Year: 2019

It can be difficult to discern fact from fiction when dealing with commercial real estate landlords.  A misunderstanding of key issues can have serious consequences affecting the profitability for your practice.  The following information will help you position yourself for successful negotiations with your landlord by eliminating several confusing misconceptions.

Many commercial real estate landlords attempt to befriend their tenants, making it difficult for tenants to remember the landlord’s primary goal is financial gain. They are seeking to secure a lease with the tenant paying as much as possible.  Even the friendliest landlord wants to make the maximum profit on their space, just like the nicest tenant seeks the lowest possible lease rate so their business can thrive.  It’s not personal, its business.

Financial burdens quickly arise for tenants who place undue trust in their landlord and fail to properly negotiate their lease.  By having experienced representation, you can learn how your lease compares to the current market and ensure you are getting the best possible terms.

Representation also removes uncomfortable conversations with your landlord and allows you to focus on running your practice vs. trying to be an expert negotiator. Representation provides you with a much higher chance of preserving your relationship with your landlord because each side is then fairly represented.

An additional layer of confusion commonly occurs when the landlord is also a patient. This often deters the tenant from pushing back against the landlord, as the tenant has a difficult time discerning between wearing the hat of a doctor with their patient vs. a tenant against their landlord. Assuming the tenant doesn’t want to lose the landlord as their patient, how much is that really worth? If the average landlord patient paid a few hundred dollars per year to your practice, how much profit would that net after you factor in overhead and expenses?

Another way to look at this would be to ask the question: ‘Would you rather lose your landlord as a patient and a few hundred dollars per year or keep your landlord as a patient and lose thousands to tens of thousands per year in unnecessary, higher rent payments and additional lost money in concessions?’

For most practices, one patient is not worth losing the amount of money that is on the line in a commercial real estate negotiation.

The bottom line is, if a landlord wants to stop being your patient because you are looking out for your best interests, then that landlord is probably not worth keeping as a patient.  It’s ok if you or your office manager have not been trained to negotiate for a living.  Hiring representation will give you assurance that nothing will be missed in negotiations  and that you will receive the best terms possible.

The reality is that the vast majority of commercial real estate landlords will understand that most practice owners are clearly outmatched against savvy landlords and their teams of agents. Understanding that the landlord is not on your side is the first step to preparing for a successful negotiation.

To find expert representation, contact an agent near you by clicking the following link – Find An Agent.

CARR Healthcare is the nation’s leading provider of commercial real estate services for healthcare tenants and buyers. Every year, thousands of healthcare practices trust CARR to achieve the most favorable terms on their lease and purchase negotiations. CARR’s team of experts assist with start-ups, lease renewals, expansions, relocations, additional offices, purchases, and practice transitions. Healthcare practices choose CARR to save them a substantial amount of time and money; while ensuring their interests are always first. carrusoldtheme.wpengine.com

Some landlords employ intimidation, instead of respect, to achieve their goal of maximizing their returns, including:

• Telling tenants they are not allowed to have representation
• Telling tenants if they do hire an agent the tenant will have to pay them

Neither of these are true, nor are many other tactics they might employ to keep a tenant from representation. Simply put, the Landlord is trying nothing more than to see if the tenant will fold before the economic negotiations have even started.

Without representation retained by the tenant, there is little to prevent a landlord from arbitrarily making up rules in their favor.  Their intent is to avert the tenant from negotiating on a level playing field by preventing them from obtaining necessary market information needed to achieve favorable terms.

It’s doubtful they would even attempt this tactic with large, national tenants. So why would they try this with smaller, less informed tenants? For exactly that reason… they don’t think the independent tenant will push back or know better.

Thankfully, you are reading this article!

Lease negotiations are different than negotiating the price of a car or trying to haggle for a better price at a flea market.  They are complex transactions, layered with hidden opportunities for landlords to take advantage of anyone not represented by an expert.  Landlords are professionals who are aware of these complexities.  If a landlord says you are not allowed to have representation, that is a clear signal they do not respect your desire to be treated fairly.

This isn’t much different than if a doctor told a landlord they had to complete their own diagnosis or perform their own surgery. They wouldn’t accept that response and neither should healthcare tenants or buyers.

