IMN Interview with Elizabeth Pagliarini CFO & COO Summit Healthcare REIT

Elizabeth Pagliarini currently serves as the Chief Financial Officer & Chief Operating Officer at Summit Healthcare REIT, Inc., a publicly registered non-traded REIT focused on investing in senior housing and skilled nursing real estate located throughout the United States. Ms. Pagliarini successfully broke the “glass ceiling” in her mid-twenties as chief executive officer and chairwoman of the board of an investment brokerage subsidiary of a public company in Beverly Hills, California. She also co-founded a boutique investment bank and registered broker-dealer. Ms. Pagliarini sits on the Mission Viejo, California City Council Investment Advisory Commission and proudly serves on the Emeritus Board of Directors for Forever Footprints, a non-profit organization that provides support to families that have suffered the loss of a baby during pregnancy or infancy and educates the medical community to improve quality of care and response.

This year, Ms. Pagliarini was awarded the Lifetime Achievement Award at the 2020 Orange County Business Journal’s CFO of the Year Awards.

IMN: How are you looking at the senior housing and skilled nursing markets now? What risks and opportunities have emerged? How are they impacting the way you are participating in the market?

Elizabeth Pagliarini: Summit Healthcare REIT focuses on both senior housing (assisted living and memory care) and skilled nursing, but we find ourselves acquiring significantly more skilled nursing. The cap rates on senior housing haven’t made sense for us over the past couple years, and we feel there has been overdevelopment in certain geographic regions. We are still in acquisition mode, but of course COVID-19-related issues have created a challenging M&A environment. We are bullish on skilled nursing in the long-term, but deal-making has slowed, and due diligence has become a challenge.

IMN: What adjustments are you making to investment strategies in the interest of capital preservation?

Elizabeth Pagliarini: Fortunately, COVID-19 has had very little impact on our specific portfolio and cash flow, so we have not had to implement any kind of alternative strategies at this point.

IMN: How are remote working and social distancing affecting finance and operations within your organization?

Elizabeth Pagliarini: Thanks to our great IT team and existing business continuity plan, we have implemented remote working for 100% of our employees and it has been relatively seamless. We, like others, have been pleasantly surprised at how effectively and efficiently our employees have transitioned to working remotely. I think this conversation will continue, and I can definitely see a future where we have some work performed remotely on a permanent basis.

The greatest impact on our business is not being able to travel and tour facilities for asset management and due diligence purposes, as well as the dearth of attractive deals.

IMN: What is your outlook for real estate valuations this and next year?

Elizabeth Pagliarini: I really think that depends on the speed of recovery from this pandemic, and how short of a memory we have. I do think we may see reduced valuations for some facilities in certain markets, but to what degree, I just don’t know. Many companies are talking about reducing their office space footprint based on the success of their remote workforce during these times. Will they follow through with that? Many people are doing most or all of their shopping online now – even grocery shopping. Will that continue? If the coronavirus re-peaks this winter, will our unemployment rate stay elevated? Will we see a continual pattern of rent defaults or necessary home sales? There are just too many unknowns to make an educated guess.

IMN: In light of the ongoing global pandemic, what are the most significant risks on the horizon for REITs, and what protections need to be in place?

Elizabeth Pagliarini: This certainly varies based on the REIT’s underlying asset class. As far as Summit, as I am sure you have read, many senior housing and skilled nursing facilities have been severely impacted by this pandemic. These homes are filled with our most vulnerable population, and the results have been tragic in many cases. So, not only are operators dealing with the loss of their beloved residents and in some cases devoted employees, they have had to endure decreased revenue, increased expenses, PPE shortages, unfair press, and much more. Thankfully, both the federal and several state governments have provided monetary relief and have also implemented important protocols to protect both residents and employees. But the risks cannot be completely mitigated until we have a vaccine or effective treatment. I honestly don’t think anyone knows the timing for this – the experts don’t even agree!