A Sale-leaseback can be an important tool for surgery centers and surgical hospitals to clear construction debt. Major renovation and construction projects for surgery centers and surgical hospitals have seen costs explode, often leading to high debt on balance sheets and negatively impacting net income.
In 2022, the principals of ASC Realty represented the physician owners of Avala Surgical Hospital on the sale-leaseback of their medical campus. The transaction allowed the Avala system to clear debt from the expansion and renovation of their facility, provide additional capital for growth, and increase EBITDA. Since the transaction, Avala has since grown their business and expanded their healthcare service offerings both organically and through acquisitions.
2022: SOLD – AVALA HOSPITAL – COVINGTON, LOUISIANA
ASC Realty Advisors. and JH Winokur, Inc. are pleased to announce the closing of a healthcare real estate sale-leaseback transaction for Avala Surgical Hospital (“Avala”) located in Covington, Louisiana.
Avala is a premier 60,087 square-foot, 21-bed surgical hospital with 8 Operating Rooms and 3 Procedure Rooms, and offers some of the most innovative and minimally invasive surgeries in the south. Avala offers a wide range of specialties and services including a state-of-the-art imaging facility, minimally invasive spine surgery, orthopedic surgery and physical therapy, bariatric surgery and GI procedures, eye surgery, plastic surgery, and more. Avala, with three Stryker Mako Robots, offers robotics-assisted surgeries for total hip replacements, total knee replacements, partial knee replacements and spine procedures.
Prior to the sale-leaseback, Avala completed an extensive Class A renovation and expansion of the facility. This included the addition of one new operating room, two treatment rooms, MRI suite, CT suite, new lab, new anesthesia offices, physician lounge, sterile supply area, kitchen, nuclear medicine, a new roof and renovation of the lobby, hallways and suites. The facility is located one hour north of New Orleans in one of the fastest growing communities in the nation.
The real estate was sold under the terms of a single long-term absolute NNN lease. The lease allows the tenant to have future flexibility for its many business entities and separate business lines within the building. The rent was not changed as a result of the transaction.
“One of the most important considerations for physician-owners of healthcare real estate is the impact that the sale, lease and rent rates will have on the on the cash flow and total value of the organization’s assets, which in this case includes interests in the group practice, surgical facility and ancillary services,” states Jon Vick, founder of ASCs Inc. and managing partner of ASC Realty Advisors.
“The sale-leaseback allows the physician/owners to recapitalize funds from their renovation and expansion and plan the next stage of the expansion of the Avala Campus. By introducing the opportunity to a vast number of real estate buyers on a regional and national level, we enabled the physician-owners to get maximum value for the real estate,” states broker Jason Winokur, EVP of JH Winokur, Inc.
Many ASC owners are considering the sale-leaseback of their ASC real estate to provide liquidity, diversify their assets or simply to take advantage of the high premium prices medical real estate buyers are paying for quality medical buildings under long-term leases.