Insights  / Case Study

TOI Combines Liquidity and Private Equity for Expansion

The Orthopaedic Institute (TOI) was poised for growth. In 2018, it was the second-largest independent orthopedic practice in Florida, with 30 physicians and 4 medical offices in Alachua, Gainesville, Lake City, Ocala, and one coming soon to Orlando, as well as an orthopedic surgery center in Gainesville co-owned in a joint venture with AmSurg, a national surgery center operator.

TOI averaged more than 106,000 annual patient visits, offering services covering the spectrum of musculoskeletal care, from prevention and diagnosis to treatment, surgery, and rehabilitation. 

The buildings were all built in the 2000s or later, and comprised 103,393 square feet. The properties were 100% owned and anchored by TOI and its JV partner. 

TOI was actively seeking a private equity partner to help take its plans for expansion to the next level, and in anticipation, the physician owners felt it was a good time to sell its properties in order to gain additional liquidity.

TOI Gainesville Map - Remedy Medical Properties

A Creative Sale-Leaseback Arrangement

Remedy offered to purchase TOI’s portfolio of five existing buildings from the physician-owners and long-term lease them back to the organization. Remedy also worked with their joint venture partner, AmSurg, to guarantee their interests were taken into account and any concerns were being met.

In the midst of negotiations, TOI was successful in finding a private equity partner: Varsity Healthcare Partners, a private equity investment firm specializing in healthcare with expertise in growing care provider platforms. Remedy adapted the lease structure to accommodate TOI’s new capital structure and worked with TOI and Varsity to ensure the sale was timed appropriately with the private equity transaction process. 

“It’s becoming more common for larger physician groups to partner with private equity investors to support expansion goals. Private equity firms can help expedite negotiations, because they often speak the same language as real estate investors.”

Krysta Bavlsik
Remedy COO/CFO

Under the new lease agreement, Remedy allowed TOI to continue self-managing the medical office buildings and surgery center as they felt was most appropriate. Meanwhile, Remedy took steps to reduce operating expenses by leveraging a national insurance relationship.

A Fruitful Partnership

Because of the success of the initial acquisition, TOI extended its relationship with Remedy a year later with a sale-leaseback of its newly constructed medical office building in The Villages, an affluent suburb of Orlando, bringing the total square footage in the portfolio to 121,787.

“We were able to extend our relationship with The Orthopaedic Institute by purchasing the new facility in Orlando,” says Joe Magliochetti, CIO of Remedy. “It’s evidence of their successful growth plan following their strategic change, and we are pleased to grow alongside them.”

Thanks to the private equity infusion from Varsity, TOI has been able to expand in Florida and now operates 13 locations throughout the state just two years later. The practice also forms the foundation for Orthopedic Care Partners, Varsity’s orthopedic-focused platform investment company. Varsity made equity investments in six high-performing regional orthopedic practices, including The Steadman Clinic, giving them the power of a national operator. Through its relationships with TOI and The Steadman Clinic, Remedy is Orthopedic Care Partners’ largest real estate partner.

The Remedy Advantage

Remedy’s platform and long-standing expertise in healthcare real estate enabled it to be patient and accommodating to meet the exacting requirements of the private equity transaction.

“As private equity takes a greater interest in investing in physician groups, this type of scenario is happening more and more. Remedy has the experience and expertise to help practices navigate the process successfully.”

Joe Magliochetti
Remedy CIO

Remedy can help other physician groups convert assets for greater liquidity while its in-house strategic innovation and advisory firm, Percival, can advise on strategic expansion plans. Get in touch to learn more.