Pay off Construction Debt with a Sale-leaseback
Paying off the new construction debt for a surgery center is an excellent way to have the cash to grow the operations. Construction costs have outpaced inflation leading to a large increase in the amount of capital required to build a new surgery center. This can lead to debt that could hamper operational growth and lower net income.
Once construction is completed and the operations are profitable and able to support market rent, the surgery center real estate is fully valued. The value can increase only by the relatively small annual rental increases. At this point, many physicians are considering a sale-leaseback, because putting the capital into the operations will typically provide a significantly higher return.
In McKinney, Texas, the new construction ASC real estate was sold roughly one year from completion.
Original Case Study:
Surgery Center Real Estate Sold to high Bidder
ASC Realty Advisors and JH Winokur, Inc. are pleased to announce the closing of an ASC real estate sale-leaseback transaction for the Wellness Ambulatory Surgery Center (WASC) is located in McKinney, Texas. The newly constructed center is CMS certified, AAAHC accredited and credentialed for 23h stay to accommodate the majority of spinal, general surgery and vascular cases.
The state-of-the-art facility occupies 13,152 sf with 4 Operating Rooms, 1 Procedure Room and 20 pre-op/recovery beds with 5 overnight stay rooms. WASC, with 20 surgeon partners including spine, pain management, ophthalmology, general/bariatric surgery, Cath lab, vascular surgeries and podiatry, accepts Medicare and is in-network with all major commercial payers.
The center is strategically located in a growing area of McKinney, the largest city in Collin County and one of the top 10 fastest growing in economic growth in the Nation, and is 30 miles north of Dallas. Population within a 5-mile radius is 180,888 with 8% annual population growth and $120,352 average household income.
“One of the most important considerations for physician-owners of ASC real estate is the impact the sale, lease and rent rates will have on the on the total value of their assets, which in this case included interests in both the surgical facility and ancillary services,” states ASC Realty Advisors founder and Managing Partner Jon Vick. “In this instance the physician-owned real estate transaction required no changes to the existing lease and rent payments, so there was no change in the financial performance of the ASC”.
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. The Wellness Ambulatory Surgery Center real estate was sold to a private investor in a 1031 exchange.
For over 20 years the industry leading team at ASC Realty Advisors has represented the best interests of physician-owners of more than 300 surgery centers, surgical hospitals and group practices. We have enabled our clients to realize maximum value for their assets, either from a strategic perspective or for their real estate. The real estate division of ASC Realty Advisors, headed by real estate expert and broker J. H. Winokur, specializes in medical property real estate and valuations, and has managed more than $3B in transactions. By leveraging their expertise and knowledge and extensive local, regional and national buyer network they ensure clients realize the absolute best outcome when selling their real estate.
ASC & MOB physician-owners can obtain fair market value rents, current cap rates, and valuations for their medical real estate by contacting Jon Vick (jv***@*******ty.com), founder of ASCs Inc. at 760-291-7745 or Jason Winokur (jw******@*******ty.com), VP of JH Winokur, Inc..