Discussing the possibilities and future at the intersection of healthcare and commercial real estate
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On this week’s episode, we’re highlighting my interview on the DocPreneur Leadership Podcast. Join us as we discuss the business of healthcare, real estate ownership, and best practices according to your patient demographics and investment goals.
The DocPreneur Leadership Podcast covers healthcare insights, news, physician education, and economic analysis about a wide variety of topics in healthcare. It was an honor to be on their show and I can’t wait to share it with you!
[2:33] My path to working with physicians
I worked in an in-house leasing department for a medical office developer that developed, owned, and operated several medical office buildings. I started working with physicians on the leasing side, then moved into third party brokerage and continued leasing work. I began to represent physicians on the tenant side and started getting into investment sales for a lot of physician owned properties, which is now where I spend most of my time. I work with physicians who own their properties, or they own an income generating property with other tenants or partners.
[6:17] Owning a medical facility while still practicing medicine
If you’re looking into owning a medical facility and wonder how you can do that while still practicing medicine, I always suggest having a really good attorney and someone who can handle property accounting. I also strongly encourage physicians to work with professional management services so that they can continue to attend to their practice and patients without any lapse in meeting with vendors for facility needs that arise. Having a professional management team will spare you from the mental, physical, and emotional exhaustion of handling the daily, weekly, monthly, and quarterly needs of your practice, patients, and building all on your own.
You should also always have a lease on your building. I suggest owning it under an LLC that is separate from your practice. There are a variety of lease options to choose from, depending on how you want to operate the property.
[10:00] How to select a real estate broker
As a commercial real estate broker, I specialize in healthcare and work with physicians or investors that are specifically focused on the medical office or health care asset class, which differs from traditional office, land, and retail. There are lenders, developers, architects, contractors and other professionals that specifically work in the healthcare asset class. If you’re going to build a medical building, you definitely don’t want it to be somebody’s first time working with a physician. You have to have certain parking requirements, ADA requirements, and it differs among municipalities.
[12:31] Trends and challenges in healthcare and real estate
If anything good came out of COVID, I think it would be the advent of telemedicine. It can be a very productive tool in completing initial evaluations to determine the level of need for each patient. It can also help organize the physician’s time. A nurse practitioner or PA can help with the diagnostic process and give doctors an estimate of how much time may be needed for each patient or case. Telemedicine can help organize the practice, resources, and help identify the level of license of the practitioner that’s required to address patient needs.
As technology continues to develop, it’s more important than ever that your practice is aware of the demographic that you’re trying to serve. It may be a gross generalization, but the odds are that the younger demographic is going to be looking for more electronic communication and record access, and they’ll potentially be holding healthcare providers more accountable to time sensitivities.
With trends in real estate, med-tail and adaptive reuse is happening more and more. With either med-tail or adaptive reuse, awareness of the patient you’re serving, patient dignity, and mindfulness regarding what types of practices you want in the space are going to be especially vital.
[20:52] Why visibility is key for your practice
Visibility is key for private practice physicians, as well as being located along major drive corridors. A lot of dentists know this, which is why you’ll see a large percentage of dentists on major thoroughfares. As more doctors become entrepreneurial, the importance of location is going to increase. The requirements for a lot of my private practices is visibility: From a business perspective, if you can’t attract patients, then you’re not going to be successful,
[25:31] How to understand the value of your medical facility
When it comes to understanding the value of your medical facility, you’ll want to work with a broker and an appraiser. Brokers will help you understand lease and cap rates and will give recommendations for improvements as well as evaluations for tenant situations and leases. Then appraisers will typically complete a high level overview of the property and comparables.
[27:52] When and how to sell your medical practice
The value of a medical office is based on the tenants, which is what the buyer market for the asset class is really looking at.So I do recommend strategic timing when it comes to selling. Obviously, with market fluctuations, you want to sell at the top of a market versus the bottom. You also want to make sure that the terms on your leases are five years on average, as it’s really hard to find high value in a building that has a lot of month to month leases.
There are investors that will buy a property that has issues or needs updates, but they’re not going to pay top dollar, which is why you’ll want an evaluation to receive a rundown on options, cost of the options, and the different ways that those will affect the value.
[29:43] The process of purchasing a medical office
Real estate is never a straight line, which is why I always suggest building yourself a runway before leaping into a purchase. I suggest starting three years before your lease runs out, so that you can capture all of the options that are available in the market. There are a lot of different avenues to explore and problems to solve, so making any purchasing decisions in a haphazard, ad hoc way is typically a recipe for a very expensive, error-filled experience.
Thank you for tuning into the Providers, Properties, & Performance podcast!