Sila Realty Trust, Inc. (NYSE:SILA) Q2 2025 Earnings Call Transcript

Sila Realty Trust, Inc. (NYSE:SILA) Q2 2025 Earnings Call Transcript August 8, 2025

Operator: Good morning, and welcome to Sila Realty Trust’s Second 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 Capital Markets and Investor Relations for Sila. You may begin.

Miles Callahan: Good morning, and welcome to Sila Realty Trust’s Second 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; Kay Neely, Executive Vice President and Chief Financial Officer; and Chris Flouhouse, Executive Vice President and Chief Investment 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 or 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 second 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 our President and Chief Executive Officer, Michael Seton.

Michael A. Seton: Thank you, Miles, and good morning to everyone. Thank you for taking the time to join our call today. Our team delivered another positive quarter of results driven by quality operating fundamentals and our ability to remain steadfast in our commitment to our prudent capital allocation strategy. While macroeconomic and legislative uncertainty remain top of mind, Sila’s portfolio continues to fire on all cylinders. With a strong average EBITDARM coverage ratio of 5.31x, a portfolio weighted average remaining lease term of 9.5 years, meaningful annual contractual rent growth of 2.2% and over $568 million in liquidity, our resilient portfolio and enviable capital position provides stability to deliver solid earnings growth and reinforces our ability to maintain a healthy dividend for our shareholders.

On top of our robust operating performance, we remain emboldened by our focus on necessity-based health care solutions, focusing on operators that deliver better outcomes for patients in convenient locations at an affordable price. Despite the headlines in various health care-related proposals coming from Capitol Hill, our strategic health care focus, along with the ultimate tailwind that is the impending silver tsunami of aging adults, provides us with confidence in our ability to continue to grow over the long term with the partnerships of our established and resilient tenancy. With the passing and signing into law of the One Big Beautiful Bill Act, there are uncertainties as it pertains to health care and how the bill will ultimately affect all aspects of the health care delivery system.

However, many of our tenants across the health care continuum of care provide us with payer mix information when reporting financial results. Of the tenants that report, Medicaid reimbursement is only a very small fraction of the revenue base. This limited exposure by our tenants to Medicaid and consequently our portfolio is largely due to the types of health care facilities that we invest in, the services being provided and the markets in which they reside. In the second quarter, we remained focused on our accretive and thoughtful capital allocation strategy. In April, we closed on the off-market acquisition of our new Dover healthcare facility asset, the only inpatient rehabilitation facility in Kent County and 1 of only 4 in the state of Delaware.

The facility is leased to a joint venture between 2 best-in-class operators, Bayhealth a very strong and successful investment-grade rated health system and the second largest in the state and PAM Health, or PAM, one of the nation’s largest and leading providers of post-acute health care services. This facility constructed in 2019, reached stabilization more rapidly than any other PAM facility in the company’s history and remains very highly utilized. With such high demand and little competition in the market comes an opportunity to expand the facility, which we are currently discussing with the existing tenancy. Subsequent to quarter end, we closed on a 2-property MOB portfolio in Southlake, Texas. These properties benefit from strong operational synergies as physicians who practice at the traditional MOB routinely perform surgeries at the outpatient surgery center, creating a unique referral and care pathway between the 2 buildings.

All 3 of these facilities fit very well within the Sila mold and we are excited to embed them within our operating platform. Beyond these 3 transactions, we are currently under exclusive LOI on over $70 million of new net lease health care transactions that are currently going through the typical pre-acquisition due diligence process. The ultimate acquisition of these properties is subject to our due diligence and closing process. However, should they occur, we currently would anticipate they would close in or around the third quarter. Beyond our most recent 3 net lease acquisitions made, we also utilized our share repurchase program to execute on over $7 million of share repurchases during the quarter. We noticed a significant enough dislocation in our public market share price and private market valuations to make the decision to use excess cash on hand to capture accretion and value for shareholders.

As conveyed previously and demonstrated this quarter, share repurchases are a tool in our toolbox that we can use if we deem there to be dislocation in our share price. That being said, our bias remains pointed towards growth through acquisitions of physical property. Finally, I’m happy to report that we have arrived at a strategic vision and solution for our Stoughton asset. After exploring many options over the past months, we deemed that the course allowing for the highest value for our shareholders is to demolish the building and entitle the land for separate use. The demolition of the building will halt a majority of the expense leakage and is expected to be completed around the end of this year. With the removal of the Stoughton asset from service, our portfolio lease percentage increased to 99.2%.