Don’t let a landlord or listing agent, who have spent decades perfecting their approach against tenants, dictate the rules of engagement on your next real estate transaction. Understand that you have the right to representation, no different than a landlord has the right to access quality healthcare.

To find expert representation, contact an agent near you by clicking the following link – Find An Agent.

CARR Healthcare is the nation’s leading provider of commercial real estate services for healthcare tenants and buyers. Every year, thousands of healthcare practices trust CARR to achieve the most favorable terms on their lease and purchase negotiations. CARR’s team of experts assist with start-ups, lease renewals, expansions, relocations, additional offices, purchases, and practice transitions. Healthcare practices choose CARR to save them a substantial amount of time and money; while ensuring their interests are always first. carrusoldtheme.wpengine.com

Saving money for your practice the wrong way can lead to diminished patient care, outdated equipment, the wrong location and additional negative results.  Conventional wisdom tells us that spending less money is the most effective approach to saving money. After all, a penny saved is a penny earned and the more you save, the more you have left over. That logic is hard to argue with, but it is not always fool proof.

There are several critical factors often overlooked when a healthcare practice’s primary focus is paying the lowest rent vs. achieving the best combination of overall terms. Let’s look at three factors where paying higher rent could actually increase your profitability.

One important factor often overlooked in the attempt to save money is the cost to build.

Healthcare buildouts often cost two-to-three times more than a typical commercial real estate space. This is attributed to many factors that are unique to healthcare, including:

• More durable finishes
• Millwork and cabinetry
• Plumbing and sinks in exam rooms, sterilization centers and laboratories
• Increased electrical and HVAC requirements (heating, ventilation and air conditioning)
• And several more

Three of these costs alone: HVAC, Electrical and Plumbing, drive up the cost considerably for healthcare buildouts when compared to non-healthcare uses.

With buildout being such a costly expense, many healthcare professionals get themselves into trouble when they only focus on the lowest lease rate. The reason this can be a costly mistake is because the landlord often cares the most about maximizing the property’s income, which is primarily driven by the lease rate.

The NOI (Net Operating Income) is the main number an appraiser or investor looks at when valuing an investment property; which again, is derived from the lease rate.  Savvy landlords recognize this and would often rather invest more money into their space while providing other concessions such as free rent, lower annual escalations and tenant improvement allowance as opposed to lowering their lease rates. To a landlord, lower lease rates devalue capitalization potential should they decide to sell the property.

For example:

• A Landlord has a 2,000 SF vacant space listed for lease at $4,000 per month on a 10-year lease term
• A doctor wants to lease the space for the lowest lease rate possible
• The doctor offers the landlord $3,250 per month to get the lowest monthly rent
• The landlord proposes keeping the rent at $4,000/month but is willing to give the tenant $100,000 and 5 months of free rent to buildout the space plus 3 months of free rent upon opening for business

In this instance, the Doctor would be spending $90,000 more in rent over the 10-year lease term (assuming the landlord would agree to the lower proposed monthly rent). However, the doctor would be better taking the landlord’s higher-rent offer because they would be saving $100,000 on the buildout loan, receiving $12,000 in free rent (plus a free build out period) and saving an additional $27,000 on loan interest expense  (assuming a 10-year loan term at a 5% interest rate). In this instance, the lower rent would have cost the doctor almost $50,000 more in total expenses!

Additionally, with paying higher rent / monthly lease rate, the doctor would receive a higher level of tax deductions as rent is 100% deductible.  Conversely, some of the additional loan costs are not deductible and a portion of what the loan was spent on would need to be depreciated over a longer period of time to account for the build out.

From the landlord’s perspective, this deal is more appealing with the higher lease rate and more concessions because the $112,000 tenant improvement and free rent allowance today will be primarily recaptured through rental income over the lease term. More importantly, it saves the Landlord from devaluing the property by over $128,000 when compared to lowering the lease rate (assuming a 7% cap rate which is a conservative rate in today’s commercial real estate market). This same approach and value carried over the entire property could save the landlord $500,0000 to $1,000,000 on an average sized property at the time of sale.

In this scenario, the landlord is much more likely to perform the transaction while the doctor would save well over $50,000 compared to seeking only the lowest monthly rent! Both the landlord and doctor win.

