Company History and Overview
Founded in 2007 by Pedro Vergne-Marini, MD, and Jeffery M. Huffman, Physicians' Capital Investments was created to address two important needs: the development and construction of medical office and clinical facilities that could be leased to national credit healthcare companies and/or physician individual practices, with the creation of an investment vehicle that would allow individual physicians and/or employees to own a part of new facilities without personal liability.
In its first three years of operation, PCI has developed and constructed 14 medical office and clinical facilities across the country. Currently, PCI has 11 new projects in development and/or construction. According to its management team, the company's model adopts key attributes of the Dallas Nephrology Associates real estate investment model, which involves fractional ownership in real estate for physicians and its corresponding key healthcare practice employees, where pro rata distributions of profits based on real estate investments are made while increasing employee retention via this employee investment program. The model also borrows from Huffman Builder's medical construction model, which provides customized turnkey building methods. As a result, over 500 physicians have invested in PCI projects. The company's tagline is, "Physicians Investing in Physicians."
The company is currently managed by Pedro Juan Vergne-Morell, CEO and president, Mr. Huffman and Dr. Vergne-Marini, managing members, and Mats Wahlstrom, chairman of the board of managers. Founding members Dr. Vergne-Marini and Mr. Huffman each bring over 35 years of experience in the healthcare industry.
At the end of 2010, Physicians Capital Investments added Mr. Wahlstrom, a move Mr. Vergne-Morell calls "the next step in the growth strategy of our company." With more than 23 years of global experience as CFO or CEO of healthcare companies, "Mats brings a lot of experience in regard to growing companies," he says.
While PCI is expanding in other areas, the company focuses primarily on medical real estate. To begin a project, team members identify a group of physicians who want to become real estate owners of the facility in which they practice, then negotiate a lease with a credit worthy tenant that averages 15 years in length with two five-year extensions. If the project involves a de novo ambulatory surgery center, PCI does site location and starts the process of designing and building a facility, taking on interim construction risks and, if necessary, financing to get the project underway. Historically, PCI projects have ranged from 7,000-20,000 square feet. For the last three years, the company has seen its "bread and butter" in dialysis facilities and medical office buildings. Recently, however, the company has been drawn more into the ASC realm, a change that generally necessitates more square footage.
Once PCI has committed to a project, the company rolls into a permanent loan at a 75/25 debt-to-equity ratio. "For simplicity sake, let's say it's $700,000 of equity that needs to be raised," Mr. Vergne-Morell says. "We'll take the $700,000 and divide it into 100 units at $7,000 a unit. In order for PCI to act as general partner and manage the investment on behalf of the partnership, PCI purchases one unit at the "strike price." The other 99 units (offered through a Reg D private placement) are offered first to physicians in the local project, second to PCI investors and third to people who have invested in other PCI projects but not the company itself. Lastly, the units are offered to other physicians that have expressed interest in PCI deals.
"White Collar Syndication" Services and Company Values
In addition to syndicating new medical buildings, PCI also provides re-syndicating services — also known as "white collar syndications" — to existing real estate owners that allow physician investors to cash-out and re-syndicate their practices and buildings. PCI can also work with physician tenants to modify lease terms or help physicians access the equity that exists within an existing building.
PCI differs from some other companies in that the company does not ask for money from investors up front. "Basically, PCI procures the construction loan and then also secures the permanent financing, and at no time until we actually close on the offering are the physicians of that practice required to put any money down," Mr. Wahlstrom says. "In addition and to date, our projects have secured non-recourse financing, so there is no personal liability or guarantee at the physician/investor level."
The management team at PCI prides itself on the company's transparency, a feature they say is essential for their positive relationships with physician investors. For each project, PCI provides project access via an internet service called Project Path, which provides investors and the healthcare provider/practice a way to access files, images and details of the project as it's going through the construction or planning cycle. PCI also provides a standardized lease agreement, reducing time to market, and a pre-lease formula, which instantly calculates the final lease formula that will be paid by tenants based on known or assumed costs.
