Earnings Call Transcript - STRW Q1 2025

Operator, Operator

Good morning, my name is Holly and I will be your conference operator today. I would like to welcome everyone to the Strawberry Fields REIT First Quarter 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Please note this conference is being recorded. I would now like to turn the conference over to Jeff Bajtner, Chief Investment Officer. Sir, please go ahead.

Jeffrey Bajtner, Chief Investment Officer

Thank you and welcome to Strawberry Fields REIT's Q1 2025 earnings call. I am the Chief Investment Officer and joining me on the call today are Moishe Gubin, our Chairman and CEO, and Greg Flamion, our CFO. Earlier today, the company issued its Q1 2025 earnings results which are available on the company's investor relations website. Participants should be aware that this call is being recorded and listeners are advised that any forward-looking statements made on today's call are based on management's current expectations, assumptions, and beliefs about Strawberry Fields REIT's business and environment in which it operates. These statements may include projections regarding future financial performance, dividends, acquisitions, investments, returns, financings, and may or may not reference other matters affecting the company's business or the businesses of its tenants, including factors that are beyond its control. Additionally, references will be made during this call to non-GAAP financial results. Investors are encouraged to review these non-GAAP financial measures, as well as explanation and reconciliation of these measures to the comparable GAAP results included on the non-GAAP measure reconciliation page in our investor presentation. And now on to discussing Strawberry Fields REIT and our Q1 2025 performance. I want to start by sharing some key highlights. During the quarter, the company collected 100% of its contractual rents. On January 2, the company closed the acquisition for the purchase of six health care facilities located in Kansas. The purchase price for the facilities was $24 million and released under a new 10-year master lease agreement. Under the master lease, the tenants will be on a triple net basis, and the tenants have two five-year options to extend the lease. The facilities are operated as five skilled nursing facilities and one assisted living facility and are comprised of 354 licensed beds. We welcome Willie Michelle Novotny of Advena Living to the Strawberry Fields family, and we look forward to growing with them. On March 31, the company completed the acquisition for a skilled nursing facility with 100 licensed beds near Oklahoma City. The acquisition was for $5 million, and the company funded the acquisition utilizing cash from the balance sheet. The facility was leased to an existing tenant to combine this facility with another facility they acquired in December 2024 to create a master lease. This lease included annual base rents of $500,000 with 3% annual rent increases and is for an initial term of 10 years with two five-year options to extend the lease. A few other items I wanted to point out. During the quarter, the company continued to pay its quarterly dividend and on March 31 made a payment of $0.14 a share. We also made a couple of new hires during the quarter, an asset manager and a lawyer. These hires reflect the company's expanding footprint and the need to grow the team accordingly. The only other hire we anticipate in the near future is another asset manager. Subsequent to quarter end, the company purchased the 112-bed facility near Houston, Texas, comprised of 102 skilled nursing beds and 10 assisted living beds. The acquisition was for $11.5 million, and the company funded the acquisition utilizing cash from the balance sheet. The property will be added to an existing master lease in Texas. As a result of this acquisition, the annual rents for this master lease increased by $1.278 million, and this master lease is subject to 3% annual rent increases. With this acquisition in Houston, the company has completed over $40 million in acquisitions to date in 2025. We are working diligently on some deals and expect that number to be closer to $100 million by the end of Q2.

