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Market Rent

Market rents in the healthcare sector are subject to regulatory oversight and market volatility.

Are you contemplating, or in the process of, leasing healthcare property?  Whether landlord or tenant, American Appraisal can assist you in estimating an appropriate and supportable market rent. 

Are your lease agreements Stark II compliant?
Regulatory oversight focuses on Stark II compliance requirements.  The Centers for Medicare & Medicaid Services, Department of Health & Human Services, have defined the type of compensation arrangements in leases that will not constitute a financial relationship between the hospital and the physician.  Criteria include:

  • The lease is set in writing.
  • The term of the lease is at least one year.
  • The space is reasonable and necessary for the legitimate business purposes.
  • The rental charges are set in advance, are consistent with fair market value and do not take into account the volume or value of any referrals.
  • The agreement would be commercially reasonable even if no referrals were made between the lessee and the lessor.

Are your leases at market rates, documented by an independent appraisal?
Market volatility in the healthcare sector is influenced by many factors, including:

  • Demographics, which drive the demand and supply for properties, as well as the depth of the pool of potential tenants
  • Economic conditions, which influence the purchasing power of the potential tenant base, from the perspective of rent affordability
  • Technological changes, which cause market participants to consider special property features and their remaining economic lives

American Appraisal’s consultants have real estate, finance and engineering backgrounds, enabling proper consideration of these issues in our analyses.  Within an active leasing market, our analyses often consider rental income and the accompanying conditions and restrictions indicated by lease agreements for comparable space.  Within an inactive leasing market, our analyses often estimate market rent by applying a market return to the market value of the property involved. 

Our services
American Appraisal provides market rent estimates for healthcare property to assist clients with various issues, including:

  • Lease agreements involving new or existing facilities
  • Lease renewal negotiations
  • Shared space arrangements

American Appraisal can also assist in considering alternative lease terms and conditions, which are equal from an economic point of view, to assist in business planning needs.

Property complexity can range widely.  American Appraisal consultants have the experience and expertise to develop market rents for all types of healthcare properties, including:

  • Acute-care and long-term acute-care hospitals
  • Ambulatory surgical centers
  • Oncology facilities
  • Rehabilitation and psychiatric hospitals
  • Diagnostic and laboratory facilities
  • Doctor suites and physician practices
  • Assisted living and skilled nursing facilities
  • Medical office buildings

Lease renewal negotiations can strain long-term relationships.  REITS may expect lease rates to rise as underlying markets improve.  Conversely, healthcare operators may expect lease rates to decline as properties age and depreciate.  American Appraisal has provided valuation and consulting services to both sides; we understand the underlying dynamics and can be relied on for objective, straightforward opinions. 

Whether negotiations involve REITS, healthcare operators, physician groups or government entities, a skilled, experienced valuation consultant is needed.  As a long-standing healthcare valuation leader, American Appraisal consistently provides clients with highly individualized solutions. 

Our credentials

  • American Appraisal has more than 50 years of experience in the healthcare sector.  We have performed work in all 50 states, Puerto Rico and the US Virgin Islands.  We have a solid record of sustaining our conclusions with various regulatory agencies.
  • Our consultants have multiple designations including MAI, ASA, MRICS and CMI, as well as the state appraisal certifications required to legally estimate market rent for real property assets, helping to ensure market rents are not overstated or understated.
  • Our consultants have engineering-related degrees or backgrounds, allowing for efficient interpretation of project drawings and specifications to appropriately identify and analyze assets.
  • Our team members have analyzed the entire life cycle of projects from development to demolition.  As a provider of multiple valuation services, we can leverage our market rent analyses to provide additional services including valuation and cost analyses for insurance, property tax and financing purposes.

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