Picture this: A multi-tenant medical office building has been the home of several medical practices for decades. The owner of the building happens to also be the owner of one of the practices operating in the building, and they are ready to sell the building to provide liquidity for their practice. Here are three reasons to sell to an experienced health care real estate firm.
- Your patients are the lifeblood of your practice and their customer experience is paramount. This experience starts with pulling into the parking lot. The parking lot needs to be managed on a daily basis to make sure there are enough parking spaces directly in front of your practice or entrance to the building. The property manager must be the bad guy and enforce strict parking rules such as designating employee and service vendors to park in the back of the parking lot. Also, trash on the ground in any form can leave patients with a bad experience. The common areas need to be clean, and nicely maintained. Additionally, snow and ice must be cleared at all times.
- Reimbursable expenses must be kept in check! If the leases are structured as triple net, closely monitoring operating costs which get passed through to the tenants is a very important part of keeping the costs down for the practicing tenants. There are some items out of the landlord’s control, such as property taxes. While property taxes can be reduced through protest, the government has the last say in what will be charged and you cannot shop that item. All other items pertaining to the maintenance and upkeep of the building, including insurance, should be shopped around on an annual basis. A health care real estate firm will work very hard to keep these costs in check.
- Health care real estate firms understand your business. They understand the sensitivity of your patients with HIPAA compliance and privacy to the cleanliness of the building. The right landlord will search for tenants that are synergistic to your practice. They are involved in the health care real estate market and often have the first opportunities to find the best tenants to fill vacancies. They understand that your success equals their success.
In July of 2017, Physicians Realty Trust, a publicly traded health care REIT (PRT) announced the purchase of $735 million of health care properties from Catholic Health Initiatives, an Englewood, Colorado based health care provider in 10 states. It turns out PRT wasn’t the highest bidder among the other buyers. Catholic Health Initiatives chose PRT because they were specialized in the health care space and the right fit for their company.
While it might be tempting to take the highest bid from any buyer who is trying to 1031 out of a five Taco Bell portfolio to get into health care because they heard it’s a good investment, your practice and the practices around you may end up suffering instead of thriving.