The steps and details required to build a new office space or open your first practice should always be handled with expert representation.  The right person will be able to help you assemble a skilled team that will help turn your dream into a reality.  It is important to hire representation that has no conflicts of interests and only represents you, the tenant or buyer. Proper representation will ensure you avoid costly pitfalls while saving you a substantial amount of time and money.

Click the button below to begin your free, no-obligation evaluation of your current or proposed terms.  When you do, complete the simple form and an expert broker will contact you right away to help determine the best course for your practice.

CARR Healthcare is the nation’s leading provider of commercial real estate services for healthcare tenants and buyers. Every year, thousands of healthcare practices trust CARR to achieve the most favorable terms on their lease and purchase negotiations. CARR’s team of experts assist with start-ups, lease renewals, expansions, relocations, additional offices, purchases, and practice transitions. Healthcare practices choose CARR to save them a substantial amount of time and money; while ensuring their interests are always first. carrusoldtheme.wpengine.com

To hear more about why it is so important to have expert representation, watch the video below.

Relocating or opening a new medical office is one of the most significant business decisions you can make.  With that decision, there are a number of strategic choices to be made to ensure your success: Should I purchase or lease my space? What are the top location options in my area? Should I purchase an existing practice or start a new office from scratch? Who do I need on my team and who can I trust to help me make the right decisions?

In many scenarios, the advantage of relocating or opening a brand new office can be very appealing if the location, aesthetics or quality of your existing space doesn’t reflect the quality of care you strive to provide. From an economic standpoint, the costs of purchasing your space or achieving favorable concessions in a lease negotiation can make the cost of a new office well worth it.  The same considerations can be true of starting a new medical office versus purchasing an existing practice. These questions and others make it imperative to know how to build the best team to help you open your new office, along with how to make the process successful, profitable and even fun!

Opening a new office can start based upon your unique requirement of: relocating your current office, starting a new practice, leasing or purchase a building, condo or land, or opening a second or additional office. While each transaction may look different, there are some common factors in building a team of experts to assist you.

To start, healthcare providers have unique needs that are foreign to most real estate brokers, architects and other service providers. Experienced professionals with a healthcare focus provide the expertise needed to address issues such as patient flow, privacy and compliance, medical technology integration, parking and accessibility requirements and the aesthetics of an office. When choosing your team, seek out experienced, healthcare-focused professionals to fill each role. Qualified partners will ensure you achieve an office that will serve you and your patients for years to come.

Here are some guidelines and ideas for putting your team together to help you find the best possible location and terms, keep your costs low, and create an ideal office to meet your patients’ current and future needs.

Healthcare real estate agent: A good real estate agent ensures the entire new office process goes smoothly and is one of the first and most important roles you will need to identify and fill. Your agent should provide guidance in choosing the best location, negotiate the most competitive rates and terms with the landlord or seller, and assist in assembling the rest of your team. He or she will be able to advise you on current market conditions, vacancies, costs to open a new office and help you avoid common pitfalls in choosing a suitable space. Should you choose to lease an office, your agent’s experience in representing healthcare tenants can also help you achieve concessions that landlords only make available to the highest quality tenants. If the agent is well-connected within the healthcare community, he or she can also introduce you to the other key players you will need on your team and help them all to work together on your behalf. Your agent’s services are typically paid for by the landlord or seller, so there should be no out of pocket cost to you for hiring an agent.

An important distinction to look for when selecting a medical real estate agent should be their commitment to representing tenants and buyers only. A severe conflict of interest arises when commercial brokers attempt to work for both the tenant/buyer and the landlord/seller. Clearly, it is not possible to fairly represent competing interests. Many agents that primarily work for landlords and sellers will often use a tenant or buyer as an opportunity to seek out new listings or as an avenue to meet new landlords or sellers. Simply put, your interests as a healthcare tenant or buyer are too important to be compromised by an agent who is not committed to your best outcome. Keeping the lines clear as to who your client is and how to help them maximize each opportunity should be the highest priority of any agent you consider. A single focus of representing healthcare tenants and buyers will help ensure your interests are protected, resulting in more favorable economic and business terms.

