Good morning, and welcome to Sila Realty Trust's Fourth Quarter 2025 Earnings Conference Call and Webcast. [Operator Instructions] I will now turn the conference over to your host, Miles Callahan, Senior Vice President of Acquisitions, Capital Markets Research and Credit for Sila. You may begin.

Good morning, and welcome to Sila Realty Trust's Fourth Quarter 2025 Earnings Conference Call. Yesterday evening, we issued our earnings release and supplement, which are available on the Investor Relations section of our website at investors.silarealtytrust.com. With me today are Michael Seton, President and Chief Executive Officer; and Kay Neely, Executive Vice President and Chief Financial Officer. Before we begin, I would like to remind you that today's comments will include forward-looking statements under federal securities laws. Forward-looking statements are identified by words such as will, be, intend, believe, expect, anticipate and other comparable words and phrases. Statements that are not historical facts such as statements about expected financial performance, are also forward-looking statements. Actual results may differ materially from those contemplated by such forward-looking statements. A discussion of the factors that could cause a material difference in our results compared to these forward-looking statements is contained in our SEC filings. Please note that on today's call, we will be referring to non-GAAP measures. You can find the reconciliation of these historical non-GAAP measures to the most directly comparable GAAP measures in our fourth quarter earnings release and our earnings supplement both of which can be found on the Investor Relations section of our website and in the Form 8-K we filed with the SEC. With that, I will now turn the call over to Michael Seton, our President and Chief Executive Officer.

Thank you, Miles, and good morning to everyone joining us today. As we begin a new year, I look back on 2025, our first full calendar year as a publicly traded company as one during which we faithfully executed our strategy of growing Sila Realty Trust in a skillful and thoughtful manner. Sila was added to several prominent equity indices during the year including the RMZ and the Russell 2000, and our shareholder base has continued to evolve to larger institutional investors from an entirely retail ownership at onetime prior. We believe our ownership transition reflects the market's recognition of what we have been building at Sila for many years, a high-quality, necessity-based health care real estate portfolio designed to deliver predictable, durable and growing income streams through any market cycle. During 2025, we acquired 6 healthcare facilities for an aggregate purchase price of approximately $150 million, which equated to 241,000 rentable square feet. Each of these new facilities fits well within what we call the Sila mold, exhibiting the characteristics that we see in new opportunities, modern construction, high utilization, favorable market demographics and quality tenant sponsorship. After the year-end, we closed on another purpose-built, state-of-the-art inpatient rehabilitation facility in Oklahoma City for $43.1 million. This well utilized facility further expands our relationship with Nobis rehabilitation partners a well-respected and strong operator in the post-acute space. The property was originally constructed in 2022 and has experienced such strong demand since opening that has recently undergone an expansion, increasing its licensed bed count from 40 to 58 beds. With the support of a long-term lease with contractual lease escalators, strong EBITDARM coverage, experienced sponsorship and limited competition, we believe this facility aligns firmly within our objective to deliver lasting value to Sila and its shareholders. Sila's ownership of high-quality, diverse…

Thank you, Michael, and good morning, everyone. I'm pleased to report that our disciplined approach to operational integrity and capital allocation drove strong financial results throughout 2025. For the year ended 2025, cash NOI was $169.9 million compared to $168.6 million for the year ended 2024, representing a 0.8% increase. This increase was largely driven by acquisition activity and an increase in same-store cash NOI of 0.9%, partially offset by dispositions and the impact of the vacancy of the Stoughton Healthcare Facility. Year-over-year cash NOI growth was also impacted by the collection of over $6 million in onetime lease termination and lease severance fees in 2024 compared to less than $300,000 in termination fees in 2025. If we were to exclude these onetime fees from cash NOI in 2025 and 2024, cash NOI and same-store cash NOI growth would have been 4.4% and 1.1%, respectively. Turning now to our earnings metrics. FFO per share for the full year was $2.16 or a 3.6% increase from the previous year, while AFFO per share for the full year was $2.18 or 5.8% decrease from the previous year. In addition to the cash NOI items just discussed, our increase in FFO per share was driven by several items, an increase in straight-line rent which was largely driven by the new lease amendments that we entered into in connection with our PAM Health properties in December 2024. Prior year write-off of above-market rent related to the GenesisCare bankruptcy in 2024. Higher revenue from interest income on our 2 outstanding mezzanine loans and a reduction in G&A and other costs in 2025 stemming from the incurrence of onetime separation pay and higher personnel costs in 2024 and $3 million in onetime listing fees in relation to our New York Stock Exchange listing. The FFO per…

