10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 000-52566

SUMMIT HEALTHCARE REIT, INC.

(Exact name of registrant as specified in its charter)

MARYLAND	73-1721791
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
23382 MILL CREEK DRIVE, SUITE 125, LAGUNA HILLS, CA	92653
(Address of principal executive offices)	(Zip Code)

800-978-8136

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Ticker symbol(s)	Name of each exchange on which registered
N/A	N/A	N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes  ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Sec. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes  ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes  ☒ No

As of November 6, 2023, we had 23,027,978 shares of common stock of Summit Healthcare REIT, Inc. outstanding.

FORM 10-Q

SUMMIT HEALTHCARE REIT, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements:	3
	Condensed Consolidated Balance Sheets (unaudited)	3
	Condensed Consolidated Statements of Operations (unaudited)	4
	Condensed Consolidated Statements of Equity (unaudited)	5
	Condensed Consolidated Statements of Cash Flows (unaudited)	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	33
SIGNATURES		34
EX-31.1
EX-31.2
EX-32

2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

SUMMIT HEALTHCARE REIT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

	September 30,		December 31,
	2023		2022
ASSETS
Cash and cash equivalents	$	11,289,000	$	11,572,000
Restricted cash		3,199,000		2,591,000
Real estate properties, net		158,343,000		173,127,000
Intangible lease assets, net		11,870,000		13,704,000
Tenant and other receivables, net		4,633,000		5,020,000
Other assets, net		1,714,000		2,107,000
Equity-method investments		3,394,000		5,182,000
Total assets	$	194,442,000	$	213,303,000
LIABILITIES AND EQUITY
Accounts payable and accrued liabilities	$	7,116,000	$	5,585,000
Security deposits		4,231,000		4,651,000
Loans payable, net of debt issuance costs		179,992,000		180,169,000
Total liabilities		191,339,000		190,405,000
Commitments and contingencies
Stockholders’ Equity
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding at September 30, 2023 and December 31, 2022		—		—
Common stock, $0.001 par value; 290,000,000 shares authorized; 23,027,978 shares issued and outstanding at September 30, 2023 and December 31, 2022		23,000		23,000
Additional paid-in capital		116,461,000		116,432,000
Accumulated deficit		(113,500,000)		(93,734,000)
Total stockholders’ equity		2,984,000		22,721,000
Noncontrolling interests		119,000		177,000
Total equity		3,103,000		22,898,000
Total liabilities and equity	$	194,442,000	$	213,303,000

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

3

SUMMIT HEALTHCARE REIT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Revenues:
Total rental revenues	$	4,552,000	$	5,416,000	$	15,298,000	$	16,392,000
Resident fees and services		2,084,000		1,125,000		5,086,000		2,396,000
Asset management fees		129,000		165,000		423,000		495,000
Total operating revenue		6,765,000		6,706,000		20,807,000		19,283,000
Expenses:
Property operating costs		917,000		846,000		2,469,000		2,385,000
Resident costs		2,095,000		1,281,000		4,362,000		2,474,000
General and administrative		1,403,000		1,280,000		3,598,000		3,460,000
Depreciation and amortization		2,066,000		1,813,000		5,685,000		5,498,000
Impairment of real estate properties		11,387,000		—		11,387,000		—
Total operating expenses		17,868,000		5,220,000		27,501,000		13,817,000
Operating (loss) income		(11,103,000)		1,486,000		(6,694,000)		5,466,000
Loss from equity-method investees		(1,671,000)		(7,000)		(1,429,000)		(496,000)
Other income		103,000		43,000		299,000		206,000
Interest expense		(4,542,000)		(3,498,000)		(13,010,000)		(9,634,000)
Gain on consolidation of interest in unconsolidated equity-method investment		1,066,000		—		1,066,000		—
Net loss		(16,147,000)		(1,976,000)		(19,768,000)		(4,458,000)
Noncontrolling interests’ share in net (income) loss		38,000		(12,000)		2,000		(49,000)
Net loss applicable to common stockholders	$	(16,109,000)	$	(1,988,000)	$	(19,766,000)	$	(4,507,000)
Basic and diluted loss per common share:
Net loss applicable to common stockholders	$	(0.70)	$	(0.09)	$	(0.86)	$	(0.20)
Weighted average shares used to calculate basic and diluted earnings per common share		23,027,978		23,027,978		23,027,978		23,027,978

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

4

SUMMIT HEALTHCARE REIT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

	Common Stock
		Common
	Number	Stock		Additional				Total
	of	Par		Paid-In		Accumulated		Stockholders’		Noncontrolling		Total
	Shares	Value		Capital		Deficit		Equity		Interests		Equity
Balance — January 1, 2023	23,027,978	$	23,000	$	116,432,000	$	(93,734,000)	$	22,721,000	$	177,000	$	22,898,000
Stock-based compensation	—		—		7,000		—		7,000		—		7,000
Distributions paid to noncontrolling interests	—		—		—		—		—		(17,000)		(17,000)
Net (loss) income	—		—		—		(1,976,000)		(1,976,000)		17,000		(1,959,000)
Balance — March 31, 2023	23,027,978	$	23,000	$	116,439,000	$	(95,710,000)	$	20,752,000	$	177,000	$	20,929,000
Stock-based compensation	—		—		10,000		—		10,000		—		10,000
Distributions paid to noncontrolling interests	—		—		—		—		—		(19,000)		(19,000)
Net (loss) income	—		—		—		(1,681,000)		(1,681,000)		19,000		(1,662,000)
Balance — June 30, 2023	23,027,978	$	23,000	$	116,449,000	$	(97,391,000)	$	19,081,000	$	177,000	$	19,258,000
Stock-based compensation	—		—		12,000		—		12,000		—		12,000
Distributions paid to noncontrolling interests	—		—		—		—		—		(20,000)		(20,000)
Net (loss) income	—		—		—		(16,109,000)		(16,109,000)		(38,000)		(16,147,000)
Balance — September 30, 2023	23,027,978	$	23,000	$	116,461,000	$	(113,500,000)	$	2,984,000	$	119,000	$	3,103,000

	Common Stock
		Common
	Number	Stock		Additional				Total
	of	Par		Paid-In		Accumulated		Stockholders’		Noncontrolling		Total
	Shares	Value		Capital		Deficit		Equity		Interests		Equity
Balance — January 1, 2022	23,027,978	$	23,000	$	116,401,000	$	(85,041,000)	$	31,383,000	$	171,000	$	31,554,000
Stock-based compensation	—		—		8,000		—		8,000		—		8,000
Distributions paid to noncontrolling interests	—		—		—		—		—		(18,000)		(18,000)
Net (loss) income	—		—		—		(325,000)		(325,000)		19,000		(306,000)
Balance — March 31, 2022	23,027,978	$	23,000	$	116,409,000	$	(85,366,000)	$	31,066,000	$	172,000	$	31,238,000
Stock-based compensation	—		—		6,000		—		6,000		—		6,000
Distributions paid to noncontrolling interests	—		—		—		—		—		(18,000)		(18,000)
Net (loss) income	—		—		—		(2,194,000)		(2,194,000)		18,000		(2,176,000)
Balance — June 30, 2022	23,027,978	$	23,000	$	116,415,000	$	(87,560,000)	$	28,878,000	$	172,000	$	29,050,000
Stock-based compensation	—		—		9,000		—		9,000		—		9,000
Distributions paid to noncontrolling interests	—		—		—		—		—		(13,000)		(13,000)
Net (loss) income	—		—		—		(1,988,000)		(1,988,000)		12,000		(1,976,000)
Balance — September 30, 2022	23,027,978	$	23,000	$	116,424,000	$	(89,548,000)	$	26,899,000	$	171,000	$	27,070,000

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

5

SUMMIT HEALTHCARE REIT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine months Ended September 30,
	2023		2022
Cash flows from operating activities:
Net loss	$	(19,768,000)	$	(4,458,000)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Amortization of debt issuance costs		685,000		684,000
Depreciation and amortization		5,430,000		5,498,000
Amortization of above-market lease intangible		48,000		47,000
Straight-line rents		(920,000)		(1,108,000)
Write off of straight-line rent receivables		1,300,000		—
Stock-based compensation expense		29,000		23,000
Write-off of leasing commissions		255,000		—
Impairment of real estate properties		11,387,000		—
Gain on consolidation of interest in unconsolidated equity-method investment		(1,066,000)		—
Loss from equity-method investees		1,429,000		496,000
Change in operating assets and liabilities:
Tenant and other receivables, net		45,000		274,000
Other assets, net		232,000		(98,000)
Accounts payable and accrued liabilities		1,148,000		2,620,000
Security deposits		(420,000)		—
Net cash (used in) provided by operating activities		(186,000)		3,978,000
Cash flows from investing activities:
Proceeds from sale of real estate properties assigned		3,839,000		—
Cash assumed in assignment of interest in unconsolidated equity-method investment		770,000		—
Additions to real estate and other assets		(243,000)		(483,000)
Investment in equity-method investees		(230,000)		(1,111,000)
Distributions received from equity-method investees		550,000		422,000
Net cash provided by (used in) investing activities		4,686,000		(1,172,000)
Cash flows from financing activities:
Payments of loans payable		(862,000)		(831,000)
Repayment of loan payable assigned		(3,171,000)		—
Distributions paid to noncontrolling interests		(56,000)		(49,000)
Deferred financing costs		(86,000)		(173,000)
Net cash used in financing activities		(4,175,000)		(1,053,000)
Net increase in cash, cash equivalents and restricted cash		325,000		1,753,000
Cash, cash equivalents and restricted cash – beginning of period		14,163,000		13,161,000
Cash, cash equivalents and restricted cash – end of period	$	14,488,000	$	14,914,000
Supplemental disclosure of cash flow information:
Cash paid for interest	$	12,007,000	$	7,864,000
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	$	—

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

6

SUMMIT HEALTHCARE REIT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(Unaudited)

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 17 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. As used in these notes, the “Company”, “we”, “us” and “our” refer to Summit and its consolidated subsidiaries, including but not limited to 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 condensed consolidated financial statements and owns four properties (the “JV Properties”) with another partially owned subsidiary. As of September 30, 2023 and December 31, 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 condensed consolidated financial statements and is accounted for under the equity-method in our condensed consolidated financial statements. As of September 30, 2023 and December 31, 2022, we have a 10% interest in the SUL JV which owns 17 properties.

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, LLC (the “Fantasia I JV”), in which we had a 35% interest. As of June 30,2023, the Fantasia I JV was not consolidated in our condensed consolidated financial statements and was accounted for under the equity-method in our condensed consolidated financial statements.

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. See Note 3 under Fantasia I JV Transfer of Interest and Sale 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 with Fantasia, and formed Summit Fantasia Holdings II, LLC (the “Fantasia II JV”). The Fantasia II JV is not consolidated in our condensed consolidated financial statements and is accounted for under the equity-method in our condensed consolidated financial statements. As of September 30, 2023 and December 31, 2022, we have a 20% interest in the Fantasia II JV which owns two properties.

7

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 condensed consolidated financial statements and is accounted for under the equity-method in our condensed consolidated financial statements. As of September 30, 2023 and December 31, 2022, we have a 10% interest in the Fantasia III JV. The Fantasia III JV owned eight properties as of September 30, 2023 and owned nine properties as of December 31, 2022.

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 condensed consolidated financial statements and is accounted for under the equity-method in our condensed consolidated financial statements. As of September 30, 2023 and December 31, 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 2, 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 100% owned real estate properties that are leased to an affiliated subsidiary (see Note 3 under Pennington Gardens Operations LLC (“Pennington Gardens”) and Sundial Operations LLC (“Sundial Assisted Living”), collectively, the “Operated Properties”) and the operations are consolidated in our condensed consolidated financial statements.

2. Summary of Significant Accounting Policies

For more information regarding our significant accounting policies and estimates, please refer to “Summary of Significant Accounting Policies” contained in the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission (“SEC”) on March 31, 2023. The accompanying condensed consolidated balance sheet at December 31, 2022 has been derived from the audited consolidated financial statements at that date. We assume that users of these condensed consolidated financial statements have read or have access to the audited December 31, 2022 consolidated financial statements and contained in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 31, 2023 and that the adequacy of additional disclosure needed for a fair presentation, except in regard to material contingencies, may be determined in that context. Accordingly, footnotes and other disclosures which would substantially duplicate those contained in our most recent Annual Report on Form 10-K for the year ended December 31, 2022 have been omitted in this report.

Principles of Consolidation and Basis of Presentation

The accompanying condensed 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.

The accompanying financial information reflects all adjustments, which are, in the opinion of management, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods. Interim results of operations are not necessarily indicative of the results to be expected for the full year. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

8

Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown on the condensed consolidated statements of cash flows.

	September 30,		December 31,
	2023		2022
Cash and cash equivalents	$	11,289,000	$	11,572,000
Restricted cash		3,199,000		2,591,000
Total cash, cash equivalents, and restricted cash shown on the condensed consolidated statements of cash flows	$	14,488,000	$	14,163,000

3. Investments in Real Estate Properties

As of September 30, 2023 and December 31, 2022, our investments in real estate properties, including those held by our consolidated subsidiaries (excluding the 33 properties owned by our unconsolidated Equity-Method Investments), are set forth below:

	September 30,		December 31,
	2023		2022
Land	$	14,905,000	$	15,565,000
Buildings and improvements		157,833,000		166,989,000
Less: accumulated depreciation		(19,403,000)		(15,985,000)
Buildings and improvements, net		138,430,000		151,004,000
Furniture and fixtures		12,121,000		12,440,000
Less: accumulated depreciation		(7,113,000)		(5,882,000)
Furniture and fixtures, net		5,008,000		6,558,000
Real estate properties, net	$	158,343,000	$	173,127,000

For the three months ended September 30, 2023 and 2022, depreciation expense (excluding lease intangibles amortization and leasing commission amortization) was approximately $1.6 million and $1.6 million, respectively. For the nine months ended September 30, 2023 and 2022, depreciation expense (excluding intangible lease amortization and leasing commission amortization) was approximately $4.7 million and $4.8 million, respectively.

As of September 30, 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 consists of the real estate of Summit Citrus Heights, LLC, our wholly-owned subsidiary (“Summit Citrus Heights”) as of July 3, 2023, and the operating assets and liabilities of its associated senior housing facility, Sun Oak Assisted Living (“Sun Oak" or "CH TRS”).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. The Fantasia I JV was considered a variable interest entity 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 condensed 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 condensed consolidated statements of operations. See below under CH TRS LLC for additional information regarding the operations of Sun Oak.

9

CH TRS LLC (Sun Oak Assisted Living)

In July 2023, as noted above under Fantasia I JV Transfer of Interest and Sale, we acquired the Fantasia I JV. Summit Citrus Heights was the sole member of CH TRS LLC, the operating company for 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 three months ended September 30, 2023, revenues from Sun Oak are recorded under resident fees and services and costs are recorded under resident costs in the condensed 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 condensed 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 three and nine months ended September 30, 2023 and for the period from February 11, 2022 through September 30, 2022, revenues from Pennington Gardens Operations are recorded under resident fees and services and costs are recorded under resident costs in the condensed 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 three and nine months ended September 30, 2023 and for the period from June 7, 2022 through September 30, 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 condensed consolidated statements of operations.

The following table provides summary information regarding our portfolio (excluding the 33 properties owned by our unconsolidated Equity-Method Investments and the $12.75 million loan from Oxford Finance, LLC (“Oxford”) (see Note 4) with Summit Georgia Holdings LLC, our wholly-owned subsidiary) as of September 30, 2023:

						Loans
						Payable,
						Excluding
						Debt
				Purchase		Issuance
Property	Location	Date Purchased	Type(1)	Price		Costs
Rivers Edge Rehabilitation and Care (f/k/a) Sheridan Care Center))	Sheridan, OR	August 3, 2012	SNF	$	4,100,000	$	3,873,000
Fernhill Care Center	Portland, OR	August 3, 2012	SNF		4,500,000		3,397,000
Friendship Haven Healthcare and Rehabilitation Center	Galveston County, TX	September 14, 2012	SNF		15,000,000		11,164,000
Pacific Health and Rehabilitation Center	Tigard, OR	December 24, 2012	SNF		8,140,000		5,664,000
Brookstone of Aledo	Aledo, IL	July 2, 2013	AL		8,625,000		6,496,000
Sundial Assisted Living	Redding, CA	December 18, 2013	AL		3,500,000		3,641,000
Pennington Gardens	Chandler, AZ	July 17, 2017	AL/MC		13,400,000		9,918,000
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	$	170,153,000

(1) SNF is an abbreviation for skilled nursing facility.

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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, 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 condensed consolidated statements of operations, wrote off leasing commissions of approximately $0.3 million, which is included in depreciation and amortization in our condensed consolidated statements of operations, and recorded income from security deposits of approximately $0.4 million, which is included in total rental revenue in our condensed 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.

Future Minimum Lease Payments

The future minimum lease payments to be received under our existing tenant operating leases (excluding the 33 properties owned by our unconsolidated Equity-Method Investments and the intercompany lease between our wholly-owned subsidiaries: Summit Chandler LLC and Pennington Gardens, and HP Redding LLC and Sundial) as of September 30, 2023, for the period from October 1, 2023 to December 31, 2023 and for each of the four following years and thereafter ending December 31 are as follows:

Years ending
October 1, 2023 to December 31, 2023	$	4,504,000
2024		18,272,000
2025		18,566,000
2026		18,865,000
2027		19,168,000
Thereafter		155,908,000
	$	235,283,000

2023 Acquisitions

None.

