Sila Realty Trust Q4 2025 Earnings Call - Low Leverage, $480M Liquidity and $225M Deployment Capacity Set the Tone

Conference Operator: Good morning. Welcome to Sila Realty Trust’s fourth quarter 2025 earnings conference call and webcast. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. I will now turn the conference over to your host, Miles Callahan, Senior Vice President of Acquisitions, Capital Markets, Research, and Credit for Sila. You may begin.

Miles Callahan, Senior Vice President of Acquisitions, Capital Markets, Research, and Credit, Sila Realty Trust: Good morning, and welcome to Sila Realty Trust’s fourth quarter 2025 earnings conference call. Yesterday evening, we issued our earnings release and supplement, which are available on the investor relations section of our website at investors.silarealtytrust.com. With me today are Michael A. Seton, President and Chief Executive Officer, and Kay C. Neely, Executive Vice President and Chief Financial Officer. Before we begin, I would like to remind you that today’s comments will include forward-looking statements under federal securities laws. Forward-looking statements are identified by words such as will, be, intend, believe, expect, anticipate, and other comparable words and phrases. Statements that are not historical facts, such as statements about expected financial performance, are also forward-looking statements. Actual results may differ materially from those contemplated by such forward-looking statements.

A discussion of the factors that could cause a material difference in our results compared to these forward-looking statements is contained in our SEC filings. Please note that on today’s call, we will be referring to non-GAAP measures. You can find the reconciliation of these historical non-GAAP measures to the most directly comparable GAAP measures in our fourth quarter earnings release and our earnings supplement, both of which can be found on the Investor Relations section of our website and in the Form 8-K we file with the SEC. With that, I will now turn the call over to Michael Seton, our President and Chief Executive Officer.

Michael A. Seton, President and Chief Executive Officer, Sila Realty Trust: Thank you, Miles. Good morning to everyone joining us today. As we begin a new year, I look back on 2025, our first full calendar year as a publicly traded company, as one during which we faithfully executed our strategy of growing Sila Realty Trust in a skillful and thoughtful manner. Sila was added to several prominent equity indices during the year, including the RMZ and the Russell 2000. Our shareholder base has continued to evolve to larger institutional investors from an entirely retail ownership at one time prior. We believe our ownership transition reflects the market’s recognition of what we have been building at Sila for many years: A high-quality, necessity-based healthcare real estate portfolio designed to deliver predictable, durable, and growing income streams through any market cycle.

During 2025, we acquired 6 healthcare facilities for an aggregate purchase price of approximately $150 million, which equated to 241,000 sq ft. Each of these new facilities fits well within what we call the Sila mold, exhibiting the characteristics that we seek in new opportunities: modern construction, high utilization, favorable market demographics, and quality tenant sponsorship. After the year-end, we closed on another purpose-built, state-of-the-art inpatient rehabilitation facility in Oklahoma City for $43.1 million. This well-utilized facility further expands our relationship with Nobis Rehabilitation Partners, a well-respected and strong operator in the post-acute space. The property was originally constructed in 2022 and has experienced such strong demand since opening that it has recently undergone an expansion, increasing its licensed bed count from 40 to 58 beds.

With the support of a long-term lease with contractual lease escalators, strong EBITDARM coverage, experienced sponsorship, and limited competition, we believe this facility aligns firmly within our objective to deliver lasting value to Sila and its shareholders. Sila’s ownership of high-quality, diverse healthcare assets with best-in-class tenancy creates opportunities to invest additional capital in existing properties, which experience outsized demand for healthcare services within current building envelopes. Over the past year, we have completed over $7 million of redevelopment opportunities at compelling risk-adjusted returns. We are readily prepared to provide capital to our strong and growing tenant base when it aligns with our mutual interest to address market-driven demand requirements with minimal operating execution risk.

Consistent with this approach, we have already committed to providing additional capital at our Dover Healthcare facility, as previously disclosed during our third quarter earnings call, and intend to execute a similar investment at our Overland Park Healthcare facility, both of which are inpatient rehabilitation facilities leased to PAM Health, our largest tenant and one of the strongest and most respected post-acute operators. We foresee additional expansion opportunities in the near future, which typically offer more favorable returns compared to recent acquisition opportunities, frequently yielding 150-200 basis points higher than going-in capitalization rates. Turning to an update on the Stoughton Healthcare facility, I’m pleased to report that the building demolition has been completed and the removal of building debris is well underway.... which work we currently expect to be entirely finished by the end of the first quarter of 2026.

