Reasons Why Now May Be the Best Time to Sell Medical Real Estate in the Next Ten Years
If you are thinking you may want to sell your medical building, now may be the best time in the next ten years because:
• The interest in healthcare properties by investors is at an all-time high. (The medical office sector has seen strong demand due to demographic drivers that have heightened consumer demand for healthcare.)
• Investors and lenders have become focused on healthcare properties because they see them as investments with more stable and creditable tenants than many office or retail properties. The medical office sector features high tenant retention rates as tenants invest significant capital in their spaces and prefer to remain in the same location that is convenient for their patient base.
• With cap rates at historic lows (high prices), sellers are seeing aggressive offer prices for quality medical properties.
• Inventory of healthcare property is low and competition for it is high.
• A property is in the best position to sell when it has (1) a good location with a good story, (2) a high occupancy with a mix of strong credit health care tenants, (3) tenants’ leases have a longer amount of term left on them (more than five years is preferable), and (4) the property is newer rather than older, or has been renovated in the last few years.
• As a property ages, or leases’ terms start to shorten, higher caps rates will apply to the value of the property, meaning lower offer prices.
• Sometimes in partnerships, some partners want to sell and others want to keep their ownership. With that in mind, another option is to recapitalize the real estate. We can look at difference percentages of ownership so that you continue to be an owner, while also receiving cash for selling a portion of the ownership.
• Some reasons many owners of healthcare real estate decide to monetize the property are so cash can be put back into the operation of the business, hiring personnel, updating equipment, renovating areas, or even investing in other opportunities. Sometimes it’s simply to change the ownership percentages of the partners.
Beth Young is an award-winning commercial real estate advisor specializing in healthcare and investment properties. Additional consulting services include leasing and tenant representation. Recipient of the Certificate of Congressional Recognition; Colliers International-Houston’s Titan Award and Top Producers Award; Outstanding Woman of Achievement in Real Estate by Houston YWCA ; Role Model Award, President’s Key Supporter, and Volunteer of the Year Award by the Greater Houston Women’s Chamber of Commerce.
Trustee, Assistant Secretary and Chairman of the Small Grants Committee for the Harris County Hospital District Foundation; Director of the Greater Houston Women’s Chamber of Commerce, and Chairwoman of the Women’s Health Network. Former President of the Houston/Gulf Coast Chapter of CCIM (Certified Commercial Investment Members), Winner of the (CCIM) Presidents’ Cup Award, former Regional VP of CCIM over Texas, Louisiana, and Oklahoma. Named “Heavy Hitter” in Commercial Real Estate by the Houston Business Journal.Beth H. Young, CCIM, LEED AP