For hospitals and health networks considering a development project or real estate transaction, engaging an advisor can provide numerous benefits. But how do you properly evaluate a firm’s experience and skills in order to select the right advisor?
Here are the seven questions you should ask that will help you select the optimal real estate advisor to achieve your goals.
Does the advisor possess high-quality, relevant experience?
The advisor should be able to demonstrate a multi-year track record of success in executing similar types of transactions, whether it involves an existing assets or new development project, including a sale, monetization, capital raise, recapitalization, development financing, joint venture structuring or other transaction. The prospective advisor should also have a well-documented history of successfully advising similar types of organizations, and an in-depth knowledge of the universe of investors or developers that target your product type, and demonstrated relationships through executing transactions with these groups.
Is the advisor part of a firm with a national presence?
Unlike many other real estate asset classes, where local market presence may be deemed more valuable, healthcare real estate is very much a national business. An advisory firm with a national presence, multiple offices throughout the country and with nationwide investor relationships, is critical in generating broad, genuine interest in your opportunity. Because local brokers and advisors often lack relationships with national healthcare real estate investors, they can fail to identify many of the most appropriate investors, capital sources or developers for a transaction.
Does the advisor have a dedicated healthcare real estate team?
Many advisory firms may claim to be healthcare real estate experts. In reality, they may only have a limited number of professionals with direct experience. Firms without a team of professionals exclusively focused on executing healthcare real estate transactions may lack the dedication, knowledge and experience required to successfully execute your transaction.
Can the advisor provide objective advice without conflicts of interest?
Selecting an advisor with high ethical standards who can provide unbiased and objective advice may seem fairly straightforward, but can be more difficult than it appears. Many advisors own or invest in vehicles such as healthcare real estate funds, REITs or development companies. Others may function as the capital markets or advisory practices of a larger parent that invests in the product type. These conflicts of interest often exist and can compromise the integrity of the advisory process.
Does the advisor possess the appropriate regulatory licensure?
Engaging an advisor with the necessary licensing for a particular transaction is critically important from a legal perspective. For example, a real estate brokerage or salesperson license may be required to buy and sell real estate, while a registered broker-dealer license may be required to raise capital. Many firms, and even some individuals, refer to themselves as “investments banks,” but very few possess a required broker-dealer license, which is monitored by the SEC and FINRA. In addition to ensuring compliance, these regulatory authorities provide oversight, review and guidelines to ensure advisors are held to high ethical and professional standards that ultimately will inure to your benefit.
Is the advisor a thought leader on important industry issues?
Given the evolving nature of healthcare, it is valuable to engage a firm that has a thorough understanding of the healthcare services industry as a whole. Healthcare reform and other topics such as changes to lease accounting rules, are key issues that will continue to shape the healthcare real estate industry. Identify thought leaders who provide valuable insights and opinions on key topics. Doing so will ensure that an advisor can position your transaction appropriately to investors or partners that may require guidance on these and other matters.
Is the advisor the right cultural and professional fit for your company?
Selecting an advisor should be based upon more than just experience and ability to execute on your engagement. Seek to form a relationship with a trusted advisor who understands your organization’s approach, goals and objectives. Your advisor is your partner, and should also be aligned with your firm both culturally and strategically.
Healthcare real estate owners and developers, as well as healthcare providers and hospital networks face an array of potential partners when it comes to advising and financing their real estate transactions. By considering these seven questions as part of the due diligence and selection process, you will be well equipped to engage an advisory firm with the right expertise to handle your real estate transaction and the right cultural fit to develop a long-term relationship.