What is Sale & Leaseback? and what are your alternative options?

A “Sale & Leaseback” of a GP Surgery is where the GP owners sell the property and simultaneously take a Lease back from the purchasing party who will then in turn become the Landlord of the GP Surgery.

Key Considerations

The Sale & Leaseback mechanism is a legally binding process with significant ongoing responsibilities and does not suit all scenarios and circumstances.  It is therefore important for GP Practices to carefully consider the following aspects when considering whether this is the best option for them:

  • Retirement / Succession Planning – S&LB can help when the property-owning GPs are looking to retire, and the non-property-owning GPs are not interested in buying the building.
  • Secures equity release – S&LB allows the owning GP Partners to release the equity (value) they have in the building.
  • Signatories to the Leaseback – there should usually be at least 2 GPs on the lease as tenants. If there is only one, then the investment is viewed as being insecure, and many investors will not be interested in buying the property.
  • Repairing & Maintenance Obligations – the lease will put repairing obligations in trust of the parties. Usually the GP Practice (Tenant) will be responsible for repairing the whole building i.e. internally and externally, known as “full repairing” though sometimes the GP Practice will only be responsible for the internal repairs known as “internal repairing”.
  • Control & Flexibility – the leases are generally set up so that GPs can leave the practice and lease so long as other GPs are added to the lease. Usually, the lease would be set up on the basis that there are at least 2 GPs on the lease any one time. This gives some flexibility for the GPs to come and go from the practice.  Against this, once a S&LB has completed the GPs no longer own the building and must pay rent to the landlord.  This means they have more obligations and there are potential additional costs for the GPs e.g. when the landlord triggers a rent review.

Alternatives to Sale & Leaseback

The main alternatives to a Sale & Leaseback include the following:

  • Sale to another Doctor.
  • Sale to another Practice or Sale to company who take over the GMS contract and employ the surgery staff.
  • Co Ownership Model.
  • Sale to a Third-Party Developer.

Some further background on these is as follows:

Sale to another Doctor

 

This is a straightforward transaction where the property-owning GP (or Doctors) sell the building to another Doctor in the practice.  In these instances, we are often instructed to do a Market Valuation of the property for either party.  The person who sells then becomes a non-owning GP Partner or retires/leaves the practice.

 

 

 

 

Sale to Another Practice or Company that buy the building and take on the NHS Contract

 

This is where another GP Practice buys the GP Surgery building and takes on the NHS Contract.  The selling practice then becomes part of the buying practice and under their “umbrella”.  Again, we can be instructed to value the property for the sale, acting for either party.

There are also some specialist GP companies who acquire GP surgeries (often buying the building as part of that process).  These companies operate on a regional and national basis and examples include GTD Limited and SSP Health in the in the northwest, or Operose Health who are Nationwide.

Sale to a Third-Party Developer

Involves a third party developing a new surgery and the practice entering a long lease.

Co-Ownership Model

 

The model itself is based on the collaboration between GPs (GP alliances, PCNs or Feds) and a social funder, who collectively form a Property Company (PropCo) that will develop and own a scheme and then lease the whole building to the GP(s). The GP(s) will own the majority share of the PropCo and have full control of the building via the lease. On this basis the GPs will be both landlord and tenant but will benefit from the development expertise and low-cost capital provided through the funding partner and with the funder partner taking all the development risk. The GP(s) also are not required to provide any capital or funding guarantees as with other models.

What can BW Healthcare Surveyors do for you?

In the first instance we would arrange a TEAMS meeting with the GP Partners to run through a short presentation explaining the benefits and pitfalls of S&LB and answer any questions they may have. Should they wish to instruct us following that meeting, our terms of service would include:

  • Initial discussions/meeting with you, survey of the property and provide initial advice,
  • Prepare a draft Heads of Terms for the proposed lease,
  • Seek the necessary approval from NHS England for the Heads of Terms and draft lease.
  • Prepare sales particulars for the property,
  • Proactively market the Property directly to specialist healthcare investors and their agents as well as other investors who are actively seeking to invest in GP Surgeries.
  • Manage the bidding process and report all bids to you.
  • Seek further bids (as necessary) to help achieve maximum offers.
  • Coordinate with your solicitor in the drafting of the lease based on the Heads of Terms.
  • Project manage the process from start to finish whilst keeping you updated.

 

 

Why choose BW Healthcare Surveyors?

 

BW Healthcare Surveyors team have considerable experience helping GP Practices through a sale and leaseback. We pride ourselves on our no-nonsense approach and highly competitive fee structures. We will manage the whole process from start to finish and keep you up to date with our progress on a regular basis.

  • We are the Top ranked primary care surveying firm in the UK according to Practice Index.
  • We have 10 specialist primary care surveyors with over 100 years combined experience supporting GP practices with all their premises requirements.
  • Our specialist team have already provided help and support to over 1,000 GP practices.
  • We are SafeContractor accredited, and a Code of Practice approved supplier.
  • We have fantastic working relationships other agents, ICB’s and NHS Premises teams to ensure a speedy and hassle-free rent review process.

Should you have any questions or queries in regard to any of the above or would like to discuss your circumstances with one of our expert advisors please don’t hesitate to get in touch on 0114 4420098 and we would be more than happy to help.

CLIENT TESTIMONIALS

Sue Pyatt

Excellent service throughout, constant updates and feedback from yourselves.

Sue Pyatt, Practice Manager

Francis Mulhern

They were extremely easy to deal with, informative, focussed and efficient.

Francis Mulhern, Bretton Medical Practice Peterborough

Adnan Mohammad

Efficient company that that has a competitive fee and get the job done.

Dr Adnan Mohammad, GP Partner, Newsome Surgery, Yorkshire

Jill Foster

BW Healthcare has that special personal touch.

Jill Foster, Practice Manager, Beacon Primary Care, Lancashire