Strawberry Fields REIT, Inc. (STRW)

Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. (continued)

Indebtedness
(continued)

Outstanding
Bond Debt

As
of June 30, 2026, the Company had outstanding Series A, Series B, Series C (Inc), Series C (BVI) Bonds and Series D
Bonds.

Series
A Bonds

In
August 2024, Strawberry Fields, Inc completed, directly, an initial offering on the Tel Aviv Stock Exchange (“TASE”) of Series
A Bonds with a par value of NIS 145.6 million ($37.1 million). The series A Bonds were issued at par. Offering and issuance costs of
approximately $1.0 million were incurred at closing. In December 2024, the Company issued an additional NIS 145.6 million ($38.1 million)
in Series A Bonds.

Exchange
of Series D Bonds for Series A Bonds

In
September 2024 the Company made an exchange tender offer of outstanding Series D Bonds for Series A Bonds. The interest rate on Series
D Bonds is 9.1% per annum. The exchange offer rate was 1.069964 Series A Bonds per Series D Bonds. As a result of this offer, NIS 47.3
million Series D Bonds ($12.7 million) were exchanged for NIS 50.6 million Series A Bonds ($13.6 million).

As
of June 30, 2026, the outstanding balance of Series A Bonds was NIS 302.2 million ($101.5 million)

The
Series A Bonds are traded on the TASE

Series
B Bonds

In
June 2025, Strawberry Fields, Inc completed, directly, an initial offering on the Tel Aviv Stock Exchange (“TASE”) of Series
B Bonds with a par value of NIS 312 million ($89.5 million). The series B Bonds were issued at par. Offering and issuance costs of approximately
$2.5 million were incurred at closing. In December 2025, the Company issued an additional NIS 30.0 million ($9.4 million) in Series B
Bonds. At June 30, 2026, the outstanding balance of Series B Bonds was NIS 328.2 million ($110.2 million).

Series
C Bonds (Inc)

In
June 2026, Strawberry Fields, Inc completed, directly, an initial offering on the Tel Aviv Stock Exchange (“TASE”) of
Series C (Inc) Bonds with a par value of NIS 162.7 million ($55.8 million). The series C Bonds (Inc) were issued at 101% of par.
Offering and issuance costs of approximately $3.6 million were incurred at closing. At June 30, 2026, the outstanding balance of the
Series C Bonds (Inc) was NIS 162.7 million ($54.7 million).

Series
C Bonds (BVI)

In
July 2021, the BVI Company completed an initial offering of Series C Bonds (BVI) with a par value of NIS 208.0 million ($64.7
million). The Series C Bonds (BVI) were issued at par. During February 2023, the BVI Company issued additional Series C Bonds (BVI)
in the face amount of NIS 40.0 million ($11.3 million) and raised a net amount of NIS 38.1 million ($10.7 million). These Series C
Bonds (BVI) were issued at a price of 95.25%. In October 2024, the BVI company issued an additional NIS 62.0 million ($16.6 million)
in Series C Bonds (BVI). The bonds were issued at 99.3%. On June 1, 2026 the Company completed an early redemption of NIS 146.4
million ($49.2 million) as of June 30, 2026, the outstanding principal amount of the Series C (BVI) Bonds was NIS 101.4
million ($34.1 million).

46

Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. (continued)

Series
D Bonds

In
June 2023, the BVI Company completed an initial offering of Series D Bonds with a par value of NIS 82.9 million ($22.9 million). The
Series D Bonds were issued at par. During August 2023, the BVI Company issued additional Series D Bonds in the face amount of NIS 70.0
million ($19.2 million). These Series D Bonds were issued at a price of 99.7%. On February 8, 2024, the BVI Company issued additional
NIS 98.2 million ($25.7 million) Series D Bonds. These Series D Bonds were issued at a price of 106.3%.

Exchange
of Series D Bonds for Series A Bonds

In
September 2024 the Company made an exchange tender offer of outstanding Series D Bonds for Series A Bonds. The interest rate on Series
D Bonds is 9.1% per annum. The exchange offer rate was 1.069964 Series A Bonds per Series D Bonds. As a result of this offer, 47.3 million
NIS Series D Bonds ($12.7 million) were exchanged for 50.6 million NIS Series A Bonds ($13.6 million).

As
of June 30, 2026, the Series D Bonds had an outstanding principal balance of approximately NIS 175.8 ($59.0 million).