2022 Acquisitions

None.

Impairment of Real Estate Properties

As a result of our ongoing analysis for potential impairment of our investments in real estate, we may be required to adjust the carrying value of certain assets to their estimated fair values, or estimated fair value less selling costs, under certain circumstances.

During the three and nine months ended September 30, 2023, we recorded an impairment of $11.4 million related to eight real estate properties, which is included in impairment of real estate properties in the condensed consolidated statements of operations.  The impairment was recorded due to the tenants experiencing issues affecting their ability to continue to pay their lease obligations.  We utilized a market approach for the fair value estimate of the real estate properties and based our impairment on an estimated yield of 10.8%.  We considered these inputs as Level 3 measurements within the fair value hierarchy.

No impairments were recorded during the nine months ended September 30, 2022.

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4. Loans Payable

As of September 30, 2023 and December 31, 2022, our loans payable consisted of the following:

	September 30, 2023		December 31, 2022
Loans payable to Lument (formerly ORIX Real Estate Capital, LLC) (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 September 30, 2023 and December 31, 2022, collateralized by Sheridan, Fernhill, Pacific Health, Aledo, Sundial and Friendship Haven.	$	34,235,000	$	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.		9,918,000		10,039,000
Loan payable to CIBC Bank, USA in monthly installments of approximately of $133,000 including cash collateral fund payments, variable interest rate (9.4% and 8.2% at September 30, 2023 and December 31, 2022, respectively), due in July 2024, and as of December 31, 2022, collateralized by Yucaipa Hill Post Acute, Creekside Post Acute and University Post Acute (“CA3 Properties”).		15,000,000		15,000,000
Loan payable to CIBC Bank, USA in monthly installments of approximately $600,000 (interest only through December 2023) variable interest rate (8.8% and 7.7% at September 30, 2023 and December 31, 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 (“GA8 Properties”).		91,000,000		91,000,000
Loan payable to Oxford Finance, LLC in monthly installments of approximately $260,000 (interest only through maturity), variable interest rate (16.4% and 15.1% at September 30, 2023 and December 31, 2022, respectively) due in March 2025, collateralized in second position by the GA8 Properties.		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 (16.4% and 15.1% at September 30, 2023 and December 31, 2022, respectively) due in December 2026, secured by the equity interests of our wholly-owned subsidiary, Summit Georgia Holdings LLC, the parent holding company for the GA8 Properties.		12,750,000		12,750,000
		182,903,000		183,765,000
Less debt issuance costs		(2,911,000)		(3,596,000)
Total loans payable	$	179,992,000	$	180,169,000

As of September 30, 2023, we have total debt obligations of approximately $182.9 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 September 30, 2023, we were in compliance with all of our debt covenants except for our GA8 Properties which were out of compliance with their consolidated minimum EBITDAR covenant. We have requested a waiver. Additionally, in October 2023 and November 2023, Oxford agreed to defer a portion of our interest payments on the mezzanine loan payable (see table above) until we can confirm a plan of action.  We have not received any notice of default for this deferral, however, we are including it in the current period in the principal payments due on the loans payable table below.

During the three months ended September 30, 2023 and 2022, we incurred approximately $4.3 million and $3.2 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 nine months ended September 30, 2023 and 2022, we incurred

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approximately $12.3 million and $8.4 million, respectively, of interest expense (excluding debt issuance costs, amortization and interest expense related to the Oxford Monthly Fee) related to our loans payable.

In connection with our loans payable, we incurred debt issuance costs. As of September 30, 2023 and December 31, 2022, the unamortized balance of the debt issuance costs was approximately $2.9 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 each of the three months ended September 30, 2023 and 2022, $0.2 million of debt issuance costs were amortized and included in interest expense in our condensed consolidated statements of operations. For each of the nine months ended September 30, 2023 and 2022, $0.7 million of debt issuance costs were amortized and included in interest expense in our condensed consolidated statements of operations.

During the three months ended September 30, 2023 and 2022, we incurred approximately $0 million and $0.1 million, respectively, of interest expense related to the Oxford Monthly Fee which is included in interest expense in our condensed consolidated statements of operations. During the nine months ended September 30, 2023 and 2022, we incurred approximately $0 million and $0.5 million, respectively of interest expense related to the Oxford Monthly Fee and is included in interest expense in our condensed consolidated statements of operations.

The principal payments due on the loans payable (excluding debt issuance costs) for the period from October 1, 2023 to December 31, 2023 and for each of the four following years and thereafter ending December 31 are as follows:

	Principal
Years Ending	Amount
October 1, 2023 to December 31, 2023	$	13,044,000
2024		107,201,000
2025		21,246,000
2026		1,292,000
2027		1,341,000
Thereafter		38,779,000
	$	182,903,000

The following information notes our loan activity:

CA3 Properties

In 2021, we entered into a first priority $15.0 million mortgage loan collateralized by the CA3 Properties with CIBC Bank, USA (“CIBC”). See table above listing loans payable for further information.

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 Holdings LLC, the parent holding company for the GA8 Properties. See table above listing loans payable for further information.

HUD-insured loans

We have six properties with HUD-insured loans from Lument Capital (formerly ORIX Real Estate Capital, LLC) and one property with a HUD-insured loan from Capital One Multifamily Finance, LLC. See table above listing loans payable for further information.

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 condensed consolidated balance sheets.

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Master Letter of Credit Agreement

In June 2023, we entered into $1.0 million Master Letter of Credit Agreement with CIBC. As of September 30, 2023, there are no outstanding letters of credit under this agreement.

5. Equity-Method Investments

As of September 30, 2023 and December 31, 2022, the balances of our Equity-Method Investments were approximately $3.4 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 is distributed monthly, first to the Operating Partnership and Best Years pari passu up to a 9% to 10% annual return, and thereafter to Best Years 75% and the Operating Partnership 25%. All capital proceeds from the sale of the properties held by the SUL JV, a refinancing or another capital event will be paid first to the Operating Partnership and Best Years pari passu until each has received an amount equal to its accrued but unpaid 9% to 10% return plus its total contribution, and thereafter to Best Years 75% and the Operating Partnership 25%.

For the nine months ended September 30, 2023 and 2022, we invested approximately $230,000 and $821,000, respectively, related to capital calls for the SUL JV.  During the three months ended September 30, 2023, the SUL JV  recorded an impairment of approximately $1.1 million on one property in this JV and we recorded our 10% share of the impairment of approximately $0.1 million in loss from equity-method investees in the condensed consolidated statements of operations.

As of September 30, 2023 and December 31, 2022, the balance of our equity-method investment related to the SUL JV was approximately $2.2 million and $2.4 million, respectively.

Summit Fantasia Holdings, LLC

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.  See Note 3 under Fantasia I JV Transfer of Interest and Sale for further information.

For the period ended July 2, 2023 and the nine months ended September 30, 2022, we invested approximately $0 and $290,000, respectively, related to capital calls for the Fantasia I JV. In September 2022, we determined the fair value of our investment in the Fantasia I JV to be impaired and recorded a $0.1 million impairment charge which is recorded in the loss from equity-method investees in the condensed consolidated statements of operations for the three and nine months ended September 30, 2022.

As of July 2, 2023 and December 31, 2022, our equity-method investment related to the Fantasia I JV was $0 due to the transfer and impairment noted above, respectively.

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 II JV is distributed quarterly, first to the Operating Partnership and Fantasia pari passu until each member has received an amount equal to its accrued, but unpaid 8% return, and thereafter 70% to Fantasia and 30% to the Operating Partnership. All capital proceeds from the sale of the properties held by the Fantasia II JV, a refinancing or another capital event, will be paid first to the Operating Partnership and Fantasia pari passu until each has received an amount equal to its accrued but unpaid 8% return plus its total capital contribution, and thereafter 70% to Fantasia and 30% to the Operating Partnership.

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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 September 30, 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.  During the three months ended September 30, 2023, the Fantasia II JV recorded an impairment of approximately $1.6 million on the two properties and we recorded our 20% share of the impairment of approximately $0.3 million in loss from equity-method investees in the condensed consolidated statements of operations.  Additionally, in September 2023, due to the ongoing issues with the receivership, we determined the fair value of 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 condensed consolidated statements of operations.

As of September 30, 2023 and December 31, 2022, the balance of our equity-method investment related to the Fantasia II JV was approximately $0 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 is distributed quarterly, first to the Operating Partnership and Fantasia pari passu until each member has received an amount equal to its accrued, but unpaid 9% return, and thereafter 75% to Fantasia and 25% to the Operating Partnership. All capital proceeds from the sale of the properties held by the Fantasia III JV, a refinancing or another capital event, will be paid first to the Operating Partnership and Fantasia pari passu until each has received an amount equal to its accrued but unpaid 9% return plus its total capital contribution, and thereafter 75% to Fantasia and 25% to the Operating Partnership.

During the three months ended September 30, 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 settlement 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 JV. The Fantasia III JV recorded a loss of approximately $3.9 million on the transaction and we recorded our 10% share of the loss of approximately $0.4 million in loss from equity-method investees in the condensed consolidated statements of operations.

As of September 30, 2023 and December 31, 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 is distributed quarterly, first to the members pari passu until each member has received an amount equal to its accrued, but unpaid 9% return, and thereafter 65.25% to Fantasy, 7.5% to Atlantis, 7.25% to Fantasia and 20% to the Operating Partnership. All capital proceeds from the sale of the properties held by the FPH JV, a refinancing or another capital event, will be paid to the members pari passu until each has received an amount equal to its accrued but unpaid 9% return plus its total capital contribution, and thereafter 65.25% to Fantasy, 7.5% to Atlantis, 7.25% to Fantasia, and 20% to the Operating Partnership.

In December 2022, Summit recorded an impairment of approximately $0.2 million of our equity-method investment balance in the FPH JV due to issues related to tenant operations, and consequently, reduced our equity-method investment balance to $0.

As of September 30, 2023 and December 31, 2022, the balance of our equity-method investment related to the FPH JV was $0.

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Distributions from Equity-Method Investments

As of September 30, 2023 and December 31, 2022, we have distributions receivable, which are included in tenant and other receivables in our condensed consolidated balance sheets, as follows:

	September 30,		December 31,
	2023		2022
SUL JV	$	269,000	$	259,000
Fantasia II JV		30,000		55,000
Fantasia III JV		69,000		22,000
FPH JV		64,000		64,000
Total	$	432,000	$	400,000

For the nine months ended September 30, 2023 and 2022, we have received cash distributions, which are included in our cash flows from operating activities in tenant and other receivables, and cash flows from investing activities, as follows:

	Nine months Ended September 30, 2023						Nine months Ended September 30, 2022
			Cash Flow		Cash Flow				Cash Flow		Cash Flow
	Total Cash		from		from		Total Cash		from		from
	Distributions		Operating		Investing		Distributions		Operating		Investing
	Received		Activities		Activities		Received		Activities		Activities
SUL JV	$	408,000	$	6,000	$	402,000	$	434,000	$	91,000	$	343,000
Fantasia II JV		136,000		—		136,000		237,000		158,000		79,000
Fantasia III JV		12,000		—		12,000		95,000		95,000		—
FPH JV		—		—		—		56,000		56,000		—
Total	$	556,000	$	6,000	$	550,000	$	822,000	$	400,000	$	422,000

Asset Management Fees

We serve as the manager of our Equity-Method Investments and provide management services in exchange for fees and reimbursements. As the manager, we are paid an annual asset management fee for managing the properties held by our Equity-Method Investments, as defined in those agreements. For the three months ended September 30, 2023 and 2022, we recorded approximately $0.1 million and $0.2 million, respectively, in asset management fees from our Equity-Method Investments. For each of the nine months ended September 30, 2023 and 2022, we recorded approximately $0.4 million and $0.5 million, respectively, in asset management fees from our Equity-Method Investments (see Note 7).

6. Receivables

Tenant and Other Receivables, Net

Tenant and other receivables, net consists of:

	September 30,		December 31,
	2023		2022
Straight-line rent receivables	$	3,482,000	$	3,862,000
Distribution receivables from Equity-Method Investments		432,000		400,000
Asset management fees		290,000		375,000
Other receivables		429,000		383,000
Total	$	4,633,000	$	5,020,000

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.

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8. Intangible Lease Assets

Intangible lease assets are as follows:

	September 30,		December 31,
	2023		2022
In-place leases	$	12,680,000	$	13,778,000
Less: accumulated amortization		(1,625,000)		(937,000)
In-place leases, net		11,055,000		12,841,000
Above-market leases		959,000		959,000
Less: accumulated amortization		(144,000)		(96,000)
Above-market leases, net		815,000		863,000
Total intangible lease assets, net	$	11,870,000	$	13,704,000

For each of the three months ended September 30, 2023 and 2022, amortization expense for intangible lease assets was approximately $0.2 million of which approximately $16,000 relates to the amortization of above market leases which is included within rental revenues in the accompanying condensed consolidated statements of operations. For each of the nine months ended September 30, 2023 and 2022, amortization expense for intangible lease assets was approximately $0.7 million of which approximately $48,000 relates to the amortization of above-market leases which is included within rental revenues in the accompanying condensed consolidated statements of operations.

Expected future amortization of the intangible lease assets as of September 30, 2023, for the period from October 1, 2023 to December 31, 2023 and for each of the four following years and thereafter ending December 31 are as follows:

Years ending December 31,
October 1, 2023 to December 31, 2023	$	224,000
2024		896,000
2025		896,000
2026		896,000
2027		896,000
Thereafter		8,062,000
	$	11,870,000

9. Right of Use (ROU) Asset - Operating

In November 2022, we entered into an operating lease for office space (“Office Lease”) for a period of sixty-six (66) months, with a five-year renewal option. The office space subject to the Office Lease is located in Laguna Hills, California. The Office Lease provides for the abatement of the base rent for the second full calendar month (January 2023) through the seventh full calendar month of the lease term (June 2023). The initial annual base rent is $204,399 and increases three percent (3%) each year on the anniversary date of the commencement of the Office Lease.

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 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. The Office Lease does not contain material residual value guarantees or material restrictive covenants.

Supplemental balance sheet information related to the Office Lease are as follows:

Component	Consolidated Balance Sheet Caption	September 30, 2023		December 31, 2022
Right of use asset - operating	Other assets, net	$	732,000	$	833,000
Lease liability - operating	Accounts payable and accrued liabilities	$	918,000	$	933,000

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Lease expense is presented as part of continuing operations within general and administrative expenses in the condensed consolidated statements of operations. For the three months ended September 30, 2023, we recognized approximately $45,000 in lease expense and for the nine months ended September 30, 2023, we recognized approximately $135,000 in lease expense. The lease payments will be classified within operating activities in the consolidated statements of cash flows. As of September 30, 2023, we had not made any lease payments and the weighted average remaining lease term is 4.4 years.

Lease payments on the Office Lease for the period from October 1, 2023 to December 31, 2023 and for each of the four following years and thereafter ending December 31 are as follows:

Year	Lease payments
October 1, 2023 to December 31, 2023	$	52,000
2024		211,000
2025		217,000
2026		224,000
2027		231,000
Thereafter		99,000
Total lease payments	$	1,034,000
Less imputed interest		(116,000)
Total lease liability	$	918,000

10. Concentration of Risk

Our cash is generally invested in short-term money market instruments. As of September 30, 2023, we had cash accounts in excess of FDIC-insured limits. During March 2023, in response to the banking crisis, we transferred cash balances in excess of FDIC-insured limits from a smaller regional bank to a multi-national bank. To date, we have not experienced losses or lack of access to cash in our cash and cash equivalent accounts.

As of September 30, 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 33 properties held by our Equity-Method Investments). Accordingly, there is a geographic concentration of risk subject to economic conditions in certain states.

Additionally, for the three months ended September 30, 2023, we leased our 16 real estate properties to 14 different tenants under long-term triple net leases, and three of the 14 tenants each represented more than 10% of our rental revenue. For the three months ended September 30, 2022, 16 of our real estate properties were leased to 14 different tenants under long-term triple net leases, and three of the 14 tenants each represented more than 10% of our rental revenue.

For the nine months ended September 30, 2023, 16 of our real estate properties were leased to 14 different tenants under long-term triple net leases, and three of the 14 tenants each represented more than 10% of our rental revenue. For the nine months ended September 30, 2022, 16 of our real estate properties were leased to 14 different tenants under long-term triple net leases, and three of the 14 tenants each represented more than 10% of our rental revenue.

As of September 30, 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.

11. Fair Value Measurements of Financial Instruments

Our condensed 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 (categorized within Level 1 of the fair value hierarchy) for such financial instruments because of the short period of time between origination of the instruments and their expected payment.

As of September 30, 2023 and December 31, 2022, the fair value of our HUD-insured loans payable was $36.6 million and $38.9 million, compared to the principal balance (excluding debt discount) of $44.1 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

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our fixed rate debt 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 September 30, 2023 and December 31, 2022, we believe the carrying amounts of our variable rate debt are reasonably estimated at their notional 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. 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.

