Discussing the possibilities and future of the intersection of healthcare and commercial real estate
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Trisha’s guest this week is Aiman Shehabi, a private real estate investor who recently worked on a deal with Trisha as a first-time commercial real estate investor. Aiman had purchased the property in 2004 at a high occupancy rate, experienced the 2008-2009 economic downturn, and then held the property during a light rail construction project right in front of the property.
[2:14] An overview of Aiman’s real estate investments
Aiman has worked primarily as an interpreter for the past 30 years, but he has been investing in primarily residential real estate on the side. The property in Phoenix was his first attempt at commercial real estate, and he invested in this property in 2004. The first four or five years was excellent, and then the economic downturn happened and the market changed. Things did not go as planned, and after he sold his commercial property, Aiman went back into his comfort zone with residential investments.
[3:28] The decision to invest in a medical office building
When looking for a commercial property, Aiman was drawn to the medical office building because the healthcare market was booming in Phoenix in the early 2000s. There was an influx of developers, and corporations were relocating offices and headquarters from different states. A large retirement community was also growing in the area, increasing demand for doctors. When Aiman picked up the building back in 2004, the performance was great. It had over 90% occupancy, and all the indicators were in the right place before he made the purchase.
[4:42] The impact of the light rail construction project
Between the 2008 recession and the light rail construction right in front of the building, Aiman lost 50% of the tenants. Suddenly the supply of medical offices was far greater than the demand, and there was a major price correction. The renter rate went down by about 35% and the recovery was a difficult road. The extension of the light rail took a long time, and that made it difficult for the tenants and patients to access the building.
The light rail is now an asset, because people using public transportation have a stop right in front of the building. It was a key selling point in the recent deal. The building also has great bones. It is all brick, so it will stand the test of time.
As it was being built, however, tenants began to vacate. Many of them had clauses in the lease that allowed them to exit if there was any obstruction by the city. They never got back to 90% occupancy – Aiman thinks the highest they achieved was back in 2016-2017 with 62-64% occupancy. He was hopeful that the light rail stop would help, but that part of Phoenix didn’t take off as much as the rest of the city in terms of growth and development.
A rehab facility also went in adjacent to the building, and it attracted a lot of homeless people. The cost of running the building then began to include 24-hour security to make sure that people weren’t loitering in the building. They had incidents with homeless people sleeping in the elevator and putting graffiti on the building, so the maintenance cost continued to increase.
[9:02] Whether Aiman would invest in another medical office building in the future
Aiman hedged his response to this question by saying that it would depend on the location. Over time, he has learned that when you invest in real estate you should pay a little bit more money and make sure you get a prime location. You want something less impacted by changes in the market, because the market will change.
[9:59] Aiman’s first job in medical staffing
Aiman worked for a medical staffing service provider for five years in southern California. He started in operations and gradually moved into sales and development.
[10:26] What Aiman would be doing if he did not invest in real estate
He is interested in technology, and he has been engaged at an investment or strategic advisory level with a lot of startups. With the globalization now, he can work with companies in the U.S. as well as in the Asian market.
[10:59] What Aiman reads and listens to for news and information
Aiman prioritizes staying up-to-date with the news as it unfolds. His primary focus is economics and following the markets in different countries through resources like Bloomberg. When it comes to politics, he watches multiple channels and reads multiple papers. There are different facts reported in sources like CNN, BBC, and Jazeera, so Aiman suggests listening to different views to formulate your opinions and make decisions.
[12:08] What Aiman does daily for self-care
Aiman tries to walk at least 5-7 miles every day, and he enjoys walking on the coast.
[12:36] Whether leaders are born or trained
Aiman thinks it is a bit of both. Some people are born with natural leadership traits. They are sharp and intuitive. Other people have significant expertise in leadership roles where they have acquired a lot of characteristics and qualifications that allow them to be good leaders. At the end of the day, it is what you do with your leadership – how you take care of your team, inspire, and influence other people’s lives.
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