Sila Realty (SILA) Q2 2025 Earnings Call Transcript

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DATE

Thursday, Aug. 7, 2025, at 11 a.m. ET

CALL PARTICIPANTS

Chief Executive Officer — Michael Seaton
Chief Financial Officer — Kay Neely
Chief Investment Officer — Chris Flouhouse

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RISKS

The company will incur approximately $1.9 million in nonrecurring demolition and asbestos abatement costs for the Stoughton facility, which will be treated as an unusual expense and added back to core or normalized FFO and AFFO calculations.
Interest income from money market accounts declined due to cash used for last year's modified Dutch auction tender offer.
Total AFFO (non-GAAP) decreased by 2.7% year-over-year, primarily due to higher interest expense from acquisitions and swap replacements, despite partial offsets from interest income and cash NOI growth.
Landmark Hospitals, a tenant for one property and currently in bankruptcy, has remained current on all obligations to Sila Realty Trust.

TAKEAWAYS

EBITDARM Coverage Ratio-- 5.31x EBITDARM coverage ratio for reporting tenants, up from 4.64x in 2024, reflecting improved tenant financial health.
Weighted Average Remaining Lease Term-- 9.5 years weighted average remaining lease term across the portfolio, supporting income visibility.
Annual Contractual Rent Growth-- 2.2% annual contractual rent growth embedded in leases.
Portfolio Lease Percentage-- 99.2% portfolio lease percentage after removal of the Stoughton asset, indicating minimal current vacancy.
Liquidity-- $568.8 million of liquidity at fiscal Q2 2025 period-end, enabling opportunistic acquisitions and capital allocation flexibility.
Cash Net Operating Income (NOI)-- Cash net operating income (non-GAAP) was $41.9 million for fiscal Q2 2025, partly offset by loss from Stoughton facility vacancy.
AFFO per Diluted Share-- AFFO was $0.54 per diluted share for fiscal Q2 2025, down 2.7% year-over-year.
Share Repurchases-- $7.3 million of share repurchases executed at an average price of $24.90 per share in fiscal Q2 2025, using excess operational cash flow, under a new board-authorized share repurchase program of up to $75 million over three years, capped at $25 million per year.
Investment-Grade Tenant Exposure-- 40% of tenancy has an investment-grade rating, up from 36.4% at the same time last year.
Net Debt to EBITDAre-- 3.6x net debt to EBITDAre, reflecting conservative leverage.
AFFO Payout Ratio-- 74%, with a quarterly cash dividend of $0.40 per share approved for payment on Sept. 4, 2025.
Recent Acquisitions-- $75 million of acquisitions closed year to date, including the Dover Healthcare facility (acquired in April 2025) and a $16.2 million two-property portfolio in Southlake, Texas (closed after fiscal Q2 2025), both with high utilization rates and long leases.
Pipeline-- Exclusive LOIs signed for over $70 million in net lease healthcare transactions as of fiscal Q2 2025, expected to close in or around Q3 at cap rates at the upper end of the 6.5%-7.5% range, with long lease terms and customary escalators.
Stoughton Demolition-- Demolition to conclude by year-end 2025, reducing monthly carry cost from about $120,000 to $20,000-$25,000, with the lower run rate expected in 2026 when demolition of the Stoughton facility is complete, and enabling future property entitlement for higher value realization.
Minimal Medicaid Exposure-- Medicaid reimbursement represents only a very small fraction of the revenue base for reporting tenants, limiting risk from policy changes.
Mezzanine Loans-- Two development loans for new healthcare facilities are being funded and are expected to be fully funded by the end of Q3, enhancing risk-adjusted return and providing future acquisition options.
Lease Expirations and Renewals-- For 2025, all but one scheduled lease expiration (representing about 8,000 sq. ft.) are expected to renew, with all 2026 expirations (representing about 3.8% of ABR) currently viewed as likely to renew; minor new vacancies in Tucson and Palm Desert total less than 9,000 sq. ft. in a 5 million sq. ft. portfolio as of 2025.
Cap Rate Environment-- New acquisition opportunities are in the 6.5%-7.5% cap rate range.