Greg Flamion, Chief Financial Officer

Thank you, Jeff, and welcome to the Strawberry Fields Q1 2025 earnings call. I'd like to start off by looking at our financials for the first quarter of 2025. Total assets increased by $199 million or 31.5% compared to Q1 2024. This growth was primarily driven by activity related to our 2024, 2025 real estate acquisitions, as well as the re-tenanting of the Landmark master lease into the Kentucky master lease. On the liabilities and equity side, we also saw an increase largely attributable to the funding used to finance these acquisitions. Turning to the income statement, total revenue for Q1 2025 was $37.3 million, up from $27.8 million in the same period last year, representing a 34.1% year-over-year increase. This growth was fueled by the timing of our key acquisitions over the past 12 months, including the Missouri Master Lease, which closed in December 2024, as well as the re-tenanting of existing leases, most notably the Landmark to Kentucky master lease, which started in January 2025. Net income for the quarter was $6.99 million or $0.13 a share compared to $5.99 million or $0.12 a share in Q1 2024. This increase reflects higher revenue, partially offset by increases in depreciation, amortization, and interest expenses. Now moving on to financial highlights, AFFO for Q1 2025 was $16.8 million up from $13.1 million a year ago, representing a 28% increase. Based on these results, we are projecting full year 2025 AFFO of $67.3 million which would represent a 20% year-over-year growth. Please note that the projection is based solely on the annualization of Q1 results and does not include any contribution from future acquisitions. With this projection, we expect our AFFO CAGR to be 13.8%. Adjusted EBITDA for Q1 2025 came in at $30.4 million compared to $21.4 million in Q1 2024, marking a 42% year-over-year increase. We are projecting a full year 2025 adjusted EBITDA of $128.8 million again based upon annualized Q1 results and excluding the impact of future acquisitions. Based on this forecast, we can expect an adjusted EBITDA CAGR of 12.2%. Finally, I want to touch on our dividend. As of March 31, 2025, our dividend yield was 4.7% with an annualized AFFO payout ratio of 46.2%. Both metrics remain below the average of peers in our sector, reflecting our commitment to retain capital in support of an active and robust acquisition pipeline. Looking ahead, we will continue to evaluate opportunities for dividend growth and remain committed to aligning future increases with the strength of our underlying performance.

