Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2023 | Apr. 08, 2024 | Jun. 30, 2023 | |
Document and Entity Information | |||
Document Type | 10-K | ||
Document Annual Report | true | ||
Document Period End Date | Dec. 31, 2023 | ||
Document Transition Report | false | ||
Entity File Number | 000-52566 | ||
Entity Registrant Name | SUMMIT HEALTHCARE REIT, INC. | ||
Entity Incorporation, State or Country Code | MD | ||
Entity Tax Identification Number | 73-1721791 | ||
Entity Address, Address Line One | 23382 Mill Creek Drive, Suite 125 | ||
Entity Address, City or Town | Laguna Hills | ||
Entity Address, State or Province | CA | ||
Entity Address, Postal Zip Code | 92653 | ||
City Area Code | 800 | ||
Local Phone Number | 978-8136 | ||
Title of 12(g) Security | Common stock, $0.001 par value | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | false | ||
ICFR Auditor Attestation Flag | false | ||
Entity Shell Company | false | ||
Document Financial Statement Error Correction [Flag] | false | ||
Entity Public Float | $ 0 | ||
Entity Common Stock, Shares Outstanding | 23,027,978 | ||
Entity Central Index Key | 0001310383 | ||
Current Fiscal Year End Date | --12-31 | ||
Document Fiscal Year Focus | 2023 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
No Trading Symbol Flag | true | ||
Auditor Name | BDO USA, P.C. | ||
Auditor Firm ID | 243 | ||
Auditor Location | Costa Mesa, California |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
ASSETS | ||
Cash and cash equivalents | $ 10,997,000 | $ 11,572,000 |
Restricted cash | 3,186,000 | 2,591,000 |
Real estate properties, net (Note 14) | 156,966,000 | 173,127,000 |
Intangible lease assets, net (Note 14) | 11,653,000 | 13,704,000 |
Tenant and other receivables, net | 2,590,000 | 5,020,000 |
Other assets, net | 1,552,000 | 2,107,000 |
Equity-method investments | 2,852,000 | 5,182,000 |
Total assets | 189,796,000 | 213,303,000 |
LIABILITIES AND EQUITY (DEFICIT) | ||
Accounts payable and accrued liabilities | 8,079,000 | 5,585,000 |
Security deposits | 3,705,000 | 4,651,000 |
Loans payable, net of debt issuance costs (Note 14) | 179,929,000 | 180,169,000 |
Total liabilities | 191,713,000 | 190,405,000 |
Commitments and contingencies (Note 11) | ||
Stockholders' Equity (Deficit) | ||
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding at December 31, 2023 and 2022 | ||
Common stock, $0.001 par value; 290,000,000 shares authorized; 23,027,978 shares issued and outstanding at December 31, 2023 and 2022 | 23,000 | 23,000 |
Additional paid-in capital | 116,473,000 | 116,432,000 |
Accumulated deficit | (118,535,000) | (93,734,000) |
Total stockholders' (deficit) equity | (2,039,000) | 22,721,000 |
Noncontrolling interests | 122,000 | 177,000 |
Total (deficit) equity | (1,917,000) | 22,898,000 |
Total liabilities and equity (deficit) | $ 189,796,000 | $ 213,303,000 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2023 | Dec. 31, 2022 |
CONSOLIDATED BALANCE SHEETS | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 290,000,000 | 290,000,000 |
Common stock, shares issued | 23,027,978 | 23,027,978 |
Common stock, shares outstanding | 23,027,978 | 23,027,978 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Revenues: | ||
Total rental revenues | $ 18,072,000 | $ 21,957,000 |
Resident fees and services | 6,823,000 | 3,678,000 |
Asset management fees | 554,000 | 659,000 |
Total operating revenue | 25,449,000 | 26,294,000 |
Expenses: | ||
Property operating costs | 3,773,000 | 3,139,000 |
Resident costs | 5,772,000 | 3,713,000 |
General and administrative | 5,171,000 | 4,580,000 |
Depreciation and amortization | 7,318,000 | 7,311,000 |
Impairment of real estate properties and intangible assets | 11,387,000 | |
Total operating expenses | 33,421,000 | 18,743,000 |
Operating (loss) income | (7,972,000) | 7,551,000 |
Loss from equity-method investees | (754,000) | (2,898,000) |
Other income | 399,000 | 252,000 |
Interest expense | (17,521,000) | (13,534,000) |
Gain on consolidation of interest in unconsolidated equity-method investment | 1,066,000 | |
Net loss | (24,782,000) | (8,629,000) |
Noncontrolling interests' share in net (income) loss | (19,000) | (64,000) |
Net loss applicable to common stockholders | $ (24,801,000) | $ (8,693,000) |
Basic and diluted: | ||
Basic, Net loss applicable to common stockholders | $ (1.08) | $ (0.38) |
Diluted, Net loss applicable to common stockholders | $ (1.08) | $ (0.38) |
Weighted average shares used to calculate earnings per common share: | ||
Basic | 23,027,978 | 23,027,978 |
Diluted | 23,027,978 | 23,027,978 |
CONSOLIDATED STATEMENTS OF EQUI
CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) - USD ($) | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders' Equity | Noncontrolling Interests | Total |
Balance at the beginning at Dec. 31, 2021 | $ 23,000 | $ 116,401,000 | $ (85,041,000) | $ 31,383,000 | $ 171,000 | $ 31,554,000 |
Balance at the beginning (in shares) at Dec. 31, 2021 | 23,027,978 | |||||
Stock-based compensation | $ 0 | 31,000 | 0 | 31,000 | 0 | 31,000 |
Distributions paid to noncontrolling interests | 0 | 0 | 0 | 0 | (58,000) | (58,000) |
Net (loss) income | 0 | 0 | (8,693,000) | (8,693,000) | 64,000 | (8,629,000) |
Balance at the ending at Dec. 31, 2022 | $ 23,000 | 116,432,000 | (93,734,000) | 22,721,000 | 177,000 | 22,898,000 |
Balance at the ending (in shares) at Dec. 31, 2022 | 23,027,978 | |||||
Stock-based compensation | $ 0 | 41,000 | 0 | 41,000 | 0 | 41,000 |
Distributions paid to noncontrolling interests | 0 | 0 | 0 | 0 | (74,000) | (74,000) |
Net (loss) income | 0 | 0 | (24,801,000) | (24,801,000) | 19,000 | (24,782,000) |
Balance at the ending at Dec. 31, 2023 | $ 23,000 | $ 116,473,000 | $ (118,535,000) | $ (2,039,000) | $ 122,000 | $ (1,917,000) |
Balance at the ending (in shares) at Dec. 31, 2023 | 23,027,978 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Cash flows from operating activities: | ||
Net loss | $ (24,782,000) | $ (8,629,000) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||
Amortization of debt issuance costs | 914,000 | 912,000 |
Depreciation and amortization | 7,063,000 | 7,311,000 |
Amortization of above-market lease intangible | 59,000 | 64,000 |
Straight-line rents | (1,282,000) | (1,467,000) |
Write off of straight-line rent receivables | 3,749,000 | |
Stock-based compensation expense | 41,000 | 31,000 |
Write-off of leasing commissions | 255,000 | |
Write off of deferred financing costs | 176,000 | |
Impairment of real estate properties and intangible assets | 11,387,000 | |
Gain on consolidation of interest in unconsolidated equity-method investment | (1,066,000) | |
Loss from equity-method investees | 754,000 | 2,898,000 |
Change in operating assets and liabilities, net of consolidated interest in unconsolidated equity-method investment: | ||
Tenant and other receivables, net | 816,000 | (2,000) |
Other assets, net | 126,000 | (143,000) |
Accounts payable and accrued liabilities | 2,141,000 | 2,223,000 |
Security deposits | (946,000) | |
Net cash (used in) provided by operating activities | (595,000) | 3,198,000 |
Cash flows from investing activities: | ||
Proceeds from sale of real estate properties assigned | 3,839,000 | |
Cash assumed in consolidation of interest in unconsolidated equity-method investment | 770,000 | |
Additions to real estate and other assets | (318,000) | (506,000) |
Investments in equity-method investees | (370,000) | (1,111,000) |
Distributions received from equity-method investees | 1,093,000 | 769,000 |
Net cash provided by (used in) investing activities | 5,014,000 | (848,000) |
Cash flows from financing activities: | ||
Payments of loans payable | (1,154,000) | (1,113,000) |
Repayment of loan payable assigned | (3,171,000) | |
Distributions paid to noncontrolling interests | (74,000) | (58,000) |
Deferred financing costs | (177,000) | |
Net cash used in financing activities | (4,399,000) | (1,348,000) |
Net increase in cash, cash equivalents and restricted cash | 20,000 | 1,002,000 |
Cash, cash equivalents and restricted cash - beginning of year | 14,163,000 | 13,161,000 |
Cash, cash equivalents and restricted cash - end of year | 14,183,000 | 14,163,000 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest: | 15,753,000 | $ 11,318,000 |
Supplemental disclosure of non-cash financing and investing activities: | ||
Consolidation of assets, net, in connection with our acquisition of partner's interest in unconsolidated equity-method investment | $ 313,000 |
Organization
Organization | 12 Months Ended |
Dec. 31, 2023 | |
Organization | |
Organization | 1. Organization Summit Healthcare REIT, Inc. (“Summit”) is a real estate investment trust that owns 100% of 14 properties, 95.3% of four properties, a 10% equity interest in an unconsolidated equity-method investment that holds 15 properties, a 20% equity interest in an unconsolidated equity-method investment that holds two properties, a 10% equity interest in an unconsolidated equity-method investment that holds eight properties, and a 10% equity interest in an unconsolidated equity-method investment that holds six properties. Summit is a Maryland corporation, formed in 2004 under the General Corporation Law of Maryland for the purpose of investing in and owning real estate. As used in these notes, the “Company”, “we”, “us” and “our” refer to Summit and its consolidated subsidiaries, including Summit Healthcare Operating Partnership, L.P. (the “Operating Partnership”), except where the context otherwise requires. We conduct substantially all of our operations through the Operating Partnership, which is a Delaware limited partnership. We own a 99.88% general partner interest in the Operating Partnership, and Cornerstone Realty Advisors, LLC (“CRA”), a former affiliate, owns a 0.12% limited partnership interest. Summit and the Operating Partnership are managed and operated as one entity, and Summit has no significant assets other than its investment in the Operating Partnership. Summit, as the general partner of the Operating Partnership, controls the Operating Partnership and consolidates the assets, liabilities, and results of operations of the Operating Partnership. Cornerstone Healthcare Partners LLC – Consolidated Joint Venture We own 95 % of Cornerstone Healthcare Partners LLC (“CHP LLC”), which was formed in 2012, and the remaining 5% noncontrolling interest is owned by Cornerstone Healthcare Real Estate Fund, Inc. (“CHREF”), an affiliate of CRA. CHP LLC is consolidated within our financial statements and owns four properties (the “JV Properties”) with another partially owned subsidiary. As of December 31, 2023 and 2022, we own a 95.3% interest in the four JV Properties, and CHREF owns a 4.7% interest. Summit Union Life Holdings, LLC – Equity-Method Investment In April, 2015, through our Operating Partnership, we entered into a limited liability company agreement with Best Years, LLC (“Best Years”), an unrelated entity and a U.S.-based affiliate of Union Life Insurance Co, Ltd. (a Chinese corporation), and formed Summit Union Life Holdings, LLC (the “SUL JV”). The SUL JV is not consolidated in our consolidated financial statements and is accounted for under the equity-method in our consolidated financial statements (see Note 5). As of December 31, 2023 and 2022, we have a 10% interest in the SUL JV which owns 15 properties as of December 31, 2023 and owned 17 properties as of December 31, 2022. Summit Fantasia Holdings, LLC – Equity-Method Investment In September 2016, through our Operating Partnership, we entered into a limited liability company agreement with Fantasia Investment III LLC (“Fantasia”), an unrelated entity and a U.S.-based affiliate of Fantasia Holdings Group Co., Limited (a Chinese corporation listed on the Stock Exchange of Hong Kong (HKEX)) and formed Summit Fantasia Holdings I, LLC (the “Fantasia I JV”). On July 3, 2023, the majority member in the Fantasia I JV assigned its 65% interest, for no consideration, to Summit. As such, as of July 2023, Summit owned 100% of Fantasia I JV and it became a wholly-owned subsidiary of Summit. The Fantasia I JV consisted of the real estate of Summit Citrus Heights, LLC (“Summit Citrus Heights”), and the operating assets and liabilities of its associated senior housing facility, Sun Oak Assisted Living (“Sun Oak” ) and was included in our consolidated financial statements from July 2023 through September 2023, when the property was sold. On September 29, 2023, we sold the real estate of Summit Citrus Heights, including the Sun Oak facility. As of December 31, 2023, our investment is no longer considered an equity-method interest in the Fantasia I JV. As of December 31, 2022, we had a 35% interest in the Fantasia I JV which owned one property. See Note 3 for further information. Summit Fantasia Holdings II, LLC – Equity-Method Investment In December 2016, through our Operating Partnership, we entered into a limited liability company agreement (the “Fantasia II LLC Agreement”) with Fantasia, and formed Summit Fantasia Holdings II, LLC (the “Fantasia II JV”). The Fantasia II JV is not consolidated in our consolidated financial statements and is accounted for under the equity-method in our consolidated financial statements. As of December 31, 2023 and 2022, we have a 20% interest in the Fantasia II JV which owns two properties. Summit Fantasia Holdings III, LLC - Equity-Method Investment In July 2017, through our Operating Partnership, we entered into a limited liability company agreement with Fantasia and formed Summit Fantasia Holdings III, LLC (the “Fantasia III JV”). The Fantasia III JV is not consolidated in our consolidated financial statements and is accounted for under the equity-method in our consolidated financial statements. As of December 31, 2023 and 2022, we have a 10% interest in the Fantasia III JV which owns eight and owned nine properties, respectively. Summit Fantasy Pearl Holdings, LLC – Equity-Method Investment In October 2017, through our Operating Partnership, we entered into a limited liability company agreement with Fantasia, Atlantis Senior Living 9, LLC, a Delaware limited liability company (“Atlantis”), and Fantasy Pearl LLC, a Delaware limited liability company (“Fantasy”), and formed Summit Fantasy Pearl Holdings, LLC (the “FPH JV”). The FPH JV is not consolidated in our consolidated financial statements and is accounted for under the equity-method in our consolidated financial statements. As of December 31, 2023 and 2022, we have a 10% interest in the FPH JV which owns six properties. Taxable REIT Subsidiaries Summit Healthcare Asset Management, LLC Summit Healthcare Asset Management, LLC (“SAM TRS”) is our wholly-owned taxable REIT subsidiary (“TRS”). We serve as the manager of the SUL JV, Fantasia I JV (through July 2023), Fantasia II JV, Fantasia III JV, and FPH JV (collectively, our “Equity-Method Investments”), and provide management services in exchange for fees and reimbursements. All asset management fees earned by us are paid to SAM TRS and expenses incurred by us, as the manager, are reimbursed from SAM TRS. See Notes 5 and 7 for further information. SHOP TRS LLC SHOP TRS LLC (“SHOP TRS”) is our wholly-owned taxable REIT subsidiary that is the sole member for two of our real estate properties that no longer have a lease with an unrelated tenant. Each of these properties are leased to an affiliated subsidiary (see Note 3 under Pennington Gardens Operations LLC (“Pennington Gardens”) and Sundial Operations LLC (“Sundial”), collectively, the “Operated Properties”) which are operated directly and earn resident fees and service revenue and the operations are consolidated in our financial statements. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2023 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies The summary of significant accounting policies presented below conform to accounting principles generally accepted in the United States of America, or GAAP, in all material respects, and have been consistently applied in preparing the accompanying consolidated financial statements. Principles of Consolidation and Basis of Presentation The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, the Operating Partnership, and its consolidated companies and are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). All intercompany accounts and transactions have been eliminated in consolidation. Accounting Standard Codification (“ASC”) 810, Consolidation Variable Interest Entities We analyze our contractual and/or other interests to determine whether such interests constitute an interest in a variable interest entity (VIE) in accordance with ASC 810, Consolidation Use of Estimates The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base these estimates on various assumptions that we believe to be reasonable under the circumstances, and these estimates form the basis for our judgments concerning the carrying values of assets and liabilities that are not readily apparent from other sources. We periodically evaluate these estimates and judgments based on available information and experience. Actual results could differ from our estimates under different assumptions and conditions. If actual results significantly differ from our estimates, our financial condition and results of operations could be materially impacted. The most significant estimates made include that of real estate acquisition valuation and the allocation of property purchase price to tangible and intangible assets acquired and liabilities assumed at relative fair value, the evaluation of potential impairment of long-lived assets and equity method investments, and the estimated useful lives of real estate assets and intangibles. Cash and Cash Equivalents We consider all short-term, highly liquid investments that are readily convertible to cash with a maturity of three months or less at the time of purchase to be cash equivalents. As of December 31, 2023, we had cash accounts in excess of FDIC-insured limits. To date, the Company has not experienced losses or lack of access to cash in its cash and cash equivalent accounts. Restricted Cash Restricted cash represent restricted cash held by our lenders in interest bearing accounts related to impound reserve accounts for property taxes, insurance and capital funds as required under the terms of the loan agreements. