Okay, that isn’t exactly what Shakespeare wrote , but wouldn’t things be simpler if there weren’t those other parties to worry about?
For healthcare institutions, those other parties are now a fact of life. The days are long past when a healthcare institution’s mission was primarily accomplished inside the walls of a hospital. Most institutions now find themselves in the role of both landlord AND tenant. What steps can be taken to simplify the operation of these growing real estate holdings, as well as properly managing relationships with landlords, physician tenants as well as hospital departments?
STEPS TO SUCCESS WITH REAL ESTATE
KNOW WHAT YOU HAVE
This first bit of advice sounds obvious, but so often events keep organizations from investing the time and resources necessary to taking a thorough inventory of both owned and leased space. There are four components to a space inventory: legal, financial, physical and operational.
Legal: Whether a property is owned or leased, the legal inventory at a minimum should include copies of all fully EXECUTED legal documents, plus the names, addresses and contact information for all parties involved. Documents should be scanned and ideally be accessible through a real estate portfolio software system.
Physical: A description of both the building and the leased or owned space. This should follow a checklist which includes:
- type of construction
- parking fire/safety systems
- HVAC/mechanical systems
- floor plans
- physical inspection reports
- feedback from the occupants on any space or management issues
- photos -remember, a picture is worth a thousand words
Financial: All financial obligations under a lease or mortgage should be captured, along with information on operating expenses, initial tenant improvement costs, book value and historical costs. Information on insurance requirements under a lease or condominium documents should also be tracked, along with evidence of coverage.
Operational: Who is responsible for what? Have a checklist of all maintenance and management obligations. The responsible party should be clearly identified along with the relevant contact information. From medical waste disposal, cleaning and light bulb changing, to roof leaks and sidewalk cleaning, make sure all parties are clear about their respective obligations. A physician practice’s first impulse may be to call the hospital facility department when there is a problem, but the correct response may be a call to the landlord’s property management company.
Invest in a real estate portfolio administration software package. Most software is adept at tracking both owned and leased properties as well as all of the above-mentioned components of a space inventory. Cost effective solutions are available for even small portfolios.
Be proactive. Pay attention to the ticklers generated by your real estate portfolio system for upcoming lease expirations and renewal options. Make sure those ticklers provide sufficient lead time to work decisions through your organization’s approval making process.
You now have the information and the tools for the efficient and timely management of the legal, financial and physical obligations of a real estate portfolio.
“Why Hospitals are Getting Into the Real Estate Business,” a recent segment on NPR, provides a look into an interesting new reason for hospitals’ real estate activities. Housing insecurity, low-quality housing, and living in an impoverished neighborhood, all have negative consequences on a person’s health. By directly addressing these drivers of poor health, hospitals can lower the cost of caring for these populations.