Sila Realty Trust, Inc. Third Quarter 2022 Results

Sila Realty Trust, Inc., or the Company, a public, non-traded real estate investment trust focused on healthcare properties, today announced operating results for the third quarter ended September 30, 2022.

Highlights of the Quarter Ended September 30, 2022

• Net income attributable to common stockholders totaled $13.4 million; net income attributable to common stockholders per diluted share was $0.06.

• Net operating income, or NOI*, attributable to the Company's operating properties totaled $43.6 million.

• Funds from operations, or FFO*, attributable to common stockholders equaled $32.0 million; FFO attributable to common stockholders per diluted share was $0.14.

• Adjusted funds from operations, or AFFO*, attributable to common stockholders equaled $31.3 million; AFFO attributable to common stockholders per diluted share was $0.14.

• On July 20, 2022, the Company acquired one healthcare property in the Tampa, FL market for an aggregate purchase price of $51.2 million. The property is approximately 87,649 rentable square feet and is entirely leased to one tenant.

• On July 21, 2022, the Company acquired one healthcare property in the San Diego, CA market for an aggregate purchase price of $63.5 million. The property is approximately 56,800 rentable square feet and is entirely leased to one tenant.

“During the third quarter, we completed the acquisition of two institutional quality healthcare facilities located in the Tampa, FL and San Diego, CA markets, adding best-in-class tenancy to our portfolio and further expanding our already diverse geographic footprint,” stated Michael Seton, the Company’s President and Chief Executive Officer. “We are pleased with our strategic portfolio growth, resulting in positive trends in net operating income, rental revenue, FFO and AFFO when compared to the third quarter of 2021. While market interest rates continue to increase and inflationary pressures persist impacting the overall property markets, we believe we are extremely well positioned to take advantage of dislocation to further expand our portfolio while keeping within our disciplined underwriting and capital allocation strategy. As we look to conclude 2022, we believe our fortress-like balance sheet, considerable liquidity position and resilient portfolio that focuses on the defensive healthcare sector of the economy, put the Company in an advantageous position as we, like all companies, continue navigating the rapidly evolving macroeconomic landscape.”

* An explanation of FFO, AFFO, and NOI, as well as reconciliations of such non-United States generally accepted accounting principles ("GAAP") financial measures, which should not be considered alternatives to GAAP measures, to the most directly comparable U.S. GAAP measures, are included at the end of this release.

Financial Results

Quarter Ended September 30, 2022, Compared to Quarter Ended September 30, 2021

• Net income attributable to common stockholders was $13.4 million for the quarter ended September 30, 2022, a decrease of 96%, compared to net income attributable to common stockholders of $371.6 million for the quarter ended September 30, 2021.

• FFO attributable to common stockholders was $32.0 million for the quarter ended September 30, 2022, an increase of 5233%, compared to $0.6 million for the quarter ended September 30, 2021.

• AFFO attributable to common stockholders was $31.3 million for the quarter ended September 30, 2022, an increase of 13%, compared to $27.7 million for the quarter ended September 30, 2021.

The decrease in net income attributable to common stockholders during the periods presented above is primarily due to the Company recognizing an aggregate gain on sale of approximately $398.6 million from the sale of its data center segment, or the Data Center Sale, on July 22, 2021, subsequently owning a smaller portfolio of properties and the sale of three operating healthcare properties since July 1, 2021. The decrease was partially offset by an increase in rental revenue due to the acquisition of ten operating properties and the placement of one development property in service since July 1, 2021, incurring defeasance and loan costs related to the extinguishment of debt and swap terminations in connection with the Data Center Sale and an impairment loss recognition on one healthcare property during the quarter ended September 30, 2021. The increases in FFO and AFFO during the periods presented above are primarily due to an increase in rental revenue from the acquisition of ten operating healthcare properties and the placement of one development healthcare property in service since July 1, 2021 as previously discussed (impairment losses and gains on sales of real estate are not included in the calculation of FFO and impairment losses, and gain on sales of real estate and debt extinguishment costs are not included in the calculation of AFFO).

Operating Results

Quarter Ended September 30, 2022, Compared to Quarter Ended September 30, 2021

• NOI attributable to our operating healthcare properties was $43.6 million for the quarter ended September 30, 2022, an increase of 9%, compared to $40.0 million for the quarter ended September 30, 2021.