In addition to these features, PCI promotes an open book process, in which the company will "true-up" project costs at the end of a project and pass on any savings to the healthcare provider via a pro rata reduction in lease rate.
Finally as part of its full and turnkey solution, when a project closes and the Limited Partnership is created, the single entity investment is managed by PCI. PCI manages all accounting, financial reporting, quarterly distributions, K1s and audits for investors. As part of its investor support, each investor also receives access to their investments through its "MyPhysCap Investor Portal."
Case study: White Collar Syndication
For one of its white collar syndications, PCI planned to release a practice from joint and several (i.e., personal liability) and free up $900,000 in equity that practice partners had to put down to securitize their first mortgage. The team decided the cash would then be used by partners to invest into two new projects, allowing the partners to expand.
The original loan amount was $1.4 million, with a down payment of $400,000 and a total syndication time of three months. The practice re-invested $396,000 (99 units) into the existing project, and the practice and its partners were able to "pocket" $404,000 to use for purchase units in their upcoming vascular access/hemodialysis/medical office facility. At the end of the syndication, partners were no longer liable for the loan.
To learn more about PCI, visit www.physcap.com or call (866) 936-3089 and ask for Jim Turner.
Legal: This document (nor any case studies or examples discussed) is neither an offer to sell nor the solicitation of an offer to buy any security. Investments in the PCI or its projects can only be made through the CPOM in jurisdictions in which such offer or solicitation is authorized, and to persons who meet the requirements and make the representations set forth in the Subscription Agreement and Suitability Questionnaire. The securities offered are exempt from registration under the Securities Act of 1933, as amended, and applicable state laws. Investment into PCI or its projects may be sold by broker/dealers authorized by the issuer to do so. No person has been authorized to give information or to make any representation concerning the securities referred to in this document or on behalf of the issuer other than as contained in the CPOM. Investors are encouraged to consultant tax advisor or legal advisor before making any investment in PCI or its projects.
Founded in 2007 by Pedro Vergne-Marini, MD, and Jeffery M. Huffman, Physicians' Capital Investments was created to address two important needs: the development and construction of medical office and clinical facilities that could be leased to national credit healthcare companies and/or physician individual practices, with the creation of an investment vehicle that would allow individual physicians and/or employees to own a part of new facilities without personal liability.
In its first three years of operation, PCI has developed and constructed 14 medical office and clinical facilities across the country. Currently, PCI has 11 new projects in development and/or construction. According to its management team, the company's model adopts key attributes of the Dallas Nephrology Associates real estate investment model, which involves fractional ownership in real estate for physicians and its corresponding key healthcare practice employees, where pro rata distributions of profits based on real estate investments are made while increasing employee retention via this employee investment program. The model also borrows from Huffman Builder's medical construction model, which provides customized turnkey building methods. As a result, over 500 physicians have invested in PCI projects. The company's tagline is, "Physicians Investing in Physicians."
The company is currently managed by Pedro Juan Vergne-Morell, CEO and president, Mr. Huffman and Dr. Vergne-Marini, managing members, and Mats Wahlstrom, chairman of the board of managers. Founding members Dr. Vergne-Marini and Mr. Huffman each bring over 35 years of experience in the healthcare industry.
At the end of 2010, Physicians Capital Investments added Mr. Wahlstrom, a move Mr. Vergne-Morell calls "the next step in the growth strategy of our company." With more than 23 years of global experience as CFO or CEO of healthcare companies, "Mats brings a lot of experience in regard to growing companies," he says.
While PCI is expanding in other areas, the company focuses primarily on medical real estate. To begin a project, team members identify a group of physicians who want to become real estate owners of the facility in which they practice, then negotiate a lease with a credit worthy tenant that averages 15 years in length with two five-year extensions. If the project involves a de novo ambulatory surgery center, PCI does site location and starts the process of designing and building a facility, taking on interim construction risks and, if necessary, financing to get the project underway. Historically, PCI projects have ranged from 7,000-20,000 square feet. For the last three years, the company has seen its "bread and butter" in dialysis facilities and medical office buildings. Recently, however, the company has been drawn more into the ASC realm, a change that generally necessitates more square footage.
