The sale-leaseback, explained for practice owners.

A sale-leaseback with a written buyback option is the version of this transaction Medre writes, and it exists because the standard version has a one-way door in it. This article explains the standard version first, honestly, and then the clause that changes it.

The trade, plainly

You own the building your practice operates in. An investor buys it from you at an agreed price. You stay exactly where you are, but now as a tenant, under a lease signed at closing. Usually a long one, often 10 to 15 years, with scheduled rent increases.

The equity that was sitting in your walls becomes cash in your account. The mortgage, if you had one, is paid off out of the proceeds. Your monthly cost changes from debt service, taxes, insurance, and maintenance to rent.

That is the whole mechanism. Nothing about it is exotic, and nothing about it is a trick. The questions worth your attention are about what happens after closing: who you are now renting from, what they want, and whether the door back to ownership exists at all.

What the buyer wants from your building

Most buyers in this market are institutions: REITs, funds, and family offices that buy medical buildings for the income. Understand their model and the offer in front of you makes sense.

The product they are buying is not really the building. It is your lease. A medical practice is a strong tenant: sticky, creditworthy, and expensive to relocate. A long lease signed by one is a reliable stream of income that can be financed, bundled, and sold. The longer the lease and the higher the rent escalations, the more your building is worth to them.

That is why institutional offers push for 15-year terms and why the purchase price rises with the lease length. It is also why those buyers have no interest in selling the building back to you. Their fund bought an income stream; your repurchase would end it. None of this makes them bad actors. It makes them the wrong counterparty if eventual ownership is part of your plan.

What you gain, and what you give up

The last item on the right is the one this article exists for. In a standard sale-leaseback, the sale is final in every sense. Whatever the brochure says about partnership, there is no path back to ownership unless one is written into the documents at closing.

The clause that changes the deal

A written buyback option gives you the right, not the obligation, to repurchase your building at a defined point in the lease. Written is the operative word: a term in the recorded documents, with dates, a pricing mechanism, and conditions. A verbal assurance that the buyer is always open to a conversation is not an option.

The version Medre writes opens at year 5 and stays open through year 10, exercisable in the year you choose, priced by independent appraisal at fair market value at the time of sale plus a purchase premium that declines each year of the option window. The appraiser doesn’t work for us, today’s price is not locked, and the process is in your documents before you sign the lease. If your market rises, you pay more; if it softens, less. What you never face is a landlord naming a number because they know you can’t leave.

Any buyback option, ours included, deserves interrogation before you sign. Who sets the price, and by what standard? When does the valuation happen? What conditions attach? What happens if you pass at the first date? Does the option survive a sale of your practice? We walk through all five in how to tell whether a purchase option is real.

Run the refinance first

If the reason you are considering this is capital, rather than landlord fatigue or an exit, there is a cheaper instrument to check first: a refinance. Borrowing against your equity keeps the deed, the appreciation, and the control, at the price of debt service and, usually, a personal guarantee.

The honest comparison is not obvious in either direction. A refinance frees less capital and keeps the landlord duties on your plate; a sale-leaseback frees more and ends them, at the cost of the deed. We built the side-by-side in refinance or sale-leaseback: run both before signing either. Run it before either suitor is in the room.

Where a structure like ours fits

Medre buys buildings from practice owners and leases them back at fair market rent plus a small premium, with the written buyback option described above, exercisable in any year from 5 through 10. The premium is the carrying cost of keeping the door open, stated separately. Together with an upfront option fee and, if you buy, a purchase premium that declines the longer you lease, it is how we make money, along with keeping good medical buildings when a practice decides not to buy. The full mechanics are on How It Works, and the equity-owner’s situation specifically is the fourth one on For Practice Owners.

Where it does not fit: if you are selling because you are leaving your market or your career, the buyback option is worthless to you, and an institutional buyer offering top dollar for a long lease is probably your better deal. If a locked repurchase price matters more to you than a clean pricing process, ours is not your structure either. And if the refinance pencils, take the refinance.

Whether the premium is worth the open door is a math question, not a marketing one.

How to read the offer in front of you

If an offer is already on your desk, the price is the least informative number on it. The lease term, the escalations, the maintenance split, and the presence or absence of a buyback clause decide what the deal actually is. We wrote a separate field guide for exactly this: how to read a sale-leaseback offer without getting boxed out of ownership.

And whatever the offer says, your attorney and accountant read it before you sign it. Including ours.

This article is educational, not legal, tax, or financial advice. Review any move with your own attorney and accountant before you sign.