Document View

Non-profit health-care providers face leveraging real estate property values as a competitive source of capital, said health-care and real estate finance experts at Jones Lang LaSalle (JLL) Chicago. JLL expects health-care systems to purchase equipment by executing sale-leasebacks, if possible, that amortize rental fees on the life of the lease. Credit market constrictions caused many health-care entities to search somewhere else for liquidity, and more hospitals reported reliance on alternative financing vehicles, including third-party ownership with operating leases, capital leases for facilities outside of the acute setting, and physician joint-venture partnerships.

Non-profit health-care providers face leveraging real estate property values as a competitive source of capital, said health-care and real estate finance experts at Jones Lang LaSalle (JLL), Chicago.

Falling revenue and severe capital restrictions place greater pressures on health-care facility operations across the sector, but non-profit health-care providers will need to follow for-profit health-care system guidance in accessing capital, according to JLL's Healthcare Real Estate Financing Outlook.

JLL forecasts sale-leaseback adoption by non-profit hospitals by leveraging medical office buildings and core real estate holdings, including acute and sub-acute hospitals, as capital sources. After 20 percent to 30 percent declines in charitable donations, sale-leasebacks will gain traction in the non-profit sector, the report said. JLL said it expects health-care systems to purchase equipment by executing sale-leasebacks, if possible, that amortize rental fees on the life of the lease.

Some hospitals, for example, purchase equipment by folding costs into the life of a lease and reduce equipment costs by using an amortized payment schedule. Cash-strapped health-care providers can address new and increased equipment needs while minimizing their debt through the sale-leaseback deal structure, said Poe Corn, executive vice president in JLL's Capital Markets Healthcare practice. The health-care sector will have very limited investment transactions this year, Corn said, but ones that do occur will take place as joint ventures or as large non-profits acquire smaller, regional hospitals or providers by executing sale-leasebacks to raise capital.

Credit market constrictions caused many health-care entities to search somewhere else for liquidity, and more hospitals reported reliance on alternative financing vehicles, including third-party ownership with operating leases, capital leases for facilities outside of the acute setting, and physician joint-venture partnerships, JLL said.