Moishe Gubin, Chairman and CEO

All right. Thank you, Greg. I'm going to continue on Slide 4 going over portfolio highlights. As Jeff said earlier in his comments, good quarter. Collected 100% of our rents. We've got our facilities up to 132 facilities in 11 states. We're marching towards 15,000 beds, 1.02 billion in total asset value at acquisition, which today market value of those same assets are about $1.4 billion. We're up to 16 master leases, which is about 90% of our portfolio. There's seven years remaining, what people call WALT, which is a weighted average lease term, that's remaining is over seven years. We expect that number to improve with the new leases that we enter into our brand new 10-year leases. And in fact, one of the new leases we're going to be entering into should be a 15-year lease with two five-year renewals. That being said, our EBITDARM coverage has improved quarter-over-quarter. In fact, most of the metrics from our operators first quarter, which is usually the worst quarter of the year, for the operators because of February being a short month. And beginning of the year, you have all the payroll taxes and 80% of the costs of our tenants are payroll. And so, but with that, we had a really nice coverage of almost a 1.9 EBITDA coverage. We have a robust pipeline, which Jeff might have mentioned, and we expect to end the year after everything to be between $100 million, $200 million adjusted by the end of half of the year, we should break $100 million already. So, god willing, we continue on our march towards growing our company. Slide 5, actually continues at the annual shareholder meeting that we had last week, where we were talking at how well we've grown and how beautiful our balance sheet and income statement look. This is actually one of them. The AFFO growth from 2019 to 2025 is almost a 14% growth rate. Really, really a good number. We expect this year to break $67 million in AFFO. God willing, we do even better than that because this is not taking into consideration any of the deals that we expect to get done this year. Next slide? Slide 6, is our base rent growth. I don't really worry too much about this, but it is nice to see that our current base rent is $135 million. That's what we expect it to be. Again, that number should be larger. The growth rate of being 11%, I think is good, but it's not such an important factor to me. So we're going to gloss over it. Next slide. This slide, fortunately or unfortunately, shows actually a pretty good growth to our stock if you consider March of '24 being at $8 and where we ended March 31 at close to $11.90. Unfortunately, the marketplace went a little crazy after April 2, and right now we're just battling to get to our NAV, which we believe to be way higher than where we're trading today. Next slide. This slide is something we're really proud of. The fact that I mean, to the negative is that we should be trading higher, but to the positive, our return versus our peers, we have the highest return at a 57%, which we just talked about with the stock price. AFFO trading multiples, unfortunately is below 10x and we really we've talked about it in previous meetings. We just want to be treated like our peers and get to an average of 13x, which would be a nice increase to our stock price. Next slide. This slide is one of the best slides that we have. We're just highlighting the AFFO payout ratio. It's somewhere in the middle of 46.2% and 46.3% which is lower than everybody, which we have another slide coming up to say how we unlike Jeff alluded to, we're using the rest of our free cash and using it to buy more assets. And therefore, our AFFO appreciation or accretion is larger than our peers. Our dividend yield today is 4.7%. Again, we're meeting the REIT standard and we feel that the total return for our shareholders is probably close to 17%. Next slide. This slide, Slide 10 just highlights the fact, like we've been saying for the last few years already, where we believe we're probably the closest pure play SNF REIT out there at over 90% close to 91% of our portfolio. And that'll continue to shrink because we specifically don't buy other assets. They usually come along with deals when we're buying a bigger portfolio of nursing homes. So that should shrink. It'll never be 100%, but it'll shrink as we continue to buy nursing homes, throughout the country and even like on the Houston deal. So it's one out of 20 deals that we did in a year where we have an assisted living that went along with the nursing home, and that assisted living is 10 beds while the nursing home is 100 beds. Yes, next slide. This slide, Slide 11 is what I was talking about a few minutes ago. If you take a look at the growth rate, the chart on the right, while most of our peers had a negative growth rate, CareTrust, which is really our best comp even though they're 2x or 3x larger than us. They're doing great, and they're a good company as well. But our growth rate for our AFFO per share is running 10%, through the last five years. And, we figure you take that and you add your dividend yield to that, and that's a good 15%, 16%, 17% return year-over-year, and we're proud of that. As far as EBITDARM coverage, 1.89 is a good number. We're in line with Omega, who's probably one of the biggest, and they're a good peer also, but they're really big in their international, which we're not. So we're in line with them, which is good company to have. We're not out of whack here. Next slide. What I've talked about already now about the slide is just evident here. The 12.1% growth rate over the last seven years or so, take that together with the dividend yield, which I think we said was 4.7%. That's a 16.8% when you put those two together. That's really the investment, what we're trying to tell people to invest in. You got 16.8%, and then you got the appreciation of our stock price that's right now undervalued at below NAV to buy the stock. And then stocks should go up and start trading the right way, and which is what we're waiting to happen. We're doing all the right moves, going all the conferences, meeting a lot of people, talking to family offices, doing non-deal roadshows. We're running around, and we enjoy doing it. We meet a lot of good people. And we've come to realize that really our company belongs can fit into anyone's portfolio. Just a question of what larger percentage in someone's portfolio we should be, depending on someone's how conservative. Because we feel at a relatively low risk basis for our business being that when we're insulated, bulletproof from, we have tailwinds in the nursing home world from the baby boomers and the fact that you got long-term debt and not so much, this is not an economic decision. If someone needs to be in nursing home, they go to a nursing home. So you have all those positives. And, well, regardless, we feel that that it's a low risk because of those positives. And because of that lower risk, to be able to get 16%, 17% return on that, we feel that that's a really strong argument for people to invest in our stock. Next slide. This slide, Slide 13, has just been part of our deck for so long. At this point, we used to push the fact that HUD debt was a big percentage of our debt. At this point, HUD is only about 39% of our debt load. And then the other two parts are Israeli bond debt and then conventional debt with Banco Popular or Popular Bank. We think we're in a good spot. I've talked about at the Annual Shareholder Meeting. Our next move at some point is to create a line of credit with a bank, unsecured to be able to just use that cash when we want to buy something, and then hopefully backfill it with using the ATM or our availability and doing a placement of stock. Of course, we need the share price to go up because we're not going to dilute current shareholders below NAV. So at this point, until the stock goes up, we'll probably just increase debt a little bit. But, again, our debt, we have so much capacity, and we're sitting at 51% leverage. We want to be between 45% and 55%. So we have a little bit of room in our own policy to get to 55% if need be. If the stock starts trading the right way, we'll sell stock and get that number down. But that's our current plan. And, again, the simple thought here is we're going to keep buying the way we buy, which is very disciplined. And then to fund that is nothing permanent there. So if the equity market is not trading well and it's not open for us, because we're not going to sell, we're not going to dilute ourselves like other REITs do. We're not going to do that. And we'll just take a little debt, and we'll increase our leverage a little bit. And then once the stock is trading, we'll issue equity and then pay it down. Alternatively, if we have excess cash and the stock doesn't trade well, we will buy back more stock. We have availability in our stock repurchase plan that we published whatever it was two years ago.

