Okay, that isn't exactly what Shakespeare wrote ("Neither a borrower nor a lender be." Hamlet Act 1, Scene 3), 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 both landlord and tenant. What steps can be taken to simplify the operation of these burgeoning real estate holdings, as well as properly managing relationships with landlords, physician tenants as well as hospital departments?

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 list all legal documents conveying occupancy rights, the dates of execution, fully executed copies, plus the names and addresses of all parties to the documents along with those of their legal representatives and third party property management firms.

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 systems, floor plans, results of a physical inspection, and feedback from the occupants regarding suitability and management issues. Remember, a picture is worth a thousand words and in this era of digital photography, thorough photo documentation is easily accomplished.

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: tenant, management company, hospital, 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.

AND THEN

Invest in a real estate portfolio administration software package. Most software is adept at tracking both owned and leased properties. If an outside property management firm is being utilized for an entire portfolio, they can provide this service. If not, cost effective solutions are available for even small portfolios. The goal of utilizing a portfolio administration package is the efficient and timely management of the legal, financial and physical obligations incumbent on the institution as an owner or tenant of real estate. For a more detailed discussion on the importance of proper lease administration, see the June issue of Real Estate Insights for the Healthcare Industry 

FINALLY       

Be proactive. Pay attention to the ticklers generated by your real estate portfolio system regarding upcoming lease expirations and renewal options. Have conversations far in advance of any deadlines with the involved parties. Thanks to your real estate inventory you now have a clear picture of your real estate resources. Determine how well those resources fit your institution's future goals, and the steps necessary to achieve them.