid Services, which administers Medicare, Medicaid and the State Children’s Health Insurance Program.

“Company” means Strawberry Fields REIT, Inc., a Maryland corporation.

“Controlling Members of the Predecessor Company” or “Controlling Members” means Moishe Gubin, Michael Blisko and Ted Lerman, members of the Predecessor Company controlled by any of them and their affiliates.

“Dollars” or “$” means United States dollars.

“EBITDAR” means earnings before interest, taxes, depreciation, amortization and rent.

“EBITDARM” means earnings before interest, taxes, depreciation, amortization, rent and management fees.

“GLA” or “gross leasable area” or means the area in any building that may be leased to tenants.

“HHS” means the U.S. Department of Health and Human Services.

“HIPAA” means the Health Insurance Portability and Accountability Act of 1996, as amended.

“HITECH Act” means the Health Information Technology for Economic and Clinical Health Act.

“HUD” means the U.S. Department of Housing and Urban Development, the government department for housing and urban development.

“long-term acute care hospital” or “LTACH” means medical institutions in which patients requiring prolonged hospitalization (but who are stable) are given medical care and rehabilitation for several weeks. The operation of these institutions is subject to receipt of a suitable license.

“NIS” means New Israeli Shekels.

“Operating Partnership” means Strawberry Fields Realty LP, a Delaware limited partnership.

“OP units” means the units of limited partnership interests in the Operating Partnership.

“Predecessor Company” means Strawberry Fields REIT, LLC, an Indiana limited liability company. Prior to the consummation of the formation transactions, the Predecessor Company was the indirect owner of 73 of our properties.

“SFMS” means Strawberry Fields Management Services, LLC. Upon the consummation of the formation transactions, SFMS became a wholly-owned subsidiary of the Operating Partnership.

“SNF” means a skilled nursing facility.

“Series A Bonds” means the Series A Bonds issued by the BVI Company, which were first offered to the public in Israel in 2015. The net outstanding principal balance of the Series A Bonds on December 31, 2021, was approximately $34.3 million.

“Series B Bonds” means the Series B Bonds issued by the BVI Company, which were first offered to the public in Israel in 2018. The outstanding principal balance of the Series B Bonds on December 31, 2021, was approximately $93.7 million. The Series B Bonds will be repaid in full on March 31, 2022, by means of a cash deposit made by the Company with the trustee of the Series B Bonds.

“Series C Bonds” means the Series C Bonds issued by the BVI Company, which were first offered to the public in Israel on July 28, 2021. As of December 31, 2021, the Series C Bonds had an outstanding principal balance of approximately $66.9 million.

“TASE” means the Tel Aviv Stock Exchange Ltd.

“TRS” means taxable REIT subsidiary.

PROSPECTUS SUMMARY

The following summary highlights some of the information contained elsewhere in this prospectus. It is not complete and does not contain all of the information you should consider before making an investment decision. You should read carefully the more detailed information set forth under the heading “Risk Factors” and the other information included in this prospectus. References in this prospectus to “we,” “our,” “us” and “the Company” refer to Strawberry Fields REIT, Inc., a Maryland corporation, together with its consolidated subsidiaries, including Strawberry Fields Realty LP, a Delaware limited partnership, which we refer to in this prospectus as our Operating Partnership. We are the sole general partner of our Operating Partnership. The historical operations described in this prospectus that occurred prior to June 8, 2021, refer to the historical operations of the businesses and assets of Strawberry Fields REIT, LLC, an Indiana limited liability company and our accounting predecessor (which we refer to in this prospectus as the Predecessor Company). On June 8, 2021, the Predecessor Company contributed all of its assets to the Operating Partnership, and the Operating Partnership assumed all of the liabilities of the Predecessor Company, in connection with the consummation of the formation transactions described in this prospectus under the caption “Structure and Formation of Our Company.”

Our Company

We are a self-managed and self-administered company that specializes in the acquisition, ownership and triple-net leasing of skilled nursing facilities and other post-acute healthcare properties. As of the date of this prospectus, our portfolio consisted of 79 healthcare properties with an aggregate of 10,426 licensed beds. We hold fee title to 78 of these properties, and hold one property under a long-term lease. These properties are located across Arkansas, Illinois, Indiana, Kentucky, Michigan, Ohio, Oklahoma, Tennessee and Texas. Our 79 properties comprise 85 healthcare facilities, consisting of the following:

We generate substantially all of our revenues by leasing our properties to tenants under long-term leases on a triple-net basis, under which the tenant pays the cost of real estate taxes, insurance and other operating costs of the facility. Each healthcare facility located at our properties is managed by a qualified operator with an experienced management team.

We are entitled to monthly rent paid by the tenants and we do not receive any income or bear any expenses from the operation of such facilities. As of the date of this prospectus, the aggregate annualized average base rent under the leases for our properties was approximately $82.8 million.

Since the Predecessor Company was formed, we have demonstrated consistent growth through acquisitions, having purchased 51 properties since January 2015, with an aggregate purchase price of approximately $385.9 million. Our aggregate annualized average base rent has grown at an approximate 21.4% CAGR from $25.9 million at December 31, 2015 to $82.8 million as of the date of this prospectus. During that period, we expanded our geographic footprint from six states to nine states.

Our management team has extensive experience in acquiring, owning, financing, operating and leasing skilled nursing facilities and other types of healthcare properties. The team is led by Moishe Gubin, our Chief Executive Officer and Chairman of our Board of Directors and Nahman Eingal, our Chief Financial Officer. After the direct listing, they will be joined by Joshua Blisko, who will serve as our Senior Investment Officer. Combined, this team has over 50 years of experience investing in real estate and particularly in healthcare related real estate and operating companies. They have completed over 80 real estate related/healthcare related acquisitions totaling over $700 million in gross investment through various investment vehicles. Our management team also has extensive experience as operators of, and healthcare consultants to, skilled nursing facilities, having managed and operated over 60 skilled nursing facilities, including 41 of our current tenants. We believe our management team’s unique experience across both skilled nursing operations and real estate and its extensive knowledge of the skilled nursing industry position us favorably to take advantage of healthcare investment opportunities. Additionally, our deep and broad relationships with industry operators have allowed us to identify and acquire skilled nursing facilities to which many of our competitors do not have access.

We have assembled a high quality and diversified portfolio of skilled nursing and other healthcare related facilities and we plan to continue to invest primarily in skilled nursing facilities and other healthcare facilities that primarily provide services to the elderly. We believe these asset classes provide potential for higher risk-adjusted returns compared to other forms of net-leased real estate assets due to the specialized expertise necessary to acquire, own, finance and operate these properties, which are factors that tend to limit competition among investors, owners, operators and finance companies. Additionally, our management team’s strong relationships in the industry have allowed us to acquire healthcare-related properties at valuations that achieve attractive lease yields, with the goal of generating strong returns for our stockholders over the long-term. As we continue to acquire additional properties and expand our portfolio, we expect to continue diversifying our portfolio by geography and by tenant, while also maintaining balance sheet strength and liquidity.

We intend to elect to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ending December 31, 2022. We are organized in an UPREIT structure in which we own substantially all of our assets and conduct substantially all of our business through the Operating Partnership. We are the general partner of the Operating Partnership and as of the date of the prospectus own approximately 11.0% of the outstanding OP units.

Industry Overview

Our discussion below of the dynamics U.S. skilled nursing facility industry is based on our medium and long-term expectations for the industry, based in certain cases on market data and industry forecasts that were published before or did not otherwise take into account the ongoing global COVID-19 pandemic. In the short term, we expect both this industry and our business will continue to be impacted by the pandemic, although we cannot predict with certainty the long-term impact the pandemic will have.  See “—Recent Developments—COVID-19 Pandemic”.

We operate as a REIT specializing in the acquisition of income-producing healthcare-related facilities, primarily focusing on skilled nursing facilities located in the United States. According to the National Health Expenditure Projections for 2019-2028 published by the Centers for Medicare & Medicaid Services (“CMS”), Office of the Actuary, nursing home expenditures are projected to grow from approximately $175 billion in 2019 to approximately $266 billion in 2028, which represents a CAGR of approximately 5% for this period. The industry has continued to evolve to meet the growing demand for post-acute and custodial healthcare services and will continue to increase in spending based on some of the following trends:

Aging Population. According to the U.S. Census Bureau, the number of Americans aged 65 or older is one of the fastest growing segments of the U.S. population and is projected to increase from approximately 56 million in 2020 to 74 million in 2030, which reflects a CAGR of approximately 3%.

Shift of Patient Care Settings to Lower Cost Alternatives. Cost containment measures adopted by the federal government encourage patient treatment in more cost-effective settings, such as SNFs. As a result, higher acuity patients that would have previously been treated in a long-term acute care hospital and/or in an inpatient rehabilitation facility are now increasingly being treated in lower cost settings such as SNFs.

Favorable Supply and Demand Industry Dynamics. The number of SNFs has declined modestly over the past several years. There were approximately 15,000 SNFs in the United States in 2019, according to MedPAC, compared with approximately 16,900 facilities in 2000, according to the Centers for Disease Control and Prevention. We expect that the potential profitability of the SNF industry will improve due to lack of growth in the supply of SNFs and an increase in demand for such facilities due to growing number of individuals over age 65.

Barriers to Entry. In most states, owners and operators of existing SNFs have the benefit of certificate of need, or CON, laws. These laws are state regulatory mechanisms for establishing or expanding health care facilities and services in a given area. In a state with a CON program, a state health planning agency must approve major capital expenditures for certain health care facilities. CON programs aim to control health care costs by restricting duplicative services and determining whether new capital expenditures meet a community need. We believe these laws create barriers to entry for new operators in CON states and limit competition for existing owners and operators. Eight of the nine states in which we own properties require a CON.