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown on the consolidated statements of cash flows: December 31, December 31, 2023 2022 Cash and cash equivalents $ 10,997,000 $ 11,572,000 Restricted cash 3,186,000 2,591,000 Total cash, cash equivalents, and restricted cash shown on the consolidated statements of cash flows $ 14,183,000 $ 14,163,000 Investments in Real Estate and Depreciation We allocate the purchase price of our properties in accordance with ASC 805 – Business Combinations. If the acquisition does not meet the definition of a business, we record the acquisition as an asset acquisition. For transactions that are business combinations, acquisition costs are expensed as incurred. For transactions that are an asset acquisition, acquisition costs are capitalized as incurred. Upon an asset acquisition of a property, we allocate the purchase price of the property based upon the relative fair value of the tangible and intangible assets acquired and liabilities assumed, which generally consists of land, buildings, site improvements, furniture and fixtures and intangible assets. The determination of fair value involves the use of significant judgment and estimation. We value land based on various inputs, which may include internal analysis of recently acquired properties, existing comparable properties within our portfolio, or third party appraisals or valuations based on comparable sales. We allocate the purchase price to tangible assets of an acquired property by valuing the property as if it were vacant. We are required to make subjective assessments as to the estimated useful lives of our depreciable assets. We consider the period of future benefit of the assets to determine the appropriate estimated useful lives. Depreciation of our assets is being charged to expense on a straight-line basis over the estimated useful lives. We depreciate the fair value allocated to building and improvements over estimated useful lives ranging from 15 to 39 years. We estimate the value of furniture and fixtures based on the assets’ depreciated replacement cost. We depreciate the fair value allocated to furniture and fixtures over estimated useful lives ranging from three In allocating the purchase price to identified intangible assets and liabilities of an acquired property, the value of above/below-market leases and in-place leases are estimated as follows: The value of above/below market leases is based on the differences between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) estimated fair market lease rates from the perspective of a market participant for the corresponding in-place leases, measured, for above-market leases, over a period equal to the remaining non-cancelable term of the lease and, for below-market leases, over a period equal to the initial term plus any below market fixed rate renewal periods. The above/below market leases are amortized as an adjustment to rental revenue over the remaining term of the respective leases. The value of in-place leases consisting of tenant origination and absorption costs and leasing commissions avoided is based on the Company’s evaluation of the specific characteristics of each tenant’s lease. Factors considered include estimates of carrying costs during expected lease-up periods, current market conditions, discount rates, and costs to execute similar leases. The value of in-place leases are amortized over the remaining term of the respective leases and included in depreciation and amortization in the consolidated statements of operations. If a tenant vacates its space prior to its contractual expiration date, any unamortized balance of the related intangible asset is recorded in the consolidated statements of operations. Held for Sale We consider properties to be assets held for sale when (1) management commits to a plan to sell the property, (2) it is unlikely that the disposal plan will be significantly modified or discontinued; (3) the property is available for immediate sale in its present condition; (4) actions required to complete the sale of the property have been initiated; (5) sale of the property is probable and we anticipate the completed sale will occur within one year; and (6) the property is actively being marketed for sale at a price that is reasonable given our estimate of current market value. Upon designation of a property as an asset held for sale, we record the property’s value at the lower of its carrying value or its estimated fair value, less estimated transaction costs. Depreciation and amortization of the property are discontinued. If a property subsequently no longer meets the criteria to be classified as held for sale, it is reclassified as held and used and measured at the lower of i) its original carrying amount before the asset was classified as held for sale, adjusted for any depreciation expense not recognized while it was classified as held for sale, and ii) its fair value. Impairment of Real Estate Properties and Related Intangible Lease Assets We evaluate the recoverability of the carrying value of our real estate properties and related intangible lease assets on a property-by-property basis. We review our real estate properties and related intangible lease assets for recoverability when events or circumstances, including changes in the Company’s use of property or the strategy for its overall business, plans to sell a property before its depreciable life has ended, occupancy changes, significant near-term lease expirations, significant deteriorations of the underlying cash flows of the property, and other market factors indicate that the carrying amount of the property may not be recoverable. Impairment is measured as the amount by which the carrying amount of the real estate properties and related intangible lease assets exceeds the fair value of the property. During 2023, we recorded an impairment of $11.4 million ($10.3 million for real estate properties and $1.1 million for intangible Fair Value Measurements Fair value represents the estimate of the proceeds to be received, or paid in the case of a liability, in a current transaction between willing parties. ASC 820, Fair Value Measurement, Financial assets and liabilities are categorized based on the inputs to the valuation techniques as follows: Level 1. Level 2. Level 3. Assets and liabilities measured at fair value are classified according to the lowest level input that is significant to their valuation. A financial instrument that has a significant unobservable input along with significant observable inputs may still be classified as a Level 3 instrument. We generally determine or calculate the fair value of financial instruments using quoted market prices in active markets when such information is available or use appropriate present value or other valuation techniques, such as discounted cash flow analyses, incorporating available market discount rate information for similar types of instruments and our estimates for non-performance and liquidity risk. These techniques are significantly affected by the assumptions used, including the discount rate, credit spreads, and estimates of future cash flow. As of and for the year ended December 31, 2023, our equity method investment in the Fantasia II JV was measured at fair value, on a nonrecurring basis using unobservable (level 3) inputs. We estimated the fair value of our equity-method investments based on discounted future cash flows. As a result, we recognized an impairment loss of $0.5 million (see Note 5). As of and for the year ended December 31, 2022, our equity method investment in the Fantasia I JV and FPH JV was measured at fair value, on a nonrecurring basis using unobservable (level 3) inputs. We estimated the fair value of our equity-method investments based on discounted future cash flows. As a result, we recognized an impairment loss of $0.4 million (see Note 5). See above under Impairment of Real Estate Properties for further information. Fair Value Measurement of Financial Instruments Our consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, tenant and other receivables, certain other assets, accounts payable and accrued liabilities, security deposits and loans payable. With the exception of the loans payable discussed below, we consider the carrying values to approximate fair value for such financial instruments because of the short period of time between origination of the instruments and their expected payment. These are considered a Level I inputs. As of December 31, 2023 and 2022, the fair value of our fixed rate U.S. Department of Housing and Urban Development (“HUD”)-insured loans payable was $36.4 million and $38.9 million, compared to the principal balance (excluding debt issuance costs) of $43.9 million and $45.0 million, respectively. The fair value of loans payable was estimated using lending rates available to us for financial instruments with similar terms and maturities. The fair value of our fixed and variable rate loans payable was estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. As the inputs to our valuation estimate are neither observable in nor supported by market activity, our loans payable are classified as Level 3 liability within the fair value hierarchy. As of December 31, 2023 and 2022, we believe the carrying amounts of our variable rate loans payable are reasonably estimated at their carrying amounts as there have been minimal changes to the fixed spread portion of interest rates for similar loans observed in the market, and as the variable portion of our interest rates fluctuate with the associated market indices. We believe the fair value of our variable rate mezzanine loan payable which is currently in default approximates the carrying amount based on the contractual rights of the mezzanine loan payable holders. See Note 14 for additional discussion. At December 31, 2023 and 2022, we do not have any significant financial assets or financial liabilities that are measured at fair value on a recurring basis in our consolidated financial statements. Tenant and Other Receivables Tenant and other receivables are comprised mainly of the cumulative amount of future adjustments necessary to present tenant rental income on a straight-line basis, accounts receivable due from residents for our Operated Properties, asset management fees and distributions receivable. Allowance for Credit Losses The allowance for credit losses is maintained on all receivables except for lease receivables and is maintained at a level believed adequate to absorb potential losses in our receivables. The determination of the credit allowance is based on a quarterly evaluation of each of these receivables, including general economic conditions and estimated collectability. We evaluate the collectability of our receivables based on a combination of credit quality indicators, including, but not limited to, payment status, historical charge-offs, and financial strength of the equity method investment. A receivable is considered to have deteriorated in credit quality when, based on current information and events, it is probable that we will be unable to collect all amounts due. As of December 31, 2023 and 2022, the allowance for credit losses is immaterial. Deferred Financing Costs Costs incurred with potential financing arrangements are recorded as deferred financing costs. Costs incurred in connection with completed debt financing are recorded as debt issuance costs. Debt issuance costs are amortized using the straight-line basis which approximates the effective interest rate method, over the contractual terms of the respective financings, and are presented net of loans payable in loans payable, net of debt issuance costs, in the consolidated balance sheets. Costs incurred in connection with an unexercised debt financing are recorded as expense when financing is no longer deemed probable. For the year ended December 31, 2023, we recorded approximately $0.7 million in property operating costs expense in the consolidated statements of operations for deferred financing costs associated with a terminated refinancing related to the CA3 Properties. Other Assets Other assets consist primarily of deferred financing costs, deposits, prepaid insurance, property taxes and other and corporate assets. Additionally, other assets will be amortized to expense over their future service periods. Balances without future economic benefit are expensed as they are identified. Equity-Method Investments We report our investments in unconsolidated entities, over whose operating and financial policies we have the ability to exercise significant influence but not control, under the equity method of accounting. Under this method of accounting, our pro rata share of the applicable entity’s earnings or losses is included in our consolidated statements of operations. We initially record our investments based on either the carrying value for properties contributed or the cash invested. We evaluate our Equity-Method Investments for impairment whenever events or changes in circumstances indicate that the carrying value of our investments may exceed the fair value. If it is determined that a decline in the fair value of our investments is not temporary, and if such reduced fair value is below its carrying value, an impairment is recorded. Determining fair value involves significant judgment. Our estimates consider available evidence including the present value of the expected future cash flows discounted at market rates, general economic conditions and other relevant factors. For the year ended December 31, 2023, we recorded impairment of approximately $0.5 million related to our equity-method investments. For the year ended December 31, 2022, we recorded impairment of approximately $0.4 million related to our equity-method investments. See Note 5 for further information. Rental Revenue We recognize rental revenue based on ASC 842, Leases Additionally, where real estate taxes and insurance expenses were paid directly by our tenants to taxing authorities or insurance companies, respectively, we do not record any revenue or expense. For our triple-net leasing arrangements in which the tenant remits payment for certain costs to us and we pay the vendor, we have reported the gross amounts in total rental revenues and property operating costs on the consolidated statements of operations. Additionally, under Topic 842, we must assess if substantially all payments due under the lease are likely to be collected. If tenant lease payments are not likely to be collected, then the revenues will be recognized on a cash basis (or if the answer changes at a later date, the revenues are adjusted to reflect what it would have been on a cash basis) and the adjustments will be recorded through rental revenues, rather than bad debt expense. During 2022, we determined that two of our leases were uncollectible and therefore, we recorded rental revenue received from those tenants on the cash basis. Resident Fees and Services Revenue We recognize resident fees and services revenue at the amount that we expect to be entitled to in exchange for providing resident care and services. Resident fees are recognized and billed monthly based on the contracted rate in the resident lease agreements and the reimbursements from Medicaid are based on contracted reimbursement rates. These amounts are paid directly from the residents and/or third-party payors (currently only Medicaid). Revenue is recognized as performance obligations are satisfied. Performance obligations are determined based on the nature of the services provided by us. The majority of resident fees and services is attributable to the portion of the base monthly lease fee in the resident lease agreement. The Company recognizes the resident fee revenue based upon the predominant component, either the lease or non-lease component, of the contracts. The Company has determined that the lease component is the predominant component and the services included under the resident agreements have the same timing and pattern of transfer and are performance obligations that are satisfied over time. Resident services consist of care level services and certain other ancillary services (i.e., housekeeping, laundry, etc.). These services are provided and paid for in addition to the standard fees included in each resident lease (i.e., room and board, standard meals, etc.). Asset Management Fees We record asset management fee revenue based on ASC 606, Revenue from Contracts with Customers (Topic 606) Stock-Based Compensation We record stock-based compensation expense for share-based payments to employees and directors, including grants of stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes option-pricing model. Compensation expense is recognized ratably over the vesting term and is included in general and administrative expense in our consolidated statements of operations. Forfeitures are recognized as they occur. See Note 12 for further information. Noncontrolling Interest in Consolidated Subsidiary Noncontrolling interest relates to the interest in the consolidated entities that are not wholly-owned by us. As of December 31, 2023 and 2022, the noncontrolling interest mainly relates to CHP, LLC. ASC 810-10-65, Consolidation We periodically evaluate individual noncontrolling interests for the ability to continue to recognize the noncontrolling interest as permanent equity in the consolidated balance sheets. Any noncontrolling interest that fails to qualify as permanent equity will be reclassified as temporary equity and adjusted to the greater of (a) the carrying amount, or (b) its redemption value as of the end of the period in which the determination is made. Income Taxes We have elected to be taxed as a REIT, under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”) beginning with our taxable year ending December 31, 2006. To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to currently distribute at least 90% of the REIT's ordinary taxable income to stockholders. As a REIT, we generally will not be subject to federal income tax on taxable income that we distribute to our stockholders. If we fail to qualify as a REIT in any taxable year, we will then be subject to federal income taxes on our taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year during which qualification is lost unless the Internal Revenue Service were to grant us relief under certain statutory provisions. Such an event could materially and adversely affect our net loss and net cash available for distribution to stockholders. However, we believe that we will be organized and operate in such a manner as to qualify for treatment as a REIT and intend to operate for the foreseeable future in such a manner so that we will remain qualified as a REIT for federal income tax purposes. Given the applicable statute of limitations, we generally are subject to audit by the Internal Revenue Service ("IRS") for the year ended December 31, 2020 and subsequent years, and state income tax returns are subject to audit for the year ended December 31, 2019 and subsequent years. We have elected to treat SAM TRS and SHOP TRS as taxable REIT subsidiaries (collectively, the “TRS Subsidiaries”), which generally may engage in any business, including the provision of customary or non-customary services for our tenants. The TRS Subsidiaries are treated as a regular corporation and are subject to federal income tax and applicable state income and franchise taxes at regular corporate rates. As of December 31, 2023 and 2022, respectively, the TRS Subsidiaries have net deferred tax assets, related primarily to their net operating losses (collectively “NOL”), of $1,142,000 and $683,000, for which there is a full valuation allowance recorded. The Company regularly assesses the ability to realize deferred tax assets recorded based upon the weight of available evidence, including such factors as recent earnings history and expected future taxable income on a jurisdiction-by-jurisdiction basis. If the Company changes its determination as to the amount of realizable deferred tax assets, the Company will adjust its valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made. The Company’s management believes that, based on a number of factors, it is more likely than not, that all or some portion of the deferred tax assets will not be realized; and accordingly, for the year ended December 31, 2023, the Company continues to provide a full valuation allowance against the TRS Subsidiaries net deferred tax assets. The net change in the valuation allowance for the year ended December 31, 2023 was an increase of $457,000. As of December 31, 2023, the TRS Subsidiaries have NOL carryforwards for federal income tax purposes of approximately $4.2 million that will begin to expire in 2035 with approximately $2.4 million of the federal net operating loss carryforward lasting indefinitely. As of December 31, 2023, the TRS Subsidiaries had net operating loss carryforwards for state income tax purposes of approximately $4.4 million that will begin to expire at various dates beginning in 2035. Uncertain Tax Positions In accordance with the requirements of ASC 740, Income Taxes, Basic and Diluted Net Income (Loss) and Distributions per Common Share Basic earnings per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income (loss) by the weighted-average number of common shares and dilutive potential common shares outstanding during the period. Dilutive potential common shares are calculated in accordance with the treasury stock method. For the years ended December 31, 2023 and 2022, all stock options outstanding were considered to be anti-dilutive. |