See Note 3 for disclosure regarding fair value of impaired real estate properties.

As of September 30, 2023 and December 31, 2022, we do not have any significant financial assets or financial liabilities that are measured at fair value on a recurring basis in our condensed consolidated financial statements.

12. 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.

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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.  The Bankruptcy Court has not yet ruled on the motions and has not indicated when a decision will be issued. Based on the assessment by management, as of September 30, 2023, the Company has accrued $75,000 for the reimbursement of legal fees and $0 for the $517,000 in attorney’s fees 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”), 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, after Mr. Eikanas was given written notice of and failed to cure various deficiencies in his performance following the expiration of a 60-day cure period.  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.  The parties are currently engaged in written discovery and related motion practice. The parties have also started depositions. 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 September 30, 2023, no accrual has been made with regard to the claim.

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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. Effective October 19, 2021, we entered into a new employment agreement with Elizabeth Pagliarini (Chief Financial Officer at the time and current Chief Executive Officer), for a term of three years. The employment agreement includes customary terms relating to salary, bonus, position, duties and benefits (including eligibility for equity compensation), as well as a cash payment following a change in control of the Company, as defined in such agreement.

We previously had entered into an employment agreement, dated October 19, 2021, with Mr. Eikanas, which was terminated on July 14, 2023 in connection with his removal as Chief Executive Officer.

Management of our Equity-Method Investments

As the manager of our Equity-Method Investments, we are responsible for day-to-day management. Additionally, we could be subject to a capital call from our Equity-Method Investments (see Note 5 for capital call activity).

13. Equity

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 by 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 with maturity dates approximating the expected term 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.

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, 2026. The options expire 10 years from the grant date. The weighted-average fair value per share of the stock options granted was $0.91.

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		37.3	%
Expected term		5.75	years
Risk-free interest rate		3.65	%
Dividend yield		—	%
Fair value per share	$	0.91

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The following table summarizes our stock options as of September 30, 2023:

				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
		Exercise		Contractual	Intrinsic
	Options	Price		Term	Value
Options outstanding at January 1, 2023	1,948,908	$	2.10
Granted	80,000	$	2.18
Exercised	—
Cancelled/forfeited	—
Options outstanding at September 30, 2023	2,028,908	$	2.10	4.45	$	1,279,000
Options exercisable at September 30, 2023	1,917,268	$	2.09	4.18	$	1,225,000

For our outstanding non-vested options as of September 30, 2023, the weighted average grant date fair value per share was $0.91. As of September 30, 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,
2023	$	12,000
2024		49,000
2025		32,000
2026		8,000
	$	101,000

The stock-based compensation expense reported for the three months ended September 30, 2023 and 2022 was approximately $12,000 and $9,000, respectively, and is included in general and administrative expense in the condensed consolidated statements of operations. The stock-based compensation expense reported for the nine months ended September 30, 2023 and 2022 was approximately $29,000 and $23,000, respectively, and is included in general and administrative expense in the condensed consolidated statements of operations.

14. Subsequent Events

None.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto contained elsewhere in this report. This section contains forward-looking statements, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to numerous risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Forward-looking statements that were true at the time made may ultimately prove to be incorrect or false. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. All forward-looking statements should be read in light of the risks identified in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 31, 2023.

Overview

As of September 30, 2023, our ownership interests in our 18 real estate properties of senior housing facilities was as follows: 100% ownership of 14 properties and a 95.3% interest in four properties in a consolidated joint venture, Cornerstone Healthcare Partners LLC. Additionally, we have a 10% interest in an unconsolidated equity-method investment that owns 17 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 (collectively, our “Equity-Method Investments”). As used in this report, the “Company,” “we,” “us” and “our” refer to Summit Healthcare REIT, Inc. and its consolidated subsidiaries, except where the context otherwise requires.

Our revenues are comprised largely of tenant rental income from our real estate properties, including rents reported on a straight-line basis over the initial term of each tenant lease, resident fees and services and asset management fees resulting from our Equity-Method Investments. We also receive cash distributions from our Equity-Method Investments, which are included in net cash provided by operating activities and net cash provided by investing activities in our condensed consolidated statements of cash flows. Our growth depends, in part, on our ability to continue to raise joint venture equity or other equity, acquire new healthcare properties at attractive prices, negotiate long-term tenant leases with sustainable rental rate escalation terms and control our expenses. Our operations are impacted by property-specific, market-specific, general economic, regulatory and other conditions.

We believe that continued investing in senior housing facilities is accretive to earnings and stockholder value. Senior housing facilities include independent living facilities (“IL”), skilled nursing facilities (“SNF”), assisted living facilities (“AL”), memory care facilities (“MC”) and continuing care retirement communities (“CCRC”). Each of these types of facilities focuses on different segments of the senior population.Our current properties are SNF, AL, and MC facilities.

Current Market and Economic Conditions

The world was, and continues to be, impacted by the COVID-19 pandemic. The healthcare industry was among those most adversely affected by the COVID-19 pandemic. During 2023 and 2022, we experienced a material adverse effect on the operations of two properties related to COVID-19 (see Note 3 to the accompanying Notes to Condensed Consolidated Financial Statements for further information on its impact to us and see below for the impact on our Equity-Method Investments). We expect the COVID-19 pandemic will continue to adversely affect our tenants’ and our Company’s financial condition and results of operations, including but not limited to, occupancy, resident leases and related resident fees and service revenues, and additional labor and operating expenses. The fluidity of this situation precludes any prediction as to the ultimate material adverse impact on the demand for senior housing and skilled nursing and presents material uncertainty and risk with respect to our business, operations, financial condition and liquidity, including recording impairments, lease modifications and credit losses in future periods.

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Recently, the broader economy began experiencing increased levels of inflation, higher interest rates and tightening monetary and fiscal policies. The Federal Reserve has increased its targeted range for the federal funds rate, leading to increased interest rates and it foresees an extended period of these higher rates. We currently have fixed and variable interest rates for our loans. The rise in overall interest rates has caused an increase in our variable rate borrowing costs and our overall cost of capital, resulting in an increase in interest expense. The higher interest rates imposed by the Federal Reserve to address inflation may also adversely impact real estate asset values. In addition, a prolonged period of high and persistent inflation could cause an increase in our expenses. The current market and economic conditions could have a material impact on our business, cash flow and results of operations. It could also impact our ability to find suitable acquisitions, sell properties, and raise equity and debt capital.

Summit Portfolio Properties

At September 30, 2023, our portfolio consisted of 18 real estate properties as noted above in the Overview section of this Item 2, 16 of which were 100% triple-net leased to the tenants of the related facilities. The other two properties are each 100% leased to an affiliated subsidiary (see Note 3 to the accompanying Notes to Condensed Consolidated Financial Statements under Pennington Gardens Operations LLC (“Pennington Gardens”) and Sundial Operations LLC (“Sundial”), collectively, the (“Operated Properties”) for which we operate directly and earn resident fees and services revenue.

The following table provides summary information (excluding the 33 properties held by our unconsolidated Equity-Method Investments) regarding these properties as of September 30, 2023:

			Square	Purchase
	Properties	Beds	Footage	Price
SNF	15	1,354	406,135	$	181,795,000
AL or AL/MC	3	221	136,765		25,525,000
Total Real Estate Properties	18	1,575	542,900	$	207,320,000

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					2023
					Lease
Property	Location	Date Purchased	Type	Beds	Revenue (1)
Sheridan Care Center	Sheridan, OR	August 3, 2012	SNF	51	$	375,000
Fernhill Care Center	Portland, OR	August 3, 2012	SNF	63		400,000
Friendship Haven Healthcare and Rehabilitation Center	Galveston County TX	September 14, 2012	SNF	150		1,059,000
Pacific Health and Rehabilitation Center	Tigard, OR	December 24, 2012	SNF	73		738,000
Brookstone of Aledo	Aledo, IL	July 2, 2013	AL	66		573,000
Sundial Assisted Living (2)	Redding, CA	December 18, 2013	AL	65		—
Pennington Gardens (2)	Chandler, AZ	July 17, 2017	AL/MC	90		—
Yucaipa Hill Post Acute	Yucaipa, CA	July 2, 2021	SNF	82		799,000
Creekside Post Acute	Yucaipa, CA	July 2, 2021	SNF	59		356,000
University Post Acute	Mentone, CA	July 2, 2021	SNF	50		340,000
Calhoun Health Center	Calhoun, GA	December 30, 2021	SNF	100		359,000
Maple Ridge Health Care Center	Cartersville, GA	December 30, 2021	SNF	74		1,421,000
Chatsworth Health Care Center	Chatsworth, GA	December 30, 2021	SNF	120		2,594,000
East Lake Arbor	Decatur, GA	December 30, 2021	SNF	103		677,000
Fairburn Health Care Center	Fairburn, GA	December 30, 2021	SNF	120		1,086,000
Grandview Health Care Center	Jasper, GA	December 30, 2021	SNF	60		799,000
Rosemont at Stone Mountain	Stone Mountain, GA	December 30, 2021	SNF	149		2,051,000
Willowwood Nursing Center & Rehab	Flowery Branch, GA	December 30, 2021	SNF	100		773,000
Total				1,575

(1) Represents year-to-date rental revenue based on in-place leases, including straight-line rent, through September 30, 2023 and excluding $1.8 million in tenant reimbursement revenue, $1.3 million in write off of straight-line rent, $0.05 million in above-market lease amortization and $0.4 million in security deposits from terminated leases.

(2) See Note 3 to the accompanying Notes to Condensed Consolidated Financial Statements for further information on these two properties. Lease revenue due under the Pennington Gardens and Sundial intercompany leases are eliminated in consolidation and revenue is reflected in resident fees and services in the accompanying condensed consolidated statements of operations for the Operated Properties.

Summit Equity-Method Investment Portfolio Properties

We continue to believe that raising institutional capital to make acquisitions will be accretive to shareholder value. Our primary source of capital since 2015 has been institutional funds raised through a joint venture structure and accounted for as equity-method investments. We still believe this is a prudent strategy for growth; however, in the future, we may raise additional equity capital through alternative methods if warranted by market conditions.

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Summit Union Life Holdings, LLC

In April 2015, through our operating partnership (“Operating Partnership”), we formed Summit Union Life Holdings, LLC (“SUL JV”) 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 entered into a limited liability company with Best Years with respect to the SUL JV (the “SUL LLC Agreement”). The SUL JV is not consolidated in our condensed consolidated financial statements and is accounted for under the equity-method in our condensed consolidated financial statements.

Equity-Method Partner – Fantasia Investment III LLC

In 2016 and 2017, through our Operating Partnership, we entered into three separate limited liability company agreements (collectively, the “Fantasia Agreements”) 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 three separate companies, Summit Fantasia Holdings, LLC (“Fantasia I JV”), Summit Fantasia Holdings II, LLC (“Fantasia II JV”) and Summit Fantasia Holdings III, LLC (“Fantasia III JV”) (collectively, the “Fantasia JVs”).

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 assets and liabilities of the Fantasia I JV, consisting of the real estate of Summit Citrus Heights LLC, its wholly-owned subsidiary as of July 3, 2023, and the operations of its associated senior housing facility, Sun Oak Assisted Living, were consolidated in our condensed consolidated financial statements beginning in July 2023 and no longer considered an equity-method investment as of September 30, 2023.

In September 2023, due to the ongoing receivership issues in the Fantasia II JV, the Fantasia II JV recorded an impairment of approximately $1.6 million on the two properties and we recorded our 20% share of the impairment of approximately $0.3 million. Additionally, as of September 30, 2023, due to the continuing issues, we determined the fair value of 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 accompanying condensed consolidated statements of operations.

On September 29, 2023, the Fantasia III JV executed a transfer agreement for one of the properties in the Fantasia III JV, transferring the real estate to the tenant in return for a monthly payment of the transferred property’s base rent through August 2032 to be received from one of the other properties in the portfolio. The JV member interest and debt was transferred to the same property in the portfolio. The Fantasia III JV recorded a net loss on the transfer of the real estate of approximately $3.9 million and our share of the net loss was $0.4 million.

The Fantasia JVs are not consolidated in our condensed consolidated financial statements and are accounted for under the equity-method in our condensed consolidated financial statements. Through the Fantasia JVs as of September 30, 2023: we own a 20% interest in two skilled nursing facilities located in Rhode Island; and a 10% interest in eight skilled nursing facilities located in Connecticut.  Through the Fantasia JVs as of December 31, 2022: we own a 35% interest in one senior housing facility located in California, a 20% interest in two skilled nursing facilities located in Rhode Island; and a 10% interest in nine skilled nursing facilities located in Connecticut.

Summit Fantasy Pearl Holdings, LLC

In October 2017, through our Operating Partnership, we entered into a limited liability company agreement (the “FPH LLC 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 condensed consolidated financial statements and is accounted for under the equity-method in our condensed consolidated financial statements.

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The following reconciles our equity investments in our Equity-Method Investments from inception through September 30, 2023 in our condensed consolidated financial statements:

	SUL JV			Fantasia II JV		Fantasia III JV		FPH JV		Total
Total investment	$	6,420,000		$	1,923,000	$	1,954,000	$	929,000	$	11,226,000
Income (loss) from equity-method investees	$	929,000		$	(82,000)	$	546,000	$	(112,000)	$	1,281,000
Distributions	$	(5,106,000)		$	(1,841,000)	$	(1,349,000)	$	(817,000)	$	(9,113,000)
Total investment at September 30, 2023	$	2,243,000		$	—	$	1,151,000	$	—	$	3,394,000
Number of properties		17	$		2		8		6		33
Number of beds		1,408			318		1,149		449		3,324

A summary of the condensed combined financial data for the balance sheets and statements of income (operations) for all unconsolidated Equity-Method Investments are as follows:

	September 30,			December 31,
Condensed Combined Balance Sheets:	2023			2022
Total Assets	$	232,374,000		$	249,540,000
Total Liabilities	$	178,309,000		$	185,857,000
Members Equity:
Summit	$	4,226,000	(1)​	$	5,676,000
JV Partners	$	49,839,000		$	58,007,000
Total Members Equity	$	54,065,000		$	63,683,000

(1)At September 30, 2023 and December 31, 2022, the aggregate balance of our equity method investments in our condensed consolidated financial statements for each period presented of approximately $3.4 million is lower by approximately $0.8 million and $0.5 million, respectively, than the equity recognized in the underlying Equity-Method Investments financial statements due to impairment losses we have recorded on our basis in the the joint venture that are not reflected in members equity at the underlying equity-method investment level.

	Three Months Ended				Nine months Ended
	September 30,				September 30,
Condensed Combined Statements of Operations:	2023		2022		2023		2022
Total Revenue	$	6,680,000	$	9,666,000	$	24,686,000	$	28,802,000
Income (loss) from Operations	$	(5,521,000)	$	3,208,000	$	633,000	$	7,766,000
Net (loss) income	$	(7,675,000)	$	1,606,000	$	(6,328,000)	$	3,015,000
Summit equity interest in Equity-Method Investments net (loss) income	$	(1,110,000)	$	131,000	$	(939,000)	$	(293,000)
JV Partners interest in Equity-Method Investments net (loss) income	$	(6,565,000)	$	1,475,000	$	(5,389,000)	$	3,308,000

Distributions from Equity-Method Investments

For the nine months ended September 30, 2023 and 2022, we recorded distributions and cash received for distributions from our Equity-Method Investments as follows:

	Nine months Ended September 30,
	2023		2022
Distributions	$	588,000	$	875,000
Cash received for distributions	$	555,000	$	822,000

Critical Accounting Policies

There have been no material changes to our critical accounting policies as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the SEC on March 31, 2023.

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Results of Operations

Our results of operations are described below:

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

	Three Months Ended
	September 30,
	2023		2022		$ Change
Total rental revenues (excludes security deposits below)	$	4,132,000	$	5,416,000	$	(1,284,000)
Property operating costs		(917,000)		(846,000)		(71,000)
Resident fees and services revenue		2,084,000		1,125,000		959,000
Resident costs		(2,095,000)		(1,281,000)		(814,000)
Net operating income (1)		3,204,000		4,414,000		(1,210,000)
Asset management fees		129,000		165,000		(36,000)
Security deposits from terminated leases		420,000		—		420,000
General and administrative		(1,403,000)		(1,280,000)		(123,000)
Depreciation and amortization		(2,066,000)		(1,813,000)		(253,000)
Loss from equity-method investees		(1,671,000)		(7,000)		(1,664,000)
Impairment of real estate properties		(11,387,000)		—		(11,387,000)
Gain on consolidation of interest in unconsolidated equity-method investment		1,066,000		—		1,066,000
Other income		103,000		43,000		60,000
Interest expense		(4,542,000)		(3,498,000)		(1,044,000)
Net loss		(16,147,000)		(1,976,000)		(14,171,000)
Noncontrolling interests’ share in loss (income)		38,000		(12,000)		50,000
Net loss applicable to common stockholders	$	(16,109,000)	$	(1,988,000)	$	(14,121,000)

(1) Net operating income (“NOI”) is a non-GAAP supplemental measure used to evaluate the operating performance of real estate properties. We define NOI as total rental revenues, resident fees and services revenue less property operating and resident costs. NOI excludes asset management fees, security deposits from terminated leases, general and administrative expense, depreciation and amortization, income (loss) from equity-method investees, impairment of real estate properties, other income, and interest expense. We believe NOI provides investors relevant and useful information because it measures the operating performance of the REIT’s real estate at the property level on an unleveraged basis. We use NOI to make decisions about resource allocations and to assess and compare property-level performance. We believe that net income (loss) is the most directly comparable GAAP measure to NOI. NOI should not be viewed as an alternative measure of operating performance to net income (loss) as defined by GAAP since it does not reflect the aforementioned excluded items. Additionally, NOI as we define it may not be comparable to NOI as defined by other REITs or companies, as they may use different methodologies for calculating NOI.