SUMMARY

Sila Realty Trust (NYSE: SILA) emphasized portfolio resiliency through improving tenant coverage ratios, nearly full lease occupancy, and strong liquidity, while continuing targeted acquisitions and strategic share repurchases. Management outlined that earnings growth is supported by high average lease terms, consistent rent escalations, and accretive capital deployment, while maintaining low leverage and a strong payout ratio. The call also highlighted ongoing risk mitigation via minimal Medicaid exposure and clear resolution strategies for watchlist assets, notably the Stoughton facility and a tenant in bankruptcy.

Michael Seaton stated: "We noticed a significant enough dislocation in our public market share price and private market valuations to make the decision to use excess cash on hand to capture accretion in value for shareholders."
The pipeline includes over $70 million under exclusive LOIs as of fiscal Q2 2025, with anticipated closings in or around Q3, potentially further lengthening weighted average lease terms and increasing scale.
Dividend stability is reinforced by board approval of a $0.40 per share quarterly cash dividend payable on Sept. 4, 2025, representing a 74% AFFO payout ratio.
Kay Neely said: "we prefer to use our balance sheet capacity and liquidity position for the acquisitions of assets that fit within the Sila Realty Trust strategy."
Management disclosed that demolition of the Stoughton facility, including asbestos abatement, will cost approximately $1.9 million, a nonrecurring unusual expense that will be added back to core or normalized FFO and AFFO, and is projected to substantially lower property carry costs.
Active share repurchases will remain opportunistic and secondary to acquisition-driven growth, guided by measurable disconnects between share price and management’s view of NAV.

INDUSTRY GLOSSARY

EBITDARM: Earnings before interest, taxes, depreciation, amortization, rent, and management fees—an operator coverage ratio commonly used to assess healthcare facility tenants' ability to meet obligations.
MOB: Medical Office Building, a healthcare facility primarily leased to physicians or clinical medical groups.
IRF: Inpatient Rehabilitation Facility, a type of acute care hospital specializing in rehabilitation services.
LOI: Letter of Intent, indicating an exclusive preliminary agreement in acquisition negotiations, subject to due diligence.
ABR: Annualized Base Rent, a portfolio-level measure of total base rental income expected on an annualized basis.
Mezzanine Loan: Subordinate debt provided for development projects, often offering higher risk-adjusted returns and purchase options on completion.

Full Conference Call Transcript

Michael Seaton: Thank you for taking the time to join our call today. Our team delivered another positive quarter of results driven by quality operating fundamentals and our ability to remain steadfast in our commitment to our prudent capital allocation strategy. While macroeconomic and legislative uncertainty remain top of mind, Sila Realty Trust's portfolio continues to fire on all cylinders. With a strong average EBITDARM coverage ratio of 5.31 times, a portfolio weighted average remaining lease term of 9.5 years, meaningful annual contractual rent growth of 2.2%, and over $568 million in liquidity, our resilient portfolio and enviable capital position provide stability to deliver solid earnings growth and reinforce our ability to maintain a healthy dividend for our shareholders.

On top of our robust operating performance, we remain emboldened by our focus on necessity-based healthcare solutions, focusing on operators that deliver better outcomes for patients in convenient locations at an affordable price. Despite the headlines in various healthcare-related proposals coming from Capitol Hill, our strategic healthcare focus, along with the ultimate tailwind that is the impending silver tsunami of aging adults, provides us with confidence in our ability to continue to grow over the long term with the partnerships of our established and resilient tenancy.

With the passing and signing into law of the One Big Beautiful Bill Act, there are uncertainties as it pertains to healthcare and how the bill will ultimately affect all aspects of the healthcare delivery system. However, many of our tenants across the healthcare continuum of care provide us with payer mix information when reporting financial results. Of the tenants that report, Medicaid reimbursement is only a very small fraction of the revenue base. This limited exposure by our tenants to Medicaid and consequently our portfolio is largely due to the types of healthcare facilities that we invest in, the services being provided, and the markets in which they reside.

