Exhibit 99.1
Missouri Properties Group Combined Statements of Revenues and Certain Expenses for the Year Ended December 31, 2023 and the Nine Month Period ended September 30, 2024
To Missouri Portfolio Group:
We have audited the combined statements of revenues and certain expenses (the “Statements”) of the Missouri Portfolio Group for the year ending December 31, 2023 and for the nine months period ended September 30, 2024, and the related notes to the combined financial statements.
In our opinion, the accompanying combined financial statements present fairly, in all material respects, the combined statement of revenues and certain expenses of Missouri Portfolio Group for the year ending December 31, 2023 and for the nine months period ended September 30, 2024, and the related notes to the combined financial statements in accordance with the basis of accounting described in Note 2.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Combined Financial Statements section of our report. We are required to be independent of the Missouri Portfolio Group and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Emphasis of Matter — Basis of Accounting
As discussed in notes to the combined financial statements, the accompanying combined financial statements were prepared for the purpose of complying with certain rules and regulations of the Securities and Exchange Commission for inclusion in the registration statement of Strawberry Fields REIT, Inc., as described in Note 2 and are not intended to be a complete presentation of the Missouri Portfolio Group’s combined revenue and expenses.
Responsibilities of Management for the Combined Financial Statements
Management is responsible for the preparation and fair presentation of the combined financial statements in accordance with the basis of accounting described in Note 2, and for determining that the basis of accounting is an acceptable basis for the preparation of the combined financial statements in the circumstances. Management is also responsible for the design, implementation, and maintenance of internal controls relevant to the preparation and fair presentation of the combined financial statements that are free from material misstatement, whether due to fraud or error.
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Missouri Portfolio Group
Page Two
Auditor’s Responsibilities for the Audit of the Combined Financial Statements
Our objectives are to obtain reasonable assurance about whether the combined financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of certain internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the combined financial statements.
In performing an audit in accordance with GAAS, we:
| - | Exercise professional judgment and maintain professional skepticism throughout the audit. |
| - | Identify and assess the risks of material misstatement of the combined financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the combined financial statements. |
| - | Obtain an understanding of internal controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Missouri Portfolio Group’s internal controls. Accordingly, no such opinion is expressed. |
| - | Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the combined financial statements. |
| - | Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Missouri Portfolio Group’s ability to continue as a going concern for a reasonable period of time. |
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
/s/ Hacker, Johnson & Smith PA
HACKER, JOHNSON & SMITH PA
Tampa, Florida
December 19, 2024
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COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 2023 AND NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2024
(Dollars in Thousands)
Year Ended | Nine Months Period Ended September 30, 2024 | |||||||
| Revenues: | ||||||||
| Rental revenue | $ | 8,539 | 6,554 | |||||
| Certain expense: | ||||||||
| Property insurance | 55 | 49 | ||||||
| Revenue In Excess of Certain Expenses | $ | 8,484 | 6,505 | |||||
See accompanying notes to combined statements of revenue and certain expenses.
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MISSOURI PORTFOLIO GROUP
NOTES TO COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 2023 AND NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2024
| NOTE 1. | ORGANIZATION AND DESCRIPTION OF BUSINESS |
Missouri Portfolio Group (the “Portfolio Group”), which is not a legal entity, but rather a combination of certain real estate entities and operations as described below, is engaged in the business of owning and leasing certain healthcare facilities located in the State of Missouri. The accompanying combined statements of revenue and certain expenses (the “Statements”) relate to the operations of the Properties Group, consisting of leasing 8 skilled nursing facilities with 1,111 licensed beds (the “Facilities”) located in Missouri. The Facilities are owned by GAHC4 Kansas City MO SNF, LLC, GAHC4 Salisbury MO SNF, LLC, GAHC4 Florissant MO SNF, LLC, GAHC4 Sedalia MO SNF, LLC, GAHC4 Milan MO SNF, LLC, GAHC4 Trenton MO SNF, LLC, GAHC4 Moberly MO SNF, LLC, GAHC4 St. Elizabeth MO SNF, LLC (collectively, the “Sellers”), all of which are affiliates of the GAHC4 Missouri SNF Portfolio, LLC.
