SILA Balance Sheet
Description
Sila was founded in 2013 as a public non-tradable REIT. From 2013-2019 they raised capital and acquired properties healthcare properties as well as data centers. In 2021 they sold their data center business, paid down debt and paid out capital to shareholders. They are now a pure-play healthcare REIT. They own 136 properties across several healthcare property sub-types -the types that typically exhibit above average growth via low patient costs such as outpatient facilities, surgical centers, etc. Notably, they do not invest in higher cost settings like senior housing, skilled nursing, or general acute care hospitals. Specifically, their exposures are: % of ABR (annualized base rent) 37% Medical office buildings 34% Specialty and surgical centers 29% Inpatient rehabilitation Sila owns both on-campus and off-campus facilities that are generally close to tenant patient referral sources such as hospitals or are in MOB clusters. They target geographies with dense populations that exhibit at or above average growth. Tenants are generally market leading providers with dominant market share. Sila puts particular emphasis on tenant financial health and rent coverage ratios. Leases are high quality, described in more detail below. Near-term Trading Catalysts Sila is newly public with little following. Sila was previously a non-traded REIT (it was technically public - they filed with the SEC, etc. but did not trade). They listed on the NYSE on June 13th, 2024 and became tradable then. Prior to going public they had 60,000 investors that essentially had no liquidity. They now have liquidity for the first time and we would guess there are quite a few hitting the bid, taking advantage of the long-awaited liquidity. This selling has likely put pressure on the stock right out of the gate. In anticipation of this selling pressure Sila announced a $50MM Dutch Tender on listing day (5% of shares). The Dutch tender is currently in effect with a price range of $22.60 - $24.00. (For the beer money crowd there is odd lot priority here with an odd lot tender offering a near guaranteed $120 profit on 99 shares by the July 19th expiration, a 5% return in 10 days). The tender could also be creating some short-term arb demand, so we may get a little choppiness the next couple of weeks. Sila came public via direct listing, so it didn’t get the normal investment banker marketing and road shows that come with IPOs. Sell-side coverage and investor relations activity is likely right around the corner. Importantly, they are very under-levered. As they increase leverage their FCFE and equity value should benefit materially. They recently made a $125MM acquisition with just cash on the balance sheet. We expect them to put their debt capacity to work in M&A, resulting in attractive FFO growth. It will likely get added to indexes.