We are pleased to introduce unique strategies for funding ASC de novo buildouts, expansions or renovations so that the ASC owners or their strategic partners incur little or no new debt or personal guarantees. We accomplish this through a sale-leaseback of the ASC real estate to institutional and private investors who will also fund ASC expansion and/or renovation in return for a long-term lease.
A significant benefit to you as a strategic partner would be the increase in ASC capacity paid for by a third-party investor, thus requiring no significant investment or new debt from you or your physician-partners. The third-party real estate buyer would purchase the real estate at market value and in addition to the cash received at closing by the sellers, would also fund the expansion of the facility. The physician owners would sign a new long-term net lease at a new rent and lease terms. The physician-owners would also be given the option of minority co-investment back into the real estate.
With debt costs being higher and often including onerous personal obligations and liability, utilizing a sale-leaseback for this funding compared to a traditional loan has been very beneficial for physicians. Being in a higher interest rate environment leads to higher operational costs to service the higher cost debt. However, a well-funded real estate development partner often has significantly cheaper cost of capital, which leads to lower costs.
Rising construction and renovation costs add another key consideration. Having a real estate partner with the ability to bulk purchase materials and equipment can lead to lower costs. The lower the renovation costs, the less additional rent or debt service that the operations would be required to pay. One of the main goals is to leverage the real estate to keep operational costs down and increase EBITDA.
