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Investors in the Healthcare Property Market

The entry of investors into the healthcare property market specifically targeting surgery premises has only emerged in the past ten years. Accordingly it is a relatively new sector with constantly changing requirements. Fundamentally the investor sees the rental from the surgery as a very safe revenue stream – the government pays the doctors a ‘current market rent’ who in turn pay the investor a rent. This is viewed as a “copper plated” investment.

There are obvious advantages to GP’s in pursuing a sale and leaseback opportunity:-

  • Capital is released
  • No cash/capital requirement for changes in partnership structure.
  • GP’s can focus on their core business – provision of healthcare
  • The external maintenance of the building becomes the responsibility of the landlord at no cost to the GP’s.
  • Physical extensions of premises can be pursued without any cash injection or additional borrowing for the GP’s.

But with every business opportunity there is always a risk and a possible disadvantage:-

  • Loss of rental income into the partnership – the current market rent paid by the LHB/NHS England will go to the investor.
  • Loss of control of premises – another party has some say over the premises. This aspect can be controlled by the careful consideration and agreement of the terms of the lease.
  • The investor will be looking for a twenty year lease commitment. Whilst this may seem daunting there will be provision for the assignment of the lease subject to certain provisos.