In the second quarter, we remain focused on our accretive and thoughtful capital allocation strategy. In April, we closed on the off-market acquisition of our new Dover Healthcare facility asset, the only inpatient rehabilitation facility in Kent County and one of only four in the state of Delaware. The facility is leased to a joint venture between two best-in-class operators, Bay Health, a very strong and successful investment-grade rated health system, and the second largest in the state, and PAM Health, or PAM, one of the nation's largest and leading providers of post-acute healthcare services. This facility, constructed in 2019, reached stabilization more rapidly than any other PAM facility in the company's history and remains very highly utilized.

With such high demand and little competition in the market comes an opportunity to expand the facility, which we are currently discussing with the existing tenancy. Subsequent to quarter end, we closed on a two-property MOB portfolio in Southlake, Texas. These properties benefit from strong operational synergies as physicians who practice at the traditional MOB routinely perform surgeries at the outpatient surgery center, creating a unique referral and care pathway between the two buildings. All three of these facilities fit very well within the Sila Realty Trust mold, and we are excited to embed them within our operating platform.

Beyond these three transactions, we are currently under exclusive LOI on over $70 million of new net lease healthcare transactions that are currently going through the typical pre-acquisition due diligence process. The ultimate acquisition of these properties is subject to our due diligence and closing process. However, should they occur, we currently would anticipate they would close in or around the third quarter. Beyond our most recent free net lease acquisitions made, we also utilized our share repurchase program to execute on over $7 million of share repurchases during the quarter.

We noticed a significant enough dislocation in our public market share price and private market valuations to make the decision to use excess cash on hand to capture accretion in value for shareholders. As conveyed previously and demonstrated this quarter, share repurchases are a tool in our toolbox that we can use if we deem there to be dislocation in our share price. That being said, our bias remains pointed towards growth through acquisitions of physical property. Finally, I am happy to report that we have arrived at this strategic vision and solution for our Stoughton asset.

After exploring many options over the past months, we deemed that the course allowing for the highest value for our shareholders is to demolish the building and entitle the land for separate use. The demolition of the building will halt a majority of the expense leakage and is expected to be completed around the end of this year. With the removal of the Stoughton asset from service, our portfolio lease percentage increased to 99.2%. Sila Realty Trust's advantages were on full display this quarter. Our balance sheet strength and liquidity position continue to allow us to be opportunistic by executing on accretive transactions while using excess cash to execute on strategic share repurchases.

While there is still much noise and uncertainty within the healthcare landscape today, our creative capital allocation decisions this quarter are a testament to our focus on delivering the best value for shareholders over the long term. I will now turn to Kay to discuss our financial performance. Thank you, Michael, and good morning, everyone.

Kay Neely: I am pleased to report positive trends in our financial results, which stem from the various accretive transactions we have recently made. For the 2025, we reported cash NOI of $41.9 million compared to $41.2 million, or a 1.7% increase from the 2025. This increase was primarily driven by our Knoxville Healthcare facility and Dover Healthcare facility acquisitions. Compared to the 2024, cash NOI was up 5% driven by our acquisition activity over the previous year and our same-store cash NOI growth of 1.5%. This was partially offset by a cash net operating loss on the Stoughton Healthcare facility due to its vacancy when compared to the prior year when we were still receiving some rent.

Note that with the demolition of Stoughton underway, we have removed the asset from the same-store pool. Our AFFO was $0.54 per diluted share for the second quarter, or a 1.7% increase from the 2025. This was driven by the cash NOI drivers mentioned previously, along with the lower G and A driven by customary first-quarter audit and accounting fees, slightly offset by higher interest expense largely driven by acquisition activity.

Compared to the second quarter of last year, our total AFFO decreased by 2.7% largely driven by an increase in interest expense related to acquisition activity and the replacement of certain swaps at the end of last year, partially offset by interest income received on our mezzanine loans and the previously mentioned cash NOI items. Additionally, interest income from our money market account decreased from the prior year due to using a portion of those funds toward our modified Dutch auction tender offer last year, decreasing the amount of weighted average shares outstanding. As a result, there was no reduction in AFFO per share compared to the second quarter of last year.

