CHALLENGE

A potentially litigious situation, where the Landlord was holding the tenant and health system hostage, with limited communication, rising rates, and a lack of support and services.

ACTION

The NKF Global Healthcare Services (GHS) team assessed the strategy of each space and aligned the health systems goals with the needs of the real estate strategy. Once that was developed, the team engaged the REIT to renegotiate only the spaces that were strategic, while keeping leverage on the REIT to reduce rates, improve operations, and control operating costs. Overall, the team renewed 35 medical office leases and negotiated two new leases for a total of 146,170 SF and a total lease value of $21,518,229 at five different St. Louis area Medical Office Building locations.

RESULT

Significant reduction in cost, realigned space utilization, caps on future costs of expenses, and more stringent requirements on the REIT to person. The GHS team was able to save the health system approximately $2.3 million on the restructured term with a major public healthcare REIT landlord. GHS team members said this transaction signified the importance of engaging brokerage to help mitigate emotions and relationships and ensure that the parties recognized and pursued mutual agreement on a large transaction that aligned with a market conditions. The outcome was long-term rent roll stability for the landlord and improved relationships with the health system and the health system was ensured not only savings, but a necessary capital infusion into the properties to meet the long-term goals of both parties.