State of Franklin Healthcare Associates (“SOFHA”) is the leading physician owned primary care group in the Tri-Cities market of Tennessee. The group was looking to monetize two of their campus-adjacent assets to take advantage of favorable market conditions, but was worried about relinquishing total control and management of the assets to an institutional buyer with little interest in structuring a deal that would accommodate physician needs.
Montecito Medical made several trips to meet with SOFHA executives and listened intently to their reservations in order to draft a deal structure that would accommodate physician needs. In order to keep all physician’s interest aligned, Montecito personally presented their proposal to a group of 65+ SOFHA doctors. The proposal included:
SOFHA physicians voted to sell the assets to Montecito Medical under the proposed deal structure. The group re-invested 10% of their proceeds back into the assets alongside Montecito, with both parties interest closely aligned. In exchange, SOFHA master-leased both buildings on a NNN lease for a 15-year term.
We were able to maximize our return on the building by selling to Montecito Medical and to do so where we were able to re-invest back into the new entity buying it. It was important to many of our physicians to continue to have some level of ownership in the properties where they practice.