Investments in Real Estate Prop
Investments in Real Estate Properties | 12 Months Ended |
Dec. 31, 2023 | |
Investments in Real Estate Properties | |
Investments in Real Estate Properties | 3. Investments in Real Estate Properties As of December 31, 2023 and 2022, consolidated investments in real estate properties(excluding the 31 properties owned by our unconsolidated Equity-Method Investments) are set forth below: December 31, December 31, 2023 2022 Land $ 14,905,000 $ 15,565,000 Buildings and improvements 157,875,000 166,989,000 Less: accumulated depreciation (20,439,000) (15,985,000) Buildings and improvements, net 137,436,000 151,004,000 Furniture and fixtures 12,106,000 12,440,000 Less: accumulated depreciation (7,481,000) (5,882,000) Furniture and fixtures, net 4,625,000 6,558,000 Real estate properties, net $ 156,966,000 $ 173,127,000 Depreciation and amortization expense (excluding intangible lease amortization and leasing commission amortization) for the years ended December 31, 2023 and 2022 was approximately $6.1 million and $6.3 million, respectively. As of December 31, 2023, our portfolio consisted of 18 real estate properties, 16 of which were 100% leased to the tenants of the related facilities. The other two properties are each 100% leased to an affiliated subsidiary (see below under Pennington Gardens Operations LLC and Sundial Operations LLC). Fantasia I JV Transfer of Interest and Sale On July 3, 2023, the majority member in the Fantasia I JV assigned its 65% interest, for no consideration, to Summit. As such, as of July 2023, Summit owned 100% of Fantasia I JV. The Fantasia I JV consisted of the real estate of Summit Citrus Heights, LLC, our wholly-owned subsidiary and the operating assets and liabilities of its associated senior housing facility, Sun Oak. As such, the operations of Sun Oak are consolidated in our financial statements beginning July 3, 2023, through September 29, 2023 (date of the sale), and all intercompany transactions have been eliminated. For the period from July 3, 2023 through September 29, 2023, revenues from Sun Oak are recorded under resident fees and services and costs are recorded under resident costs in the consolidated statements of operations. The following summarizes the fair value of the assets and liabilities consolidated in our condensed consolidated financial statements beginning in July 2023: cash of $0.8 million, real estate of $3.8 million, other assets of $0.1 million, loan payable of $3.2 million and other liabilities of $0.4 million. Prior to the assignment, the Fantasia I JV was considered an equity method investment and the consolidation of the entity resulted in a gain of approximately $1.1 million, which is recorded in gain on consolidation of interest in unconsolidated equity-method investment in the consolidated statements of operations. Additionally, on September 29, 2023, we sold the real estate of Summit Citrus Heights, including the Sun Oak facility for net cash of approximately $0.6 million (which consists of the $3.8 million sale price and the payoff of the loan payable of approximately $3.2 million) and recorded a loss of approximately $0.01 million, which is recorded in gain on consolidation of interest in unconsolidated equity-method investment in the consolidated statements of operations. Pennington Gardens Operations LLC In February 2022, our former tenant’s lease was terminated and we received approximately $0.2 million under a settlement agreement which is recorded in total rental revenues in the consolidated statements of operations. Concurrently, we entered into a management agreement with a new operator that began operating the facility, Pennington Gardens, and we entered into a new lease agreement with Pennington Gardens Operations LLC, the newly formed operating company for Pennington Gardens, which is a wholly owned subsidiary of SHOP TRS. As such, the operations of Pennington Gardens are consolidated in our financial statements beginning February 11, 2022, and all intercompany transactions have been eliminated. For the year ended December 31, 2023 and for the period from February 11, 2022 through December 31, 2022, revenues from Pennington Gardens Operations are recorded under resident fees and services and costs are recorded under resident costs in the consolidated statements of operations. Sundial Operations LLC In June 2022, our former tenant’s lease was terminated and we entered into a management agreement with a new operator that began operating the facility, Sundial Assisted Living. Concurrently, we entered into a new lease agreement with Sundial Operations LLC, the newly formed operating company for Sundial Assisted Living, which is a wholly owned subsidiary of SHOP TRS. As such, for the year ended December 31, 2023 and for the period from June 7, 2022 through December 31, 2022, the operations of Sundial Assisted Living are consolidated in our financial statements and revenues from Sundial Assisted Living are recorded under resident fees and services and costs are recorded under resident costs in the consolidated statements of operations. The following table provides summary information regarding our portfolio (excluding the 31 properties owned by our unconsolidated Equity-Method Investments and the $12.75 million mezzanine loan from Oxford (see Note 4) with Summit Georgia Holdings LLC (“Summit Georgia”), our wholly-owned subsidiary) as of December 31, 2023: Loans Payable, Excluding Debt Purchase Issuance Property Location Date Purchased Type (1) Price Costs Sheridan Care Center Sheridan, OR August 3, 2012 SNF $ 4,100,000 $ 3,829,000 Fernhill Care Center Portland, OR August 3, 2012 SNF 4,500,000 3,359,000 Friendship Haven Healthcare and Rehabilitation Center Galveston County, TX September 14, 2012 SNF 15,000,000 11,109,000 Pacific Health and Rehabilitation Center Tigard, OR December 24, 2012 SNF 8,140,000 5,600,000 Brookstone of Aledo Aledo, IL July 2, 2013 AL 8,625,000 6,461,000 Sundial Assisted Living Redding, CA December 18, 2013 AL 3,500,000 3,626,000 Pennington Gardens Chandler, AZ July 17, 2017 AL/MC 13,400,000 9,877,000 Yucaipa Hill Post Acute Yucaipa, CA July 2, 2021 SNF 10,715,000 8,014,000 Creekside Post Acute Yucaipa, CA July 2, 2021 SNF 4,780,000 3,575,000 University Post Acute Mentone, CA July 2, 2021 SNF 4,560,000 3,411,000 Calhoun Health Center Calhoun, GA December 30, 2021 SNF 7,670,000 6,549,000 Maple Ridge Health Care Center Cartersville, GA December 30, 2021 SNF 13,548,000 11,568,000 Chatsworth Health Care Center Chatsworth, GA December 30, 2021 SNF 29,785,000 25,432,000 East Lake Arbor Decatur, GA December 30, 2021 SNF 15,640,000 13,354,000 Fairburn Health Care Center Fairburn, GA December 30, 2021 SNF 14,644,000 12,503,000 Grandview Health Care Center Jasper, GA December 30, 2021 SNF 10,061,000 8,591,000 Rosemont at Stone Mountain Stone Mountain, GA December 30, 2021 SNF 23,908,000 20,414,000 Willowwood Nursing Center & Rehab Flowery Branch, GA December 30, 2021 SNF 14,744,000 12,589,000 Total: $ 207,320,000 $ 169,861,000 (1) SNF is an abbreviation for skilled nursing facility. AL is an abbreviation for assisted living facility. MC is an abbreviation for memory care facility. Tenant/Operator Changes In September 2023, three of our wholly-owned properties and their related facilities, Rivers Edge Rehabilitation and Care (f.k.a. Sheridan Care Center), Fernhill Care Center, and Pacific Health and Rehabilitation Center, replaced the tenant/operator. The previous tenant requested the lease be terminated and on September 1, 2023, HUD approved the change. As a result of the lease termination, we wrote off the straight-line rent receivable of approximately $1.3 million, which is included in rental revenues in our consolidated statements of operations, wrote off leasing commissions of approximately $0.3 million, which is included in depreciation and amortization in our consolidated statements of operations, and recognized income from retained security deposits of approximately $0.4 million, which is included in total rental revenue in our consolidated statements of operations. The new tenant leases are structured under a master lease at the same lease rates for a 10-year term through August 2033, with two five-year renewal options. Other Tenant Issues During the fourth quarter of 2023, we wrote off the straight-line rent receivable of approximately $2.4 million related to eight real estate properties, which is included in rental revenues in our consolidated statements of operations for the year ended December 31, 2023. The write off was recorded due to the tenants experiencing issues affecting their ability to continue to pay their full lease obligations. Future Minimum Lease Payments The future minimum lease payments to be received under existing tenant operating leases (excluding the 31 properties owned by our unconsolidated Equity-Method Investments and the intercompany leases for Pennington Gardens and Sundial Assisted Living as well as the related resident fees and services) for our consolidated properties as of December 31, 2023 are as follows: Years ending December 31, 2024 18,272,000 2025 18,566,000 2026 18,865,000 2027 19,168,000 2028 17,909,000 Thereafter 137,999,000 $ 230,779,000 There were no acquisitions in the years ended December 31, 2023 and 2022. |
Loans Payable
Loans Payable | 12 Months Ended |
Dec. 31, 2023 | |
Loans Payable | |
Loans Payable | 4. Loans Payable As of December 31, 2023 and 2022, loans payable consisted of the following December 31, 2023 December 31, 2022 Loans payable to Lument (insured by HUD) in monthly installments of approximately $183,000, including interest, ranging from a fixed rate of 2.79% to 4.2%, due in September 2039 through April 2055, and as of December 31, 2023 and 2022, collateralized by Sheridan, Fernhill, Pacific Health, Aledo, Sundial and Friendship Haven. $ 33,984,000 $ 34,976,000 Loan payable to Capital One Multifamily Finance, LLC (insured by HUD) in monthly installments of approximately $49,000, including interest at a fixed rate of 4.23%, due in September 2053, and collateralized by Pennington Gardens. 9,877,000 10,039,000 Loan payable to CIBC Bank, USA in monthly installments of approximately $106,000 including cash collateral fund payments, variable interest rate as noted below (9.45% and 8.17% at December 31, 2023 and 2022, respectively), due in July 2024 and collateralized by Yucaipa Hills Post Acute, Creekside Post Acute and University Post Acute. 15,000,000 15,000,000 Loan payable to CIBC Bank, USA in monthly installments of approximately $680,000 (interest only through December 2023) variable interest rate as noted below (8.85% and 7.68% at December 31, 2023 and 2022, respectively), due in December 2024, and collateralized by Calhoun Health Center, Maple Ridge Health Care Center, Chatsworth Health Care Center, East Lake Arbor, Fairburn Health Care Center, Grandview Health Care Center, Rosemont at Stone Mountain, and Willowwood Nursing Center & Rehab. 91,000,000 91,000,000 Loan payable to Oxford Finance, LLC in monthly installments of approximately $280,000 (interest only through maturity), variable interest rate as noted below (16.4% and 15.1% at December 31, 2023 and 2022, respectively) due in March 2025, collateralized in second position by Calhoun Health Center, Maple Ridge Health Care Center, Chatsworth Health Care Center, East Lake Arbor, Fairburn Health Care Center, Grandview Health Care Center, Rosemont at Stone Mountain, and Willowwood Nursing Center & Rehab. 20,000,000 20,000,000 Mezzanine Loan payable to Oxford Finance, LLC in monthly installments of approximately $168,000 (interest only through maturity), variable interest rate as noted below (16.4% and 15.1% at December 31, 2023 and 2022, respectively) due in December 2026, secured by the equity interests of Summit Georgia, the parent holding company for the GA8 Properties. 12,750,000 12,750,000 182,611,000 183,765,000 Less debt issuance costs (2,682,000) (3,596,000) Total loans payable $ 179,929,000 $ 180,169,000 As of December 31, 2023, we have total debt obligations of approximately $182.6 million that will mature between 2024 and 2055. See Note 3 for loans payable balance for each property. All of the loans payable have certain financial and non-financial covenants, including ratios and financial statement considerations. As of December 31, 2023, we were in compliance with all of our debt covenants except for the GA8 Properties. See below under GA8 Properties for further information. During the years ended December 31, 2023 and 2022, we incurred approximately $16.6 million and $12.0 million of interest expense, respectively (excluding debt issuance costs amortization and interest expense related to the Oxford mezzanine loan as noted below (“Oxford Monthly Fee”)), related to our loans payable. During the years ended December 31, 2023 and 2022, we incurred approximately $0 million and $0.6 million of interest expense, respectively, related to the Oxford Monthly Fee, which is included in interest expense in our consolidated statements of operations. As of December 31, 2023 and 2022, the unamortized balance of the debt issuance costs was approximately $2.7 million and $3.6 million, respectively. These debt issuance costs are being amortized over the life of their respective financing agreements using the straight-line basis which approximates the effective interest rate method. For the years ended December 31, 2023 and 2022, approximately $0.9 million, of debt issuance costs were amortized and included in interest expense in our consolidated statements of operations. The principal payments due on the loans payable (excluding debt issuance costs and cash collateral funds) for each of the five following years and thereafter ending December 31 are as follows: Principal Year Amount 2024 139,951,000 (1) 2025 1,246,000 2026 1,292,000 2027 1,341,000 2028 1,391,000 Thereafter 37,390,000 $ 182,611,000 (1) The following information notes our loan activity: GA8 Properties In 2021, we acquired our interest in the GA8 Properties subject to a $91.0 million first priority mortgage loan with CIBC collateralized by those properties, a $20.0 million subordinated term loan with Oxford Financing LLC (“Oxford”) collateralized by those properties and a $12.75 million mezzanine loan with Oxford secured by the equity interests of the wholly-owned subsidiary, Summit Georgia, the parent holding company for the GA8 Properties. As of December 31, 2023, we were out of compliance with our debt covenants due to the tenants being out of compliance with their consolidated minimum EBITDAR covenant for each quarter in 2023. Additionally, in October, November and December 2023, Oxford agreed to defer a portion of our interest payments on the mezzanine loan payable totaling approximately $0.6 million, which is included in accrued liabilities on the consolidated balance sheet until we can confirm a plan of action. In March 2024, we received a notice of default from Oxford for the mezzanine loan (see Note 14 for further information). The Oxford notice of default also constitutes an event of default under the GA8 Properties subordinated term loan with Oxford and the mortgage loan with CIBC. Additionally, we are including the subordinated loan and the mezzanine loan principal payments in the 2024 period in the table above due to the noncompliance with the loan covenant. HUD-insured loans All of the HUD-insured loans are subject to customary representations, warranties and ongoing covenants and agreements with respect to the operation of the facilities, including the provision for certain maintenance and other reserve accounts for property tax, insurance, and capital expenditures, with respect to the facilities all as described in the HUD agreements. These reserves are included in restricted cash in our consolidated balance sheets. Master Letter of Credit Agreement In June 2023, we entered into a $1.0 million Master Letter of Credit Agreement with CIBC. As of December 31, 2023, there were two letters of credit totaling approximately $0.2 million under this agreement. |
Equity-Method Investments
Equity-Method Investments | 12 Months Ended |
Dec. 31, 2023 | |
Equity-Method Investments | |