As Michael mentioned, we executed on over $7.3 million of strategic share repurchases at an average price of approximately $24.9 per share. We believe this execution was accretive to both earnings and to NAV, we used excess cash flows from operations to fund these repurchases. We may continue to execute repurchases with excess cash on hand depending on other capital deployment priorities. The board recently approved a three-year share repurchase program for share repurchases up to $75 million with no more than $25 million of repurchases in any twelve-month period. That said, we prefer to use our balance sheet capacity and liquidity position for the acquisitions of assets that fit within the Sila Realty Trust strategy.

Net lease assets that are accretive to both earnings and the quality of the portfolio. The strength of the portfolio was once again demonstrated through the collection of financial reporting at either the tenant or guarantor level of 73.4% of our portfolio ABR. Our reporting tenancy maintained a strong EBITDARM coverage ratio of 5.31 times, up from 4.64 times in the 2024. Notably, our MOB and IRF coverages have increased, and we now have 40% of our tenancy that is associated with an investment-grade rated tenant, guarantor, or affiliate, up from 36.4% at the same time last year.

The significant and improving coverages that the majority of our tenants and guarantors possess further bolsters our confidence in our ability to grow earnings through cycles and over the long term. Similar to our tenancy, Sila Realty Trust remains in a strong fiscal state as evidenced by our balance sheet position ending the quarter with $568.8 million of liquidity, and net debt to EBITDAre of 3.6 times. We reported an AFFO payout ratio for the quarter of 74% and on August 5, the company's board approved and authorized a quarterly cash dividend of 40¢ per share payable on 09/04/2025.

As we've said in the past, we believe maintaining a strong balance sheet with low to moderate leverage, ample liquidity, and financial flexibility is fundamental to being a resilient and sustainable REIT. This type of environment with economic and legislative unknowns still looming over the market is precisely why we continue to position the company in a place which can withstand and perhaps even take advantage of disruption. Today, we remain committed to external growth in a prudent manner, making sure acquisitions fit with our strategy and are accretive and sustainable. This thoughtful approach combined with our tenants' robust operational performance allows us to remain confident in our capital allocation and the maintenance of the dividend over the long run.

I will now turn the call over to Chris to share details on our portfolio activity.

Chris Flouhouse: Thank you, Kay, and good morning, everyone. We have had another great few months filled with successful net lease acquisitions that fit our investment criteria, strong leasing momentum, and the continual building of our acquisition pipeline. Our newly acquired Dover Healthcare facility, which had the most successful start of any PAM Health property in the company's history, is a prime example of an asset that fits well within the Sila Realty Trust investment strategy, a newer and highly utilized facility in a market with significant barriers to entry. Both the limited competition and consistently high utilization allow for an expansion opportunity, which we are currently discussing with the tenancy and look forward to bringing to fruition in the near term.

This opportunity came to us as an off-market deal via a private owner in our existing relationship with PAM Health, highlighting Sila Realty Trust's unique ability to find and transact on accretive deals through our strong relationships that are not available to the rest of the market. Subsequent to quarter end, we closed on a two-property medical outpatient building portfolio for approximately $16.2 million. Both properties are well located and highly utilized by investment-grade affiliates, and the operational synergies due to their complementary uses and proximity to each other offer a unique dynamic that further enhances the tenancy that would have otherwise fit well within our portfolio on their own.

The portfolio is comprised of a medical outpatient building leased to GI Alliance, the largest independent provider of gastroenterology services in the United States, along with an ambulatory surgery center leased to a joint venture between Baylor Scott and White Health, a subsidiary of Tenet Healthcare, and a high-performing physician group. This portfolio is located in Southlake, Texas, an affluent suburb of Dallas with compelling demographics and approximately two miles from the 302-bed. Like our recently acquired Dover asset, these two properties are accretive to the quality of the portfolio and are the types of opportunities we'll continue to pursue.

