Equity-Method Investments

12 Months Ended

Dec. 31, 2024

5. Equity-Method Investments

As of December 31, 2024 and 2023, the aggregate balances of our Equity-Method Investments were approximately $0.4 million and $2.9 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 will be distributed monthly, first to the Operating Partnership and Best Years pari passu up to a 9% to 10% annual return, as defined, 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 capital contribution, and thereafter to Best Years 75% and the Operating Partnership 25%.

For the years ended December 31, 2024 and 2023, we invested approximately $29,000 and $370,000 related to capital calls for the SUL JV.

In March 2024, the SUL JV sold one property for a gain of $7.7 million. We recorded our 10% share of the gain of approximately $0.8 million in income from equity-method investees in the consolidated statements of operations for the year ended December 31, 2024 and received approximately $1.9 million in cash related to the sale. In May 2024, the SUL JV sold one property for a gain of $1.0 million. We recorded our 10% share of the gain of approximately $0.1 million in income from equity-method investees in the consolidated statements of operations for the year ended December 31, 2024. In November 2024, the SUL JV sold four properties for a gain of approximately $11.1 million. We recorded our 10% share of the gain of approximately $1.1 million in income from equity-method investees in the consolidated statements of operations for the year ended December 31, 2024 and received approximately $1.0 million in cash related to the sale.

In December 2023, the SUL JV sold two properties for a gain of approximately $7.0 million. We recorded our 10% share of the gain of approximately $0.7 million in loss from equity-method investees in the consolidated statements of operations for the year ended December 31, 2023 and received approximately $1.1 million in cash from the sale.

In 2023, the SUL JV recorded an aggregate impairment charge of approximately $1.1 million on one of the properties in the SUL JV and our 10% share of the impairment of approximately $0.1 million is included in loss from equity-method investees in the consolidated statements of operations for the year ended December 31, 2023.

As of December 31, 2024 and 2023, the balance of our equity-method investment related to the SUL JV was approximately $0.7 million and $1.8 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 of July 2023, we no longer have any equity-method interest in the Fantasia I JV. See Note 3 under Fantasia I JV Transfer of Interest and Sale for further information.

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 JV will be 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 which was extended for six months. Through December 31, 2024, 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. In September 2023, the Fantasia II JV recorded an impairment of approximately $1.6 million on the two properties and our 20% share of the impairment of approximately $0.3 million is included in loss from equity-method investees in the consolidated statements of operations. Additionally, in September 2023, due to the ongoing issues with the receivership, we determined 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 consolidated statements of operations for the year ended December 31, 2023. Due to our intention to fund a capital call, if needed, we are recording our share of the Fantasia II JV losses.

As of December 31, 2024 and 2023, the balance of our equity-method investment related to the Fantasia II JV was approximately ($0.2) million and $(0.1) million, respectively.

Summit Fantasia Holdings III, LLC

In May 2024, the Fantasia III JV sold their eight properties for $60.0 million. We received approximately $2.1 million in cash from the sale resulting in the winding-up of our equity-method investment and recorded income from the sale of approximately $0.9 million, which is recorded in income from equity-method investees in the consolidated statements of operations. Due to the sale of the properties, as of May 2, 2024, we no longer have an equity-method investment in the Fantasia III JV.

As of December 31, 2023, the balance of our equity-method investment related to the Fantasia III JV was approximately $1.2 million.

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 will be 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.

During 2022 and into 2023, the FPH JV tenants deferred rent and paid reduced rents, and as such, we determined the fair value of our investment in the FPH JV to be impaired and recorded a $0.2 million impairment charge in 2022. When the tenant resumed paying all rents and recorded net income, we recorded the income after the losses incurred were reduced to zero beginning in January 2024, and additionally, recorded distributions, resulting in a negative equity-method investment balance as of December 31, 2024.

As of December 31, 2024 and 2023, the balance of our equity-method investment related to the FPH JV was approximately ($0.1) million and $0.

None of our Equity-Method Investments are significant equity-method investments.

Distributions from Equity-Method Investments

As of December 31, 2024 and 2023, we have distributions receivable, which is included in tenant and other receivables in our consolidated balance sheets, as follows:


	December 31,		December 31,
	2024		2023
SUL JV	$	49,000	$	311,000
Fantasia II JV		30,000		30,000
Fantasia III JV		—		87,000
FPH JV		56,000		64,000
Total	$	135,000	$	492,000

For the years ended December 31, 2024 and 2023, we received cash distributions, which are included in our cash flows from operating activities in the change in tenant and other receivables, and cash flows from investing activities, using the cumulative earnings approach, as follows:


	Year Ended December 31, 2024						Year Ended December 31, 2023
	Total Cash		Cash Flow		Cash Flow		Total Cash		Cash Flow		Cash Flow
	Distributions		from		from		Distributions		from		from
	Received		Operating		Investing		Received		Operating		Investing
SUL JV	$	3,391,000	$	2,050,000	$	1,341,000	$	1,706,000	$	760,000	$	946,000
Fantasia II JV		—		—		—		135,000		—		135,000
Fantasia III JV		2,158,000		916,000		1,242,000		12,000		—		12,000
FPH JV		128,000		—		128,000		—		—		—
Total	$	5,677,000	$	2,966,000	$	2,711,000	$	1,853,000	$	760,000	$	1,093,000

Summit Healthcare REIT, Inc 10-K