By Kathleen Morgan
Needless to say, the healthcare sector has faced multiple challenges since the beginning of the COVID-19 pandemic. Practitioners have adjusted their care protocol to keep their patients safe and healthy. This has hit their bottom line due to the decrease of patient visits, procedures and surgeries.
Here is how I facilitated a successful multi-tenant medical office investment sale in the midst of the COVID-19 shutdowns.
About the Property and the Buyer
The property was a 22,000 sq-ft medical and dental facility in Tempe, AZ. The tenant base was predominantly dentists, an asset class hit hard by COVID-19.
Despite this, it was an attractive investment. Several tenants have longstanding dental practices that were managing despite having to shut down some of their locations. Some dentists received PPP loans, which also helped with cash flow. One of the tenants even expanded their dental practice during the pandemic.
The buyer was Equity, based out of Hilliard, OH. This was their 1st MOB transaction in Arizona.
Since this sale took place during the pandemic, there were new procedures and experiences for all parties involved. I took the property to market during the shutdown. Here were a few of the challenges:
Travel Restrictions for Buyers
Buyers usually expect to tour the property in person. However, many buyers were located out of state. Traveling was not advised at the time, flights were limited, and quarantines were mandated. Buyers were concerned that if they traveled to AZ to view the property, they may not be able to return home as planned or resume a normal schedule due to their state’s quarantine rules.
Solving the Appraisal Problem
Because of the COVID-19 lockdown, a normal, in-person appraisal was not an option. The tenants wanted to limit visitors due to the risk of the virus spreading to staff or patients. Thankfully, the tenants trusted me to go into their suites and take photos to send to the appraisal company. The appraisal company accepted and used my photos, which helped the appraisal process go smoothly.
Multiple Delays Due to COVID
Medical office sales are complex with many moving parts. Delays can set back the entire process if not managed properly. In this case, lenders were being more conservative due to the uncertainty of the economy, which led to delays.
Additionally, the title company the buyer selected had a COVID-19 outbreak in their office with led to them having a skeleton crew. This resulted in delays on getting the closing documents, which is not normal and definitely a result of COVID-19. Fortunately, we were able to communicate these delays to all parties and keep everyone on the same page throughout the sales process.
A Win-Win for Everyone Involved
Since the buyer, Equity, was in Ohio, we worked together to figure out OH and AZ regulations when it came to quarantining and travel restrictions. We were able to figure out the logistics of the brand-new COVID-19 precautions: reducing group sizes and in-person meetings, wearing masks, using hand sanitizer.
I had to work harder to develop solutions to brand-new problems, but in the end, all parties were happy. Everyone had the satisfaction of knowing that they did their part to help spur on the economy in challenging times – and keeping everyone safe while doing so!