• Rental revenue attributable to our operating healthcare properties was $46.9 million for the quarter ended September 30, 2022, an increase of 9%, compared to $43.1 million for the quarter ended September 30, 2021.

• Same store NOI attributable to our operating healthcare properties was $40.6 million for the quarter ended September 30, 2022, an increase of 0.7%, compared to $40.3 million for the quarter ended September 30, 2021.

The increase in NOI and rental revenue attributable to operating healthcare properties during the quarter ended September 30, 2022, as compared to the quarter ended September 30, 2021, is primarily attributable to the acquisition of ten operating healthcare properties and the placement of one development healthcare property in service since July 1, 2021, partially offset by a decrease due to the sale of three operating healthcare properties since July 1, 2021.

Portfolio Overview

During the third quarter of 2022, the Company acquired two healthcare properties, located in the Tampa, FL and San Diego, CA markets, for an aggregate purchase price of $114.7 million. The properties are composed of 144,449 rentable square feet and are fully leased to two tenants.

As of September 30, 2022, the Company owned 132 operating real estate properties and two undeveloped land parcels, located in 58 markets, composed of approximately 5.5 million rentable square feet with a total real estate investment of approximately $2.4 billion. As of September 30, 2022, the Company's properties had a weighted average leased rate of 99.5% and weighted-average remaining lease term of 9.5 years.

Balance Sheet and Liquidity

As of September 30, 2022, the Company had liquidity of approximately $492.3 million, consisting of $17.3 million in cash and cash equivalents and $475.0 million in borrowing base availability under its credit facility.

As of September 30, 2022, the Company had total principal debt outstanding of $600.0 million under the Company's credit facility, with a net debt leverage ratio, which is the ratio of principal debt outstanding less cash to fair value of real estate plus the total aggregate cost of properties acquired after the net asset value date of June 30, 2022, of 23.9%. As of September 30, 2022, the Company’s outstanding debt was composed of approximately 81% fixed rate debt through the use of interest rate swaps and approximately 19% variable rate debt.

During the three months ended September 30, 2022, the Company drew $50.0 million and $20.0 million, respectively, on its term loan to fund acquisitions.

During the three months ended September 30, 2022, the Company drew $35.0 million on its revolving line of credit to fund acquisitions and repaid $10.0 million on its revolving line of credit, with cash flows from operations.

Distributions

The following table summarizes the Company's distributions paid and distributions declared per share during the third quarter of 2022 (amounts in thousands, except per share amounts):

Supplemental Information

The Company routinely provides information for investors and the marketplace through press releases, SEC filings and the Company's website at investors.silarealtytrust.com. The information that the Company posts to its website may be deemed material. Accordingly, the Company encourages investors and others interested in the Company to routinely monitor and review the information that the Company posts on its website, in addition to following the Company's press releases and SEC filings. A glossary of definitions (including those of certain non-GAAP financial measures) and other supplemental information may be found attached to the Current Report on Form 8-K filed on November 10, 2022. A comprehensive listing of the Company's properties is available at silarealtytrust.com/portfolio.

About Sila Realty Trust, Inc.

Sila Realty Trust, Inc. is a public, non-traded real estate investment trust headquartered in Tampa, Florida, that invests in high-quality healthcare properties leased to tenants capitalizing on critical and structural economic growth drivers. The Company is primarily focused on investing in and managing strategic healthcare assets across the continuum of care, with emphasis on lower cost patient settings, which generate predictable, durable and growing income streams. As of September 30, 2022, the Company owned 132 operating healthcare properties and two undeveloped land parcels located in 58 markets across the United States.

