Healthcare realty development project overview

A group of physicians wants to own its own hospital. Clarity Health works with the physicians and provides comprehensive services ranging from consulting services and project syndication to full operations management. These services are provided by a Clarity Health project company that is partially owned by the physicians that are leading the project. This ensures the hospital operating company is viable and can manage its start-up and operating expenses. Clarity Health also tests the viability of the health care model in the marketplace in reference to competition, reimbursement, legal and regulatory requirements. The hospital operating company and the owners of the hospital operating company will be required to guarantee the lease.

Clarity Development provides full development services including the preparation of development plans, negotiating all contracts, managing construction, and sourcing and negotiating the terms of all financing. Clarity Development charges an industry standard development fee, financing fee and leasing commission. All of these services are provided by, and the fees paid to, a Clarity Development project company that may be in part owned by the physicians that are championing the project.
Clarity Development works with Clarity Realty to finance the project. Clarity Realty will set up a Clarity Realty project company to own the real estate. Clarity Realty will work with equity investors and individual physicians or physician groups, to provide equity for the project. The intent is to provide a preferred return on equity. Clarity Realty will work with Clarity Development to obtain financing for the project.

The intent is that the Clarity Realty project company will charge a lease rate equal to a pre determined yield on cost of the project with set annual lease escalation. Clarity Realty charges an asset management fee to the Clarity Realty project company.

Upon completion of the building, the Clarity Realty project company will either hold the building in its portfolio, or sell the completed and leased building to a third party or a Real Estate Investment Trust (REIT) for a determined Capitalization Rate (Cap Rate). The REIT will either be predetermined prior to the start of development or marketed to after lease-up of the facility.

Upon the sale to the REIT, or the refinancing of the building, the intent is that the proceeds will be distributed to the equity investors to make possible a pre determined Internal Rate of Return (IRR). Remaining excess gains will be distributed as per the requirements of the entity financing the project

If you enjoyed this post, make sure you subscribe to my RSS feed!