In February, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) shed additional light on their proposed rule that changes how lease agreements are treated for accounting purposes. The proposed rule, originally published in an exposure draft on August 17, 2010, treated all lease agreements as capital lease agreements for accounting purposes. The proposed rule was originally met with criticism by most in the accounting and real estate industries.

After receiving an overwhelming amount of comments questioning the proposed rule, FASB and IASB reconsidered some of the more controversial sections of the proposed rule. In February, FASB and IASB announced that they would consider a two-model approach for accounting leases: finance leases and “other-than-finance” leases which more closely mirrored the current practice of accountants when considering capital lease agreements as distinct from operating lease agreements. (more…)

Many large construction projects, including hospitals and health care facilities, utilize a Fast Track project delivery process. The goal of the Fast Track method is to bring a facility from concept to reality in a fraction of the time of a normal building project. Naturally, this process provides certain benefits and risks that an owner of the project must be comfortable with.

The Fast Track process saves time by engaging the contractor prior to the completion of design. Generally, the contractor is compensated using a “Cost Plus the Contractor’s Fee” method, often with the contractor giving a Guaranteed Maximum Price (GMP). (more…)

 If you are a tenant in a medical office building and do not appreciate the difference between “rentable” area and “usable” area you may be paying more (or less) rent for the space than what is fair and reasonable.  In May, the Building Owners and Managers Association (“BOMA”) updated its measurement methodology for office buildings.  This is an important development for all landlords and tenants of multi-occupant office buildings, including medical office buildings.  The prior version was initially published in 1996. The new standard, referred to as ANSI/BOMA Z65.1-2010, is a substantial improvement over its predecessor.  I believe that the use of the new standard will result in better measurement practices and a higher degree of accuracy in determining rentable areas for tenants.  (more…)

In 2010, a number of decisions were handed down by state courts reviewing property tax exemptions for hospitals and healthcare providers.  Out of those decisions, the opinion by the Illinois Supreme Court in Provena Covenant Medical Center v. The Department of Revenue deserves special attention. In its opinion, the Illinois Supreme Court reviewed the facts surrounding a property tax exemption valued at $ 1.1 million sought by Provena Covenant Medical Center (“Provena”) for its real estate located in Urbana, Illinois. (more…)

Catholic owners of real estate often require, by imposition of written use restrictions in leases, deeds and recorded covenants, adherence to the Ethical and Religious Directives for Catholic Health Care Services (the “ERDs“).  The ERDs were promulgated, and are occasionally modified by, the United States Conference of Catholic Bishops.  The ERDs are  binding upon all Catholic hospitals and other Catholic health care providers and compliance by the Catholic provider is not discretionary.  (more…)