Equity-Method Investments | 5. Equity-Method Investments As of December 31, 2023 and 2022, the aggregate balances of our Equity-Method Investments were approximately $2.9 million and $5.2 million, respectively, and are as follows: Summit Union Life Holdings, LLC The SUL JV will exist until an event of dissolution occurs, as defined in the limited liability company agreement of the SUL JV (the “SUL LLC Agreement”). Under the SUL LLC Agreement, net operating cash flow of the SUL JV will be distributed monthly, first to the Operating Partnership and Best Years pari passu pari passu For the years ended December 31, 2023 and 2022, we invested approximately $370,000 and $821,000 related to capital calls for the SUL JV. In December 2023, the SUL JV sold two properties for a gain of approximately $7.0 million. Our 10% share of the gain of approximately $0.7 million is included in loss from equity-method investees in the consolidated statements of operations. Additionally, we received approximately $1.1 million in cash from the sale. In 2023, the SUL JV recorded an aggregate impairment charge of approximately $1.1 million on one of the properties in the SUL JV and our 10% share of the impairment of approximately $0.1 million is included in loss from equity-method investees in the consolidated statements of operations for the year ended December 31, 2023. In 2022, the SUL JV recorded an aggregate impairment charge of approximately $6.8 million on several of the properties in the SUL JV and our 10% share of the impairment of approximately $0.7 million is included in loss from equity-method investees in the consolidated statements of operations for the year ended December 31, 2022. As of December 31, 2023 and 2022, the balance of our equity-method investment related to the SUL JV was approximately $1.8 million and $2.4 million, respectively. Summit Fantasia Holdings, LLC For the year ended December 31, 2022, we invested approximately $290,000 related to capital calls for the Fantasia JV. In 2022, the Fantasia JV recorded an impairment charge of approximately $6.4 million on one of the properties in the Fantasia JV and our 35% share of the impairment of approximately $2.2 million is included in loss from equity-method investees in the consolidated statements of operations. Additionally, we determined our investment in the Fantasia JV to be impaired and recorded an aggregate impairment of $0.2 million and wrote off distributions receivable of approximately $0.2 million in 2022, which is recorded in the loss from equity-method investees in the consolidated statements of operations for the year ended December 31, 2022, and consequently, reduced our equity-method investment balance to $0. On July 3, 2023, the majority member in the Fantasia I JV assigned its 65% interest, for no consideration, to Summit. As such, as of July 2023, we no longer have any equity-method interest in the Fantasia I JV. See Note 3 under Fantasia I JV Transfer of Interest and Sale for further information. Summit Fantasia Holdings II, LLC The Fantasia II JV will exist until an event of dissolution occurs, as defined in the limited liability company agreement of the Fantasia II JV (the “Fantasia II LLC Agreement”). Under the Fantasia II LLC Agreement, net operating cash flow of the Fantasia JV will be distributed quarterly, first to the Operating Partnership and Fantasia pari passu pari passu In June 2023, the tenant for the two properties in the Fantasia II JV filed for receivership. The two properties are currently being operated by the receivership estate in conjunction with a third-party manager under a one-year management agreement. As of December 31, 2023, there has been no termination of the tenant leases and the Fantasia II JV is currently communicating with the receiver regarding ongoing lease terms and payments. The Fantasia II JV has not received any rent payments since May 2023. In September 2023, the Fantasia II JV recorded an impairment of approximately $1.6 million on the two properties and our 20% share of the impairment of approximately $0.3 million is included in loss from equity-method investees in the consolidated statements of operations. Additionally, in September 2023, due to the ongoing issues with the receivership, we determined our investment in the Fantasia II JV to be impaired and recorded a $0.5 million impairment charge which is recorded in the loss from equity-method investees in the consolidated statements of operations for the year ended December 31, 2023. Due to our intention to fund a capital call, if needed, we recorded additional losses of $0.1 million. As of December 31, 2023 and 2022, the balance of our equity-method investment related to the Fantasia II JV was approximately ($0.1) million and $1.2 million, respectively. Summit Fantasia Holdings III, LLC The Fantasia III JV will continue until an event of dissolution occurs, as defined in the limited liability company agreement of the Fantasia III JV (the “Fantasia III LLC Agreement”). Under the Fantasia III LLC Agreement, net operating cash flow of the Fantasia III JV will be distributed quarterly, first to the Operating Partnership and Fantasia pari passu pari passu In September 2023, the Fantasia III JV deeded the ownership in a transfer of one of the properties in the Fantasia III JV to the tenant for no contractual consideration, however as part of the transfer agreement, the Fantasia III JV will receive a monthly payment of the base rent of the transferred property that was in place at the time of the transfer, through the end of the lease term, August 2032, from one of the other tenants in the Fantasia III JV. The Fantasia III JV recorded a loss of approximately $3.9 million on the transaction and our 10% share of the loss of approximately $0.4 million is included in loss from equity-method investees in the consolidated statements of operations for the year ended December 31, 2023. As of December 31, 2023 and 2022, the balance of our equity-method investment related to the Fantasia III JV was approximately $1.2 million and $1.6 million, respectively. Summit Fantasy Pearl Holdings, LLC The FPH JV will continue until an event of dissolution occurs, as defined in the limited liability company agreement of the FPH JV (the “FPH LLC Agreement”). Under the FPH LLC Agreement, net operating cash flow of the FPH JV will be distributed quarterly, first to the members pari passu refinancing or another capital event, will be paid to the members pari passu In December 2022, we recorded an impairment of approximately $0.2 million of our equity method investment in the FPH JV due to issues related to tenant operations which continued through June 2023, and is recorded in the loss from equity-method investees in the consolidated statements of operations for the year ended December 31, 2022, and consequently, reduced our equity-method investment balance to $0. As of December 31, 2023 and 2022, the balance of our equity-method investment related to the FPH JV was approximately $0. None of our Equity-Method Investments are significant equity-method investments. Distributions from Equity-Method Investments As of December 31, 2023 and 2022, we have distributions receivable, which is included in tenant and other receivables in our consolidated balance sheets, as follows: December 31, December 31, 2023 2022 SULH JV $ 311,000 $ 259,000 Fantasia II JV 30,000 55,000 Fantasia III JV 87,000 22,000 FPH JV 64,000 64,000 Total $ 492,000 $ 400,000 For the years ended December 31, 2023 and 2022, we received cash distributions, which are included in our cash flows from operating activities in the change in tenant and other receivables, and cash flows from investing activities, using the cumulative earnings approach, as follows: Year Ended December 31, 2023 Year Ended December 31, 2022 Total Cash Cash Flow Cash Flow Total Cash Cash Flow Cash Flow Distributions from from Distributions from from Received Operating Investing Received Operating Investing SUL JV $ 1,706,000 $ 760,000 $ 946,000 $ 615,000 $ — $ 615,000 Fantasia JV — — — — — — Fantasia II JV 135,000 — 135,000 311,000 213,000 98,000 Fantasia III JV 12,000 — 12,000 134,000 134,000 — FPH JV — — — 56,000 — 56,000 Total $ 1,853,000 $ 760,000 $ 1,093,000 $ 1,116,000 $ 347,000 $ 769,000 |
Receivables
Receivables | 12 Months Ended |
Dec. 31, 2023 | |
Receivables | |
Receivables | 6. Receivables Tenant and Other Receivables, net Tenant and other receivables, net consists of: December 31, December 31, 2023 2022 Straight-line rent receivables $ 1,396,000 $ 3,862,000 Distribution receivables from Equity-Method Investments 492,000 400,000 Asset management fees 327,000 375,000 Other receivables 375,000 383,000 Total $ 2,590,000 $ 5,020,000 |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2023 | |
Related Party Transactions | |
Related Party Transactions | 7. Related Party Transactions Equity-Method Investments See Notes 5 and 6 for further discussion of distributions and asset management fees related to our Equity-Method Investments. |
Intangible Lease Assets
Intangible Lease Assets | 12 Months Ended |
Dec. 31, 2023 | |
Intangible Lease Assets | |
Intangible Lease Assets | 8. Intangible Lease Assets Intangible lease assets as of December 31, 2023 and 2022 are as follows: December 31, December 31, 2023 2022 In-place leases $ 12,680,000 $ 13,778,000 Less: accumulated amortization (1,831,000) (937,000) In-place leases, net 10,849,000 12,841,000 Above-market leases 959,000 959,000 Less: accumulated amortization (155,000) (96,000) Above-market leases, net 804,000 863,000 Total intangible lease assets, net $ 11,653,000 $ 13,704,000 For each of the years ended December 31, 2023 and 2022, amortization expense for intangible lease assets was approximately $1.0 million, of which approximately $0.1 million relates to the amortization of above-market leases which is included within rental revenues in the accompanying consolidated statements of operations. Expected future amortization of the intangible lease assets as of December 31, 2023 and for each of the five following years and thereafter ending December 31 are as follows: Years ending December 31, 2024 900,000 2025 900,000 2026 900,000 2027 900,000 2028 900,000 Thereafter 7,153,000 $ 11,653,000 |
Right of Use Asset - Operating
Right of Use Asset - Operating Lease | 12 Months Ended |
Dec. 31, 2023 | |
Right of Use Asset - Operating Lease | |
Right of Use Asset - Operating Lease | 9. Right of Use Asset – Operating Lease In November 2022, we entered into an operating lease for office space (“Office Lease”) for a period of sixty-six The Office Lease is classified as an operating lease. A “right to use” or “ROU asset” represents the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Office Lease did not provide an explicit rate of interest; therefore we used an estimated incremental borrowing rate of 5% based on a fully collateralized and fully amortizing loan with a maturity date of the same length as the lease that is based on information available at the commencement date in determining the present value of lease payments. At inception, we recorded an ROU asset and lease liability of approximately $0.9 million. As a result, the Company had non-cash liabilities Supplemental balance sheet information related to the Office Lease as of December 31, 2023 is as follows: Component Consolidated Balance Sheet Caption Right of use asset - operating Other assets, net $ 698,000 Lease liability - operating Accounts payable and accrued liabilities $ 877,000 Lease expense is presented as part of continuing operations within general and administrative expenses in the consolidated statements of operations. For the year ended December 31, 2023 and 2022, we recognized approximately $182,000 and $87,000, respectively, in lease expense related to this lease. The lease payments are classified within operating activities in the consolidated statements of cash flows. As of December 31, 2023 and 2022, we paid approximately$103,000 and $26,000, respectively, in lease payments and the weighted average remaining lease term is 4.3 years. Pursuant to ASC 842, lease payments on the Office Lease for each of the five following years ending December 31 are as follows: Year Lease payments 2024 211,000 2025 217,000 2026 224,000 2027 231,000 2028 98,000 Total lease payments $ 981,000 Less imputed interest (104,000) Total lease liability $ 877,000 |
Concentration of Risk
Concentration of Risk | 12 Months Ended |
Dec. 31, 2023 | |
Concentration of Risk | |
Concentration of Risk | 10. Concentration of Risk As of December 31, 2023, we owned eight properties in Georgia, four properties in California, three properties in Oregon, one property in Texas, one property in Illinois, and one property in Arizona (excluding the 31 properties held by our Equity-Method Investments). Accordingly, there is a geographic concentration of risk subject to economic conditions in certain states. Additionally, as of December 31, 2023, we leased our 16 real estate properties to 14 different tenants under long-term triple net leases. For the year ended December 31, 2023, three of the 14 tenants each had rental revenue greater than 10% (17%, 14% and 10%). As of December 31, 2022, we leased our 16 real estate properties to 14 different tenants under long-term triple net leases. For the year ended December 31, 2022, three of the 14 tenants each had rental revenue greater than 10% (16%, 14%, and 10%). As of December 31, 2023, our GA8 Properties are considered to be a significant asset concentration as the aggregate net assets of the GA8 Properties were greater than 20% of our total assets due to cross-default provisions in the leases. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2023 | |
Commitments and Contingencies | |
Commitments and Contingencies | 11. Commitments and Contingencies We inspect our properties under a Phase I assessment for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist, we are not currently aware of any environmental liability with respect to the properties that would have a material effect on our consolidated financial condition, results of operations and cash flows. Further, we are not aware of any environmental liability or any unasserted claim or assessment with respect to an environmental liability that we believe would require additional disclosure or the recording of a loss contingency. Our commitments and contingencies include the usual obligations of real estate owners and licensed operators in the normal course of business. In the opinion of management, these matters are not expected to have a material impact on our consolidated financial condition, results of operations and cash flows. We are also subject to contingent losses resulting from litigation against the Company. Legal Proceedings HCRE In September 2015, a bankruptcy petition was filed against Healthcare Real Estate Partners, LLC (“HCRE”) by the investors in Healthcare Real Estate Fund, LLC and Healthcare Real Estate Qualified Purchasers Fund, LLC (collectively, the “Funds”). HCRE did not timely respond to the involuntary petition and the Bankruptcy Court entered an Order of Relief making HCRE a debtor in bankruptcy. As a result, HCRE was removed as manager under the Funds’ operating agreement. Thereafter the Company became the manager of the Funds and purchased the investors’ interests in the Funds for approximately $0.9 million. Following the subsequent dismissal of the involuntary bankruptcy petition filed against it, HCRE filed a motion for attorneys’ fees and damages and a separate complaint for violation of the automatic stay against the petitioning creditors and the Company in the United States Bankruptcy Court of the District of Delaware. The Bankruptcy Court granted a motion to dismiss the complaint for violation of the automatic stay filed jointly by the petitioning creditors and us, and dismissed the complaint with prejudice. HCRE appealed the Bankruptcy Court’s decision to the United States District Court for the District of Delaware which affirmed the Bankruptcy Court’s dismissal of the complaint in a decision dated September 9, 2018. On October 11, 2018, HCRE appealed the District Court’s decision affirming the Bankruptcy Court’s dismissal of the complaint to the United States Court of Appeals for the Third Circuit. On October 22, 2019, the Third Circuit granted HCRE’s appeal, reversing the District Court and holding that HCRE could assert the adversary complaint seeking damages for violation of the automatic stay. The Company filed a Petition for Rehearing on November 5, 2019 asserting that HCRE is not entitled to assert a claim for damages for violation of the automatic stay. This Petition was denied and the mandate was issued sending the matter back to the Bankruptcy Court. The Bankruptcy Court held a status conference on February 4, 2021, and subsequently entered scheduling orders to govern discovery and pretrial matters. The parties filed dispositive motions, including a motion filed by the Company and the petitioning creditors for judgment on the pleadings. On February 4, 2022, the Bankruptcy Court entered an order denying the motion for judgment on the pleadings on the basis that the Bankruptcy Court would consider the points raised therein after trial. The Bankruptcy Court also entered an order denying HCRE’s motion to dismiss certain counterclaims and severing certain other counterclaims asserted by the petitioning creditors and the Company against HCRE on jurisdictional grounds, with the effect that such counterclaims may be pursued in the United States District Court. Trial in the Bankruptcy Court was conducted on January 9 and 10, 2023, with final concluding arguments presented on January 19, 2023. On May 12, 2023, the Court issued an opinion to award the plaintiffs $75,000 for reimbursement of legal fees related to the filing of the involuntary bankruptcy petition plus $517,000 for reimbursement of attorney’s fees related to the stay violation. Several additional motions have been filed and were heard in September 2023. On November 14, 2023, the Bankruptcy Court entered a further Memorandum Opinion, which modified the award for reimbursement of attorneys’ fees for the stay violation from $517,000 to $665,000, though a final judgment has not yet been entered by the Bankruptcy Court. Subject to entry of judgment, the Company has filed an appeal of the fee award related to the stay violation and also asserts that any award should be offset by the Company’s counterclaims that remain pending in the district court. Based on the assessment by management, as of December 31, 2023, the Company has accrued $75,000 for the reimbursement of legal fees related to the involuntary petition filing and $0 for the $665,000 in attorney’s fees related to the stay violation as we believe that a loss is currently not probable under Accounting Standards Codification 450, “Contingencies.” Eikanas Dispute On May 15, 2023, the Board of Directors of the Company sent Kent Eikanas, the then-Chief Executive Officer, written notice of various deficiencies in his performance , thereby initiating the 60-day cure period required by Mr. Eikanas’ Amended and Restated Employment Agreement, dated October 19, 2021. On July 14, 2023 (the “Termination Date”), after the expiration of the 60-day cure period, the Board of Directors (the “Board”) of the Company terminated, for cause, Mr. Eikanas from his position as Chief Executive Officer and Secretary of the Company. Per the terms of his employment agreement, upon Mr. Eikanas’ termination for cause, Mr. Eikanas is also deemed to have resigned, as of the Termination Date, from all positions with the Company and its subsidiaries, the Board and any boards of directors or managers of any of Company’s subsidiaries and affiliates. On June 5, 2023, Mr. Eikanas filed a lawsuit against the Company in the Superior Court of California for, among other things, wrongful termination and breach of contract, and seeking unspecified monetary damages. On April 8, 2024, Mr. Eikanas amended his Complaint to add additional causes of action and three new defendants – Steven Roush, Board Member; Suzanne Koenig, Board Member; and Elizabeth Pagliarini, Chief Executive Officer and Board Member. Based on the assessment by management, the Company believes that a loss is currently not probable or estimable under ASC 450, “Contingencies”, and as of December 31, 2023, no accrual has been made with regard to the claim. Indemnification and Employment Agreements We have entered into indemnification agreements with certain of our executive officers and directors which indemnify them against all judgments, penalties, fines and amounts paid in settlement and all expenses actually and reasonably incurred by him or her in connection with any proceeding. Management of our Equity-Method Investments As the manager of our Equity-Method Investments, we are responsible for managing the day-to-day operations. Additionally, we could be subject to a capital call from our Equity-Method Investments. |
Equity
Equity | 12 Months Ended |
Dec. 31, 2023 | |
Equity | |
