Sila Realty Trust (SILA): Tender Offer Opportunity for Small Shareholders

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Thomas Moroder

In 2019, Thomas Moroder founded RealEstate.it Srl, aiming to provide comprehensive services in real estate research and investment.

Yet Another Profit Opportunity for Small Shareholders

SILA Presentation

A Triple Net REIT Focused on Healthcare Properties

Sila Realty Trust (SILA) is a triple net REIT focused exclusively on healthcare properties. In mid-June, the company completed a direct listing on the NYSE, paving the way for liquidity and exit opportunities for SILA shareholders. Before this event, the company repurchased shares only “due to death or involuntary exigent circumstances”. Naturally, such a listing created significant selling pressure from the pre-listing shareholder base. To mitigate potential volatility and support the stock price, SILA simultaneously launched a tender offer to repurchase approximately 4% of outstanding shares at $22.6-$24.0. Odd lots (lots of 99 or fewer shares) will be accepted with priority. The offer expires on July 19, 2024.

A Profit Opportunity

Currently, the stock price is slightly below the lower limit of the offer. This is often the case in similar direct listing + tender offer setups. I wouldn’t be surprised if, during the remaining tender period, the stock price drifts even lower due to continued selling pressure. At the current price of $21.4, small shareholders can earn $118 per account.

The risk of the transaction being canceled or amended is virtually zero: the stock price would crater if that happened, which would not bode well for a newly listed entity. It is worth knowing that management in the future (similarly to Blue Owl-ODBC or Oaktree-OCSL, for example) will raise SILA II, III, IV… as non-traded vehicles, and then, once the funds are fully invested, merge the portfolios into SILA in exchange for newly issued shares to provide liquidity to investors. This strategy will not work if SILA trades chronically significantly below NAV (Net Asset Value). To ensure the success of fundraising and future mergers, it is crucial that SILA’s stock price remains stable and close to its net asset value.

Management and Major Shareholders

Management is not participating in the tender offer but owns less than 1% of the shares. There are no major shareholders on the register.

Valuation and Comparison with Competitors

While I believe the offer will likely end up oversubscribed and priced at the lower limit, it is worth noting that the company seems relatively inexpensive compared to its peers.

SILA’s Business Strategy

A detailed overview of the business is provided in this investor presentation. Management is focused on expanding scale and indicated that the direct listing on the NYSE was primarily done to improve access to capital markets for growth purposes.

Conclusion

Sila Realty previously had an extremely illiquid OTC listing with the ticker CVMCA, but the company’s 10K still indicated that “no public trading market for the shares” existed. The recent NYSE listing and tender offer represent a significant evolution for the company, offering interesting profit opportunities for small shareholders.

If you are a shareholder of Sila Realty Trust, this could be a good opportunity to gain an extra return on your investment by taking advantage of the priority reserved for odd lots. The last date to purchase shares to participate in the tender offer is July 18, 2024, and the last date to notify your broker of participation in the tender offer is July 19, 2024.

I have bought 99 shares at the cost of $21.41 and will participate in the tender offer; once the tender offer is concluded, I will monitor how the stock evolves to decide whether to invest further. As always, DYODD (Do Your Own Due Diligence)!

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