Once PCI has committed to a project, the company rolls into a permanent loan at a 75/25 debt-to-equity ratio. "For simplicity sake, let's say it's $700,000 of equity that needs to be raised," Mr. Vergne-Morell says. "We'll take the $700,000 and divide it into 100 units at $7,000 a unit. In order for PCI to act as general partner and manage the investment on behalf of the partnership, PCI purchases one unit at the "strike price." The other 99 units (offered through a Reg D private placement) are offered first to physicians in the local project, second to PCI investors and third to people who have invested in other PCI projects but not the company itself. Lastly, the units are offered to other physicians that have expressed interest in PCI deals.
"White Collar Syndication" Services and Company Values
In addition to syndicating new medical buildings, PCI also provides re-syndicating services — also known as "white collar syndications" — to existing real estate owners that allow physician investors to cash-out and re-syndicate their practices and buildings. PCI can also work with physician tenants to modify lease terms or help physicians access the equity that exists within an existing building.
PCI differs from some other companies in that the company does not ask for money from investors up front. "Basically, PCI procures the construction loan and then also secures the permanent financing, and at no time until we actually close on the offering are the physicians of that practice required to put any money down," Mr. Wahlstrom says. "In addition and to date, our projects have secured non-recourse financing, so there is no personal liability or guarantee at the physician/investor level."
The management team at PCI prides itself on the company's transparency, a feature they say is essential for their positive relationships with physician investors. For each project, PCI provides project access via an internet service called Project Path, which provides investors and the healthcare provider/practice a way to access files, images and details of the project as it's going through the construction or planning cycle. PCI also provides a standardized lease agreement, reducing time to market, and a pre-lease formula, which instantly calculates the final lease formula that will be paid by tenants based on known or assumed costs.
In addition to these features, PCI promotes an open book process, in which the company will "true-up" project costs at the end of a project and pass on any savings to the healthcare provider via a pro rata reduction in lease rate.
Finally as part of its full and turnkey solution, when a project closes and the Limited Partnership is created, the single entity investment is managed by PCI. PCI manages all accounting, financial reporting, quarterly distributions, K1s and audits for investors. As part of its investor support, each investor also receives access to their investments through its "MyPhysCap Investor Portal."
Case study: White Collar Syndication
For one of its white collar syndications, PCI planned to release a practice from joint and several (i.e., personal liability) and free up $900,000 in equity that practice partners had to put down to securitize their first mortgage. The team decided the cash would then be used by partners to invest into two new projects, allowing the partners to expand.
The original loan amount was $1.4 million, with a down payment of $400,000 and a total syndication time of three months. The practice re-invested $396,000 (99 units) into the existing project, and the practice and its partners were able to "pocket" $404,000 to use for purchase units in their upcoming vascular access/hemodialysis/medical office facility. At the end of the syndication, partners were no longer liable for the loan.
To learn more about PCI, visit www.physcap.com or call (866) 936-3089 and ask for Jim Turner.
Legal: This document (nor any case studies or examples discussed) is neither an offer to sell nor the solicitation of an offer to buy any security. Investments in the PCI or its projects can only be made through the CPOM in jurisdictions in which such offer or solicitation is authorized, and to persons who meet the requirements and make the representations set forth in the Subscription Agreement and Suitability Questionnaire. The securities offered are exempt from registration under the Securities Act of 1933, as amended, and applicable state laws. Investment into PCI or its projects may be sold by broker/dealers authorized by the issuer to do so. No person has been authorized to give information or to make any representation concerning the securities referred to in this document or on behalf of the issuer other than as contained in the CPOM. Investors are encouraged to consultant tax advisor or legal advisor before making any investment in PCI or its projects.