PART I. FINANCIAL INFORMATION Condensed Consolidated Financial Statements The company presents its unaudited condensed consolidated financial statements for H1 2020, detailing financial position and performance post-REIT I merger Condensed Consolidated Balance Sheets As of June 30, 2020, total assets were $3.22 billion, liabilities $1.55 billion, and stockholders' equity $1.67 billion, reflecting increased credit facility usage Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Total real estate, net | $2,723,411 | $2,768,462 | | Cash and cash equivalents | $74,782 | $69,342 | | Total assets | $3,218,378 | $3,239,534 | | Total notes payable, net | $453,562 | $454,845 | | Credit facility, net | $931,440 | $900,615 | | Total liabilities | $1,546,808 | $1,501,115 | | Total stockholders' equity | $1,671,568 | $1,738,417 | Condensed Consolidated Statements of Comprehensive Income (Loss) H1 2020 rental revenue increased to $138.1 million and net income to $16.8 million, driven by the REIT I merger, but an unrealized swap loss led to a $4.7 million comprehensive loss Statement of Comprehensive Income Highlights (in thousands, except per share data) | Metric | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Rental revenue | $138,060 | $93,404 | | Total expenses | $94,481 | $63,051 | | Gain on real estate disposition | $2,703 | $— | | Net income attributable to common stockholders | $16,764 | $10,625 | | Other comprehensive loss | $(21,474) | $(11,163) | | Comprehensive (loss) income | $(4,710) | $(538) | | Basic EPS | $0.08 | $0.08 | | Diluted EPS | $0.08 | $0.08 | Condensed Consolidated Statements of Cash Flows H1 2020 net cash from operations increased to $55.7 million, investing activities used $12.5 million, and financing activities used $36.0 million, primarily for distributions and repurchases Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $55,740 | $38,571 | | Net cash used in investing activities | $(12,537) | $(7,036) | | Net cash used in financing activities | $(35,969) | $(32,574) | | Net change in cash | $7,234 | $(1,039) | Notes to the Condensed Consolidated Financial Statements The notes detail organization, accounting policies, property transactions, segment reporting, $1.39 billion total debt, and the planned $40 million management internalization - The company was formed to invest in data centers and healthcare properties. As of June 30, 2020, it owned 152 real estate properties24 - During H1 2020, the company acquired one healthcare facility for $5.03 million and sold one for $35.0 million, recognizing a $2.7 million gain676869 - The company operates through two segments: data centers and healthcare. For H1 2020, the healthcare segment generated $74.9 million in net operating income, while data centers generated $40.7 million100104 - On July 28, 2020, the company agreed to internalize its external management for $40 million, expected to close on September 30, 2020129131 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses H1 2020 financial condition and results, highlighting the REIT I merger, COVID-19 impact, and the planned $40 million management internalization, with total rental revenue up 47.8% - The company's portfolio grew to 152 properties as of June 30, 2020, largely due to the merger with REIT I in October 2019154 - Due to COVID-19, the company collected approximately 97% of contracted rental revenue for H1 2020 and temporarily suspended its share repurchase program (SRP), except for repurchases due to death157159 - The company agreed to internalize its external management functions for $40 million, with closing expected on September 30, 2020161164 Funds from Operations (FFO) and Modified FFO (MFFO) (in thousands) | Metric | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net income attributable to common stockholders | $16,764 | $10,625 | | FFO attributable to common stockholders | $66,420 | $44,481 | | MFFO attributable to common stockholders | $54,719 | $36,896 | Results of Operations H1 2020 total rental revenue increased by 47.8% to $138.1 million, driven by Legacy REIT I properties, while total expenses rose 49.8% to $94.5 million due to portfolio expansion Rental Revenue Breakdown - Six Months Ended June 30 (in thousands) | Category | 2020 | 2019 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Same store rental revenue | $81,752 | $81,508 | $244 | 0.3% | | Non-same store rental revenue | $2,943 | $— | $2,943 | 100.0% | | Legacy REIT I properties rental revenue | $39,498 | $— | $39,498 | 100.0% | | Total Rental Revenue | $138,060 | $93,404 | $44,656 | 47.8% | Expense Breakdown - Six Months Ended June 30 (in thousands) | Category | 2020 | 2019 