Operator, Operator

Thank you. At this time, we will be conducting a question-and-answer session. Your first question for today is from Rob Stevenson with Janney.

Rob Stevenson, Analyst

Good afternoon, guys. Can you just dive into the Landmark lease and sort of talk about what's going on there and what prompted that in a little bit detail?

Moishe Gubin, Chairman and CEO

Sure. Thanks, Rob. Good to hear your voice. Yes, I'm just going to talk in roundabout numbers. Me and Greg or Jeff can add the actual numbers. But, basically, what happened was the facilities were doing well, and there was an opportunity for us to recast a new lease with a new operator. And so what we did was we struck a deal with our previous tenant for them to surrender their lease so that we would have the ability to enter into a new 10-year lease with two five-year renewals, and we recast it at a one and a quarter coverage to what the previous tenant was doing. And with that, we had a nice increase to our top-line, and our deal with the predecessor was that we would pay them about a million dollars. The owner of the previous company would pay them about a million dollars a month for the next five years, which is right around the increase in rent for the first year. And that Strawberry would win, because we'd have a brand new lease with a new tenant that we could grow with, which we had before also, but this is just diversifies the pool a little further. And Strawberry gets the benefit of a 3% increases on the higher rent number. And meanwhile, the other operator leaves having made was getting paid out over five years. And, so we net out to for the first year, it nets out to be around the same number as we were making before with an increase at top line and an increase of the expenses on the bottom line. But after year one, we get the 3% increases at strawberry. And then after year five, we get the full benefit of the higher rent amount. So we felt it was good for us at Strawberry. We end up in the same position or better. The tenant leaving leaves happy, and the tenant incoming starts happy. And, I think we've already had their first month or two months of operation, and they actually have a rent coverage in like one and three quarters, even though we built it out at one and a quarter. They end up beating that by a nice number. So that's the general story. If you need exact numbers, Greg or Jeff, I'm sure able to walk you through the exact numbers if you want them. Just let me know.

Rob Stevenson, Analyst

So the Landmark lease was somewhere, call it about $11 million and so. The new lease is $23.3 million and so that's plus or minus a little bit, that's essentially what's happening here?

Moishe Gubin, Chairman and CEO

Exactly.

Rob Stevenson, Analyst

The level of the increase?

Moishe Gubin, Chairman and CEO

Exactly. And in the long run, we make out more money with a new operator that's hungry and we're able to grow with them. And, I think it's very positive for us.

Rob Stevenson, Analyst

Okay. And then the million dollars a month is just going to be coming out of the rental expense number, which was like $3.8 million in the first quarter?

Moishe Gubin, Chairman and CEO

You would think so, but under GAAP accounting, the way this gets recorded is actually, we created a debt on the books, okay? And then as that debt gets paid down, the debt goes lower. And on the other side, we amortize the payments being made, and therefore, you end up netting out. So it's not netted in the top. What you're thinking is exactly how I would have done it, but that doesn't conform to gap accounting, unfortunately. And so basically, you're going to see a higher top line number. And by the way, this is similar to like three, four years ago when the gap rule changed with regards to how to record property taxes that are collected from tenants. So property taxes come out come in, and we pay it out for them. It comes in as a top line revenue number, and it goes out as an expense. They net out again to the same rent number that's supposed to be the real rent number. But over here so if it's that's I hope I answered what you said. That's basically how it plays out.

Rob Stevenson, Analyst

Okay. And then I guess the other one's for me. Anything non-recurring in either revenues or expenses in the first quarter income statement that we should be aware of?