Total rental revenues for our properties includes rental revenues and tenant reimbursements for property taxes and insurance. Resident fees and services income are generated from the Operated Properties. Property operating costs include insurance, and property taxes, and resident costs are related to the Operated Properties. Net operating income decreased approximately $1.2 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 primarily due to the $1.3 million write off of straight-line rents related to the change in three tenants in September 2023.

The increase in general and administrative expenses of $0.1 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 is mainly due to an increase in legal fees in the three months ended September 30, 2023.

The increase in depreciation and amortization for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 is mainly due to the write off of the leasing commissions related to the change in the three tenants during the three months ended September 30, 2023.

The increase in loss from equity-method investees of approximately $1.7 million is mainly due to the impairment loss and write off of the equity-method investment of $1.2 million related to the Fantasia II JV, our share of the impairment in one property in the SUL JV of $0.1 million, and loss from the Fantasia III JV for $0.4 million in the three months ended September 30, 2023.

28

The impairment of real estate properties for the three months ended September 30, 2023 of $11.4 million is related to the GA8 properties.  See Note 3 to the accompanying Notes to Condensed Consolidated Financial Statements for further information.

The increase in gain on consolidation of interest in unconsolidated equity-method investment of approximately $1.1 million is due to the consolidation of a variable interest entity (Fantasia I JV) in July 2023 and the related gain and then the subsequent sale of the real estate in September 2023.

The increase in interest expense of $1.0 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 is due to an increase of approximately 3% in interest rates on approximately $139.0 million of debt for the CA3 and GA8 Properties.

Nine months Ended September 30, 2023 Compared to Nine months Ended September 30, 2022

	Nine months Ended
	September 30,
	2023		2022		$ Change
Total rental revenues (excludes security deposits below)	$	14,878,000	$	16,392,000	$	(1,514,000)
Property operating costs		(2,469,000)		(2,385,000)		(84,000)
Resident fees and services revenue		5,086,000		2,396,000		2,690,000
Resident costs		(4,362,000)		(2,474,000)		(1,888,000)
Net operating income (1)		13,133,000		13,929,000		(796,000)
Security deposits from terminated leases		420,000		—		420,000
Asset management fees		423,000		495,000		(72,000)
General and administrative		(3,598,000)		(3,460,000)		(138,000)
Depreciation and amortization		(5,685,000)		(5,498,000)		(187,000)
Loss from equity-method investees		(1,429,000)		(496,000)		(933,000)
Impairment of real estate properties		(11,387,000)		—		(11,387,000)
Gain on consolidation of interest in unconsolidated equity-method investment		1,066,000		—		1,066,000
Other income		299,000		206,000		93,000
Interest expense		(13,010,000)		(9,634,000)		(3,376,000)
Net loss		(19,768,000)		(4,458,000)		(15,310,000)
Noncontrolling interests’ share in loss (income)		2,000		(49,000)		51,000
Net loss applicable to common stockholders	$	(19,766,000)	$	(4,507,000)	$	(15,259,000)

Total rental revenues for our properties includes rental revenues and tenant reimbursements for property taxes and insurance. Resident fees and services income are generated from the Operated Properties. Property operating and resident costs include insurance, property taxes and resident costs are related to the Operated Properties. Net operating income decreased approximately $0.8 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 primarily due to the $1.3 million write off of straight-line rents related to the change in three tenants in September 2023 and Sundial being included in our condensed consolidated financials for four months in the nine months ended September 30, 2022 compared to nine months in the nine months ended September 30, 2023.

The increase in general and administrative expenses of $0.1 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 is mainly due to an increase in legal fees and payroll offset by accounting fees.

The increase in depreciation and amortization of $0.2 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 is mainly due to the write off the leasing commissions related to the change in the three tenants in September 2023.

The increase in loss from equity-method investees of approximately $1.0 million is mainly due to the impairment loss and write off of the equity-method investment of $1.1 million related to the Fantasia II JV, impairment in one property in the SUL JV of $0.01 million, and loss from the Fantasia III JV for $0.3 million in September 30, 2023 compared to income of $0.6 million from the Fantasia II, III and FPH JVs and $0.1 million from the SUL JV offset by the loss from the Fantasia I JV of $1.2 million in the nine months ended September 30, 2022.

29

The impairment of real estate properties for the nine months ended September 30, 2023 of $11.4 million is related to the GA8 properties.  See Note 3 to the accompanying Notes to Condensed Consolidated Financial Statements for further information.

The increase in gain on consolidation and sale of real estate property of approximately $1.1 million is due to the consolidation of a variable interest entity (Fantasia I JV) in July 2023 and the related gain and then the subsequent sale of the real estate in September 2023.

The increase in interest expense of $3.4 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 is due to an increase of approximately 3% in interest rates on approximately $139.0 million of debt for the CA3 and GA8 Properties.

Liquidity and Capital Resources

As of September 30, 2023, we had approximately $11.3 million in cash and cash equivalents on hand. During March 2023, in response to the banking crisis, we transferred cash balances in excess of FDIC-insured limits from a smaller regional bank to a multi-national bank with more liquidity and a significantly larger balance sheet. We will continue to address the banking environment and make appropriate changes as necessary. To date, we have not experienced losses or lack of access to cash in our cash and cash equivalent accounts. Based on current conditions, we believe that we have sufficient capital resources to sustain operations.

Going forward, we expect our primary sources of cash to be rental revenues, equity-method investment distributions and asset management fees. In addition, we may increase cash through the sale of additional properties, which may result in the deconsolidation of properties we already own or borrowing against currently-owned properties. For the foreseeable future, we expect our primary uses of cash to be for funding future acquisitions, investments in joint ventures, operating expenses, interest expense on outstanding indebtedness and the repayment of principal on loans payable. We may also incur expenditures for renovations of our existing properties, making our facilities more appealing in their market.

Seven of our debt obligations are long-term, fixed rate U.S. Department of Housing and Urban Development (“HUD”)-insured loans that mature between 2039 and 2055. The other debt obligations are short-term loans that mature in July 2024 through December 2026 with variable interest rates (see Note 4 to the accompanying Notes to Condensed Consolidated Financial Statements). Due to the current environment of increasing interest rates, this may have a negative effect on our results of operations, which could result in foreclosure if our cash is insufficient to meet our obligations under our loans payable, and for that reason, we may refinance these short-term loans with long-term, fixed rate HUD-insured debt, other long-term debt, a combination of debt and equity or sale of the real estate in 2023 or 2024. Our liquidity will increase if cash from operations exceeds expenses, we receive net proceeds from the sale of whole or partial interest in a property or properties, or refinancing results in excess loan proceeds. Our liquidity will decrease as proceeds are expended in connection with our acquisitions and operation of properties. In regard to our Operated Properties, our intent is to stabilize the operations of the facilities and market them for sale due to the significantly reduced willingness of AL manager/operators to execute long-term triple-net leases.

Credit Facilities and Loan Agreements

As of September 30, 2023, we had debt obligations of approximately $182.9 million. The outstanding balance by lender is as follows (see Note 4 to the accompanying Notes to Condensed Consolidated Financial Statements for further information regarding our refinancing arrangements):

● Capital One Multifamily Finance, LLC (HUD-insured) – approximately $9.9 million maturing September 2053

● Lument Capital (formerly ORIX Real Estate Capital, LLC) (HUD-insured) – approximately $34.2 million maturing from September 2039 through April 2055

● CIBC Bank, USA - approximately $106.0 million maturing from July 2024 to December 2024

● Oxford Finance LLC – approximately $32.8 million maturing from March 2025 to December 2026

● CIBC Bank, USA - Master Letter of Credit Agreement for $1.0 million

30

Distributions

We made no stockholder distributions during the nine months ended September 30, 2023.

Funds from Operations (“FFO”)

FFO is a non-GAAP supplemental financial measure that is widely recognized as a measure of REIT operating performance. We compute FFO in accordance with the definition outlined by the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT defines FFO as net income (loss), computed in accordance with GAAP, excluding gains or losses from sales of property, plus depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures.

Our FFO may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than we do. We believe that FFO is helpful to investors and our management as a measure of operating performance because it excludes real estate depreciation and amortization, gains and losses from property dispositions, impairments and extraordinary items, and as a result, when compared period to period, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs, development activities, general and administrative expenses, and interest costs, which is not immediately apparent from net income. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting alone to be insufficient. As a result, our management believes that the use of FFO, together with the required GAAP presentations, provide a more complete understanding of our performance. Factors that impact FFO include start-up costs, fixed costs, delays in buying assets, lower yields on cash held in accounts pending investment, income from portfolio properties and other portfolio assets, interest rates on acquisition financing and operating expenses. FFO should not be considered as an alternative to net income (loss), as an indication of our performance, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions.

The following is the reconciliation from net income (loss) applicable to common stockholders, the most direct comparable financial measure calculated and presented with GAAP, to FFO for the three and nine months ended September 30, 2023 and 2022:

	Three Months Ended				Nine months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Net loss applicable to common stockholders (GAAP)	$	(16,109,000)	$	(1,988,000)	$	(19,766,000)	$	(4,507,000)
Adjustments:
Depreciation and amortization		2,049,000		1,805,000		5,644,000		5,479,000
Depreciation and amortization related to non-controlling interests		(23,000)		(9,000)		(43,000)		(31,000)
Depreciation related to Equity-Method Investments		183,000		202,000		549,000		658,000
Impairment on real estate property in Equity-Method Investments (included in loss from Equity-Method Investments)		423,000		138,000		423,000		1,338,000
Impairment on real estate properties		11,387,000		—		11,387,000		—
Gain on sale of property in Fantasia I JV (included in income from Equity-Method Investments)		—		—		—		(437,000)
Gain on consolidation of interest in unconsolidated equity-method investment		(1,066,000)		—		(1,066,000)
Funds provided by (used in) operations (FFO) applicable to common stockholders	$	(3,156,000)	$	148,000		(2,872,000)	$	2,500,000
Weighted-average number of common shares outstanding - basic		23,027,978		23,027,978		23,027,978		23,027,978
FFO per weighted average common shares - basic	$	(0.14)	$	0.01	$	(0.12)	$	0.11
Weighted-average number of common shares outstanding – diluted		23,027,978		23,587,253		23,027,978		23,587,253
FFO per weighted average common shares - diluted	$	(0.14)	$	0.01	$	(0.12)	$	0.11

Subsequent Events

See Note 14 to the accompanying Notes to Condensed Consolidated Financial Statements.

31

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Not applicable.

Item 4. Controls and Procedures.

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our senior management, including our Chief Executive Officer (Principal Executive Officer) and our Chief Financial Officer (Principal Financial Officer), to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer) evaluated the effectiveness of our disclosure controls and procedures and concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report.

There have been no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1.Legal Proceedings.

See Note 12 to the accompanying Notes to Condensed Consolidated Financial Statements for a summary of our material legal proceedings.

Item 1A.Risk Factors.

There have been no material changes to the Risk Factors described in Part I, Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2022.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.

(a) We did not sell any equity securities that were not registered under the Securities Act of 1933, as amended, during the periods covered by this Form 10-Q.

(b) Not applicable.

(c) During the nine months ended September 30, 2023, we redeemed no shares pursuant to our stock repurchase program.

Item 3.Defaults Upon Senior Securities.

None.

Item 4.Mine Safety Disclosures.

None.

Item 5.Other Information.

None.

32

Item 6.Exhibits.

Ex.	Description
3.1	Amendment and Restatement of Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K filed on March 24, 2006).
3.2	Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.3 to Post-Effective Amendment No. 1 to the Registration Statement on Form S-11 (No. 333-121238) filed on December 23, 2005).
3.3	Articles of Amendment of the Company dated October 16, 2013 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on October 22, 2013).
3.4	Second Articles of Amendment and Restatement of Articles of Incorporation of the Company dated June 30, 2010 (incorporated by reference to Exhibit 3.4 to the Company’s Annual Report on Form 10-K filed on March 20, 2015).
4.1	Subscription Agreement (incorporated by reference to Appendix A to the prospectus included on Post-Effective Amendment No. 2 to the Registration Statement on Form S-11 (No. 333-155640) filed on April 16, 2010 (“Post-Effective Amendment No. 2”)).
4.2	Statement regarding restrictions on transferability of shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued shares without certificates) (incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-11 (No. 333-121238) filed on December 14, 2004).
4.3	Amended and Restated Distribution Reinvestment Plan (incorporated by reference to Appendix B to the prospectus dated April 16, 2010 included on Post-Effective Amendment No. 2).
4.4	2015 Omnibus Incentive Plan dated October 28, 2015 (incorporated by reference to Appendix A to the Definitive Proxy Statement on Schedule 14A filed on September 28, 2015).
31.1	Certification of Principal Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.1	The following information from the Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2023, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Operations; (iii) Condensed Consolidated Statements of Cash Flows.
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

33

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this quarterly report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SUMMIT HEALTHCARE REIT, INC.
	/s/ Elizabeth A. Pagliarini
Date: November 14, 2023	Elizabeth A. Pagliarini
	Chief Executive Officer
	(Principal Executive Officer)
	/s/ Sharyn I. Grant
Date: November 14, 2023	Sharyn I. Grant
	Chief Financial Officer
	(Principal Financial Officer)

34

EX-31.1

Exhibit 31.1

CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER

I, Elizabeth A. Pagliarini, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Summit Healthcare REIT, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/s/ Elizabeth A. Pagliarini
Date: November 14, 2023	Elizabeth A. Pagliarini
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATIONS OF PRINCIPAL FINANCIAL OFFICER

I, Sharyn I. Grant, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Summit Healthcare REIT, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	Sharyn I. Grant
Date: November 14, 2023	Sharyn I. Grant
	Chief Financial Officer
	(Principal Financial Officer)

EX-32

Exhibit 32

CERTIFICATIONS PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Elizabeth A. Pagliarini, the Company’s Chief Executive Officer, and Sharyn I. Grant, the Company’s Chief Financial Officer, do each hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of their knowledge, the Quarterly Report of Summit Healthcare REIT, Inc. on Form 10-Q for the period ended September 30, 2023 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of Summit Healthcare REIT, Inc.