Our Portfolio

As of the date of this prospectus, we own and lease a geographically diverse portfolio of 79 healthcare properties in nine states, with an aggregate of 10,426 licensed beds. Of these 79 properties, 74 are stand-alone skilled nursing facilities, four are dual-purpose facilities used as both skilled nursing facilities and long-term acute care hospitals, and three are assisted living facilities.

The following table contains information regarding our owned and leased healthcare facility portfolio by facility type, as of the date of this prospectus.

Property Types

Skilled Nursing Facilities. Skilled nursing facilities, or SNFs, provide services that include daily nursing, therapeutic rehabilitation, social services, housekeeping, nutrition and administrative services for individuals and patients requiring certain assistance for daily living activities. A typical SNF includes mostly one or two bed units, each equipped with a private or shared bathroom and community dining halls.

Long-Term Acute Care Hospitals. Long-term acute care hospitals, or LTACHs, provide a range of services and treatments for acute care domains such as emergency care; urgent care; short-term stabilization; trauma care and acute care surgery; critical care; and prehospital care. The acute service domains mentioned are for individuals and patients with acute life-or limb-threatening medical surgical needs, ambulatory care needs, acute needs before delivery of definitive treatment, community care needs until patient transfer, life-threatening conditions requiring comprehensive care and constant monitoring, and life-threatening injuries requiring acute surgical attention.

Assisted Living Facilities. Assisted living facilities, or ALFs, provide services that include minimal nursing assistance, housekeeping, nutrition, laundry and administrative services for individuals and patients requiring minimal assistance for daily living activities. ALFs enable residents to maintain some of their privacy and independence as they do not require constant supervision and assistance. ALFs are typically comprised of one and two bedroom suites equipped with private bathrooms and efficiency kitchens. Services bundled within one regular monthly fee usually include three meals per day in a central dining room, daily housekeeping, laundry, medical reminders and 24-hour availability of assistance with the activities of daily living, such as eating, dressing and bathing. Professional nursing and healthcare services are available at the facility on-call or at scheduled times.

Geographic Diversification

As of the date of this prospectus, our portfolio of 79 properties is broadly diversified by geographic location across nine U.S. states, comprising Arkansas, Illinois, Indiana, Kentucky, Michigan, Ohio, Oklahoma, Tennessee and Texas.

The following table contains information regarding our healthcare facility portfolio by geography, as of the date of this prospectus:

Tenants and Operators

As of the date of this prospectus, our properties are leased to 83 tenants under 28 lease agreements. Our leases include 9 master lease agreements that cover 64 facilities leased to 64 of these tenants, with the remaining 19 leases each covering a single facility leased to one tenant. Forty-seven of our tenants are related parties. As of the date of this prospectus, two of our LTACH facilities were vacant.

Each property is operated as a healthcare facility by a licensed operator, which may be the tenant or a separate operator. Each operator holds a license granted by state regulators to operate a specific type of facility. All of the operators have an experienced management team and senior healthcare staff with substantial knowledge of their respective local markets. We target healthcare operators that are owned by principals with a history of quality care, and the demonstrated ability to successfully navigate in a changing healthcare operating environment. Certain operators are related parties.

We believe that each of the operators of our properties is primarily focused on serving the needs of the local community. Unlike operators that are part of a large national healthcare conglomerate, we believe the operators at our properties can manage their facilities more efficiently because they are not burdened by costly infrastructure and have the flexibility to rapidly adjust their cost structure to respond to changes in the reimbursement environment.

In order to operate efficiently and improve profitability, most of the operators at our facilities have engaged large consulting firms that specialize in healthcare and skilled nursing operations. These consulting firms provide advice and assistance on marketing, operating policies and procedures, billing, collections and regulatory compliance. The operators and consultants work together to develop and standardize best practices in the facilities, while operating in a cost-efficient manner. The operators at our properties primarily use one of nine principal consulting firms, including four firms that are part of Infinity Healthcare, a healthcare consulting business that is owned by Moishe Gubin, who is our Chairman and Chief Executive Officer, Michael Blisko, who is one of our directors.

The tenants and operators of our properties have demonstrated the ability to generate consistent profitability despite the challenging markets in which they operate. In many cases, these tenants and operators have successfully optimized and stabilized underperforming skilled nursing facilities. While these tenants and operators have been successful, we expect to seek opportunities to diversify our tenant/operator mix through future acquisitions that will be leased to new operators.

The following table contains information regarding our healthcare facility portfolio by tenant, as of the date of this prospectus:

(1) The tenant and the operator are the same for each facility other than the 13 SNFs leased under the Indiana master lease agreement and one SNF in Amarillo, Texas. In the case of these other facilities, the tenants are county hospitals which have entered into management agreements with the operators listed in the table. These arrangements permit the facilities to participate in a CMS program that pays higher Medicaid reimbursement rates for facilities associated with hospitals in underserved areas.

(2) The expiration dates do not reflect the exercise of any renewable options.

Related Party Transactions

As further described in “Certain Relationships and Related Transactions,” and throughout this prospectus, we have engaged in certain related party transactions. Our related parties include Moishe Gubin, who is our Chairman and Chief Executive Officer and one of the Controlling Members of the Predecessor Company, Michael Blisko, who is one of our directors and one of the Controlling Members of the Predecessor Company, Ted Lerman, who is the third Controlling Member of the Predecessor Company, Nahman Eingal, who is our Chief Financial Officer, and Steven Blisko, who is the brother of Michael Blisko, and their affiliated entities.

Formation Transactions

On June 8, 2021, pursuant to a contribution agreement among the Company, the Predecessor Company and the Operating Partnership, the Predecessor Company contributed all of its assets to the Operating Partnership, and the Operating Partnership assumed all of its liabilities. In exchange, our Operating Partnership issued an aggregate of 51,686,280 OP units to the Predecessor Company. The Predecessor Company distributed these OP units to its members, and certain of these members transferred their OP units to their beneficial owners and other transferees. We subsequently exchanged 5,824,846 of these OP units for 5,824,846 shares of our common stock.

The assets that were contributed to the Operating Partnership by the Predecessor Company included all of the shares of the BVI Company, all of the membership interests in three property-owning limited liability companies owned directly by the Predecessor Company and all of the membership interests in SFMS. The BVI Company continues to own, through wholly-owned subsidiaries, all of our 78 properties and to hold, through a wholly-owned subsidiary, one lease for an additional property.

The contribution agreement was not negotiated on an arms’ length basis and may not be as favorable to us as an agreement negotiated on an arms’ length basis. We did not obtain independent third-party appraisals of the assets owned by the Predecessor Company for purposes of the formation transactions nor any independent third-party valuation or fairness opinion. Accordingly, the value of the OP units that we issued as consideration for the assets of the Predecessor Company in the formation transactions may have exceeded their aggregate fair market value.

In connection with the formation transactions, the Company also issued 19,320 shares of the Company’s common stock to the employees of the Company and its affiliates.

As a result of the completion of the formation transactions and the other transactions described above, we became the owner of approximately 11.3% of the outstanding OP units, which was reduced to 11.0% of the OP units following the issuance of additional OP units in connection with the Operating Partnership’s acquisition of additional properties in Tennessee and Kentucky in August 2021 and the issuance of additional shares of the Company’s common stock to the employees of the Company and its affiliates under the employee bonus plan. See “Structure and Formation of Our Company—Formation Transactions” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Acquisitions.”

Related Party Consulting Firms

Most of the operators at our facilities have engaged large consulting firms that specialize in healthcare and skilled nursing operations. The operators at our properties primarily use one of nine principal consulting firms, including four firms that are part of Infinity Healthcare, a healthcare consulting business that is owned by Moishe Gubin, who is our Chairman and Chief Executive Officer and one of the Controlling Members of the Predecessor Company and Michael Blisko, who is one of our directors and one of the Controlling Members of the Predecessor Company. See “—Principal Consulting Firms to Operators.”

Leases with Related Parties

As of the date of this prospectus, we lease 41 of our facilities to affiliates of Moishe Gubin, who is our Chairman and Chief Executive Officer and one of the Controlling Members of the Predecessor Company, Michael Blisko, who is one of our directors and one of the Controlling Members of the Predecessor Company, and Ted Lerman, who is the third Controlling Member of the Predecessor Company. We also lease 6 additional facilities to affiliates of Steven Blisko, who is the brother of Michael Blisko. As a result, a substantial portion of our rental income is received from related parties. Steven Blisko is not a Controlling Member of the Predecessor Company and is not an affiliate of the Company.

Rental income from leases with these related party tenants represented 66.4% of all rental income for the quarter ended December 31, 2021. We believe these affiliated relationships provide a strong alignment of interests between us and our tenants and offers us increased operating flexibility with regards to potentially replacing underperforming tenants or evaluating acquisitions in new states. As we continue to grow and expand our portfolio, we intend to seek to develop new relationships with unrelated party tenants and operators in order to diversify our tenant base and reduce our dependence on related party tenants and operators.

The following table contains information regarding tenant/operators that are related parties of the Predecessor Company as of the date of this prospectus:

Other Related Party Transactions

The Predecessor Company funded $2,465,000 in organizational and listing costs incurred by the Company through the consummation of the formation transactions.

In connection with the formation transactions, we entered into a tax protection agreement with the Predecessor Company, pursuant to which we agreed to indemnify Predecessor Company, its members and their beneficial owners (the “protected parties”) against potential adverse tax consequences to them, including future gain with respect to any negative capital account balances that exist after formation or that are “built-in” gain relating to assets that the protected parties were deemed to contribute to the Company.