Summary
of fixed and variable loans

47

Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. (continued)

Funds
From Operations (“FFO”)

The
Company believes that funds from operations (“FFO”), as defined in accordance with the definition used by the National Association
of Real Estate Investment Trusts (“NAREIT”), and adjusted funds from operations (“AFFO”) are important non-GAAP
supplemental measures of our operating performance. Because the historical cost accounting convention used for real estate assets requires
straight-line depreciation (except on land), such accounting presentation implies that the value of real estate assets diminishes predictably
over time. However, since real estate values have historically risen or fallen with market and other conditions, presentations of operating
results for a REIT that uses historical cost accounting for depreciation could be less informative. Thus, NAREIT created FFO as a supplemental
measure of operating performance for REITs that excludes historical cost depreciation and amortization, among other items, from net income,
as defined by GAAP. FFO is defined as net income, computed in accordance with GAAP, excluding gains or losses from real estate dispositions,
plus real estate depreciation and amortization. AFFO is defined as FFO excluding the impact of straight-line rent, above-/below-market
leases, non-cash compensation and certain non-recurring items. We believe that the use of FFO, combined with the required GAAP presentations,
improves the understanding of our operating results among investors and makes comparisons of operating results among REITs more meaningful.
We consider FFO and AFFO to be useful measures for reviewing comparative operating and financial performance because, by excluding the
applicable items listed above, FFO and AFFO can help investors compare our operating performance between periods or as compared to other
companies.

While
FFO and AFFO are relevant and widely used measures of operating performance of REITs, they do not represent cash flows from operations
or net income as defined by GAAP and should not be considered an alternative to those measures in evaluating our liquidity or operating
performance. FFO and AFFO also do not consider the costs associated with capital expenditures related to our real estate assets nor do
they purport to be indicative of cash available to fund our future cash requirements. Further, our computation of FFO and AFFO may not
be comparable to FFO and AFFO reported by other REITs that do not define FFO in accordance with the current NAREIT definition or that
interpret the current NAREIT definition or define AFFO differently than we do.

The
following table reconciles our calculations of FFO and AFFO for the six and three months ended June 30, 2026 and 2025, to net income
the most directly comparable GAAP financial measure, for the same periods:

FFO
and AFFO

48

Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. (continued)

Subsequent
Events

On July 31, 2026, the Company
redeemed in full the Series C Bonds (BVI) issued by the BVI company. The final redemption payment was for NIS 109.8 million ($34.1
million) and was funded from cash from the condensed consolidated balance sheet. The redemption of Series C Bonds (BVI) released
liens on 9 properties previously pledged as collateral for the bond.

Critical
Accounting Policies and Estimates

Our

ITEM
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The
discussion below contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially
from those anticipated in these forward-looking statements as a result of various factors, including those which are discussed in the
section titled “Risk Factors.” Also see “Statement Regarding Forward-Looking Statements” preceding Part I.

The
following discussion and analysis should be read in conjunction with our accompanying consolidated financial statements and the notes
thereto.

Overview

Strawberry
Fields REIT, Inc. (the “Company”) is engaged in the ownership, acquisition, financing and triple-net leasing of skilled nursing
facilities and other post-acute healthcare properties. As of December 31, 2025, our portfolio consists of 143 healthcare facilities
with an aggregate of 15,602 licensed beds. We hold fee title to 132 of these properties and hold one property under a long-term lease.
These properties are located in Arkansas, Illinois, Indiana, Kansas, Kentucky, Missouri, Ohio, Oklahoma, Tennessee and Texas. We generate
substantially all our revenues by leasing our properties to tenants under long-term leases primarily on a triple-net basis, under which
the tenant pays the cost of real estate taxes, insurance and other operating costs of the facility and capital expenditures. Each healthcare
facility located at our properties is managed by a qualified operator with an experienced management team.

We
employ a disciplined approach in our investment strategy by investing in healthcare real estate assets. We seek to invest in assets that
will provide attractive opportunities for dividend growth and appreciation in asset value, while maintaining balance sheet strength and
liquidity, thereby creating long-term stockholder value. We expect to grow our portfolio by diversifying our investments by tenant, facility
type and geography.

We
are entitled to monthly rent paid by the tenants and we do not receive any income or bear any expenses from the operations of such facilities.
As of the date of this report, the aggregate annualized average base rent under the leases for our properties was approximately $142.7
million.

We
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 report own approximately 24.0% of the
outstanding OP units.

37

Significant Events in 2025

On
January 1, 2025, the Company entered into a new master lease for 10 Kentucky properties formally part of the Landmark Master Lease. Base
rent is $23.3 million a year and is subject to an increase based on CPI with a minimum increase of 2.50%. The initial lease term is 10
years with four 5-year extension options. Also, as part of the negotiation of the new Kentucky Master Lease, the Company entered into
a 5 year note payable with the parent of the Landmark tenant for $50.9 million dollars, included in Note Payable in the accompanying
consolidated balance sheets.

On
January 2, 2025, the Company acquired 6 facilities consisting of 354 beds in Kansas. The acquisition was $24.0 million and the Company
funded the acquisition utilizing cash from the consolidated balance sheets. The Company formed a new master lease for an initial
10-year period that included two 5-year extension options on a triple-net basis. Additionally, the lease will increase the Company’s
annual rents by $2.4 million and is subject to 3% annual increases.