Year to date, we have closed approximately $75 million of high-quality acquisitions and currently have over $70 million of properties under an exclusive LOI. On top of the success we continue to have on the acquisition front, totaling approximately 56,000 square feet, all of which were at positive rent spreads. We are diligently working with a few remaining tenants whose leases expire in 2025, all of which are expected to renew. We're proactively working with our tenants on all of our 2026 expirations. We also continue to make progress on the funding of our loans for the development of a brand new 60,000 square foot inpatient rehabilitation facility and a 60,000 square foot behavioral healthcare facility.

Since our update last quarter, we have received the origination fee and begun funding the development of the behavioral facility. As previously disclosed, we expect both mezzanine loans to be completely funded by the end of the third quarter. These loans provide the company with strong risk-adjusted returns during the development period while creating future pipeline opportunities with purchase options for Sila Realty Trust for each facility upon completion of construction. Sila Realty Trust's philosophy of investing in net lease necessity-based healthcare infrastructure run by operators that deliver positive outcomes in convenient locations remains unchanged. Our acquisition opportunities remain strong, as we continue to see single assets and as of late more portfolio opportunities.

The net lease opportunities we see are comprised of facilities servicing needs all along the healthcare continuum and are largely priced within a 6.5% to 7.5% cap rate range. As we look forward, our team members remain focused on sourcing high-quality investment opportunities that fit well within the Sila Realty Trust standard. This concludes our prepared remarks. We will now move on to your questions.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the If you are using a speakerphone, please leave the handset by two. Your first question comes from Nate Crossett from BNP. Please go ahead.

Nate Crossett: Hey. Good morning. Just the $70 million LOIs, can you kinda tell us you know, what types of assets are those? You know, what is the pricing kinda look like that we should expect? And just outside it's under LOI would kinda look like for the back half of this year.

Michael Seaton: Sure. Nate, this is Michael. Thank you for joining today. As we mentioned, we have $70 million of additional property under exclusive LOI. In addition to that, I'll just mention to you, we have another a number of interesting opportunities as well that we're looking at that could be possibilities for now and year-end. Particularly those properties that are under acquisition, that we're doing the due diligence on that were mentioned, are consistent with the property types that we currently own. From a cap rate perspective, the cap rate guidance that we have given has been, generally speaking, from the low 6s to the mid 7s.

In this, these particular properties fall into more of the upper end range of what I described in terms of cap rate. I would also mention the lease duration on those properties is very long. And will have a very beneficial effect on our remaining average lease term in the overall portfolio. And also have lease escalators that are consistent, generally speaking, with what's also in the portfolio? Okay. Just so just so I heard it right, it's $70 million. Right? It's not 7 Oh, I apologize. Yes. Slightly over $70 million. Correct. Okay. Oh, okay. Okay. Okay. Yes. Yeah. Uh-huh. There's no difference.

Can you just maybe I guess you kinda change the buyback too, right, to be three years I think it's what, capped at $25 million a year. You know, just given your comments on pricing, for this 70, how do you view I don't know, maxing out to 25? I'm back this year. As we've mentioned historically, we view the share repurchase option to be a tool in the toolbox. And as mentioned, we acquired a little bit over $7 million worth of our shares at an average price of just over $24.24.09 per share. In the quarter. We had previously the Board had previously up to $25 million in share repurchases for a twelve-month period.

And so what the Board has now approved is up to $75 million in share repurchase over a three-year period capped at $25 million per year. So as we see an opportunity, potentially with the share price being from private market values, we will consider that. We did mention our bias is to, of course, grow the portfolio. What I just also want to mention to you about the share repurchases that did occur in the quarter, those occurred at a level that we believe is well over 150 basis points in disconnect between private market values relative to where we saw the value of the company at the time we repurchased those shares.

So pretty significant differential of NAV or intrinsic value the way we see it, relative to where we bought those shares. Good. No. That's helpful. Just the last one, is there anything on the watch list or tenant issue that we should be tracking or be aware of? I would say nothing material. I would just mention, just from a watch perspective, we addressed Stoughton, as you know, on this call. I would I would consider that to be on the watch list, but we've got a very clear strategy around that. And I would also mention, which we did publicly disclose, that Landmark Hospitals, of which we own one property, they're a LTAC operator, is in bankruptcy. Still.

