We recently met with a doctor who owns multiple medical real estate parcels AND a successful multi-location practice. The doctor has some vacancies to fill, is contemplating an expansion at one location, would like to open an office in a particular area, and is open to sell at the right price. Oh, and this doctor is 61 years old.

Whether you caught it or not, that last sentence DRAMATICALLY impacts all of the answers.

Every decision this doctor makes needs to be considered in light of its impact on the marketability of the real estate AND the practice, as well as on the decision’s payback period. And for the non-medical business owner, the same principles apply.
Here are a few of our thoughts in the case of the doctor:

  • Unless there’s a very large and very rapid payback on a building expansion, or if NOT expanding would hurt revenues or operations, it’s not wise… particularly since healthcare reform muddies the payback period analysis.

  • If the plan is to sell the practice, then a sale-leaseback should be considered NOW. The doctor can set the term and future rent levels now to maximize property value to an investor, and then sell the practice in 5 (?) years when the long term lease may not be as scary since 5 years of it is gone. But… that rent level must not hinder the practice’s P&L statement, lest the practice’s marketability be affected.

  • Opening a new office may not be the best thing to do unless it can be carved out of the rest of the practice and become a place that this doctor settles into as a “retirement practice.”

When developing any business plan, it’s best to have exit strategy in mind from day one. When real estate ownership is part of the picture, it’s critical.

WHOEVER you rely upon for your real estate advice, please be sure that they think strategically. We see far too many situations in which an “order taker” executes on the wrong strategy with results that limit future options.

Written by GHS member John Cobb. John specializes in healthcare and technology tenant/buyer and owner representation. His personal blog is

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