Attorney: A real estate attorney plays a critical role in leasing, purchasing or opening a new office. They will ensure that all the legal terms of the lease or purchase contract that your real estate agent negotiated on your behalf are drafted to protect your interests in the short and long term. Similar to selecting a real estate agent who specialized in healthcare, you want to choose an attorney who specializes in real estate transactions. A thorough understanding of real estate and corporate law will help the legal negotiations with the landlord or seller move faster and thereby reduce legal fees.

Often times, a healthcare provider will assume you can either hire a real estate agent OR an attorney. The reality is that you need a qualified partner in both categories. Real estate agents should not be providing legal advice any more than attorneys should not be giving you up-to-date market knowledge or negotiating economic terms. Also, if the attorney is spending time on activities that are better handled by a real estate agent, you will end up paying two to three times more than you should for the legal review process.

Hiring an attorney who specializes in representing healthcare providers and who is trained in real estate and corporate law is essential to protecting your interests and increasing the success of your new office project. In addition to reviewing lease and purchase contracts for your office space, there are numerous additional areas and documents your attorney can help you set up and manage, such as your entity, corporate structure and more.

To learn more about opening a new practice, watch the video below:

To find an agent who can help you start your practice, click ‘Find an Agent’.

CARR Healthcare is the nation’s leading provider of commercial real estate services for healthcare tenants and buyers. Every year, thousands of healthcare practices trust CARR to achieve the most favorable terms on their lease and purchase negotiations. CARR’s team of experts assist with start-ups, lease renewals, expansions, relocations, additional offices, purchases, and practice transitions. Healthcare practices choose CARR to save them a substantial amount of time and money; while ensuring their interests are always first. carrusoldtheme.wpengine.com

Relocating or opening a new medical office is one of the most significant business decisions you can make.  In part 1 of this series, we covered the significance of having a healthcare real estate agent and attorney. A good healthcare real estate agent, at minimum, will provide a few important services: guidance in choosing the best location, negotiating the most competitive rates and terms with the landlord or seller and assist in assembling the rest of your team.  An attorney ensures all the legal terms of the lease or purchase contract that your real estate agent negotiated on your behalf are drafted to protect your interests in the short and long term, along with ensuring you have the proper entity structure and more.

The next two roles needed on your team are a lender and architect.  Healthcare providers have unique financial and space plan / layout requirements that are different from general commercial real estate.

Let’s begin by looking at the importance of a healthcare focused lender.

Lender: Many office projects will require financing for additional build-out, equipment, technology, furniture and operating capital. When evaluating your options for a new loan or refinance, it is essential to work with a practice lending specialist who understands healthcare and works with healthcare providers on a regular basis. Many banks now have specialized departments who exclusively deal with commercial loans for healthcare providers and are able to provide rates and terms not available to other traditional businesses and customers.

The lender will work closely with the real estate agent to ensure that the requirements of the lender’s underwriters are included in the terms of the lease or sale. The lender will also help determine the size and quality of office you can afford. While many lenders or banks talk about their desire to work with healthcare providers, it’s imperative to verify that the lender can not only talk about doing healthcare loans but can actually perform and see the transaction through to completion.  Working with a niche lender who has special programs and rates for healthcare professionals, along with a proven track record of performing, is crucial to a successful new office project.

Architect: Anytime you are building a new office, you ideally want to envision yourself in that location or space for a minimum of ten years or more. Your needs may change over time and you may desire to relocate in the future; but having the ability to remain in your space for at least ten years is an ideal option if the location, size and aesthetics still meet your needs.

With any long-term decision, the more you can plan ahead for future growth, the better you will be served. An experienced, healthcare specific architect can help you plan out your future growth needs and create an office environment you will be happy with for years to come. The architect will meet with you and other key members of your team, including your equipment and technology providers. The goal of those meetings is to determine the best way to achieve your vision for your new office. The architect is responsible for the overall design, submitting for and obtaining permits, complying with the design and standards of building codes and will also play a role in coordinating the work of the engineers, contractors and suppliers.

Through constant oversight and communication with the whole team, the architect holds everyone accountable to meet deadlines and makes sure your space is done on time, on budget and meets your functional and aesthetic requirements.

Your healthcare real estate agent will quarterback the first phase of finding your new office, negotiating the most favorable terms possible and assisting you in assembling the most qualified team. Then, your architect should become your next quarterback to direct the design, construction documents, permitting and coordination with the rest of your team. Architects are an integral part of your team that will allow your vision to become a reality.

