GLOBAL HEALTHCARE SERVICES

NEWMARK KNIGHT FRANK

EXIT STRATEGY IS OFTEN OVERLOOKED

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 www.healthtechre.com.

All information contained in this publication is derived from sources that are deemed to be reliable. However, Newmark Knight Frank has not verified any such information, and the same constitutes the statements and representations only of the source thereof, and not of Newmark Knight Frank. Any recipient of this publication should independently verify such information and all other information that may be material to any decision that recipient may make in response to this publication, and should consult with professionals of the recipient's choice with regard to all aspects of that decision, including its legal, financial, and tax aspects and implications. Any recipient of this publication may not, without the prior written approval of Newmark Knight Frank, distribute, disseminate, publish, transmit, copy, broadcast, upload, download, or in any other way reproduce this publication or any of the information it contains. This document is intended for informational purposes only and none of the content is intended to advise or otherwise recommend a specific strategy. It is not to be relied upon in any way to predict market movement, investment in securities, transactions, investment strategies or any other matter.

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