The Company estimates that the total amount of protected built-in gain on all of the properties and other assets contributed to the Company in connection with the formation transactions was approximately $392.2 million. Such indemnification obligations could result in aggregate payments, based on current tax laws, of up to $180.4 million. The amount of tax is calculated without regard to any deductions, losses or credits that may be available. Therefore, although it may be otherwise in our stockholders’ best interests that we sell one of these properties, it may be economically prohibitive for us to do so because of these indemnification obligations to the protected parties incurred by our Operating Partnership. In this regard, the Company has granted the tenant of one of the Company’s properties, an SNF located in Illinois, an option to purchase this property. If the tenant had exercised its option as of December 31, 2021, the Company would have recognized a built-in gain of approximately $1.8 million on such property, which could have required the Company to make a tax indemnity payment of approximately $0.8 million. The Company has also entered into an option agreement with the tenants for 13 of the Company’s properties in Arkansas to grant these tenants an option to purchase the properties for an aggregate price of $90 million. The tenants are entitled to exercise the option within the lease period but after the claims by the prior owners of the properties have been resolved. See “Business and Properties—Legal Proceedings” for more information on the claims. If the Company had sold these properties for this price as of December 31, 2021, the Company would have recognized a built-in gain of approximately $43.1 million on such properties, which could have required the Company to make a tax indemnity payment of approximately $18.8 million.

The tax protection agreement also provided that we would offer the protected parties the opportunity to guarantee debt, or, alternatively, to enter into a deficit restoration obligation, in a manner intended to provide an allocation of Operating Partnership liabilities to the partner for federal income tax purposes. In March 2022, the protected parties waived their right to such opportunities.

For a complete list of the related party transactions, see “Certain Relationships and Related Transactions.”

Principal Consulting Firms to Operators

The principal consulting firms engaged by our tenants as of December 31, 2021 are described below. They provide the tenants with a wide range of advice and assistance that we believe significantly enhances the operators’ ability to operate successfully. As further described below, certain operators and consultants are related parties.

Infinity Healthcare (“Infinity”). Infinity is a consulting group that provides healthcare consulting services to the healthcare industry, including facilities that offer skilled and intermediate nursing, short-term rehabilitation, services for residents with dementia and Alzheimer’s disease, behavioral health, ventilator units, in-house dialysis, and home health. Infinity was founded in 2008 by Moishe Gubin, who is our Chairman and Chief Executive Officer and one of the Controlling Members of the Predecessor Company and Michael Blisko, who is one of our directors and one of the Controlling Members of the Predecessor Company. Infinity provides consulting services to 48 facilities (of which 41 are leased from us) in Illinois, Indiana, Michigan, Oklahoma, Tennessee and Texas.

Benchmark Healthcare (“Benchmark”). Benchmark is a healthcare consulting service provider to the skilled nursing facility industry. Benchmark was founded in 2015 and primarily provides consulting services to A&M Healthcare which, through its subsidiaries, holds the licenses to 15 skilled nursing facilities. A&M Healthcare operates under the trade name Landmark. Benchmark provides consulting services to 17 facilities (of which 16 are leased from us) in Kentucky, Illinois Texas, Michigan and Oklahoma.

Integrity Healthcare Communities (“Integrity”). Integrity is a healthcare consulting company that provides consulting services to the skilled nursing facility industry. Integrity was founded in 2010 by Steven Blisko, who is the brother of Michael Blisko. Integrity provides consulting services to 12 skilled nursing facilities (of which 6 are leased from us) in central and southern Illinois.

AOM Healthcare Management (“AOM”). AOM is a diverse and experienced healthcare consulting firm founded in the 2000’s and based in New York. AOM provides consulting services to 22 skilled nursing facilities (of which four are leased from us) in New York and Ohio.

Oasis Healthcare Group – Oasis is a diverse healthcare consulting firm founded in 2020 by three healthcare experienced individuals, Abraham Schreiber, Morris Schreiber, and Matis Herzka. The Company is based in New York. Oasis provides consulting services to 13 skilled nursing facilities and 1 assisted living facilities (of which all are leased from us) in Arkansas.

Paramount Healthcare Consultants (“Paramount”). Paramount is a diverse and experienced healthcare consulting firm founded in 2008 and based in Louisiana. Paramount provides consulting services to 11 healthcare facilities (of which one is leased from us) in Louisiana and Texas.

Competitive Strengths

We believe that the following competitive strengths provide a solid foundation for the sustained growth of our business and successful execution of our business strategies:

Diversified Portfolio. We have a portfolio that is diversified in terms of both geography and tenant composition. As of the date of this prospectus, our portfolio is comprised of 79 healthcare-related properties with a total of 10,426 licensed beds located throughout Arkansas, Illinois, Indiana, Kentucky, Michigan, Ohio, Oklahoma, Tennessee and Texas. We believe that our geographic diversification limits the potential impact of any regulatory, reimbursement, competitive dynamic or other changes in any single market on the overall performance of our portfolio. We lease our properties to 83 tenants, with no tenant accounting for more than 3.1% of our annualized base rent. This diversification limits our exposure for any single tenant that encounters financial or operational difficulties.

Protected Markets. In eight of the nine states in which we operate, we benefit from CON laws that require state approval for the constructions and expansion of certain types of healthcare facilities. These laws represent significant barriers to entry and limit competition in these markets.

Demonstrated Ability to Identify and Structure Accretive Acquisition Opportunities. Our management team has long-standing relationships in the skilled nursing and post-acute healthcare industries. Through their experience in acquiring these types of facilities, we have the proven ability to identify and complete complex and accretive transactions. For example, in 2019, we acquired seven skilled nursing facilities in Arkansas and Kentucky through the assumption of approximately $37 million of mortgage debt, which allowed us to acquire the properties at an estimated discount of approximately 31% to the fair market value of the properties based on a third party appraisal that we received prior to the purchase. Similarly, in 2018, we also acquired an additional 10 facilities for a total consideration of $44.8 million through the assumption or payment of the outstanding loan on the facilities or directly from the lender, in each case at an estimated discount of approximately 38% to the fair market value of the properties based on a third party appraisal that we received prior to the purchase. These 16 properties are expected to generate average annual rental income of approximately $14 million over the life of the leases and represent an opportunity that is consistent with our track record of identifying and acquiring accretive acquisitions. Additionally, because many of our acquisitions are off-market opportunities sourced through our management team’s network of industry relationships, we believe we do not typically compete with larger healthcare-focused real estate companies for acquisitions as they tend to focus on larger, platform acquisition opportunities. Although our acquisitions in 2020 and 2021 were completed based on such properties’ estimated fair market values, we have regularly acquired assets at attractive valuations and believe we can continue to identify these types of opportunities to expand our portfolio.

Significant Experience Acquiring Underperforming Assets. Although we primarily seek to acquire properties that have had consistent profitability, we may also acquire underperforming properties if we believe that the underlying facilities can become successful through better management. Our management team’s prior experience as operators gives it the ability to evaluate these types of facilities and their potential for improved revenue enhancement and increased operating efficiencies. We will consider the acquisition of underperforming properties if they are available at attractive valuations and provide us with significant upside potential once their new operators have successfully stabilized and optimized their operations. If we acquire underperforming properties, we would expect to lease them to tenants and operators that have significant turnaround experience and support from experienced consultants.

Experienced and Adept Operators. We have strong and long-standing relationships with operators and their principals who have significant experience in operating successful skilled nursing facilities. These operators and their principals have a strong track record of operating in challenging markets where operators are subject to increased regulatory issues and significant competition. Additionally, these operators and their principals have learned to successfully operate facilities in which most of the revenue is earned from providing services to patients covered by Medicaid which are subject to lower reimbursement rates than other revenue sources.

Consulting Firms Provide Additional Resources for the Operators of our Facilities. Most of the operators of our facilities utilize the services of experienced healthcare consulting firms to provide them with expert advice and assistance with their operations. We believe these consulting firms provide the operators with additional expertise and resources that materially enhance their ability to operate efficiently and to meet applicable regulatory requirements.

Close Relationships with Tenants, Operators and Consultants Provide Enhanced Oversight, Market Intelligence and Strong Alignment of Interests. The nature of our close relationships with the tenants and operators of our properties and their consulting firms allows us to maintain close communication and obtain early knowledge of potential issues faced by our tenants, enabling us to address those issues that affect us as the lessor. These relationships also provide us with intelligence on the markets in which we own properties and assistance in locating new and replacement tenants. Additionally, the consulting firms assist us without charge in evaluating potential acquisitions and operators. This assistance provides us with insight on local market trends, which is particularly valuable for new markets. These relationships also provide a strong alignment of interests between our interests as a property owner and our tenants’ interests.

Well-Structured, Long-Term, Triple-Net Leases Generate Predictable and Growing Rental Income Streams. Most of our owned properties are leased to tenants under long-term, non-cancellable, triple-net leases, pursuant to which the tenants are responsible for all maintenance and repairs, insurance and taxes associated with the leased properties and the business conducted at the properties. As of December 31, 2021, 98.4% of the gross leasable area of our facilities was leased with an average remaining lease term of 6.3 years. Our portfolio had normalized EBITDARM and normalized EBITDAR coverage ratios of 2.44x and 1.78x, respectively, for the twelve month period ended November 30, 2021 (based on internally prepared financial results of our tenants). Our leases generally have terms that range from 10 to 20 years with two five-year extensions, and annual rent escalators of 1% to 3% per year, which provides us with a steady and growing cash rental stream. Additionally, our leases are structured to provide us with key credit support and have credit enhancement provisions that may include non-refundable security deposits of up to 6 months, personal and corporate guarantees and cross-default provisions under our master leases. Approximately 70.5% of our total annualized rental revenue is generated through our 9 master leases that have cross-default and cross-collateralization provisions.