Moishe Gubin, Chairman and CEO

I don't think so. Greg, is there anything that you could think of that's non-recurring?

Greg Flamion, Chief Financial Officer

Nothing comes to mind. No. It was a pretty clean quarter.

Rob Stevenson, Analyst

Okay. And then last one for me. Did you guys issue any shares under the ATM in the quarter?

Moishe Gubin, Chairman and CEO

I'm going to defer to Greg to that also. I know we haven't been doing anything because the stock price is down, because our limit at some point was $12 a share. Greg, did we sell anything under the ATM in the first quarter? It would have been January or February.

Greg Flamion, Chief Financial Officer

Yes. We did sell some shares. Actually, it was about $190,000 give or take. It was about $2.2 million.

Moishe Gubin, Chairman and CEO

$11.75 a share.

Rob Stevenson, Analyst

$2.2 million you said?

Moishe Gubin, Chairman and CEO

Yes, but we also bought back shares, when the stock went down. What was our stock repurchase for the quarter?

Greg Flamion, Chief Financial Officer

That was in Q2.

Moishe Gubin, Chairman and CEO

That already happened in the second quarter. All right. Never mind.

Rob Stevenson, Analyst

Well, I guess the question, because I saw that the $2.5 million remain the same from the K as of December 31st. How much shares have you bought back thus far in the second quarter?

Greg Flamion, Chief Financial Officer

I don't have the exact number from you, unfortunately, but it's I think about, well, it's about over around 100,000 shares, I believe.

Moishe Gubin, Chairman and CEO

Yes, and we bought it around $10 a share. So we've theoretically, we made a profit on our own stock.

Rob Stevenson, Analyst

Okay. All right. Thanks, guys. Appreciate the time, and have a great weekend.

Moishe Gubin, Chairman and CEO

All right. Thanks, Rob. Have a good weekend.

Operator, Operator

Your next question for today is from Rich Anderson with Wedbush.

Rich Anderson, Analyst

Hey, thanks. Good afternoon, morning, wherever you are. So just a question on the map, the beautiful map, Moishe, you referred to with all the nice colors. There's one color yellow. I'd like to ask about the miscellaneous operators. I'm just curious if you have a plan there to kind of blend them in with other existing operators, what that strategy looks like for you going forward?

Moishe Gubin, Chairman and CEO

So that's a good question and good hearing your voice as well, Rich. Yes, the way, so you got to look at it by state. So Oklahoma, Oklahoma is just the first one that caught my eye as I opened up the map here to be able to answer your question. So Oklahoma, we're growing a master lease there. And so the short answer to your question is we're not going to consolidate individuals to make, all the yellows to be one guy. But what we are looking to do and we are doing is that each one of the little groups of yellows that are individuals, we're looking to grow their master leases so that they could be a standalone color, I guess, on the map. So Oklahoma, we have a deal for another facility, and then we have another facility after that, and then I'll end up bringing it to, I think four with that operator. Texas, we have two different master leases in Texas. One of those master leases, we are actually growing that master lease as well. That one's a little bit anti to what we typically do because we're bringing them to a whole new state with a bigger portfolio. But it's going to be still in one big master lease, which will make that relationship go up to, I think 11 facilities and that'll be good. And then Illinois, we've been slowly but surely taking out the single operated facilities, which are real legacy facilities, and we've been slowly transitioning them out of mom and pop and into a new operator, that has a master lease with us already. I think we have, I think three, no, maybe we already have four or five facilities with them, and then we'll be able to grow that. So what you should see, assuming everything happens the way we expect it to happen in '25, that at the end of the year, we'll see that Oklahoma will be their own color because they'll have a bunch of properties there and then you'll get rid of a couple of the Texas, and then we'll add another state, and that'll be different color. And so we'll be narrowed down to very few singles, basically is what we want to get rid of. We want everything on the master leases. Like I said earlier, I think we're about 90% of our facilities are master leased. And if we could get the last 10%, into master leases at a minimum of four or five facilities, then that'll be getting to where we want to be.

