SBA 504 Feasibility Study Case Study: A Two-OR Orthopedic and Pain Ambulatory Surgery Center in Leland, North Carolina, Feasible Conditioned on Surgeon Commitments

A 1.38-acre commercial parcel at 130 Carolina Avenue in Leland, Brunswick County, North Carolina, listed at $787,500 in a T-5 zone within an Opportunity Zone, is the site for a proposed 10,000 square foot, two-operating-room orthopedic and pain management ambulatory surgery center at a $10,000,000 total project cost under an SBA 504 structure of a $5,000,000 bank first lien, a $3,000,000 CDC debenture and $2,000,000 of equity. The project exists because North Carolina law changed: the certificate of need exemption for ambulatory surgical facilities in counties above 125,000 residents took effect November 21, 2025, Brunswick County qualifies at 174,702 residents growing 4.7 percent a year with 36.6 percent of its population 65 or older, and the exemption's price is a statutory covenant that at least 4 percent of annual procedures serve self-pay or Medicaid patients. The center ramps to 2,050 cases in Year 3, covers at 1.09x in Year 2 against an $850,000 reserve-funded first year, 1.63x in Year 3 and 2.30x in Year 5, and breaks even at 1.00x coverage at 1,778 cases. The county's operating room supply is thin and concentrated: the one existing ambulatory OR runs at 101 percent of the state's utilization standard and is owned by the dominant orthopedic group, which is why the determination turns on surgeon commitments rather than on demand. Determination: feasible, conditioned on committed surgeon case volume, the 4 percent statutory test and the exemption compliance file.

Model study prepared by MMCG Invest | Michal Mohelsky, J.D., FMVA | October 4, 2026

MMCG concludes that the two-OR ambulatory surgery center at 130 Carolina Avenue is feasible, conditioned on surgeon commitments. The demand arithmetic is not the question. Brunswick County is one of the fastest-growing retirement destinations on the East Coast, at 174,702 residents in 2025, growing 4.7 percent in a year, with 36.6 percent of the population aged 65 or older, the demographic that consumes joint replacement, sports medicine revision and interventional pain management at the highest rates in medicine. Against that demand the county's surgical infrastructure is thin and was, until November 21, 2025, legally frozen: the certificate of need regime kept ambulatory OR supply to a single dedicated ambulatory operating room at Brunswick Surgery Center, which the state's own utilization data shows running at 1,325 hours against the 1,312-hour standard, 101 percent of capacity, plus shared hospital ORs at Novant and Dosher. The General Assembly's exemption for counties above 125,000 residents opened the door, and the subject walks through it with the exemption's statutory price attached: at least 4 percent of annual procedures for self-pay or Medicaid patients, a covenant the study treats as a hard compliance obligation with its own reporting plan, not a marketing line.

The condition is supply-side, and it is specific. The one entity best positioned to fill a new ASC, EmergeOrtho, the dominant regional orthopedic group with 14 to 15 surgeons in the market, owns the existing Brunswick Surgery Center, and Novant's own two-OR ASC in Leland opens in 2026 alongside its $251,000,000 Leland hospital approved March 30, 2026. A new independent center therefore cannot underwrite ambient demand; it must underwrite named surgeons. The break-even table is the sizing instrument: 1,778 cases hold 1.00x coverage and 1,886 hold 1.25x, so the loan file needs written commitments, with historical case-volume support, covering at least the 1.00x threshold from the sponsoring physician group before the first drawing. With that file in hand, the economics are the strongest in this study series: 1.63x in Year 3, 2.30x in Year 5, and a Year 1 loss of $184,078 fully absorbed by an $850,000 reserve sized to the measured gap of $818,433.

This is an MMCG model study: a complete feasibility analysis performed on a real, publicly listed parcel under a newly effective statute, using public data, prepared to show 504 lenders, certified development companies and physician sponsors how MMCG tests a post-CON-exemption surgery center before the operating agreement is drafted. It is not a client engagement, MMCG has no relationship with the landowner, the listing broker, any physician group or any lender, and the analysis is not an offer, an appraisal or a recommendation. Figures drawn from the listing, the North Carolina statutes and session law, the State Medical Facilities Plan utilization data, CMS CY2026 ASC payment rates, SBA and CDC published debenture pricing and BLS wage data are identified as such. Figures labeled MMCG assumption are underwriting inputs set by MMCG, including the construction budget, which is built from contractor ranges of $550 to $850 per SF for ground-up ASC construction, the case mix, the staffing model and the per-case realization. Items not verified from a primary source at the study date are listed in Conditions and Limitations rather than estimated silently.

