Monetize Your Real Estate Through a Hybrid Sale-Leaseback
HREA offers the Hybrid SLB which allows physician-owners to sell the majority of their MOB, ASC, or Surgical Hospital and retain continued physician-ownership in a tax-deferred manner.
WHAT IS A HYBRID SALE-LEASEBACK?
With a Hybrid Sale-Leaseback (“Hybrid SLB”), the ownership monetizes all or a portion of their real estate and leases it back, which allows ownership to unlock up to 100% of their passive equity to invest in their core business, modernize facilities and equipment, expand an existing facility, build a new facility, reduce debt, or make partner distributions.
THE OUTCOME
Take chips off the table in a seller’s market Maintain physician alignment between the real estate and the practice Retain control through a long-term lease with multiple renewal options Ability to reinvest proceeds tax-deferred into a larger diversified medical office portfolio.
Why Considering Selling Now?
Benefits of a Sale-Leaseback
Practice Focus: Free up time to focus more on the care aspects of medicine and less on the real estate ownership and management issues.
Improved Economics: Unlike traditional debt financing with a loan-to-value ratio of 65-75%, a sale-leaseback unlocks 100% of the value.
Practice Alignment: Creative transaction structures that allow for continued physician-ownership in the real estate, providing lower buy-in for physician recruitment.
Portfolio Reinvestment: The ability to structure a tax-deferred transaction and diversified income through an UPREIT transaction.
Improved Financial Statements: The lease can be structured as an operating lease in order to reduce any impact on the balance sheet and loan covenants.
Operational Control: Maintain long-term full operating control over the facility with the ability to modify the space as the business evolves.
Tax Benefits: Rental payments are fully deductible whereas a fully depreciated asset does not offer any tax benefits.
Reduce Conflict: Eliminate challenges of having future physicians as owners in the practice but not in the real estate.
Recent Case Study
The Objective: The original founders of a physician-owned hospital and ASC were interested in monetizing their real estate to prevent a potential imbalance between retiring physicians and incoming physicians but also wanted to maintain a level of control and alignment with the real estate.
The Solution: HREA’s Hybrid Sale-Leaseback Model allows physicians to monetize 51% - 90% of their real estate ownership in a tax-deferred manner and maintain physician-alignment, maximum control, and future ‘buy-back’ rights.
The Result:
HREA’s discreet marketing process ensured a competitive and transparent bid process generating 15 qualified purchase offers
The physicians sold 80% of their ownership generating a 16x valuation multiple
The tax-deferred reinvestment was more than 2x their original investment
Included a purchase option to ‘buy-back’ the real estate in the future Maintained continued alignment between the practice and the real estate.
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