Sila Realty Trust Announces Sale and New Lease

Interest rate swap agreements aim to stabilize costs through 2029.

December 17, 2024

Recent Asset Sale and New Lease Agreement

Sila Realty Trust, Inc., a Maryland-based real estate investment trust (REIT), has executed a strategic repositioning of key healthcare assets as part of its ongoing response to the GenesisCare bankruptcy. The REIT reported completing the sale of the Yucca Valley Healthcare Facility on December 10, 2024, for a contractual price of $1.7 million. After accounting for transaction costs, the deal generated $1.6 million in net proceeds, with some minor expenses still to be settled post-closing.

The Yucca Valley property was previously leased to GenesisCare USA, Inc., a tenant that declared Chapter 11 bankruptcy earlier in the year. GenesisCare emerged from bankruptcy on February 16, 2024, and Sila Realty Trust has since sought to reposition affected properties.

In a notable move, Sila finalized a triple-net lease agreement for the El Segundo Healthcare Facility on December 13, 2024. The new tenant, Regents of the University of California, secured the lease under an initial 10-year term, with options for two additional 5-year renewals. These renewal terms hinge on satisfying certain conditions. The agreement ensures long-term occupancy for the property and represents a pivotal recovery milestone for the asset.

Financial Strategy: Interest Rate Swaps to Manage Debt Costs

In addition to asset repositioning, Sila Realty Trust took measures to stabilize its financial outlook through a series of interest rate swap agreements. On November 27, 2024, the company entered into two swaps with a combined notional amount of $150 million, effective December 31, 2024. A week later, on December 6, 2024, Sila entered into two additional swaps, totaling $100 million. All four agreements have a maturity date of March 20, 2029 and carry a weighted average fixed interest rate of 3.76%.

These swaps replace five existing agreements with a notional value of $250 million, set to mature on December 31, 2024. By transitioning to these new arrangements, Sila aims to mitigate interest rate risks while locking in favorable terms for long-term stability.

Strategic Outlook

Sila Realty Trust’s recent actions reflect a proactive approach to overcoming challenges posed by tenant bankruptcy and a fluctuating interest rate environment. The asset sale, lease repositioning, and financial restructuring all indicate a commitment to preserving shareholder value and enhancing portfolio resilience.

The long-term lease agreement with a high-quality tenant like the University of California ensures stable cash flows for the El Segundo property, while the interest rate swaps provide predictability in debt servicing costs. Combined, these strategic moves position Sila Realty Trust for sustained financial health and operational stability through 2029.