Summit Healthcare Expands Skilled Nursing Portfolio

Summit Healthcare REIT has acquired a three-property skilled nursing portfolio in San Bernardino County for $20 million. The three facilities total 191 licensed beds. Rockwell Healthcare is operating the facilities on a triple-net lease.

Summit and Rockwell have both expressed excitement in forging this new relationship, which also marks Rockwell’s foray into the Inland Empire market. Summit CEO Kent Eikanas said that Rockwell offers invaluable industry experience, and that this is the beginning of a long relationship with room for growth. While Elizabeth Pagliarini, Summit’s CFO and COO, noted the impressive dedication of Rockwell’s team, calling the company a “rare gem.”

The partnership between the two leaders in the skilled nursing space is notable following a disruptive year. While hotels and retail made most of the headlines, skilled nursing was among the asset classes most impacted by the pandemic. The road out of the pandemic has been bumpy. In May, a report from NIC MAP Vision showed signs of recovery. The occupancy at US skilled nursing facilities increased from 70.7% in January to 71.2% in February 2021, returning to occupancy rates at the end of 2020. Still, the industry is 13.7% below pre-pandemic occupancy.

In June, a report from Moody’s Analytics REIS confirmed that the skilled nursing sector is struggling to bounce back after the pandemic. It shows a national vacancy rate of nearly 17%—a figure that matches the overall national vacancy rate for all property types within the sector. Senior housing, on the other hand, continued along the similar trajectory in Q1 as in previous quarters during the pandemic and posted the fourth straight quarter of increasing vacancy. Skilled nursing increased 140 basis points, while memory care facilities showed a vacancy uptick of 9% and ended Q1 at 20.1% vacant. Independent living care facilities posted a 6.4% rise in vacancy over the pandemic period to hit 16.2% in Q1, while assisted living properties increased 7% to 18.3%.

However, the vacancy rate hasn’t had a material impact on revenue. According to the NIC MAP Vision report, traditional Medicare revenue per patient day stayed steady at $555, but the share of Medicare revenue declined to 23.4% from 25.1% in January. The share of Medicare Advantage revenue increased to 11.1%. In May 2020, it recorded its pre-pandemic low of 8.3%.