The decision to raise the existing building structures has allowed us to already significantly reduce carrying costs of the properties, which will be reduced to approximately $35,000 per month from as much as $120,000 per month during the middle of last year. I would like to bring your attention to a few planned dispositions in 2026 and our continued pursuit to optimize our portfolio construction. Toward year-end 2025, we executed purchase and sale agreements on three properties: our Henderson, Las Vegas Two, and Saginaw healthcare facilities. After year-end, we closed on the sale of the Saginaw healthcare facility for gross sales proceeds of $14.5 million, while the Henderson and Las Vegas Two healthcare facilities are estimated to close in the first quarter of 2026.

We also recently executed a purchase and sale agreement to sell the Alexandria healthcare facility, which became vacant in December of 2025, with the departure of our ASE tenant. Subject to the typical due diligence process, we would expect this sale to close around the end of the first quarter or beginning of the second quarter. We had approximately 4.8% of total gross leasable area scheduled to expire in 2025. Our leasing team successfully retained 90% of scheduled expiring tenancy on a square footage basis, while the 10% of tenants who did not renew represented only 0.5% of ABR. The Alexandria healthcare facility, which I just mentioned, accounted for 60% of that 10% non-renewal. The tenant, which had a lease expiry in 2025 at our Tampa healthcare facility, did not fully vacate its space.

It simply reduced its footprint in the building due to the departure of a subtenant. This available space is only 2,100 sq ft and has seen strong interest due to the facility’s location in a bustling medical corridor in Tampa, in close proximity to BayCare St. Joseph’s Hospital and BayCare’s newly planned health hub. Our lease renewal activity and proactive early lease extensions at our other properties resulted in an increase to our weighted average remaining lease term from 9.7 years at the end of the third quarter of 2025 to 10 years by year-end. For leases scheduled to expire in 2026, we have already completed renewals for 34.8% of the 4.1% of total gross leasable area expiring in the year.

For the renewal pipeline for 2026, we have a known conversion of a single-tenant property into a multi-tenant property. With this change, the legacy tenancy will renew approximately 60% of the total space, leaving the balance or 40%, which represents approximately 0.3% of company ABR, to be relet to new tenants. We have already engaged a well-known broker and are actively marketing the anticipated available space. Our portfolio continues to demonstrate significant strength, while our high credit quality remains a critical factor in ensuring Sila’s sustained success. Notably, there have been meaningful improvements in our tenant credit quality during 2025, which have aided the growth in our investment grade rated tenant guarantor and affiliate percentage by 2.3% on a year-over-year basis to 40.6%.

As an example of credit quality upgrade in the fourth quarter of 2025, Washington Regional Medical Center, an investment grade rated best-in-class regional hospital system, executed a lease and took occupancy of our Fayetteville healthcare facility from Community Health Systems. This transition moves Community Health Systems from being our third largest tenant to our seventh largest tenant at year-end, further diversifying our tenant concentration and upgrading our overall sponsorship profile. In addition, subsequent to year-end, Community Health Systems completed the divestiture of its three Pennsylvania hospitals, including our Wilkes-Barre healthcare facility, to Tanner Health Foundation, effective February 1, 2026, which will further reduce our CHS exposure going forward.

In the fourth quarter, our tenant at our Savannah healthcare facility was successfully sold through the bankruptcy process to Select Medical, an existing tenant in CHS portfolio, moving Select up to be our fourth largest tenant and providing operational strength and stability to the Savannah asset going forward. Lastly, on the tenant sponsorship front, late in the fourth quarter of 2025, Cencora, one of the largest Fortune 500 companies, announced that it has entered into a definitive agreement to acquire the majority of the outstanding equity interest that it does not already own in OneOncology. Cencora, with over $300 billion in annual revenue, will be the common control at our seven former GenesisCare master leased properties. As we look ahead to the full year of 2026 I see Sila as a company in prime position to continue executing on its strategy.

We have the balance sheet, strength, pipeline, team members, and discipline to continue to allocate capital skillfully and thoughtfully. The silver tsunami is imminent, with the entire baby boomer generation reaching 65 or older by 2030, which is expected to increase total outpatient healthcare spending to nearly $2 trillion. We continue to believe that this demographic shift should drive increasing patient volumes and case acuity, supporting stronger operator revenues and therefore more durable income streams for Sila. As we know, healthcare is non-discretionary, which means healthcare real estate is vital social infrastructure. Today, Sila owns over $2 billion worth of institutional quality healthcare facilities with high utilization, which, along with the triple net lease structures that we have in place at 99.9% of our properties, provides a powerful combination for long-term success.