However, they've been current on all of our all of their obligations to us, which is really just rent. During the period of the bankruptcy, and our particular property continues to perform very well and cover its rent and we are hopeful and anticipating that they may emerge from bankruptcy, I would say, roughly over the next sixty days. And, with either potentially a recapitalized, sponsor or with a new sponsor of that property. But feel good about, the lease, that exists there in terms of that being continue to be assumed and in place.

Nate Crossett: Okay. Thank you. I'll leave it there.

Michael Seaton: Thank you, Nate.

Operator: The next question comes from Michael Lewis from Truist Security. Please go ahead.

Michael Lewis: Great. Thank you. On Stouten, I would have thought demolition would have been really quick. Although, I guess, we're getting close to the end closer to the end of the year than I than I realized. Any sense on how long it would take to entitle it and have that land ready to go to market? For sale?

Michael Seaton: Hi, Michael. Thank you for joining today. The demolition takes some time because it's about a 180,000 square foot building. I would also tell you that just going to the market and getting bids to do such a fairly large project, which is the demolition of this has taken some time. We certainly wish it was a shorter time frame. I would also mention, there is asbestos in the building. So the asbestos the building, some of it will be removed prior to the demolition. So it will take I'm giving you a time frame. We mentioned, it should be completed towards the year end. As we are starting now.

You know, it is about a, call it, five ish, four, five month process. In terms of entitlement, we've actually been working and talking to various partners on the entitlement. I would also mention to you that we have had, multiple occasions of direct dialogue with Town Of Stoughton. At various levels about entitling the property. And, those have gone those conversations have gone very positively because the Town Stoughton would like to have some, I would say, revitalization of that property. From what it was. It's a large land parcel. But the entitlement process will take some time, think it may take us into 2026.

But I would tell you, the reason we are taking this tact first and foremost, demolition to reduce the carry cost on the building. Will be, I think we said majority, it's going to be substantially reduced. In terms of those carry costs, that we've disclosed, per month. Really to just substantially real estate taxes as that building is taken down. Addition to that, the value that we will realize, that we expect to realize, I should say, from simply selling it today as is to, an entitled property, is going to be what we believe will be significantly greater and benefit our shareholders. Great.

And then on the stock repurchases, you know, how do you measure your cost of equity or the value of those repurchases? When you compare it versus acquisition yields? Because, you know, you repurchased that $24 stuck at 25 today. I think, you know, by our math, it you're still a materially better yield on the buybacks than on acquisitions, although I realize you know, the acquisitions have growth and some permanency. But I guess the question is, you know, how do you measure it and decide to do the buyback versus the acquisitions? Given, you know, your stock is still discounted?

I think, Michael, the way to look at it is it's really a combination of investing our capital with a certain cap rate, to grow the portfolio, which has benefit in terms of diversification of the portfolio. Bringing down certain exposures, for instance, expanding the portfolio to new tenant relationships. With buybacks, are just a economic play. And we're not getting the benefit of that growth, that diversification of the portfolio. And the way we are evaluating it is wanna see a disconnect, I would say, relative to what we view NAV to be or the intrinsic value of the company, of at least a 100.

And as I mentioned, was well over a 150 basis points relative to where the private market trade is. So you're correct in saying, share buybacks, from a economic perspective. Are advantageous to the company and increase our NAV. And, therefore, shareholder value. We agree with that. That's why the Board approved, this program. And we'll use it selectively and, when we think it's appropriate. So I think that our approach is really a combination of the two. With our, you know, cash available that we've got. K. The core portfolio is 99% leased Are there any are there any lease expirations or anything that looks like it might change that in the near term?

Anything you see on the horizon? Yes. Let me let me say that we've done a fantastic job, so far this year. With our 2025 lease expirations. And we expect to renew all but one of our scheduled 2025 lease expirations. I also mentioned that for 2026, the way we see it today, we have been in touch with every tenant expires in 2026. And we are optimistic that we are going to be able to renew all of those tenants as we sit here today. Obviously, things can change. But we're optimistic about 2026. Which has about 3.8% of our ABR expiring. This year, by the way, it was about 4.6% of our ABR expiring.