Equity | 12. Equity Distributions The Company declared no cash distributions per common share during the years ended December 31, 2023 and 2022. Our distribution reinvestment plan was suspended indefinitely effective December 31, 2010. At this time, we cannot provide any assurance as to if or when we will resume our distribution reinvestment plan. Share-Based Compensation Plans Upon the grant of stock options, we determine the exercise price by using our estimated per-share value, which is calculated by aggregating the estimated fair value of our investments in real estate and the estimated fair value of our other assets, subtracting the book value of our liabilities, utilizing a discount for the fact that the shares are not currently traded on a national securities exchange and a lack of a control premium, and divided the total by the number of our common shares outstanding at the time the options were granted. The fair value of each grant is estimated on the date of grant using the Black-Scholes option-pricing model. Assumptions required by the model include the risk-free interest rate, the expected life of the options, the expected stock price volatility over the expected life of the options, and the expected distribution yield. Compensation expense for employee stock options is recognized ratably over the vesting term. The expected life of the options was based on the simplified method as we do not have sufficient historical exercise data. The risk-free interest rate was based on the U.S. Treasury yield curve at the date of grant using the expected life of the options at the date of grant. Volatility was based on historical volatility of the stock prices for a sample of publicly traded companies with risk profiles similar to ours. The valuation model applied in this calculation utilizes highly subjective assumptions that could potentially change over time, including the expected stock price volatility and the expected life of an option. Summit Healthcare REIT, Inc. 2015 Omnibus Incentive Plan On October 28, 2015, we adopted the Summit Healthcare REIT, Inc. 2015 Omnibus Incentive Plan (“Incentive Plan”). The purpose of the Incentive Plan is to provide a means through which to attract and retain key personnel and to provide a means whereby current or prospective directors, officers, employees, consultants and advisors can acquire and maintain an equity interest in us, or be paid incentive compensation, including incentive compensation measured by reference to the value of our common stock, thereby strengthening their commitment to our welfare and aligning their interests with those of our stockholders. We may grant non-qualified stock options and incentive stock options, stock appreciation rights, restricted stock and restricted stock units, and performance based compensation awards. Stock options granted under the Incentive Plan are required to have a per share exercise price that is not less than 100% of the fair market value of our common stock underlying such stock options on the date an option is granted (other than in the case of options that are substitute awards). All stock options that are intended to qualify as incentive stock options must be granted pursuant to an award agreement expressly stating that the option is intended to qualify as an incentive stock option, and will be subject to the terms and conditions that comply with the rules as may be prescribed by Section 422 of the Code. The maximum term for stock options granted under the Incentive Plan will be ten years from the initial date of grant. The Incentive Plan provides that the total number of shares of common stock that may be issued is 3,000,000, of which 1,851,937 is available for future issuances as of December 31, 2023. On April 1, 2023, we granted 80,000 stock options to our non-executive employees under our Summit Healthcare REIT, Inc. 2015 Omnibus Incentive Plan (“Incentive Plan”). The stock options vest monthly beginning on May 1, 2023 and continuing over a three-year period through April 1, 2025. The options expire 10 years from the grant date. The weighted-average fair value per share of the stock options granted was $0.91. In October 2023, 880,845 vested shares were forfeited due to the termination of an employee. The estimated fair value using the Black-Scholes option-pricing model with the following weighted average assumptions: 2023 Stock options granted 80,000 Expected volatility 37.34 % Expected term 5.75 years Risk-free interest rate 3.65 % Dividend yield 0 % Fair value per stock option $ 0.91 The following table summarizes our stock options as of December 31, 2023: Weighted Weighted Average Average Remaining Aggregate Exercise Contractual Intrinsic Options Price Term Value Options outstanding at January 1, 2022 1,867,908 $ 2.09 Granted 81,000 2.35 Exercised — Cancelled/forfeited Options outstanding at December 31, 2022 1,948,908 $ 2.10 Granted 80,000 2.18 Exercised — Cancelled/forfeited 880,845 2.02 Options outstanding at December 31, 2023 1,148,063 $ 2.16 4.79 $ — Options exercisable at December 31, 2023 1,049,840 $ 2.15 4.41 $ — For our outstanding non-vested options as of December 31, 2023, the weighted average grant date fair value per share was $0.91. As of December 31, 2023, we have unrecognized stock-based compensation expense related to unvested stock options which is expected to be recognized as follows: Years Ending December 31, 2024 49,000 2025 32,000 2026 8,000 $ 89,000 The stock-based compensation expense reported for the years ended December 31, 2023 and 2022 was approximately $41,000 and $31,000, respectively, and is included in general and administrative expense in the consolidated statements of operations. |
Segment Reporting
Segment Reporting | 12 Months Ended |
Dec. 31, 2023 | |
Segment Reporting | |
Segment Reporting | 13. Segment Reporting ASC 280, Segment Reporting |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2023 | |
Subsequent Events | |
Subsequent Events | 14. Subsequent Events CA3 Properties In February 2024, we entered into a Purchase and Sale Agreement (“PSA”) to sell our CA3 Properties. The aggregate purchase price is $30.0 million and the transaction is expected to close in the second quarter of 2024. Either party may terminate the agreement for non-satisfaction or failure of a condition to the obligation of either party to consummate the transaction contemplated by this PSA, unless such matter has been satisfied or waived by the date specified in this PSA or by the closing date. GA8 Properties On March 13, 2024, we received a notice of default, dated March 12, 2024, from Oxford for the mezzanine loan, whereby the mezzanine lender has exercised certain rights, including, their right to act as attorney-in-fact of Summit Georgia Holdings LLC, appointment of an independent manager over the GA8 Properties, thereby removing the Company as the manager and removing the Company’s voting rights and rights to receive any distributions with respect to such properties. The Oxford notice of default also constitutes an event of default under the GA8 Properties subordinated term loan with Oxford and the mortgage loan with CIBC Bank, USA. We are currently analyzing this contractual change and the impact on our continued consolidation of Summit Georgia and the underlying GA8 Properties that included the following in our consolidated balance sheet as of December 31, 2023: $98.4 million in real estate properties, net, $10.4 million in intangible lease assets, net, and $122.8 million of loans payable, net, and the following in our statement of operations for the year ended December 31, 2023: $11.8 million in total rental revenues, $1.3 million in property operating costs, $5.1 million in depreciation and amortization and $13.2 million in interest expense. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2023 | |
Summary of Significant Accounting Policies | |
Principles of Consolidation and Basis of Presentation | Principles of Consolidation and Basis of Presentation The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, the Operating Partnership, and its consolidated companies and are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). All intercompany accounts and transactions have been eliminated in consolidation. Accounting Standard Codification (“ASC”) 810, Consolidation |
Variable Interest Entities | Variable Interest Entities We analyze our contractual and/or other interests to determine whether such interests constitute an interest in a variable interest entity (VIE) in accordance with ASC 810, Consolidation |
Use of Estimates | Use of Estimates The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base these estimates on various assumptions that we believe to be reasonable under the circumstances, and these estimates form the basis for our judgments concerning the carrying values of assets and liabilities that are not readily apparent from other sources. We periodically evaluate these estimates and judgments based on available information and experience. Actual results could differ from our estimates under different assumptions and conditions. If actual results significantly differ from our estimates, our financial condition and results of operations could be materially impacted. The most significant estimates made include that of real estate acquisition valuation and the allocation of property purchase price to tangible and intangible assets acquired and liabilities assumed at relative fair value, the evaluation of potential impairment of long-lived assets and equity method investments, and the estimated useful lives of real estate assets and intangibles. |
Cash and Cash Equivalents | Cash and Cash Equivalents We consider all short-term, highly liquid investments that are readily convertible to cash with a maturity of three months or less at the time of purchase to be cash equivalents. As of December 31, 2023, we had cash accounts in excess of FDIC-insured limits. To date, the Company has not experienced losses or lack of access to cash in its cash and cash equivalent accounts. |
Restricted Cash | Restricted Cash Restricted cash represent restricted cash held by our lenders in interest bearing accounts related to impound reserve accounts for property taxes, insurance and capital funds as required under the terms of the loan agreements. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown on the consolidated statements of cash flows: December 31, December 31, 2023 2022 Cash and cash equivalents $ 10,997,000 $ 11,572,000 Restricted cash 3,186,000 2,591,000 Total cash, cash equivalents, and restricted cash shown on the consolidated statements of cash flows $ 14,183,000 $ 14,163,000 |
Investments in Real Estate and Depreciation | Investments in Real Estate and Depreciation We allocate the purchase price of our properties in accordance with ASC 805 – Business Combinations. If the acquisition does not meet the definition of a business, we record the acquisition as an asset acquisition. For transactions that are business combinations, acquisition costs are expensed as incurred. For transactions that are an asset acquisition, acquisition costs are capitalized as incurred. Upon an asset acquisition of a property, we allocate the purchase price of the property based upon the relative fair value of the tangible and intangible assets acquired and liabilities assumed, which generally consists of land, buildings, site improvements, furniture and fixtures and intangible assets. The determination of fair value involves the use of significant judgment and estimation. We value land based on various inputs, which may include internal analysis of recently acquired properties, existing comparable properties within our portfolio, or third party appraisals or valuations based on comparable sales. We allocate the purchase price to tangible assets of an acquired property by valuing the property as if it were vacant. We are required to make subjective assessments as to the estimated useful lives of our depreciable assets. We consider the period of future benefit of the assets to determine the appropriate estimated useful lives. Depreciation of our assets is being charged to expense on a straight-line basis over the estimated useful lives. We depreciate the fair value allocated to building and improvements over estimated useful lives ranging from 15 to 39 years. We estimate the value of furniture and fixtures based on the assets’ depreciated replacement cost. We depreciate the fair value allocated to furniture and fixtures over estimated useful lives ranging from three In allocating the purchase price to identified intangible assets and liabilities of an acquired property, the value of above/below-market leases and in-place leases are estimated as follows: The value of above/below market leases is based on the differences between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) estimated fair market lease rates from the perspective of a market participant for the corresponding in-place leases, measured, for above-market leases, over a period equal to the remaining non-cancelable term of the lease and, for below-market leases, over a period equal to the initial term plus any below market fixed rate renewal periods. The above/below market leases are amortized as an adjustment to rental revenue over the remaining term of the respective leases. The value of in-place leases consisting of tenant origination and absorption costs and leasing commissions avoided is based on the Company’s evaluation of the specific characteristics of each tenant’s lease. Factors considered include estimates of carrying costs during expected lease-up periods, current market conditions, discount rates, and costs to execute similar leases. The value of in-place leases are amortized over the remaining term of the respective leases and included in depreciation and amortization in the consolidated statements of operations. If a tenant vacates its space prior to its contractual expiration date, any unamortized balance of the related intangible asset is recorded in the consolidated statements of operations. Held for Sale We consider properties to be assets held for sale when (1) management commits to a plan to sell the property, (2) it is unlikely that the disposal plan will be significantly modified or discontinued; (3) the property is available for immediate sale in its present condition; (4) actions required to complete the sale of the property have been initiated; (5) sale of the property is probable and we anticipate the completed sale will occur within one year; and (6) the property is actively being marketed for sale at a price that is reasonable given our estimate of current market value. Upon designation of a property as an asset held for sale, we record the property’s value at the lower of its carrying value or its estimated fair value, less estimated transaction costs. Depreciation and amortization of the property are discontinued. If a property subsequently no longer meets the criteria to be classified as held for sale, it is reclassified as held and used and measured at the lower of i) its original carrying amount before the asset was classified as held for sale, adjusted for any depreciation expense not recognized while it was classified as held for sale, and ii) its fair value. |
Impairment of Real Estate Properties and Related Intangible Lease Assets | Impairment of Real Estate Properties and Related Intangible Lease Assets We evaluate the recoverability of the carrying value of our real estate properties and related intangible lease assets on a property-by-property basis. We review our real estate properties and related intangible lease assets for recoverability when events or circumstances, including changes in the Company’s use of property or the strategy for its overall business, plans to sell a property before its depreciable life has ended, occupancy changes, significant near-term lease expirations, significant deteriorations of the underlying cash flows of the property, and other market factors indicate that the carrying amount of the property may not be recoverable. Impairment is measured as the amount by which the carrying amount of the real estate properties and related intangible lease assets exceeds the fair value of the property. During 2023, we recorded an impairment of $11.4 million ($10.3 million for real estate properties and $1.1 million for intangible |
Fair Value Measurements | Fair Value Measurements Fair value represents the estimate of the proceeds to be received, or paid in the case of a liability, in a current transaction between willing parties. ASC 820, Fair Value Measurement, Financial assets and liabilities are categorized based on the inputs to the valuation techniques as follows: Level 1. Level 2. Level 3. Assets and liabilities measured at fair value are classified according to the lowest level input that is significant to their valuation. A financial instrument that has a significant unobservable input along with significant observable inputs may still be classified as a Level 3 instrument. We generally determine or calculate the fair value of financial instruments using quoted market prices in active markets when such information is available or use appropriate present value or other valuation techniques, such as discounted cash flow analyses, incorporating available market discount rate information for similar types of instruments and our estimates for non-performance and liquidity risk. These techniques are significantly affected by the assumptions used, including the discount rate, credit spreads, and estimates of future cash flow. As of and for the year ended December 31, 2023, our equity method investment in the Fantasia II JV was measured at fair value, on a nonrecurring basis using unobservable (level 3) inputs. We estimated the fair value of our equity-method investments based on discounted future cash flows. As a result, we recognized an impairment loss of $0.5 million (see Note 5). As of and for the year ended December 31, 2022, our equity method investment in the Fantasia I JV and FPH JV was measured at fair value, on a nonrecurring basis using unobservable (level 3) inputs. We estimated the fair value of our equity-method investments based on discounted future cash flows. As a result, we recognized an impairment loss of $0.4 million (see Note 5). See above under Impairment of Real Estate Properties for further information. |
Fair Value Measurement of Financial Instruments | Fair Value Measurement of Financial Instruments Our consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, tenant and other receivables, certain other assets, accounts payable and accrued liabilities, security deposits and loans payable. With the exception of the loans payable discussed below, we consider the carrying values to approximate fair value for such financial instruments because of the short period of time between origination of the instruments and their expected payment. These are considered a Level I inputs. As of December 31, 2023 and 2022, the fair value of our fixed rate U.S. Department of Housing and Urban Development (“HUD”)-insured loans payable was $36.4 million and $38.9 million, compared to the principal balance (excluding debt issuance costs) of $43.9 million and $45.0 million, respectively. The fair value of loans payable was estimated using lending rates available to us for financial instruments with similar terms and maturities. The fair value of our fixed and variable rate loans payable was estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. As the inputs to our valuation estimate are neither observable in nor supported by market activity, our loans payable are classified as Level 3 liability within the fair value hierarchy. As of December 31, 2023 and 2022, we believe the carrying amounts of our variable rate loans payable are reasonably estimated at their carrying amounts as there have been minimal changes to the fixed spread portion of interest rates for similar loans observed in the market, and as the variable portion of our interest rates fluctuate with the associated market indices. We believe the fair value of our variable rate mezzanine loan payable which is currently in default approximates the carrying amount based on the contractual rights of the mezzanine loan payable holders. See Note 14 for additional discussion. At December 31, 2023 and 2022, we do not have any significant financial assets or financial liabilities that are measured at fair value on a recurring basis in our consolidated financial statements. |
Tenant and Other Receivables | Tenant and Other Receivables Tenant and other receivables are comprised mainly of the cumulative amount of future adjustments necessary to present tenant rental income on a straight-line basis, accounts receivable due from residents for our Operated Properties, asset management fees and distributions receivable. |