Rich Anderson, Analyst

Okay. I'm intrigued by the expectation to be at a $100 million by the end of the second quarter. And you mentioned, not using equity at this level. So what is the game plan if everything sort of holds constant right now? Is it just more debt, cash? How much cash do you have to use right now? I'm just curious, what the funding strategy would be to get to that incremental $60 million?

Moishe Gubin, Chairman and CEO

So that deal, that's right around $60 million. We are going to take $20 million of cash from our balance sheet, and then we're going to take $30 million in a conventional loan with a bank. And then the last $10 million, we will most likely just draw on our bond debt in Israel, to be able to just meet our cash needs for the second quarter.

Rich Anderson, Analyst

Okay. And last for me, are you having any sort of issues trying to underwrite deals going forward with some questions around Medicaid, the Congressional budgetary process? Is that getting in the way at all in your conversations? Are you changing your underwriting to kind of protect yourself a little bit? I'm just curious what's going on there in your mind?

Moishe Gubin, Chairman and CEO

So two points there. First of all, our underwriting hasn't changed in many, many years, and we've talked about that. I'm sure but you've already heard me say it at least three or four times of how disciplined we are and how we underwrite. That hasn't changed the factors that we need our tenants to come into the deal, their experience and their financial strength, and I always talk about their integrity, right? Those are the three, basically the pillars that hold up our world. And so from that point of view, nothing's changed. We haven't changed our bogey as far as what return we want and our debt service coverage ratio we want on day one and rent coverage that we want on day one. That all stays exactly what it's been for many years. And in fact, our board's really, really adamant and at the same time, really strong and pushing and proud that we remain stable and consistent. And over the years, they've told me if we can't find deals that meet our box, just don't do deals. And that's not a problem that we've had, but nevertheless that's a philosophy that we have. As far as the Medicaid conversation, I mean that is a very, very common conversation that I have both with investors and with bankers as well. I mean, keep in mind our balance sheet today, really our debt, the way our debt is structured, the tranches that we have, we don't talk to HUD about any of this stuff, so they're not out of the contention. Conventional lenders are health care lenders because that's the space that you have to find a lender that knows health care then. And so they all know what's going on, and it's really just a conversation. It's not inquisition or any trouble. I guess the biggest topic at the water cooler would be the Israelis and the Israeli bond market because they read the stuff and they believe everything they hear. And it's a little bit of an aggravation because firstly, I have to have the same conversation over and over and over. We don't ever have groups of call like, on this call where we have a group of people calling. Over there, it's one by one by one meetings, and that's the respect that they want and they deserve, at least in their mind. And so you have to have the same conversation over and over and over, but they also don't understand, really the starting point culturally in America versus Israel or other countries is that other countries, people take care of their elderly at home, and they're more, it's more understood in the culture to do that. And America, that's more of a minority of the people. Most of the time, somebody needs a nursing home, they just put them in a nursing home, and they don't consider taking care of mom or dad at home. Good or bad. I'm not judging anybody. So culturally, the way that works in America obviously is that we're not going to turn our back on the elderly. And so I have the conversations, but none of it affects business. It just affects, just the conversation I have with and it could be it turns away an investor when I talk to somebody, that they're worried about this or that. But it hasn't affected our business, and it's not going to change our model of us going out there, being transparent, talking to people and doing what we do. And I expect business fail to continue as it is and which has been very good. And I don't see where any of this stuff really hurts us. It gets me a little bit more work and a little aggravation, but other than that, it's fine.

Gaurav Mehta, Analyst

Thank you. Good afternoon. I wanted to go back to your comments around $60 million of acquisitions expected in Q2 and on the funding portion coming from that. Can you provide some color on what's the cost of that for you guys today to fund that acquisition?