Seasoned Management Team with Significant Experience. Moishe Gubin, our Chairman and Chief Executive Officer, has over 21 years of operating and real estate experience in the skilled nursing and long-term care industries. Prior to founding the Predecessor Company, Mr. Gubin worked as an operator of skilled nursing facilities and built a strong operational knowledge base that has been incorporated into the day-to-day management of our current portfolio. Additionally, Mr. Gubin has significant acquisition experience, having completed over 80 healthcare-related facilities with an aggregate investment amount of over $700 million since 2003. Nahman Eingal, our Chief Financial Officer, has an extensive background in real estate finance with over 20 years of experience in the banking industry focusing on commercial lending to healthcare providers. Mr. Gubin and Mr. Eingal also have significant experience accessing the debt capital markets to fund growth, having raised over $266 million of publicly traded bonds that are listed on the Tel Aviv Stock Exchange, or TASE. Joshua Blisko, our proposed Senior Investment Officer, has served in various roles across corporate finance and real estate and previously oversaw over $400 million in asset dispositions and over $350 million in financing and refinancing transactions. We believe that the diverse operational and financial background and expertise of our management team gives us the ability to successfully manage our portfolio and sustain our growth.

Experienced Public Filer. Our BVI Company has raised, in aggregate, over $266 million from the sale of bonds that are listed on the TASE. Under the regulations of the TASE and the Israeli Securities Act, the BVI Company has reporting and corporate governance requirements that include filing of quarterly and annual financial reports, conducting stockholder meetings, maintaining an independent board and addressing conflicts of interest. As a result, our management team has experience in operating in a manner that is similar to a U.S. public company and has established reporting and governance processes and policies that can be adapted to meet the requirements for operating as a U.S. public company.

Our Business and Growth Strategies

Our objective is to generate attractive returns for our stockholders over the long-term through dividends and capital appreciation. Key elements of our strategy include the following:

Acquire Additional Healthcare Properties in Concentrated Geographic Areas. We plan to invest primarily in real estate used as skilled nursing facilities and other healthcare facilities that provide services to the elderly, where our management team has substantial experience and relationships. We believe these facilities have the potential to provide higher risk-adjusted returns compared to other forms of net-leased real estate assets due to the specialized expertise necessary to acquire, own, finance and manage these properties, which are factors that tend to limit competition among investors, owners, operators and finance companies. We will seek to acquire properties in states where we believe we can build regional density in order to create competitive advantages and drive operational and cost efficiencies.

Negotiate Well-Structured Net Leases. Our primary ownership structure is a facility purchase with a long-term triple-net lease with the healthcare operator. We seek to structure our leases with lease terms ranging from 10 to 15 years with tenant options to extend the lease for an additional period of 5 to 10 years, and rent escalators that provide a steadily growing cash rental stream. Our lease structures are designed to provide us with credit support for our rents, including, in certain cases, lease deposits, covenants regarding liquidity, and various provisions for cross-default. We believe these features help insulate us from variability in operator cash flows and enable us to minimize our expenses while we continue to build our portfolio.

Leverage Existing and Develop New Operator Relationships. Our management team has long-standing relationships in the healthcare industry through which we have sourced our existing portfolio, and we intend to continue to expand our portfolio by leveraging these existing relationships. Most of our properties are leased to related parties. We also intend to seek to develop new relationships with unaffiliated operators in order to diversify our tenant base and reduce our dependence on related party tenants.

Finance existing portfolio with Long-Term, Low-Interest Rate, HUD Guaranteed Non-Recourse Debt. We have, and will continue to use, an attractive capital structure in the form of HUD guaranteed mortgage loans through existing government programs, which are long-term, low-interest rate and non-recourse. Currently HUD guaranteed loans are available for periods of 30 to 35 years at a weighted-average interest rate of 10 year Treasury bill plus 1.8%-2.0% (excluding an additional 0.65% per annum mortgage insurance premium payable to HUD).

Utilize Comprehensive Investment Underwriting Criteria. We have adopted what we believe to be a thorough investment underwriting process based on careful analysis and due diligence with respect to both the healthcare real estate and the healthcare service operations. We seek to make investments in healthcare properties that have the following attributes: well-located, visible to traffic, in good physical condition with predictable future capital improvement needs and with attractive prospects for future profitability.

Monitor the Performance of our Facilities and Industry Trends. We carefully monitor the financial and operational performance of our tenants and of the specific facilities in which we invest through a variety of methods, such as reviews of periodic financial statements, and regular meetings with the facility operators. Pursuant to the terms of our leases, our tenants are required to provide us with certain periodic financial statements and operating data.

Utilize Targeted Leverage in Our Investing Activities. We seek to utilize a targeted level of leverage that is appropriate in light of market conditions, future cash flows, the creditworthiness of tenants and future rental rates. We will seek to achieve a ratio of debt to asset fair market value in the range of 45% to 55%. However, our charter and bylaws do not limit the amount of debt that we may incur and our board of directors has not adopted a policy limiting the total amount of our borrowings.

Recent Developments

COVID-19 Pandemic

As of the date of this prospectus, the pandemic caused by the coronavirus known as COVID-19 has not had a material adverse effect on the Company’s financial performance, results of operations, liquidity or access to financing. However, the Company’s operations and financial performance are dependent on the ability of its tenants to meet their lease obligations to the Company.

To the Company’s knowledge and based on information provided to the Company by its tenants, the principal financial effects of the pandemic on the Company’s tenants have been to increase their payroll expenses, to require additional purchases of personal protective equipment, and to decrease occupancy at their facilities. The Company believes that the decline in occupancy was primarily due to declining referrals as a result of hospitals postponing elective surgeries as well as patients’ concerns regarding the risk of infection from COVID-19.

The following table reflects the changes in occupancy at the SNFs operated by related party tenants on the first date of each month from March 1, 2020, through March 1, 2022. Occupancy at these SNFs was not affected due to COVID-19 until after March 1, 2020. The Company is aware that unrelated tenants experienced similar changes through November 2021 which is the most recent information available to the Company for occupancy of unrelated tenants. 

Between March 1, 2020, and September 1, 2020, occupancy at the SNFs operated by related party tenants decreased from 73.4% on March 1, 2020, to 63.7% on September 1, 2020, or approximately 13%. Since that time, occupancy has varied between a low of 63.7% on September 1, 2020 and again on February 1, 2021, to a high of 69.4% on March 1, 2022. Occupancy steadily increased after April 2021 due to the widespread availability of vaccines for COVID-19, so that the occupancy as of March 1, 2022 was only 5.5% below the level on March 1, 2020. To the Company’s knowledge, the emergence of the delta variant in the summer of 2021 and the omicron variant in the fall of 2021 has not resulted in any reduction in occupancy at the Company’s facilities.

As a result of the COVID-19 pandemic, our tenants have received financial support under several government programs. These programs consisted of forgivable loans under Paycheck Protection Program, grants to operators under the Coronavirus Aid, Relief and Economic Security (CARES) Act in an amount equal to 2% of their historical annual revenues, the waiver of the three day hospital stay required by Medicare, accelerated payments under Medicare, and increased funding for Medicaid patients by some state governments.

The Company’s management does not expect that the discontinuation of these government programs will have a material adverse effect on the tenants’ ability to pay rent for four reasons. First, the Company’s management believes that most nursing home residents in the United States have received vaccines for COVID-19, which have been highly effective in preventing cases of COVID-19. Second, occupancy significantly increased between April 2021 and the beginning of March 2022. Third, the source of the tenants’ revenues has partially shifted from Medicaid to Medicare because more patients have become eligible for Medicare due to changes in the eligibility criteria. The tenants receive larger payments from Medicare than Medicaid. Fourth, most of the Company’s tenants have the ability to maintain profitability notwithstanding the decrease in revenues because approximately 85% to 90% of their operating costs are variable items (such as labor costs, food, drugs and supplies, including personal protection equipment and cleaning supplies) that can be reduced when occupancy decreases.

To the Company’s knowledge, its tenants are complying with all applicable governmental requirements and guidelines for addressing the risks posed by COVID-19. Although there have been a limited number of confirmed cases of COVID-19 at the facilities operated by the Company’s tenants, to its knowledge, these cases have not had a material impact on any of the operators or resulted in any claims against any of the operators.

As a landlord, the Company does not control the operations of its tenants, including related party tenants, and is not able to cause its tenants to take any specific actions to address trends in occupancy at the facilities operated by its tenants, other than to monitor occupancy and income of its tenants, discuss trends in occupancy with tenants and possible responses, and, in the event of a default, to exercise its rights as a landlord. However, Moishe Gubin, our Chairman and Chief Executive Officer, and Michael Blisko, one of our directors, as the controlling members of 41 of our tenants and related operators, have the ability to obtain information regarding these tenants and related operators and cause the tenants and operators to take actions, including with respect to occupancy. Messrs. Gubin and Blisko are subject to potential conflicts of interest due to their ownership of these tenants and their duties as directors of the Company. As a result of these conflicts, actions by the Company with respect to these related party tenants would be directed by the audit committee of our board of directors, comprised of independent directors, under our conflicts of interest policies. See “Policies with respect to Certain Activities and Transactions—Conflict of Interest Policies.”

