HEALTHCARE REAL ESTATE · MEDICAL & SURGICAL

Sell the Building. Keep the Practice.

Many physicians own the building their practice operates in, and after years of appreciation it has become one of their most valuable assets. We offer a way to turn that value into cash at the building's independently appraised price, spread the tax over time and diversify — while your practice stays exactly where it is, on a long-term lease you help to write.

Physician Owners: Request a Structure Review

Brokers: See What We Buy

The Building Served You Well. Now It May Be Holding You Back.

Once a practice has owned its building for a decade or two, three challenges tend to appear at the same time.

A Large Gain, and a Large Tax Bill

You may have bought the building for a fraction of what it's worth today, and claimed depreciation on it for years. An outright sale would trigger capital gains tax, recapture of that depreciation and the 3.8% tax on investment income, all in the same year.

Too Much Wealth in One Place

A big share of the partners' net worth sits in a single building, in a single location, rented to a single tenant — the partners themselves.

Partners on Different Timelines

Senior partners approaching retirement often want to cash out. Younger partners may not be able to afford to buy them out. Ownership of the building and succession in the practice rarely line up neatly.

The option most practices are offered is a straightforward sale to a REIT or private investor. That solves the cash problem — but it hands the building under your practice to a stranger, and leaves you negotiating future lease renewals with a landlord whose interests may no longer match yours.

Cash at a Fair, Independent Price

The building's value is set by an independent appraiser. Shares in the trust that owns it are then offered to 1031 exchange investors, usually over six to twelve months.

You Stay in Your Premises

Your practice signs a long-term lease, negotiated with your own attorney, and continues to occupy the building. Your staff and patients won't notice any change.

Tax Spread over Time

Moving the building into the trust is structured so that it doesn't trigger tax by itself. Tax on your gain arises as shares are sold, rather than all in one year.

A Path to Diversification

When the trust reaches the end of its term, its investors can choose to exchange their shares for units in RREI's medical REIT — turning ownership of one building into a share of many.

The key difference from an outright sale: your practice doesn't become the tenant of a stranger. It becomes the tenant under a structure it helped to design.

The Buildings That Fit Our Program.

Not every medical building is right for a trust. The investors who buy trust shares are relying on a stable, long-term income, so we look for buildings — and practices — that can deliver it. Brokers and owners can use this list as a quick guide.

What we look at	What we look for
Type of building	Multi-tenant outpatient medical buildings and single-tenant ambulatory surgery centers — purpose-built for clinical use, not converted shops or offices. Buildings that combine imaging, labs, surgery and physician offices are especially attractive.
Size	$5 million to $20 million per building — typically too small for large institutional funds, but larger than most private buyers can comfortably manage.
Lease	A triple-net or modified-net lease of 10 to 15 years, with renewal options and fixed annual rent increases, at a rent confirmed by an independent appraisal.
Tenant	Health systems, hospital affiliates and established physician groups with a proven history, a healthy mix of payers and steady patient volumes. We consider both credit-rated and unrated tenants.
Location and Title	On or near a hospital campus, or in the suburbs where patients live. Clean title, no complicated ground lease and no unresolved environmental issues.
Succession	The lease has to outlast the people who signed it, so it must allow for mergers, acquisitions and new partners joining the practice.
How We Buy	Sale-leasebacks, purchases of already-leased buildings, build-to-suit and completion purchases, and joint ventures.

Medical Care Is Moving Out of the Hospital.

More and more procedures that once required a hospital stay are now performed in outpatient clinics and surgery centers, which are more convenient for patients and less costly for everyone. That shift has made well-located medical buildings some of the most sought-after properties in real estate.

Because building new medical space has become so expensive, the rents in most existing buildings are well below what a new building would need to charge. That limits new competition and supports the value of existing, well-leased buildings — exactly the kind of property that 1031 exchange investors look for.

Why Surgery Centers Stand Out

Surgery centers are among the most dependable medical tenants. Their operating rooms and equipment are expensive to install, so a practice that has made that investment has every reason to stay put. In states that require a “certificate of need” before a new facility can open, regulation itself limits competition. And as more procedures move out of hospitals, demand for surgery centers continues to grow.

To be balanced about it, healthcare real estate isn't immune to changes in government policy. Changes to Medicaid or insurance subsidies can squeeze the finances of healthcare providers and, through them, their ability to pay rent. A long lease is only as strong as the tenant behind it — which is why we assess the practice as carefully as the building.

Three Ways to Sell a Medical Building.

	Sell to a REIT or Investor	Do a Direct 1031 Exchange	Place the Building in an RREI Trust
Tax	All due at closing — capital gains, recapture and the 3.8% investment income tax	Deferred, as long as you reinvest in time	Paid as shares of the trust are sold, spread over the sale period
Time Pressure	Immediate	45 days to find a replacement property and 180 days to buy it	Follows the pace at which shares sell
Your Landlord Afterward	An outside investor	Not applicable — you've moved out	A trust set up under a structure you helped design
Your Practice's Lease	Negotiated with a stranger	Not applicable	A long lease, with terms agreed up front
What You End Up With	Cash, after tax	Another building to manage	Cash, with an optional path for the trust's investors into a medical REIT

From First Conversation to Completed Sale.

Stage	Typical timing	What happens
Is it a fit?	Weeks 1–2	We confirm the building meets our criteria and that this approach suits your group's goals better than an outright sale.
Review and appraisal	Weeks 3–8	An independent appraisal, plus title, environmental and a review of the practice's history.
Agree the lease	Weeks 6–12	The lease term, rent, annual increases and succession provisions are agreed with your own attorney.
Move into the trust	At closing	The building enters the trust, any mortgage is paid off, and reserves are fully funded.
Sell the shares	6–12 months	Shares are placed with 1031 exchange investors. Your group is paid, and pays tax, as they sell.

Partners can make their own decisions where the structure allows — and if, after all of this, the answer is no, that's a perfectly good outcome too.

Request a Structure Review