Unique Real Estate Needs of Healthcare Professionals | Colin Carr, CARR.US

Speech to text:

Mike Koelzer, Host: [00:00:00] Colin, for those that haven't come across you online, introduce yourself and tell our listeners what we're talking about today.

Colin Carr: My name's Colin Carr and I am a commercial real estate agent. I started a real estate firm about 15 years ago that exclusively focused on representing the needs of healthcare providers. So I, if you're a pharmacist and you wanted open a pharmacy, if you're a physician, a dentist, a veterinarian, and you are acting as a tenant or a buyer,that's the transactional focus of what we started our firm to do, today we operate in over 45 states across the country, and we represent several thousand healthcare providers per year with their real estate needs.

Mike Koelzer, Host: What are the trickiest professions to work with? What are the trickiest personalities?

Colin Carr: That's a great question. There are different personality types, I would say, in every, like specialty. So sometimes people say that, they're accustomed to seeing maybe a little bit stronger personalities or maybe stronger egos like in plastics or dermatology. That's certainly true.

But,we've, we've done hundreds of plastics and hundreds of dermatologists and there's amazed people there too. 

Mike Koelzer, Host: You mean plastic surgery doctors?

Colin Carr: yes.

Mike Koelzer, Host: We know why. It's because they're dealing with cosmetic patients who, golly, you gotta take your frustration out on somebody when dealing with those people all day.

Colin Carr: Yeah. It's just kind of funny. Again, I don't wanna stereotype, but, that, that is one that sometimes can be worthy of it. You just, you get involved in transactions and you start getting them asking questions like, well, can I get a, I want my own private, like electric charging station for my whatever vehicle.

And would they build me a canopy for my vehicle outside? Or can we get 24 7 security? Or you start giving these random questions and it's like, Hey, no problem asking the question. And if we can accommodate, we will. But, it's not just like, I think what's kind of funny in the plastics world is whatever you want to be true.

Like, you can make it true. Like if you want something different, cosmetically, like, if you want something that you don't have, you can have it all of a sudden. Or if you want to change something, you can. So a lot of times they'll go into real estate transactions with the same thing, like, can we change this?

Can we change that? Or, and sometimes you can, but a lot of times it's like, no, that's the building. The building is the building. And so no, we can't change that. you like it or you don't. 

Mike Koelzer, Host: you can give somebody an augmentation, but not an augmentation of this building.

Colin Carr: Yes, exactly. It's, there's no problem asking. But, there, it has to be like an end game where, hey, it's gonna meet our needs and we're not gonna be able to go beyond this point to where it just becomes, cost prohibitive.

Mike Koelzer, Host: Well, here's a thing, Colin, with Plastic surgery doctors is that if you are a patient of, let's say you have a cold or a flu, you go to the doctor's office, you don't wanna see the doctor pull up in a Mercedes or something. You just want them to be a run-of-the-mill doctor, kind of a family person and so on.

But when it comes to the plastic surgeon there, you want to make sure you have the best. And so you want your doctor, pulling up in that car and you want the office to look a certain way, and those doctors know it.

And so I can see where they probably have to put on a show just a little bit more.

Colin Carr: Yeah, that's exactly right. There's like a level of criteria where, let's say you have a veterinarian pull up, you have a dentist pull up, even like a general dentist versus like an oral surgeon or something like that, or a cosmetic dentist. There are different personas that you anticipate or expect to see.

And so it's not much different than in real estate, honestly. If you're gonna go look at houses, like high end houses or you're gonna go look at commercial real

estate, If,if the agent you're working with pulls up in a not that nice of a vehicle or not well maintained or, it just, it speaks something.

It's similar to a lot of healthcare providers too. You walk into their space. if the carpet looks old or worn, if the ceiling tiles, the lights, like, the check-in checkout counter, you know, the furniture is just kind of a hodgepodge of furniture. It does communicate something.