As of the date of this prospectus, none of the Company’s tenants are delinquent on the payment of rent, and none of them have requested the Company to amend the terms of their leases to reduce current or future lease payments. Nevertheless, if the reduced level of occupancy caused by COVID-19 were to continue for an extended period, or if occupancy were to decrease due to the emergence of new variants of COVID-19, the financial condition and operating results of the Company’s tenants could be affected to such an extent that tenants would be unable to meet their lease obligations to us. “Risk Factors- A pandemic, epidemic or outbreak of an infectious disease in the United States, such as the recent outbreak of the coronavirus known as COVID-19, could adversely affect the operating results and financial condition of the operators of our facilities, which in turn could undermine their ability to meet their lease obligations to us.”

Acquisitions

On January 10, 2019, we acquired two properties located in Western Illinois, for an aggregate purchase price of $5.9 million. These properties each contain a skilled nursing facility. The two facilities have a total of 361 licensed beds and approximately 95,490 square feet. Prior to the date of acquisition, the two properties were leased by subsidiaries of the Predecessor Company, which subleased them to sub-tenants that are entities controlled by a related party. These properties are included under the Central Illinois 1 master lease.

On February 23, 2019, we acquired three properties located in Kentucky for a purchase price of $21.3 million, which we paid through the assumption of debt. These properties each contain a skilled nursing facility. The facilities contain an aggregate of 312 licensed beds and approximately 100,725 square feet. Concurrently with the closing of the acquisition, we leased these properties to third-party operators, which will operate and manage the properties for 10 years in exchange of annual base rent of $2.7 million. The lease includes an annual increase of approximately 3% in the rent and two extension options of five years each. These properties are included under the Kentucky 2 master lease.

On March 27, 2019, we acquired a property located in Arkansas for a purchase price of $6.9 million, which we funded through a $5.2 million mortgage loan and existing working capital. This property contains a skilled nursing facility with aggregate of 120 licensed beds and approximately 45,771 square feet. Concurrently with the closing of the acquisition, we leased the property to entities controlled by the Controlling Members of the Predecessor Company, which will operate and manage the property. The lease has an initial term of 10 years, with two extension options of five years each. The initial annualized base rent is $735,000, which is subject to an annual increase of approximately 3%.

On April 7, 2019, we acquired three properties located in Arkansas for a purchase price of $14.4 million, which we paid through the assumption of debt. Two of these properties contain a skilled nursing facility and the third contains a skilled nursing facility and an assisted living facility. The facilities have an aggregate of 448 licensed beds and approximately 130,429 square feet. Concurrently with the closing of the acquisition, we leased these properties to entities controlled by the Controlling Members of the Predecessor Company, which will operate and manage the properties for 10 years in exchange of annual base rent of $2.7 million. The lease provides for annual increases in rent of approximately 3% and includes two extension options of five years each. These properties are included under one of the Arkansas master leases.

On June 27, 2019, we acquired title to a building and the leasehold under a long-term ground lease for a property located in Des Plaines, Illinois, for a purchase price of $15.4 million. This property contains a skilled nursing facility with 231 licensed beds and approximately 70,556 square feet. We leased the facility to a third-party operator, which operates and manages the facility under a five-year lease in exchange of annual base rent of $1.6 million. The lease provides for annual increases in rent of 2% and includes three extension options of five years each. This property is included under the Texas/Oklahoma/Michigan/Illinois master lease.

On November 12, 2019, we acquired one skilled nursing facility located in Muncie, Indiana for an aggregate gross purchase price of $3,150,000, paid in cash. The facility has a total of 72 licensed beds and approximately 22,350 square feet. We previously leased the property under an operating lease and subleased it under the Indiana master lease. The acquisition will not increase the rental income that we receive, but we will save $330,000 in annual rent payments.

 On June 5, 2020, we acquired a property located in Kentucky for a purchase price of $4.4 million, which we paid in cash. This property contains 90 skilled nursing facility beds and 18 ALF/IL beds with aggregate of 108 licensed beds and approximately 46,500 square feet. Concurrently with the closing of the acquisition, we leased this property to third-party operators, which will operate and manage the property for 10 years in exchange of annual base rent of $540,000. The lease includes an annual increase of approximately 3% in the rent and two extension options of five years each. This property is included under the Kentucky 1 master lease.

On October 1, 2020, we acquired a property located in Illinois for a purchase price of $4.0 million, which we paid in cash. This property contains 245 skilled nursing facility beds and approximately 104,000 square feet. Concurrently with the closing of the acquisition, we leased this property on a triple net basis to an entity controlled by the Controlling Members of the Predecessor Company, which will operate and manage the property. The lease has an initial term of 10 years with two extension options of five years each. The lease provides for annual base rent of $400,000 in the first year, $450,000 in the second year and annual increases of approximately 2% thereafter. In addition, we gave the operator an option to purchase the property for an option price of $4.6 million during 2020, which will increase by $600,000 in each subsequent year during the term of the option.

On August 25, 2021, the Company acquired five properties located in Tennessee and one in Kentucky (the “Tennessee/Kentucky Properties”) for an aggregate acquisition cost of $81.0 million, which was paid through the issuance of 1,545,217 OP units valued at $16,977,000 and a cash payment of $63,990,000. The properties contain skilled nursing facilities of approximately 223,000 square feet and 515 beds. The Company financed part of the cash portion of the purchase price from the net proceeds received by the Company from the sale of Series C Bonds in Israel. Moishe Gubin, our Chairman of the Board and Chief Executive Officer, and the sellers have entered into an agreement, pursuant to which, Mr. Gubin has agreed to purchase the OP units issued to the sellers, unless the sellers elect to retain of the OP units. In the event that the sellers do not elect to retain the OP units, then Mr. Gubin will be required to pay to the sellers an amount (less any distributions paid to the sellers) equal to the greater of value of $11.00 per OP unit (which represents the agreed value of the OP units issued to pay a portion of the purchase price for the properties) or the value of the shares of our common stock as of the date of the repurchase. The value of the shares of our common stock would be determined pursuant to the terms of the partnership agreement of the Operating Partnership, which provides that the value is equal to the average of the daily market prices of such shares for the ten consecutive trading days immediately preceding the date of such valuation, or, if the shares are not then traded, the value shall be determined by the Company acting in good faith on the basis of such information as it considers, in its reasonable judgment, to be appropriate.

We have leased the five Tennessee facilities to related parties under a new Tennessee master lease, and the one Kentucky property to an unrelated third party under the existing Landmark master lease. As a result of the lease of these properties, our annual base rent will increase by $8.1 million in the first year, with annual increases of 3% thereafter.

The following table contains information regarding our recent acquisitions, as of the date of this prospectus:

(1) Prior to the acquisition of these facilities, the Predecessor Company was the tenant of each property and had subleased the property to tenant/operators. The acquisition of these properties did not increase the rental income received by the Company from these properties, but did eliminate the rental payments of $554,000 previously paid by the Company.

(2) Prior to the acquisition of this facility, the Predecessor Company was the tenant of the property and had subleased the property to tenant/operators. The acquisition of this property did not increase the rental income received by the Company from this property, but did eliminate the rental payments of $330,000 previously paid by the Company.

Disposition

On February 12, 2021, we sold five properties located in southern Illinois that housed skilled nursing facilities for an aggregate price of $26.1 million. The leases for these properties provided for annualized base rent of $3.6 million. We elected to sell these properties because the offered price was attractive and the sale reduced our concentration in this market. We recognized a gain of $3.8 million as a result of these sales.

Acquisition Opportunities

We believe that our management team’s extensive network of relationships with market participants will continue to provide us with access to attractive acquisition opportunities. We currently have several acquisition opportunities in various stages of negotiation and due diligence. These opportunities could have aggregate transaction value of more than $400 million, and involve investments in SNFs and ALFs in 3 different states. Although we continue to negotiate the terms of these significant investment opportunities, we have not reached binding agreement or understanding with respect to any of them. However, it is possible that we could reach agreement before the end of this year on one or more of such investments.

We cannot assure you that we will acquire any particular properties because the acquisition of any property is subject to a number of factors, including the negotiation and execution of definitive purchase and sale agreements, our completion of satisfactory due diligence with respect to the property and satisfaction of customary closing conditions, including the receipt of third-party consents and approvals.

Other Recent Developments

In April 2021, tenants for 13 of our properties located in Arkansas agreed to assign their leases to a group of unaffiliated third parties. The prior tenants were related parties of the Company. The facilities located on these properties consist of 12 SNFs and 2 ALFs, with one property housing both a SNF and an ALF. There were no changes to the terms of the existing leases. The assignment of the leases was subject to the approval of the Arkansas Department of Human Services, which was granted in November 2021. In connection with the lease assignments, the Company granted the new tenants an option to purchase the properties for an aggregate price of $90 million. The tenants are entitled to exercise the option within the lease period but after the claims by the prior owners of the properties have been resolved. See “Business and Properties—Legal Proceedings” for more information on the claims. These properties are subject to claims by the prior owners of the properties. These claims are not expected to have any impact on the assignment of the leases, but they may interfere with any sale of the properties. See “Business and Properties—Legal Proceedings.”

For additional information regarding our recently completed and pending acquisitions and dispositions, see “Business and Properties.”

Structure and Formation of Our Company

Our Operating Entities

Our Company

We were formed as a Maryland corporation in July 2019 and we commenced operations in June 2021, following the completion of the formation transactions. We conduct our business through a traditional UPREIT structure in which our properties are owned by our Operating Partnership directly or through limited partnerships, limited liability companies or other subsidiaries, as described below under “—Our Operating Partnership.” We are the sole general partner of our Operating Partnership and as of the date of this prospectus we own approximately 11.0% of the outstanding OP units. Our board of directors oversees our business and affairs.