We had one tenant, that we don't expect to renew. It accounts for about 8,000 square feet, of the portfolio, so relatively small of our total over 5,000,000 square foot portfolio. In terms of other vacancies this year, we had one tenant relatively small, in a building in Tucson. It's a multi tenant building. It was a doctor who apparently, by the way, became ill from COVID related, you know, challenges. He paid all of his rent through last year. The lease remained in place this year. It was only about 2,000 feet. By the way, that became available this year.

One other property as well in California which accounted for slightly under 7,000 feet It was a GenesisCare related facility. The physicians couldn't really make the property work. They were former GenesisCare physicians. And, that property we had held a security deposit We've applied it to ongoing rent. But that building will be available for sale or lease. So when I total all of that up, we had 8,000 of expiring lease that we did not renew relatively small, obviously, for the year scheduled for this year. And then from the perspective of getting space back, I mentioned a doctor with a couple thousand feet of exposure. In our multi tenant Tucson building.

And then a whole building for slightly under 7,000 square feet 6,900 square feet, roughly speaking, in the California market. Palm Desert. K. I appreciate all the all the detail. It's a it's small exposure. We'll we'll call it. Small so but, you know, I wanna be transparent with you. We've been very successful with all of you. Yeah. Yeah. So, my final question, and maybe this is a question as much for me as for you and not easily answered, but you know, we see REITs sometimes that get you know, at attractive cost of equity capital and are kinda off to the races. And others that you know, sometimes don't ever get that green light.

You know, what do you think it is that you need to show to kinda get this cost of equity you know, where it should be? And you know, are investors telling you directly what they what they would like to see or need to see? Again, that's a question for you as well as us. Right? What I would say what I would say is, you know, we have been publicly traded for just over a year now. And what we have heard consistently from you and your colleagues in the research community and from investors is you know, clearly, folks don't know the company. Initially because we didn't do an IP We did a direct listing.

We did not want to dilute our shareholders. Because we didn't need to. We needed to get a few quarters under our belt of steadiness. And I think when I'd like to think when you look at the results of this quarter, you can see that we're doing all the right things, whether it's on the acquisition side, whether it's on the leasing side, whether it's as we're dealing with issues that have come up in prior quarters, like the Stoughton asset for in Insys or GenesisCare last year. I think we're really hitting our stride in terms of also ability to grow the company.

As you can hear, the year to date acquisitions the post quarter closing that Chris referred to as well as the properties we have under contract. I feel like, over the next few quarters, if we can demonstrate to the market this consistency then, we should see that recognition in our share price which is what you're referring to. From a numeric perspective, after we acquire to the extent we're successful and meaning we just get through due diligence, on this $70 million we'll have the ability to acquire another $100 million worth of property to just get to the very low end of our target leverage range before we start thinking about raising capital.

So that's the 4 and a times debt to EBITDA To get to the higher end of that range, which is five and a half times debt to EBITDA, we can acquire again after this $70 million. Another $260 million what I'm referring to in total is we have another $360 million of capital that we can use to either acquire property buy back stock, whatever makes the most sense, probably a combination of the two to the extent our share price doesn't, you know, we don't see, you know, some significant movement there. To bring value to our shareholders. So our goal is to get the share price up to grow the company.

Do think we're a differentiated strategy in the health care and the net lease space. And we certainly want the investing community to recognize that. So we think we've got all the right elements today. The portfolio is very strong. We're tremendously liquid today in terms of the capital that we have. And we're just starting to hit our stride.

Michael Lewis: Sounds good to me. Thanks, Skip.

Michael Seaton: You're welcome. Thank you for joining, Michael.

Operator: The next question comes from Rob Stevenson from Janney. Please go ahead.

Rob Stevenson: Good morning, guys. Is it gonna cost you to demolish the Stoughton facility? And are those costs gonna run through the income statement?

Michael Seaton: The cost will run as approximately $1.9 million, and that's inclusive of any asbestos abatement that we have to do prior to the demolition. I'll let Kay address how it will be treated from a financial perspective in terms of our balance sheet and income statement.

