How a Sale-Leaseback of ASC Real Estate Can Eliminate Debt and Increase Cash Flow
Ambulatory Surgery Centers (ASCs) are valuable healthcare assets, often delivering high-quality, efficient surgical care in a cost-effective setting. Yet, many physician-owned ASCs carry debt from startup costs, expansions, or equipment purchases. One underutilized financial tool to strengthen their balance sheet and enhance financial performance is a sale-leaseback of their real estate.
What Is a Sale-Leaseback?
In a sale-leaseback transaction, an ASC sells its real estate to a third-party investor or real estate investment trust (REIT) and simultaneously signs a long-term lease to remain in the facility. The ASC continues to operate as usual but now pays rent instead of owning the property.
This arrangement can unlock immediate capital while preserving control of the surgical operations.
Key Financial Benefits
1. Debt Elimination and Liquidity Generation
For ASCs with real estate equity, a sale-leaseback provides an opportunity to convert an illiquid asset into cash—often without disrupting operations. Proceeds from the sale can be used to:
Pay off existing debt
Buy out partners
Fund expansion
Build cash reserves
If the ASC has significant debt on its balance sheet, using sale proceeds to eliminate that debt immediately reduces interest expense and improves overall financial health.
2. A sale-leaseback can increase ASC cash flow
Typically, rent on a 12 or 15-year long-term lease will be less than the mortgage payments on a shorter-term loan at the currently high interest rates. Thus, in addition to having no long-term debt that has to be paid by the facility, the facility cash flow will increase.
Example: Suppose an ASC currently has $500,000 in annual debt service. By selling the property and leasing it back at a $350,000 annual rent, the ASC eliminates the debt service expense and cash flow increases by $150,000.
In addition, long-term debt burdens the facility with potentially onerous bank compliance requirements and with a debt obligation that will reduce the value of the ASC business in a strategic transaction.
Strategic Implications
More Attractive to Private Equity
Higher cash flow and a stronger balance sheet with less debt can increase an ASC’s valuation—especially when preparing for a private equity sale. Because EBITDA is often multiplied in valuation models (e.g., 6–10× EBITDA), and then debt is subtracted, eliminating debt can significantly boost enterprise value.
Reduced Risk and Simplified Ownership
Physician-owners often prefer to focus on clinical and operational excellence—not property management. Sale-leasebacks can simplify ownership structures while leaving the ASC business owners in control of the property with a NNN lease.
What to Consider: While the benefits are compelling, sale-leasebacks are long-term financial commitments. Key considerations include:
Lease Terms: Rent escalations, renewal options, and lease length should be negotiated carefully.
Valuation: Both the sale price of the property and the rent should reflect fair market value.
Tax Implications: Physicians may face capital gains taxes on the sale; however, these may be offset or deferred through tax strategies like a 1031 exchange.
Conclusion: A sale-leaseback can be a strategic financial move for ASC owners seeking to eliminate debt, increase cash flow, and position the center for growth or a future sale. By unlocking the value of their real estate without disrupting operations, physician-owners can strengthen their center’s financial profile and maximize long-term returns.
If you’re considering a sale-leaseback, it’s essential to engage experienced advisors to evaluate offers, negotiate favorable lease terms, and align the transaction with your strategic goals.
When pursuing a sale-leaseback for Ambulatory Surgery Center (ASC) real estate, it’s critical to work with advisors who understand both healthcare operations and healthcare real estate.
Firms representing ASC owners in negotiating and structuring sale-leaseback transactions:
1. ASC Realty Advisors
National firm specializing in representing physician groups and surgery centers in sale-leasebacks.
Deep understanding of healthcare lease structures, fair market rent, and buyer relationships.
Provides valuation and transaction support for healthcare real estate, often working with healthcare REITs, family trusts, private investors, and other buyers of medical real estate.
Good fit for ASCs aligned or potentially aligned with PE or health systems.
2. JH Winokur
Strong national reach and extensive REIT relationships.
Offers sale-leaseback advisory services, valuation, and capital sourcing.
Ideal for larger or multi-site ASC groups.
Represent physician groups and medical building owners in sale-leaseback transactions.
Known for creative structuring and strong REIT relationships.
Final Tip: Choose an advisor who:
Understands the nuances of ASC reimbursement and operations.
Has relationships with healthcare-specific buyers and REITs.
Can help ensure lease terms don’t impair your EBITDA or future business sale valuation.