The Project will develop a 10,000 SF single-story ambulatory surgery center on the 1.38-acre parcel at 130 Carolina Avenue in Leland, with two Class C operating rooms, one procedure room for interventional pain, four pre-operative bays, six PACU positions, a sterile processing department, imaging with a C-arm, and the administrative and registration core. The clinical program is orthopedic surgery and interventional pain management: total joint replacement at the volumes Medicare has shifted to the ASC setting, arthroscopy of the knee and shoulder, hand and foot surgery led by carpal tunnel release, fracture fixation appropriate to the setting, and a pain line of epidural steroid injections, radiofrequency ablation and spinal cord stimulator trials in the procedure room. The sponsor is a physician-owned entity under a 504 structure, with the physicians as guarantors, occupying and operating its own facility; anesthesia is provided by a contracted group billing separately, which the pro forma reflects by excluding anesthesia professional revenue and cost alike. Licensure as an ambulatory surgical facility, Medicare certification and accreditation follow the exemption pathway, and the compliance file documents the two statutory conditions: county population above 125,000 at the 2020 census, which Brunswick County meets as one of 23 qualifying counties, and the 4 percent self-pay and Medicaid procedure covenant with annual reporting.

Marketing and Sales Strategy

An ASC does not market to patients; it recruits surgeons and then helps those surgeons' patients choose the site of service. The first channel is the sponsoring group's own case migration from hospital outpatient departments, where commercial allowables run far above ASC rates and payers now steer actively toward the ASC setting. The second channel is payer contracting: site-of-service differentials make a new ASC a cost-saving story to every commercial plan in the market, and contracting begins at licensure, not at opening. The third channel is the pain line, which builds daily throughput independent of the OR schedule and feeds surgical conversion. The fourth is the demographic itself: 36.6 percent of the county is 65 or older, Medicare's ASC-payable joint volumes are the fastest-growing segment of orthopedics, and the center's Medicare rates are set by regulation, so volume, not price, is the entire commercial question, which is why the surgeon-commitment condition governs the determination.

Facility Program

The subject is a 1.38-acre commercial parcel at 130 Carolina Avenue in Leland, Brunswick County, North Carolina, listed at $787,500 (LoopNet 25012493), or about $570,652 per acre, zoned T-5 under Leland's form-based code and located within a designated Opportunity Zone. Leland is the growth engine of a growth county: the Wilmington-adjacent corridor west of the Cape Fear River where Brunswick County's subdivision pipeline concentrates, and the corridor Novant chose for its $251,000,000 hospital, approved by certificate of need on March 30, 2026, and its own two-OR ASC opening in 2026. The study reads Novant's siting decisions as third-party validation of the corridor and as the competitive clock on the subject's timeline in equal measure.

Brunswick County's demographics are the demand engine: 174,702 residents in 2025, up 4.7 percent in a single year, among the fastest growth rates on the Atlantic coast, with 36.6 percent of residents aged 65 or older. The site's liabilities are ordinary and listed: the parcel's utilities, stormwater and any wetland constraints require the survey and geotechnical work carried in the budget, and T-5 permissibility for an ambulatory surgical facility requires the Town of Leland's written zoning confirmation, a condition precedent.

The regulatory architecture is the reason this study exists, and it is stated precisely. Until late 2025, a new ambulatory surgical facility in North Carolina required a certificate of need, and the State Medical Facilities Plan governed OR supply county by county. Session law created an exemption, codified at G.S. 131E-176(21a) and effective November 21, 2025, for ambulatory surgical facilities in counties with more than 125,000 residents at the 2020 federal census, a threshold 23 counties meet, including Brunswick and, in the study's sensitivity set, Johnston. The exemption carries a statutory condition at G.S. 131E-147.5: the facility must provide at least 4 percent of its annual procedures to self-pay or Medicaid patients, and the study carries that covenant as a binding operating constraint with a compliance plan, because a facility that fails the test risks the exemption that is its license to exist. SB 1040, a bill that would revisit the exemption framework, has sat in Senate Appropriations since May 13, 2026; the study carries it as a monitored legislative risk and not as a base-case change, and notes that the subject's position strengthens if it is licensed before any amendment. Licensure by the Division of Health Service Regulation, Medicare certification as an ASC, and accreditation complete the pathway.

Municipal water and sewer are carried as available at the Carolina Avenue frontage subject to the town's confirmation, with connection fees inside the sitework allowance. Property tax is modeled at $77,000 per year on a stabilized assessment near project cost at a combined Leland and Brunswick County rate of about $0.85 per $100, an MMCG assumption pending the assessor's practice for medical facilities. The Opportunity Zone designation may offer the sponsor's investors capital-gains benefits that are tax matters outside this study's scope; the study notes the designation and prices nothing for it.