Our Operating Partnership

Our Operating Partnership was formed as a Delaware limited partnership in July 2019 and it commenced operations in June 2021, following the completion of the formation transactions. Substantially all of our assets are held by, and our operations are conducted through, our Operating Partnership. As the sole general partner of our Operating Partnership, we generally have the exclusive power under the partnership agreement to manage and conduct its business and affairs, subject to certain limited approval and voting rights of the limited partners, which are described more fully below in “Description of the Partnership Agreement of Strawberry Fields Realty LP.” In the future, we may issue additional OP units or preferred OP units of limited partnership interest in our Operating Partnership, or preferred OP units, from time to time in connection with property acquisitions, compensation or otherwise.

For more information on our formation transactions, see “Structure and Formation of Our Company.”

Formation Transactions

On June 8, 2021, pursuant to a contribution agreement among the Company, the Predecessor Company and the Operating Partnership, the Predecessor Company contributed all of its assets to the Operating Partnership, and the Operating Partnership assumed all of its liabilities. In exchange, our Operating Partnership issued an aggregate of 51,686,280 OP units to the Predecessor Company. The Predecessor Company distributed these OP units to its members, and certain of these members transferred their OP units to their beneficial owners and other transferees. We subsequently exchanged 5,824,846 of these OP units for 5,824,846 shares of our common stock.

The assets that were contributed to the Operating Partnership by the Predecessor Company included all of the shares of the BVI Company, all of the membership interests in three property-owning limited liability companies owned directly by the Predecessor Company and all of the membership interests in SFMS. The BVI Company continues to own, through wholly-owned subsidiaries, all of our 78 properties and to hold, through wholly-owned subsidiaries, one lease for an additional property.

The contribution agreement was not negotiated on an arms’ length basis and may not be as favorable to us as an agreement negotiated on an arms’ length basis. We did not obtain independent third-party appraisals of the assets owned by the Predecessor Company for purposes of the formation transactions nor any independent third-party valuation or fairness opinion. Accordingly, the value of the OP units that we issued as consideration for the assets of the Predecessor Company in the formation transactions may have exceeded their aggregate fair market value.

In connection with the formation transactions, the Company also issued 19,320 shares of the Company’s common stock to the employees of the Company and its affiliates.

As a result of the completion of the formation transactions and the other transactions described above, we became the owner of approximately 11.3% of the outstanding OP units, which was reduced to 11.0% of the OP units following the issuance of additional OP units in connection with the Operating Partnership’s acquisition of additional properties in Tennessee and Kentucky in August 2021 and the issuance of additional shares of the Company’s common stock to the employees of the Company and its affiliates under the employee bonus plan. See “Structure and Formation of Our Company—Formation Transactions” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Acquisitions.”

Our Ownership Structure

The following diagram depicts our ownership structure following the completion of the formation transactions and the acquisition of the Tennessee/Kentucky properties, and assumes the sale to the public of all of the shares that may be that may be sold pursuant to this prospectus.

Restrictions on Transfer of OP Units

Under the partnership agreement for the Operating Partnership, holders of OP units may not transfer their units without our prior consent, as general partner of the Operating Partnership.

Subject to limits imposed under the partnership agreement for the Operating Partnership, each limited partner that holds OP units may tender its units for redemption by the Operating Partnership in exchange for cash equal to the market price of our common stock at the time of redemption or, at our option, for shares of common stock on a one-for-one basis. For the OP units that are currently outstanding, including the OP units held by our directors, executive officers and their affiliates, such OP units may not be redeemed for at least one year after their issue date (or such lesser time as determined by the General Partner in its sole and absolute discretion). The Company has no plans to approve a shorter period for any person. For OP units issued in the future, the OP units shall be subject to such restrictions as may be agreed to in writing between the Limited Partner and the General Partner. See “Description of the Partnership Agreement of Strawberry Fields Realty LP—Redemption Rights.”

In the event that any affiliates of the Company tender their OP units for cash redemption or exchange for shares of our common stock, we will treat this request as a related party transaction. The determination will be made by our audit committee, comprised of independent directors, pursuant to our related party transaction policy. In making this determination, the audit committee would consider the impact of the redemption or exchange on the Company and its stockholders, including any impact on the Company’s status as a REIT beginning in 2022. See “Policies With Respect To Certain Activities and Transactions —Policies Applicable to All Directors and Officers.”

Restrictions on Ownership of our Capital Stock

Due to limitations on the concentration of ownership of REIT stock imposed by the Internal Revenue Code of 1986, as amended, or the Code, subject to certain exceptions, our charter provides that, subject to certain exceptions, no person may beneficially or constructively own more than 9.8% in value of the aggregate outstanding shares of our common stock or more than 9.8% in value of the outstanding shares of any class or series of our preferred stock. See “Description of Capital Stock—Restrictions on Ownership and Transfer.”

Our charter also prohibits any person from, among other things:

● beneficially or constructively owning or transferring shares of our capital stock if such ownership or transfer would result in our being “closely held” within the meaning of Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a year);

● transferring shares of our capital stock if such transfer would result in our capital stock being owned by fewer than 100 persons (determined under the principles of Section 856(a)(5) of the Code);

● beneficially or constructively owning shares of our capital stock to the extent such beneficial or constructive ownership would cause us to constructively own 9.9% or more of stocks or interest (determined in accordance with Section 856(d)(2)(B) of the Code) of a tenant, other than a TRS, of our real property; or

● beneficially or constructively owning or transferring shares of our capital stock if such beneficial or constructive ownership or transfer would otherwise cause us to fail to qualify as a REIT under the Code.

Our board of directors, in its sole discretion, may prospectively or retroactively exempt a person from certain of the limits described above and may establish or increase an excepted holder percentage limit for such person if our board of directors obtains such representations, covenants and undertakings as it deems appropriate in order to conclude that granting the exemption and/or establishing or increasing the excepted holder percentage limit will not result in our being “closely held” under Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable years) or otherwise failing to qualify as a REIT.

Our charter also provides that any ownership or purported transfer of our stock in violation of the foregoing restrictions will result in the shares owned or transferred in such violation being automatically transferred to one or more charitable trusts for the benefit of a charitable beneficiary and the purported owner or transferee acquiring no rights in such shares, except that any transfer that results in the violation of the restriction relating to shares of our capital stock being beneficially owned by fewer than 100 persons will be void ab initio. If the transfer to the trust is ineffective for any reason to prevent a violation of the restriction, the transfer that would have resulted in such violation will be void ab initio.

Conflicts of Interest

All the properties that we owned or controlled immediately following the completion of the formation transactions were owned by former subsidiaries of the Predecessor Company. The Predecessor Company entered into a contribution agreement with us and the Operating Partnership, pursuant to which the Predecessor Company contributed all of the assets of the Predecessor Company to the Operating Partnership, and the Operating Partnership assumed all of its liabilities. In exchange, the Operating Partnership issued OP units to the Predecessor Company which were distributed to the beneficial owners of the Predecessor Company. See “Structure and Formation of Our Company—Formation Transactions.” The contribution agreement was not negotiated on an arms’ length basis and may not be as favorable to us as an agreement negotiated on an arms’ length basis. We did not obtain third-party property appraisals of the properties that were contributed to us in the formation transactions or fairness opinions in connection with the formation transactions. Accordingly, the value of the OP units that were issued as consideration for the assets of the Predecessor Company in the formation transactions may have exceeded their aggregate fair market value. See “Certain Relationships and Related Party Transactions—Formation Transactions.”

We have also entered into a tax protection agreement with the Predecessor Company and certain of its affiliates, who became our stockholders or limited partners of our Operating Partnership, pursuant to which our Operating Partnership agreed to indemnify these parties against certain adverse tax consequences to such parties, which may affect the way in which we conduct our business, including with respect to when and under what circumstances we sell properties acquired in the formation transactions or interests therein or repay debt during the restriction period. The amount of tax is calculated without regard to any deductions, losses or credits that may be available. Because of our obligations under the tax protection agreement, we may pursue growth and acquisition opportunities less vigorously than if we did not have these obligations. See “Structure and Formation of Our Company—Tax Protection Agreement.”

To the extent that any breach, dispute or ambiguity arises with respect to any of the contribution agreement or the tax protection agreement, we may choose not to enforce, or to enforce less vigorously, our rights under these agreements due to our ongoing relationships with the members of our executive management team.

In addition, conflicts of interest may arise between the holders of OP units, on the one hand (including our Chairman and Chief Executive Officer, Moishe Gubin, and another one of our directors, Michael Blisko), and our stockholders, on the other hand, with respect to certain transactions, such as the sale of properties or a reduction of indebtedness, which could have adverse tax consequences to holders of OP units, thereby making those transactions less desirable to such holders. See “Policies with respect to Certain Activities and Transactions—Conflict of Interest Policies” and “Description of the Partnership Agreement of Strawberry Fields Realty LP.”

We have had and currently have relationships and transactions with related parties. The related parties involved in these relationships and transactions consist of Moishe Gubin, who is our Chairman and Chief Executive Officer and one of the Controlling Members of the Predecessor Company, Michael Blisko, who is one of our directors and one of the Controlling Members of the Predecessor Company, Ted Lerman, who is the third Controlling Member of the Predecessor Company, Steven Blisko, who is the brother of Michael Blisko, and Nahman Eingal, our Chief Financial Officer, and their affiliated entities.

