Sila Realty Trust, Inc.

Good morning and welcome to Zilla Realty Trust's fourth quarter 2024 earnings conference call and webcast. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. I will now turn the conference over to your host, Myles Callahan, Senior Vice President of Capital Markets and Investor Relations for Zilla. You may begin.

Good morning and welcome to Cielo Realty Trust's fourth quarter and year-ended 2024 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.cielorealtytrust.com. With me today are Michael Seaton, President and Chief Executive Officer, Kay Neely, Executive Vice President and Chief Financial Officer, and Chris Flohaus, 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 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 8K we filed with the SEC. With that, I will now turn the call over to our President and Chief Executive Officer, Michael Seaton.

Thank you, Miles. Good morning, and I sincerely appreciate everyone taking the time to join us this morning. Let me first say that I am tremendously proud of the work by the leadership team and all of my colleagues to bring about the results that we are presenting to you today. I am pleased to report an extremely positive quarter to end 2024. capping one of the most eventful years in CLS history. Throughout the year, we were prudent and thoughtful in our investing, and yet remained very proactive with our existing portfolio, executing over 1 million square feet of lease renewals and extensions for the portfolio. One of the most significant lease modifications was the long-term extension of our largest tenant, Post Acute Medical, in the fourth quarter. We also continue to successfully position our balance sheet from both a strength of portfolio and capital perspective. As you know by now, Stila listed on the New York Stock Exchange on June 13th, 2024. And I am very proud to convey outperform the S&P and RMZ on a total return basis between our listing date in June and year end 2024. TILA is already realizing the benefits of our direct listing with significantly greater overall market visibility to the investor and analyst communities. We believe that our increased access to the capital markets and liquidity position will allow for meaningful opportunities to grow and enhance value for existing shareholders and prospective shareholders. Our forward-footed positioning starts with the recent recast of our revolving line of credit, with which we realized a $100 million increase in our total aggregate commitments to $600 million. Commitments to our facility were oversubscribed by 70%, and hence our decision to upsize the facility. This oversubscription demonstrates the confidence that the REIT lending community has in COS strategy, assets, and balance sheet management. The size of the facility is expected to allow us to execute on our external growth objectives to enhance the diversity, quality, and size of our healthcare real estate portfolio. While the seemingly higher for longer interest rate environment may present challenges for some of our competitors in the market, we believe CELA can use this time to take advantage of existing portfolio and new growth opportunities while others sit on the sidelines. First, the lack of new healthcare real estate development coming online limits opportunities for existing tenants to relocate to new buildings, creating what we believe is a stickier releasing environment. Second, while there may be more discrete limited new construction in markets that are in need of increased healthcare delivery, Developers and operators often need to fill a gap in their capital stack of the construction, as traditional lenders remain more restricted than in a typical stabilized market environment. These situations create an opportunity for CELA to step up and to fill the gaps in the capital stack, providing the necessary funding to allow for the construction and access to an ultimate ownership of the completed property. We took advantage of exactly this type of opportunity in the fourth quarter, executing two mezzanine loans for the development of an inpatient rehab facility and a behavioral healthcare facility in Lynchburg, Virginia, which include the purchase options at CELA's election for each facility once they are completed. We believe these loans are an outstanding use of CELA's capital, providing a mid-teens return during the development and funded period and the opportunity to acquire brand-new, build-to-suit healthcare facilities upon completion with long-term leases with investment-grade healthcare sponsorship. We are seeing more types of these types of opportunities arise through our relationships with developers, brokers, and some of the largest healthcare operators in the U.S., and we look forward to increasing returns and growing our pipeline with these types of transactions. We remain very enthusiastic about our investment thesis targeting high quality healthcare facilities and strategic locations leased to reliable tenants in a geographically diverse manner. Beyond the mezzanine loan activity in 2024, we acquired over $164 million of accretive investments, which included eight assets that all fit the anatomy of our ideal property. These transactions reinforce the effectiveness of CELA's capital allocation strategy and the belief in our long-term goals. We believe that the ultimate tailwind, the aging U.S. population, paired with our 99.9% net lease structure sets CELA apart from the rest of the REIT space and will allow for outperformance over time by having long, predictable, durable income streams supported by underlying businesses which are growing. Pivoting to tenant operations, overall our portfolio showed improved EBITDARM coverage ratios over the prior quarter and demonstrated an increasing upward trend, and we now have less than 2% of our ABR with an EBITDARM coverage ratio that is less than one times, down from third quarter of 4.5% of ABR. There were only three tenants at two properties with EBITDARM below 1.0 times in the fourth quarter versus six tenants spread across nine properties in the third quarter, a significant improvement quarter over quarter. Also, our overall portfolio EBITDARM coverage ratio for the fourth quarter improved to 5.3 times signifying, we believe, our tenants' skill in navigating the healthcare operating environment. Since the fourth quarter of 2023, we increased exposure to investment-grade and rated tenants, guarantors, or affiliates to 66.9%. We take an active and engaged approach to continually monitor the financials and creditworthiness of our tenant base, And we are very pleased with the improving trends in our portfolio that we have seen throughout the course of the year. While we were faced with the bankruptcy of two tenants in our portfolio in 2024, Genesis Care and Stewart, we successfully resolved all of our Genesis Care exposure by releasing, leasing, or selling all 17 assets owned by us. We successfully resolved the final two remaining vacant properties that were formally leased to Genesis Care in December 2024 by selling one and leasing the other to an investment grade rated tenant for 10 years. Our only exposure to Stewart's bankruptcy has been a single property located in Stoughton, Massachusetts, which we are actively marketing for sale or lease through a national broker and which we feel confident about the progress. Since our listing, our shareholder base has changed materially, particularly with CELA being added to certain indices, including the S&P Total Market, the CRISP U.S. Total Market, the FTSE NAIRI, the S&P Completion, the MSCI U.S. IMI Real Estate 2550, and most recently the RMZ. With these additions, we have seen our shareholder base become more institutionally diversified and trading volumes have increased. This momentum should continue as we expect to be added to other indices this year, including the Russell 2000. We believe that over 50% of our initial 100% retail shareholder base has turned over, which compares more favorably to other REITs that have entered the publicly traded REIT markets in a similar manner to us. I confidently convey to you that the CELA team's hard work paid off with tangible results in 2024, and I am excited to continue to have the opportunity to demonstrate to you that we can carry this positive momentum into the future. Our industry leading balance sheet will continue to be the foundation of our long term success as we search out and find the best risk adjusted returns in the property market. I say with the greatest sincerity, We appreciate all of you who have already joined us as shareholders of our company. We have enjoyed getting to know a large number of you for the first time over these last several months, and we look forward to expanding on all of our existing and new relationships for years to come. 2024 has been a memorable year filled with significant milestones, and our CELA team is beyond enthusiastic to continue executing our growth strategy in 2025. Now, Chris will provide more details on the activity in our portfolio.