Case Study

Ortho Group Buys Out JV Partner with No Cash Out of Pocket

Case Study Details

Financing Type:
JV Partners
Ortho Group Buys Out JV Partner with No Cash Out of Pocket

CMAC Pioneers Innovative Strategies as Buyout Trend Continues

September saw a leading Northern state orthopedic group buy out its reluctant JV development partner after years of unsuccessful negotiations. A bit of innovative thinking combined with long-term strategic planning made it happen in a way that never seemed possible BC (before CMAC). In this case, the buyout that resulted in the group taking a 100% ownership position also saw a purchase that

  • Required no cash out of pocket
  • Provided a return on equity in the double digits, and
  • Saved seven figures in interest expense over the loan term.

Physician groups often bring in equity partners at the inception of new real estate projects for a variety of reasons. At some point in time, however, many of those same groups realize that there are better reasons to have 100% of the ownership (economic and control) and look for ways to buy out their JV partners. That is not always an easy task, as those partners often resist efforts to leave lucrative investments by refusing offers or demanding substantial premiums.

CMAC has become the industry-acknowledged expert in negotiating improved ownership positions on behalf of its physician clients. Unrecognized leverage points and unique financing structures may be the answer. In 2019 and 2020, CMAC negotiated more than a half dozen formerly-stalled buyouts with all parties feeling good about the outcomes.

The bottom line is that many practices who feel handcuffed in a relationship with their equity partner have opportunities to take full control of their medical office building(s).  With a team that can analyze various purchase options, create structures that minimize capital contribution and maximize long term cash flow, you may be less restrained than you think.

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