The primary service area is Brunswick County's northern corridor, Leland, Belville and Navassa, with the full county as the secondary area and specific leakage across the river to Wilmington's established surgical infrastructure. The county's 174,702 residents and 4.7 percent annual growth are primary-verified; the 65-and-older share of 36.6 percent is the single most important number in the demand file, because orthopedic and pain utilization concentrates in exactly that cohort, and because Medicare's migration of total joint replacement to the ASC payable list converted that cohort from a hospital constituency into an ASC constituency. Payer-mix implications follow: a Medicare-heavy surgical book at regulated rates, a commercial layer from the working-age growth population, and the statutory 4 percent self-pay and Medicaid floor, which the model carries at 5 percent of procedures to hold margin above the covenant.

The supply side is the sharpest part of the demand case, because the state publishes it. The State Medical Facilities Plan's utilization inventory for Brunswick County shows one dedicated ambulatory operating room at Brunswick Surgery Center operating 1,325 hours against the 1,312-hour standard, 101 percent of the state's own utilization benchmark; Novant Brunswick Medical Center with one inpatient OR and four shared ORs; and Dosher Memorial with two shared ORs. Into that inventory, Novant's Leland ASC adds two ORs in 2026 and the subject adds two more with a procedure room. The demand question is therefore whether the county's growth and the HOPD-to-ASC migration fill four new ORs, and the arithmetic says yes with room: a county of 174,702 with a 36.6 percent senior share generates ambulatory surgical demand measured in the tens of thousands of cases, the existing dedicated capacity is saturated by the state's own measure, and the subject's Year 3 program of 2,050 cases represents a single-digit share of county demand. What the arithmetic cannot do is assign surgeons, which is the determination's condition.

The ramp is an MMCG assumption: Year 3 surgical volume of 820 cases across two ORs is 410 per room, a third of the 1,250-case capacity convention, and the pain line of 1,230 procedures runs in the procedure room, so the model succeeds at utilization levels a committed surgical group clears without strain.

MMCG identified four surgical facilities in the county and the announced entrant. Verification rests on the State Medical Facilities Plan inventory and public announcements, as flagged.

Competitor Number 1 Brunswick Surgery Center This ambulatory surgery center is located in the county with one dedicated ambulatory operating room recorded at 1,325 annual hours against the 1,312-hour standard, 101 percent of the state utilization benchmark. It is owned by EmergeOrtho, the dominant regional orthopedic group with 14 to 15 surgeons in the market, which makes it simultaneously the proof of demand and the subject's recruiting constraint.

Competitor Number 2 Novant Health Brunswick Medical Center This community hospital operates one inpatient operating room and four shared operating rooms per the state inventory. It is the county's hospital surgical platform and the HOPD setting from which commercial cases migrate.

Competitor Number 3 Dosher Memorial Hospital This small hospital in Southport operates two shared operating rooms per the state inventory, serving the county's southern coast.

Competitor Number 4 Novant Health Leland Ambulatory Surgery Center This two-OR ambulatory surgery center opens in Leland in 2026 alongside Novant's $251,000,000 Leland hospital, approved by certificate of need on March 30, 2026. It is the subject's direct competitor in geography and timing, with a health system's payer leverage and employed-physician pipeline.

Wilmington's surgical infrastructure across the Cape Fear River is the historical destination for Brunswick County cases and is noted as the leakage pool the subject repatriates rather than enumerated facility by facility.

Medicare's CY2026 ASC payment system anchors the rate card: a conversion factor of $56.322 produces facility payments of $9,393 for total knee arthroplasty (27447), $9,614 for total hip (27130), $13,964 for revision knee (27487) and $948.66 for carpal tunnel release (64721), with the pain line in the neighborhood of $483 for a lumbar epidural, $953 for a stimulator trial and $387 for a facet injection. Commercial allowables above Medicare and the implant economics inside each joint case lift the realized averages the model carries: $10,800 per joint case, $3,900 per other orthopedic surgical case and $780 per pain procedure, blended across a payer mix of commercial 55 percent, Medicare 35 percent and Medicaid, self-pay and other 10 percent, with the statutory 4 percent floor satisfied inside that last band at a modeled 5 percent of procedures. All three realized averages are MMCG assumptions built on the published Medicare rates, and payer contracting outcomes are a condition. Rates escalate 2 percent per year in the model.

