Who'll buy your medical building, Doctor?

The new partner isn't interested in purchasing your stake. So how do you unload that white elephant?

By Robert Lowes
Midwest Editor

In the mid-1980s, Indianapolis cardiovascular surgeon John Pittman embarked on a real estate adventure that didn't end quite as he expected.

Pittman was one of about 80 physicians who had invested in a new, five-story medical office building on the campus of Methodist Hospital. Those doctors and several dozen nonowner physicians occupied the building. At the time, Pittman's game plan was a familiar one in medicine: When he was ready to retire, a younger surgeon would join his practice and buy his share of the property.

The building eventually filled up with 175 doctors, but over the years the number of physician-owners dropped to 55. Young doctors in Indianapolis, like young ones everywhere, became increasingly loath to invest in medical property. "I don't think they have any spare cash," Pittman says.

Fortunately, a real estate investment trust (REIT) bought the building in 1999 for $26 million. That allowed Pittman to cash out with around $300,000 when he retired the same year. Such a happy ending, however, isn't guaranteed for tens of thousands of other doctors who worry that their office buildings have become white elephants. The medical real estate scene has gotten so dicey that it inspires cynicism.

"What's the difference between a medical office building and venereal disease?" jokes Santa Rosa, CA, practice management consultant Keith Borglum. "You can get rid of VD."

Black humor aside, there are things you can do to unload your interest in an office building when you say goodbye to your last patient. With a little luck and creativity, you may convert a new practice associate into a buyer. As a last resort, you can turn to any number of businesses, including REITs, who have spotted opportunities in sometimes-maligned medical office buildings.