Allowance for Credit Losses | Allowance for Credit Losses The allowance for credit losses is maintained on all receivables except for lease receivables and is maintained at a level believed adequate to absorb potential losses in our receivables. The determination of the credit allowance is based on a quarterly evaluation of each of these receivables, including general economic conditions and estimated collectability. We evaluate the collectability of our receivables based on a combination of credit quality indicators, including, but not limited to, payment status, historical charge-offs, and financial strength of the equity method investment. A receivable is considered to have deteriorated in credit quality when, based on current information and events, it is probable that we will be unable to collect all amounts due. As of December 31, 2023 and 2022, the allowance for credit losses is immaterial. |
Deferred Financing Costs | Deferred Financing Costs Costs incurred with potential financing arrangements are recorded as deferred financing costs. Costs incurred in connection with completed debt financing are recorded as debt issuance costs. Debt issuance costs are amortized using the straight-line basis which approximates the effective interest rate method, over the contractual terms of the respective financings, and are presented net of loans payable in loans payable, net of debt issuance costs, in the consolidated balance sheets. Costs incurred in connection with an unexercised debt financing are recorded as expense when financing is no longer deemed probable. For the year ended December 31, 2023, we recorded approximately $0.7 million in property operating costs expense in the consolidated statements of operations for deferred financing costs associated with a terminated refinancing related to the CA3 Properties. |
Other Assets | Other Assets Other assets consist primarily of deferred financing costs, deposits, prepaid insurance, property taxes and other and corporate assets. Additionally, other assets will be amortized to expense over their future service periods. Balances without future economic benefit are expensed as they are identified. |
Equity-Method Investments | Equity-Method Investments We report our investments in unconsolidated entities, over whose operating and financial policies we have the ability to exercise significant influence but not control, under the equity method of accounting. Under this method of accounting, our pro rata share of the applicable entity’s earnings or losses is included in our consolidated statements of operations. We initially record our investments based on either the carrying value for properties contributed or the cash invested. We evaluate our Equity-Method Investments for impairment whenever events or changes in circumstances indicate that the carrying value of our investments may exceed the fair value. If it is determined that a decline in the fair value of our investments is not temporary, and if such reduced fair value is below its carrying value, an impairment is recorded. Determining fair value involves significant judgment. Our estimates consider available evidence including the present value of the expected future cash flows discounted at market rates, general economic conditions and other relevant factors. For the year ended December 31, 2023, we recorded impairment of approximately $0.5 million related to our equity-method investments. For the year ended December 31, 2022, we recorded impairment of approximately $0.4 million related to our equity-method investments. See Note 5 for further information. |
Rental Revenue | Rental Revenue We recognize rental revenue based on ASC 842, Leases Additionally, where real estate taxes and insurance expenses were paid directly by our tenants to taxing authorities or insurance companies, respectively, we do not record any revenue or expense. For our triple-net leasing arrangements in which the tenant remits payment for certain costs to us and we pay the vendor, we have reported the gross amounts in total rental revenues and property operating costs on the consolidated statements of operations. Additionally, under Topic 842, we must assess if substantially all payments due under the lease are likely to be collected. If tenant lease payments are not likely to be collected, then the revenues will be recognized on a cash basis (or if the answer changes at a later date, the revenues are adjusted to reflect what it would have been on a cash basis) and the adjustments will be recorded through rental revenues, rather than bad debt expense. During 2022, we determined that two of our leases were uncollectible and therefore, we recorded rental revenue received from those tenants on the cash basis. |
Resident Fees and Services Revenue | Resident Fees and Services Revenue We recognize resident fees and services revenue at the amount that we expect to be entitled to in exchange for providing resident care and services. Resident fees are recognized and billed monthly based on the contracted rate in the resident lease agreements and the reimbursements from Medicaid are based on contracted reimbursement rates. These amounts are paid directly from the residents and/or third-party payors (currently only Medicaid). Revenue is recognized as performance obligations are satisfied. Performance obligations are determined based on the nature of the services provided by us. The majority of resident fees and services is attributable to the portion of the base monthly lease fee in the resident lease agreement. The Company recognizes the resident fee revenue based upon the predominant component, either the lease or non-lease component, of the contracts. The Company has determined that the lease component is the predominant component and the services included under the resident agreements have the same timing and pattern of transfer and are performance obligations that are satisfied over time. Resident services consist of care level services and certain other ancillary services (i.e., housekeeping, laundry, etc.). These services are provided and paid for in addition to the standard fees included in each resident lease (i.e., room and board, standard meals, etc.). |
Asset Management Fees | Asset Management Fees We record asset management fee revenue based on ASC 606, Revenue from Contracts with Customers (Topic 606) |
Stock-Based Compensation | Stock-Based Compensation We record stock-based compensation expense for share-based payments to employees and directors, including grants of stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes option-pricing model. Compensation expense is recognized ratably over the vesting term and is included in general and administrative expense in our consolidated statements of operations. Forfeitures are recognized as they occur. See Note 12 for further information. |
Noncontrolling Interest in Consolidated Subsidiary | Noncontrolling Interest in Consolidated Subsidiary Noncontrolling interest relates to the interest in the consolidated entities that are not wholly-owned by us. As of December 31, 2023 and 2022, the noncontrolling interest mainly relates to CHP, LLC. ASC 810-10-65, Consolidation We periodically evaluate individual noncontrolling interests for the ability to continue to recognize the noncontrolling interest as permanent equity in the consolidated balance sheets. Any noncontrolling interest that fails to qualify as permanent equity will be reclassified as temporary equity and adjusted to the greater of (a) the carrying amount, or (b) its redemption value as of the end of the period in which the determination is made. |
Income Taxes | Income Taxes We have elected to be taxed as a REIT, under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”) beginning with our taxable year ending December 31, 2006. To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to currently distribute at least 90% of the REIT's ordinary taxable income to stockholders. As a REIT, we generally will not be subject to federal income tax on taxable income that we distribute to our stockholders. If we fail to qualify as a REIT in any taxable year, we will then be subject to federal income taxes on our taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year during which qualification is lost unless the Internal Revenue Service were to grant us relief under certain statutory provisions. Such an event could materially and adversely affect our net loss and net cash available for distribution to stockholders. However, we believe that we will be organized and operate in such a manner as to qualify for treatment as a REIT and intend to operate for the foreseeable future in such a manner so that we will remain qualified as a REIT for federal income tax purposes. Given the applicable statute of limitations, we generally are subject to audit by the Internal Revenue Service ("IRS") for the year ended December 31, 2020 and subsequent years, and state income tax returns are subject to audit for the year ended December 31, 2019 and subsequent years. We have elected to treat SAM TRS and SHOP TRS as taxable REIT subsidiaries (collectively, the “TRS Subsidiaries”), which generally may engage in any business, including the provision of customary or non-customary services for our tenants. The TRS Subsidiaries are treated as a regular corporation and are subject to federal income tax and applicable state income and franchise taxes at regular corporate rates. As of December 31, 2023 and 2022, respectively, the TRS Subsidiaries have net deferred tax assets, related primarily to their net operating losses (collectively “NOL”), of $1,142,000 and $683,000, for which there is a full valuation allowance recorded. The Company regularly assesses the ability to realize deferred tax assets recorded based upon the weight of available evidence, including such factors as recent earnings history and expected future taxable income on a jurisdiction-by-jurisdiction basis. If the Company changes its determination as to the amount of realizable deferred tax assets, the Company will adjust its valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made. The Company’s management believes that, based on a number of factors, it is more likely than not, that all or some portion of the deferred tax assets will not be realized; and accordingly, for the year ended December 31, 2023, the Company continues to provide a full valuation allowance against the TRS Subsidiaries net deferred tax assets. The net change in the valuation allowance for the year ended December 31, 2023 was an increase of $457,000. As of December 31, 2023, the TRS Subsidiaries have NOL carryforwards for federal income tax purposes of approximately $4.2 million that will begin to expire in 2035 with approximately $2.4 million of the federal net operating loss carryforward lasting indefinitely. As of December 31, 2023, the TRS Subsidiaries had net operating loss carryforwards for state income tax purposes of approximately $4.4 million that will begin to expire at various dates beginning in 2035. |
Uncertain Tax Positions | Uncertain Tax Positions In accordance with the requirements of ASC 740, Income Taxes, |
Basic and Diluted Net Income (Loss) and Distributions per Common Share | Basic and Diluted Net Income (Loss) and Distributions per Common Share Basic earnings per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income (loss) by the weighted-average number of common shares and dilutive potential common shares outstanding during the period. Dilutive potential common shares are calculated in accordance with the treasury stock method. For the years ended December 31, 2023 and 2022, all stock options outstanding were considered to be anti-dilutive. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Summary of Significant Accounting Policies | |
Schedule of reconciliation of cash, cash equivalents, and restricted cash | December 31, December 31, 2023 2022 Cash and cash equivalents $ 10,997,000 $ 11,572,000 Restricted cash 3,186,000 2,591,000 Total cash, cash equivalents, and restricted cash shown on the consolidated statements of cash flows $ 14,183,000 $ 14,163,000 |
Investments in Real Estate Pr_2
Investments in Real Estate Properties (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Investments in Real Estate Properties | |
Schedule of investments in real estate properties | December 31, December 31, 2023 2022 Land $ 14,905,000 $ 15,565,000 Buildings and improvements 157,875,000 166,989,000 Less: accumulated depreciation (20,439,000) (15,985,000) Buildings and improvements, net 137,436,000 151,004,000 Furniture and fixtures 12,106,000 12,440,000 Less: accumulated depreciation (7,481,000) (5,882,000) Furniture and fixtures, net 4,625,000 6,558,000 Real estate properties, net $ 156,966,000 $ 173,127,000 |
Schedule of real estate properties | The following table provides summary information regarding our portfolio (excluding the 31 properties owned by our unconsolidated Equity-Method Investments and the $12.75 million mezzanine loan from Oxford (see Note 4) with Summit Georgia Holdings LLC (“Summit Georgia”), our wholly-owned subsidiary) as of December 31, 2023: Loans Payable, Excluding Debt Purchase Issuance Property Location Date Purchased Type (1) Price Costs Sheridan Care Center Sheridan, OR August 3, 2012 SNF $ 4,100,000 $ 3,829,000 Fernhill Care Center Portland, OR August 3, 2012 SNF 4,500,000 3,359,000 Friendship Haven Healthcare and Rehabilitation Center Galveston County, TX September 14, 2012 SNF 15,000,000 11,109,000 Pacific Health and Rehabilitation Center Tigard, OR December 24, 2012 SNF 8,140,000 5,600,000 Brookstone of Aledo Aledo, IL July 2, 2013 AL 8,625,000 6,461,000 Sundial Assisted Living Redding, CA December 18, 2013 AL 3,500,000 3,626,000 Pennington Gardens Chandler, AZ July 17, 2017 AL/MC 13,400,000 9,877,000 Yucaipa Hill Post Acute Yucaipa, CA July 2, 2021 SNF 10,715,000 8,014,000 Creekside Post Acute Yucaipa, CA July 2, 2021 SNF 4,780,000 3,575,000 University Post Acute Mentone, CA July 2, 2021 SNF 4,560,000 3,411,000 Calhoun Health Center Calhoun, GA December 30, 2021 SNF 7,670,000 6,549,000 Maple Ridge Health Care Center Cartersville, GA December 30, 2021 SNF 13,548,000 11,568,000 Chatsworth Health Care Center Chatsworth, GA December 30, 2021 SNF 29,785,000 25,432,000 East Lake Arbor Decatur, GA December 30, 2021 SNF 15,640,000 13,354,000 Fairburn Health Care Center Fairburn, GA December 30, 2021 SNF 14,644,000 12,503,000 Grandview Health Care Center Jasper, GA December 30, 2021 SNF 10,061,000 8,591,000 Rosemont at Stone Mountain Stone Mountain, GA December 30, 2021 SNF 23,908,000 20,414,000 Willowwood Nursing Center & Rehab Flowery Branch, GA December 30, 2021 SNF 14,744,000 12,589,000 Total: $ 207,320,000 $ 169,861,000 (1) SNF is an abbreviation for skilled nursing facility. AL is an abbreviation for assisted living facility. MC is an abbreviation for memory care facility. |
Schedule of future minimum lease payments | Years ending December 31, 2024 18,272,000 2025 18,566,000 2026 18,865,000 2027 19,168,000 2028 17,909,000 Thereafter 137,999,000 $ 230,779,000 |
Loans Payable (Tables)
Loans Payable (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Loans Payable | |
Schedule of loans payable | December 31, 2023 December 31, 2022 Loans payable to Lument (insured by HUD) in monthly installments of approximately $183,000, including interest, ranging from a fixed rate of 2.79% to 4.2%, due in September 2039 through April 2055, and as of December 31, 2023 and 2022, collateralized by Sheridan, Fernhill, Pacific Health, Aledo, Sundial and Friendship Haven. $ 33,984,000 $ 34,976,000 Loan payable to Capital One Multifamily Finance, LLC (insured by HUD) in monthly installments of approximately $49,000, including interest at a fixed rate of 4.23%, due in September 2053, and collateralized by Pennington Gardens. 9,877,000 10,039,000 Loan payable to CIBC Bank, USA in monthly installments of approximately $106,000 including cash collateral fund payments, variable interest rate as noted below (9.45% and 8.17% at December 31, 2023 and 2022, respectively), due in July 2024 and collateralized by Yucaipa Hills Post Acute, Creekside Post Acute and University Post Acute. 15,000,000 15,000,000 Loan payable to CIBC Bank, USA in monthly installments of approximately $680,000 (interest only through December 2023) variable interest rate as noted below (8.85% and 7.68% at December 31, 2023 and 2022, respectively), due in December 2024, and collateralized by Calhoun Health Center, Maple Ridge Health Care Center, Chatsworth Health Care Center, East Lake Arbor, Fairburn Health Care Center, Grandview Health Care Center, Rosemont at Stone Mountain, and Willowwood Nursing Center & Rehab. 91,000,000 91,000,000 Loan payable to Oxford Finance, LLC in monthly installments of approximately $280,000 (interest only through maturity), variable interest rate as noted below (16.4% and 15.1% at December 31, 2023 and 2022, respectively) due in March 2025, collateralized in second position by Calhoun Health Center, Maple Ridge Health Care Center, Chatsworth Health Care Center, East Lake Arbor, Fairburn Health Care Center, Grandview Health Care Center, Rosemont at Stone Mountain, and Willowwood Nursing Center & Rehab. 20,000,000 20,000,000 Mezzanine Loan payable to Oxford Finance, LLC in monthly installments of approximately $168,000 (interest only through maturity), variable interest rate as noted below (16.4% and 15.1% at December 31, 2023 and 2022, respectively) due in December 2026, secured by the equity interests of Summit Georgia, the parent holding company for the GA8 Properties. 12,750,000 12,750,000 182,611,000 183,765,000 Less debt issuance costs (2,682,000) (3,596,000) Total loans payable $ 179,929,000 $ 180,169,000 |
Schedule of principal payments due on the loans payable (excluding debt issuance costs) | Principal Year Amount 2024 139,951,000 (1) 2025 1,246,000 2026 1,292,000 2027 1,341,000 2028 1,391,000 Thereafter 37,390,000 $ 182,611,000 (1) |
Equity-Method Investments (Tabl
Equity-Method Investments (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Equity-Method Investments | |
Schedule of distributions receivable | December 31, December 31, 2023 2022 SULH JV $ 311,000 $ 259,000 Fantasia II JV 30,000 55,000 Fantasia III JV 87,000 22,000 FPH JV 64,000 64,000 Total $ 492,000 $ 400,000 |
Schedule of cash distributions | Year Ended December 31, 2023 Year Ended December 31, 2022 Total Cash Cash Flow Cash Flow Total Cash Cash Flow Cash Flow Distributions from from Distributions from from Received Operating Investing Received Operating Investing SUL JV $ 1,706,000 $ 760,000 $ 946,000 $ 615,000 $ — $ 615,000 Fantasia JV — — — — — — Fantasia II JV 135,000 — 135,000 311,000 213,000 98,000 Fantasia III JV 12,000 — 12,000 134,000 134,000 — FPH JV — — — 56,000 — 56,000 Total $ 1,853,000 $ 760,000 $ 1,093,000 $ 1,116,000 $ 347,000 $ 769,000 |
Receivables (Tables)
Receivables (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Receivables | |
Schedule of tenant and other receivables | December 31, December 31, 2023 2022 Straight-line rent receivables $ 1,396,000 $ 3,862,000 Distribution receivables from Equity-Method Investments 492,000 400,000 Asset management fees 327,000 375,000 Other receivables 375,000 383,000 Total $ 2,590,000 $ 5,020,000 |
Intangible Lease Assets (Tables
Intangible Lease Assets (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Intangible Lease Assets | |