I will now turn the call over to Kay to discuss our financial performance.

Kay C. Neely, Executive Vice President and Chief Financial Officer, Sila Realty Trust: Thank you, Michael. Good morning, everyone. I’m pleased to report that our disciplined approach to operational integrity and capital allocation drove strong financial results throughout 2025. For the year ended 2025, cash NOI was $169.9 million, compared to $168.6 million for the year ended 2024, representing a 0.8% increase. This increase was largely driven by acquisition activity and an increase in same-store cash NOI of 0.9%, partially offset by dispositions and the impact of the vacancy of the Stoughton Healthcare facility. Year-over-year cash NOI growth was also impacted by the collection of over $6 million in one-time lease termination and lease severance fees in 2024, compared to less than $300,000 in termination fees in 2025.

If we were to exclude these one-time fees from cash NOI in 2025 and 2024, cash NOI and same-store cash NOI growth would have been 4.4% and 1.1% respectively. Turning now to our earnings metrics. FFO per share for the full year was $2.16, or a 3.6% increase from the previous year, while AFFO per share for the full year was $2.18, or a 5.8% decrease from the previous year. In addition to the cash NOI items just discussed, our increase in FFO per share was driven by several items: an increase in straight-line rent, which was largely driven by the new lease amendments that we entered into in connection with our PAM Health properties in December 2024.

Prior year write-offs of above-market rent related to the GenesisCare bankruptcy in 2024. Higher revenue from interest income on our two outstanding mezzanine loans, a reduction in G&A and other costs in 2025, stemming from the incurrence of one-time separation pay and higher personnel costs in 2024, and $3 million in one-time listing fees in relation to our New York Stock Exchange listing. The FFO per share increase was partially offset by an increase in interest expense, largely related to new swaps that we entered into at the end of 2024 due to the expiration of prior swap maturities. Our decrease in AFFO per share was driven by the increase in interest expense, partially offset by the cash NOI items previously discussed, lower G&A costs due to lower personnel costs, and an increase in interest income related to our fully funded mezzanine loans.

As Michael A. Seton mentioned earlier in the call, the strength and resilience of our tenant base continued, as demonstrated by the company’s strong financial results. We now have 75.6% of our portfolio ABR reporting financial results at either the tenant or guarantor level. We generated a portfolio-wide EBITDARM rent coverage ratio of 5.9x in 2025, as compared to 5.3x in 2024. The tenant at our Saginaw Healthcare facility, which we sold in late January 2026, was the tenant with an outsized EBITDARM coverage ratio that we described last quarter and drove our average up meaningfully. Without the Saginaw tenant included, our portfolio-wide EBITDARM rent coverage was 5.7x in 2025, still well above 2024 levels.

Moving to our balance sheet, net debt to EBITDAre was a conservative 3.9 times at year-end, remaining below our targeted leverage range of 4.5 times-5.5 times. Our leverage level translates into over $200 million of debt capital we can readily deploy to reach the midpoint of our targeted leverage range. Total liquidity at year-end exceeded $480 million, providing substantial dry powder for acquisitions and growth initiatives. As of December 31, 2025, we had $676 million of outstanding debt under our unsecured credit facilities at a weighted average interest rate of 4.7%. Our capital allocation philosophy remains unchanged.

We will deploy capital in a manner that creates the most long-term value for our shareholders, be that through acquisitions, investment in existing properties in need of expansion, share repurchases or other means. With that, we look forward to taking your questions.

Michael A. Seton, President and Chief Executive Officer, Sila Realty Trust: Thank you, ladies and gentlemen. We will now begin the question-and-answer session.

Conference Operator: Should you have a question, please press the star key, followed by the number 1 on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star key, followed by the number 2. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, while we assemble the queue. Your first question comes from Michael Lewis of Truist. Please go ahead.

Michael Lewis, Analyst, Truist: Great. Thank you. If this first one’s too specific, I could follow up, but I was wondering how much rent you collected on the Alexandria building that you’re selling. I think they had some holdover rent, also the two redevelopments placed in service. I think they were placed in later in the quarter. I was wondering if they contributed significant rent in the quarter as well.