Sila’s advantages were on full display this quarter. Our balance sheet strength and liquidity position continue to allow us to be opportunistic by executing on accretive transactions while using excess cash to execute on strategic share repurchases. While there is still much noise and uncertainty within the health care landscape today, our creative capital allocation decisions this quarter are a testament to our focus on delivering the best value for shareholders over the long term. I will now turn to Kay to discuss our financial performance.

Kay C. Neely: Thank you, Michael, and good morning, everyone. I am pleased to report positive trends in our financial results, which stem from the various accretive transactions we have recently made. For the second quarter of 2025, we reported cash NOI of $41.9 million compared to $41.2 million or 1.7% increase from the first quarter of 2025. This increase was primarily driven by our Knoxville Healthcare facility and Dover Healthcare facility acquisitions. Compared to the second quarter of 2024, cash NOI was up 5%, driven by our acquisition activity over the previous year and our same-store cash NOI growth of 1.5%. This was partially offset by a cash net operating loss on the Stoughton Healthcare Facility due to its vacancy when compared to the prior year when we were still receiving some rent.

Note that with the demolition of Stoughton underway, we have removed the asset from the same-store pool. Our AFFO was $0.54 per diluted share for the second quarter or a 1.7% increase from the first quarter of 2025. This was driven by the cash NOI drivers mentioned previously, along with the lower G&A driven by customary first quarter audit and accounting fees, slightly offset by higher interest expense, largely driven by acquisition activity. Compared to the second quarter of last year, our total AFFO decreased by 2.7%, largely driven by an increase in interest expense related to acquisition activity and the replacement of certain swaps at the end of last year, partially offset by interest income received on our mezzanine loans and the previously mentioned cash NOI items.

Additionally, interest income from our money market account decreased from the prior year due to using a portion of those funds toward our modified Dutch Auction tender offer last year, decreasing the amount of weighted average shares outstanding. As a result, there was no reduction in AFFO per share compared to the second quarter of last year. As Michael mentioned, we executed on over $7.3 million of strategic share repurchases at an average price of approximately $24.09 per share. We believe this execution was accretive to both earnings and to NAV, and we use excess cash flows from operations to fund these repurchases. We may continue to execute repurchases with excess cash on hand, depending on other capital deployment priorities. The Board recently approved a 3-year share repurchase program for share repurchases up to $75 million with no more than $25 million of repurchases in any 12-month period.

That said, we prefer to use our balance sheet capacity and liquidity position for the acquisitions of assets that fit within the Sila strategy, net lease assets that are accretive to both earnings and the quality of the portfolio. The strength of the portfolio was once again demonstrated through the collection of financial reporting at either the tenant or guarantor level of 73.4% of our portfolio ABR. Our reporting tenancy maintained a strong EBITDARM coverage ratio of 5.31x, up from 4.64x in the second quarter of 2024. Notably, our MOB and IRF coverages have increased by 2.26x and 0.73x year-over-year, respectively, and we now have 40% of our tenancy that is associated with an investment-grade rated tenant, guarantor or affiliate, up from 36.4% at the same time last year.

The significant and improving coverages that the majority of our tenants and guarantors possess further bolsters our confidence in our ability to grow earnings through cycles and over the long term. Similar to our tenancy, Sila remains in a strong fiscal state as evidenced by our balance sheet position, ending the quarter with $568.8 million of liquidity and net debt-to-EBITDAre of 3.6x. We reported an AFFO payout ratio for the quarter of 74%. And on August 5, the company’s Board approved and authorized a quarterly cash dividend of $0.40 per share, payable on September 4, 2025. As we’ve said in the past, we believe maintaining a strong balance sheet with low to moderate leverage, ample liquidity and financial flexibility is fundamental to being a resilient and sustainable REIT.

This type of environment with economic and legislative unknowns still looming over the market is precisely why we continue to position the company in a place which can withstand and perhaps even take advantage of disruption. Today, we remain committed to external growth in a prudent manner, making sure acquisitions fit with our strategy and are accretive and sustainable. This thoughtful approach, combined with our tenants’ robust operational performance, allows us to remain confident in our capital allocation philosophy and the maintenance of the dividend over the long run. I will now turn the call over to Chris to share details on our portfolio activity.

