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Reimagining Healthcare Real Estate Through Nonprofit Ownership Structures

August 18, 2026
Greg Markvluwer, MBA Avatar
Greg Markvluwer, MBA
Vice President, Real Estate Development

As healthcare providers face mounting pressure to control operating expenses while expanding access to care, real estate strategy has become an increasingly important lever for reducing long-term occupancy costs. One often overlooked approach is the strategic partnership between healthcare real estate developers and qualified nonprofit organizations that can own the underlying real estate.

When structured appropriately, nonprofit ownership can unlock two powerful financial advantages:

  1. Access to tax-exempt bond financing
  2. Exemption from real property taxes

Individually, each benefit can materially lower the cost of occupancy. Combined, they can create significant long-term savings that improve the financial sustainability of healthcare facilities.

The Power of Tax-Exempt Financing

Tax-exempt bonds generally provide lower interest rates than conventional taxable debt because investors do not pay federal income taxes on the interest they receive. This tax advantage allows nonprofit owners to borrow capital at a lower cost.

For large healthcare projects, even a modest reduction in borrowing costs can translate into millions of dollars of savings over the life of the financing. Lower debt service requirements ultimately flow through to lower occupancy costs for tenants and operators.

Instead of allocating additional dollars toward interest expense, healthcare organizations can redirect capital toward patient care, technology investments, clinical programs, and workforce development.

Property Tax Exemption Creates Ongoing Savings

The second major advantage is the potential elimination of real estate taxes.

In many markets, property taxes represent one of the largest components of facility occupancy costs. While developers and healthcare providers often focus on construction and financing expenses, annual property taxes can create a substantial long-term burden.

When a qualified nonprofit entity owns and operates the real estate for charitable healthcare purposes, the property may qualify for exemption from local property taxes. These savings continue year after year and are particularly impactful in jurisdictions with high assessment values or escalating tax rates.

Unlike many cost reduction initiatives that require operational changes, property tax exemption creates a structural reduction in occupancy costs from day one.

The Combined Impact on Occupancy Costs

The most compelling opportunity occurs when both benefits are realized simultaneously.

A healthcare facility financed with tax-exempt bonds and benefiting from property tax exemption can experience a materially lower ownership cost structure compared to a conventionally financed taxable project.

The result is:

  • Lower annual debt service
  • Reduced or eliminated property tax expense
  • More predictable occupancy costs
  • Enhanced project feasibility
  • Increased flexibility for future healthcare investments

For healthcare providers operating in an environment of declining reimbursement and increasing labor costs, these savings can help preserve margins without compromising patient care.

Aligning Mission and Economics

Beyond the financial benefits, nonprofit ownership structures can create alignment between real estate and community healthcare objectives.

When the ownership model is designed around a charitable mission, capital can be deployed more efficiently in support of community health initiatives, expanded patient access, and long-term healthcare infrastructure needs.

This approach demonstrates that healthcare real estate strategy can serve as both a financial tool and a mission-enabling platform.

Looking Forward

As healthcare organizations continue to evaluate ways to reduce operating costs and improve capital efficiency, nonprofit ownership models deserve greater consideration. By combining tax-exempt financing with potential property tax exemptions, healthcare real estate projects can significantly lower occupancy costs over the life of an asset when structured with a nonprofit ownership entity.

In an industry where every dollar saved on facilities can be redirected toward patient care, workforce investment, and clinical innovation, the strategic structuring of ownership may prove to be one of the most impactful financial decisions made during project development.

The future of healthcare real estate may not be defined solely by how buildings are designed and constructed, but by how they are owned and financed.

Greg Markvluwer, MBA

Vice President, Real Estate Development

LET’S TALK

The right real estate strategy can unlock value well beyond the building itself. Contact ERDMAN to explore innovative ownership and financing approaches that can lower occupancy costs, strengthen project feasibility, and put more resources toward what matters most: delivering care.

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