On October 8, 2024, the Sellers and Strawberry Fields REIT Inc. (the “Purchaser”) entered into a Purchase and Sale Agreement (the “Purchase Agreement”), pursuant to with the Purchaser agreed to purchase the Facilities. The Purchaser will assign the right to acquire the Facilities to newly organized indirect subsidiaries of the Strawberry Fields Realty, LP, the Purchaser’s operating partnership. The purchase price for the Facilities is $87.5 million, payable at the closing. The Purchaser completed the acquisition on December 19, 2024.
| NOTE 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Presentation
The accompanying combined statements of revenue and certain expenses have been prepared for the purpose of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933, as amended. Accordingly, the statements are not representative of the actual results of operations for the periods presented as revenues and certain expenses, which may not be directly attributable to the revenue and expenses to be incurred in the future operations of the Portfolio Group, have been excluded. Such excluded items include depreciation and amortization, interest expense, related party fees, management fees, non-recurring professional fees, and other miscellaneous revenue and expenses not directly related to the proposed future operations of the Portfolio Group.
Revenue Recognition
Rental and escalation income from operating real estate is derived from the leasing of healthcare facilities to tenants/operators. The leases are for fixed terms and provide for annual rentals and expense reimbursements to be paid in monthly installments. Rental revenues relating to non-contingent leases that contain specified rental increases over the life of the lease are recognized on the straight-line basis. Recognizing income on a straight-line basis requires the Facilities to calculate the total non-contingent rent
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MISSOURI PORTFOLIO GROUP
NOTES TO COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES, CONTINUED
| NOTE 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
Revenue Recognition (Cont.)
containing specified rental increases over the life of the lease and to recognize the revenue evenly over that life. This method results in rental income in the early years of a lease being higher than actual cash received. At some point during the lease, depending on its terms, the cash rent payments eventually exceed the straight-line rent which results in the straight-line rent receivable asset decreasing to zero over the remainder of the lease term. The Portfolio Group assesses the collectability of straight-line rent in accordance with the applicable accounting standards and reserve policy. If the lessee becomes delinquent in rent owed under the terms of the lease, the Portfolio Group may provide a reserve against the recognized straight-line rent receivable asset for a portion, up to its full value, that the Portfolio Group estimates may not be recoverable.
Use of Estimates
The preparation of the Statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that could affect the amounts of reported revenues and certain operating expenses. Actual results could differ from those estimates.
Commitments and Contingencies
The Portfolio Group may be subject to legal claims and disputes in the ordinary course of business. Management believes any settlement of any existing potential claims and dispute would not have a material impact on the Portfolio Groups revenues and certain expenses.
| NOTE 3. | MINIMUM FUTURE LEASE RENTALS |
There is a master lease agreement with the tenant to lease the Facilities. As of September 30, 2024, the minimum future cash rents receivable under noncancelable operating leases in each of the next five years and thereafter are as follows (dollars in thousands):
Years Ending: | ||||
| 2024 (three-month period) | $ | 2,233 | ||
| 2025 | 9,000 | |||
| 2026 | 9,270 | |||
| 2027 | 9,549 | |||
| 2028 | 9,835 | |||
| Thereafter | 50,868 | |||
| Total | $ | 90,755 | ||
| NOTE 4. | TENANT CONCENTRATIONS |
For the year ended December 31, 2023 and the nine months period ended September 30, 2024, no single tenant accounted for a significant amount of rental revenue.
| NOTE 5. | SUBSEQUENT EVENTS |
Management has evaluated the events and transactions that have occurred through December 19, 2024, the date which the Statements were available to be issued, and noted no items requiring adjustment of the Statements or additional disclosure.
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