From Dental Practice Owner to Commercial Property Investor: A Full Asset Lifecycle Case Study

Aug 20, 2021

5 min read

Updated: Aug 18

Most dental practice owners think of their property as part of their business. The clinic is where the patients come, where the equipment lives, where the team works. The building exists to serve the practice. When the practice is sold, the building is sold with it, or vacated.

This case study is about a client who took a different path, and the SURVPROP advisory that made it possible. Working across two dental practice premises in Hulme and Salford, SURVPROP transformed a set of operational clinical assets into investment-grade commercial freeholds generating long-term rental income from strong healthcare sector tenants. The client exited his dental practice businesses. He kept the buildings. He became a commercial property landlord, and the portfolio has since been sold to one of the largest dental groups operating in the UK.

This is what a full asset lifecycle looks like in practice.

Stage 1: The Refurbishment Instruction

The client had built up a portfolio of dental practices in Hulme and Salford over a number of years. Each practice occupied its own premises, owned by the client, and operated as a working clinical environment. SURVPROP was instructed to refurbish the existing dental clinics.

The brief was not simply to modernise the clinical fit-out. The design of the refurbishment incorporated dedicated training facilities and seminar areas alongside the clinical and administrative spaces. This was a deliberate strategic decision. A dental clinic that also provides training space is a different asset from a clinic that does not: it attracts a different category of occupier, it generates a different mix of income, and it positions the building within the broader professional education market as well as the healthcare sector.

SURVPROP managed the refurbishment programme across the portfolio, overseeing the works to deliver clinical spaces that met regulatory and operational standards alongside modern training and seminar accommodation.

Stage 2: Tenant Procurement and Multi-Let Strategy

With the refurbishment complete, SURVPROP worked with the client to bring additional tenants into the buildings to occupy the newly created training and seminar spaces alongside his own dental practice operations. The incoming tenants included a dentistry training company and freelance training providers operating in the professional education and clinical skills sector.

This was not a conventional multi-let office play. The tenants were carefully selected for their fit with the building's clinical character and with each other. A dentistry training provider occupying space in a building where a dental practice also operates is not simply a co-occupier. The uses are complementary. The building develops a professional identity within the dental and healthcare education sector that makes it more attractive to future occupiers of the same type, and more defensible in the event of a vacancy.

The client continued to operate his dental practice businesses from the buildings during this period. SURVPROP managed the asset, overseeing the mix of uses and the relationships between the occupiers.

Stage 3: Lease Structuring

With tenants in place and the buildings performing as multi-let healthcare and professional education hubs, SURVPROP negotiated the formal lease terms across the portfolio. The leases were structured to maximise the investment quality of the income stream:

Term. 15 years on each letting, providing the long income that institutional property investors require.

Rent reviews. Structured into each lease at appropriate intervals to provide income growth over the term.

Landlord step-in provisions. Built into each lease to protect the asset owner in the event of tenant operational difficulties. In a healthcare context, step-in provisions are particularly important. If a tenant operating a clinical or training business from specialist premises encounters difficulties, the landlord needs the contractual ability to step in and either operate or manage that use rather than being left with a vacant specialist unit that is difficult and expensive to re-let.

The covenant quality of the tenants, the length of the leases and the structure of the reviews combined to produce an income profile that is legible and attractive to professional property investors. These are not short-term licences or rolling arrangements. They are long commercial commitments from businesses operating in a sector with strong and growing demand.

Stage 4: The Client's Exit from Practice

After a period of SURVPROP asset management with the buildings performing as multi-let professional hubs, the client made the decision to exit his dental practice businesses. The clinical operations were sold. The client did not sell the buildings with them.

This is the step that most dental practice owners never take, because they have never been advised to think about their property and their practice as separate assets with separate exit strategies. The dental practice is a business. Its value is tied to its goodwill, its patient list, its clinical team and its contracts. The building is a property asset. Its value is tied to its location, its income and its lease structure. These two things can be separated, and separating them in the right sequence produces better outcomes for both.

By the time the client exited the practices, the buildings were already repositioned. They were not vacant clinical units dependent on a single occupier who had just left. They were multi-let commercial properties with diversified income from strong healthcare sector tenants on 15-year leases. The client stepped out of dentistry as a practitioner and into property as a landlord, without any period of vacancy or income interruption.

Stage 5: The Investment Exit

With the portfolio under SURVPROP management and performing with long leases and strong tenants in place, the exit was completed.

The healthcare property sector attracts significant institutional investor interest. Long-leased, freehold healthcare assets with good covenants trade at competitive yields because the income characteristics are compelling: essential services, regulated sector, sticky occupiers who are expensive and difficult to relocate, and a demand backdrop that is structural rather than cyclical. A pair of healthcare freeholds in Hulme and Salford, with 15-year leases from professional healthcare and education sector tenants, is an investment-grade proposition.

The quality of the income justifies institutional pricing, and a buyer at that level was exactly what the asset's income profile attracted.

The sale completed the transformation that began with a refurbishment instruction: dental practice buildings, repositioned through tenant strategy, lease structuring and active management into a healthcare investment that would appeal to a investor at institutional pricing.

The SURVPROP Lifecycle

This case study illustrates the full range of services SURVPROP delivers, and why the sequence matters as much as the individual components.

The refurbishment was not just a building works programme. It incorporated a tenant strategy that would determine the buildings' future income profile. The tenant procurement was not just a letting exercise. The mix of occupiers was designed to build a coherent professional hub with a defensible identity in its sector.

The lease structuring was not just a standard commercial letting. It was designed to produce an income stream legible to institutional investors at the exit stage. The asset management was not just maintenance and rent collection. It was active oversight of the buildings' performance through the period between letting and exit. The exit advisory drew on SURVPROP's understanding of the investment market for healthcare assets and the client's long-term objectives.

None of these stages works in isolation. A refurbishment without a tenant strategy produces a better building and nothing more. A tenant strategy without lease structuring produces income that does not hold its value. Lease structuring without asset management produces documentation without performance. And a portfolio without exit advisory never realises its full potential value for the owner.

SURVPROP advises at every stage of the asset lifecycle, from the first instruction through to the final disposal. If you own operational property, whether in healthcare, professional services or any other sector, and you have not considered the distinction between the value of your business and the value of your property, we would welcome the conversation.