Christopher K. Flouhouse: Thank you, Kay, and good morning, everyone. We have had another great few months filled with successful net lease acquisitions that fit our investment criteria, strong leasing momentum and the continual building of our acquisition pipeline. Our newly acquired Dover Healthcare facility, which had the most successful start of any PAM Health property in the company’s history is a prime example of an asset that fits well within the Sila investment strategy, a newer and highly utilized facility in a market with significant barriers to entry. Both the limited competition and consistently high utilization allows for an expansion opportunity, which we are currently discussing with the tenancy and look forward to bringing to fruition in the near term.

This opportunity came to us as an off-market deal via private owner and our existing relationship with PAM Health, highlighting Sila’s unique ability to find and transact on accretive deals through our strong relationships that are not available to the rest of the market. Subsequent to quarter end, we closed on a 2-property medical outpatient building portfolio for approximately $16.2 million. Both properties are well located and highly utilized leased to operators owned in part by investment-grade affiliates and the operational synergies due to their complementary uses and proximity to each other offer a unique dynamic that further enhances the tenancy that would have otherwise fit well within our portfolio on their own. The portfolio is comprised of a medical outpatient building leased to GI Alliance, the largest independent provider of gastroenterology services in the United States, along with an ambulatory surgery center leased to a joint venture between Baylor Scott & White Health, a subsidiary of Tenet Healthcare and a high-performing physician group.

This portfolio is located in Southlake, Texas, an affluent suburb of Dallas with compelling demographics and approximately 2 miles from the 302-bed Baylor Scott & White Medical Center, enhancing the referral base even further. Like our recently acquired Dover asset, these 2 properties are accretive to the quality of the portfolio and are the types of opportunities we’ll continue to pursue. Year-to-date, we have closed approximately $75 million of high-quality acquisitions and currently have over $70 million of properties under exclusive LOI. On top of the success we continue to have on the acquisition front, we continue to experience strong leasing momentum in the second quarter. We executed a total of 3 renewals totaling approximately 56,000 square feet, all of which were at positive rent spreads.

We are diligently working with a few remaining tenants who leases expire in 2025, all of which are expected to renew. We’re proactively working with our tenants on all of our 2026 expirations. We also continue to make progress on the funding of our mezzanine loans for the development of a brand-new 60,000 square foot inpatient rehabilitation facility and a 60,000 square foot behavioral health care facility. Since our update last quarter, we have received the origination fee and begun funding the development of the behavioral facility. As previously disclosed, we expect both mezzanine loans to be completely funded by the end of the third quarter. These loans provide the company with strong risk-adjusted returns during the development period while creating future pipeline opportunities with purchase options for Sila for each facility upon completion of construction.

Sila’s philosophy of investing in net lease necessity-based health care infrastructure run by operators that deliver positive outcomes in convenient locations remains unchanged. Our acquisition opportunities remain strong as we continue to see single assets and as of late, more portfolio opportunities. The net lease opportunities we see are comprised of facilities servicing needs all along the health care continuum and are largely priced within a 6.5% to 7.5% cap rate range. As we look forward, our team members remain focused on sourcing high-quality investment opportunities that fit well within the Sila standard. This concludes our prepared remarks. We will now move on to your questions.

Q&A Session

Operator: [Operator Instructions] Your first question comes from Nate Crossett from BNP.

Nathan Daniel Crossett: Just on the $70 million LOIs, can you kind of tell us what types of assets are those? What does the pricing kind of look like that we should expect? And just outside of what’s under LOI, what does kind of look like for the back half of this year?

Michael A. Seton: Sure. Nate, this is Michael. Thank you for joining today. As we mentioned, we have $7 million of additional property under exclusive LOI. In addition to that, I’ll just mention to you, we have a number of interesting opportunities as well that we’re looking at that could be possibilities for now and year-end. Particularly those properties that are under acquisition that we’re doing the due diligence on that were mentioned are consistent with the property types that we currently own. From a cap rate perspective, the cap rate guidance that we have given has been, generally speaking, from the low 6s to the mid-7s. These particular properties fall into more of the upper end range of what I described in terms of cap rate.

I would also mention the lease duration on those properties is very long and will have a very beneficial effect to our remaining average lease term in the overall portfolio and also have lease escalators that are consistent, generally speaking, with what’s also in the portfolio.

Nathan Daniel Crossett: Just so I heard it right, $70 million, right? It’s not $7 million.

Michael A. Seton: I apologize. Yes. Slightly over $70 million, correct.