Location: 130 Carolina Ave, Leland, NC 28451 Units: 10,000 SF

Source: Marshall & Swift CoreLogic, MMCG

Hard cost of $638 per SF sits inside the contractor range of $550 to $850 for ground-up ASC construction, equipment of $1,150,000 sits at the top of the $750,000 to $1,000,000 two-OR convention because the joint program requires instrumentation depth, and the $850,000 reserve is sized to the measured Year 1 gap of $818,433 with $31,567 of margin. Every construction and equipment line is an MMCG assumption against the stated ranges, which is what a model study of an unbuilt facility can honestly claim.

Loan Assumptions

Debenture fees are carried at the published schedule: CDC servicing at 0.625 percent, central servicing agent at 0.100 percent, SBA annual fee at 0.209 percent for FY2026 loans falling to 0.203 percent for FY2027, and the 0.50 percent upfront SBA guarantee fee, all embedded in the 6.54 percent effective rate and the $77,000 fee line.

The Project finances land, construction and long-lived equipment for an owner-occupied operating business, the core 504 use case. The borrower contribution of 20 percent exceeds the 15 percent required of a business in operation two years or less and covers the possibility that the CDC classifies an ASC as a limited or special purpose property, which would itself require 20 percent, so the structure is robust to the classification either way. The job opportunity standard of one job per $95,000 of debenture for loans approved on or after October 1, 2025 implies about 32 jobs against the center's roughly 20 to 24 full-time equivalents at stabilization; the study therefore carries qualification under a public policy goal, modeled as a design reducing energy consumption at least 10 percent against the applicable code baseline on new construction, with the CDC's acceptance a condition, and notes the Opportunity Zone location for the CDC's community development analysis. Physician ownership is permissible under the program's ordinary eligibility rules, the operating company occupies the property, and the guarantors are the physician principals.

The Year 3 operating budget at 2,050 cases is built for a two-OR orthopedic center with a joint program.

Payroll is anchored to the published North Carolina wage set: registered nurses at an $86,270 mean, surgical technologists at $60,920, and certified registered nurse anesthetists at a $224,610 median noted for context and excluded because anesthesia is contracted and separately billed. The implant line is the budget's governing variable: joints carry $4,000 to $5,000 of implant cost each, and the 26 percent supplies ratio holds only with disciplined vendor contracts, which is why the sensitivity grid prices a 10 percent expense overrun explicitly.

The Year 1 gap of $818,433 is funded from the $850,000 reserve. Coverage of 1.09x in Year 2 is the file's weakest number and is stated as such; it is the year the surgeon commitments must already be producing, which is why the commitments are a closing condition rather than a marketing plan. From Year 3 the center's 22.4 percent margin and 1.63x coverage reflect what the ASC model is: the lowest-cost surgical setting in American healthcare, paid accordingly, with operating leverage that turns each case above break-even into margin at better than 60 cents on the revenue dollar.

At Year 3 pricing, fixed operating costs are $2,235,000 and variable costs run 34.5 percent of revenue across supplies, implants, drugs and billing, at a blended $2,530 of revenue per case.

The 1.00x threshold of 1,778 cases is the number the surgeon-commitment file must cover: roughly 710 surgical cases and 1,070 pain procedures at the model's mix, a book of business that two committed orthopedic surgeons and one interventional pain physician generate in an ordinary year. The thresholds sit at 87 and 92 percent of forecast, closer than the coverage multiples suggest, because an ASC's operating leverage cuts both ways, and the study says so.

The grid isolates the credit's single point of failure: volume. Rate compression, cost overrun and rate rises each cost coverage and each holds above 1.00x; only a 17 percent volume miss breaches it, landing at 0.82x. The joint-halving case is the subtler warning: joints are 6 percent of cases and about 27 percent of revenue, so the commitment file must name the joint surgeons specifically, not orthopedic volume generically.

The determination of feasible is subject to the following conditions precedent:

The following items could not be verified from a primary source at the study date and are disclosed: the parcel's utilities, stormwater and wetland status; the Leland and Brunswick County tax treatment of the facility; Novant Leland ASC's exact opening date and case mix; the commercial allowables behind the realized per-case averages; the construction and equipment budgets, which are MMCG assumptions within stated contractor ranges; and the status of SB 1040 beyond its committee posture at the study date.

This model study applies the methodology described on MMCG's ambulatory surgery center feasibility study and medical feasibility study pages. MMCG prepares ASC and medical facility feasibility studies for SBA 504 and 7(a), USDA and conventional lenders nationwide, with fixed-fee engagements quoted by facility type and delivery in 9 to 16 business days.