PREP: How to sell your medical office building and remain an owner—the Montecito way

Through Montecito’s pioneering Provider Real Estate Partnership (PREP), providers can retain ownership—and gain big advantages—even after selling their building to us.

  • Recurring income opportunities — Enjoy opportunities to participate in regular cash flow from the property.
  • Tax advantages — You may be able to defer recognition of capital gains taxes on your ownership share under a properly structured arrangement.
  • Profits on resale — We expect ultimately to resell your property. At that point, you’ll realize a share of the profits proportionate to your ownership stake.
  • Aligned physician interests — PREP participants can include providers who were not part of your building's previous ownership structure — so retiring doctors have the option to cash out while you offer younger doctors the opportunity to buy in.

To date, physicians have chosen to retain more than $85 million in equity in their buildings through our PREP program.

Why stay an owner with us?

Hear from PREP participants.

Dr. John D. Sheppard - Virginia Eye Consultants

Our PREP program

Dr. Mitesh Kothari - Capital Women's Care

Schedule a free consultation today to begin building wealth.

How PREP Works

  1. Participating providers may choose, in lieu of 100% cash at the time of sale, to hold a minority ownership interest in their property by contributing to a partnership in which Montecito serves as managing partner.
  2. Montecito aggregates the property into a large, carefully assembled portfolio of other prime medical office buildings.* Historically, large institutional investors have paid a premium for such portfolios, giving PREP partners an opportunity to realize increased value from their investment beyond the worth of their individual property.
  3. PREP partners enjoy opportunities to participate in the recurring cash flow from the property. They also may be able to defer recognition of capital gains on the share of the property they retain as an owner.
  4. Montecito ultimately expects to resell the property. At that point, PREP partners receive profits proportional to their retained ownership share.

* Based on market conditions, Montecito reserves the right periodically to sell individual properties as a one-off disposition and not part of a portfolio.

Since inception in 2006, Montecito’s sales of medical office portfolios have achieved an internal rate of return (IRR) of 24.8%*

Here's a brief illustration of how PREP worked for one large specialty practice. Montecito purchased 9 medical office properties from the group. When we sold the properties as part of a portfolio, we achieved these property-level returns*:

Sales price $103.5 million
Net proceeds (excludes return on equity) $25.3 million
Realized internal rate of return (IRR) 41.1%
Avg. annual cash-on-cash return 10%+
Investment multiple 2.0x
*Note: Past performance is not a guarantee of future results. This is for illustrative purposes only. Investors should not assume that they will experience returns, if any, comparable to those experienced by investors in prior transactions sponsored and/or managed by Montecito.

What Providers Say about PREP

The reputation of Montecito among physicians is outstanding. My experience with my personal funds reinvested into [our] building, through Montecito's larger fund, has been non-cumbersome and continuously remunerative.

John Sheppard, MD, President
Virginia Eye Consultants

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.

Richard Panek, CEO
State of Franklin Healthcare Associates

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