New REIT Gained 20% In the Last Three Weeks: Should You Buy it?

Investors are often excited when companies have an Initial Public Offering (IPO), but frequently, it takes a while before new stocks begin to appreciate. Some new stocks will decline far below the IPO price before reaching the bottom and performing better. So, it's notable when a stock rises off the IPO and remains above the IPO price.

This was the case with one REIT that had its IPO this year at $19, rose to $26 on its first trading day, pulled back to $20.20, and has been slowly climbing higher since. A recent close at $25.65 gave it a 20% price surge within the last three weeks. Take a look:

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Sila Realty Trust

Sila Realty Trust Inc. SILA is a Tampa, FL-based, net-lease health care REIT with 137 properties and 5.3 million rentable square feet. As of June 30, its portfolio was 97.5% leased with 8.2 years of Weighted Average Lease Term (WALT) and 2.2% annual rent escalations. Tenant Health Care Corp. THC is one of its largest tenants.

Sila Realty Trust had its IPO on the New York Stock Exchange on June 13, 2024, and it's been in the news several times in recent months:

• On June 25, Exane BNP Paribas analyst Stefan Slowinski initiated coverage on Sila Realty Trust at Outperform and announced a $30 price target.
• On July 29, Sila Realty Trust announced the completion of a $28.25 million acquisition of the Fort Smith Inpatient Rehabilitation Facility in Fort Smith, Arkansas. This 50-bed facility treats patients with brain injuries, strokes, and other neurological conditions. 
• On Aug. 6, Sila Realty Trust declared its second-quarter operating results. Adjusted Funds From Operations (AFFO) of $0.54 was below $0.55 from the same quarter a year ago, while EPS rose from $0.07 to $0.08. Rental revenue of $43.550 million was down from $44.965 million in Q2 2023.
• On Aug. 19, Sila Realty Trust announced that its Board of Directors authorized a 12-month share repurchase program of up to $25 million or 1.5 million shares, whichever is less.

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Sila pays a quarterly dividend of $0.40 per share and the annualized $1.60 dividend rate yields 6.28%. The payout ratio is a comfortable 73% and the price/FFO ratio is 11.69, below the health care sub-sector average of 14.09.

In addition, its total debt-to-capital rate of 27.63% is below the median of 49.50% for the health care sub-sector. 

One reason for Sila's recent improvement in performance was the resolution of the relationships with troubled operators Genesis Healthcare Inc. GENN and Stewart Health Care. New tenants have since executed several of the lease agreements.

Sila has had a total return of 20.36% since Aug. 12 and was one of the leading REITs in August. One caveat is that it's short-term overbought, but on Sept. 6, when the three major indexes were clobbered, Sila gained 0.67%. That kind of performance deserves consideration from investors going forward. 

Better Yields Than Some REITs?

The current high-interest-rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, but not through publicly-traded REITs.

Arrived Homes, the Jeff Bezos-backed investment platform has launched its Private Credit Fund, which provides access to a pool of short-term loans backed by residential real estate with a target 7% to 9% net annual yield paid to investors monthly. It paid 8.1% in July. The best part? Unlike other private credit funds, this one has a minimum investment of only $100. 

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