CMAC Supports a Growing Georgia Orthopedic Group for Nearly 10 Years
Case Study Details
Twenty years ago, a small orthopedic practice in Georgia launched with a handful of partners. Then the practice grew, opening a new office upstate …and then a new surgery center … and then merging with another group. All the while, appreciating real estate values and routine debt payments have caused the equity in the real estate portfolio to skyrocket – making it more expensive for to new partners to buy in and harder for existing partners to cash out their own shares.
Sound familiar? Adapting a practice’s financing to meet its current needs is a conundrum faced by many of our clients as they expand and acquire new properties. Fortunately, CMAC is there to help you find the ideal financing solution to make your model work.
This group, Augusta Orthopedic Specialists (AOS), has worked with CMAC for nearly a decade. Through expansions and mergers, transitions and market shifts, our team has helped the group structure its financing, overcome challenges, and expand to serve a growing community of patients.
2014: The Start of a Successful Partnership
Initially, AOS sought to refinance its existing medical office building and finance the construction of a new ambulatory surgery center. CMAC stepped in to request offers from a wide range of lenders – and the group’s incumbent lender responded by lowering their interest rate, offering an improvement of 1%.
2019: Cashing Out and Buying In
Five years later, AOS encountered a new challenge: As existing partners repaid debt, the practice equity ballooned and the cost of buying in as a new partner became unfeasibly high. Once again, they came to CMAC in search of help.
Leveraging our market expertise, CMAC worked with local, regional, and national bankers to secure 13 loan proposals for the practice. The best term sheet that was offered allowed existing partners to lower the interest rate, take cash out of over $3 million, while also allowing new partners to buy in at an affordable rate. As an added benefit, CMAC helped consolidate debt under one loan and removed the physicians from personal liability.
2020: Taking Advantage of Market Conditions
During the height of the COVID-19 pandemic, with interest rates dropping precipitously, CMAC saw an opportunity to secure a better rate for AOS. With the doctors’ permission, we reached out to the current lender to request options.
The group elected to accept a rate improvement of nearly 1%, generating over $400,000 in interest savings over the remaining term of the loan. The bank also allowed the loan to be re-amortized to stretch out the repayment, which improved monthly cash flow. The lower loan payment was especially welcomed with the uncertainty caused by the pandemic.
Later that same year, the doctors purchased an adjacent vacant lot with the goal of constructing a Rehabilitation and Physical Therapy location and alleviating parking constraints. CMAC coordinated with the bank to secure the loan required for the construction project.
2021: A Bright Future Ahead
In an exciting step forward, AOS announced a planned merger with Carolina Musculoskeletal Institute which would combine four owner-occupied properties between the two groups. Faced with the prospect of consolidating and equalizing the ownership of the combined real estate portfolio, the group once again turned to CMAC for guidance.
Not only did CMAC refinance the debt of all properties at a rate of 2.5% fixed for ten-years, but it also facilitated structural changes by ensuring all physician-owners held an equal share in the property. In the end, both groups were successfully integrated with no out-of-pocket expenses.
2022: Wrapping up a Loose End
During the merger, AOS was drawing on the construction loan for its planned Rehabilitation facility. Now that the property has been completed and occupied, CMAC was able to have the bank commit to offering the same 2.5% fixed rate on the conversion to the permanent financing, even though market rates had increased to over 4%.
As your practice grows and changes, so do its financing needs. By securing the most advantageous terms for our clients’ debt – and using that debt strategically to adapt to new market conditions – CMAC is more than a one-stop service provider. We’re a long-term partner for your evolving real estate portfolio.