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16 Jun

Leasing and Renewing Your Lease: Important things to know

Posted by Mark McGaunn on Tuesday, June 16, 2015

By Dave Miller
Carr Healthcare Realty

Leasing 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, you can negotiate a lower lease rate and receive substantial tenant improvement allowances 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 (usually five or ten years) by giving your landlord six to twelve months’ written notice. Renewal options include terms for specific lease rates, concessions such as free rent and tenant improvement allowances, and whether a new base year for operating expenses will be granted. All of these terms are negotiable and play a large role in the financial structure of a lease renewal.

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. We have seen a substantial decrease in lease rates over the last two years. 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.

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

If properly negotiated, you can receive significant rent savings and build out allowances. It is very common to start a lease renewal at a lower lease rate than what you are currently paying. As the economy continues to struggle, landlords are offering aggressive concessions and more attractive lease terms to good tenants to keep their buildings leased. The amount of overall savings will depend on the availability of competitive vacancies, the efficiencies of the buildings, the market knowledge of the broker and the broker’s ability to negotiate business points and reduce overall exposure.

What are some common mistakes doctors make during the process?

One of the most common mistakes doctors make is negotiating without the help of a commercial real estate professional, specifically one who specializes in representing healthcare professionals. Some doctors believe they can save money by not using a broker; but to benefit in real estate, you need leverage. 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 responsible for paying commissions, not tenants, so professional representation is available to you at no out of pocket cost.

Another mistake doctors make when entering into a lease renewal negotiation is not being familiar with their current lease terms and 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. As mentioned, 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.

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, they often see penalties of 150 to 200 percent of their last month’s rent and can also incur consequential 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.

Dave Miller is an Agent of Carr Healthcare Realty and specializes in representing Healthcare Professionals with all their real estate needs. Carr Healthcare Realty has successfully negotiated over 600 lease and sale transactions. You can reach Dave at (617)595-6497 or dave.miller@carrhr.com


19 Aug

Converting to Xero for Veterinary Practice Owners

Posted by Mark McGaunn on Tuesday, August 19, 2014

The path our own firm took to being Xero cloud accounting converts was circuitous.

I first read about Xero two years ago, noted it was something to watch, along with Kashoo, FreshBooks, Wave, QuickBooks Online, and Zoho Books, and went back to business as usual on QuickBooks. But I still read surveys and reviews on the cloud products out there, just in case near-perfect accounting software came into being. Since a client started using QuickBooks online back in early 2000, I hadn’t been too enamored with any online accounting systems-they were just too simplistic and exceedingly hard to navigate, even for a CPA. Plus, they catered it appeared to the very small generic business, not those with over $1 million in revenues.

Fast forward to the 2013 VetPartners Mid-Year Meeting in Kansas City. Kelly Baltzell, CEO of the Beyond Indigo Group, ran over to me to discuss the new cloud accounting package Xero. “My accountant is using it, I love it, and I wanted to know if you are using it for your clients too?” Clearly embarrassed by not being an early adopter (Kelly is much cooler than I, so naturally she would be in tune with it), I stammered that I had heard about it and was waiting to get on until I had heard some good user experiences. “You have to start using it!” That’s all I needed.

The rest is history. We converted our own firm’s accounting to Xero in the fall of 2013 and client conversions happened soon thereafter with our goal of being a 100% Xero firm. Our website and marketing packages were redesigned by a Xero partner in New Zealand, and we became uber Xero- friendly, to the point that Michael Carter of Practice Paradox in Wellington, New Zealand is talking about McGaunn & Schwadron’s integrated use of the cloud, Xero and our industry specialization at Xerocon 2014 in Sydney, Australia this week.

Xero provides a host of automated processes designed to help veterinary practice owners by:

  • a)      Enabling veterinary practice financial data to be populated in Xero with minimal effort
  • b)      Making the reconciliation process much faster and cleaner as bank data is shown against checkbook or credit card data, allowing for a “paperless” reconciliation function, and

  • c)      Sharing seamlessly with over 300 add-on cloud programs to round out  

The change to Xero is not free from operational and generational glitches, though. My partner Alan Schwadron, CPA is not a huge fan of Xero because all of the traditional accounting reports that he is used to creating in QuickBooks are not in Xero. I tell him that Xero is for the user, not the accountant. So there is a new mindset change that needs to be adopted when using the program. Two examples:

  1. Die-hard QuickBooks desktop users may be unsettled by the lack of a proper check register, and home pages don’t look like anything they are used to. QuickBooks attempts to throw the kitchen sink at you by adding every icon known to woman to handle any task on its home page. But QuickBooks is not used by veterinarians for the patient revenue cycle of invoicing, payment collection, and managing accounts receivable. That function is ably handled by Cornerstone, Avimark, Impromed, VIA, Stringsoft, or BeeFree, etc. QuickBooks is really used for recording bank deposits, cash disbursements and various expenses incurred through bank and credit card accounts. Xero automates the process much more than QuickBooks in those basic functions, and by using Xero “bank rules” globally, the system learns what accounts to code transactions based on a variety of your pre-determined rules. The Xero “Dashboard” primarily displays bank and credit card accounts both numerically and graphically, really all you need to control the proper recording of most financial activity. As CPAs, we feel that the more icons there are present, the more potential you have to place data where it doesn’t belong. So Xero gives you just enough to get the job done.
  2. Check writing is a cumbersome task in Xero unless you have the logistics figured out. I did not know when I converted to Xero that the check writing functionality was rudimentary and required an add-on partner to complete the task. Why you may ask? Businesses in New Zealand and Australia do not write checks as much as it seems that US and Canadian businesses do. So there is more online bill pay and credit card usage, which lends well to the automated download of disbursement data to Xero. Does it require a mindset shift to think like a Gen Y practice owner? Absolutely yes. Can you still write checks? Yes, the Xero add-on Checkeeper now lets you print on blank check stock, as well as pay bills that were entered into Xero (they just show up in Checkeeper like magic). Checkeeper check templates may not be perfect if you plan on using pre-printed checks (hence the new blank check stock feature), but if you can successfully navigate the setup phase, it works well. And the now subscription site will hopefully have helpful changes.

Once veterinary practice owners embrace the cutting-edge results that Xero offers, they will be converts. I like the fact that client data can export to programs that are informative and easy to use. Dashboard programs like Spotlight and Fathom are great resources, and Xero has both a proprietary payroll system and other outside vendors like ZenPayroll, ADP and SurePayroll that it works with to eliminate manual data entry.

Once you start using Xero, you’ll find more ways to make it more efficient, and you’ll probably even look at the data in it more than before.

Mark J. McGaunn, CPA/PFS, CFP® leads the veterinary/dental/financial planning divisions at McGaunn & Schwadron, CPA’s, LLC and can be reached via mark@mcgaunnschwadron.com or (781) 489-6651.


12 Aug

Keeping a Future Dentist's Dream Alive

Posted by Mark McGaunn on Tuesday, August 12, 2014

My goal in life is to leave a legacy... Isn't that what we're all searching for?  As a future dentist, my goal is to relieve pain and anxiety that patients face regarding their oral health and the appearance of their smile.  I am a second year doctor of dental medicine student at Harvard University and in May 2017, you'll be able to call me Dr. Lauren.  It is a thrilling situation to find myself in--I'm attending my dream school, living in the wonderful city of Boston, and serving my community as Miss Massachusetts and volunteering and raising funds for worthy causes, such as women's education and Children's Miracle Network Hospitals.  Unfortunately, this amazing experience comes with a hefty price tag.  I will be 25 years old when I graduate as a dentist and I will have at least $200,000 in debt.  If I choose to pursue a specialty, it is likely that it will add an additional $300,000 to my debt burden for a grand total of $500,000.  This is intimidating for many students and it is my fear that future dentists are being deterred from their dreams by the extreme cost.

Did you know that graduate students, like myself, pay a higher student loan interest rate than undergraduate students?  In addition, these loan rates are rising (see attached image entitled "loans").  The cost of attendance for my education is about $100,000 per year for four years at the Harvard School of Dental Medicine (see attached chart, entitled "HSDM costs").  Dental students like myself are burdened by debt and unfortunately, this adds to the problem of not having enough dentists in low-income and under-served areas.  New dentists often are forced to practice in areas with plenty of demand and an ability to pay because they themselves need to pay back their student debt.  Loan debt also contributes to the high cost of dental services that most patients are asked to pay.  While this is not an easy situation for me, it is still encouraging to know that I can learn to manage my budget, appreciate my education more since I am financing it, and be generous and considerate in the future, knowing all too well the challenges that students and young professionals are facing.  I have and will continue to lobby on Capitol Hill for student loan debt reduction to help future dentists, in addition to students in other fields, find ways to make their educational dreams a reality.

Hoping you will pursue your dreams fearlessly,

Lauren Kuhn is McGaunn & Schwadron's latest blog contributor. She is the current reigning Miss Massachusetts 2014 and a member of Harvard University's School of Dental Medicine Class of 2017.