Moishe Gubin, Chairman and CEO

Yes, our cost is based on a 10 cap, which translates to a deal of approximately $59 million, resulting in rents of about $5.9 million. On one side, we have $20 million in cash and around $30 million, likely at SOFR 300. Additionally, there's $10 million in bond debt with a current rate of about 6.25%. The overall cost for financing will probably be close to 7%. The bank debt is expected to be fixed for three to five years, while the bond debt may have a duration of around five to seven years. In terms of blended costs, if one-third of the $20 million is at zero, about 40% is at SOFR 300, and the remaining is at 7%, the overall blended rate is likely in the low sixes, around 6.25% to 6.5%. Does that make sense?

Rich Anderson, Analyst

When you guys look at acquisitions going forward and you already alluded to the 10% cap rate on the current assets. Are you still seeing deals or a fair amount of them, at the 10% cap rate while being able to stick to your rent coverage for the tenants? Or is that starting to get a little narrow and maybe you have to come into 9.5 to kind of keep the tenant at the rent coverage where you'd like to see them?

Moishe Gubin, Chairman and CEO

No, absolutely not. And I guess really, if I really wanted to prepare that I would start trending or tracking quarter-over-quarter, what our pipeline has between because we divide our pipeline between hot, warm, and cold, basically or high, low, medium likelihood to get done. And so we haven't changed our standard at all. Everything begins at a 1.25 minimum, and everything is a 10 cap. We haven't bought less than an effect. On some of these deals, we've even gotten a little bit better than the 10, and maybe 10 point something, maybe not up to really 11, but somewhere over there as far as our return. And today our pipeline is easily like, $300 million and out of that, we probably expect, like I said giving the guidance of between $100 million and $200 million knowing full well that we expect by half a year, we'll have broken 100 already. So last half of the year, we have enough in our pipeline at our exact investment protocol to be able to do the rest of hopefully another $100 million for the second half. So we should be able to do that. We don't have any problem at all. And out of the rest of that $300 million, you're probably talking about low likelihood of on maybe a $100 million something of it. And so we'll keep working. And God willing, we'll find more deals, and we'll keep doing what we're doing.

Barry Oxford, Analyst

Great. Thanks, guys. When you guys look at acquisitions going forward and you already alluded to the 10% cap rate on the current assets. Are you still seeing deals or a fair amount of them, at the 10% cap rate while being able to stick to your rent coverage for the tenants? Or is that starting to get a little narrow and maybe you have to come into 9.5 to kind of keep the tenant at the rent coverage where you'd like to see them? When I'm looking, you mentioned that you had two more hires and maybe another Asset Manager by the end of the year. When I think about your G&A as a percent of revenue, are you going to be able to keep that fairly constant, or will we see that rise, because of the new hires, or will the revenue, will the ramp in revenue kind of keep G&A as a percent of revenue fairly static?

Moishe Gubin, Chairman and CEO

No, no, no. When you see a full quarter, which will be the second quarter, you'll see our total payroll went up. Actually, first quarter had a one-time, I think Rob asked if there was a one-time. And so first quarter of this year, unless we accrued it in the fourth quarter, I gave a bonus a couple hundred thousand dollars to our employees, and we gave it to them in half stock and half cash. I don't know if that was accrued in the fourth quarter or if that was just Greg Flamion: It was accrued. Yes. Moishe Gubin: It was accrued. So fine. So ignoring that comment then, you're talking about an increase to the G&A in the second quarter of maybe max a hundred thousand dollars a quarter. I mean, it's not a big number at all to anybody that's on this call. And then the last hire that we need to bring in is not a six-figure salary. So, and other than that, our cost of running our business should remain flat. Like, that's it. And unless I'm missing something, I don't see. We're running real well. We're timely on producing financial statements. We're timely, and we have good analytics, and we have a good knowledge of our tenants' operations through the asset managers. The only reason another asset manager is needed is because we should end the second quarter with over a 140 facilities. And if you divide that by three people, it's a little bit stretching them thin. The good news is that, 50 facilities or so are infinity. So we don't have to worry about that because nobody cares more about these facilities than Michael and I. And so, but they still have an asset manager that has a job to do, but nevertheless, you don't have to be as worried than you do for, like, the real outside operators. And but, you take 140/3, that's an awful lot of work to be done. And when we have a rule that you got to get to the facilities at least twice a year, just travel dates alone makes it that there's not enough time to really know your buildings well as far as managing the asset. So I feel like we have to do that, because I want to stay with our model, making sure. We haven't had a bill to get closed on us. We haven't had, like, you guys know our competitors and you know the issues they've all gone through. Now they are bigger than us. That's true. But we haven't had any of that. We collect all of our rents. Our buildings are never been shut down. We have a nurse consultant that actually reviews every single survey. I don't know if other people do that, but we do that, and we have calls with their operators about the care in the buildings. Even though we don't control them and do anything, but we care about our asset, and we want the residents to be taken care of. That's just us going above and beyond, because we care about people. And so, but as far as costs for our company, there's nothing coming down the pipe that's big. Oh, I mean, one thing that I brought up, I think maybe a year ago, which is still out there is my pay. My pay still hasn't changed in 10 years, and there has been conversation in the company to pay me what a normal CEO makes for the REITs. I've deferred it myself, because I don't really care. I care about my company more than I care about me. And so it hasn't been an important thing, but at some point down the road somewhere, I assume compensation committee will decide something, and there'll be something for me. But that's definitely not today. I hope I answered your question.