Michael A. Seton, President and Chief Executive Officer, Sila Realty Trust: Hi, Michael. This is Michael. Thank you for joining the call today. Great to hear from you. On the Alexandria property, their scheduled rent, it was essentially $40,000 per month. Their lease expired in August, and they paid holdover rent through November. The holdover rent was at 125% of the scheduled rent. They ultimately ended up, essentially, if you count it this way, paying full rent for the year due to the holdover rent. They paid total rent in the fourth quarter of $120,000.

Michael Lewis, Analyst, Truist: The redevelopments, I guess I’ll tag on to that. Is there a material difference between the leased % you show on the supplemental versus what’s commenced? In other words, do you have some rent that may be on the come that we can’t see from that lease number?

Michael A. Seton, President and Chief Executive Officer, Sila Realty Trust: You mean our lease status at year-end?

Michael Lewis, Analyst, Truist: Yeah, I think you know, you had two-.

Michael A. Seton, President and Chief Executive Officer, Sila Realty Trust: Yeah

Michael Lewis, Analyst, Truist: redevelopment projects placed in service during the quarter. Those were listed, I think, as leased, you know, last quarter.

Michael A. Seton, President and Chief Executive Officer, Sila Realty Trust: Yes

Michael Lewis, Analyst, Truist: They started. Yeah, you understand.

Michael A. Seton, President and Chief Executive Officer, Sila Realty Trust: Yes. Specifically, for instance, the El Segundo property, which has UCLA as the tenant, has a free rent period. They’re still in that, you know, free rent period, the building’s considered leased as of the year-end. That one specifically comes to mind.

Michael Lewis, Analyst, Truist: Okay. My next question’s about-- I guess it’s about acquisition yields, but I think you’ll see where I’m going with this. When you acquire, you know, assets that are similar to what’s in your portfolio or you see similar assets trade in the market, what’s the pricing like for, you know, for the types of assets you own?

Michael A. Seton, President and Chief Executive Officer, Sila Realty Trust: The pricing for the type of assets that we own today, you know, consistent, I think, with what we’ve done on the acquisition side, is we generally see rehabs kind of in the. This is subject to, you know, performing assets, you know, longer-term leases, good national sponsors on the operational side, in the high 6s to, I would say, generally speaking, the low 7s to mid 7s. You know, generally speaking, 7 and a quarter can be a little tighter, it can be a little wider, depending upon circumstances.

The MOB outpatient, you know, call it ASC-type assets, we can say those get fairly tight, and those can get, you know, to as low as 6 or low 6s to, I would say, generally not the high 6s, so I’ll say mid 6s, but MOB assets, again, 6 to 6 and a half. On the LTAC side, because we do own some LTACs, we frankly don’t see them trade much at all. I can’t tell you the last time we saw an LTAC trade. We don’t own too many, but we do own some surgical hospitals. We’ve seen a, I would say, over the last, I would say, 12 months, kind of a, an interest.

We saw, call it pre-2022, a lot of interest in surgical hospitals, and we’ve seen that kind of renewed interest, particularly over the last 12 months. We will see those trade, depending, again, on the credit circumstance, the lease term, anywhere from the high 6s to around 7. I think, you know, when we think about, you know, the portfolio of assets that we own, you know, on a blended basis, we do see it somewhere in the 7, the 7 cap rate, cash cap rate going in.

Michael Lewis, Analyst, Truist: Okay. It was a little bit of a leading question to my, to my last question. On our calc, at least, we have the stock a little bit north of an 8% implied cap rate. It’s been moving in the right direction. The question is, you know, as you sell some of these assets and you’re below leverage, you know, what’s kind of the I know you’ve gotten this question before about potential stock repurchases. I also wonder, to the extent you could answer, if you get inbounds from institutions or private equity, about the company at this price.

Michael A. Seton, President and Chief Executive Officer, Sila Realty Trust: As it relates specifically to stock repurchases, you know, I’ll tell you what we’ve always said, which is it’s a tool in the toolbox. I will also say that, you know, one thing that makes us particularly cautious about stock repurchases is, as we’re trying to build our institutional investor base, it does pull liquidity for our stock out of the market. That’s where it causes us pause, particularly. As it relates to, you know, inbounds, I would say, you know, over time, we’ve certainly had interest in our company, but even pre-listing, by the way, up to listing. You know, the goal of our listing was, of course, to bring liquidity to our stockholders, which I think we’ve done.