[Operator Instructions] Your first question comes from Michael Lewis of Truist.

If this first one is too specific, I can follow up, but I was wondering how much rent you collected on the Alexandria building that you're selling? I think they had some holdover rent and then also the 2 redevelopments placed in service. I think they were placed in later in the quarter. I was wondering if they contributed significant rent in the quarter as well.

Michael, this is Michael. Thank you for joining the call today. Great to hear from you. On the Alexandria property, we -- their scheduled rent was essentially $40,000 per month. Their lease expired in August, and they paid holdover rent through November. The holdover rent was at 125% of the scheduled rent. So they ultimately ended up essentially if you count it this way, paying full rent for the year due to the holdover rent. So they paid total rent in the fourth quarter of $120,000.

Okay. And the redevelopments, I guess I'll tag on to that. Is there a material difference between the leased percentage you show in the supplemental versus what's commenced? In other words, do you have some rent that may be on the come that we can't see from that lease number?

You mean our lease status at year-end?

Yes. I think we -- you had 2 redevelopment projects placed in service during the quarter. Those were listed, I think, as leased last quarter but they started paying, yes...

Yes. So specifically, for instance, the El Segundo property, which has UCLA is a tenant has a free rent period. So they're still in that free rent period, but they are considered -- the building is considered leased as of the year-end. That one specifically comes to mind.

Okay. And my next question is about -- I guess, it's about acquisition yields, but I think you'll see where I'm going with this. When you acquire assets that are similar to what's in your portfolio or you see similar assets trade in the market, what's the pricing like for the types of assets you own?

The pricing for the type of assets that we own today, consistent, I think, with what we've done on the acquisition side is we generally see rehabs kind of in the -- this is subject to performing assets, longer-term leases, good national sponsors on the operational side in the high 6s to, I would say, generally speaking, the low 7s to mid-7s. So generally speaking, 7, 7.25 can be a little tighter, it can be a little wider depending upon circumstances. And the MOB outpatient, call it ASC-type assets, we can see those get fairly tight and those can get to as low as 6 or low 6s to, I would say, generally not the high 6s so I'll say mid-6s, but MOB assets, again, 6 to 6.5. On the LTAC side, because we do own some LTACs, we frankly don't see them trade much at all. So I can't tell you the last time we saw an LTAC trade. We don't own too many, but we do own some surgical hospitals. We've seen, I would say, over the last, I would say, 12 months kind of interest, we saw call pre-2022. A lot of interest in surgical hospitals, and we've seen that kind of renewed interest, particularly over the last 12 months. And we will see those trade depending again on the credit circumstance, the lease term, anywhere from the high 6s to around 7. So I think when we think about the portfolio of assets that we own, on a blended basis, we do see it somewhere in the 7 cap range, cash cap rate going in.

Okay. So it was a little bit of a leading question to my last question. So on our calc at least, we have the stock a little bit north of an 8% implied cap rate. It's been moving in the right direction. But the question is, as you sell some of these assets and you're below leverage, what's kind of the -- I know you've gotten this question before about potential stock repurchases. I also wonder to the extent you could answer if you get inbounds from institutions or private equity about the company at this price.