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Same store rental expenses | $18,333 | $19,270 | $(937) | (4.9)% | | General and administrative expenses | $7,787 | $2,938 | $4,849 | 165.0% | | Asset management fees | $11,925 | $6,987 | $4,938 | 70.7% | | Depreciation and amortization | $52,359 | $33,856 | $18,503 | 54.7% | | Total Expenses | $94,481 | $63,051 | $31,430 | 49.8% | Liquidity and Capital Resources The company's liquidity sources include operating cash flows and its credit facility, with $74.8 million cash and $191.5 million available, and 71% of H1 2020 distributions funded by operations - As of June 30, 2020, the company had $191.5 million available to be drawn under its credit facility213 - During H1 2020, the company drew $75 million on its credit facility for additional liquidity due to COVID-19 uncertainty212 Source of Distributions - Six Months Ended June 30, 2020 (in thousands) | Source | Amount | Percentage | | :--- | :--- | :--- | | Cash flows provided by operations | $38,065 | 71% | | Offering proceeds from DRIP | $15,442 | 29% | | Total Sources | $53,507 | 100% | Quantitative and Qualitative Disclosures About Market Risk The company faces interest rate risk on $538.0 million of variable rate debt, mitigated by $736.6 million in interest rate swaps, and is monitoring the LIBOR transition - The company is exposed to interest rate risk, with $538.0 million of its $1.39 billion total debt subject to variable rates as of June 30, 2020256257 - A 50 basis point (0.50%) increase in market interest rates would increase the company's annual interest expense by approximately $2.7 million257 - The company utilizes interest rate swaps to manage risk, with an aggregate notional amount of $736.6 million under 20 agreements as of June 30, 2020252 - The company is monitoring the planned cessation of LIBOR after 2021, which could affect interest payments on its variable rate debt and derivative instruments250251 Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of June 30, 2020, with no material changes during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2020261 - No material changes to the company's internal control over financial reporting occurred during the three months ended June 30, 2020262 PART II. OTHER INFORMATION Legal Proceedings The company is not aware of any material pending legal proceedings to which it or its properties are subject - As of the filing date, the company is not a party to any material pending legal proceedings265 Risk Factors New and updated risk factors include those related to the Internalization Transaction, COVID-19 pandemic impacts, and geographic and tenant concentration risks exceeding 10% of rental revenue - New risks relate to the pending Internalization Transaction, including potential delays, failure to close, and the risk that it may not be financially beneficial or accretive to stockholders267268271 - The COVID-19 pandemic poses significant risks, including diminished public trust in healthcare facilities, increased tenant costs, potential tenant bankruptcies, and negative impact on financial covenants289292293 - The company has geographic concentration risk, with Atlanta and Houston MSAs accounting for 11.6% and 10.3% of H1 2020 rental revenue, respectively281 - Tenant concentration risk exists, with leases under common control of Post Acute Medical, LLC accounting for 10.1% of H1 2020 rental revenue282 Unregistered Sales of Equity Securities and Use of Proceeds The company's Share Repurchase Program (SRP) was temporarily suspended on April 30, 2020, due to COVID-19, after repurchasing 1,415,299 shares for $12.2 million in Q2 2020 - On April 30, 2020, the company's board temporarily suspended the Share Repurchase Program (SRP) due to COVID-19 uncertainty, except for repurchases due to death322 Share Repurchases for the Three Months Ended June 30, 2020 | Period | Total Number of Shares Repurchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2020 | 1,394,797 | $8.65 | | May 2020 | — | $— | | June 2020 | 20,502 | $8.65 | | Total | 1,415,299 | N/A | - Repurchase requests for Q2 2020 were prorated as the company reached its DRIP Funding Limitation321 Defaults Upon Senior Securities The company reports no defaults upon its senior securities - None325 Mine Safety Disclosures This section is not applicable to the company - Not applicable326 Other Information The company reports no other information for this item - None327 Exhibits This section lists all exhibits filed with the Form 10-Q, including agreements related to the REIT Merger, Internalization Transaction, corporate governance, and required certifications
Sila Realty Trust, Inc.(SILA) - 2020 Q2 - Quarterly Report