Why Now is the Time for Doctors to Cash Out of Their Buildings
by
Michael Campbell , CCIM
Once considered a subsegment of office properties , medical office buildings have come into their own over the past decade .
While the pandemic has left many owners with large vacancies to fill , medical office buildings , or MOBs , as they are often referred to , are experiencing vacancies of less than 5 percent in some markets . Strong absorption and low deliveries , combined with an increase in average rental rates , are keeping investors , particularly medical office real estate investment trusts ( REITs ), hungry for more .
Despite forecasts of a possible recession , the Federal Reserve ’ s pause of programmatic rate hikes and discussion of rate cuts as early as this summer suggest otherwise . Now could be a great time to dust off your physician client ’ s building valuation to strategize on a sale . With the average age of providers nearing 54 , a sale and leaseback transaction could be the solution they seek .
What exactly is a sale and leaseback , and who might be a good candidate ?
A sale and leaseback real estate transaction is a simultaneous real estate sale and lease , whereby an owner-occupier ( particularly a physician group or hospital system ) chooses to sell their real estate to a third party while executing a longterm lease . This structure enables their practice to continue operating uninterrupted while allowing the partnership to cash out of their real estate investment at a premium value .
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