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Sila Realty Trust, Inc. (SILA)·Q1 2025 Earnings Summary

Executive Summary

  • Revenue modestly beat consensus while EPS and FFO/share were slightly below: Q1 rental revenue was $48.26M vs S&P Global consensus $46.64M*; diluted EPS was $0.13 vs $0.22*; FFO/share (REIT) was $0.51 vs $0.525* . S&P Global estimates noted with asterisk.
  • Cash NOI was $41.18M, up ~0.5% q/q but down y/y due to non-recurring 1Q24 items and Steward bankruptcy; AFFO/share was $0.53 with a 76.4% payout ratio, supporting the maintained $0.40 quarterly dividend .
  • Balance sheet/liquidity strengthened: net debt/EBITDAre 3.5x, interest coverage 4.5x, liquidity ~$598.5M; revolver was upsized to $600M in February, enhancing external growth flexibility .
  • Management tone: constructive on acquisition pipeline at 6.5–7.5% cap rates, but disciplined given cost of equity/interest rate backdrop; target leverage range reaffirmed at ~4.5–5.5x net debt/EBITDAre .

What Went Well and What Went Wrong

  • What Went Well

    • Revenue beat with sequential Cash NOI growth: Q1 revenue $48.26M vs $41.00M 4Q Cash NOI moving to $41.18M in Q1 (+~0.5% q/q) as Knoxville acquisition and rent escalators helped offset vacancies .
    • Strong balance sheet/liquidity: net debt/EBITDAre 3.5x, liquidity ~$598.5M, and new $600M revolver (oversubscribed), supporting accretive growth optionality .
    • Strategic focus reiterated: “We are pleased with our strong start to 2025…” and remain focused on “necessity, purpose-built healthcare real estate” with WALT 9.7 years and 2.2% average annual escalators .

  • What Went Wrong

    • Earnings below consensus on interest reset and prior-year comps: EPS $0.13 vs $0.22*; FFO/share $0.51 vs $0.525* as interest expense rose with swap resets; y/y Cash NOI lower due to 1Q24 severance/termination fees and Steward impact .
    • Interest coverage compressed to 4.5x (from 6.4x in Q4), reflecting higher interest costs after year-end swap changes .
    • Vacancy drag persists (Stoughton), with impairment in Q1 and ongoing carry costs pending sale/lease resolution .

Financial Results

MetricQ1 2024Q3 2024Q4 2024Q1 2025
Rental revenue ($USD Millions)$50.64 $46.12 $46.55 $48.26
Net income ($USD Millions)$14.98 $11.94 $11.11 $7.10
Diluted EPS ($)$0.26 $0.21 $0.20 $0.13
EBITDAre ($USD Millions)$39.10 $36.06 $33.86 $36.52
FFO/share – diluted ($)$0.59 $0.54 $0.51 $0.51
Core FFO/share – diluted ($)$0.63 $0.55 $0.52 $0.53
AFFO/share – diluted ($)$0.66 $0.57 $0.54 $0.53
Cash NOI ($USD Millions)$46.94 $40.81 $40.96 $41.18
Cash NOI margin (%)92.7% 88.5% 88.0% 85.3%

Actual vs S&P Global Consensus – Q1 2025

MetricConsensusActualSurprise
Revenue ($USD Millions)$46.64*$48.26 Above
Diluted EPS ($)$0.22*$0.13 Below
FFO/share – diluted ($)$0.525*$0.51 Below
Values with asterisk (*) retrieved from S&P Global.

KPIs and Balance Sheet

KPIQ3 2024Q4 2024Q1 2025
Weighted avg leased rate95.5% 96.0% 96.0%
Weighted avg remaining lease term8.3 yrs 9.7 yrs 9.7 yrs
Avg annual rent escalators2.2% 2.2% 2.2%
Net debt/EBITDAre3.5x 3.3x 3.5x
Interest coverage6.6x 6.4x 4.5x
Liquidity ($USD Millions)$528.61 $539.84 $598.46
Dividend per share (quarter)$0.40 $0.40 $0.40

Guidance Changes

MetricPeriodPrevious Guidance/StatusCurrent Guidance/StatusChange
Dividend per shareQuarterly$0.40 (Q4 declaration) $0.40 (Q1 paid/declared) Maintained
Revolver capacityN/A$500M availability (12/31/24) $600M commitments (2/18/25) Increased
Target leverage (Net debt/EBITDAre)Ongoing4.5–5.5x (Q4 call) 4.5–5.5x reiterated (Q1 call) Maintained
Acquisition cap rate focusOngoing~6.5–7.5% (Q4 call) ~6.5–7.5% reiterated (Q1 call) Maintained
Formal financial guidance (rev/EPS/FFO)FY25Not provided (Q4 call) Not provided (Q1 release/call) N/A