	/s/ Elizabeth A. Pagliarini
Date: November 14, 2023	Elizabeth A. Pagliarini
	Chief Executive Officer
	(Principal Executive Officer)

	/s/ Sharyn I. Grant
Date: November 14, 2023	Sharyn I. Grant
	Chief Financial Officer
	(Principal Financial Officer)

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2023	Nov. 06, 2023
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 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
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
Entity Shell Company	false
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	Q3
Amendment Flag	false

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)	Sep. 30, 2023	Dec. 31, 2022
ASSETS
Cash and cash equivalents	$ 11,289,000	$ 11,572,000
Restricted cash	3,199,000	2,591,000
Real estate properties, net	158,343,000	173,127,000
Intangible lease assets, net	11,870,000	13,704,000
Tenant and other receivables, net	4,633,000	5,020,000
Other assets, net	1,714,000	2,107,000
Equity-method investments	3,394,000	5,182,000
Total assets	194,442,000	213,303,000
LIABILITIES AND EQUITY
Accounts payable and accrued liabilities	7,116,000	5,585,000
Security deposits	4,231,000	4,651,000
Loans payable, net of debt issuance costs	179,992,000	180,169,000
Total liabilities	191,339,000	190,405,000
Commitments and contingencies
Stockholders' Equity
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding at September 30, 2023 and December 31, 2022
Common stock, $0.001 par value; 290,000,000 shares authorized; 23,027,978 shares issued and outstanding at September 30, 2023 and December 31, 2022	23,000	23,000
Additional paid-in capital	116,461,000	116,432,000
Accumulated deficit	(113,500,000)	(93,734,000)
Total stockholders' equity	2,984,000	22,721,000
Noncontrolling interests	119,000	177,000
Total equity	3,103,000	22,898,000
Total liabilities and equity	$ 194,442,000	$ 213,303,000

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2023	Dec. 31, 2022
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical)
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

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Revenues:
Total rental revenues	$ 4,552,000	$ 5,416,000	$ 15,298,000	$ 16,392,000
Resident fees and services	2,084,000	1,125,000	5,086,000	2,396,000
Asset management fees	129,000	165,000	423,000	495,000
Total operating revenue	6,765,000	6,706,000	20,807,000	19,283,000
Expenses:
Property operating costs	917,000	846,000	2,469,000	2,385,000
Resident costs	2,095,000	1,281,000	4,362,000	2,474,000
General and administrative	1,403,000	1,280,000	3,598,000	3,460,000
Depreciation and amortization	2,066,000	1,813,000	5,685,000	5,498,000
Impairment of real estate properties	11,387,000		11,387,000
Total operating expenses	17,868,000	5,220,000	27,501,000	13,817,000
Operating (loss) income	(11,103,000)	1,486,000	(6,694,000)	5,466,000
Loss from equity-method investees	(1,671,000)	(7,000)	(1,429,000)	(496,000)
Other income	103,000	43,000	299,000	206,000
Interest expense	(4,542,000)	(3,498,000)	(13,010,000)	(9,634,000)
Gain on consolidation of interest in unconsolidated equity-method investment	1,066,000		1,066,000
Net loss	(16,147,000)	(1,976,000)	(19,768,000)	(4,458,000)
Noncontrolling interests' share in net (income) loss	38,000	(12,000)	2,000	(49,000)
Net loss applicable to common stockholders	$ (16,109,000)	$ (1,988,000)	$ (19,766,000)	$ (4,507,000)
Basic and diluted loss per common share:
Basic, Net loss applicable to common stockholders	$ (0.70)	$ (0.09)	$ (0.86)	$ (0.20)
Diluted, Net loss applicable to common stockholders	$ (0.70)	$ (0.09)	$ (0.86)	$ (0.20)
Weighted average shares used to calculate earnings per common share:
Basic	23,027,978	23,027,978	23,027,978	23,027,978
Diluted	23,027,978	23,027,978	23,027,978	23,027,978

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CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Unaudited) - 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	8,000	0	8,000	0	8,000
Distributions paid to noncontrolling interests	0	0	0	0	(18,000)	(18,000)
Net (loss) income	0	0	(325,000)	(325,000)	19,000	(306,000)
Balance at the ending at Mar. 31, 2022	$ 23,000	116,409,000	(85,366,000)	31,066,000	172,000	31,238,000
Balance at the ending (in shares) at Mar. 31, 2022	23,027,978
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
Net (loss) income						(4,458,000)
Balance at the ending at Sep. 30, 2022	$ 23,000	116,424,000	(89,548,000)	26,899,000	171,000	27,070,000
Balance at the ending (in shares) at Sep. 30, 2022	23,027,978
Balance at the beginning at Mar. 31, 2022	$ 23,000	116,409,000	(85,366,000)	31,066,000	172,000	31,238,000
Balance at the beginning (in shares) at Mar. 31, 2022	23,027,978
Stock-based compensation	$ 0	6,000	0	6,000	0	6,000
Distributions paid to noncontrolling interests	0	0	0	0	(18,000)	(18,000)
Net (loss) income	0	0	(2,194,000)	(2,194,000)	18,000	(2,176,000)
Balance at the ending at Jun. 30, 2022	$ 23,000	116,415,000	(87,560,000)	28,878,000	172,000	29,050,000
Balance at the ending (in shares) at Jun. 30, 2022	23,027,978
Stock-based compensation	$ 0	9,000	0	9,000	0	9,000
Distributions paid to noncontrolling interests	0	0	0	0	(13,000)	(13,000)
Net (loss) income	0	0	(1,988,000)	(1,988,000)	12,000	(1,976,000)
Balance at the ending at Sep. 30, 2022	$ 23,000	116,424,000	(89,548,000)	26,899,000	171,000	27,070,000
Balance at the ending (in shares) at Sep. 30, 2022	23,027,978
Balance at the beginning at Dec. 31, 2022	$ 23,000	116,432,000	(93,734,000)	22,721,000	177,000	22,898,000
Balance at the beginning (in shares) at Dec. 31, 2022	23,027,978
Stock-based compensation	$ 0	7,000	0	7,000	0	7,000
Distributions paid to noncontrolling interests	0	0	0	0	(17,000)	(17,000)
Net (loss) income	0	0	(1,976,000)	(1,976,000)	17,000	(1,959,000)
Balance at the ending at Mar. 31, 2023	$ 23,000	116,439,000	(95,710,000)	20,752,000	177,000	20,929,000
Balance at the ending (in shares) at Mar. 31, 2023	23,027,978
Balance at the beginning at Dec. 31, 2022	$ 23,000	116,432,000	(93,734,000)	22,721,000	177,000	22,898,000
Balance at the beginning (in shares) at Dec. 31, 2022	23,027,978
Net (loss) income						(19,768,000)
Balance at the ending at Sep. 30, 2023	$ 23,000	116,461,000	(113,500,000)	2,984,000	119,000	3,103,000
Balance at the ending (in shares) at Sep. 30, 2023	23,027,978
Balance at the beginning at Mar. 31, 2023	$ 23,000	116,439,000	(95,710,000)	20,752,000	177,000	20,929,000
Balance at the beginning (in shares) at Mar. 31, 2023	23,027,978
Stock-based compensation	$ 0	10,000	0	10,000	0	10,000
Distributions paid to noncontrolling interests	0	0	0	0	(19,000)	(19,000)
Net (loss) income	0	0	(1,681,000)	(1,681,000)	19,000	(1,662,000)
Balance at the ending at Jun. 30, 2023	$ 23,000	116,449,000	(97,391,000)	19,081,000	177,000	19,258,000
Balance at the ending (in shares) at Jun. 30, 2023	23,027,978
Stock-based compensation	$ 0	12,000	0	12,000	0	12,000
Distributions paid to noncontrolling interests	0	0	0	0	(20,000)	(20,000)
Net (loss) income	0	0	(16,109,000)	(16,109,000)	(38,000)	(16,147,000)
Balance at the ending at Sep. 30, 2023	$ 23,000	$ 116,461,000	$ (113,500,000)	$ 2,984,000	$ 119,000	$ 3,103,000
Balance at the ending (in shares) at Sep. 30, 2023	23,027,978

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Cash flows from operating activities:
Net loss	$ (19,768,000)	$ (4,458,000)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Amortization of debt issuance costs	685,000	684,000
Depreciation and amortization	5,430,000	5,498,000
Amortization of above-market lease intangible	48,000	47,000
Straight-line rents	(920,000)	(1,108,000)
Write off of straight-line rent receivables	1,300,000
Stock-based compensation expense	29,000	23,000
Write-off of leasing commissions	255,000
Impairment of real estate properties	11,387,000
Gain on consolidation of interest in unconsolidated equity-method investment	(1,066,000)
Loss from equity-method investees	1,429,000	496,000
Change in operating assets and liabilities:
Tenant and other receivables, net	45,000	274,000
Other assets, net	232,000	(98,000)
Accounts payable and accrued liabilities	1,148,000	2,620,000
Security deposits	(420,000)
Net cash (used in)provided by operating activities	(186,000)	3,978,000
Cash flows from investing activities:
Proceeds from sale of real estate properties assigned	3,839,000
Cash assumed in assignment of interest in unconsolidated equity-method investment	770,000
Additions to real estate and other assets	(243,000)	(483,000)
Investment in equity-method investees	(230,000)	(1,111,000)
Distributions received from equity-method investees	550,000	422,000
Net cash provided by (used in) investing activities	4,686,000	(1,172,000)
Cash flows from financing activities:
Payments of loans payable	(862,000)	(831,000)
Repayment of loan payable assigned	(3,171,000)
Distributions paid to noncontrolling interests	(56,000)	(49,000)
Deferred financing costs	(86,000)	(173,000)
Net cash used in financing activities	(4,175,000)	(1,053,000)
Net increase in cash, cash equivalents and restricted cash	325,000	1,753,000
Cash, cash equivalents and restricted cash - beginning of period	14,163,000	13,161,000
Cash, cash equivalents and restricted cash - end of period	14,488,000	14,914,000
Supplemental disclosure of cash flow information:
Cash paid for interest	12,007,000	$ 7,864,000
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

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Organization

9 Months Ended

Sep. 30, 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 17 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. As used in these notes, the “Company”, “we”, “us” and “our” refer to Summit and its consolidated subsidiaries, including but not limited to 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 condensed consolidated financial statements and owns four properties (the “JV Properties”) with another partially owned subsidiary. As of September 30, 2023 and December 31, 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 condensed consolidated financial statements and is accounted for under the equity-method in our condensed consolidated financial statements. As of September 30, 2023 and December 31, 2022, we have a 10% interest in the SUL JV which owns 17 properties.

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, LLC (the “Fantasia I JV”), in which we had a 35% interest. As of June 30,2023, the Fantasia I JV was not consolidated in our condensed consolidated financial statements and was accounted for under the equity-method in our condensed consolidated financial statements.

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. See Note 3 under Fantasia I JV Transfer of Interest and Sale 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 with Fantasia, and formed Summit Fantasia Holdings II, LLC (the “Fantasia II JV”). The Fantasia II JV is not consolidated in our condensed consolidated financial statements and is accounted for under the equity-method in our condensed consolidated financial statements. As of September 30, 2023 and December 31, 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 condensed consolidated financial statements and is accounted for under the equity-method in our condensed consolidated financial statements. As of September 30, 2023 and December 31, 2022, we have a 10% interest in the Fantasia III JV. The Fantasia III JV owned eight properties as of September 30, 2023 and owned nine properties as of December 31, 2022.

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 condensed consolidated financial statements and is accounted for under the equity-method in our condensed consolidated financial statements. As of September 30, 2023 and December 31, 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 2, 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 100% owned real estate properties that are leased to an affiliated subsidiary (see Note 3 under Pennington Gardens Operations LLC (“Pennington Gardens”) and Sundial Operations LLC (“Sundial Assisted Living”), collectively, the “Operated Properties”) and the operations are consolidated in our condensed consolidated financial statements.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2023

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

For more information regarding our significant accounting policies and estimates, please refer to “Summary of Significant Accounting Policies” contained in the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission (“SEC”) on March 31, 2023. The accompanying condensed consolidated balance sheet at December 31, 2022 has been derived from the audited consolidated financial statements at that date. We assume that users of these condensed consolidated financial statements have read or have access to the audited December 31, 2022 consolidated financial statements and contained in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 31, 2023 and that the adequacy of additional disclosure needed for a fair presentation, except in regard to material contingencies, may be determined in that context. Accordingly, footnotes and other disclosures which would substantially duplicate those contained in our most recent Annual Report on Form 10-K for the year ended December 31, 2022 have been omitted in this report.

Principles of Consolidation and Basis of Presentation

The accompanying condensed 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.

The accompanying financial information reflects all adjustments, which are, in the opinion of management, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods. Interim results of operations are not necessarily indicative of the results to be expected for the full year. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown on the condensed consolidated statements of cash flows.

	September 30,		December 31,
	2023		2022
Cash and cash equivalents	$	11,289,000	$	11,572,000
Restricted cash		3,199,000		2,591,000
Total cash, cash equivalents, and restricted cash shown on the condensed consolidated statements of cash flows	$	14,488,000	$	14,163,000

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Investments in Real Estate Properties

9 Months Ended

Sep. 30, 2023

Investments in Real Estate Properties

Investments in Real Estate Properties

3. Investments in Real Estate Properties

As of September 30, 2023 and December 31, 2022, our investments in real estate properties, including those held by our consolidated subsidiaries (excluding the 33 properties owned by our unconsolidated Equity-Method Investments), are set forth below:

	September 30,		December 31,
	2023		2022
Land	$	14,905,000	$	15,565,000
Buildings and improvements		157,833,000		166,989,000
Less: accumulated depreciation		(19,403,000)		(15,985,000)
Buildings and improvements, net		138,430,000		151,004,000
Furniture and fixtures		12,121,000		12,440,000
Less: accumulated depreciation		(7,113,000)		(5,882,000)
Furniture and fixtures, net		5,008,000		6,558,000
Real estate properties, net	$	158,343,000	$	173,127,000

For the three months ended September 30, 2023 and 2022, depreciation expense (excluding lease intangibles amortization and leasing commission amortization) was approximately $1.6 million and $1.6 million, respectively. For the nine months ended September 30, 2023 and 2022, depreciation expense (excluding intangible lease amortization and leasing commission amortization) was approximately $4.7 million and $4.8 million, respectively.

As of September 30, 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 consists of the real estate of Summit Citrus Heights, LLC, our wholly-owned subsidiary (“Summit Citrus Heights”) as of July 3, 2023, and the operating assets and liabilities of its associated senior housing facility, Sun Oak Assisted Living (“Sun Oak" or "CH TRS”).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. The Fantasia I JV was considered a variable interest entity 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 condensed 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 condensed consolidated statements of operations. See below under CH TRS LLC for additional information regarding the operations of Sun Oak.

CH TRS LLC (Sun Oak Assisted Living)

In July 2023, as noted above under Fantasia I JV Transfer of Interest and Sale, we acquired the Fantasia I JV. Summit Citrus Heights was the sole member of CH TRS LLC, the operating company for 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 three months ended September 30, 2023, revenues from Sun Oak are recorded under resident fees and services and costs are recorded under resident costs in the condensed 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 condensed 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 three and nine months ended September 30, 2023 and for the period from February 11, 2022 through September 30, 2022, revenues from Pennington Gardens Operations are recorded under resident fees and services and costs are recorded under resident costs in the condensed 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 three and nine months ended September 30, 2023 and for the period from June 7, 2022 through September 30, 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 condensed consolidated statements of operations.

The following table provides summary information regarding our portfolio (excluding the 33 properties owned by our unconsolidated Equity-Method Investments and the $12.75 million loan from Oxford Finance, LLC (“Oxford”) (see Note 4) with Summit Georgia Holdings LLC, our wholly-owned subsidiary) as of September 30, 2023:

						Loans
						Payable,
						Excluding
						Debt
				Purchase		Issuance
Property	Location	Date Purchased	Type(1)	Price		Costs
Rivers Edge Rehabilitation and Care (f/k/a) Sheridan Care Center))	Sheridan, OR	August 3, 2012	SNF	$	4,100,000	$	3,873,000
Fernhill Care Center	Portland, OR	August 3, 2012	SNF		4,500,000		3,397,000
Friendship Haven Healthcare and Rehabilitation Center	Galveston County, TX	September 14, 2012	SNF		15,000,000		11,164,000
Pacific Health and Rehabilitation Center	Tigard, OR	December 24, 2012	SNF		8,140,000		5,664,000
Brookstone of Aledo	Aledo, IL	July 2, 2013	AL		8,625,000		6,496,000
Sundial Assisted Living	Redding, CA	December 18, 2013	AL		3,500,000		3,641,000
Pennington Gardens	Chandler, AZ	July 17, 2017	AL/MC		13,400,000		9,918,000
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	$	170,153,000

(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, 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 condensed consolidated statements of operations, wrote off leasing commissions of approximately $0.3 million, which is included in depreciation and amortization in our condensed consolidated statements of operations, and recorded income from security deposits of approximately $0.4 million, which is included in total rental revenue in our condensed 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.

Future Minimum Lease Payments

The future minimum lease payments to be received under our existing tenant operating leases (excluding the 33 properties owned by our unconsolidated Equity-Method Investments and the intercompany lease between our wholly-owned subsidiaries: Summit Chandler LLC and Pennington Gardens, and HP Redding LLC and Sundial) as of September 30, 2023, for the period from October 1, 2023 to December 31, 2023 and for each of the four following years and thereafter ending December 31 are as follows:

Years ending
October 1, 2023 to December 31, 2023	$	4,504,000
2024		18,272,000
2025		18,566,000
2026		18,865,000
2027		19,168,000
Thereafter		155,908,000
	$	235,283,000

2023 Acquisitions

None.

2022 Acquisitions

None.

Impairment of Real Estate Properties

As a result of our ongoing analysis for potential impairment of our investments in real estate, we may be required to adjust the carrying value of certain assets to their estimated fair values, or estimated fair value less selling costs, under certain circumstances.

During the three and nine months ended September 30, 2023, we recorded an impairment of $11.4 million related to eight real estate properties, which is included in impairment of real estate properties in the condensed consolidated statements of operations.  The impairment was recorded due to the tenants experiencing issues affecting their ability to continue to pay their lease obligations.  We utilized a market approach for the fair value estimate of the real estate properties and based our impairment on an estimated yield of 10.8%.  We considered these inputs as Level 3 measurements within the fair value hierarchy.

No impairments were recorded during the nine months ended September 30, 2022.

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Loans Payable

9 Months Ended

Sep. 30, 2023

Loans Payable

Loans Payable

4. Loans Payable

As of September 30, 2023 and December 31, 2022, our loans payable consisted of the following:

	September 30, 2023		December 31, 2022
Loans payable to Lument (formerly ORIX Real Estate Capital, LLC) (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 September 30, 2023 and December 31, 2022, collateralized by Sheridan, Fernhill, Pacific Health, Aledo, Sundial and Friendship Haven.	$	34,235,000	$	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.		9,918,000		10,039,000
Loan payable to CIBC Bank, USA in monthly installments of approximately of $133,000 including cash collateral fund payments, variable interest rate (9.4% and 8.2% at September 30, 2023 and December 31, 2022, respectively), due in July 2024, and as of December 31, 2022, collateralized by Yucaipa Hill Post Acute, Creekside Post Acute and University Post Acute (“CA3 Properties”).		15,000,000		15,000,000
Loan payable to CIBC Bank, USA in monthly installments of approximately $600,000 (interest only through December 2023) variable interest rate (8.8% and 7.7% at September 30, 2023 and December 31, 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 (“GA8 Properties”).		91,000,000		91,000,000
Loan payable to Oxford Finance, LLC in monthly installments of approximately $260,000 (interest only through maturity), variable interest rate (16.4% and 15.1% at September 30, 2023 and December 31, 2022, respectively) due in March 2025, collateralized in second position by the GA8 Properties.		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 (16.4% and 15.1% at September 30, 2023 and December 31, 2022, respectively) due in December 2026, secured by the equity interests of our wholly-owned subsidiary, Summit Georgia Holdings LLC, the parent holding company for the GA8 Properties.		12,750,000		12,750,000
		182,903,000		183,765,000
Less debt issuance costs		(2,911,000)		(3,596,000)
Total loans payable	$	179,992,000	$	180,169,000

As of September 30, 2023, we have total debt obligations of approximately $182.9 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 September 30, 2023, we were in compliance with all of our debt covenants except for our GA8 Properties which were out of compliance with their consolidated minimum EBITDAR covenant. We have requested a waiver. Additionally, in October 2023 and November 2023, Oxford agreed to defer a portion of our interest payments on the mezzanine loan payable (see table above) until we can confirm a plan of action.  We have not received any notice of default for this deferral, however, we are including it in the current period in the principal payments due on the loans payable table below.

