Summit Healthcare REIT Navigates Portfolio Shifts

Strategic restructuring continues as the company manages lease terminations and defaulted operators.

March 27, 2025

Ongoing Transitions Mark a Pivotal Year

Summit Healthcare REIT spent much of 2023 in active transition. The company focused on repositioning key parts of its portfolio, responding to operator defaults, and managing financial pressures that continue to shape the skilled nursing and senior housing market.

Over the last year, Summit has made several moves to address underperformance and limit exposure to risk. That includes terminating leases, recovering operational control of affected properties, and pursuing litigation to enforce lease obligations. The broader backdrop here is no surprise—labor shortages, wage inflation, and the lingering effects of COVID-19 have left many healthcare operators under strain. For Summit, staying ahead meant moving quickly when issues surfaced.

Lease Terminations and Operator Turnover

One key example: a negotiated lease termination involving eight assisted living facilities in South Carolina and Ohio. After operational and financial challenges mounted, Summit took back the properties and lined up new operators. This wasn’t just a cleanup effort—it was a realignment of assets to bring more control and long-term stability into the portfolio.

Other transitions weren’t as smooth. A major operator, formerly known as Legacy Healthcare, stopped making rent payments on 17 facilities in 2022. Although Summit implemented a temporary management agreement and recovered partial payments, full rent hasn’t resumed. The company responded by initiating legal proceedings, aiming to recover what’s owed while keeping facilities running.

Legal Disputes and Recovery Efforts

Summit is also still managing the fallout from a lease default involving 19 properties tied to Granite Investment Group. That situation triggered a mix of foreclosure proceedings, court-appointed receiverships, and new operator transitions. The company is pursuing over $30 million in damages through litigation tied to unpaid rent and related costs. Some of those cases are ongoing, while others have led to partial recoveries or settlements.

As of the end of 2023, Summit held a portfolio of 54 properties across 13 states. That includes 40 skilled nursing facilities, eight assisted living centers, and six hybrid-use locations. Many of these are financed with mortgage debt, and while servicing those loans remains a priority, the company is also facing a more challenging credit environment. Several properties are now in forbearance, with Summit actively negotiating extensions and restructuring options where needed.

Financial and Operational Stability Remain in Focus

Financial results reflected the pressures of the year. Rental income dipped slightly as a result of operator defaults and transitions. Total assets edged down, though the company remained profitable. Through all this, Summit prioritized asset control, continuity of care, and targeted management of legal risk.

Capital Strategy in a Tight Market

The lending environment added another layer of complexity. With higher interest rates and tighter credit, refinancing options narrowed. Still, Summit completed select refinancings in 2023 and continues to work closely with lenders to stay in compliance and avoid forced sales.

Growth took a backseat this year, with no new acquisitions reported. Instead, the focus was on stabilization—shoring up what’s working, fixing what’s not, and limiting exposure where needed. The company’s leadership pointed to this as a deliberate approach given current market volatility.

Looking Ahead

Legal matters remain in play, with multiple claims still in progress related to operator defaults and lease guarantees. Some settlements have already brought in partial recoveries, while others are moving through the courts. The outcomes could have a material impact on future earnings.

Looking ahead, Summit sees both challenge and opportunity. Labor costs and staffing gaps will likely remain a drag on the skilled nursing and assisted living sectors. But as the market resets, Summit is watching for deals—especially opportunities to acquire or reposition distressed assets.

The path forward is clear: continue transitioning troubled properties, recover outstanding obligations where possible, and maintain operational continuity across the portfolio. With each step, Summit is working to stay responsive, protect asset value, and adapt to the evolving healthcare real estate landscape.