Summit Healthcare REIT, Inc. Recommends Rejection of MacKenzie Tender Offer

October 11, 2017

Summit Healthcare REIT, Inc. Recommends Rejection of MacKenzie Tender Offer

October 10, 2017 | James Sprow | Blue Vault

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In a letter to shareholders, Summit Healthcare REIT, Inc. (“Summit”) recommended that its shareholders reject the unsolicited mini-tender offer by MacKenzie Realty Capital (“MacKenzie”) to purchase its shares for $1.34 per share.

In the letter, Summit stated, “We understand that MacKenzie is offering to purchase up to 330,000 of Summit’s shares for approximately $1.34 per share. We believe that MacKenzie’s offer price is less than the current and potential long-term value of Summit’s shares and recommend against selling shares at those prices.”

The letter continued, “MacKenzie’s offer price is substantially below our most recent estimated valuation (as of December 31, 2016) of $2.53 per share. In arriving at our recommendation against selling your shares to MacKenzie, we considered the historical performance of the real estate market and of our portfolio, along with our outlook with respect to executing and achieving our investment objectives in a manner that is accretive to stockholder value. Based on that review, we believe that MacKenzie is attempting to opportunistically acquire your shares in order to make a profit and, as a result, deprive you of the opportunity to recover past loss of value and realize longer term appreciation in value of your shares.”

“Please be aware that Summit is not in any way affiliated with MacKenzie. MacKenzie made a similar unsolicited mini-tender offer for Summit’s shares in March 2016 and again in September 2016, and MacKenzie has a history of making such unsolicited mini-tender offers for shares of other public companies. We urge you to consult your financial advisor and exercise caution with respect to this and other mini-tender offers. Mini-tender offers are designed to seek less than 5% of a company’s outstanding shares, thereby avoiding the filing, disclosure and procedural requirements adopted by the Securities and Exchange Commission (“SEC”) for the protection of investors. The SEC has cautioned investors about offers of this nature, noting that some “bidders make mini-tender offers at below-market prices, hoping that they will catch investors off guard.” Additional information about mini-tender offers is available on the SEC’s website at www.sec.gov/investor/pubs/minitend.htm.”

The letter from Summit was signed by Elizabeth Pagliarini, Chief Financial Officer of Summit.

In its Q2 2017 Nontraded REIT Industry Review, Blue Vault reported that Summit owns 10 healthcare-related properties and interest in a joint venture with a total of 764 beds. The Company was not paying cash distributions to shareholders, and none have been declared or paid since 2011.  The REIT had total assets of $88.4 million and total debt of $51.5 million as of June 30, 2017, and diluted weighted average shares outstanding for Q2 2017 of 23,027,978.



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Gil Armour, CFP
February 3, 2016

I have been using Blue Vault Partners for the past five years.  I have found them to be a valuable, unbiased resource when it comes to evaluating and comparing non-traded REITs.  The reports help me analyze which sponsors are doing a responsible job of managing their offerings.  This allows me to limit my REIT recommendations to only the most competitive products, and then track those REITs throughout their life cycle.