During the three months ended September 30, 2023 and 2022, we incurred approximately $4.3 million and $3.2 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 nine months ended September 30, 2023 and 2022, we incurred

approximately $12.3 million and $8.4 million, respectively, of interest expense (excluding debt issuance costs, amortization and interest expense related to the Oxford Monthly Fee) related to our loans payable.

In connection with our loans payable, we incurred debt issuance costs. As of September 30, 2023 and December 31, 2022, the unamortized balance of the debt issuance costs was approximately $2.9 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 each of the three months ended September 30, 2023 and 2022, $0.2 million of debt issuance costs were amortized and included in interest expense in our condensed consolidated statements of operations. For each of the nine months ended September 30, 2023 and 2022, $0.7 million of debt issuance costs were amortized and included in interest expense in our condensed consolidated statements of operations.

During the three months ended September 30, 2023 and 2022, we incurred approximately $0 million and $0.1 million, respectively, of interest expense related to the Oxford Monthly Fee which is included in interest expense in our condensed consolidated statements of operations. During the nine months ended September 30, 2023 and 2022, we incurred approximately $0 million and $0.5 million, respectively of interest expense related to the Oxford Monthly Fee and is included in interest expense in our condensed consolidated statements of operations.

The principal payments due on the loans payable (excluding debt issuance costs) for the period from October 1, 2023 to December 31, 2023 and for each of the four following years and thereafter ending December 31 are as follows:

	Principal
Years Ending	Amount
October 1, 2023 to December 31, 2023	$	13,044,000
2024		107,201,000
2025		21,246,000
2026		1,292,000
2027		1,341,000
Thereafter		38,779,000
	$	182,903,000

The following information notes our loan activity:

CA3 Properties

In 2021, we entered into a first priority $15.0 million mortgage loan collateralized by the CA3 Properties with CIBC Bank, USA (“CIBC”). See table above listing loans payable for further information.

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 Holdings LLC, the parent holding company for the GA8 Properties. See table above listing loans payable for further information.

HUD-insured loans

We have six properties with HUD-insured loans from Lument Capital (formerly ORIX Real Estate Capital, LLC) and one property with a HUD-insured loan from Capital One Multifamily Finance, LLC. See table above listing loans payable for further information.

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 condensed consolidated balance sheets.

Master Letter of Credit Agreement

In June 2023, we entered into $1.0 million Master Letter of Credit Agreement with CIBC. As of September 30, 2023, there are no outstanding letters of credit under this agreement.

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Equity-Method Investments

9 Months Ended

Sep. 30, 2023

Equity-Method Investments

Equity-Method Investments

5. Equity-Method Investments

As of September 30, 2023 and December 31, 2022, the balances of our Equity-Method Investments were approximately $3.4 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 is distributed monthly, first to the Operating Partnership and Best Years pari passu up to a 9% to 10% annual return, and thereafter to Best Years 75% and the Operating Partnership 25%. All capital proceeds from the sale of the properties held by the SUL JV, a refinancing or another capital event will be paid first to the Operating Partnership and Best Years pari passu until each has received an amount equal to its accrued but unpaid 9% to 10% return plus its total contribution, and thereafter to Best Years 75% and the Operating Partnership 25%.

For the nine months ended September 30, 2023 and 2022, we invested approximately $230,000 and $821,000, respectively, related to capital calls for the SUL JV.  During the three months ended September 30, 2023, the SUL JV  recorded an impairment of approximately $1.1 million on one property in this JV and we recorded our 10% share of the impairment of approximately $0.1 million in loss from equity-method investees in the condensed consolidated statements of operations.

As of September 30, 2023 and December 31, 2022, the balance of our equity-method investment related to the SUL JV was approximately $2.2 million and $2.4 million, respectively.

Summit Fantasia Holdings, LLC

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.  See Note 3 under Fantasia I JV Transfer of Interest and Sale for further information.

For the period ended July 2, 2023 and the nine months ended September 30, 2022, we invested approximately $0 and $290,000, respectively, related to capital calls for the Fantasia I JV. In September 2022, we determined the fair value of our investment in the Fantasia I JV to be impaired and recorded a $0.1 million impairment charge which is recorded in the loss from equity-method investees in the condensed consolidated statements of operations for the three and nine months ended September 30, 2022.

As of July 2, 2023 and December 31, 2022, our equity-method investment related to the Fantasia I JV was $0 due to the transfer and impairment noted above, respectively.

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 II JV is distributed quarterly, first to the Operating Partnership and Fantasia pari passu until each member has received an amount equal to its accrued, but unpaid 8% return, and thereafter 70% to Fantasia and 30% to the Operating Partnership. All capital proceeds from the sale of the properties held by the Fantasia II JV, a refinancing or another capital event, will be paid first to the Operating Partnership and Fantasia pari passu until each has received an amount equal to its accrued but unpaid 8% return plus its total capital contribution, and thereafter 70% to Fantasia and 30% to the Operating Partnership.

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 September 30, 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.  During the three months ended September 30, 2023, the Fantasia II JV recorded an impairment of approximately $1.6 million on the two properties and we recorded our 20% share of the impairment of approximately $0.3 million in loss from equity-method investees in the condensed consolidated statements of operations.  Additionally, in September 2023, due to the ongoing issues with the receivership, we determined the fair value of 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 condensed consolidated statements of operations.

As of September 30, 2023 and December 31, 2022, the balance of our equity-method investment related to the Fantasia II JV was approximately $0 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 is distributed quarterly, first to the Operating Partnership and Fantasia pari passu until each member has received an amount equal to its accrued, but unpaid 9% return, and thereafter 75% to Fantasia and 25% to the Operating Partnership. All capital proceeds from the sale of the properties held by the Fantasia III JV, a refinancing or another capital event, will be paid first to the Operating Partnership and Fantasia pari passu until each has received an amount equal to its accrued but unpaid 9% return plus its total capital contribution, and thereafter 75% to Fantasia and 25% to the Operating Partnership.

During the three months ended September 30, 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 settlement 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 JV. The Fantasia III JV recorded a loss of approximately $3.9 million on the transaction and we recorded our 10% share of the loss of approximately $0.4 million in loss from equity-method investees in the condensed consolidated statements of operations.

As of September 30, 2023 and December 31, 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 is distributed quarterly, first to the members pari passu until each member has received an amount equal to its accrued, but unpaid 9% return, and thereafter 65.25% to Fantasy, 7.5% to Atlantis, 7.25% to Fantasia and 20% to the Operating Partnership. All capital proceeds from the sale of the properties held by the FPH JV, a refinancing or another capital event, will be paid to the members pari passu until each has received an amount equal to its accrued but unpaid 9% return plus its total capital contribution, and thereafter 65.25% to Fantasy, 7.5% to Atlantis, 7.25% to Fantasia, and 20% to the Operating Partnership.

In December 2022, Summit recorded an impairment of approximately $0.2 million of our equity-method investment balance in the FPH JV due to issues related to tenant operations, and consequently, reduced our equity-method investment balance to $0.

As of September 30, 2023 and December 31, 2022, the balance of our equity-method investment related to the FPH JV was $0.

Distributions from Equity-Method Investments

As of September 30, 2023 and December 31, 2022, we have distributions receivable, which are included in tenant and other receivables in our condensed consolidated balance sheets, as follows:

	September 30,		December 31,
	2023		2022
SUL JV	$	269,000	$	259,000
Fantasia II JV		30,000		55,000
Fantasia III JV		69,000		22,000
FPH JV		64,000		64,000
Total	$	432,000	$	400,000

For the nine months ended September 30, 2023 and 2022, we have received cash distributions, which are included in our cash flows from operating activities in tenant and other receivables, and cash flows from investing activities, as follows:

	Nine months Ended September 30, 2023						Nine months Ended September 30, 2022
			Cash Flow		Cash Flow				Cash Flow		Cash Flow
	Total Cash		from		from		Total Cash		from		from
	Distributions		Operating		Investing		Distributions		Operating		Investing
	Received		Activities		Activities		Received		Activities		Activities
SUL JV	$	408,000	$	6,000	$	402,000	$	434,000	$	91,000	$	343,000
Fantasia II JV		136,000		—		136,000		237,000		158,000		79,000
Fantasia III JV		12,000		—		12,000		95,000		95,000		—
FPH JV		—		—		—		56,000		56,000		—
Total	$	556,000	$	6,000	$	550,000	$	822,000	$	400,000	$	422,000

Asset Management Fees

We serve as the manager of our Equity-Method Investments and provide management services in exchange for fees and reimbursements. As the manager, we are paid an annual asset management fee for managing the properties held by our Equity-Method Investments, as defined in those agreements. For the three months ended September 30, 2023 and 2022, we recorded approximately $0.1 million and $0.2 million, respectively, in asset management fees from our Equity-Method Investments. For each of the nine months ended September 30, 2023 and 2022, we recorded approximately $0.4 million and $0.5 million, respectively, in asset management fees from our Equity-Method Investments (see Note 7).

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Receivables

9 Months Ended

Sep. 30, 2023

Receivables

Receivables

6. Receivables

Tenant and Other Receivables, Net

Tenant and other receivables, net consists of:

	September 30,		December 31,
	2023		2022
Straight-line rent receivables	$	3,482,000	$	3,862,000
Distribution receivables from Equity-Method Investments		432,000		400,000
Asset management fees		290,000		375,000
Other receivables		429,000		383,000
Total	$	4,633,000	$	5,020,000

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Related Party Transactions

9 Months Ended

Sep. 30, 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.

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Intangible Lease Assets

9 Months Ended

Sep. 30, 2023

Intangible Lease Assets

Intangible Lease Assets

8. Intangible Lease Assets

Intangible lease assets are as follows:

	September 30,		December 31,
	2023		2022
In-place leases	$	12,680,000	$	13,778,000
Less: accumulated amortization		(1,625,000)		(937,000)
In-place leases, net		11,055,000		12,841,000
Above-market leases		959,000		959,000
Less: accumulated amortization		(144,000)		(96,000)
Above-market leases, net		815,000		863,000
Total intangible lease assets, net	$	11,870,000	$	13,704,000

For each of the three months ended September 30, 2023 and 2022, amortization expense for intangible lease assets was approximately $0.2 million of which approximately $16,000 relates to the amortization of above market leases which is included within rental revenues in the accompanying condensed consolidated statements of operations. For each of the nine months ended September 30, 2023 and 2022, amortization expense for intangible lease assets was approximately $0.7 million of which approximately $48,000 relates to the amortization of above-market leases which is included within rental revenues in the accompanying condensed consolidated statements of operations.

Expected future amortization of the intangible lease assets as of September 30, 2023, for the period from October 1, 2023 to December 31, 2023 and for each of the four following years and thereafter ending December 31 are as follows:

Years ending December 31,
October 1, 2023 to December 31, 2023	$	224,000
2024		896,000
2025		896,000
2026		896,000
2027		896,000
Thereafter		8,062,000
	$	11,870,000

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Right of Use (ROU) Asset - Operating

9 Months Ended

Sep. 30, 2023

Right of Use (ROU) Asset - Operating

Right of Use (ROU) Asset - Operating

9. Right of Use (ROU) Asset - Operating

In November 2022, we entered into an operating lease for office space (“Office Lease”) for a period of sixty-six (66) months, with a five-year renewal option. The office space subject to the Office Lease is located in Laguna Hills, California. The Office Lease provides for the abatement of the base rent for the second full calendar month (January 2023) through the seventh full calendar month of the lease term (June 2023). The initial annual base rent is $204,399 and increases three percent (3%) each year on the anniversary date of the commencement of the Office Lease.

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 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. The Office Lease does not contain material residual value guarantees or material restrictive covenants.

Supplemental balance sheet information related to the Office Lease are as follows:

Component	Consolidated Balance Sheet Caption	September 30, 2023		December 31, 2022
Right of use asset - operating	Other assets, net	$	732,000	$	833,000
Lease liability - operating	Accounts payable and accrued liabilities	$	918,000	$	933,000

Lease expense is presented as part of continuing operations within general and administrative expenses in the condensed consolidated statements of operations. For the three months ended September 30, 2023, we recognized approximately $45,000 in lease expense and for the nine months ended September 30, 2023, we recognized approximately $135,000 in lease expense. The lease payments will be classified within operating activities in the consolidated statements of cash flows. As of September 30, 2023, we had not made any lease payments and the weighted average remaining lease term is 4.4 years.

Lease payments on the Office Lease for the period from October 1, 2023 to December 31, 2023 and for each of the four following years and thereafter ending December 31 are as follows:

Year	Lease payments
October 1, 2023 to December 31, 2023	$	52,000
2024		211,000
2025		217,000
2026		224,000
2027		231,000
Thereafter		99,000
Total lease payments	$	1,034,000
Less imputed interest		(116,000)
Total lease liability	$	918,000

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Concentration of Risk

9 Months Ended

Sep. 30, 2023

Concentration of Risk

Concentration of Risk

10. Concentration of Risk

Our cash is generally invested in short-term money market instruments. As of September 30, 2023, we had cash accounts in excess of FDIC-insured limits. During March 2023, in response to the banking crisis, we transferred cash balances in excess of FDIC-insured limits from a smaller regional bank to a multi-national bank. To date, we have not experienced losses or lack of access to cash in our cash and cash equivalent accounts.

As of September 30, 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 33 properties held by our Equity-Method Investments). Accordingly, there is a geographic concentration of risk subject to economic conditions in certain states.

Additionally, for the three months ended September 30, 2023, we leased our 16 real estate properties to 14 different tenants under long-term triple net leases, and three of the 14 tenants each represented more than 10% of our rental revenue. For the three months ended September 30, 2022, 16 of our real estate properties were leased to 14 different tenants under long-term triple net leases, and three of the 14 tenants each represented more than 10% of our rental revenue.

For the nine months ended September 30, 2023, 16 of our real estate properties were leased to 14 different tenants under long-term triple net leases, and three of the 14 tenants each represented more than 10% of our rental revenue. For the nine months ended September 30, 2022, 16 of our real estate properties were leased to 14 different tenants under long-term triple net leases, and three of the 14 tenants each represented more than 10% of our rental revenue.

As of September 30, 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.

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Fair Value Measurements of Financial Instruments

9 Months Ended

Sep. 30, 2023

Fair Value Measurements of Financial Instruments

Fair Value Measurements of Financial Instruments

11. Fair Value Measurements of Financial Instruments

Our condensed 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 (categorized within Level 1 of the fair value hierarchy) for such financial instruments because of the short period of time between origination of the instruments and their expected payment.

As of September 30, 2023 and December 31, 2022, the fair value of our HUD-insured loans payable was $36.6 million and $38.9 million, compared to the principal balance (excluding debt discount) of $44.1 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 rate debt 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 September 30, 2023 and December 31, 2022, we believe the carrying amounts of our variable rate debt are reasonably estimated at their notional 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. 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.

See Note 3 for disclosure regarding fair value of impaired real estate properties.

As of September 30, 2023 and December 31, 2022, we do not have any significant financial assets or financial liabilities that are measured at fair value on a recurring basis in our condensed consolidated financial statements.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2023

Commitments and Contingencies

Commitments and Contingencies

12. 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.  The Bankruptcy Court has not yet ruled on the motions and has not indicated when a decision will be issued. Based on the assessment by management, as of September 30, 2023, the Company has accrued $75,000 for the reimbursement of legal fees and $0 for the $517,000 in attorney’s fees 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”), 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, after Mr. Eikanas was given written notice of and failed to cure various deficiencies in his performance following the expiration of a 60-day cure period.  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.  The parties are currently engaged in written discovery and related motion practice. The parties have also started depositions. 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 September 30, 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. Effective October 19, 2021, we entered into a new employment agreement with Elizabeth Pagliarini (Chief Financial Officer at the time and current Chief Executive Officer), for a term of three years. The employment agreement includes customary terms relating to salary, bonus, position, duties and benefits (including eligibility for equity compensation), as well as a cash payment following a change in control of the Company, as defined in such agreement.

We previously had entered into an employment agreement, dated October 19, 2021, with Mr. Eikanas, which was terminated on July 14, 2023 in connection with his removal as Chief Executive Officer.

