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Feature Story: Has the case for monetizations changed in light of COVID-19?

A webinar that includes HRE professionals, a system exec discuss the issue

By John B. Mugford

The number of true “monetizations” in which health systems have sold ancillary real estate properties, including medical office buildings (MOBs), has been relatively scarce in recent years.

This lack of monetizations, according to healthcare real estate (HRE) professionals, has been driven, in part, by the fact that many health systems currently occupy most of, if not all of, the space in MOBs they occupy, their access to inexpensive capital during a period of historically low interest rates, and other factors, including the long-held desire of many to own as many of their properties as possible.

However, does the havoc created by COVID-19 pandemic, including a loss of significant revenue for many health systems, change this way of thinking to some degree, prompting even financially strong organizations to consider selling assets to raise capital for a variety of other, revenue-producing endeavors?

A group of panelists discussed this topic during a Sept. 24 webcast hosted by Chicago-based McDermott Will & Emery, a diversified, international law firm, and New York-based Hammond Hanlon Camp (H2C), a healthcare investment banking and advisory firm. John Callahan, a partner with the law firm, moderated the session, which was titled, “The Business Case and Cutting-Edge Legal Strategy for Monetizing Healthcare Real Estate.”

“The reason for this panel today is that our (health system) clients were asking about it,” Mr. Callahan said at the outset. “They’re very interested in healthcare monetization, in particular in the current environment that we’re in.”

In talking with professionals at H2C, a healthcare investment banking and advisory firm, “we knew that they were getting a lot of the same types of questions, and so we decided that we would combine forces and put the program together to really respond to the demand.”

In addition to partners with McDermott, the panel included two executives with H2C: Philip J. “PJ” Camp, a principal and leader of the firm’s real estate practice, and Phil Kaplan, managing director. Also on the panel was Mark Rich, executive VP of Global Operations with Dallas-based Steward Health Care, a private, for-profit system with 40 hospitals in nine states.

When Mr. Callahan asked whether “now is a good time, generally, to think about a real estate monetization transaction in light of what’s happening in the COVID world, Mr. Kaplan of H2C replied that there are “two components” to the answer.

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