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Lease, Build, Buy, Sell: Finding the Best Fit, continued from page 9 they receive a return on their investment.” Conk added many of the same dynamics and principles also apply to hospitals and health systems. “Hospitals in the U.S. collectively own more than $1 trillion in real estate,” he pointed out. “The economic power of those assets is greatly underutilized. Selling office properties that they own enables them to redirect capital for new technologies, improvements in care delivery and even new outpatient facilities such as ambulatory surgery centers.” When deciding what direction to take when it comes to owning, selling and leasing, Conk said it was important to start with an accurate picture of what the real estate is worth and then look at the strategy for addressing important needs … whether that is paying down debt or expanding technology or services. He noted the model used by Montecito helps address the individual needs and interests of physicians, allowing younger providers who might not be able to afford an ownership stake or those simply not interested in the investment to continue practicing without being required to put up personal funds. “Reinvesting in the property is a decision for individual physicians in the group.” Campbell said when purchasing or divesting real estate as a group, it’s critically important to have addressed buy/ sell provisions on the front end. What happens to a physician partner’s shares of the facility when he or she retires or dies?

There is no one-size-fits-all solution when it comes to owning a facility. Firms specializing in healthcare real estate can help with the lease, buy, build or sell decision.

Do they pass to a spouse or children? If so, do those non-physician owners have input on facility decisions? “It gets really convoluted so you have to be really careful with your operational policies, as well,” he said of thinking about the longterm investment.

Reaching Out to a Specialist Campbell and Conk said partnering with a healthcare real estate specialist is important when considering facility needs. Campbell laughingly noted he recently had to re-read a particular lease amendment “about 17 times” to fully

understand what was being required. “There’s no way a client could understand it,” he said. Campbell added, “Never hesitate to make a call and ask for help.” Because the process is complex and often takes time, he encouraged physicians to reach out well before a lease is up to begin considering other options. “If it’s too early, folks will tell you,” Campbell said. More often, he added, physicians wait too long to reach out, which crunches the timeline on an important decision. “Physicians oftentimes have needs that don’t necessarily require a real estate transaction,” said Campbell, noting it’s one of

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14 • JUNE 2019

JAMES M. KRELL, MD

Birmingham Medical News

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the reasons Veritas offers advisory services. Campbell said a general commercial real estate broker without medical real estate experience is always happy to help close a transaction, which is their job. However, he continued, “The broker is not trained, nor is he motivated, to step back and ask if this is right for your practice.” Campbell added it’s important to find someone who understands the intricacies of medical practices and the total cost of occupancy. Sometimes, he pointed out, “You need someone willing to say, ‘You don’t need to do this deal.’” Conk noted the same principles apply to physicians considering selling the properties they own. “For some physician groups, it might make more sense to refinance their property rather than sell,” he noted. “But we can help them get a clearer picture of their options so they can come to the decision they think is best for them.” He added that practices mulling over the possibility of a sale should consider timing and the state of today’s market. “Right now, values for medical office real estate are at historic highs, and interest rates remain low … it won’t always be that way,” Conk pointed out. Buy, sell, build or lease – the decision always stays with the practice but having all the facts enables providers to make an informed decision that is best for individual physicians, the practice and patients. “Go in with eyes wide open,” Campbell concluded.

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Profile for Medical News

June 2019 BMN  

Birmingham Medical News June 2019

June 2019 BMN  

Birmingham Medical News June 2019