We know a lot about dental and veterinary practices. Our main focus is to ensure the profitability of growing veterinary and dental practices. We also help with the implementation of best practices right across the business. And if you’re just starting out or acquiring a practice, we really can help you make it the best start possible.

Read More

Accounting & Tax

The core of our practice consulting services. The keys to your profitability.

Practice RADAR™

A roadmap that puts your business growth firmly on your practice’s radar.

Blogs

23 Nov

Renewing Your Lease: Important things to know

Posted by Mark McGaunn on Monday, November 23, 2015

By Dave Miller
Carr Healthcare Realty

Leases and lease renewals are not typically conducted on a level playing field. After all, the landlord is in the real estate business and most doctors are not. By planning ahead and having professional representation, it is possible to negotiate a lower lease rate and receive a substantial tenant improvement allowance and free rent.

How does the lease renewal process work?

An important clause found in a standard lease is the renewal option. This allows you to extend your lease for a predetermined amount of time (often three, five or ten years) by giving your landlord advance written notice. Renewal options include terms for specific lease rates, concessions such as free rent and tenant improvement allowance, and whether a new base year for operating expenses will be granted. Whether or not a renewal clause exists in the original lease, all of these terms are negotiable and play a large role in the financial structure of a lease renewal.

Renewal negotiations are most effective when conducted in the proper timeframe, by having multiple viable relocation options, and creating a strong posture to maintain the upper hand.

When should the process begin?

As a rule of thumb, you should begin to consider the renewal process 12 – 18 months in advance of your lease’s expiration. This is recommended so that you can compare all relocation options in the market before your current lease options expire. Tenants who miss their lease options incur more risk. Landlords view this as an opportunity to push rents higher as the window of opportunity to relocate closes. If tenants holdover (stay in the space after the lease expires), they often see penalties of 150 – 200% of their last month’s rent and can also incur damages if they holdover without permission. The bottom line is that if there is not ample time to relocate if necessary, the landlord has a strong upper hand.

What type of cost savings can be achieved through a successful renewal?

If properly negotiated, you can achieve significant rent savings, a build out allowance, free rent and other concessions. It is very common to start a lease renewal term at a lower lease rate than what you are currently paying. In many markets, landlords are offering aggressive concessions and more attractive lease terms to good tenants to keep their buildings leased and avoid vacancies. The amount of overall savings will depend on the availability of competitive vacancies, the efficiencies of the buildings, and your market knowledge and ability to negotiate business points.

What are some common mistakes practices make during the process?

One of the most common mistakes practices make is negotiating without the help of a commercial real estate professional, specifically one who specializes in representing healthcare providers. Some believe they can save money by not using an agent; but to benefit in real estate, leverage is the key to posture. Landlords are in the real estate business and negotiate with professional guidance. Selecting an expert to represent you provides the leverage needed to receive the best possible lease terms. Further, landlords are typically responsible for paying commissions so professional representation is available to you at no out of pocket cost.

Another mistake practices make when entering into a lease renewal negotiation is not being familiar with their current lease terms and risk exposure. Prior to contacting the landlord about a lease renewal, you should be well aware of your current lease terms including every option and deadline. Most leases contain options that must be exercised within a specific time period, typically six to twelve months prior to the lease’s expiration. If you allow this period to pass, you risk losing all rights outlined in the option, which can cause the negotiations to begin at a disadvantage.

How do I calculate what I am currently paying per square foot?  

Knowing what you are already paying per square foot is especially important if you are thinking about renewing your lease. What you are paying now versus what buildings are leasing for in your immediate area can be vastly different, especially if your lease has had automatic escalations in the rate over the term of the lease. The way to calculate your price per square foot is to multiply your monthly rent by 12 months and divide it by your square footage. Keep in mind that NNN or CAM charges (operating expenses for the property) are also calculated the same manner.

Summary

Successfully negotiating a lease renewal is more than bartering, bluffing, or asking for a good deal. Landlords and their professional representatives are in the full-time business of maximizing their profits, even if it means taking advantage of uninformed tenants. You can level the playing field by engaging your own professional representation, gaining competitive market knowledge, and by having multiple options for your office space. When done properly, a well-negotiated lease renewal can have a dramatic impact on your practice’s profitability.

