Written By: Collin Hart

As a veteran ophthalmologist, you may have built your career with the goal of owning your own practice. Along the way, you had the opportunity to buy your clinical office or even build an ambulatory surgery center, giving you control over the destiny of your practice.

There is a wealth of information surrounding practice management, but what about real estate? With an informed real estate strategy and proper structuring, you have the opportunity to maximize the value of your assets.

In Part 3 of a five-part series, Collin Hart, MBA, CEO and managing director of ERE Healthcare Real Estate Advisors, highlights the success of Gainesville Eye Associates and Eye Centers of North Florida. Both practices benefitted from preparing for a real estate sale while simultaneously kicking off a successful relationship with their private equity-backed partner, EyeSouth Partners.


As the leading comprehensive ophthalmology practices serving the Gainesville, Ga. and Panama City, Fla. areas, Gainesville Eye Associates and Eye Centers of North Florida were attractive candidates to a private equity-backed management services organization or MSO. Through discussions with their peers and multiple interviews, both practices made the determination to partner with EyeSouth. Based in Atlanta, EyeSouth has built a premier network of integrated eye care practices serving the southern United States with a focus on provider empowerment and quality patient care.

Given the large market presence of both practices, the partners had strategically built or acquired facilities in which to operate and see patients. Although the physician partners and EyeSouth desired to keep all of their locations intact, the dynamic of the partners’ real estate investment would change. Now, instead of paying rent to themselves, controlling the destiny of their investment, rent would be coming from their new partner and tenant, EyeSouth. Before that could happen, a new lease would have to be struck to reflect market terms.

Establishing a new lease is part of most private equity transactions where the physicians own their practice real estate, but your investment objectives determine the path of that discussion. If you seek to refinance or sell your property, a long-term lease is critical; that happens to align nicely with private equity-backed MSO’s, particularly EyeSouth, who often prefers to continue operating in strategic and established locations.

The Solution

With their sights set on a real estate sale, the two partnerships engaged the expertise of their counsel and advisors to structure mutually beneficial leases. The leases would enable EyeSouth to continue operating in the facilities for the long-term, but featured market terms that would enable the partners to monetize their buildings for a premium value. Such features included a rental rate in line with fair market value, long term lease, annual rental increases and NNN (“triple-net”) structure, whereby the tenant would pay the costs of real estate taxes, insurance and property maintenance. Such an arrangement is common in the commercial real estate world.

The new leases were negotiated as part of the practice transactions with EyeSouth, which were successfully consummated. Shortly after the practice transactions closed, and with professional guidance, the real estate partnerships were able to monetize their properties. In the end, informed lease structuring led to a win-win outcome for all parties.

Key Takeaways

  • Identifying a private equity-backed MSO partner with a long-term outlook and collaborative culture will help ensure a successful outcome for your practice and real estate transactions.
  • Understanding your partnership’s real estate objectives will help shape lease discussions with your private equity partner.
  • Leveraging professional guidance to structure your lease with the right parameters positions your asset as attractive to potential buyers.

Click here to read on AAOE Practice Management

About the Author

Collin Hart is the CEO and managing director of ERE Healthcare Real Estate Advisors where he leads the company’s strategy to provide executive level advisory to owners of healthcare real estate. Before co-founding ERE Advisors, Collin was a director in the real estate division of a private investment banking firm, where he focused on advising physician partnerships and hospital systems in sale-leaseback transactions. He earned his MBA from the SC Johnson School of Management at Cornell University.

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Investment demand, sale transaction volume, and valuations for healthcare real estate have reached historic highs. Even if a real estate sale doesn’t meet your current objectives, addressing potential partnership challenges early will maximize the value and security of your investment.