| As a practicing physician, does it make sense for me to sell my building and lease it back? Who are the most active buyers for medical office properties? |
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Posted by: Lynch, Kevin
Arlington Heights
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Does it make sense to sell and lease back your medical office building (MOB). Many times the answer is “yes” but it could be “no”. Much depends on the strength of the practice, financial strength of the partners, property condition and location, lease length… As to who are the most active buyers of MOBs it depends on the deal size, location, building age and condition… On small deal (less than $2.5M) you will find individuals and private investment groups chasing real deals. On MOBs with values greater than $2M you have private and public investment groups who will be interested. MOBs are in demand nationwide as they are financeable and usually have lengthy leases guaranteed by the doctors. From the physician point of view the other benefits include tax write-offs and the cash infusion due to a sale.
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| Are values determined by cap rates for medical office sale leasebacks and if so what is the % I can expect to attain? I don't want to pay exorbitant rent to achieve a higher value.(A friend of mine claims that is possible.) |
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Posted by: Lynch, Kevin
Arlington Heights
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CAP rates (Net Operating Income/Sale Price=CAP rate) are one of the calculations used in determining a sale price but it goes much farther than that for most prudent investors. You mentioned “exorbitant rent”. Investors will not close a deal if the rent is exorbitant as they will not be able to duplicate the cash flow once the current tenant vacates. It is better to determine the rent the tenant can pay and base the sale price on this rent rate (with annual escalations). Medical office building CAP rates will vary depending on the properties location, age, condition, lease length… I am working on a MOB in Chicago with a CAP rate of 7.75%. The range can be from 7% to 15%+.
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| What are some of the most productive marketing ways to lease medical office suites? |
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Posted by: Anderson, Jerry
Orlando
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Be aggressive. Hire a broker that understands and has experience with the product type. Mail postcards and/or flyers to every medical related user in your community.(CRE brokers have access to the data). And do it more that once!. Some brokers even hand deliver personal letter to doctor to avoid the receptionist tossing the mail piece.Pay a higher commission than your competitive space. Make sure every single real estate agent in town knows of your space. Give some rent or improvement concessions to get the prospects to pay attention. These are competitive times for tenants, you must be proactive, reactive will not fill your building.
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