Forward-Looking Statements

Certain statements contained herein, including those regarding our focus on investing and managing strategic healthcare assets, taking advantage of dislocation to further expand our portfolio, and our underwriting and capital allocation strategy, may be considered “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbor provided by the same. These statements are based on management’s current expectations and beliefs and are subject to a number of trends and uncertainties. No forward-looking statement is intended to, nor shall it, serve as a guarantee of future performance. You can identify the forward-looking statements by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “outlook,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “will” and other similar terms and phrases, including references to assumptions and forecasts of future results, strategic acquisitions and growth opportunities, and future distributions. Forward-looking statements are subject to various risks and uncertainties and factors that could cause actual results to differ materially from the Company's expectations, and you should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond the Company's control and could materially affect the Company's results of operations, financial condition, cash flows, performance or future achievements or events. Additional factors include the risk that the expected benefits for the Company’s pure-play healthcare REIT strategy are not achieved, and other factors, including those described under the section entitled Item 1A. "Risk Factors" of Part I of the Company's 2021 Annual Report on Form 10-K with the SEC a copy of which is available at www.sec.gov. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law.

Condensed Consolidated Balance Sheets (amounts in thousands, except share data)

Condensed Consolidated (Unaudited) Statements of Comprehensive Income (amounts in thousands, except share data and per share amounts)

Use of Non-GAAP Information

Net operating income, or NOI, a non-GAAP financial measure, is defined as rental revenue, less rental expenses, on accrual basis, excluding general and administrative expenses, depreciation and amortization, impairment losses, interest and other expense, net, and income from discontinued operations. The Company believes that net operating income serves as a useful supplement to net income because it allows investors and management to measure unlevered property-level operating results and to compare operating results to the operating results of other real estate companies between periods on a consistent basis. Net operating income should not be considered as an alternative to net income determined in accordance with GAAP as an indicator of financial performance, and accordingly, the Company believes that in order to facilitate a clear understanding of the consolidated historical operating results, net operating income should be examined in conjunction with net income as presented in the condensed consolidated financial statements and data included on the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 10, 2022.

The following are reconciliations of net operating income to net income attributable to common stockholders, which is the most directly comparable GAAP financial measure, for the three months ended September 30, 2022 and 2021 (amounts in thousands):

The Company generates its net operating income from property operations. In order to evaluate the overall portfolio, management analyzes the net operating income of same store properties. The Company defines "same store properties" as operating properties that were owned and operated for the entirety of both calendar periods being compared and excludes properties under development and properties or land classified as held for sale. By evaluating the net operating income of the same store properties, management is able to monitor the operations of the Company's existing properties for comparable periods to measure the performance of the current portfolio and determine the effects of new acquisitions and dispositions on net income.

The following table represents the breakdown of the three months ended September 30, 2022, total rental revenue and rental expenses and compares with amounts for the 2021 corresponding periods (amounts in thousands).

_______________________

Funds From Operations, or FFO, and Adjusted Funds From Operations, or AFFO, are non-GAAP financial measures. FFO is calculated consistent with NAREIT's definition, as net income (calculated in accordance with GAAP), excluding gains (or losses) from sales of real estate assets and impairments of real estate assets, plus depreciation and amortization of real estate assets, and after adjustments for unconsolidated partnerships and joint ventures. It should be noted, however, that other REITs may not define FFO in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently than the Company does, making comparisons less meaningful. In addition to FFO, the Company uses AFFO as a supplemental financial performance measure because the Company believes it provides to stakeholders a more complete understanding of its sustainable performance. AFFO is a metric used by management to evaluate the Company's dividend policy. The Company calculates AFFO by further adjusting FFO for the following items included in the determination of GAAP net income: amortization of above- and below-market leases, amortization of operating leases and the finance lease, straight-line rent adjustments, deferred rent, discount amortization related to the deferred liability in connection with the internalization transaction, (gain) loss on extinguishment of debt, amortization of deferred financing costs and stock-based compensation. Other REITs may use different methodologies for calculating AFFO and, accordingly, the Company’s AFFO may not be comparable to other REITs.

FFO and AFFO should not be considered to be more relevant or accurate than the GAAP methodology in calculating net income or in its applicability in evaluating our operational performance. The method used to evaluate the value and performance of real estate under GAAP should be considered as a more relevant measure of operating performance and considered more prominent than the non-GAAP FFO and AFFO measures and the adjustments to GAAP in calculating FFO and AFFO.

The following is a reconciliation of net income attributable to common stockholders, which is the most directly comparable GAAP financial measure, to FFO and AFFO for the three months ended September 30, 2022 and 2021 (amounts in thousands, except share data and per share amounts):

View source version on businesswire.com: https://www.businesswire.com/news/home/20221110006138/en/