Nathan Daniel Crossett: Okay. This is big difference. Can you just maybe — I guess you kind of changed the buyback to, right, to be 3 years. I think it’s capped at $25 million a year. Just given your comments on pricing for this $70 million, how do you view maxing out to $25 back this year?

Michael A. Seton: As we’ve mentioned historically, we view the share repurchase option to be a tool in the toolbox. And as mentioned, we acquired a little bit over $7 million worth of our shares at an average price of just over $24, $24.09 per share in the quarter. We had previously — the Board had previously approved up to $25 million in share repurchases for a 12-month period. And so what the Board has now approved is up to $75 million in share repurchase over a 3-year period, capped at $25 million per year. So as we see an opportunity potentially with the share price being dislocated from private market values, we will consider that. We did mention our bias is to, of course, grow the portfolio. What I just also want to mention to you about the share repurchases that did occur in the quarter, those occurred at a level that we believe is well over 150 basis points in disconnect between private market values relative to where we saw the value of the company at the time we repurchased those shares.

So pretty significant differential of NAV or intrinsic value the way we see it relative to where we bought those shares.

Nathan Daniel Crossett: Okay. No, that’s helpful. Just the last one. Is there anything on the watch list or tenant issue that we should be tracking or be aware of?

Michael A. Seton: I would say nothing material. I would just mention, just from a watch perspective, we addressed Stoughton, as you know, on this call. I would consider that to be on the watch list, but we’ve got a very clear strategy around that. And I would also mention, which we did publicly disclose that Landmark Hospitals, of which we own one property, they’re an LTACH operator, is in bankruptcy still. However, they’ve been current on all of our — all of their obligations to us, which is really just rent during the period of the bankruptcy. And our particular property continues to perform very well and cover its rent. And we are hopeful and anticipating that they may emerge from bankruptcy, I would say, roughly over the next 60 days and with either potentially a recapitalized sponsor or with a new sponsor of that property, but we feel good about the lease that exists there in terms of that being — continue to be assumed and in place.

Operator: The next question comes from Michael Lewis from Truist Securities.

Michael Robert Lewis: On Stoughton, I would have thought demolition would have been really quick, although I guess we’re getting closer to the end of the year than I realized. Any sense on how long it would take to entitle it and have that land ready to go to market for sale?

Michael A. Seton: Michael, thank you for joining today. The demolition takes some time because it’s about 180,000 square foot building. I would also tell you that just going to the market and getting bids to do such a fairly large project, which is the demolition of this has taken some time. We certainly wish it was a shorter time frame. I would also mention there is asbestos in the building. So the asbestos in the building, some of it will be removed prior to the demolition. So it will take — I’m giving you a rough time frame. We mentioned it should be completed towards the year-end as we are starting now, it is about, call it, 5-ish, 4-, 5-month process. In terms of entitlement, we’ve actually been working and talking to various partners on the entitlement.

I would also mention to you that we have had multiple occasions of direct dialogue with the town of Stoughton at various levels about entitling the property. And those have gone — those conversations have gone very positively because the town of Stoughton would like to have some, I would say, revitalization of that property from what it was. It’s a large land parcel. But the entitlement process will take some time. We think it may take us into 2026. But I would tell you, the reason we are taking this tact first and foremost, demolition to reduce the carry cost on the building, which will be — I think we said majority, it’s going to be substantially reduced in terms of those carry costs that we’ve disclosed per month really to just substantially real estate taxes as that building is taken down.

In addition to that, the value that we will realize that we expect to realize, I should say, from simply selling it today as is to an entitled property is going to be what we believe will be significantly greater and benefit our shareholders.

Michael Robert Lewis: Great. And then on the stock repurchases, how do you measure your cost of equity or the value of those repurchases when you compare it versus acquisition yields because you repurchased at $24, the stock is at $25 today. I think by our math, you’re still a materially better yield on the buybacks than on acquisitions, although I realize the acquisitions will have growth and some permanency. But I guess the question is, how do you measure it and decide to do the buyback versus the acquisitions given your stock is still discounted?

Michael A. Seton: I think, Michael, the way to look at it is it’s really a combination of investing our capital at a certain cap rate to grow the portfolio, which has benefit in terms of diversification of the portfolio, bringing down certain exposures, for instance, expanding the portfolio to new tenant relationships. With buybacks, obviously, are just an economic play, and we’re not getting the benefit of that growth, that diversification of the portfolio. And the way we are evaluating it is we want to see a disconnect, I would say, relative to what we view NAV to be or the intrinsic value of the company of at least 100. And as I mentioned, this was well over 150 basis points relative to where the private market trade is. So you’re correct in saying share buybacks from an economic perspective are advantageous to the company and increase our NAV and therefore, shareholder value.

