Real Estate Negotiations are Key to a Successful Practice Sale and Transition
Don’t overlook your real estate when selling your practice. The location, look and feel of your office is a vital part of your practices success. Especially if you are attempting to sell it now or in the future. You may be in an office building and a lot of new young dentists want a storefront location. You may want to lease the condo you own but the new young buyer may want to buy your space for the same reason you did years ago. The lease or the ownership position you maintain can greatly affect the viability and value of your medical office space. Banks require long term leases to finance transitions and buyers want to have a “market” lease. If the buyer buys the building he is only going to pay market value.
Medical and Dental Practice Owners
As a practice owner, if you own the real estate, will you have capital gains implications if you sell the building? If you assign the lease agreement are you still legally on the hook in the event of a default? Some practice brokers will claim they can help with the leasing or sale of the real estate in addition to the sale of the business. Be careful here! Practice brokers are not licensed real estate brokers and should not be engaged in the real estate business legally. Moreover, they do not have the requisite experience or knowledge to handle your real estate situation. Nor do they have understand the local areas in terms of the data necessary to make a firm decision like market pricing, age range, population density, foot traffic, up and coming areas, etc. I have seen practice brokers try to juggle values of real estate and offices to “make the deal”. The problem is that the business and real estate are valued different by the bank. The practice is based on gross revenues or EBITA but the real estate is valued on comps and CAP rates. That means “mixing” the two is often a recipe for disaster at the goal line of the deal. We recommend a transition expert to sell the business and a real estate expert to sell or lease the real estate.
These are just a few questions you need to be aware of when getting ready to sell your practice.
For a complimentary assessment of your individual situation call Charles Feitel at 301.365.6940 or email me at firstname.lastname@example.org