You Sold Your Practice to Private Equity. Should You Sell the Real Estate Too?

It is one of the most common scenarios I see in healthcare real estate right now.

A physician sells their practice to a private equity group. They stay on clinically. But they kept the real estate. Now the PE group is the tenant, paying rent on a space they used to own operationally. And at some point, the question comes up: what do I do with the building?

If you are a physician-owner sitting on a medical office condo in Northern Virginia with a PE-backed tenant in place, here is how I would think through the decision.

The Three Paths

Every disposition decision for a medical condo comes down to three options. Sell now. Extend the tenant and then sell. Or hold and collect rent. Each has real tradeoffs, and the right answer depends on where you are in the lease cycle, what the tenant is asking for, and how much risk you are comfortable carrying.

Path 1: Sell Now With the Lease in Place

This is often the strongest position a physician-owner will be in, and many do not realize it.

If you have a performing lease with three to five years of remaining term and an above-market rent from a creditworthy PE-backed tenant, that is a story an investor or owner-user can underwrite today. The medical buildout adds value. The income stream is predictable. And the buyer knows exactly what they are getting.

The catch is that the buyer pool for medical condos is narrow. You are typically looking at one of two buyers: another physician who wants to own their space, or a small private investor who values the yield. Institutional capital almost never targets individual condo units. That means pricing is driven by local demand, not national capital flows.

But here is the part most owners miss. That story gets weaker every year. As the lease term shrinks, so does the buyer's confidence in the income stream. A four-year lease tells a different story than a two-year lease. And if you wait until the tenant is within 18 months of expiration, you are effectively selling a vacant building with a countdown clock.

Path 2: Extend the Tenant, Then Sell

On paper, this sounds like the smart play. Lock in a longer lease, then take it to market with a stronger income story. In practice, the math often does not work for medical condos.

The reason is tenant improvement costs. Medical tenants, especially PE-backed groups, will almost always request significant TI dollars as part of a renewal. I have seen requests ranging from $80 to $140 per square foot or more for medical office extensions. On a 2,500 square foot unit, that is $200,000 to $350,000 out of your pocket before you even list the property.

The question you have to answer is whether the incremental value of a longer lease justifies that capital outlay. If you spend $300,000 in TI and it only adds $150,000 to your sale price because the cap rate compresses slightly, you are underwater on the deal.

Before committing to a renewal, run the numbers. What is the TI cost per square foot? What is the expected cap rate compression from a longer lease? And what does that actually translate to in sale price? If the math does not pencil, the extension is not a value-creation strategy. It is a capital trap.

Path 3: Hold and Collect Rent

If you do not need the capital and you are comfortable with the risk, holding is a perfectly reasonable option. You continue to collect above-market rent, and you defer any transaction costs or tax events.

But you are making a bet that the status quo holds. And in a PE-backed tenancy, the status quo is not guaranteed. If the PE group that acquired your practice sells to another PE group, that transaction could trigger an assignment of your lease. Depending on your lease language, the new group may or may not be obligated to honor the same rent. They may renegotiate. They may not renew at all.

The risk is not dramatic. But it compounds. Every year you hold, the lease gets shorter and the PE ownership picture gets murkier.

What the Northern Virginia Market Is Telling Us

Medical office condos in Northern Virginia are a niche within a niche. The broader office market has been recovering slowly, with vacancy in the region hovering around 21% and average asking rents in the Vienna and Tysons submarket running approximately $36 to $40 per square foot for Class A space.

On the investment side, medical office cap rates nationally are ranging from 5.5% to 8.5% in 2026, with institutional-quality properties averaging around 6.3%. Single condo units will trade at the wider end of that range, typically between 7% and 8.5%, depending on lease term, tenant credit, and buildout quality.

Recent comparable transactions in Northern Virginia bear this out. Medical condos with long-term NNN leases to creditworthy tenants have traded in the $350 to $410 per square foot range. Properties with shorter lease terms or weaker tenant profiles are pricing lower, often in the $300 to $350 range.

The takeaway is that lease term is the single biggest driver of value for a medical condo. Everything else, including location, buildout quality, and parking, matters. But nothing moves the needle like the length and quality of the income stream behind the unit.

The PE-to-PE Risk That Nobody Talks About

This is the variable I see physician-owners underestimate most.

When you sold your practice to a PE group, you entered into a lease with a specific entity. But PE groups have finite hold periods, typically three to seven years. If that group sells your practice along with dozens of others to another PE platform, the tenant entity on your lease may change.

Whether that change requires your consent depends entirely on your lease language. Some leases allow assignment without landlord approval in the context of a corporate acquisition. Others require written consent. Some have change-of-control provisions. Some do not.

If you do not know the answer to this question, pull your lease and read the assignment and subletting section. If the lease allows the PE group to assign without your consent, you could wake up one morning with a completely different tenant credit profile and no recourse.

This risk is not theoretical. PE-to-PE transactions in healthcare are happening constantly. Dental, ophthalmology, dermatology, orthopedics. If your practice was acquired by PE, the odds of a secondary transaction within the next three to five years are meaningful.

What I Would Do

If I were advising a physician-owner in Northern Virginia with a PE-backed tenant and three to five years of remaining lease term, here is what I would recommend.

First, pull the lease and review the assignment provisions. Understand your exposure to a PE-to-PE transfer before you make any decisions.

Second, confirm the exact square footage of your unit and get a clear picture of current rent versus market rent. If you are 15% to 20% above market, that is a selling point today but a reversion risk tomorrow.

Third, if you are leaning toward selling, do it sooner rather than later. Your story is strongest when you have the most lease term, the most tenant certainty, and the most above-market rent in the bank. Every year you wait, one or more of those advantages erodes.

And fourth, if the tenant is asking for significant TI dollars to extend, do not say yes until you have run the numbers against what the extension actually adds to your sale price. The TI request is not a negotiation. It is a capital allocation decision, and it should be treated as one.

Brian Perry, CCIM, is a Vice President at eXp Commercial and founder of Brian Perry Advisory, specializing in healthcare and medical office tenant representation across Northern Virginia, Washington, DC, and Maryland. If you are a physician-owner considering a sale or need guidance on lease strategy, contact Brian at brianperryadvisory.com or (202) 869-1198.