Earnings Call Themes & Trends

TopicQ-2 (Q3 2024)Q-1 (Q4 2024)Current (Q1 2025)Trend
Macro/costsAddressed Steward rejection; balanced on rates “Higher-for-longer” discussed; swaps reset; disciplined growth Notes tariffs, labor, recession risk; healthcare seen resilient Cautious macro; resilient end markets
Tenant health/coverageReporting coverage 4.82x; <1.0x at 4.5% ABR Coverage improved to 5.31x; <1.0x at 1.8% ABR Coverage 5.30x; <1.0x at 0.5% ABR; all current on rent Improving
Portfolio occupancy/leasingLeased 95.5%; Stoughton vacant Leased 96.0%; GenesisCare issues resolved; index adds Leased 96.0%; selective renewals/extensions Stabilizing
Balance sheet/liquidityLiquidity $528.6M; net debt/EBITDAre 3.5x Liquidity $539.8M; 3.3x; swaps reset Liquidity $598.5M; new $600M revolver; 3.5x Strengthening liquidity
External growth/cap ratesAccretive acquisitions; mezz loan options EV growth ambition; development capital via mezz loans Two acquisitions ~$59M; cap rates 6.5–7.5% Active, disciplined
Stoughton (Steward)Under contract then terminated; plan to sell/lease Actively marketing; aim to resolve Exploring sale/demolition to maximize value Resolution pending
Guidance stanceNo formal guidance No formal guidance; framework shared No formal guidance Unchanged

Management Commentary

  • CEO: “We are pleased with our strong start to 2025… acquisitions… exemplify the asset quality that Sila seeks to own,” highlighting focus on lower-cost patient settings and growing markets .
  • CEO on portfolio durability: “WALT of 9.7 years and average annual escalations of 2.2%… indicative of the long-term, durable nature of our cash flows” .
  • CFO: “AFFO payout ratio for the first quarter was 76.4%, which should provide further confidence in our ability to maintain a strong and stable dividend” .
  • CIO: “Completed two acquisitions totaling approximately $59 million… purpose-built, highly utilized inpatient rehabilitation facilities in Knoxville, TN, and Dover, DE” .
  • CEO on macro: While tariffs/labor/inflation create uncertainty, healthcare real estate “is a vital part of societal infrastructure” and demographics support demand .

Q&A Highlights

  • Stoughton (MA) strategy: More robust sale interest (multifamily), considering demolition/entitlement path to maximize value; impairment reflects current cash bids; potential 12–18 month process .
  • Mezzanine loans/CECL: CECL reserve increase ($171K) tied to mezz loans; expect both mezz loans to be fully funded in Q3 2025 .
  • Acquisition yields and cost of equity: Targeting ~6.5–7.5% cap rates; balancing pace with cost of equity and leverage discipline .
  • Borrowing cost: Revolver at ~SOFR + 125 bps (~5.57% at quarter end); longer-duration private placement debt would price higher today .
  • Tenant coverage: <1.0x ABR improved to 0.5%; drivers include specific tenant improvements; all sub-1.0x obligors current on rent .

Estimates Context

  • Wall Street (S&P Global) vs actuals: Revenue beat ($48.26M vs $46.64M*), but EPS ($0.13 vs $0.22*) and FFO/share ($0.51 vs $0.525*) missed, largely consistent with higher interest expense after year-end swap resets discussed by management .
  • Implications: Models may lift revenue/Cash NOI modestly on acquisitions and escalators but recalibrate interest expense run-rate (lower interest coverage q/q, higher swaps) and incorporate timing of Stoughton resolution and mezz loan funding benefits .

Values with asterisk (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Revenue/Cash NOI execution solid; sequential Cash NOI growth with selective acquisitions and escalators offsetting vacancy—supportive for internal and external growth narratives .
  • Earnings quality headwind is interest expense: lower interest coverage (4.5x) vs Q4 due to swap reset; watch rate path and funding mix for 2025 acquisitions .
  • Dividend sustained with comfortable coverage (AFFO payout 76.4%); management explicitly highlighted dividend stability .
  • Balance sheet optionality improved: $600M revolver, ~$598.5M liquidity, net leverage 3.5x; room to pursue accretive deals while staying within 4.5–5.5x target over time .
  • Catalysts: (1) Stoughton monetization (reduces carry costs), (2) continued accretive acquisitions within 6.5–7.5% cap range, (3) mezz loan funding/interest income in 2025 and potential property takeouts in 2026 .
  • Tenant health improving (coverage 5.3x; sub-1x ABR down to 0.5%), reducing credit risk premium on the portfolio .
  • Trading lens: Narrative supportive for medium-term multiple stability/expansion if growth is funded prudently and Stoughton is resolved; near-term print was mixed (revenue beat but EPS/FFO miss), with interest expense the swing factor .