We have seen our shareholder base rotate, as I said, you know, in my remarks, from 100% retail to really what is now 70% institutional. We’ve seen that occur. We do see that disconnect, Michael, that you’re referring to. You know, I would say it makes us, you know, cautious on the acquisition side. We are poised for growth. We are also conscious of others out there, you know, who have run up leverage and, you know, find themselves in a box. We’re definitely not in a box today because we’ve got a lot of liquidity. You know, we’re not gonna find ourselves in this box. We would like to see, you know, a higher share price, you know, fairly significantly higher in order to raise equity. Okay, great.

Thank you. Thank you for joining.

Conference Operator: Your next call comes from John Pawlowski from Wells Fargo. Please go ahead.

John Pawlowski, Analyst, Wells Fargo: Hi, can you hear me?

Michael A. Seton, President and Chief Executive Officer, Sila Realty Trust: Hi, John, I can hear you.

John Pawlowski, Analyst, Wells Fargo: Perfect. Sorry, I just barged from another call, so forgive me, I’m a little bit late, and I hope I didn’t miss anything. Just kind of following up on that last question. You know, I guess it felt like I got part of the answer there. My question is, at what point here, and maybe we can start with remaining leverage capacity and where you’re comfortable taking that, what that buying power means for 2026? My second part of the question is gonna be, at what point do you start to, not that maybe you’re not taking it seriously today, but at what point do you get a little bit more aggressive if, you know, maybe that incremental growth doesn’t get the stock working, that you start to look for other ways to realize that?

Michael A. Seton, President and Chief Executive Officer, Sila Realty Trust: Sure. Just in terms of liquidity, you know, ability to buy more, essentially, to reach the midpoint of our targeted leverage, which would be 5 times, ’cause we’ve given some indications of between 4.5 and 5.5 times, we could see investing about $225 million, roughly speaking. If we were to reach the high end of our leverage, it could be as much as $375 million. Again, we’re being very discerning with the acquisitions. There is competition in the marketplace. I think we have a good brand in the marketplace on the acquisition front with the developer, with the brokerage community, et cetera, with the tenant community.

In terms of, you know, us looking at other ways to, you know, bring opportunity for our shareholders, I think we’re always looking at that. In terms of timing, I can’t really give you an indication of timing. We think the company is very solid right now. It’s been stronger than it’s ever been before in terms of our portfolio, and I think you can see that in the results, that we reported, you know, last evening. When we think about the opportunities also within the portfolio to really get greater yield, which I mentioned in my remarks as well, those opportunities are coming, more and more. We mentioned some. There are actually additional ones that we have where we can get, yields north of...

You heard just Michael Lewis talk about where he evaluates where we’re trading at an implied cap rate basis north of that. We’re gonna take advantage of those opportunities within our portfolio. That only exists when you own the existing real estate and have those existing direct tenant relationships. We’re gonna continue to, you know, be forward-footed as it relates to taking advantage of opportunity and deploying our capital, but we’re gonna do it cautiously and thoughtfully.

John Pawlowski, Analyst, Wells Fargo: You know, in that same vein, if you think about the 375 of capacity that you mentioned at the high end, what’s a fair cadence for that? You know, as we look at maybe the incremental opportunities that are starting to come to you know, yields have been relatively steady. Transaction markets seem to have improved for most. I’m curious, is there an improved cadence relative to what we’ve seen in the past that could maybe accelerate AFFO growth from here?

Michael A. Seton, President and Chief Executive Officer, Sila Realty Trust: I think the market will drive the cadence. That being said, I think that gives us about 24 months of buying capacity. From a, you know, indication perspective, you know, I would expect, you know, volume this year to be similar to what it would be last year. Of course, we already made an acquisition this year. It could be more at the towards the end of this year as opposed to the beginning of this year, particularly as we’re focused on investing capital in these, you know, development opportunities with our existing tenancy and existing assets.

John Pawlowski, Analyst, Wells Fargo: Got it. Very helpful. Thank you.

Michael A. Seton, President and Chief Executive Officer, Sila Realty Trust: Thanks for joining, John. Good to hear from you.

Conference Operator: There are no further questions at this time. I will now turn the call back over to Michael A. Seton, CEO. Please continue.

Michael A. Seton, President and Chief Executive Officer, Sila Realty Trust: I would like to once again extend my sincere thanks to the entire Sila team. Their hard work, dedication, and commitment to excellence continue to drive our success. We deeply appreciate the support and confidence of our shareholders and remain excited about the opportunities that lie ahead in 2026. Thank you for joining today’s call.

Conference Operator: Ladies and gentlemen, that concludes today’s conference call. Thank you for your participation. You may now disconnect.