Carr Healthcare Realty is the nation’s leading provider of commercial real estate services for healthcare tenants and buyers. Every year, hundreds of medical, dental, veterinary, and other healthcare practices trust Carr Healthcare Realty to help them achieve the most favorable terms on their lease and purchase negotiations. By not representing landlords or sellers, Carr Healthcare Realty is able to strongly advocate for healthcare providers and avoid conflicts of interest while saving their clients hundreds of thousands of dollars. Carr Healthcare Realty’s team of experts can assist with all types of real estate transactions, including lease renewals, expansions, relocations, startup offices, purchases, and practice transitions. www.carrhr.com

06 Nov

Leveling the Playing Field in Your Next Office Lease Negotiation

Posted by Mark McGaunn on Friday, November 06, 2015

By Dave Miller
Carr Healthcare Realty

The current commercial real estate market has been dramatically affected by the economy in the past several years. This has resulted in a very favorable environment for tenants, as landlords are extremely motivated to attract new tenants and retain existing ones—especially high quality tenants such as healthcare practices. Some of the current opportunities include reducing your monthly rent payment, upgrading your office’s appearance through an improvement allowance, as well as obtaining free rent and other favorable concessions.

One of the keys to a successful negotiation is to take advantage of the free services of a real estate broker or agent. This is important because most landlords are in the business of real estate and typically have the upper hand when negotiating with tenants directly. Additionally, the majority of landlords hire a real estate broker to represent their interests and provide expertise. Though dramatic concessions are available, a specific posture and negotiation strategy are paramount to achieving the best possible terms.

When the time comes to evaluate your current lease situation, you’ll need to consider the pros and cons of renewing the lease in your current location versus relocating to a new property. Since economics and concessions will have a dramatic impact on the decision, it is essential to understand all of your available options and implement a strategy to leverage them. It is critical to the success of your negotiation that your landlord knows that you have the option to relocate, which means that you need to begin negotiations well in advance of your lease’s expiration; ideally 9 – 24 months before your current term ends.

When you begin negotiations, you have two options available to you: You can work with the landlord’s agent and represent yourself, or you can hire a real estate broker. Here are some things you need to know if you choose to represent yourself in a lease negotiation.

Under state law, a real estate broker can enter into an agreement to serve clients as an Agent. An agent is obligated to serve his or her client’s interests with the utmost good faith, loyalty and fidelity. Clearly, it is not practical for an agent to act with utmost loyalty to two parties on opposite sides of a transaction, meaning the landlord or landlord’s broker should not also represent your interests.

Simply put, if you do not bring an agent into the negotiations, no one will be protecting your interests but yourself. If you deal directly with the landlord or landlord’s agent, it is crucial to remember that he or she is not legally or logically in a position to advocate on your behalf, so it is important to exercise discretion with the information you share with the landlord’s agent.

Even if your building’s ownership and management are pleasant to work with, respond to issues quickly, and maintain the building well, their primary interest is maximizing profits. Landlords know that without market knowledge, tenants have no baseline against which to compare a lease offer. Therefore a landlord will most likely offer the highest lease terms that they believe an uninformed tenant will accept.

The only way to know if any offer is truly competitive is to compare it to the market. To do this you need to identify all the available properties which suit your needs, and then tour a significant number of them to determine which ones will be best suited for you and ensure that you don’t miss any opportunities.

You then need to negotiate with the landlord at each property to receive the best offers for a suitable space for your practice. These offers will include terms for the base lease rate and any increases in the lease rate, as well as concessions such as free rent and an improvement allowance. You’ll also need to know the lease terms and concession that new tenants in your current building are receiving from your landlord. At each step along the way, you’ll be dealing with a professional real estate broker who is hired to achieve the best possible terms for the landlord.

If this sounds daunting to handle yourself, you do have an alternative. You can hire an experienced real estate professional as your agent—to act on your behalf with your interests in mind. He or she can provide you with comparable properties’ lease rates, build out allowances, and other concessions, which can then be used as valuable leverage on your behalf in the negotiations with the landlord. Ideally, you should select an agent with experience representing healthcare practices because they will be able to achieve specific terms and concessions that are not generally available to other types of tenants. Your agent will handle all the research and communication with the landlords, while maintaining a professional negotiating posture on your behalf. 

Fortunately for you as a tenant, landlords and sellers have agreed to pay for an agent’s services on your behalf, so it costs you nothing. Commercial real estate is structured similarly to residential real estate. If you were to sell your home, you might list it with a broker and agree to pay a commission. The commission is split between the listing broker and the broker who brings the buyer. If the listing broker is able to find the buyer directly, then he or she would earn a double commission. The same kind of arrangement is made in the commercial real estate market, and you as a tenant or buyer have access to professional representation at the seller’s expense.