Schedule of intangible lease assets | December 31, December 31, 2023 2022 In-place leases $ 12,680,000 $ 13,778,000 Less: accumulated amortization (1,831,000) (937,000) In-place leases, net 10,849,000 12,841,000 Above-market leases 959,000 959,000 Less: accumulated amortization (155,000) (96,000) Above-market leases, net 804,000 863,000 Total intangible lease assets, net $ 11,653,000 $ 13,704,000 |
Schedule of expected future amortization of the intangible lease assets | Years ending December 31, 2024 900,000 2025 900,000 2026 900,000 2027 900,000 2028 900,000 Thereafter 7,153,000 $ 11,653,000 |
Right of Use Asset - Operatin_2
Right of Use Asset - Operating Lease (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Right of Use Asset - Operating Lease | |
Schedule of supplemental balance sheet information related to the office lease | Component Consolidated Balance Sheet Caption Right of use asset - operating Other assets, net $ 698,000 Lease liability - operating Accounts payable and accrued liabilities $ 877,000 |
Schedule of lease payments on the office lease | Year Lease payments 2024 211,000 2025 217,000 2026 224,000 2027 231,000 2028 98,000 Total lease payments $ 981,000 Less imputed interest (104,000) Total lease liability $ 877,000 |
Equity (Tables)
Equity (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Equity | |
Schedule of estimated fair value using assumptions | 2023 Stock options granted 80,000 Expected volatility 37.34 % Expected term 5.75 years Risk-free interest rate 3.65 % Dividend yield 0 % Fair value per stock option $ 0.91 |
Schedule of stock options | Weighted Weighted Average Average Remaining Aggregate Exercise Contractual Intrinsic Options Price Term Value Options outstanding at January 1, 2022 1,867,908 $ 2.09 Granted 81,000 2.35 Exercised — Cancelled/forfeited Options outstanding at December 31, 2022 1,948,908 $ 2.10 Granted 80,000 2.18 Exercised — Cancelled/forfeited 880,845 2.02 Options outstanding at December 31, 2023 1,148,063 $ 2.16 4.79 $ — Options exercisable at December 31, 2023 1,049,840 $ 2.15 4.41 $ — |
Schedule of unrecognized stock-based compensation expense | Years Ending December 31, 2024 49,000 2025 32,000 2026 8,000 $ 89,000 |
Organization (Details)
Organization (Details) | 1 Months Ended | 12 Months Ended | ||
Jul. 03, 2023 USD ($) | Jul. 31, 2023 | Dec. 31, 2023 property | Dec. 31, 2022 property | |
Summit Healthcare REIT, Inc | ||||
Organization | ||||
Percentage of ownership investment | 100% | |||
Number of owned properties | 14 | |||
Summit Healthcare Operating Partnership, L.P | ||||
Organization | ||||
Limited partnership interest | 99.88% | |||
Cornerstone Healthcare Partners LLC | ||||
Organization | ||||
Limited partnership interest | 95% | |||
Cornerstone Healthcare Real Estate Fund | ||||
Organization | ||||
Noncontrolling interest, ownership percentage by noncontrolling owners | 5% | |||
JV Properties | ||||
Organization | ||||
Number of owned properties | 4 | 4 | ||
Limited partnership interest | 95.30% | 95.30% | ||
Noncontrolling interest, ownership percentage by noncontrolling owners | 4.70% | 4.70% | ||
Summit Union Life Holdings, LLC | ||||
Organization | ||||
Number of owned properties | 15 | 17 | ||
Limited partnership interest | 10% | 10% | ||
Fantasia III JV | ||||
Organization | ||||
Number of owned properties | 8 | 9 | ||
Limited partnership interest | 10% | 10% | ||
Summit Fantasy Pearl Holdings, LLC | ||||
Organization | ||||
Number of owned properties | 6 | 6 | ||
Limited partnership interest | 10% | 10% | ||
Fantasia II JV | ||||
Organization | ||||
Number of owned properties | 2 | 2 | ||
Limited partnership interest | 20% | 20% | ||
Fantasia JV | ||||
Organization | ||||
Number of owned properties | 35 | |||
Limited partnership interest | 100% | |||
Percentage of ownership interest assigned | 65% | |||
Consideration for interest assigned | $ | $ 0 | |||
Fantasia JV | Summit Healthcare REIT, Inc | ||||
Organization | ||||
Percentage of ownership investment | 100% | |||
Cornerstone Realty Advisors, LLC | ||||
Organization | ||||
Limited partnership interest | 0.12% |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Restricted Cash (Details) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 |
Summary of Significant Accounting Policies | |||
Cash and cash equivalents | $ 10,997,000 | $ 11,572,000 | |
Restricted cash | 3,186,000 | 2,591,000 | |
Total cash, cash equivalents, and restricted cash shown on the consolidated statements of cash flows | $ 14,183,000 | $ 14,163,000 | $ 13,161,000 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Additional information (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Summary of Significant Accounting Policies | ||
Impairments | $ 11,387,000 | |
Impairment of real estate properties | 10,300,000 | |
Intangible lease assets | $ 1,100,000 | |
Impairment, Intangible Asset, Finite-Lived, Statement of Income or Comprehensive Income [Extensible Enumeration] | Impairments | |
Impairment loss | $ 500,000 | $ 400,000 |
Fair value of loans payable | 36,400,000 | 38,900,000 |
Principal balance excluding debt discount | 182,611,000 | 183,765,000 |
General and administrative expenses | 700,000 | |
Impairment loss of related to equity-method investments | 500,000 | 400,000 |
Deferred tax assets valuation allowance | 1,142,000 | 683,000 |
Net change in the valuation allowance | 457,000 | |
Principal amount of loan | $ 43,900,000 | $ 45,000,000 |
Market approach | ||
Summary of Significant Accounting Policies | ||
Percentage of impairment properties on estimated yield | 10.80% | |
Federal | ||
Summary of Significant Accounting Policies | ||
Carryforwards for income tax | $ 4,200,000 | |
Federal net operating loss carryforward | 2,400,000 | |
State | ||
Summary of Significant Accounting Policies | ||
Carryforwards for income tax | $ 4,400,000 | |
Real Estate Investment Trust | ||
Summary of Significant Accounting Policies | ||
Percentage of taxable income | 90% | |
Minimum | Buildings and improvements | ||
Summary of Significant Accounting Policies | ||
Estimated useful life | 15 years | |
Minimum | Furniture and Fixture | ||
Summary of Significant Accounting Policies | ||
Estimated useful life | 3 years | |
Maximum | Buildings and improvements | ||
Summary of Significant Accounting Policies | ||
Estimated useful life | 39 years | |
Maximum | Furniture and Fixture | ||
Summary of Significant Accounting Policies | ||
Estimated useful life | 6 years |
Investments in Real Estate Pr_3
Investments in Real Estate Properties - Investments in real estate properties (Details) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
Investments in Real Estate Properties | ||
Real estate properties, net | $ 156,966,000 | $ 173,127,000 |
Land | ||
Investments in Real Estate Properties | ||
Real estate properties, net | 14,905,000 | 15,565,000 |
Buildings and improvements | ||
Investments in Real Estate Properties | ||
Real estate properties, gross | 157,875,000 | 166,989,000 |
Less: accumulated depreciation | (20,439,000) | (15,985,000) |
Real estate properties, net | 137,436,000 | 151,004,000 |
Furniture and fixtures | ||
Investments in Real Estate Properties | ||
Real estate properties, gross | 12,106,000 | 12,440,000 |
Less: accumulated depreciation | (7,481,000) | (5,882,000) |
Real estate properties, net | $ 4,625,000 | $ 6,558,000 |
Investments in Real Estate Pr_4
Investments in Real Estate Properties - Summary information regarding portfolio (Details) | 12 Months Ended |
Dec. 31, 2023 USD ($) | |
Investments in Real Estate Properties | |
Purchase Price | $ 207,320,000 |
Loans Payable, Excluding Debt Issuance Costs | $ 169,861,000 |
Sheridan Care Center | |
Investments in Real Estate Properties | |
Location | Sheridan, OR |
Date Purchased | Aug. 03, 2012 |
Type | SNF |
Purchase Price | $ 4,100,000 |
Loans Payable, Excluding Debt Issuance Costs | $ 3,829,000 |
Fernhill Care Center | |
Investments in Real Estate Properties | |
Location | Portland, OR |
Date Purchased | Aug. 03, 2012 |
Type | SNF |
Purchase Price | $ 4,500,000 |
Loans Payable, Excluding Debt Issuance Costs | $ 3,359,000 |
Friendship Haven Healthcare and Rehabilitation Center | |
Investments in Real Estate Properties | |
Location | Galveston County, TX |
Date Purchased | Sep. 14, 2012 |
Type | SNF |
Purchase Price | $ 15,000,000 |
Loans Payable, Excluding Debt Issuance Costs | $ 11,109,000 |
Pacific Health and Rehabilitation Center | |
Investments in Real Estate Properties | |
Location | Tigard, OR |
Date Purchased | Dec. 24, 2012 |
Type | SNF |
Purchase Price | $ 8,140,000 |
Loans Payable, Excluding Debt Issuance Costs | $ 5,600,000 |
Brookstone of Aledo | |
Investments in Real Estate Properties | |
Location | Aledo, IL |
Date Purchased | Jul. 02, 2013 |
Type | AL |
Purchase Price | $ 8,625,000 |
Loans Payable, Excluding Debt Issuance Costs | $ 6,461,000 |
Sundial Assisted Living | |
Investments in Real Estate Properties | |
Location | Redding, CA |
Date Purchased | Dec. 18, 2013 |
Type | AL |
Purchase Price | $ 3,500,000 |
Loans Payable, Excluding Debt Issuance Costs | $ 3,626,000 |
Pennington Gardens | |
Investments in Real Estate Properties | |
Location | Chandler, AZ |
Date Purchased | Jul. 17, 2017 |
Type | AL/MC |
Purchase Price | $ 13,400,000 |
Loans Payable, Excluding Debt Issuance Costs | $ 9,877,000 |
Yucaipa Hill Post Acute | |
Investments in Real Estate Properties | |
Location | Yucaipa, CA |
Date Purchased | Jul. 02, 2021 |
Type | SNF |
Purchase Price | $ 10,715,000 |
Loans Payable, Excluding Debt Issuance Costs | $ 8,014,000 |
Creekside Post Acute | |
Investments in Real Estate Properties | |
Location | Yucaipa, CA |
Date Purchased | Jul. 02, 2021 |
Type | SNF |
Purchase Price | $ 4,780,000 |
Loans Payable, Excluding Debt Issuance Costs | $ 3,575,000 |
University Post Acute | |
Investments in Real Estate Properties | |
Location | Mentone, CA |
Date Purchased | Jul. 02, 2021 |
Type | SNF |
Purchase Price | $ 4,560,000 |
Loans Payable, Excluding Debt Issuance Costs | $ 3,411,000 |
Calhoun Health Center | |
Investments in Real Estate Properties | |
Location | Calhoun, GA |
Date Purchased | Dec. 30, 2021 |
Type | SNF |
Purchase Price | $ 7,670,000 |
Loans Payable, Excluding Debt Issuance Costs | $ 6,549,000 |
Maple Ridge Health Care Center | |
Investments in Real Estate Properties | |
Location | Cartersville, GA |
Date Purchased | Dec. 30, 2021 |
Type | SNF |
Purchase Price | $ 13,548,000 |
Loans Payable, Excluding Debt Issuance Costs | $ 11,568,000 |
Chatsworth Health Care Center | |
Investments in Real Estate Properties | |
Location | Chatsworth, GA |
Date Purchased | Dec. 30, 2021 |
Type | SNF |
Purchase Price | $ 29,785,000 |
Loans Payable, Excluding Debt Issuance Costs | $ 25,432,000 |
East Lake Arbor | |
Investments in Real Estate Properties | |
Location | Decatur, GA |
Date Purchased | Dec. 30, 2021 |
Type | SNF |
Purchase Price | $ 15,640,000 |
Loans Payable, Excluding Debt Issuance Costs | $ 13,354,000 |
Fairburn Health Care Center | |
Investments in Real Estate Properties | |
Location | Fairburn, GA |
Date Purchased | Dec. 30, 2021 |
Type | SNF |
Purchase Price | $ 14,644,000 |
Loans Payable, Excluding Debt Issuance Costs | $ 12,503,000 |
Grandview Health Care Center | |
Investments in Real Estate Properties | |
Location | Jasper, GA |
Date Purchased | Dec. 30, 2021 |
Type | SNF |
Purchase Price | $ 10,061,000 |
Loans Payable, Excluding Debt Issuance Costs | $ 8,591,000 |
Rosemont at Stone Mountain | |
Investments in Real Estate Properties | |
Location | Stone Mountain, GA |
Date Purchased | Dec. 30, 2021 |
Type | SNF |
Purchase Price | $ 23,908,000 |
Loans Payable, Excluding Debt Issuance Costs | $ 20,414,000 |
Willowwood Nursing Center & Rehab | |
Investments in Real Estate Properties | |
Location | Flowery Branch, GA |
Date Purchased | Dec. 30, 2021 |
Type | SNF |
Purchase Price | $ 14,744,000 |
Loans Payable, Excluding Debt Issuance Costs | $ 12,589,000 |
Investments in Real Estate Pr_5
Investments in Real Estate Properties - Future Minimum Lease Payments (Details) | Dec. 31, 2023 USD ($) |
Investments in Real Estate Properties | |
2024 | $ 18,272,000 |
2025 | 18,566,000 |
2026 | 18,865,000 |
2027 | 19,168,000 |
2028 | 17,909,000 |
Thereafter | 137,999,000 |
Future minimum lease payments | $ 230,779,000 |
Investments in Real Estate Pr_6
Investments in Real Estate Properties - Additional information (Details) | 1 Months Ended | 3 Months Ended | 12 Months Ended | |||||
Sep. 29, 2023 USD ($) | Jul. 03, 2023 USD ($) | Sep. 30, 2023 USD ($) item property | Jul. 31, 2023 USD ($) | Feb. 28, 2022 USD ($) | Dec. 31, 2023 USD ($) property | Dec. 31, 2023 USD ($) property | Dec. 31, 2022 USD ($) property | |
Investments in Real Estate Properties | ||||||||
Number of properties owned by our unconsolidated Equity-Method Investments | property | 31 | 31 | ||||||
Depreciation | $ 6,100,000 | $ 6,300,000 | ||||||
Number of real estate properties | property | 18 | 18 | ||||||
Number of real estate properties leased to related facilities | property | 16 | 16 | 16 | |||||
Number of real estate properties leased to affiliated subsidiary | property | 2 | 2 | ||||||
Impairment of real estate properties | $ 10,300,000 | |||||||
Percentage of real estate properties | 100% | |||||||
Principal amount of loan | $ 43,900,000 | $ 43,900,000 | $ 45,000,000 | |||||
Loans payable | 36,400,000 | 36,400,000 | $ 38,900,000 | |||||
Proceeds from sale of real estate | 3,839,000 | |||||||
Number of wholly-owned properties replaced tenant/ operator | property | 3 | |||||||
Amount of write off of rent receivable | $ 1,300,000 | |||||||
Amount of write off of leasing commissions | 300,000 | |||||||
Write-Off Of rent receivable | $ 2,400,000 | 255,000 | ||||||
Amount of write off of income from security deposits | $ 400,000 | |||||||
Term of contract (in years) | 10 years | |||||||
Number of renewal options | item | 2 | |||||||
Renewal term (in years) | 5 years | |||||||
Impairments | $ 11,387,000 | |||||||
No Of Aquisition | 0 | 0 | ||||||
Summit Healthcare REIT, Inc | ||||||||
Investments in Real Estate Properties | ||||||||
Equity method investment, ownership percentage | 100% | 100% | ||||||
Fantasia JV | ||||||||
Investments in Real Estate Properties | ||||||||
Percentage of ownership interest assigned | 65% | |||||||
Consideration for interest assigned | $ 0 | |||||||
Cash | $ 800,000 | |||||||
Real Estate | 3,800,000 | |||||||
Other assets | 100,000 | |||||||
Loans payable | 3,200,000 | |||||||
Other liabilities | 400,000 | |||||||
Gain on consolidation | $ 1,100,000 | |||||||
Fantasia JV | Summit Healthcare REIT, Inc | ||||||||
Investments in Real Estate Properties | ||||||||
Equity method investment, ownership percentage | 100% | |||||||
Pennington Gardens facility in Chandler, Arizona | ||||||||
Investments in Real Estate Properties | ||||||||
Lease termination revenues received | $ 200,000 | |||||||
Summit Georgia Holdings LLC | ||||||||
Investments in Real Estate Properties | ||||||||
Number of properties owned by our unconsolidated equity-method investments | property | 31 | 31 | ||||||
Principal amount of loan | $ 12,750,000 | $ 12,750,000 | ||||||
Summit Citrus Heights | Fantasia JV | ||||||||
Investments in Real Estate Properties | ||||||||
Proceeds from sale of real estate | $ 600,000 | |||||||
Loans held for sale price | 3,800,000 | |||||||
Payoff of the loan payable | 3,200,000 | |||||||
Loss on sale of real estate | $ 10,000 |
Loans Payable - Debt (Details)
Loans Payable - Debt (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Loans Payable | ||
Total debt obligations | $ 182,611,000 | $ 183,765,000 |
Less debt issuance costs | (2,682,000) | (3,596,000) |
Total loans payable | 179,929,000 | 180,169,000 |
Interest Expense, Debt | 0 | 600,000 |
Loans payable to Lument (formerly ORIX Real Estate Capital, LLC) due in September 2039 through April 2055 | ||
Loans Payable | ||
Total debt obligations | 33,984,000 | 34,976,000 |
Loans payable to Capital One Multifamily Finance, LLC due in September 2053 | ||
Loans Payable | ||
Total debt obligations | 9,877,000 | 10,039,000 |
Loans payable to CIBC Bank, USA due in July 2024 | ||
Loans Payable | ||
Total debt obligations | 15,000,000 | 15,000,000 |
Loans payable to CIBC Bank, USA due in December 2024 | ||
Loans Payable | ||
Total debt obligations | 91,000,000 | 91,000,000 |
Loans payable to Oxford Finance, LLC due in March 2025 | ||
Loans Payable | ||
Total debt obligations | 20,000,000 | 20,000,000 |
Loans payable to Oxford Finance, LLC due in December 2026 | ||
Loans Payable | ||
Total debt obligations | $ 12,750,000 | $ 12,750,000 |
Loans Payable - (Parenthetical)
Loans Payable - (Parenthetical) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Loans payable to Lument (formerly ORIX Real Estate Capital, LLC) due in September 2039 through April 2055 | ||
Loans Payable | ||
Monthly installments | $ 183,000 | $ 183,000 |
Loans payable to Lument (formerly ORIX Real Estate Capital, LLC) due in September 2039 through April 2055 | Minimum | ||
Loans Payable | ||
Fixed rate of interest (in percent) | 2.79% | 2.79% |
Loans payable to Lument (formerly ORIX Real Estate Capital, LLC) due in September 2039 through April 2055 | Maximum | ||
Loans Payable | ||
Fixed rate of interest (in percent) | 4.20% | 4.20% |
Loans payable to Capital One Multifamily Finance, LLC due in September 2053 | ||
Loans Payable | ||
Monthly installments | $ 49,000 | |
Fixed rate of interest (in percent) | 4.23% | |
Loans payable to CIBC Bank, USA due in July 2024 | ||
Loans Payable | ||
Monthly installments | $ 106,000 | |
Variable interest rate (in percent) | 9.45% | 8.17% |
Loans payable to CIBC Bank, USA due in December 2024 | ||
Loans Payable | ||
Monthly installments | $ 680,000 | |
Variable interest rate (in percent) | 8.85% | 7.68% |
Loans payable to Oxford Finance, LLC due in March 2025 | ||
Loans Payable | ||
Monthly installments | $ 280,000 | |
Variable interest rate (in percent) | 16.40% | 15.10% |
Loans payable to Oxford Finance, LLC due in December 2026 | ||
Loans Payable | ||
Variable interest rate (in percent) | 16.40% | 15.10% |
Periodic payment | $ 168,000 |
Loans Payable - Maturities of l
Loans Payable - Maturities of long term debt (Details) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
Loans Payable | ||
2024 | $ 139,951,000 | |
2025 | 1,246,000 | |
2026 | 1,292,000 | |
2027 | 1,341,000 | |
2028 | 1,391,000 | |
Thereafter | 37,390,000 | |
Total | 182,611,000 | |
Total debt obligations | 182,611,000 | $ 183,765,000 |
Summit Georgia Holdings LLC | GA8 Properties | ||
Loans Payable | ||
2024 | 12,750,000 | |
Oxford Finance | Subordinated debt | ||
Loans Payable | ||
2024 | $ 20,000,000 |
Loans Payable - Additional info
Loans Payable - Additional information (Details) - USD ($) | 12 Months Ended | |||||
Dec. 31, 2023 | Dec. 31, 2022 | Nov. 30, 2023 | Oct. 31, 2023 | Jun. 30, 2023 | Dec. 31, 2021 | |
Loans Payable | ||||||
Total debt obligations | $ 182,611,000 | $ 183,765,000 | ||||
Interest expense (excluding debt issuance costs, amortization and interest expense related to the Oxford mezzanine loan) | 16,600,000 | 12,000,000 | ||||
Interest Expense, Debt | 0 | 600,000 | ||||
Unamortized balance of the debt issuance costs | 2,682,000 | 3,596,000 | ||||
Amortization of debt issuance costs | 900,000 | 900,000 | ||||
Aggregate amount | 43,900,000 | 45,000,000 | ||||
Master Letter of Credit Agreement | ||||||
Loans Payable | ||||||
Amount outstanding | 200,000 | $ 1,000,000 | ||||
GA8 Properties | Summit Georgia Holdings LLC | ||||||
Loans Payable | ||||||
Aggregate amount | $ 12,750,000 | |||||
First priority mortgage loan | GA8 Properties | ||||||
Loans Payable | ||||||
Aggregate amount | 91,000,000 | |||||
