Case Study

The Importance of Partner Integration and Roll Ups in Real Estate

Case Study Details

Financing Type:
Roll Ups
The Importance of Partner Integration and Roll Ups in Real Estate … and How to Make Them Happen

Mergers have become commonplace in the independent physician market because consolidation is often the most pragmatic method of shielding groups from declining reimbursements and fierce competition. In contrast, real estate consolidation within these groups is far from commonplace and is often left rather awkwardly misaligned from the mission of the entities.

Addressing the real estate holistically is crucial for propagating growth and providing a basis for equality between physician partners. It is not unusual for the issues surrounding disparate ownership to cause fragmented decision-making that leads to an unhealthy dynamic between newly formed groups. With rent being the practices' second highest expense, this is often for good reason.

Over the past 18 months, CMAC has successfully developed and implemented a methodology to realign the ownership of the real estate to reflect the underlying post-merger practice. This is a multi-level process and requires significant strategic foresight to answer questions related to valuation, rents, and capital exchange. This is often the most complicated real estate transaction physician groups undertake and requires significant expertise and support from advocates such as CMAC, CPAs, and Attorneys.  

CMAC first provided their real estate restructuring solution to the physicians of Michigan Orthopedic Surgeons who were able to consolidate four real estate entities with disparate ownership. More recently, Premier Family Medical (PFM) followed the CMAC methodology. Two practices merged in 2018 to form PFM. One of the pre-merger practices had three subsets of owners with interest in three separate buildings and the other practice had two subsets and two buildings. In total, there were five properties with five ownership groups. With another location on the horizon, PFM, was finding great difficulty in deciding which buildings had long term viability without disproportionately affecting one ownership group. To make things even more complicated, there were numerous former physicians and physician spouses still involved in PFM's real estate. The only thing more contentious than paying above-market rent to a partner is paying above-market rent to partners that are no longer practicing!

The streamlined process that CMAC created to roll-up and equalize the ownership positions of every partner in the group was beyond the expectations of PFM. Four months after consulting with CMAC, PFM has the freedom to make one-minded decisions and achieved this through a painless transition. The vast majority of the partners with pre-merger ownership received capital and the capital requirement for all partners with no ownership was minimized to facilitate that transaction.

View Michigan Orthopaedic Surgeons

Case Studies