Most healthcare providers have plenty to do serving their patients and running a successful practice.  Spending hours on end making sure your lease renewal is competitive and handled properly is typically not the best use of your time. Since professional representation does not cost you anything as a tenant, it makes a lot of sense to let a licensed real estate professional review your lease, represent your interests in your negotiations, and then help you capitalize on the current market conditions so you can achieve the best possible terms.

Carr Healthcare Realty is the nation’s leading provider of commercial real estate services for healthcare tenants and buyers. Every year, hundreds of medical, dental, veterinary, and other healthcare practices trust Carr Healthcare Realty to help them achieve the most favorable terms on their lease and purchase negotiations. By not representing landlords or sellers, Carr Healthcare Realty is able to strongly advocate for healthcare providers and avoid conflicts of interest while saving their clients hundreds of thousands of dollars. Carr Healthcare Realty’s team of experts can assist with all types of real estate transactions, including lease renewals, expansions, relocations, startup offices, purchases, and practice transitions. www.carrhr.com


30 Oct

Assembling the Right Team to Open a New Office

Posted by Mark McGaunn on Friday, October 30, 2015

By Dave Miller
Carr Healthcare Realty

One of the most significant business decisions you will make is the strategic choice of your office’s location. In many markets, the incentives offered by landlords to new tenants make relocation more appealing than renewing a lease in your existing space, and before signing any lease renewal you should evaluate all the options in your area.

If you decide to open a new office, whether as a relocation, new start-up practice, property purchase, or second office, having the right team in place is paramount and can make the process successful, profitable, and maybe even fun!

The unique office needs of healthcare providers 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 aesthetics. When choosing your team, seek out experienced, healthcare-focused professionals to fill each role and you will end up with 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’ needs.

Real estate agent: The real estate agent helps to make sure the entire new office process goes smoothly, and is one of the first 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 the 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 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 is usually no out of pocket cost to you.

Attorney: A real estate attorney plays a critical role to ensure that all the legal terms of the lease or purchase are drafted to protect your interests in the short term and long term. Choosing an attorney who specializes in real estate transactions will help the legal negotiations with the landlord or seller to move faster and thereby reduce legal fees.

Lender: Many office projects will require financing for additional build-out, equipment and furniture, and operating capital, and it is essential to bring in a practice lending specialist. Many major banks now have special departments who exclusively deal with commercial loans for healthcare providers and are able to provide rates and terms not available to other customers. The lender will be closely involved with the agent and the attorney to ensure that the requirements of the underwriters are included in the terms of the lease or sale, and will help to determine the size and quality of office that you can afford.

Architect: An experienced, healthcare-specific architect is the key to transforming your new space into your ideal office. He or she will meet with you, your equipment and technology providers, and building engineers and determine the best way to achieve your design ideas while completing your new office. The architect is responsible for the overall design, obtaining permits and complying with building codes, and is also in charge of 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 will meet your functional and aesthetic requirements.

Equipment and technology providers: If your new office will require new equipment or technologies, your providers will meet with the real estate agent and architect early in the process to ensure that the design can accommodate the new equipment and they will coordinate delivery and installation within the proper timeframe set by the architect. The terms you negotiate during the lease or purchase combined with the loan package you receive will usually determine the amount you can invest in your new office’s initial equipment, so it is very helpful for these providers to work with your lender and real estate agent early in the process as well.

General contractors and sub-contractors: Your architect will be able to recommend several general contractors with a good track record for their quality of service. 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. In either scenario, costs, communication, and service are key determinants in choosing the right contractor.

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 go as smoothly as possible. Having the right team causes the project to be on time and on budget and of the highest quality. Equally as important, having the right team protects your time and frees you to focus on your practice and enjoy your new office.


Carr Healthcare Realty is the nation’s leading provider of commercial real estate services for healthcare tenants and buyers. Every year, hundreds of medical, dental, veterinary, and other healthcare practices trust Carr Healthcare Realty to help them achieve the most favorable terms on their lease and purchase negotiations. By not representing landlords or sellers, Carr Healthcare Realty is able to strongly advocate for healthcare providers and avoid conflicts of interest while saving their clients hundreds of thousands of dollars. Carr Healthcare Realty’s team of experts can assist with all types of real estate transactions, including lease renewals, expansions, relocations, startup offices, purchases, and practice transitions. www.carrhr.com