Summit Healthcare REIT Updates Shareholders on Plans
February 27, 2017 | by James Sprow | Blue Vault
Summit Healthcare REIT filed a press release with the SEC on February 27, updating shareholders on its plans. The REIT plans to file its 10-K for 2016 with the SEC by March 31, 2017. Its current strategy is to raise institutional third party capital to make acquisitions that it believes are accretive to shareholder value and moving closer to its goal of resuming shareholder distributions. In 2016, the REIT added a second joint venture partner, Fantasia Holdings. The Company’s sole source of new capital since 2015 has been institutional equity raised through joint venture structures at the property level. It states that this strategy is the most prudent for growth for four reasons:
- It has not incurred the expense of organizational and offering costs, including brokerage commissions, that could amount to 15% or more of the actual capital raised through a registered public secondary offering;
- It has not diluted its original shareholders’ holdings;
- Additional revenue, in the form of fees, is earned from the joint venture partners, as opposed to paying fees to an advisor, broker or other third party in connection with that form of capital; and
- Based on successful acquisitions, it earns a waterfall return on operating cash flow and sales proceeds.
Over the past four years, the REIT has acquired an interest in 30 senior housing properties across the country with an aggregate purchase price totaling approximately $250 million, and has disposed one property for a gain of approximately $2.6 million at closing. It currently owns equity interests ranging from 10% to 100% in 29 properties.
FREQUENTLY ASKED QUESTIONS:
When will the REIT start distributions again?
Distributions from the REIT were suspended effective December 31, 2010. Since then, the REIT has experienced a complete restructuring and repositioning, including the addition of a new executive management team and Board of Directors. It is the REIT’s intent to resume distributions once the Board determines that it is in the best interest of the shareholders to distribute cash flow from operations as opposed to reinvesting the cash in additional acquisitions in an effort to regain shareholder value and maximize future returns.
Why does a brokerage firm show a zero value for Summit shares?
If a Summit investment is held in an IRA account or other custodial or brokerage account, the statement may report the value as zero or N/A. This is due to a 2016 amendment to FINRA rules that provides for a specific methodology for calculating share value that would require an independent third-party valuation expert to perform costly appraisals on all the properties in which Summit holds an interest. The REIT is not subject to these FINRA rules and believes that this process would be very expensive, time consuming and an irresponsible use of the REIT’s funds, as it believes that the methodology it uses to calculate NAV as reported on its Form 10-K employs reasonable assumptions and conforms to standard industry practice. Investors are asked to review all the REIT’s filings with the SEC for more information. If shareholders have any questions, they may contact their financial advisor, the REIT’s investor services and transfer agent team at ACS Securities Services at (888) 522-1771, or its Director of Communications, Vince Finnegan, at (949) 648-4620.
Blue Vault Partners reported Summit Healthcare REIT’s net asset value per share at $2.34 as of December 31, 2015 in the Q3 2016 Nontraded REIT Industry Review, the last reported NAV. Shares have been sold on the Central Trade & Transfer auction site in 2016 at $1.36 to $1.48 per share. (www.cttauctions.com)Go Back
Our firm has been using Blue Vault from the first year it was available.
We have found it to be a valuable tool to verify what wholesalers tell us and to dig deep into how the reported investments are really performing.
We appreciate that Blue Vault has expanded its services from initially covering REIT's to now also including BDC's.
Our clients also appreciate that we conduct this additional due diligence on their behalf.