Townhill Medical Centre – ‘Sale & Leaseback’ attracts new partners to the practice

Adam Thompson of Primary Care Surveyors (PCS) has successfully negotiated a ‘Sale & Leaseback’ transaction for Townhill Medical Centre in Guards Avenue, Caterham, which had the added effect of attracting new medical partners to the practice at a time when the existing partners had retired.

Townhill Medical Centre in Caterham provides crucial health care services to the community. As well as a general medical practice, the centre offers a wide range of services from its busy Health Review & Assessment Clinic where patients can get advice and treatment for a variety of conditions, including asthma, blood pressure, breathlessness, contraception, epilepsy, smoking assessments and alcohol consumption, to name a few. Other services help patients to come to terms with abuse, bereavement, cancer, disabilities, drugs and alcohol abuse, and as well as care for the elderly, there is also provision for mental and sexual health through the Wellbeing Centre. With a pharmacy on-site as well as a Covid-19 support room, Townhill Medical Centre is a busy practice that provides essential support to patients in the local area.

Built in 2004, the three-storey Townhill Medical Centre is owned by an entity called the ‘Townhill Property Partners’, which previously was made up of the partners of the practice. In addition, the GPs in the medical practice were members of the ‘Townhill Medical Partners’ which today, due to retirements, leaves only one GP owner – Dr Kevin DeFriend – with other GPs being employees but with the intention of being partners.

With over 12,000 patients, this busy centre needs additional GPs willing to become partners to increase the size of the team. However, as has been the trend in recent years, some doctors would prefer to be salaried only, not wishing to become partners as historically this would have meant investing in the property element of the business.

With prospective medical partners reluctant to buy into property, Dr DeFriend began to explore the possibility of selling the practice to a larger group and then leasing the practice back over several years. Contacting several of the top healthcare groups that may be interested in acquiring Townhill Medical Centre, it was apparent that this type of negotiation was of a complex nature. The lawyers acting for Dr DeFriend and Townhill Property Partners suggested contacting Adam Thompson of Primary Care Surveyors, as Adam specialises in this type of transaction within the primary care sector. Adam was instructed to act for the practice, managing the preliminary valuation and then negotiating the ‘Sale & Leaseback’ for the practice, which would culminate in the practice agreeing to lease their surgery.

The local Clinical Commissioning Group (CCG) was consulted, advising that a 15-year lease would be favourable. With the CCG required to approve the new lease, certain criteria needed to be met. The surgery was built in 2004 and the interior fit-out was not up to prevailing standards. The CCG pointed out that this would entail changing taps and basins to meet modern hygiene standards, and this work needed to be completed before a longer lease would be approved.  These works in turn required other refurbishment works being made at the same time and in recognition of the upgrades made by the practice, and at a cost to the practice, Adam Thompson agreed an extension to the tenure making it a 20-year lease, which gave the practice added security as a reward for their financial investment.

The Sale & Leaseback transaction was completed at the end of March 2020, with Assura becoming the new owners. Townhill Medical Centre had three tenants in all: the doctors’ practice; the pharmacy operated by Paydens; and the Ambulance Trust (the latter two both had leases already in place).

Adam Thompson comments, “We are seeing more of this type of property adjustment in the primary care sector, with a common theme being doctors coming into General Practice who don’t want to invest in the property aspect of the business. On this occasion by removing the ‘property’ from the equation when attracting good GPs who would aspire to become partners, the result was positive. The barrier the property presents and the price of becoming a ‘property partner’ over just becoming a ‘medical partner’ can signal the success or demise of a perfectly good and viable practice. Running out of partners can put a practice at risk of failure, as salaried doctors may not be as committed to the future and put the practice at risk.

“This was a complex negotiation, with many layers of legal contracts to oversee between the doctor in practice, the new buyer, the CCG and the co-tenants of the building. And whilst completion was achieved on the 31st March, just before the Covid19 lockdown when we entered a period of uncertainty, the price for Townhill Medical Centre was strong. If the same deal was done today, seven weeks into the lockdown, would the sale price have been as strong? Yes, I think that it would be, demonstrating the resilience of the primary care property market, and the value placed on the primary care sector in this, the most horrible and uncertain of times.”

Townhill Medical Centre has now attracted new GP partners, giving the business a secure and bright future, which in turn ensures the local community can continue to receive the excellent primary healthcare the practice provides.