On
March 31, 2025, the Company acquired a skilled nursing facility with 100 licensed beds near Oklahoma City, Oklahoma. The acquisition
was $5.0 million and was funded utilizing cash from the consolidated balance sheets. The initial term of the lease is 10 years
and includes two 5-year extension options. Base rent for the property is $0.5 million dollars annually and is subject to 3% annual increases.

On
April 4, 2025, the Company completed the acquisition for a skilled nursing facility with 112 licensed beds near Houston, Texas. The acquisition
was for $11.5 million and was funded utilizing cash from the consolidated balance sheets. The Company funded the acquisition utilizing cash from the consolidated balance sheets. The facility
was leased to an existing third party operator and added to their Master Lease (Texas Master Lease 2). The initial annual base rents
are $1.3 million dollars and subject to 3% annual rent increases.

On
June 24, 2025, the Company issued 312.0 million NIS in Series B Bonds on the TASE, which is approximately $89.5 million. The bonds are
unsecured, were issued at par and have a fixed interest rate of 6.70%. Repayment of the bond principal, at 4% of the principal, will
be paid in the years 2026 through 2028, with the remaining 88% due in June 2029. Interest payments will be due semi-annually on June
30th and December 30th of the years 2025 through maturity in 2029.

On
July 1, 2025, the Company completed the acquisition of nine skilled nursing facilities, comprised of 686 beds, located in Missouri. The
acquisition was for $59 million and the Company funded the acquisition utilizing cash from the consolidated balance sheets.
Eight of the facilities were leased to the Tide Group and were added to the master lease the Company entered into in August 2024. This
acquisition increased Tide Group’s annual rents by $5.5 million. These properties are subject to an annual rent increase of 3%
and the initial term is 10 years. The ninth facility was leased to an affiliate of Reliant Care Group L.L.C. The facility was added to
the master lease the Company assumed in December 2024 and increased Reliant Care Group’s annual rents by $0.6 million.

On
July 1, 2025, the Company sold Chalet of Niles, a property in Michigan that was formally part of the Landmark Master Lease, to a third-party
purchaser. The property sold for $2.7 million dollars. A loss of $0.01 million dollars resulted from this sale. The buyer received financing
from the Company for the acquisition. The financing was $2.4 million for three years and is interest only, with an annual interest rate
of 10%. The financing has a balloon payment at the end of year three.

On
August 5, 2025, the Company completed the acquisition for a skilled nursing facility with 80 licensed beds near McLoud, Oklahoma. The
acquisition was for $4.25 million. The Company funded the acquisition utilizing cash from the consolidated balance sheets.
The initial annual base rents are $0.4 million dollars and subject to 3% annual rent increases. The initial term is 10 years and includes
two 5-year extension options.

On
August 29, 2025, the Company completed the acquisition for a healthcare facility comprised of 108 skilled nursing beds and 16 assisted
living beds near Poplar Bluff, Missouri. The acquisition was for $5.3 million. The Company funded the acquisition utilizing cash from
the consolidated balance sheets. The initial annual base rents are $0.5 million dollars and subject to 3% annual rent increases.
The property was assumed by the Reliant Care master lease and is subject to the terms of the master lease.

38

On
November 4, 2025, the Company completed the acquisition for a skilled nursing facility with 60 licensed beds near Grove, Oklahoma.
The acquisition was for $3.0 million. The Company funded the acquisition utilizing cash from the consolidated balance sheet.
The initial annual base rents are $0.3 million dollars and subject to 3% annual rent increases.

Related
Party Tenants

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 66 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.

Results
of Operations

Operating
Results

Year
Ended December 31, 2025 Compared to Year Ended December 31, 2024:

39

Rental
revenues: Rental revenues increased $37.9 million, or 32.4%, compared to fiscal year 2024. The year-over-year growth was primarily
driven by $13.1 million in additional revenue associated with the re-tenanting of the Landmark and Kentucky Master Lease, as well as
contributions from recent property acquisitions completed in 2024 and 2025. These acquisitions included the Missouri lease ($10.3 million),
the Tide Group Master Lease ($5.5 million), and the Kansas Master Lease ($2.4 million). The increase also reflects additional reimbursed
property taxes from tenants.

Depreciation
and Amortization: Depreciation expense increased $6.7 million, or 23.2%, compared to fiscal year 2024. The results were driven by
year-over-year depreciation from new real estate investments placed into service during
the 2024 and 2025. These increases were partially offset by assets that became fully depreciated in 2025. Amortization expense increased $5.8
million, or 124.9%, primarily due to the amortization of an asset associated with the note payable related to the re-tenanting of the
properties under the Kentucky Master Lease.

General
and Administrative Expense: General and administrative expenses increased $1.8 million compared to fiscal year 2024, or 25.6%, primarily due to $1.7 million of higher payroll expenses driven by increased executive
compensation and employee bonus costs.

Property
and Other Taxes: Property expenses increased $0.8 million year over year.

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