Operator, Operator

I will now hand the call back to Jeff to answer webcast questions.

Jeffrey Bajtner, Chief Investment Officer

Thank you very much. We have a couple questions from the folks at Freedom Capital Markets. Their first question is, are AFFO and rental revenue guidance limited to the current portfolio, or do they also include future acquisitions?

Moishe Gubin, Chairman and CEO

So, really, you could answer the own question because you're the one that did the model for that. But if I was answering that, our numbers that we present are based off of current annualizing first quarter numbers. I think our current number we're expecting is 121, but we know that we should beat that. I think 121 is AFFO per share annualized for '25. I think we'll end up beating that anyway, please, god. And, yes, so I think I answered their question.

Jeffrey Bajtner, Chief Investment Officer

And their second question is, for new acquisitions, is the company open to issuing OP units or stock in lieu of cash?

Moishe Gubin, Chairman and CEO

Oh, yes. 100%. I should add that to my regular comments to begin with. I'm glad they asked the question. We love that. We did that in a Tennessee deal. We're doing that now on this 59 million. I guess I misled who asked me? I don't know if that was Gaurav. I forgot who asked me that, but we have at least at minimum $2 million out of the $59 million as they're taking OP units, hopefully at higher than a NAV per share number. And so we're not going to dilute anybody. But, yes, we love doing that. And that's actually a value add, because we go out there and talk to people and say, hey, listen. You could defer a capital gain, especially if it's family money. Nursing home has been in the family for a couple generations, and you don't want to see a capital gain day one. You could defer the capital gain. You could put it in a trust. You could take it and pass it along to the children's trust, and you could gift it to them. And until they turn it into tradable shares, it's not a taxable event. And there's the same dividend that's paid out. Like, as you all you guys know that are on the call, it's an exchange one for one, and it's what do you call it? It's the same dividend yield, because the same dividend that's paid out to common is paid out to the OP units. So we love it. We've had a lot of interest in it, which is great. And if they would look at where we're trading at a discount to NAV, right then they have upside of the stock trading, if it traded appropriately as a multiple of the AFFO, like all the other peers, then even from NAV, there's a premium to be had on that where someone can make 10%, 20%, 30%, getting the stock at NAV versus what the market price should be. So the answer is yes to the question, a long winded yes.

Jeffrey Bajtner, Chief Investment Officer

That does it from my end, and I believe that does it for questions from the analysts. So I want to thank everyone for joining us today. It's been a pleasure as always, and feel free to reach out to Moishe, myself, or Greg. We are available to answer any questions you've got about our performance or what our pipeline looks like, and we look forward to keeping in touch. And hopefully, we'll see you all soon. Have a great weekend.

Moishe Gubin, Chairman and CEO

Great weekend.

Greg Flamion, Chief Financial Officer

Take care, guys.

Operator, Operator

This concludes today's event, and you may disconnect your lines at this time. Thank you for your participation.