Kay Neely: Hey, Ron. So that amount will flow through if you know, given the amount you know, it may have its own per se line item on our income statement as it comes through. Just depends how this is coming through over the next you know, four, five months. But we consider that to be a, nonrecurring unusual type expense. And so we would add that back for core or normalized FFO, which would also then, flow through as an add back to AFFO.

Rob Stevenson: Okay. And can you remind us what the current carry costs are on a monthly or quarterly basis on that and what you expect that to be once the demolition is complete?

Kay Neely: Yes. So we had previously I think, said that we estimated roughly around a $120,000 a month and that will that has fluctuated a little bit. It was slightly less this quarter, just because lumpiness of various repairs and maintenance, for example. Just to keep the building, you know, safe while it's while it's currently up. Those costs will ratchet down you know, each month, and then we believe the kind of run rate carry, which we'll really see the benefit of in 2026 when it's fully demolished, to be around 20 to 25,000 a month.

Rob Stevenson: Okay. Alright. So that's material enough to put any a share or so. And then Michael or Chris, what's the current thinking for entitlement there for sale, for rent residential, mixed use? What's your latest thinking, and what does the town wanna see in your conversations with them?

Michael Seaton: Great question, Rob. I would tell you, to a degree, the world her oyster in terms of that and the town views it that way as well. They want to see a new building there They wanna see, a use which, fits in, to the community there. The highest and best use probably involves some type of residential. Meaning multifamily. It may or may not have a component of call it, some subsidized housing. It could just be market rental. It could have a component of senior housing. The site itself is quite big. So I would tell you, for us, we wanna maximize value naturally.

From the town perspective, I think they see it similarly in terms of the use. And just having a new attractive property there that they view to be kind of a destination type location.

Rob Stevenson: Okay. That's helpful. And then Kaye, if you do close the $70 million or possibly more of acquisitions, in the coming months, how are you thinking about financing that over the intermediate term? Assume it gets put on the line initially, but does it stay there until rates come down? Do you do something in 2025 with term loans, or is there some other debt that looks attractive to you at this point? How are you sort of thinking about you know, beyond just closing funding, but the sort of more intermediate term funding?

Kay Neely: I think, you know, for now, yes, we would use our revolver to fund the acquisitions. You know, it remains to be seen what ultimately happens with interest rates. As you know, that's a hot top daily. With the Fed and the economy. But since we don't have anything I think we talked about this last quarter a little bit, Rob. We don't have any looming maturities You know, we do think perhaps our next, form of debt would be longer term debt in a private placement, but I would not call that imminent.

And then, obviously, as our you know, as our leverage ticks up and if you know, we do in fact like our share price, we, you know, can, can tap the equity markets to do ever as well. So but the revolver for the short to medium term.

Rob Stevenson: Okay. And then last one for me. Michael, just curious as to what the thinking is of the board in putting that sort of $25 million you know, whether or not it was in the one year program or now on an annual basis on the three-year program, governor on the program. They worried that Kay and Miles were gonna go wild on repos.

Michael Seaton: I think the board has a view that they would that we have a unique platform here that we are scaled to grow, the board, of course, is very supportive of the strategy. And there we've seen, obviously, a pretty quiet market just generally speaking in the commercial real estate market and then the cap right, over the last three years. And I think they view our business strategy to be very sound, and have a lot of legs to it. So I think the board wants to give the tools to us to be nimble but they also wanna see an opportunity to see this company grow.

Rob Stevenson: Okay. Thanks, guys. Appreciate the time this morning.

Michael Seaton: Thank you for joining, Rob.

Operator: There are no further questions at this time. I will now turn the call over to Michael Seaton. Please continue.

Michael Seaton: I want to once again extend my sincere thanks to the entire team at Sila Realty Trust. Their hard work and dedication continue to drive our success. On behalf of our leadership team, and Board of Directors, we deeply appreciate the support of our shareholders. And we will do everything in our control to ensure that Sila Realty Trust remains a sound investment opportunity for both existing and future shareholders. Thank you all, and have a great day.

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