Second priority mortgage loan | GA8 Properties | ||||||
Loans Payable | ||||||
Aggregate amount | $ 20,000,000 | |||||
Loans payable to Oxford Finance, LLC due in December 2026 | ||||||
Loans Payable | ||||||
Total debt obligations | 12,750,000 | $ 12,750,000 | ||||
Interest Payable, Current | $ 600,000 | $ 600,000 | $ 600,000 |
Equity-Method Investments - Sum
Equity-Method Investments - Summarized Financial Data for Equity-Method Investments (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Equity-Method Investments | ||
Revenue | $ 25,449,000 | $ 26,294,000 |
Net Income (Loss) | (24,801,000) | (8,693,000) |
Straight-line rent receivables | 1,396,000 | 3,862,000 |
Loss from equity-method investees | (754,000) | (2,898,000) |
Equity-method investments | $ 2,852,000 | $ 5,182,000 |
Equity-Method Investments - Dis
Equity-Method Investments - Distributions receivable (Details) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
Equity-Method Investments | ||
Distributions receivable | $ 492,000 | $ 400,000 |
Fantasia II JV | ||
Equity-Method Investments | ||
Distributions receivable | 30,000 | 55,000 |
Fantasia III JV | ||
Equity-Method Investments | ||
Distributions receivable | 87,000 | 22,000 |
FPH JV | ||
Equity-Method Investments | ||
Distributions receivable | 64,000 | 64,000 |
SULH JV | ||
Equity-Method Investments | ||
Distributions receivable | $ 311,000 | $ 259,000 |
Equity-Method Investments - Cas
Equity-Method Investments - Cash Distributions (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Equity-Method Investments | ||
Total Cash Distributions Received | $ 1,853,000 | $ 1,116,000 |
Cash Flow from Operating Activities | 760,000 | 347,000 |
Cash Flow from Investing Activities | 1,093,000 | 769,000 |
SUL JV | ||
Equity-Method Investments | ||
Total Cash Distributions Received | 1,706,000 | 615,000 |
Cash Flow from Operating Activities | 760,000 | |
Cash Flow from Investing Activities | 946,000 | 615,000 |
Fantasia JV | ||
Equity-Method Investments | ||
Total Cash Distributions Received | 0 | |
Cash Flow from Operating Activities | 0 | |
Cash Flow from Investing Activities | 0 | |
Fantasia II JV | ||
Equity-Method Investments | ||
Total Cash Distributions Received | 135,000 | 311,000 |
Cash Flow from Operating Activities | 0 | 213,000 |
Cash Flow from Investing Activities | 135,000 | 98,000 |
Fantasia III JV | ||
Equity-Method Investments | ||
Total Cash Distributions Received | 12,000 | 134,000 |
Cash Flow from Operating Activities | 0 | 134,000 |
Cash Flow from Investing Activities | 12,000 | |
FPH JV | ||
Equity-Method Investments | ||
Total Cash Distributions Received | 0 | 56,000 |
Cash Flow from Operating Activities | 0 | 0 |
Cash Flow from Investing Activities | $ 0 | $ 56,000 |
Equity-Method Investments - Add
Equity-Method Investments - Additional information (Details) | 1 Months Ended | 12 Months Ended | ||||
Dec. 31, 2023 USD ($) property | Sep. 30, 2023 USD ($) property | Dec. 31, 2022 USD ($) | Dec. 31, 2023 USD ($) property | Dec. 31, 2022 USD ($) | Jul. 03, 2023 | |
Equity-Method Investments | ||||||
Equity-method investment | $ 2,852,000 | $ 5,182,000 | $ 2,852,000 | $ 5,182,000 | ||
Loss from equity-method investees | 754,000 | 2,898,000 | ||||
Impairment loss of related to equity-method investments | 500,000 | 400,000 | ||||
Additional losses | $ 100,000 | |||||
SUL JV | ||||||
Equity-Method Investments | ||||||
Gain on sale of properties | $ 7,000,000 | |||||
SUL JV | ||||||
Equity-Method Investments | ||||||
Minimum percentage of interest in annual return | 9% | |||||
Percentage of interest in annual return | 10% | |||||
Invested to capital calls | $ 370,000 | $ 821,000 | ||||
SUL JV | ||||||
Equity-Method Investments | ||||||
Percentage of ownership investment | 10% | 10% | ||||
Loss from equity-method investees | $ 700,000 | |||||
Return of capital from the sale | $ 1,100,000 | |||||
Fantasia JV | ||||||
Equity-Method Investments | ||||||
Percentage of ownership investment | 35% | 35% | ||||
Summit Union Life Holdings, LLC | ||||||
Equity-Method Investments | ||||||
Percentage of ownership investment | 10% | 10% | 10% | 10% | ||
Summit Fantasia Holdings Llc | Summit Healthcare Operating Partnership, L.P | ||||||
Equity-Method Investments | ||||||
Percentage of ownership investment | 65% | |||||
Summit Fantasia Holdings II, LLC | ||||||
Equity-Method Investments | ||||||
Percentage of ownership investment | 20% | |||||
Loss from equity-method investees | $ 300,000 | |||||
Impairment loss of related to equity-method investments | $ 500,000 | |||||
Summit Fantasia Holdings III, LLC | ||||||
Equity-Method Investments | ||||||
Equity-method investment | $ 1,200,000 | $ 1,600,000 | $ 1,200,000 | $ 1,600,000 | ||
Percentage of ownership investment | 10% | 10% | ||||
Loss from equity-method investees | $ 400,000 | |||||
Summit Fantasia Holdings II, LLC | ||||||
Equity-Method Investments | ||||||
Equity-method investment | $ (100,000) | 1,200,000 | (100,000) | 1,200,000 | ||
Summit Union Life Holdings, LLC | ||||||
Equity-Method Investments | ||||||
Equity-method investment | $ 1,800,000 | 2,400,000 | 1,800,000 | 2,400,000 | ||
Impairment charge | $ 1,100,000 | 6,800,000 | ||||
Number of properties impaired | property | 1 | |||||
Impairment loss of related to equity-method investments | $ 100,000 | 700,000 | ||||
Summit Union Life Holdings, LLC | Minimum | ||||||
Equity-Method Investments | ||||||
Percentage of interest in annual return | 9% | |||||
Summit Union Life Holdings, LLC | Maximum | ||||||
Equity-Method Investments | ||||||
Percentage of interest in annual return | 10% | |||||
Summit Union Life Holdings, LLC | SUL JV | ||||||
Equity-Method Investments | ||||||
Number of properties sold | property | 2 | 2 | ||||
Summit Union Life Holdings, LLC | Best Years Llc | ||||||
Equity-Method Investments | ||||||
Percentage of interest in capital proceeds from the sale of properties held | 75% | |||||
Summit Union Life Holdings, LLC | Operating Partnership | ||||||
Equity-Method Investments | ||||||
Percentage of interest | 25% | |||||
Percentage of interest in capital proceeds from the sale of properties held | 25% | |||||
Summit Union Life Holdings, LLC | Best Years Llc | ||||||
Equity-Method Investments | ||||||
Percentage of interest | 75% | |||||
Summit Fantasia Holdings Llc | ||||||
Equity-Method Investments | ||||||
Impairment charge | $ 1,600,000 | |||||
Number of properties impaired | property | 2 | |||||
Summit Fantasia Holdings II, LLC | ||||||
Equity-Method Investments | ||||||
Percentage of interest in annual return | 8% | |||||
Summit Fantasia Holdings II, LLC | Operating Partnership | ||||||
Equity-Method Investments | ||||||
Percentage of interest | 30% | |||||
Percentage of interest in capital proceeds from the sale of properties held | 30% | |||||
Summit Fantasia Holdings II, LLC | Fantasia Investment III LLC | ||||||
Equity-Method Investments | ||||||
Percentage of interest | 70% | |||||
Percentage of interest in capital proceeds from the sale of properties held | 70% | |||||
Summit Fantasia Holdings III, LLC | ||||||
Equity-Method Investments | ||||||
Percentage of interest in annual return | 9% | |||||
Loss on transaction | $ 3,900,000 | |||||
Summit Fantasia Holdings III, LLC | Operating Partnership | ||||||
Equity-Method Investments | ||||||
Percentage of interest | 25% | |||||
Percentage of interest in capital proceeds from the sale of properties held | 25% | |||||
Summit Fantasia Holdings III, LLC | Fantasia Investment III LLC | ||||||
Equity-Method Investments | ||||||
Percentage of interest | 75% | |||||
Percentage of interest in capital proceeds from the sale of properties held | 75% | |||||
Summit Fantasy Pearl Holdings, LLC | ||||||
Equity-Method Investments | ||||||
Equity-method investment | $ 0 | 0 | $ 0 | 0 | ||
Percentage of interest in annual return | 9% | |||||
Impairment charge | 200,000 | |||||
Summit Fantasy Pearl Holdings, LLC | Operating Partnership | ||||||
Equity-Method Investments | ||||||
Percentage of interest | 20% | |||||
Percentage of interest in capital proceeds from the sale of properties held | 20% | |||||
Summit Fantasy Pearl Holdings, LLC | Fantasia Investment III LLC | ||||||
Equity-Method Investments | ||||||
Percentage of interest | 7.25% | |||||
Percentage of interest in capital proceeds from the sale of properties held | 7.25% | |||||
Summit Fantasy Pearl Holdings, LLC | Summit Fantasy Pearl Holdings, LLC- Equity-Method Investment | ||||||
Equity-Method Investments | ||||||
Percentage of interest | 65.25% | |||||
Percentage of interest in capital proceeds from the sale of properties held | 65.25% | |||||
Summit Fantasy Pearl Holdings, LLC | Atlantis | ||||||
Equity-Method Investments | ||||||
Percentage of interest | 7.50% | |||||
Percentage of interest in capital proceeds from the sale of properties held | 7.50% | |||||
Fantasia JV | ||||||
Equity-Method Investments | ||||||
Equity-method investment | $ 0 | $ 0 | ||||
Invested to capital calls | $ 290,000 | |||||
Impairment charge | 2,200,000 | |||||
Impairment loss of related to equity-method investments | 6,400,000 | |||||
Fair Value of distributions receivable | $ 200,000 | 200,000 | ||||
Aggregate impairment loss fair value on equity method investment | $ 200,000 |
Receivables (Details)
Receivables (Details) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
Receivables | ||
Straight-line rent receivables | $ 1,396,000 | $ 3,862,000 |
Distribution receivables from Equity-Method Investments | 492,000 | 400,000 |
Asset management fees | 327,000 | 375,000 |
Other receivables | 375,000 | 383,000 |
Total | $ 2,590,000 | $ 5,020,000 |
Intangible Lease Assets (Detail
Intangible Lease Assets (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Intangible Lease Assets | ||
Total intangible lease assets, net | $ 11,653,000 | $ 13,704,000 |
Amortization expense for intangible lease assets | 1,000,000 | |
Amortization of above market leases | 100,000 | |
In-place leases | ||
Intangible Lease Assets | ||
Intangible lease assets, gross | 12,680,000 | 13,778,000 |
Less: accumulated amortization | (1,831,000) | (937,000) |
Total intangible lease assets, net | 10,849,000 | 12,841,000 |
Above-market leases | ||
Intangible Lease Assets | ||
Intangible lease assets, gross | 959,000 | 959,000 |
Less: accumulated amortization | (155,000) | (96,000) |
Total intangible lease assets, net | $ 804,000 | $ 863,000 |
Intangible Lease Assets - Expec
Intangible Lease Assets - Expected future amortization (Details) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
Intangible Lease Assets | ||
2024 | $ 900,000 | |
2025 | 900,000 | |
2026 | 900,000 | |
2027 | 900,000 | |
2028 | 900,000 | |
Thereafter | 7,153,000 | |
Total intangible lease assets, net | $ 11,653,000 | $ 13,704,000 |
Right of Use Asset - Operatin_3
Right of Use Asset - Operating Lease (Details) | 1 Months Ended |
Nov. 30, 2022 USD ($) | |
Right of Use (ROU) Asset - Operating | |
Estimated incremental borrowing rate | 5% |
Temporary License | |
Right of Use (ROU) Asset - Operating | |
Termination term of lease after substantial completion of certain tenant improvements in office space | 5 years |
Standard Office Lease | |
Right of Use (ROU) Asset - Operating | |
Lease term under three separate triple net leases | 66 years |
Initial annual base rent | $ 204,399 |
Increase in initial annual base rent (as a percent) | 3% |
Right of Use Asset - Operatin_4
Right of Use Asset - Operating Lease - Supplemental balance sheet information related to the Office Lease (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Nov. 30, 2022 | |
Right of Use Asset - Operating Lease | |||
Right of use asset - operating | $ 698,000 | $ 900,000 | |
Right of use asset - operating, Location | Other Assets | Other Assets | |
Lease liability - operating | $ 877,000 | $ 900,000 | |
Lease liability, location | Accounts Payable and Accrued Liabilities | Accounts Payable and Accrued Liabilities | |
Operating lease expense | $ 182,000 | $ 87,000 | |
Operating lease payments | $ 103,000 | $ 26,000 | |
Weighted average remaining lease term | 4 years 3 months 18 days |
Right of Use Asset - Operatin_5
Right of Use Asset - Operating Lease - Lease payments (Details) - USD ($) | Dec. 31, 2023 | Nov. 30, 2022 |
Maturity of lease payments | ||
2024 | $ 211,000 | |
2025 | 217,000 | |
2026 | 224,000 | |
2027 | 231,000 | |
Lessee, Operating Lease, Liability, to be Paid, Year Five | 98,000 | |
Total lease payments | 981,000 | |
Less imputed interest | (104,000) | |
Total lease liability | $ 877,000 | $ 900,000 |
Concentration of Risk (Details)
Concentration of Risk (Details) | 12 Months Ended | |
Dec. 31, 2023 property tenant | Dec. 31, 2022 tenant property | |
Concentration of Risk | ||
Number of owned properties held by equity method investment | 31 | |
Number of real estate properties leased to related facilities | 16 | 16 |
Number of tenants under long-term triple net leases | tenant | 14 | 14 |
Number of tenants represents more than 10% of our rental revenue | tenant | 3 | 3 |
Customer concentration risk | Tenant | Assets, Total | ||
Concentration of Risk | ||
Concentration risk, percentage | 20% | |
Customer concentration risk | Tenant One | Tenant One, Concentration Risk | ||
Concentration of Risk | ||
Concentration risk, percentage | 10% | 10% |
Customer concentration risk | Tenant Two | Tenant Two Concentration Risk | ||
Concentration of Risk | ||
Concentration risk, percentage | 17% | 16% |
Customer concentration risk | Tenant Three | Tenant Three Concentration Risk | ||
Concentration of Risk | ||
Concentration risk, percentage | 14% | 14% |
Customer concentration risk | Tenant Four | Tenant Four Concentration Risk | ||
Concentration of Risk | ||
Concentration risk, percentage | 10% | 10% |
Georgia | ||
Concentration of Risk | ||
Number of owned properties | 8 | |
California | ||
Concentration of Risk | ||
Number of owned properties | 4 | |
Oregon | ||
Concentration of Risk | ||
Number of owned properties | 3 | |
Texas | ||
Concentration of Risk | ||
Number of owned properties | 1 | |
Illinois | ||
Concentration of Risk | ||
Number of owned properties | 1 | |
Arizona | ||
Concentration of Risk | ||
Number of owned properties | 1 |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) | 12 Months Ended | |||||
Nov. 14, 2023 | Nov. 13, 2023 | Jul. 14, 2023 | May 15, 2023 | May 12, 2023 | Dec. 31, 2023 | |
Commitments and Contingencies | ||||||
Purchased the investors' interests | $ 900,000 | |||||
Accrued contingencies | 0 | |||||
Cure period of Kent Eikanas | 60 days | 60 days | ||||
Legal fees | ||||||
Commitments and Contingencies | ||||||
Amount awarded to the plaintiffs | $ 75,000 | 75,000 | ||||
Attorney's fees | ||||||
Commitments and Contingencies | ||||||
Amount awarded to the plaintiffs | $ 665,000 | $ 517,000 | $ 517,000 | 665,000 | ||
Accrued contingencies | $ 0 |
Equity - Black-Scholes option-p
Equity - Black-Scholes option-pricing model (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Equity | ||
Stock options granted | 80,000 | 81,000 |
Expected volatility | 37.34% | |
Expected term | 5 years 9 months | |
Risk-free interest rate | 3.65% | |
Dividend yield | 0% | |
Fair value per share | $ 0.91 |
Equity - Stock options (Details
Equity - Stock options (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Equity | ||
Options outstanding, Beginning Balance | 1,948,908 | 1,867,908 |
Options outstanding, Granted | 80,000 | 81,000 |
Options outstanding, Exercised | 0 | |
Options outstanding, Cancelled/forfeited | 880,845 | |
Options outstanding, Ending Balance | 1,148,063 | 1,948,908 |
Options exercisable, Ending Balance | 1,049,840 | |
Weighted Average Exercise Price, Outstanding at Beginning Balance | $ 2.10 | $ 2.09 |
Weighted Average Exercise Price, Granted | 2.18 | 2.35 |
Weighted Average Exercise Price, Cancelled/forfeited | 2.02 | |
Weighted Average Exercise Price, Outstanding at Ending Balance | 2.16 | $ 2.10 |
Weighted Average Exercise Price, Exercisable at Ending Balance | $ 2.15 | |
Options outstanding, Weighted Average Remaining Contractual Term | 4 years 9 months 14 days | |
Options exercisable, Weighted Average Remaining Contractual Term | 4 years 4 months 28 days |
Equity - Unrecognized stock-bas
Equity - Unrecognized stock-based compensation expense (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Equity | ||
Unrecognized stock-based compensation expense related to unvested stock options, net of forfeitures | $ 89,000 | |
General and administrative expense | ||
Equity | ||
Stock-based compensation expense | 41,000 | $ 31,000 |
2024 | ||
Equity | ||
Unrecognized stock-based compensation expense related to unvested stock options, net of forfeitures | 49,000 | |
2025 | ||
Equity | ||
Unrecognized stock-based compensation expense related to unvested stock options, net of forfeitures | 32,000 | |
2026 | ||
Equity | ||
Unrecognized stock-based compensation expense related to unvested stock options, net of forfeitures | $ 8,000 |
Equity - Additional Information
Equity - Additional Information (Details) - $ / shares | 1 Months Ended | 12 Months Ended | ||
Apr. 01, 2023 | Oct. 31, 2023 | Dec. 31, 2023 | Dec. 31, 2022 | |
Equity | ||||
Stock options granted | 80,000 | 81,000 | ||
Weighted average grant date fair value (per share) | $ 0.91 | |||
Distribution Made to Limited Partner, Distributions Declared, Per Unit | $ 0 | $ 0 | ||
Omnibus Incentive Plan | ||||
Equity | ||||
Share-Based Compensation Arrangement by Share-Based Payment Award, Number of Shares Available for Grant | 3,000,000 | |||
Common Stock, Capital Shares Reserved for Future Issuance | 1,851,937 | |||
Number of shares vested forfeited due to the termination of an employee. | 880,845 | |||
Omnibus Incentive Plan | Non-executive employee | ||||
Equity | ||||
Stock options granted | 80,000 | |||
Vesting period | 3 years | |||
Expiration period | 10 years |
Segment Reporting (Details)
Segment Reporting (Details) - segment | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Segment Reporting | ||
Number of reportable segments | 1 | 1 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) | 12 Months Ended | |||
Mar. 13, 2024 | Dec. 31, 2023 | Dec. 31, 2022 | Feb. 29, 2024 | |
Subsequent Events | ||||
Real estate properties, net (Note 14) | $ 156,966,000 | $ 173,127,000 | ||
Intangible lease assets, net | 11,653,000 | 13,704,000 | ||
Loans payable | 179,929,000 | 180,169,000 | ||
Total rental revenues | 18,072,000 | 21,957,000 | ||
Property operating costs | 3,773,000 | 3,139,000 | ||
Depreciation and amortization | 7,318,000 | 7,311,000 | ||
Interest expense | $ 17,521,000 | $ 13,534,000 | ||
Subsequent events | GA8 Properties | Summit Georgia Holdings LLC | ||||
Subsequent Events | ||||
Real estate properties, net (Note 14) | $ 98,400,000 | |||
Intangible lease assets, net | 10,400,000 | |||
Loans payable | 122,800,000 | |||
Total rental revenues | 11,800,000 | |||
Property operating costs | 1,300,000 | |||
Depreciation and amortization | 5,100,000 | |||
Interest expense | $ 13,200,000 | |||
Subsequent events | CA3 Properties | Discontinued Operations, Held-for-Sale | ||||
Subsequent Events | ||||
Aggregate purchase price | $ 30,000,000 |
Pay vs Performance Disclosure
Pay vs Performance Disclosure - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Pay vs Performance Disclosure | ||
Net Income (Loss) | $ (24,801,000) | $ (8,693,000) |
Insider Trading Arrangements
Insider Trading Arrangements | 3 Months Ended |
Dec. 31, 2023 | |
Trading Arrangements, by Individual | |
Rule 10b5-1 Arrangement Adopted | false |
Non-Rule 10b5-1 Arrangement Adopted | false |
Rule 10b5-1 Arrangement Terminated | false |
Non-Rule 10b5-1 Arrangement Terminated | false |