To learn more about opening a new practice, watch the video below:

To find an agent who can help you start your practice, click ‘Find an Agent’.

CARR Healthcare is the nation’s leading provider of commercial real estate services for healthcare tenants and buyers. Every year, thousands of healthcare practices trust CARR to achieve the most favorable terms on their lease and purchase negotiations. CARR’s team of experts assist with start-ups, lease renewals, expansions, relocations, additional offices, purchases, and practice transitions. Healthcare practices choose CARR to save them a substantial amount of time and money; while ensuring their interests are always first. carrusoldtheme.wpengine.com

Opening a new medical office is an important and exciting endeavor.  A successful project requires expert partners who can function both independently and as a team to help turn your dream into a reality.  The team members we focused on in parts 1 and 2 of this series are a healthcare real estate agent, attorney, architect and lender.

In the final part of this series, we will explore the partnership roles that equipment and technology specialists and general contractors play in the successful launch of your new office.

Equipment and technology providers: The majority of new offices will involve engaging expert equipment and technology partners whose products and instruments will allow you to serve your patients at the highest and most efficient levels. You will want your providers to meet with your real estate agent and architect early in the process to ensure that the new space and design can accommodate the new equipment and technology properly.

Your equipment and technology specialists will coordinate delivery, installation and proper set up within the timeframes set by the architect. They will sign off on the design and construction plans that are created by the architect to ensure what was designed will meet the requirements of the actual equipment and technology. They will also meet with the architect and contractor on site during the construction process to ensure their portion of the new space is being built properly.

The economic terms your healthcare real estate agent negotiates during the lease or purchase, combined with the loan package you receive from your healthcare specific lender will usually determine the amount you can invest in your new office’s equipment and technology. Knowing this, it is very helpful for these key providers to work with your lender and real estate agent early in the process.

General contractors and sub-contractors: Your architect will be able to recommend several qualified general contractors who have a proven track record for delivering quality built-out spaces and buildings to healthcare providers. The contractor has the task of building what was designed—within the budget and on time. Your architect will recommend whether it makes the most sense to hire a general contractor on a negotiated basis or to competitively bid the project to multiple contractors. Cost, communication and service are key determinants in choosing the right contractor in either scenario.

As with any key vendor, the cheapest price is not always the best option. When it comes to partners who have mastered their craft, there is usually an equitable balance between quality, service, timing and price. Looking for the cheapest or fastest partner will many times result in a compromise of the final product.

The best way to verify the strength and integrity of each player on your team is through the community of people you are already working with. When you assemble your team, you want to ensure that everyone is an expert in his or her specialty and collaboratively works together with the goal of making the process as smooth as possible. Having the right team causes the project to be on time and on budget and of the highest quality. Having the right team also protects your time and frees you to focus on your practice and enjoy your new office. Many providers only do one or two new offices in their entire career. Hire the top partners you can, and it can be one of the most rewarding steps in your career.

CARR Healthcare is the nation’s leading provider of commercial real estate services for healthcare tenants and buyers. Every year, thousands of healthcare practices trust CARR to achieve the most favorable terms on their lease and purchase negotiations. CARR’s team of experts assist with start-ups, lease renewals, expansions, relocations, additional offices, purchases, and practice transitions. Healthcare practices choose CARR to save them a substantial amount of time and money; while ensuring their interests are always first. carrusoldtheme.wpengine.com

To learn more about opening a new practice, watch the video below:

To find an agent who can help you start your practice, click ‘Find an Agent’.

Many healthcare professionals desire to own their office space. However, it can often be difficult to find an existing building small enough or priced competitively enough when only a few thousand square feet are needed. Unlike residential real estate, building a few thousand square foot commercial building can be very challenging and cost prohibitive depending on the city or jurisdiction. This is one of many reasons office condos can be a great investment opportunity for healthcare professionals to consider. Let’s look at three advantages that make office condos a desirable option for ownership:

Part 1: Smaller Size Options

The number one reason healthcare providers consider purchasing an office condo is to obtain a smaller space that fits their needs, that otherwise would only be available to lease. When looking for a property or building to purchase, finding a smaller space that is only a few thousand square feet is very rare. Even more rare is finding a small building that is available for sale instead of for lease.