We agree with that, and that’s why the Board approved this program. And we’ll use it selectively and when we think it’s appropriate. So I think that our approach is really a combination of the two with our cash available that we’ve got.

Michael Robert Lewis: Okay. The core portfolio is 99% leased. Are there any lease expirations or anything that looks like it might change that in the near term? Anything you see on the horizon?

Michael A. Seton: Yes. Let me say that we’ve done a fantastic job so far this year with our 2025 lease expirations, and we expect to renew all but one of our scheduled 2025 lease expiration. I’ll also mention that for 2026, the way we see it today, we have been in touch with every tenant who expires in 2026. And we are optimistic that we are going to be able to renew all of those tenants as we sit here today. Obviously, things can change, but we’re optimistic about 2026, which has about 3.8% of our ABR expiring. This year, by the way, it was about 4.6% of our ABR expiring. We had one tenant that we don’t expect to renew. It accounts for about 8,000 square feet of the portfolio, so relatively small of our total over 5 million square foot portfolio.

In terms of other vacancies this year, we had one tenant, relatively small in a building in Tucson. It’s a multi-tenant building. It was a doctor who apparently, by the way, became ill from COVID-related challenges. He paid all of his rent through last year. The lease remained in place this year. And it was only about 2,000 feet, by the way, that became available this year. One other property as well in California, which accounted for slightly under 7,000 feet. It was a GenesisCare-related facility. The physicians couldn’t really make the property work. They were former GenesisCare physicians. And that property, we held a security deposit. We’ve applied it to ongoing rent, but that building will be available for sale or lease. So when I total all of that up, we had 8,000 of expiring lease that we did not renew, relatively small, obviously, for the year, scheduled for this year.

And then from the perspective of getting space back, I mentioned the doctor with a couple of thousand feet of exposure in our multi-tenant Tucson building and then a whole building for slightly under 7,000 square feet, 6,900 square feet, roughly speaking, in the California market, Palm Desert.

Michael Robert Lewis: I appreciate all the detail. It’s small exposure, we’ll call it.

Michael A. Seton: Small exposure, but I want to be transparent with you. We’ve been very successful…

Michael Robert Lewis: Yes. So my final question, and maybe this is a question as much for me as for you and not easily answered, but we see REITs sometimes that get an attractive cost of equity capital and are kind of off to the races and others that sometimes don’t ever get that green light. What do you think it is that you need to show to kind of get this cost of equity where it should be? And are investors telling you directly what they would like to see or need to see?

Michael A. Seton: Again, that’s a question for you as well as us, right? What I would say is we have been publicly traded for just over a year now. And what we have heard consistently from you and your colleagues in the research community and from investors is clearly, folks don’t know the company initially because we didn’t do an IPO. We did a direct listing. We did not want to dilute our shareholders because we didn’t need to. We needed to get a few quarters under our belt of steadiness. And I think when — I’d like to think when you look at the results of this quarter, you can see that we’re doing all the right things, whether it’s on the acquisition side, whether it’s on the leasing side, whether it’s as we’re dealing with issues that have come up in prior quarters like the Stoughton asset, for instance, or GenesisCare last year.

I think we’re really hitting our stride in terms of also ability to grow the company. As you can hear, the year-to-date acquisitions, the post-quarter closing that Chris referred to as well as the properties we have under contract. So I feel like over the next few quarters, if we can demonstrate to the market this consistency, then we should see that recognition in our share price, which is what you’re referring to. From a numeric perspective, after we acquire to the extent we’re successful and meaning we just get through due diligence on the $70 million, we’ll have the ability to acquire another $100 million worth of property to just get to the very low end of our target leverage range before we start thinking about raising capital. So that’s the 4.5x debt to EBITDA.

To get to the higher end of that range, which is 5.5x debt to EBITDA, we can acquire, again, after this $70 million, another $260 million. So what I’m referring to in total is we have another $360 million of capital that we can use to either acquire a property, buy back stock, whatever makes the most sense, probably a combination of the two to the extent our share price doesn’t — we don’t see some significant movement there to bring value to our shareholders. So our goal is to get the share price up to grow the company. We do think we’re a differentiated strategy in the health care and the net lease space, and we certainly want the investing community to recognize that. So we think we’ve got all the right elements today. The portfolio is very strong.