As of the date of this prospectus, we lease 41 of our facilities to affiliates of Moishe Gubin, Michael Blisko and Ted Lerman, and 6 additional facilities to affiliates of Steven Blisko. These lease agreements may give rise to conflicts of interest between the Company and such related parties. See “Risk Factors—Risks Related to Business - The leases with related parties have not been negotiated on an arm’s-length basis, and the terms of those agreements may be less favorable to us than they might otherwise have been in an arm’s-length transaction.”

For additional information about these relationships, see “Certain Relationships and Related Transactions.”

Our Tax Status

We intend to elect and qualify to be taxed as a REIT for federal income tax purposes commencing with our taxable year ending December 31, 2022. Our qualification as a REIT will depend upon our ability to meet, on a continuing basis, through actual investment and operating results, various complex requirements under the Code relating to, among other things, the sources of our gross income, the composition and values of our assets, our distribution levels and the diversity of ownership of our capital stock. We believe that we are organized in conformity with the requirements for qualification as a REIT under the Code and that our intended manner of operation will enable us to meet the requirements for qualification and taxation as a REIT for federal income tax purposes commencing with our taxable year ending December 31, 2022.

As a REIT, we generally will not be subject to federal income tax on our net taxable income that we distribute currently to our stockholders. Under the Code, REITs are subject to numerous organizational and operational requirements, including a requirement that they distribute each year at least 90% of their REIT taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gains. If we fail to qualify for taxation as a REIT in any taxable year and do not qualify for certain statutory relief provisions, our income for that year will be taxed at regular corporate rates, and we would be disqualified from taxation as a REIT for the four taxable years following the year during which we ceased to qualify as a REIT. Even if we qualify as a REIT for federal income tax purposes, we may still be subject to state and local taxes on our income and assets and to federal income and excise taxes on our undistributed income.

Implications of Being an Emerging Growth Company and Smaller Reporting Company

We qualify as an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. For as long as we are an emerging growth company, among other things:

● we are exempt from the requirement to obtain an attestation and report from our auditors on the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act;

● we are permitted to provide less extensive disclosure about our executive compensation arrangements; and

● we are not required to give our stockholders non-binding advisory votes on executive compensation or golden parachute arrangements.

We may take advantage of these provisions until we are no longer an emerging growth company. We would cease to be an emerging growth company upon the earliest to occur of (i) the last day of the fiscal year during which our total annual revenue equals or exceeds $1.07 billion (subject to adjustment for inflation), (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale under the registration statement (of which this prospectus forms a part), (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt or (iv) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act.

In addition to qualifying as an emerging growth company, we also currently qualify as a smaller reporting company under Rule 12b-2 of the Securities Exchange Act of 1934, as amended. As long as we remain a smaller reporting company, we may take advantage of certain scaled or reduced disclosure requirements, some of which are the same as the reduced disclosure requirements applicable to an emerging growth company. In the event that we cease to be an emerging growth company as a result of a lapse of the five year period, but continue to be a smaller reporting company, we would continue to take advantage of the scaled disclosure requirements applicable to a smaller reporting company.

Listing on the Nasdaq Capital Market

We are seeking to list the shares of our common stock on the Nasdaq Capital Market. We have filed a listing application with Nasdaq Stock Market (“Nasdaq”), which is currently under review by Nasdaq.

In order to complete the listing, we will need to meet Nasdaq’s quantitative criteria for a direct listing on the Nasdaq Capital Market. In our case, the criteria include a minimum income of $750,000 during the most recent fiscal year, stockholders’ equity of at least $4,000,000, a market value of unrestricted publicly held shares in excess of $10,000,000 and a minimum bid price of $8.00 per share. The Company believes that it meets the first two criteria because the Company had $8.4 million in net income in 2021, and the Company’s equity as of December 31, 2021 was $35.1 million.

For purposes of the next two criteria, the Company is required to provide a valuation from an experienced independent third party that evidences that the market value of our unrestricted publicly held shares and our bid price will exceed these requirements. The Company has obtained and provided to Nasdaq a valuation report from an experienced independent third party that is unrelated to Cantor, our financial advisor. This report is dated as of March 4, 2022, and reflects an estimated market value as of $9.23 per share of common stock.

If the Company’s application for listing on Nasdaq is not approved, then the Company will withdraw this Registration Statement and no shares of our common stock will be sold by the Registered Stockholders.

If Nasdaq approves our application and our shares begin trading, we will be required to satisfy Nasdaq’s continued listing standards, which include maintaining stockholders’ equity of at least $2,500,000, a market value of unrestricted publicly held shares of at least $1,000,000 and a minimum bid price of $1.00 per share. If we are unable to satisfy these ongoing listing criteria following our listing, we may be required to delist.

Corporate Information

Our principal executive offices are located at 6101 Nimtz Parkway, South Bend, In 46628. Our telephone number at our executive offices is (574) 807-0800 and our corporate website is www.strawberryfieldsreit.com. The information contained on, or accessible through, our website is not incorporated by reference into, and does not form a part of, this prospectus.

Summary Risk Factors

An investment in our shares involves various risks, and prospective investors are urged to carefully consider the matters discussed under “Risk Factors” prior to making an investment in our shares. The following is a list of some of these risks:

We lease 41 of our facilities to tenants that are affiliates of Moishe Gubin who serves as Chairman of the Board and our Chief Executive Officer, Michael Blisko, who serves as one of our directors, and Ted Lerman, one of the Controlling Members of the Predecessor Company. We lease six additional facilities to affiliates of Steven Blisko, the brother of Michael Blisko. As of the data of this prospectus, approximately 67.1% of our annualized base rent is received from these related-party tenants. The failure of these tenants to perform their obligations under their leases or renew their leases upon expiration could have a material adverse effect on our business, financial condition and results of operations.

The leases with related parties have not been negotiated on an arm’s-length basis, and the terms of those agreements may be less or more favorable to us than they might otherwise have been in arm’s-length transactions.

We have entered into nine master lease agreements with respect to 64 of our facilities, including three master lease agreements with tenants that are affiliates of Moishe Gubin who serves as Chairman of the Board and our Chief Executive Officer, Michael Blisko, who serves as one of our directors, and Ted Lerman, one of the Controlling Members of the Predecessor Company. As of the date of this prospectus, these nine leases represent approximately 70.5% of the annualized base rent under all of our leases. The failure of these tenant/operators to meet their obligations to us could materially and adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

Our growth strategy will depend upon future acquisitions of healthcare properties, and we may be unsuccessful in identifying and consummating attractive acquisitions or taking advantage of other investment opportunities, which would impede our growth and negatively affect our cash available for distribution to stockholders.

Our real estate investments are, and are expected to continue to be, concentrated in skilled nursing facilities, which could adversely affect our operations relative to a more diversified portfolio of assets.

A pandemic, epidemic or outbreak of an infectious disease in the United States, such as the ongoing COVID-19 pandemic, could adversely affect the operating results and financial condition of the operators of our facilities, which in turn could undermine their ability to meet their lease obligations to us.

We depend on key personnel whose continued service is not guaranteed and each of whom would be difficult to replace.

Our growth depends on our ability to obtain additional debt and equity financing from third-party sources. Such financing is outside of our control and may not be available to us on commercially reasonable terms or at all, which could limit our ability, among other things, to meet our capital and operating needs or make the cash distributions to our stockholders necessary to qualify and maintain our qualification as a REIT.

We have substantial indebtedness, which could adversely affect our financial condition, results of operations and cash flows.

Certain of our debt agreements include restrictive covenants which could limit our ability to make distributions.

Mortgage debt obligations expose us to the possibility of foreclosure, which could result in the loss of our investment in a property or group of properties subject to mortgage debt.

The indenture for the Series C Bonds provides for a balloon payment of the entire principal of $50.8 million in 2026. We may also obtain additional financing that contains balloon payment obligations. These types of obligations may materially adversely affect us, including our cash flows, financial condition and ability to make distributions.

Changes in the method pursuant to which LIBOR is determined and potential phasing out of LIBOR after 2021 may adversely affect our financial results.

We have experienced and expect to continue to experience significant growth and may not be able to adapt our management and operational systems to respond to the integration of the healthcare properties we expect to acquire without unanticipated disruption or expense, which could have a material adverse effect on our business, financial condition, results of operations and ability to make distributions to our stockholders.

We may be unsuccessful in our efforts to develop relationships with unaffiliated operators.

Properties in Illinois, Indiana, Tennessee and Arkansas account for approximately 82.6% of the annualized base rent from our portfolio as of the date of this prospectus.

We face potential adverse consequences of bankruptcy or insolvency by our tenants, operators, borrowers, managers and other obligors.

Long-term leases may result in below market lease rates over time, which could adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

We may incur additional costs in acquiring or re-leasing properties, which could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

We may have difficulty finding suitable replacement tenants in the event of a tenant default or non-renewal of our leases.

We and our directors and officers may become subject to litigation and disputes, which could have an adverse effect on our financial condition, results of operations, cash flow and per share trading price of our common stock.

Our use of OP units as consideration to acquire properties could result in stockholder dilution or limit our ability to sell such properties, which could have a material adverse effect on our business, results of operations and cash flows.

We did not obtain any third-party appraisals of the assets and properties previously owned by the Predecessor Company for purposes of the formation transactions nor any independent third-party valuations or fairness opinions. Accordingly, the value of the common stock and OP units that were issued by us to the Predecessor Company in exchange for its assets and liabilities in the formation transactions may have exceeded their aggregate fair market value.

The historical performance of the Predecessor Company is not, and the consolidated financial statements of the Predecessor Company included in this prospectus are not necessarily, indicative of our future results.

