Sila Realty Trust: A Fortress Balance Sheet in the Healthcare REIT Sector

Healthcare real estate remains a cornerstone of economic resilience, and Sila Realty Trust (SLA) has positioned itself as a leader by leveraging a hedged balance sheet, stable cash flows, and disciplined acquisitions. With a focus on long-term leases, strategic debt management, and a portfolio of high-demand healthcare assets, Sila stands out in a sector facing rising interest rates and evolving tenant dynamics.

A Hedged Fortress Against Rate Volatility
Sila's financial strategy prioritizes insulation from interest rate fluctuations. As of December 31, 2024, the company had 10 interest rate swaps covering $425 million of its $525 million debt, fixing the interest rate at 4.6% and extending maturities to 2028 and 2029. This hedging locks in borrowing costs, shielding cash flows from rising rates—a critical advantage as the Federal Reserve's policy remains uncertain.

Sila's liquidity further strengthens its defensive stance: it holds $539.8 million in available capital, including $500 million undrawn under its expanded $600 million revolving credit facility. With a net debt to enterprise value ratio of just 26.5%, the balance sheet is among the strongest in the healthcare REIT sector, offering ample flexibility for growth while maintaining a conservative leverage profile.

Stable Cash Flows: A Foundation of Long-Term Leases
Sila's cash flows are underpinned by its 96% occupancy rate and a portfolio of 5.3 million rentable square feet, anchored by long-term leases. The weighted average remaining lease term of 9.7 years—among the longest in the sector—ensures steady income streams. Notably, 15 leases with Post Acute Medical were extended to 20-year terms (maturing in 2044), eliminating near-term rollover risk and securing predictable revenue.

Despite a modest dip in 2024 AFFO to $2.31 per share, the payout ratio of 73.3% remains comfortably below the 80% threshold investors demand for sustainability. The shift to quarterly dividends of $0.40 per share (annualized $1.60) further signals confidence in cash flow stability, aligning with investor expectations for predictable income.

Disciplined Acquisitions Drive Sustainable Growth
Sila's acquisition strategy emphasizes high-quality, mission-critical healthcare assets with strong tenant covenants. In 2024, the company deployed $164.1 million to acquire eight properties, including the El Segundo Healthcare Facility, leased to the University of California for 10 years with renewal options. These deals focus on geographic diversification and tenant diversification, reducing exposure to single markets or operators.

Meanwhile, strategic dispositions—such as the sale of the Yucca Valley Healthcare Facility—allow Sila to prune lower-performing assets while recycling capital into higher-yielding opportunities. The company also ventured into mezzanine lending, deploying $17.5 million into two healthcare facilities, which carry purchase options upon completion. This hybrid approach balances risk and return, ensuring growth without overextending the balance sheet.

Why Invest Now?
Sila's combination of interest rate protection, long-dated leases, and a prudent capital allocation framework creates a rare blend of safety and growth. With healthcare demand buoyed by an aging population and federal infrastructure investments, Sila's assets are positioned to thrive.

The 96.0% occupancy rate and 26.5% net debt to EV ratio suggest the company can weather macroeconomic headwinds, while its $600 million credit facility fuels future acquisitions. For income-focused investors, the $1.60 annual dividend (covered 73% by AFFO) offers stability, while the stock's 12-month total return outperforms broader REIT indices.

Final Call to Action
Sila Realty Trust is not just surviving—it's thriving. With a hedged balance sheet, fortress-like cash flows, and a track record of disciplined growth, SLA presents a compelling opportunity to capitalize on the healthcare real estate sector's long-term trajectory. For investors seeking both income and resilience, now is the time to act.

Data as of May 26, 2025. Past performance is not indicative of future results. Always conduct thorough due diligence before making investment decisions.