We’re tremendously liquid today in terms of the capital that we have and we’re just starting to hit our stride.

Operator: The next question comes from Rob Stevenson from Janney.

Robert Chapman Stevenson: What is it going to cost you to demolish the Stoughton facility? And are those costs going to run through the income statement?

Michael A. Seton: The cost will run us approximately $1.9 million, and that’s inclusive of any asbestos abatement that we have to do prior to the demolition. I’ll let Kay address how it will be treated from a financial perspective in terms of our balance sheet and income statement.

Kay C. Neely: Rob, so that amount will flow through. Given the amount, it may have its own per se line item on our income statement as it comes through, just depends how this is coming through over the next 4, 5 months. But we consider that to be a nonrecurring unusual type expense. And so we would add that back for core or normalized FFO, which would also then flow through as an add-back to AFFO.

Robert Chapman Stevenson: Okay. And can you remind us what the current carry costs are on a monthly or quarterly basis on that? And what you expect that to be once the demolition is complete?

Kay C. Neely: Yes. So we had previously, I think, said that we estimated roughly around $120,000 a month. And that will — that has fluctuated a little bit. It was slightly less this quarter just because of lumpiness of various repairs and maintenance, for example, just to keep the building safe while it’s currently up. Those costs will ratchet down each month. And then we believe the kind of run rate carry, which we’ll really see the benefit of in 2026 when it’s fully demolished to be around $20,000 to $25,000 a month.

Robert Chapman Stevenson: Okay. All right. So that’s material enough to put [ any ] a share or so. And then Michael or Chris, what’s the current thinking for entitlement there for sale, for rent residential, mixed use? What’s your latest thinking? And what does the town want to see in your conversations with them?

Michael A. Seton: Great question, Rob. I would tell you, to a degree, the world is your oyster in terms of that and the town views it that way as well. They want to see a new building there. They want to see a use which fits in the community there. The highest and best use probably involves some type of residential, meaning multifamily. It may or may not have a component of, call it, some subsidized housing. It could just be market rental. It could have a component of senior housing. The site itself is quite big. So I would tell you, for us, we want to maximize value naturally. From the town perspective, I think they see it similarly in terms of the use and just having a new attractive property there that they view to be kind of a destination type location.

Robert Chapman Stevenson: Okay. That’s helpful. And then, Kay, if you do close the $70 million or possibly more of acquisitions in the coming months, how are you thinking about financing that over the intermediate term? I assume it gets put on the line initially, but does it stay there until rates come down? Do you do something in 2025 with term loans? Or is there some other debt that looks attractive to you at this point? How are you sort of thinking about beyond just the closing funding, but the sort of more intermediate-term funding?

Kay C. Neely: I think for now, yes, we would use our revolver to fund the acquisitions. It remains to be seen what ultimately happens with interest rates. As you know, that’s a hot topic daily with the Fed and the economy. But since we don’t have anything and I think we talked about this last quarter a little bit, Rob, we don’t have any looming maturities. We do think perhaps our next form of debt would be longer-term debt and a private placement, but I would not call that imminent. And then obviously, as our leverage ticks up and if we do, in fact, like our share price, we can tap the equity markets to delever as well. So — but the revolver for the short to medium term.

Robert Chapman Stevenson: Okay. And then last one for me. Michael, just curious as to what the thinking is of the Board in putting that sort of $25 million, whether or not it was in the 1-year program or now on an annual basis on the 3-year program, governor on the program. They worried that Kay and Miles were going to go wild on repos.

Michael A. Seton: I think the Board has a view that they would — that we have a unique platform here that we are scaled to grow. The Board, of course, is very supportive of the strategy. And we’ve seen obviously a pretty quiet market, just generally speaking, in the commercial real estate market and in the capital markets, right, over the last 3 years. And I think they view our business strategy to be very sound and have a lot of legs to it. So I think the Board wants to give the tools to us to be nimble, but they also want to see an opportunity to see this company grow.

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

Michael A. Seton: I want to once again extend my sincere thanks to the entire team at Sila. Their hard work and dedication continue to drive our success. On behalf of our leadership team and Board of Directors, we deeply appreciate the support of our shareholders, and we will do everything in our control to ensure that Sila remains a sound investment opportunity for both existing and future shareholders. Thank you all, and have a great day.

Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.