We have no operating history as a REIT or a publicly traded company in the United States and may not be able to operate our business successfully as a REIT or publicly traded company.

We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make common stock less attractive to investors.

We have elected to avail ourselves of the extended transition period for adopting new or revised accounting standards available to emerging growth companies under the JOBS Act and will, therefore, not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies, which could make our common stock less attractive to investors.

We will be subject to the requirements of the Sarbanes-Oxley Act.

Adverse trends in healthcare provider operations may negatively affect the operations at our properties, which in turn, could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

Both we and the tenants and operators of our properties may be adversely affected by healthcare regulation and enforcement.

Our tenants/operators may be subject to significant legal actions that could subject them to increased operating costs and substantial uninsured liabilities, which may affect their ability to pay their rent payments to us and, thus, could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

Our business is subject to risks associated with real estate assets and the real estate industry, which could materially adversely affect our financial condition, results of operations, cash flow, cash available for distribution and our ability to service our debt obligations.

As an owner of real estate, we could incur significant costs and liabilities related to environmental matters.

We did not obtain new Phase I Environmental Site Assessments for the properties contributed by the Predecessor Company in connection with our formation transactions, and the assessments that the Predecessor Company obtained in connection with its acquisition of these properties do not provide assurance that we will not be exposed to environmental liabilities in our initial portfolio.

Our properties may contain or develop harmful mold or suffer from other air quality issues, which could lead to liability for adverse health effects and costs of remediation.

Our properties may be subject to impairment charges.

We may incur significant costs complying with various federal, state and local laws, regulations and covenants that are applicable to our properties.

Moishe Gubin, our Chairman and Chief Executive Officer, and Michael Blisko, one of our directors, are the beneficial owners of approximately 7.2% of our outstanding shares and approximately 80.5% of the OP units in the Operating Partnership. They have the ability to influence decisions by the Company and the Operating Partnership, including the approval of matters involving conflicts of interest and significant corporate transactions.

Conflicts of interest may exist or could arise in the future between the interests of our stockholders and the interests of holders of OP units in the Operating Partnership, which may impede business decisions that could benefit our stockholders.

We may assume unknown liabilities in connection with our formation transactions, and any recourse against third parties, including the Predecessor Company, for certain of these liabilities will be limited.

Our charter contains certain provisions restricting the ownership and transfer of our stock that may delay, defer or prevent a change of control transaction that might involve a premium price for our common stock or that our stockholders otherwise believe to be in their best interests.

We could increase the number of authorized shares of stock, classify and reclassify unissued stock and issue stock without stockholder approval.

Certain provisions of Maryland General Corporation Law, or MGCL, could inhibit changes of control, which may discourage third parties from conducting a tender offer or seeking other change of control transactions that could involve a premium price for our common stock or that our stockholders otherwise believe to be in their best interests.

Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Certain provisions in the partnership agreement of the Operating Partnership may delay or prevent unsolicited acquisitions of us.

The tax protection agreement with the Predecessor Company and its affiliates could limit our ability to sell or otherwise dispose of certain properties.

We may pursue less vigorous enforcement of terms of the contribution and other agreements with the Predecessor Company and its affiliates because of their relationship with members of our management and board of directors.

Our board of directors may change our strategies, policies and procedures without stockholder approval and we may become more highly leveraged, which may increase our risk of default under our debt obligations.

Our rights and the rights of our stockholders to take action against our directors and officers are limited.

We are a holding company with no direct operations and, as such, we will rely on funds received from our limited ownership interest in the Operating Partnership to pay liabilities, and the interests of our stockholders will be structurally subordinated to all liabilities and obligations of the Operating Partnership and its subsidiaries.

If we are deemed to be an investment company under the Investment Company Act, our stockholders’ investment return may be reduced.

If we do not qualify to be taxed as a REIT, or if we fail to remain qualified as a REIT, we will be subject to U.S. federal income tax as a regular corporation and could face substantial tax liability, which would substantially reduce funds available for distribution to our stockholders.

Our failure to qualify as a REIT could cause our shares to be delisted from Nasdaq.

Our ownership of and relationship with any future taxable REIT subsidiaries will be limited and a failure to comply with the limits would jeopardize our REIT status and may result in the application of a 100% excise tax.

Our ownership of and relationship with our tenants will be limited and a failure to comply with such limits would jeopardize our REIT status.

We must distribute earnings and profits in our first taxable year as a REIT that were attributable to any period before we were a REIT.

We may potentially have additional tax exposure from built-in gains from the disposal of assets that we hold at the time that we become a REIT.

Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.

Qualifying as a REIT involves highly technical and complex provisions of the Code.

The prohibited transactions tax may limit our ability to dispose of our properties.

If our Operating Partnership failed to qualify as a partnership for federal income tax purposes, we would cease to qualify as a REIT and suffer other adverse consequences.

Legislative, administrative, regulatory or other actions affecting REITs, including positions taken by the IRS, could have an adverse impact on our investors or us.

REIT distribution requirements could adversely affect our liquidity and our ability to execute our business plan.

Complying with REIT requirements may cause us to forego otherwise attractive acquisition opportunities or liquidate otherwise attractive investments.

Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities.

The share ownership limit imposed by the Code for REITs and our certificate of incorporation may inhibit market activity in our shares and restrict our business combination opportunities.

Even if we qualify as a REIT for federal income tax purposes, we may be subject to other tax liabilities that reduce our cash flow and our ability to make distributions to our stockholders.

The structure of the formation transactions and related transactions could cause the Company to have greater taxable income than if the Company had purchased its assets.

Our listing differs significantly from an underwritten initial public offering.

Shares of our common stock currently have no public market. An active trading market may not develop or continue to be liquid and the market price of shares of our common stock may be volatile.

Future sales of common stock by our Registered Stockholders could cause our share price to decline.

None of our stockholders are party to any contractual lock-up agreement or other contractual restrictions on transfer. Following our listing, sales of substantial amounts of our common stock in the public markets or the perception that sales might occur, could cause the market price of our common stock to decline.

Increases in market interest rates may have an adverse effect on the trading prices of our common stock as prospective purchasers of our common stock may expect a higher dividend yield.

The number of shares of our common stock available for future issuance or sale could adversely affect the per share trading price of our common stock.

Summary Consolidated Financial Data

The following table sets forth selected financial and other data for the Company and the Predecessor Company based on the consolidated financial statements of the Company and the Predecessor Company set forth elsewhere in this prospectus. See “Consolidated Financial Statements.”

The Company’s selected consolidated financial and operating data as of December 31, 2021 and for the year ended December 31, 2021, reflect the completion of the formation transactions that occurred on June 8, 2021. The Predecessor Company’s consolidated financial and operating data as of December 31, 2020 and 2019, and for the years ended December 31, 2020 and 2019, reflect the historical financial conditions and results of the Predecessor Company.

The financial information is not necessarily indicative of what our actual financial position and results of operations would have been if the formation transactions had occurred at the beginning of the periods indicated, nor does it purport to represent our future financial position or results of operations.

Since the information presented below is only a summary and does not provide all of the information contained in the consolidated financial statements of the Company and the Predecessor Company, including the related notes, you should read the following in conjunction with the information contained in the consolidated financial statements of Strawberry Fields REIT, Inc. and Strawberry Fields REIT, LLC and related notes thereto appearing elsewhere in this prospectus.

(1) Funds from Operations, or FFO, is a supplemental measure of our performance. We present FFO calculated in accordance with the current National Association of Real Estate Investment Trusts, or NAREIT, definition. In addition, we present FFO, as Adjusted for certain other adjustments that we believe enhance the comparability of our FFO across periods and to the FFO reported by publicly traded REITs. FFO and FFO, as Adjusted are supplemental performance measures that are commonly used in the real estate industry to assist investors and analysts in comparing results of companies that invest in real estate. FFO is generally defined by NAREIT as net income, calculated in accordance with GAAP, excluding gains from sales of real estate, gains from bond retirement and adding back real estate depreciation and amortization and foreign currency transaction loss. We present FFO because we consider it an important supplemental measure of our operating performance, and we believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies that invest in real estate, many of which present FFO when reporting results.

We adjust FFO to present FFO, as Adjusted as an alternative measure of our operating performance, which, when applicable, excludes the impact of straight-line rent, above-/below-market leases, non-cash compensation and certain non-recurring items. For the years ended December 31, 2021, 2020 and 2019, we excluded as a non-recurring item the $5,128,000, $2,109,000 and $5,820,000, respectively, in provision for doubtful accounts the Company and the Predecessor Company recorded with respect to a mortgage loan the Predecessor Company had purchased with the intention of acquiring five properties subject to the mortgage loan. The proposed acquisition was cancelled due to the loss of the licenses for the properties. See “Note 2. Concentration of Credit Risk” to the consolidated financial statements of the Company for the year ended December 31, 2021. In future periods, we may also exclude other items from FFO, as Adjusted that we believe may help investors compare our results.

FFO and FFO, as Adjusted are presented as supplemental financial measures and do not fully represent our operating performance. Some REITs may use different methodologies for calculating FFO and FFO, as Adjusted or use other definitions of FFO and FFO, as Adjusted and, accordingly, our presentation of these measures may not be comparable to those presented by some REITs. Neither FFO nor FFO, as Adjusted is intended to be a measure of cash flow or liquidity. Please refer to our consolidated financial statements, prepared in accordance with GAAP for purposes of evaluating our financial condition, results of operations and cash flows.

The following table sets forth a reconciliation of the Company and the Predecessor Company’s net income to FFO and FFO, as Adjusted, for the years ended December 31, 2021, 2020 and 2019: