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Category: Case Study, Healthcare Tags: Healthcare, Sale Leaseback
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Property Profile

$2,400,000
Toyos Clinic - Memphis, TN
Cap Rate
6.80%
Leasable Area
8,160 sq. ft.
Year Built
2002
Term Remaining
20 Years
NOI
$163,200

Challenge
The subject property is a multi-tenant medical office building that is condomiumized into several suites. The Matthews™ team was retained by Toyos Clinic, a premier vision and aesthetics operator, to structure a sale leaseback on the entire first floor of the building so that they could take the proceeds and fund their expansion to a flagship location in Manhattan, NY. The practice backfilled a vacant bank and structured a 20-year absolute NNN lease with annual increases at a modest initial rental rate of $20/SF. Although the opportunity was located in a high-growth neighborhood in Memphis, many buyers couldn’t get comfortable with the size, non-credit tenancy, as well as the fee-condo ownership structure. The deal was ideal for a 1031 exchange buyer looking for a long-term coupon-clipper looking to park money.

Strategy
The team advised the seller on a sale leaseback structure that would net them the most money possible out while keeping their rental levels modest and sustainable. Matthews™ utilized an aggressive marketing campaign to source a buyer for the property by sending out blasts to our internal database of brokers, investors, developments, syndicators, etc. The Matthews™ Healthcare Division highlighted the strong points of the deal, including the strong rental increases and 20-year absolute NNN lease. The buyer, a Matthews™ client who the team had discussed other exchange opportunities with, had recently traded out of a vet hospital in Pennsylvania and was nearing the end of her identification period. The team presented this exchange option to the buyer, knowing it was the right fit with her acquisition criteria. She was happy to own a management-free deal leased to an experienced tenant in a high-income area.

Results
The client was able to make a significant profit on the sale by monetizing the real estate and almost sold for double what they initially paid for the condo. In addition to that, they were more than happy with the lease they structured, which provided them with the security of the space for years to come at modest rent levels. The buyer was able to exchange into a property that allowed them to experience passive income achieved through net lease ownership, with the added peace of a 20-year lease. We ended up closing on the asset at a 6.80% cap rate.

Testimonial
“My experience working with Rahul Chhajed, Michael Moreno, and the Matthews™ Healthcare Division was nothing short of excellent. I first reached out to Rahul via LinkedIn about structuring a sale leaseback on my medical office condo because I had seen an article he and his partner had published. It dove into how physicians that own their real estate can sell their building and sign a long-term lease with a buyer for a significant amount of money, essentially unlocking capital from the building that could be invested into my practice’s operations and expansion. They advised me professionally throughout the entire process, from providing me with pricing and suggesting how I structure my lease, to finding a qualified buyer and running a smooth transaction process from start to finish. We were in a time crunch, and they were able to execute punctually and helped put me in a position to expand my practice’s footprint across the country.” – Dr. Rolondo Toyos

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