Management of our Equity-Method Investments

As the manager of our Equity-Method Investments, we are responsible for day-to-day management. Additionally, we could be subject to a capital call from our Equity-Method Investments (see Note 5 for capital call activity).

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Equity

9 Months Ended

Sep. 30, 2023

Equity

Equity

13. Equity

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 by 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 with maturity dates approximating the expected term 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.

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, 2026. The options expire 10 years from the grant date. The weighted-average fair value per share of the stock options granted was $0.91.

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		37.3	%
Expected term		5.75	years
Risk-free interest rate		3.65	%
Dividend yield		—	%
Fair value per share	$	0.91

The following table summarizes our stock options as of September 30, 2023:

				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
		Exercise		Contractual	Intrinsic
	Options	Price		Term	Value
Options outstanding at January 1, 2023	1,948,908	$	2.10
Granted	80,000	$	2.18
Exercised	—
Cancelled/forfeited	—
Options outstanding at September 30, 2023	2,028,908	$	2.10	4.45	$	1,279,000
Options exercisable at September 30, 2023	1,917,268	$	2.09	4.18	$	1,225,000

For our outstanding non-vested options as of September 30, 2023, the weighted average grant date fair value per share was $0.91. As of September 30, 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,
2023	$	12,000
2024		49,000
2025		32,000
2026		8,000
	$	101,000

The stock-based compensation expense reported for the three months ended September 30, 2023 and 2022 was approximately $12,000 and $9,000, respectively, and is included in general and administrative expense in the condensed consolidated statements of operations. The stock-based compensation expense reported for the nine months ended September 30, 2023 and 2022 was approximately $29,000 and $23,000, respectively, and is included in general and administrative expense in the condensed consolidated statements of operations.

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Subsequent Events

9 Months Ended

Sep. 30, 2023

Subsequent Events

Subsequent Events

14. Subsequent Events

None.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2023

Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

Principles of Consolidation and Basis of Presentation

The accompanying condensed 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.

The accompanying financial information reflects all adjustments, which are, in the opinion of management, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods. Interim results of operations are not necessarily indicative of the results to be expected for the full year. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

Restricted Cash

Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown on the condensed consolidated statements of cash flows.

	September 30,		December 31,
	2023		2022
Cash and cash equivalents	$	11,289,000	$	11,572,000
Restricted cash		3,199,000		2,591,000
Total cash, cash equivalents, and restricted cash shown on the condensed consolidated statements of cash flows	$	14,488,000	$	14,163,000

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2023

Summary of Significant Accounting Policies

Schedule of reconciliation of cash, cash equivalents, and restricted cash

	September 30,		December 31,
	2023		2022
Cash and cash equivalents	$	11,289,000	$	11,572,000
Restricted cash		3,199,000		2,591,000
Total cash, cash equivalents, and restricted cash shown on the condensed consolidated statements of cash flows	$	14,488,000	$	14,163,000

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Investments in Real Estate Properties (Tables)

9 Months Ended

Sep. 30, 2023

Investments in Real Estate Properties

Schedule of investments in real estate properties

	September 30,		December 31,
	2023		2022
Land	$	14,905,000	$	15,565,000
Buildings and improvements		157,833,000		166,989,000
Less: accumulated depreciation		(19,403,000)		(15,985,000)
Buildings and improvements, net		138,430,000		151,004,000
Furniture and fixtures		12,121,000		12,440,000
Less: accumulated depreciation		(7,113,000)		(5,882,000)
Furniture and fixtures, net		5,008,000		6,558,000
Real estate properties, net	$	158,343,000	$	173,127,000

Schedule of real estate properties

The following table provides summary information regarding our portfolio (excluding the 33 properties owned by our unconsolidated Equity-Method Investments and the $12.75 million loan from Oxford Finance, LLC (“Oxford”) (see Note 4) with Summit Georgia Holdings LLC, our wholly-owned subsidiary) as of September 30, 2023:

						Loans
						Payable,
						Excluding
						Debt
				Purchase		Issuance
Property	Location	Date Purchased	Type(1)	Price		Costs
Rivers Edge Rehabilitation and Care (f/k/a) Sheridan Care Center))	Sheridan, OR	August 3, 2012	SNF	$	4,100,000	$	3,873,000
Fernhill Care Center	Portland, OR	August 3, 2012	SNF		4,500,000		3,397,000
Friendship Haven Healthcare and Rehabilitation Center	Galveston County, TX	September 14, 2012	SNF		15,000,000		11,164,000
Pacific Health and Rehabilitation Center	Tigard, OR	December 24, 2012	SNF		8,140,000		5,664,000
Brookstone of Aledo	Aledo, IL	July 2, 2013	AL		8,625,000		6,496,000
Sundial Assisted Living	Redding, CA	December 18, 2013	AL		3,500,000		3,641,000
Pennington Gardens	Chandler, AZ	July 17, 2017	AL/MC		13,400,000		9,918,000
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	$	170,153,000

(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
October 1, 2023 to December 31, 2023	$	4,504,000
2024		18,272,000
2025		18,566,000
2026		18,865,000
2027		19,168,000
Thereafter		155,908,000
	$	235,283,000

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Loans Payable (Tables)

9 Months Ended

Sep. 30, 2023

Loans Payable

Schedule of loans payable

	September 30, 2023		December 31, 2022
Loans payable to Lument (formerly ORIX Real Estate Capital, LLC) (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 September 30, 2023 and December 31, 2022, collateralized by Sheridan, Fernhill, Pacific Health, Aledo, Sundial and Friendship Haven.	$	34,235,000	$	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.		9,918,000		10,039,000
Loan payable to CIBC Bank, USA in monthly installments of approximately of $133,000 including cash collateral fund payments, variable interest rate (9.4% and 8.2% at September 30, 2023 and December 31, 2022, respectively), due in July 2024, and as of December 31, 2022, collateralized by Yucaipa Hill Post Acute, Creekside Post Acute and University Post Acute (“CA3 Properties”).		15,000,000		15,000,000
Loan payable to CIBC Bank, USA in monthly installments of approximately $600,000 (interest only through December 2023) variable interest rate (8.8% and 7.7% at September 30, 2023 and December 31, 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 (“GA8 Properties”).		91,000,000		91,000,000
Loan payable to Oxford Finance, LLC in monthly installments of approximately $260,000 (interest only through maturity), variable interest rate (16.4% and 15.1% at September 30, 2023 and December 31, 2022, respectively) due in March 2025, collateralized in second position by the GA8 Properties.		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 (16.4% and 15.1% at September 30, 2023 and December 31, 2022, respectively) due in December 2026, secured by the equity interests of our wholly-owned subsidiary, Summit Georgia Holdings LLC, the parent holding company for the GA8 Properties.		12,750,000		12,750,000
		182,903,000		183,765,000
Less debt issuance costs		(2,911,000)		(3,596,000)
Total loans payable	$	179,992,000	$	180,169,000

Schedule of principal payments due on the loans payable (excluding debt issuance costs)

	Principal
Years Ending	Amount
October 1, 2023 to December 31, 2023	$	13,044,000
2024		107,201,000
2025		21,246,000
2026		1,292,000
2027		1,341,000
Thereafter		38,779,000
	$	182,903,000

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Equity-Method Investments (Tables)

9 Months Ended

Sep. 30, 2023

Equity-Method Investments

Schedule of distributions receivable

	September 30,		December 31,
	2023		2022
SUL JV	$	269,000	$	259,000
Fantasia II JV		30,000		55,000
Fantasia III JV		69,000		22,000
FPH JV		64,000		64,000
Total	$	432,000	$	400,000

Schedule of cash distributions

	Nine months Ended September 30, 2023						Nine months Ended September 30, 2022
			Cash Flow		Cash Flow				Cash Flow		Cash Flow
	Total Cash		from		from		Total Cash		from		from
	Distributions		Operating		Investing		Distributions		Operating		Investing
	Received		Activities		Activities		Received		Activities		Activities
SUL JV	$	408,000	$	6,000	$	402,000	$	434,000	$	91,000	$	343,000
Fantasia II JV		136,000		—		136,000		237,000		158,000		79,000
Fantasia III JV		12,000		—		12,000		95,000		95,000		—
FPH JV		—		—		—		56,000		56,000		—
Total	$	556,000	$	6,000	$	550,000	$	822,000	$	400,000	$	422,000

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Receivables (Tables)

9 Months Ended

Sep. 30, 2023

Receivables

Schedule of tenant and other receivables

	September 30,		December 31,
	2023		2022
Straight-line rent receivables	$	3,482,000	$	3,862,000
Distribution receivables from Equity-Method Investments		432,000		400,000
Asset management fees		290,000		375,000
Other receivables		429,000		383,000
Total	$	4,633,000	$	5,020,000

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Intangible Lease Assets (Tables)

9 Months Ended

Sep. 30, 2023

Intangible Lease Assets

Schedule of intangible lease assets

	September 30,		December 31,
	2023		2022
In-place leases	$	12,680,000	$	13,778,000
Less: accumulated amortization		(1,625,000)		(937,000)
In-place leases, net		11,055,000		12,841,000
Above-market leases		959,000		959,000
Less: accumulated amortization		(144,000)		(96,000)
Above-market leases, net		815,000		863,000
Total intangible lease assets, net	$	11,870,000	$	13,704,000

Schedule of expected future amortization of the intangible lease assets

Expected future amortization of the intangible lease assets as of September 30, 2023, for the period from October 1, 2023 to December 31, 2023 and for each of the four following years and thereafter ending December 31 are as follows:

Years ending December 31,
October 1, 2023 to December 31, 2023	$	224,000
2024		896,000
2025		896,000
2026		896,000
2027		896,000
Thereafter		8,062,000
	$	11,870,000

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Right of Use (ROU) Asset - Operating (Tables)

9 Months Ended

Sep. 30, 2023

Right of Use (ROU) Asset - Operating

Schedule of supplemental balance sheet information related to the office lease

Component	Consolidated Balance Sheet Caption	September 30, 2023		December 31, 2022
Right of use asset - operating	Other assets, net	$	732,000	$	833,000
Lease liability - operating	Accounts payable and accrued liabilities	$	918,000	$	933,000

Schedule of lease payments on the office lease

Year	Lease payments
October 1, 2023 to December 31, 2023	$	52,000
2024		211,000
2025		217,000
2026		224,000
2027		231,000
Thereafter		99,000
Total lease payments	$	1,034,000
Less imputed interest		(116,000)
Total lease liability	$	918,000

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Equity (Tables)

9 Months Ended

Sep. 30, 2023

Equity

Schedule of estimated fair value using assumptions

	2023
Stock options granted		80,000
Expected volatility		37.3	%
Expected term		5.75	years
Risk-free interest rate		3.65	%
Dividend yield		—	%
Fair value per share	$	0.91

Schedule of stock options

				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
		Exercise		Contractual	Intrinsic
	Options	Price		Term	Value
Options outstanding at January 1, 2023	1,948,908	$	2.10
Granted	80,000	$	2.18
Exercised	—
Cancelled/forfeited	—
Options outstanding at September 30, 2023	2,028,908	$	2.10	4.45	$	1,279,000
Options exercisable at September 30, 2023	1,917,268	$	2.09	4.18	$	1,225,000

Schedule of unrecognized stock-based compensation expense

Years Ending December 31,
2023	$	12,000
2024		49,000
2025		32,000
2026		8,000
	$	101,000

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Organization (Details)		1 Months Ended	9 Months Ended	12 Months Ended
	Jul. 03, 2023 USD ($)	Sep. 30, 2016	Sep. 30, 2023 USD ($) property	Dec. 31, 2022 USD ($) property	Jul. 31, 2023
Organization
Equity-method investments | $			$ 3,394,000	$ 5,182,000
Unconsolidated
Organization
Equity method investment ownership percentage			10.00%
Number of owned properties			17
Summit Healthcare Operating Partnership, L.P
Organization
Limited partnership interest			99.88%
Summit Healthcare Operating Partnership, L.P | Consolidated
Organization
Equity method investment ownership percentage			100.00%
Number of owned properties			14
Summit Healthcare Operating Partnership, L.P | Cornerstone Realty Advisors, LLC
Organization
Limited partnership interest			0.12%
Cornerstone Healthcare Partners LLC
Organization
Limited partnership interest			95.00%
Cornerstone Healthcare Real Estate Fund
Organization
Limited liability company (LLC) or limited partnership (LP), members or limited partners, ownership interest by affiliates			5.00%
JV Properties
Organization
Number of owned properties			4	4
Noncontrolling interest, ownership percentage by noncontrolling owners			4.70%	4.70%
Summit Union Life Holdings, LLC
Organization
Number of owned properties			17	17
Limited liability company (LLC) or limited partnership (LP), members or limited partners, ownership interest by affiliates			10.00%	10.00%
Real estate investment trust own percentage			10.00%
Four Jv Properties
Organization
Limited liability company (LLC) or limited partnership (LP), members or limited partners, ownership interest by affiliates			95.30%	95.30%
Limited partnership interest			95.30%
Summit Fantasia Holdings III, LLC
Organization
Number of owned properties			8	9
Fantasia III JV
Organization
Number of owned properties			8
Limited liability company (LLC) or limited partnership (LP), members or limited partners, ownership interest by affiliates			10.00%	10.00%
Summit Fantasy Pearl Holdings, LLC
Organization
Number of owned properties			6	6
Limited partnership interest			10.00%	10.00%
Fantasia II JV
Organization
Number of owned properties			2	2
Limited liability company (LLC) or limited partnership (LP), members or limited partners, ownership interest by affiliates			20.00%
Fantasia II JV | Unconsolidated
Organization
Equity method investment ownership percentage			20.00%	20.00%
Fantasia I JV
Organization
Percentage of ownership interest assigned	65.00%
Consideration for interest assigned | $	$ 0
Fantasia I JV | Summit Healthcare REIT, Inc
Organization
Equity method investment ownership percentage					100.00%
Summit Fantasia Holdings, LLC
Organization
Limited liability company (LLC) or limited partnership (LP), members or limited partners, ownership interest by affiliates		35.00%

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Summary of Significant Accounting Policies - Restricted Cash (Details) - USD ($)	Sep. 30, 2023	Dec. 31, 2022	Sep. 30, 2022	Dec. 31, 2021
Summary of Significant Accounting Policies
Cash and cash equivalents	$ 11,289,000	$ 11,572,000
Restricted cash	3,199,000	2,591,000
Total cash, cash equivalents, and restricted cash shown on the consolidated statements of cash flows	$ 14,488,000	$ 14,163,000	$ 14,914,000	$ 13,161,000

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Investments in Real Estate Properties - Investments in real estate properties (Details) - USD ($)	Sep. 30, 2023	Dec. 31, 2022
Investments in Real Estate Properties
Real estate properties, net	$ 158,343,000	$ 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	157,833,000	166,989,000
Less: accumulated depreciation	(19,403,000)	(15,985,000)
Real estate properties, net	138,430,000	151,004,000
Furniture and fixtures
Investments in Real Estate Properties
Real estate properties, gross	12,121,000	12,440,000
Less: accumulated depreciation	(7,113,000)	(5,882,000)
Real estate properties, net	$ 5,008,000	$ 6,558,000

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Investments in Real Estate Properties - Summary information regarding portfolio (Details)	9 Months Ended
	Sep. 30, 2023 USD ($)
Investments in Real Estate Properties
Purchase Price	$ 207,320,000
Loans Payable, Excluding Debt Issuance Costs	$ 170,153,000
Rivers Edge Rehabilitation and Care (f/k/a) 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	$ 3,873,000
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	$ 3,397,000
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	$ 11,164,000
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	$ 5,664,000
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	$ 6,496,000
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	$ 3,641,000
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	$ 9,918,000
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

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Investments in Real Estate Properties - Future Minimum Lease Payments (Details)	Sep. 30, 2023 USD ($)
Investments in Real Estate Properties
October 1, 2023 to December 31, 2023	$ 4,504,000
2024	18,272,000
2025	18,566,000
2026	18,865,000
2027	19,168,000
Thereafter	155,908,000
Future minimum lease payments	$ 235,283,000

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Investments in Real Estate Properties - Additional information (Details)			1 Months Ended		3 Months Ended		9 Months Ended
	Sep. 29, 2023 USD ($)	Jul. 03, 2023 USD ($)	Sep. 30, 2023 USD ($) item property	Feb. 28, 2022 USD ($)	Sep. 30, 2023 USD ($) item property	Sep. 30, 2022 USD ($) property	Sep. 30, 2023 USD ($) item property	Sep. 30, 2022 USD ($) property	Jul. 31, 2023 USD ($)
Investments in Real Estate Properties
Number of properties owned by our unconsolidated Equity-Method Investments | property			33		33		33
Depreciation					$ 1,600,000	$ 1,600,000	$ 4,700,000	$ 4,800,000
Number of real estate properties | property			18		18		18
Number of real estate properties leased to related facilities | property			16		16	16	16	16
Percentage of leased to the tenants of the related facilities							100.00%
Number of real estate properties leased to affiliated subsidiary | property			2		2		2
Percentage of leased to affiliated subsidiary							100.00%
Impairment of real estate properties					$ 11,387,000		$ 11,387,000
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
Amount of write off of income from security deposits			$ 400,000
Term of contract (in years)			10 years		10 years		10 years
Number of renewal options | item			2
Renewal term (in years)			5 years		5 years		5 years
Impairments								$ 0
Estimated yield rate | Level 3
Investments in Real Estate Properties
Real estate properties, measurement input | item			10.8		10.8		10.8
Fantasia I JV
Investments in Real Estate Properties
Percentage of ownership interest assigned		65.00%
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 I JV | Summit Healthcare REIT, Inc
Investments in Real Estate Properties
Equity method investment, ownership percentage									100.00%
Eight real estate properties
Investments in Real Estate Properties
Impairment of real estate properties					$ 11,400,000		$ 11,400,000
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			33		33		33
Principal amount of loan			$ 12,750,000		$ 12,750,000		$ 12,750,000
Summit Citrus Heights | Fantasia I 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	$ 10,000.00

