Introduction

This article examines the different types of preferential rights in ground leases for medical office buildings, and examines strategies in drafting preferential rights provisions to protect the interests of both ground lessors and ground lessees.  Ground leases are a popular way for hospitals and health systems (collectively, “Hospitals“) to maintain ownership and control of their hospital campus, while also allowing them expand their campuses or monetize equity tied up in Hospital-owned buildings.  Typically, a ground lessee (or, the “MOB Owner“) is either a developer of, or investor in, medical office buildings (“MOBs“) who either develops the MOB or acquires an existing MOB from the Hospital and then subleases space within the MOB to physicians, physician groups or the Hospital itself.  Under a ground lease, typically the MOB Owner holds a leasehold interest in the real property and owns fee title to the building and other improvements located thereon for the term of the ground lease, and upon the expiration of the ground lease, title to the improvements reverts to the Hospital.Continue Reading Exploring Preferential Rights in Hospital Ground Leases