Filing Alert: Squirrel Hill Wellness & Rehabilitation Center Chapter 11

Squirrel Hill PA Realty, LLC and its debtor affiliate⁽¹⁾, owner of Squirrel Hill Wellness & Rehabilitation Center, a 178-bed skilled nursing facility in Pittsburgh, PA, filed for Chapter 11 protection on Aug. 21 in the U.S. Bankruptcy Court for the Western District of Pennsylvania.

The Debtors attribute the filing to a prolonged liquidity deterioration driven by increased operating costs following the COVID-19 pandemic, persistent below-average occupancy, and generally stagnant payments from the Commonwealth of Pennsylvania, with the fixed cost base of the 178-bed skilled nursing facility outpacing the Debtors' ability to grow revenue. The Facility, which participates in Medicare and Medicaid, has struggled to attract and retain residents since March 2020, and the Debtors have been unable to fund the capital improvements they say are necessary to lift occupancy. Through the first three quarters of 2025, the Debtors generated net revenue of approximately $6.7 million, operating losses of approximately $1.7 million, and negative EBITDARM of $1.1 million.

The Debtors enter Chapter 11 with approximately $32.3 million in aggregate principal outstanding under the prepetition secured facility, secured by a first-priority mortgage on the Facility and a lien on substantially all of the Debtors' property, including gross revenues. The obligation originated as a $19 million loan extended by Greystone Servicing Corporation to Debtor Squirrel Hill PA Realty and affiliate Squirrel Hill PA Management in August 2018; following a 2020 manager change to Debtor SH Operator, a January 2021 assumption by an investor group, and successive omnibus amendments, the final extended maturity date was Feb. 1, 2024. Prior Secured Lender 2025 Wightman St, LLC filed a mortgage foreclosure complaint and receiver petition in the Court of Common Pleas of Allegheny County (Case No. GD-24-014518), alleging at least ten Events of Default, including failure to pay the loan at maturity, maintain debt service coverage ratios, maintain minimum occupancy, and pay Pennsylvania nursing facility assessments. Michael F. Flanagan of Flanagan & Associates was appointed Receiver in December 2024 pursuant to an agreed order, and Squirrel Hill PA Property LLC purchased the Loan Documents from the Prior Secured Lender on March 31, 2026.

Regulatory liabilities are a material component of the capital structure. The Pennsylvania Department of Human Services, Office of Long Term Living notified the Facility's administrator on June 7, 2024 that, as of May 16, 2024, approximately $4.63 million in nursing facility assessments were more than 60 days past due; the Debtors currently estimate DHS calculations reflect approximately $6.98 million in assessments. The Debtors are also subject to a CMS fine, as well as a Pennsylvania Department of Health civil penalty arising from deficiencies identified in a February 2024 survey, with the declaration identifying potential recoupment, offset, interest, penalties, or other regulatory consequences. The Facility was significantly in arrears to unsecured creditors that supplied goods and services as of the Receiver's appointment, though the Receiver and 5151 Financial, Inc. subsequently re-established vendor relationships. During the receivership, which the declaration describes as running approximately 19 months, the Secured Lender advanced more than $2.1 million to stabilize operations, with the Receiver directing those funds toward CMS and DOH obligations and high-priority patient and resident care items; 5151 has managed day-to-day operations since May 2026, and the Debtors appointed William R. Frederick of Meridian Management Partners as CRO on Aug. 17, 2026, with the Receiver's consent.

The filing aims to implement a court-supervised sale of substantially all of the Debtors' assets under section 363 of the Bankruptcy Code, with the Debtors intending to propose and confirm a chapter 11 plan of reorganization providing for a going-concern sale of the Facility. The Debtors note that potential purchasers are underwriting the Facility as a going concern and would either decline to close or seek a substantial purchase price reduction if operations cease. Operating on narrow margins, the Debtors have secured the Secured Lender's consent to the use of cash collateral subject to a budget, and seek interim and final orders authorizing such use and granting adequate protection for a period of not less than 90 days from the Petition Date. The Secured Lender may advance additional funds in its sole discretion, in exchange for a superpriority claim under section 507(b) in the amount of any postpetition advances.

Squirrel Hill PA Realty, LLC reports $10 million to $50 million in both assets and liabilities. The filing indicates that there will be funds available for distribution to unsecured creditors. The case number is 26-22337.

⁽¹⁾ SH Operator, LLC.

Key Parties

Counsel:

• Michael A. Shiner
  Tucker Arensberg, P.C.
  Email: mshiner@tuckerlaw.com

Signatories:

• William R. Frederick – CRO

Bondoro Insights is continuing to monitor this case and will provide further coverage as appropriate.

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