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Loans Payable - Debt (Details) - USD ($)	Sep. 30, 2023	Dec. 31, 2022
Loans Payable
Total debt obligations	$ 182,903,000	$ 183,765,000
Less debt issuance costs	(2,911,000)	(3,596,000)
Total loans payable	179,992,000	180,169,000
Loans payable to Lument (formerly ORIX Real Estate Capital, LLC) due in September 2039 through April 2055
Loans Payable
Total debt obligations	34,235,000	34,976,000
Loans payable to Capital One Multifamily Finance, LLC due in September 2053
Loans Payable
Total debt obligations	9,918,000	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

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Loans Payable - (Parenthetical) (Details) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 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	$ 49,000
Fixed rate of interest (in percent)	4.23%	4.23%
Loans payable to CIBC Bank, USA due in July 2024
Loans Payable
Monthly installments	$ 133,000
Variable interest rate (in percent)	9.40%	8.20%
Loans payable to CIBC Bank, USA due in December 2024
Loans Payable
Monthly installments	$ 600,000
Variable interest rate (in percent)	8.80%	7.70%
Loans payable to Oxford Finance, LLC due in March 2025
Loans Payable
Monthly installments	$ 260,000
Variable interest rate (in percent)	16.40%	15.10%
Loans payable to Oxford Finance, LLC due in December 2026
Loans Payable
Monthly installments	$ 168,000
Variable interest rate (in percent)	16.40%	15.10%

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Loans Payable - Maturities of long term debt (Details)	Sep. 30, 2023 USD ($)
Loans Payable
October 1, 2023 to December 31, 2023	$ 13,044,000
2024	107,201,000
2025	21,246,000
2026	1,292,000
2027	1,341,000
Thereafter	38,779,000
Total	$ 182,903,000

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Loans Payable - Additional information (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Jun. 30, 2023	Dec. 31, 2022	Dec. 31, 2021
Loans Payable
Total debt obligations	$ 182,903,000		$ 182,903,000			$ 183,765,000
Interest expense (excluding debt issuance costs, amortization and interest expense related to the Oxford mezzanine loan)	4,300,000	$ 3,200,000	12,300,000	$ 8,400,000
Unamortized balance of the debt issuance costs	2,911,000		2,911,000			$ 3,596,000
Amortization of debt issuance costs	200,000	200,000	700,000	700,000
Interest expense related to Oxford monthly fee	0	$ 100,000	0	$ 500,000
Master Letter of Credit Agreement
Loans Payable
Aggregate amount					$ 1,000,000.0
Amount outstanding	$ 0		$ 0
GA8 Properties | Summit Georgia Holdings LLC
Loans Payable
Aggregate amount							$ 12,750,000
CIBC Bank | CA3 Properties
Loans Payable
Aggregate amount							15,000,000.0
First priority mortgage loan | GA8 Properties
Loans Payable
Aggregate amount							91,000,000.0
Subordinated term loan | GA8 Properties
Loans Payable
Aggregate amount							$ 20,000,000.0

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Equity-Method Investments - Distributions receivable (Details) - USD ($)	Sep. 30, 2023	Dec. 31, 2022
Equity-Method Investments
Distributions receivable	$ 432,000	$ 400,000
SUL JV
Equity-Method Investments
Distributions receivable	269,000	259,000
Fantasia II JV
Equity-Method Investments
Distributions receivable	30,000	55,000
Fantasia III JV
Equity-Method Investments
Distributions receivable	69,000	22,000
FPH JV
Equity-Method Investments
Distributions receivable	$ 64,000	$ 64,000

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Equity-Method Investments - Cash Distributions (Details) - USD ($)	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Equity-Method Investments
Total Cash Distributions Received	$ 556,000	$ 822,000
Cash Flow from Operating Activities	6,000	400,000
Cash Flow from Investing Activities	550,000	422,000
SUL JV
Equity-Method Investments
Total Cash Distributions Received	408,000	434,000
Cash Flow from Operating Activities	6,000	91,000
Cash Flow from Investing Activities	402,000	343,000
Fantasia II JV
Equity-Method Investments
Total Cash Distributions Received	136,000	237,000
Cash Flow from Operating Activities		158,000
Cash Flow from Investing Activities	136,000	79,000
Fantasia III JV
Equity-Method Investments
Total Cash Distributions Received	12,000	95,000
Cash Flow from Operating Activities		95,000
Cash Flow from Investing Activities	$ 12,000
FPH JV
Equity-Method Investments
Total Cash Distributions Received		56,000
Cash Flow from Operating Activities		$ 56,000

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Equity-Method Investments - Additional information (Details)		1 Months Ended	3 Months Ended		6 Months Ended	9 Months Ended
	Jul. 03, 2023 USD ($)	Dec. 31, 2022 USD ($)	Sep. 30, 2023 USD ($) property	Sep. 30, 2022 USD ($)	Jul. 02, 2023 USD ($)	Sep. 30, 2023 USD ($)	Sep. 30, 2022 USD ($)	Jul. 31, 2023	Jun. 30, 2023 USD ($)
Equity-Method Investments
Equity-method investment		$ 5,182,000	$ 3,394,000			$ 3,394,000
Loss from equity-method investees			$ 1,671,000	$ 7,000		1,429,000	$ 496,000
SUL JV
Equity-Method Investments
Invested to capital calls						$ 230,000
Fantasia JV | Summit Healthcare Operating Partnership, L.P
Equity-Method Investments
Invested to capital calls					$ 0
Summit Fantasia Holdings III, LLC
Equity-Method Investments
Equity method investment ownership percentage			10.00%			10.00%
Loss from equity-method investees			$ 400,000
Summit Union Life Holdings, LLC
Equity-Method Investments
Equity method investment ownership percentage			10.00%			10.00%
Impairment loss of related to equity-method investments			$ 100,000
Summit Fantasia Holdings II, LLC
Equity-Method Investments
Equity method investment ownership percentage			20.00%			20.00%		100.00%
Impairment loss of related to equity-method investments						$ 500,000
Loss from equity-method investees			$ 300,000
Equity Method Investments
Equity-Method Investments
Asset management fees			100,000	200,000		400,000	500,000
Summit Union Life Holdings, LLC
Equity-Method Investments
Equity-method investment		2,400,000	2,200,000			$ 2,200,000
Minimum percentage of interest in annual return						9.00%
Percentage of interest in annual return						10.00%
Impairment charge			$ 1,100,000
Number of properties impaired | property			1
Summit Union Life Holdings, LLC | Operating Partnership
Equity-Method Investments
Percentage of interest						25.00%
Percentage of interest in capital proceeds from the sale of properties held						25.00%
Summit Union Life Holdings, LLC | Best Years Llc
Equity-Method Investments
Percentage of interest						75.00%
Percentage of interest in capital proceeds from the sale of properties held						75.00%
SUL JV
Equity-Method Investments
Invested to capital calls							821,000
Summit Fantasia Holdings Llc
Equity-Method Investments
Equity-method investment		0			$ 0				$ 0
Impairment charge			$ 1,600,000
Number of properties impaired | property			2
Summit Fantasia Holdings Llc | Summit Healthcare Operating Partnership, L.P
Equity-Method Investments
Percentage of ownership interest assigned	65.00%
Consideration for interest assigned	$ 0
Summit Fantasia Holdings Llc | Fantasia JV
Equity-Method Investments
Invested to capital calls							290,000
Summit Fantasia Holdings II, LLC
Equity-Method Investments
Equity-method investment		1,200,000	$ 0			$ 0
Percentage of interest in annual return						8.00%
Summit Fantasia Holdings II, LLC | Operating Partnership
Equity-Method Investments
Percentage of interest						30.00%
Percentage of interest in capital proceeds from the sale of properties held						30.00%
Summit Fantasia Holdings II, LLC | Fantasia Investment III LLC
Equity-Method Investments
Percentage of interest						70.00%
Percentage of interest in capital proceeds from the sale of properties held						70.00%
Summit Fantasia Holdings III, LLC
Equity-Method Investments
Equity-method investment		1,600,000	1,200,000			$ 1,200,000
Percentage of interest in annual return						9.00%
Loss on transaction			3,900,000
Summit Fantasia Holdings III, LLC | Operating Partnership
Equity-Method Investments
Percentage of interest						25.00%
Percentage of interest in capital proceeds from the sale of properties held						25.00%
Summit Fantasia Holdings III, LLC | Fantasia Investment III LLC
Equity-Method Investments
Percentage of interest						75.00%
Percentage of interest in capital proceeds from the sale of properties held						75.00%
Summit Fantasy Pearl Holdings, LLC
Equity-Method Investments
Equity-method investment		0	$ 0			$ 0
Percentage of interest in annual return						9.00%
Impairment charge		$ 200,000
Summit Fantasy Pearl Holdings, LLC | Operating Partnership
Equity-Method Investments
Percentage of interest						20.00%
Percentage of interest in capital proceeds from the sale of properties held						20.00%
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 I JV
Equity-Method Investments
Impairment loss of related to equity-method investments				$ 100,000			$ 100,000

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Receivables (Details) - USD ($)	Sep. 30, 2023	Dec. 31, 2022
Receivables
Straight-line rent receivables	$ 3,482,000	$ 3,862,000
Distribution receivables from Equity-Method Investments	432,000	400,000
Asset management fees	290,000	375,000
Other receivables	429,000	383,000
Total	$ 4,633,000	$ 5,020,000

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Intangible Lease Assets (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Intangible Lease Assets
Total intangible lease assets, net	$ 11,870,000		$ 11,870,000		$ 13,704,000
Amortization expense for intangible lease assets	200,000	$ 200,000	700,000	$ 700,000
Amortization of above market leases	16,000	$ 16,000	48,000	$ 48,000
In-place leases
Intangible Lease Assets
Intangible lease assets, gross	12,680,000		12,680,000		13,778,000
Less: accumulated amortization	(1,625,000)		(1,625,000)		(937,000)
Total intangible lease assets, net	11,055,000		11,055,000		12,841,000
Above-market leases
Intangible Lease Assets
Intangible lease assets, gross	959,000		959,000		959,000
Less: accumulated amortization	(144,000)		(144,000)		(96,000)
Total intangible lease assets, net	$ 815,000		$ 815,000		$ 863,000

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Intangible Lease Assets - Expected future amortization (Details) - USD ($)	Sep. 30, 2023	Dec. 31, 2022
Intangible Lease Assets
October 1, 2023 to December 31, 2023	$ 224,000
2024	896,000
2025	896,000
2026	896,000
2027	896,000
Thereafter	8,062,000
Total intangible lease assets, net	$ 11,870,000	$ 13,704,000

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Right of Use (ROU) Asset - Operating (Details)	1 Months Ended
	Nov. 30, 2022 USD ($)
Right of Use (ROU) Asset - Operating
Estimated incremental borrowing rate	5.00%
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 months
Initial annual base rent	$ 204,399
Increase in initial annual base rent (as a percent)	3.00%

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Right of Use (ROU) Asset - Operating - Supplemental balance sheet information related to the Office Lease (Details) - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2023	Dec. 31, 2022
Right of Use (ROU) Asset - Operating
Right of use asset - operating	$ 732,000	$ 732,000	$ 833,000
Right of use asset - operating, Location	Other Assets	Other Assets	Other Assets
Lease liability - operating	$ 918,000	$ 918,000	$ 933,000
Lease liability, location	Accounts Payable and Accrued Liabilities	Accounts Payable and Accrued Liabilities	Accounts Payable and Accrued Liabilities
Operating lease expense	$ 45,000	$ 135,000
Weighted average remaining lease term	4 years 4 months 24 days	4 years 4 months 24 days

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Right of Use (ROU) Asset - Operating - Lease payments (Details) - USD ($)	Sep. 30, 2023	Dec. 31, 2022
Maturity of lease payments
October 1, 2023 to December 31, 2023	$ 52,000
2024	211,000
2025	217,000
2026	224,000
2027	231,000
Thereafter	99,000
Total lease payments	1,034,000
Less imputed interest	(116,000)
Total lease liability	$ 918,000	$ 933,000

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Concentration of Risk (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2023 tenant property	Sep. 30, 2022 tenant property	Sep. 30, 2023 tenant property	Sep. 30, 2022 tenant property
Concentration of Risk
Number of owned properties held by equity method investment	33		33
Number of real estate properties leased to related facilities	16	16	16	16
Number of tenants under long-term triple net leases | tenant	14	14	14	14
Number of tenants represents more than 10% of our rental revenue | tenant	3	3	3	3
Customer concentration risk | Tenant | Assets, Total
Concentration of Risk
Concentration risk, percentage			20.00%
Customer concentration risk | Tenant One | Tenant One, Concentration Risk
Concentration of Risk
Concentration risk, percentage	10.00%	10.00%	10.00%	10.00%
Georgia
Concentration of Risk
Number of owned properties	8		8
California
Concentration of Risk
Number of owned properties	4		4
Oregon
Concentration of Risk
Number of owned properties	3		3
Texas
Concentration of Risk
Number of owned properties	1		1
Illinois
Concentration of Risk
Number of owned properties	1		1
Arizona
Concentration of Risk
Number of owned properties	1		1

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Fair Value Measurements of Financial Instruments (Details) - USD ($)	Sep. 30, 2023	Dec. 31, 2022
Fair Value Measurements of Financial Instruments
Principal balance excluding debt discount	$ 182,903,000	$ 183,765,000
HUD
Fair Value Measurements of Financial Instruments
Fair value of loans payable	36,600,000	38,900,000
Principal balance excluding debt discount	$ 44,100,000	$ 45,000,000.0

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Commitments and Contingencies (Details) - USD ($)				9 Months Ended
	Jul. 14, 2023	May 15, 2023	May 12, 2023	Sep. 30, 2023
Commitments and Contingencies
Purchased the investors' interests				$ 900,000
Cure period of Kent Eikanas	60 days	60 days
Legal fees
Commitments and Contingencies
Amount awarded to the plaintiffs			$ 75,000
Accrued contingencies				75,000
Attorney's fees
Commitments and Contingencies
Amount awarded to the plaintiffs			$ 517,000	517,000
Accrued contingencies				$ 0

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Equity - Black-Scholes option-pricing model (Details)	9 Months Ended
	Sep. 30, 2023 $ / shares shares
Equity
Stock options granted | shares	80,000
Expected volatility	0.373%
Expected term	5 years 9 months
Risk-free interest rate	0.0365%
Fair value per share | $ / shares	$ 0.91

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Equity - Stock options (Details)	9 Months Ended
	Sep. 30, 2023 USD ($) $ / shares shares
Equity
Options outstanding, Beginning Balance	1,948,908
Options outstanding, Granted	80,000
Options outstanding, Exercised	0
Options outstanding, Ending Balance	2,028,908
Options exercisable, Ending Balance	1,917,268
Weighted Average Exercise Price, Outstanding at Beginning Balance | $ / shares	$ 2.10
Weighted Average Exercise Price, Granted | $ / shares	2.18
Weighted Average Exercise Price, Outstanding at Ending Balance | $ / shares	2.10
Weighted Average Exercise Price, Exercisable at Ending Balance | $ / shares	$ 2.09
Options outstanding, Weighted Average Remaining Contractual Term	4 years 5 months 12 days
Options exercisable, Weighted Average Remaining Contractual Term	4 years 2 months 4 days
Options outstanding, Aggregate Intrinsic Value | $	$ 1,279,000
Options exercisable, Aggregate Intrinsic Value | $	$ 1,225,000

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Equity - Unrecognized stock-based compensation expense (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Equity
Unrecognized stock-based compensation expense related to unvested stock options, net of forfeitures	$ 101,000		$ 101,000
General and administrative expense
Equity
Stock-based compensation expense	12,000	$ 9,000	29,000	$ 23,000
2023
Equity
Unrecognized stock-based compensation expense related to unvested stock options, net of forfeitures	12,000		12,000
2024
Equity
Unrecognized stock-based compensation expense related to unvested stock options, net of forfeitures	49,000		49,000
2025
Equity
Unrecognized stock-based compensation expense related to unvested stock options, net of forfeitures	32,000		32,000
2026
Equity
Unrecognized stock-based compensation expense related to unvested stock options, net of forfeitures	$ 8,000		$ 8,000

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Equity - Additional Information (Details) - $ / shares		9 Months Ended
	Apr. 01, 2023	Sep. 30, 2023
Equity
Stock options granted		80,000
Weighted average grant date fair value (per share)	$ 0.91	$ 0.91
Omnibus Incentive Plan | Non-executive employee
Equity
Stock options granted	80,000
Vesting period	3 years
Expiration period	10 years