OrthoCarolina Case Study
OrthoCarolina is one of the largest orthopedic practices in the US, with 160 orthopedic surgeons and more than 1,600 employees in 39 locations who serve more than one million patients per year. Over the years, OrthoCarolina's real estate had become so valuable that it was difficult for younger physicians to buy ownership shares in the properties. However, the group initially was uninterested in selling any of its real estate; with getting physicians in such a large practice to agree to a sale-leaseback arrangement was both challenging and complex. Instead, the group explored refinancing its medical office assets.
Coincidentally, Montecito helped resolve a difficult, contentious situation involving between the group and one of its joint venture partners in a property that Montecito owned. This interaction, noted OrthoCarolina CEO Bruce Cohen, led the group to explore working further with Montecito. The physicians were particularly interested in the opportunity to re-invest in the buildings after the sale through Montecito’s distinctive Provider Real Estate Partnership (PREP) program. By enabling younger physicians to gain an ownership stake, PREP helps balance the interests of physicians in the group.
OrthoCarolina sold 9 of its medical office properties to Montecito, leasing them back under an agreement that locked in long-term rental rate certainty. The group’s physicians re-invested 15% of the sale proceeds back into their buildings, enjoying monthly income and tax advantages. When Montecito eventually resold the buildings, it worked with the new buyer to ensure that physicians could maintain their 15% ownership stake. Meanwhile, the group gained new capital from the sale that enabled it to expand its real estate portfolio.
I highly recommend Montecito Medical without any reservations for any physician group that is exploring selling their real estate assets.- Bruce Cohen, M.D., Chief Executive Officer