The alternative of trying to develop your own small building is equally challenging. It’s often difficult to locate a commercial lot that is not too large or too expensive when you only intend to develop a relatively small space.  Additionally, several challenges arise with new construction, such as complex hearings, zoning issues and longer development timelines that can easily span up to 18 months or more to complete.  Simply put, new construction can often be challenging when you only need a few thousand square feet.

There are times when you can find a stand-alone building, multi-tenant building or ground-up construction project that does fit your smaller space requirements at a great price. In those situations, use your healthcare-specific real estate agent to fully evaluate all your opportunities and be prepared to capitalize if you can find the diamond in the rough. But for healthcare providers that only need a few thousand square feet, office condos are an excellent option. Whether the project was originally developed as an office condo or is an office building or retail property that was later converted to a condo project, most office condos offer smaller footprints and more competitively priced options for healthcare providers.

Office condos make a great choice for healthcare providers who are looking for the ability to own their space and want to avoid the time-consuming and expensive new construction process. The majority of office condos can be purchased and built out with healthcare specific finishes just as quickly as you could obtain and build out a leased space.

CARR Healthcare is the nation’s leading provider of commercial real estate services for healthcare tenants and buyers. Every year, thousands of healthcare practices trust CARR to achieve the most favorable terms on their lease and purchase negotiations. CARR’s team of experts assist with start-ups, lease renewals, expansions, relocations, additional offices, purchases, and practice transitions. Healthcare practices choose CARR to save them a substantial amount of time and money; while ensuring their interests are always first. carrusoldtheme.wpengine.com

To learn more about CARR, click here.

To see more finished spaces, click here.

For a free lease or purchase evaluation, click here.

To see testimonials from hundreds of satisfied clients, click here.

The financial benefits to owning an office condo for your medical practice may be the best reasons of all. 

#3: Financial Benefits: Costs, Principal Paydown and Tax Deductions

Office condos have a proportionately smaller cost as compared to a stand-alone commercial building. In most jurisdictions, the cost to develop commercial real estate can be two to three times more expensive than developing residential properties. It’s not unusual for a commercial water tap fee (the cost / fee to simply obtain the right to tap into the water system serving that area) to cost over one hundred thousand dollars for even a small commercial building. Development costs like this and others can make building a new property very challenging, especially when you only require a few thousand-foot space.

The same financial benefits of owning a traditional building also exist with owning an office condo. The first and most notable is that with every payment you make, your principle is reduced, and your equity and net worth increases. The next benefit is being able to take advantage of additional tax deductions, such as depreciation. Your practice can still write off the entire lease payment made to the entity or LLC you use to own the property, so the practice still gets the same or even higher deductions compared to leasing. Additionally, as the property owner, you also get to depreciate the space / building.

Owning commercial property can be an excellent way to create an additional asset that is driven by the fact you own a practice. Often, the real estate is worth even more than your practice! Many property owners will also retain the property after they sell their practice to create an additional income stream for years or decades after they transition out of medicine.

And More…

There are several additional benefits of property ownership; including, eliminating landlord negotiations every five, seven or ten years; along with increased flexibility when it’s time to sell your practice. If you are interested in owning your office space, start by hiring an expert commercial real estate agent who specializes in representing healthcare tenants and buyers and will ensure you understand all your available options. Next, confirm you fully understand the economic advantages and responsibilities that come with property ownership by evaluating a detailed purchase vs. lease or purchase vs. purchase comparison. If the economics make sense and you like the property, an office condo can be an excellent option with many advantages in both the short and long term.

CARR Healthcare is the nation’s leading provider of commercial real estate services for healthcare tenants and buyers. Every year, thousands of healthcare practices trust CARR to achieve the most favorable terms on their lease and purchase negotiations. CARR’s team of experts assist with start-ups, lease renewals, expansions, relocations, additional offices, purchases, and practice transitions. Healthcare practices choose CARR to save them a substantial amount of time and money; while ensuring their interests are always first. carrusoldtheme.wpengine.com

To learn more about CARR, click here.

To see more finished spaces, click here.

For a free lease or purchase evaluation, click here.

To see testimonials from hundreds of satisfied clients, click here.