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In this episode, we talk about…

[2:07] The history of Klingbeil Capital Management

Klingbeil Capital Management has been around for a little over 60 years.  Its founder, Jim Klingbeil, is still very much involved on a day-to-day basis.  They got into the medical space when Jim and Mark decided to buy well-located medical office buildings, put condominium maps on them, and then offer the individual suites to doctors and small 1031 investors who really had nowhere to go with their money.

That was productive for 8-10 assets, and then they started to realize that they had passed on a lot of medical buildings that had very good investment yields.  They thought maybe they should get into the medical office investment business, and their basic business plan was to buy adjacent to hospital campuses.  They did that for a bit, and then the Affordable Care Act came along.  At that point, they realized that in order to survive in this business, you had to have hospital relationships because the doctors and the practices were migrating to the hospital model.  Klingbeil was competing against major medical REITs and other folks, and they did not have a real competitive advantage.  At that point, they decided to get out of the medical office business and back into multi-family.

[4:27] What attracted the company to the medical asset class

Mark shares that Jim may have been swayed by the aging baby boomer population and the corresponding need for more medical services.  In addition, there was a huge market out there for real estate professionals like them to offer investment vehicles to smaller investors for 1031 exchanges.  Those folks have a difficult time finding assets to exchange into.  The 8-10 deals they did do were well-received, but it became harder and harder to find medical buildings that would fit that bill

[7:44] Facing the challenge of tenants wanting short-term leases

A lot of the physicians were not wanting to do long-term leases (five years or longer).  Some even wanted to go month-to-month or do 6-12 months.  Mark explains that you do get attached to tenants, and there would be older doctors that would be unsure about retirement and decide to hang around for another year or so.  They did not want to kick the doctors out, so they would find themselves doing these short-term deals for years on end.

[9:14] Klingbeil’s future plans regarding medical office assets

Mark shares that Klingbeil is essentially out of the medical business.  He, however, would love to work on short-term housing for the medical professionals that work in the hospitals.  They recently finished a big project outside of Denver, immediately adjacent to a hospital, and now they have a program with the hospital to lease units to their medical personnel.  The medical professionals can walk from their units right over to the hospital.

[10:40] Mark’s words of wisdom for those considering stepping into the medical office asset class

If you are Phoenix, Mark advises hiring us! (schedule a strategy consultation here) If you are investing in the medical office asset class, you need to work with people who will manage expectations and be upfront and honest with you.  That will help both sides get to a successful close.

[14:18] What Mark’s day-to-day is like at Klingbeil 

Mark is the head of their multi-family development group.  They develop multi-family communities of 150+ units.  Right now they are heavily focused in the Denver metro area, but they have also developed in Columbus and Washington DC.

[15:08] Mark’s first jobs

Mark did every odd job under the sun when he was a kid.  After college, he went on to law school.  He was a practicing attorney for a while, and then got into the real estate development side of the equation.

[16:16] What Mark would be doing if was not working in commercial real estate

Mark was a high school football coach for almost ten years.  He thinks he would be in a public service job, maybe even teaching, that would also allow him to coach. 

[16:48] What Mark is reading and listening to for news, information, and inspiration

Lately, Mark has been reading scientific journals to learn more about COVID-19.  He also listens to podcasts, and he recommends Word on Fire by Bishop Robert Barron.

[18:12] Mark’s self-care activity

Mark swims – exercise and self-care in one!

[18:30] Whether leaders are born or trained

Watching his nine-year-old son evolve, Mark has noticed that he is very opinionated and wants to take charge of situations.  Mark doesn’t know where he gets that, so he thinks it’s a bit of both.  You are probably inclined that way, and then you have to learn the finer points of how to lead.