So as it relates specifically to stock repurchases, I'll tell you what we've always said, which is it's a tool in the toolbox. I will also say that one thing that makes us particularly cautious about stock repurchases is as we're trying to build our institutional investor base, it does pull liquidity for our stock out of the market. So that's where it causes us pause particularly. As it relates to inbounds, I would say, over time, we've certainly had interest in our company, even pre-listing, by the way, up to listing. The goal of our listing was, of course, to bring liquidity to our stockholders, which I think we've done. We have seen our shareholder base rotate, as I said in my remarks, from 100% retail to really what is now 70% institutional and so we've seen that occur. We do see that disconnect, Michael, that you're referring to. I would say it makes us cautious on the acquisition side. We are poised for growth, but we are also conscious of others out there who have run up leverage and find themselves in a box, and we're definitely not in a box today because we've got a lot of liquidity, and we're not going to find ourselves in that box, but we would like to see a higher share price fairly significantly higher in order to raise equity.

Your next call comes from John Kilichowski from Wells Fargo.

Can you hear me?

John, I can hear you.

Perfect. Sorry, I just barred from another call. So forgive me, I'm a little bit late, and I hope I didn't miss anything. But just kind of following up on that last question. I guess it felt like I got part of the answer there. My question is at what point here -- and maybe we can start with remaining leverage capacity and where you're comfortable taking that, what that buying power means for 2026. And then my second part of the question is going to be at what point do you start to -- not that maybe you're not taking it seriously today, but at what point do you get a little bit more aggressive if maybe that incremental growth doesn't get the stock working that you start to look for other ways to realize NAV?

Sure. Just in terms of liquidity, ability to buy more, we essentially to reach the midpoint of our targeted leverage, which is would be 5x because we've given some indications of between 4.5x and 5.5x, we could see investing about $225 million, roughly speaking. If we were to reach the high end of our leverage, it could be as much as $375 million. But again, we're being very discerning with the acquisitions. There is competition in the marketplace. I think our -- we have a good brand in the marketplace on the acquisition front with the developer, with the brokerage community, et cetera, with the tenant community. In terms of us looking at other ways to bring opportunity for our shareholders. I think we're always looking at that. In terms of timing, I can't really give you an indication of timing. We think the company is very solid right now. It's been stronger than it's ever been before in terms of our portfolio. And I think you can see that in the results that we reported last evening. And when we think about the opportunities also within the portfolio to really get greater yield, which I mentioned in my remarks as well, those opportunities are coming more and more. So we mentioned some there are actually additional ones that we have where we can get yields north of -- you heard Michael Lewis talk about where he evaluates where we're trading at an implied cap rate basis, north of that. So we're going to take advantage of those opportunities within our portfolio that only exists when you own the existing real estate and have those existing direct tenant relationships so we're going to continue to be forward-footed as it relates to taking advantage of opportunity in deploying our capital, but we're going to do it cautiously and thoughtfully.

And in that same vein, if you think about the $375 million of capacity that you mentioned to the high end, what's a fair cadence for that as we look at maybe the incremental opportunities that are starting to come to you, yields have been relatively steady. Transaction markets seem to have improved for most. I'm curious, is there an improved cadence relative to what we've seen in the past that could maybe accelerate AFFO growth from here?

I think the market will drive the cadence. That being said, I think that gives us about 24 months of buying capacity. So from an indication perspective, I would expect volume this year to be similar to what it would be last year. And of course, we already made an acquisition this year. It could be more at the -- towards the end of this year as opposed to the beginning of this year, particularly as we're focused on investing capital in these development opportunities with our existing tenancy and existing assets.

There are no further questions at this time. I will now turn the call back over to Michael Seton, CEO. Please continue.

I would like to once again extend my sincere thanks to the entire Sila team, their hard work, dedication and commitment to excellence continue to drive our success. We deeply appreciate the support and confidence of our shareholders and remain excited about the opportunities that lie ahead in 2026. Thank you for joining today's call.

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