Sell & Leaseback Your ASC/MOB Real Estate
SURGERY CENTERS • SURGICAL HOSPITALS • ENDOSCOPY CENTERS • EYE CENTERS • SPECIALTY CENTERS • MEDICAL OFFICE BUILDINGS
Having worked with hundreds of surgery centers, endoscopy centers, surgical hospital, group practices and their physician-owners over 20 years we have met many physicians who own their ASC/Medical Office Building (MOB) real estate or Surgical Hospital real estate and who, at some point in their careers, have an interest in selling the real estate to free up cash and realize the often very substantial increase in value. The current low interest rate environment, which maximizes surgery center real estate value, is the right time to think seriously about selling. Healthcare real estate values area at historic heights with 14X to 17X valuation multiples.
Our real estate division has the unique ability to accurately gauge your facility’s value, inspect your property and design an exceptional marketing package. We then market this to a network of buyers who are focused on acquiring ASC/MOB real estate nationwide to get our clients the best possible price in a timely and professional manner. Most ASC properties that we market receive cash offers from qualified buyers within 30 days.
Maximize the Value of your Surgery Center or MOB
The market for selling medical real estate is currently excellent, and there are multiple buyers interested in bidding on good quality properties. The potential buyers include healthcare Real Estate lnvestment Trusts (REITs), private investors, private equity firms, and real estate investment companies.
What makes a “good quality property” from a buyer’s perspective? Most buyers want to invest in properties of a certain scale, usually the larger the better. In most cases, properties of 10,000 square feet or more will elicit the most interest and will attract buyers with the most capital to invest. Location, of course, is important with properties in affluent, highly populated areas being the most attractive, although we have seen fully leased properties in small towns attract excellent offers. Fully leased properties, with tenants that have profitable businesses and a good balance sheet, are most attractive to buyers. Many buyers will not require personal guarantees of the lease if the businesses are strong. Most important is to price the property at fair market value based on rent that will generate a return for the buyer that makes the real estate an attractive investment. Today, most real estate investors want to buy at a price that returns 7% to 8% (cap rate) on their investment.
If you have been thinking about selling your ambulatory surgery center real estate or medical office building, this is an opportune time to seek purchase proposals. We recommend obtaining bids from at least three potential buyers so that you have negotiating power, and that you work through a broker who specializes in medical properties and will discount the brokerage fee.
3 Keys to Increasing the Value of Your Real Estate
Establish your rent at the highest possible fair market value rate
The value of medical real estate is determined by the rental income, so the higher the rent the more valuable your property. However, rent must be fair market value, so set a rent that is comparable to similar medical properties in the market.
Leases should be triple-net
Tenant is responsible for net real estate taxes, net common area maintenance, and net building insurance- i.e. “triple-net”. Leases should be for 10- or 12-year terms with two or more 5-year options to renew; leases should include 2% to 3% or CPI “bumps” each year.
Timing
If you need to rewrite your lease to include these terms, do so before you partner with a new partner. While it is very beneficial to have a deep-pocketed corporate or hospital partner as a guarantor of the lease, it is very difficult to get your corporate partner to agree to a higher lease rate and other terms that will increase the value of your property after the partnership has been formed.
