Summit Healthcare REIT Sells Skilled Nursing Facility Portfolio for 50% IRR
Summit Healthcare REIT Inc., a publicly registered non-traded real estate investment trust, sold a portfolio of three skilled nursing facilities in San Bernardino County, Calif., originally acquired in 2021 for just over $20 million. The portfolio, which consists of a total of 191 licensed beds, sold for a price of $30 million to affiliates of the current operator of the facilities.
Two of the properties, the Yucaipa Hill Post Acute and the Creekside Post Acute, are located in Yucaipa, Calif., and the third property, University Post Acute, is located in Mentone, Calif.
The net cash proceeds the REIT received following the closing of the properties was approximately $14.9 million after the payoff of the outstanding $15 million loan payable from CIBC Bank, USA, and less the expenses and fees incurred with the sale.
The sale yielded the REIT an internal rate of return of over 50%, and the transaction was conducted without the aid of an outside brokerage firm.
“The impressive return on the sale of this portfolio is another step in the right direction for Summit,” said Elizabeth Pagliarini, chief executive officer. “We continue to make material headway with the strategic plan we implemented last year after my appointment to CEO. I remain optimistic about the future and our ability to deliver value to our shareholders.”
The healthcare REIT reported total assets of $204.12 million as of June 30, 2024. This was a 2.92% decrease from June 2023’s $210.25 million.
A May 2024 letter to shareholders from Pagliarini conceded that 2023 “was admittedly a frustrating year for Summit.” It highlighted its estimated net asset value as of Dec. 31, 2023, of $1.71, down 37.36% from the estimated $2.73 NAV in the year prior. The CEO said the decrease was “due in part to the $11.4 million impairment of [its] wholly owned portfolio of eight skilled nursing facilities in Georgia that Summit acquired in December 2021, as well as a reduction in the fair value of [its] Summit Union Life Holdings joint venture and [its] Summit Fantasia Holdings II joint venture.”
The letter also highlighted the REIT’s March sale of one of its joint venture portfolios, the Applewood Retirement Community, for $10.6 million to a behavioral health operator for a premium based on the location and zoning of the asset. The sale yielded a gain of approximately $7.7 million for the joint venture. According to the REIT, its net proceeds based on its 10% ownership interest and promote were approximately $1.9 million, representing an IRR of 43.1% and total return of 2505.5%. In Q2 2024, the REIT sold the Fantasia III joint venture/Connecticut portfolio back to the tenant for $60 million. This eight-facility portfolio sale yielded total joint venture profits of approximately $7.4 million. Finally, the letter noted the appointment of Sharyn Grant as chief financial officer.
Summit Healthcare REIT invests in senior housing real estate located throughout the United States. As of June 30, its portfolio included interests in 36 senior housing facilities across 11 states. The REIT owned 100% of 14 properties, 95.3% of four properties, and three unconsolidated equity-method investments with interests ranging from 10% to 20% that held an aggregate of 21 properties. The REIT also owned a 99.88% general partner interest in the operating partnership; Cornerstone Realty Advisors LLC, a former affiliate, owns a 0.12% limited partnership interest.
Click here to visit AltsWire directory page.
