Solo Dental Office: Renew or Buy

We were hired by a solo dental practice in an affluent area of the Valley with almost a year until their lease would expire. Although the client had been in the office approaching 10 years, they were dissatisfied with a few elements of the current property, mostly property maintenance related to the building being in foreclosure.

We began by meeting with the client and determining under what circumstances a relocation might be considered. We then went out to the market and found various options that might fit the requirements as discussed. Over a period of a few months, we toured and met with various property owners and brokers.

After considering more than a dozen options, the tenant decided that based on the comparative costs, pursuing a bank owned office condominium might be a feasible next step for their financial career. We entered negotiations with the bank’s broker and had ultimately come to an acceptable price. During this time, we had maintained conversations with their existing landlord’s agent and prior to their funds becoming non-refundable we made a last-ditch effort “low ball” lease offer to remain as a tenant in the property (provided the servicing agent would address the maintenance issues).

Much to our surprise and excitement, the landlord excepted our proposed terms at less than 50% of the current rental rates with minimal annual increases. Although the purchase option was good, this was even better.

Through strategic planning, mutual trust and patience, we were able to save our client significant money and allowed them to remain in a suite that was ultimately well positioned in attaining their personal and practice goals.

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Perseverance Yields Results

MOB began a relationship with a national health care provider that had a need for a larger facility due to the increased volume of patients. Working through the various obstacles proved to be a challenge we were ready to take head on. 

They were located in a freestanding building with great visibility within a retail center. However, the clinic had outgrown their space. After searching and exploring all other alternatives we determined the best solution was to physically expand their building. This turned out to be one issue after another, but we were determined to work through the issues to deliver our client the best possible solution.

In order to expand, we had to first determine the retail center had a surplus of parking. This meant completing a parking survey of the entire center. After working with the city and an architect we were able to move forward with the ability to park in compliance. Next, we needed to convince the owner of the building to put forth the money required to build the expansion. The current owners were unwilling. Convincing the ownership to sell and finding a buyer that would be willing to fund the tenant improvements for the expansion while still and most importantly providing our client a fair market deal on a new lease was the next step. Success, we delivered on both. However, the obstacles did not end at that point.

After the property was in escrow, we uncovered some additional unforeseen issues that needed to be addressed for our building expansion. The title company could not find the CC&Rs recorded publicly but after an extensive search, we found the original developer of the center from 25 years prior. They were more than gracious to give us everything we needed. Upon reading through the CC&R’s we learned the anchor tenant of the center, who happens to be the largest retailer in the nation, had the ability to control any future construction in the center. Not deterred, we were able to work with this retailer directly to waive this restriction in order for us to expand the building. 

The approval for the expansion was received by the retailer, CC&Rs were amended, the investor closed on the property and our client received a lease for an expanded building with a below market rental rate. 

We will always put forth the effort and resources needed to accomplish our clients’ goals.

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On or Off Campus?

A client came to MOB with a desire to explore the option of moving their office away from a hospital campus. Feedback received was that patients were finding it difficult to locate the clinic and the client was paying an unnecessary premium for being on campus. Additionally, there was a need for greater visibility, ease of access and reduced overhead.

We began our search with three primary focal points: finding a location with visibility from major streets, a location closer to their primary patient base and a reduction in rent. From hundreds of available spaces, MOB narrowed the options to properties that fit the strict criteria – projects that provided building signage on major streets with ease of access.

During our negotiations we were met with several obstacles to overcome. One in particular was the city requirement for medical parking being 6.67:1,000. Unknowingly to the city planners, there is not one class A off campus medical building in this city that could accommodate this parking requirement without some creative solutions. The ultimate solution came from a property that had other existing tenants in the project not using their allotted parking, thus giving us the surplus we needed to pass through the city in compliance.

MOB provided this client with a highly visible location within close proximity to their target patient base, saved them a significant amount of money in the process, and delivered a brand new built out facility paid for by the landlord. The client is now in position for ultimate success.

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Investor Acquisitions

With increasing frequency, investors will call us inquiring as to our opinion of value (of a medical office building) or the timeline of it becoming leased in the future. A local economist named Barry Asmus once said, “Those that live by the crystal ball learn to eat cracked glass”. That being said, no one can be correct all of the time, but we feel that investors continue to call us based on the number of leases we’ve been a party to over the years and our integrity to tell the truth without ‘sugar coating’.

In summary, market knowledge and integrity can be a very valuable resource in commercial real estate and MOB will be bringing both to the medical investment arena in 2013.

While we had previously served only the tenant and buyer segment for owner occupants, we feel that our expanded services into the investment arena will help not only individual investors but many medical providers looking to either sell their buildings or invest in medical real estate. MOB now serves both acquisitions and dispositions of medical office buildings in Maricopa County (i.e., the greater Phoenix area). Please let us know if we can be of service to you in this area.

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Group Practice Desires Better Location for Patients

One of our existing clients knew from the beginning of the process that they were not happy with one of their older locations due to lack of parking and their patients having a difficult time finding the building within the office condominium style complex.

While we may have been able to solve the parking problem through designation of reserved spaces, the governing municipality would not have acquiesced on the signage restrictions. After talking to the landlord about a lease extension, we then had enough time for site selection, contract negotiations and actual construction of the new (future) suite.

Our goal for the project was to secure a new location in close proximity to the existing office and transportation corridors, adding patient parking and prominent signage. Further, the client did not want to increase the budget for monthly rent.

With the desire for prominent signage, we looked at both retail and office buildings. While there were many retail spaces available, it was decided that moving adjacent to a sandwich shop or nail salon would be a detraction from the professionalism and branding that the doctors had worked hard to establish.

Eventually we found a ground floor space in a Class “A” general office building with a landlord willing to provide us with the required parking and signage on the building (adjacent to national credit financial service firms). While we were the only medical users in the building, this worked to our benefit, as there was no parking compression as seen in the previous location.

The landlord was happy to have a good credit tenant with a positive reputation. Our client was happy with the accomplishment of their goals, including the one to not pay any additional rent per square foot.

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