Why You Should Not Accept a Direct Offer for Your Medical Real Estate
LATEST NEWS
RECENT CASE STUDY
THE SCENARIO:
The physician partners of a multi-specialty practice were directly approached by a private equity group with an unsolicited offer of $34.5M for their medical portfolio.
THE SOLUTION:
CREG was instructed by the physician practice to weigh in on the offer. Although the offer was respectable, we advised them to run a discreet marketing campaign to maximize the value. Through a competitive bid process, 10 offers were received from a mixture of private equity groups and REITs with varying prices and terms to consider.
THE RESULT:
The portfolio ended up selling for $3.5M more than the unsolicited direct offer from the private equity group. In addition, CREG also significantly improved the terms, including reducing the rental increases from 3% to 2% annually, which provided rent savings over the term of the lease of $1.5M. Combined savings were north of $5.0M.
REASONS NOT TO ACCEPT A DIRECT OFFER
LIMITED EXPOSURE TO POTENTIAL BUYERS
When you accept a direct offer, you limit your exposure to potential buyers. There are multiple healthcare investment groups throughout the country that all have a different investment criteria and objectives. Without the help of an advisor, your property will only be seen by the buyer who made the direct offer. This means that you may be missing out on other potential buyers who may be willing to pay more for your property, provide better lease terms, and deliver a better overall outcome for the physician partners.
A trusted healthcare real estate advisor can help you market your property to a wider audience and attract more buyers who may align better with the practice’s goals and objectives. An advisor can leverage those buyers against one another which can result in a much more advantageous deal on multiple fronts for the Seller.
BUYERS ARE REPRESENTING THEMSELVES, NOT YOU
When a buyer is aware of a Seller not being represented, they have an upper hand and will look to negotiate the best possible price and terms for themselves and their investors. Their job is to make a positive return on their investment and make their investors happy, who they have a fiduciary responsibility to, not you. As such, there are many items in a purchase contract and lease that a buyer can and will sneak by a seller who is not represented by an advisor. Therefore, it’s critical to have someone on your team to negotiate on your behalf, leveling the playing field.
LIMITED NEGOTIATION POWER
When you accept a direct offer, you also limit your negotiation power. Without an experienced healthcare real estate advisor, you may not be aware of the true value of your property or what other buyers may be willing to pay. This can result in you accepting an offer that is lower than what your property is worth and leaving money on the table. Having a buyer know there is outside competition will at the very least keep them honest, resulting in an overall better outcome.
An advisor will negotiate with potential buyers and ensure that you receive the best possible offer. They can provide you with an objective assessment of your property's value and help you determine a market clearing asking price. They can also help you navigate any counteroffers and ensure that your interests are protected throughout the negotiation process.
LIMITED LEGAL PROTECTION
When you accept a direct offer, you may also be limiting your legal protection. Real estate transactions can be complex and involve various legal requirements and disclosures. Without the assistance of a real estate advisor, you may not be aware of all the legal requirements and may inadvertently overlook something important.
A real estate advisor can help you navigate the legal aspects of selling your property and ensure that all the necessary paperwork and disclosures are completed correctly. This can help protect your practice from any legal issues that may arise after the sale.
CONCLUSION
In conclusion, accepting a direct offer when selling your medical real estate may seem like an easy solution, but it can ultimately result in a lower sale price, limited exposure to potential buyers, unfavorable lease terms, limited negotiation power, and limited legal protection. Working with a healthcare real estate advisor can help you navigate the sales process and ensure that you receive the best possible outcome.
Your Trusted Healthcare Real Estate Partner
CREG | U.S. HEALTHCARE INVESTMENT SALES
Andrew R. Larwood
Managing Partner & Principal
m: +1 (770) 845-2091
andrew.larwood@capitalre.com
Allen C. Inman
Managing Partner & Principal
m: +1 (404) 550-7897
allen.inman@capitalre.com
Joshua D. H. Rees
Managing Partner & Principal
m: +1 (858) 312-0657
josh.rees@capitalre.com
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