The Colliers team in Birmingham, AL combined healthcare real estate expertise, local market knowledge and personalized strategy to guide GI Associates & Endoscopy Center through a win-win sale-leaseback
There is nothing more mission critical for a healthcare provider than its flagship facility. So, when an investor makes an unsolicited offer to buy that facility, it suddenly becomes imperative to objectively assess the opportunity.
Considering taking advantage of ideal market conditions when time is of the essence, what criteria can a healthcare provider use to select the best real estate partner to help it to accurately explore its options?
Trust, for sure. Excellent customer service, undoubtedly. But even more important is having a real estate partner who understands your goals and has the capability to help you achieve them.
Such was the case with one of the largest recent healthcare real estate transactions in the Southeast: a $42.9 million sale-leaseback transaction of the GI Associates & Endoscopy medical office portfolio in Jackson and Vicksburg, MS. The transaction, which closed in June 2018, included the highly respected specialty medical group’s headquarters, a 84,051- square-foot, single-tenant facility and endoscopy center in Jackson, and a 7,475-square-foot standalone building in Vicksburg.
Josh Randolph, Vice President, Investments in Colliers’ Birmingham, AL office not only represented GI Associates as the seller in the sizable transaction. As it turns out, Colliers Alabama also had previous experience with the undisclosed buyer.
An Opportune Time to Sell
In today’s marketplace, healthcare real estate is in such high demand from investors that building owners often receive unsolicited offers to sell their properties. That was what happened with GI Associates, Mr. Randolph says.
“Our client was approached with a sale-leaseback offer in early 2016,” he recounts.
“At first, they didn’t want to entertain the idea,” he says. GI Associates had just settled in to its newly-built headquarters, realizing its objective of expanding and consolidating its two Jackson offices to one centralized location with all its services under one roof — and the practice’s leadership had little inclination to sell its real estate.
However, the Colliers team spent a lot of time educating the ownership group about ideal market conditions and the advantages of a sale-leaseback transaction emphasizing the tax advantages, reinvestment of proceeds and relieving the physician group of any personal guarantees.
The team also communicated their ability to obtain a substantially higher price than the prior offer by openly marketing the property to thousands of investors who would be competing for the attractive assets.
The Colliers team knew that with a carefully crafted sale-leaseback transaction, GI Associates could make a sizable profit on the real estate while continuing to enjoy the full use and branding power of the facilities, as well as having the flexibility to move should their building become obsolete after the lease term in a time of constantly advancing technologies and building efficiencies.
A Large Number of Offers
There were several competing brokers vying for the assignment, but Mr. Randolph believes that several factors played a role in Colliers being awarded the assignment. Colliers’ experience in sale-leaseback transactions was a big advantage, as well as the local market expertise which was critical in obtaining maximum value by educating potential buyers about the market and the tenant. Mr. Randolph also emphasized that being persistent and developing personal relationships over time to gain trust was instrumental in winning out over its competitors.
Mr. Randolph also assembled a team for the presentation to include not only all his team members, but also the national director of Healthcare Services, Mary Beth Kuzmanovich. Mr. Randolph felt that it was not only important to show the significance of the assignment by bringing Ms. Kuzmanovich in, but it also allowed her to speak more from a high-level macro perspective of the market.
Making the potential sale even more enticing for would-be buyers — and potentially profitable for GI Associates — was the brand new state-of-the-art headquarters building, as well as the opportunity to secure a long-term, single-tenant lease for both facilities with the largest, busiest and most successful gastrointestinal group in the state and one of the largest in the country.
The decision paid off. Thanks to Colliers’ efforts, GI Associates received approximately 15 offers for the portfolio.
“We had a large number of offers, with the groups really competing against each other in a blind bidding process,” Mr. Randolph says. “That’s always a differentiator.”
In the end, the client was able to sell the portfolio for almost three times what it cost to build.
Todd Warren, CEO of GI Associates says the practice clearly made the right choice.
“At first, we weren’t sure we wanted to take this step,” Warren says. “But Colliers helped us to understand the benefits and orchestrated what was a very efficient, successful process.
“They took the time to listen to us, guide us, set our transaction up in such a way that it was very attractive and caught the attention of a wide variety of buyers. Every step of the way, we felt as though we were in control, and in very capable hands.
“It’s one of the best decisions we’ve ever made in our 40-year history, and Colliers was a big part of it.”
Colliers’ Competitive Edge
What made Colliers stand out in this win-win transaction? According to Mr. Randolph, Colliers had a competitive edge due to several factors. Not only was there an advantage due to the firm’s experience with sale-leaseback transactions, but its wealth of local market knowledge definitely came into play.
“Colliers has a great resume selling assets like this,” Mr. Randolph says. “Not a lot of groups do this kind of work, especially in markets like this. Our local market expertise was a big asset.”
He continues, “Our team worked very hard from day one.” Mr. Randolph was joined by Colliers Alabama associates Alison Waddell and Tommy Hiltz.
“We set expectations for the group we competed against and exceeded even our own expectations. In this case, local market knowledge is so critical. You need to really dial into that location and tell a story about that tenant. If someone is not familiar with the market, it’s hard for them to do.”
In the end, the portfolio buyer was also someone with whom Colliers had an extensive and trusting working relationship.
“It was very interesting that Colliers not only had an outstanding relationship with the seller; we also had a strong trust factor with the buyer,” Mr. Randolph reveals. “It was our fourth or fifth transaction with them.”
That trust made all the difference in this significant transaction.