5 Key Considerations when addressing succession planning
One of the common topics we hear from our clients are the challenges of succession planning involving the real estate – specifically the high buy-in, which often requires refinancing the property (assuming there is equity available) or suppressing the value of the equity buy-in and buy-out, requiring new physicians to buy into the real estate in order to create liquidity for retiring physicians.
In most cases, the buy-in and the buy-out is significantly less than selling all or a portion of the real estate ownership where we are currently achieving valuations that range from 16x – 20x EBITDA
Planning your exit strategy can seem daunting, no matter how much time you allow yourself to prepare. That’s why partnering with HREA | Healthcare Real Estate Advisors is a critical component in ensuring a smooth transition when considering the sale or partial sale of your medical real estate.
A well-planned succession plan helps maximize the value of your real estate and translates your goals into actionable steps.
HREA will partner you with a buyer that has the same long-term operational goals as you, while maximizing the proceeds of the real estate and provide you with the ability to modify or make improvements to the building and site in the future.
The sale of the Property can be structured to allow existing and future physicians to invest in the real estate – known as the tax-deferred Hybrid Sale-Leaseback®, which generates an annual dividend of over 9% for the physicians. In addition, this type of transaction reduces the buy-in amount for incoming physicians and maximizes the buy-out for existing physicians.
Over time, the ownership between the Operating Company and the Property Holding Company can diverge creating a conflict of interest. Planning before a transition is on the horizon is beneficial as you can extract the highest value and best terms for your medical real estate while ensuring long-term control and stability for the practice and the real estate.
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