So, there's a lot of things we work on in the commercial real estate world where we're dealing with the economics. Like, what's the rate, what's the price, what are the concessions? free rent, build out period. How much can the landlord push through in operating expenses? And so there's the economic side, but then you also have to have the aesthetic side as well because, nobody wants to go into, a,a facility again, depending on if you're there to have your back adjusted for a chiropractor or if you're there to, pick up pharmaceuticals.

Like you don't want to go into a facility where it looks like it's lacking in cleanliness. It's lacking in. and people just paying attention to just very obvious aesthetics like the flooring or the door, or, what have you.

Mike Koelzer, Host: Well that's exactly right. When you've got someone cutting into your back or something like that. That's kind of like the reason why restaurants should have clean bathrooms, because you relate that to what's on the grill. And same with doctors, you know,that aesthetic of,of tight order and cleanliness, it's like, yeah, you hope that's what's going on in your body too.

Colin Carr: Absolutely.

Mike Koelzer, Host: Colin, My brother has a company in Chicago called 

Tenant Advisors. And I know you guys work on behalf of the [00:05:00] tenants, more. And so your allegiance is not split between the tenants and the landlords. C O V D. What is c o v done? I brought up my brother for him. It's been interesting, I guess to say the least.

I don't know for sure where things are with him, but I know it's been quite volatile. I don't imagine you come across that as much with your stuff because it's medical. Probably the last group that's gonna be working from home and refusing to go back.

Colin Carr: Yeah, so let's hit on a couple of those things. first thing you mentioned, yeah, we are all on the tenant side, the tenant or buyer side. So having no conflicts of interest as you point out, that's a really important aspect. A lot of times, you healthcare providers specifically are not paying attention to that element, whereas they're talking to a listing agent, they're talking to the landlord or the seller, and they don't realize, they're just not paying attention.

They don't realize that person has either a personal interest or they have a fiduciary obligation to help the other party maximize their return or their success in the transaction. So you're talking to a listing broker. That listing broker has a fiduciary to help the owner make as much money as possible, meaning that you pay more as a tenant or you receive less concessions.

And so we're all on the tenant and buyer side. That's a really key element, any healthcare provider going into a transaction. You should look for someone to only have your interests at hand. and it's very obvious once you're aware of it, but it's amazing how many healthcare providers are just not thinking about that.

It's kind of something, it happens in residential as well too, where someone will call on a sign or they'll go to a showing or an open house and they're talking to the person that represents the opposing party. And they're really nice. they're cordial, they're responsive, they get them documents, floor plans, pictures, whatever they need, but they don't realize that person legally is working against you.

So, that point is very important. your second point about, what's happening since Covid, the healthcare community, is as strong as an I community, across the board, there's certain sectors of commercial real estate that, that did not flinch in the slightest.

Like for instance, like industrial, they can't build industrial, whether it's distribution or warehouse, they cannot build it fast enough everywhere. You, everywhere. I drive in Denver where I'm at right now, I mean, everywhere I'm going across every major expressway, thoroughfare, warehouse upon warehouses going up.

 I was in an up and coming part of the front range yesterday at a soccer match for my son. And I mean, the amount of industrial abilities that I counted that were being developed or going up, and I'm talking large, like Amazon type, hundreds of thousands of square foot facilities, they can't build that stuff fast enough.

multi-family, like in Colorado, they can't build apartments fast enough. Other areas though, like large office spaces, that's where you're starting to see a lot of companies say, Hey, we don't need this large of a footprint. We don't need to have our employees in the office every day, maybe not even every week.

And so you're getting a lot of what they call, like, hot seats where, they have maybe four or five offices, but they can be shared amongst 15 employees. Because the odds of all 15 employees being in the office at one time is very minimal. So from that perspective, you're seeing a lot of offices, like large office spaces, a lot of movement companies, not renewing leases, companies downsizing, and square footage.

Them saying, I don't need as many locations. That's more of a volatile area of commercial real estate now is the large office stuff. For the most part, the class A retail spaces,where you expect to take a Chipotle or a Starbucks go, that's not really slowing down either.

Like, like the strong retailers have remained strong for a number of reasons. The top reason is that there's just so much money in the economy. It's how we got into the situation where we have 40 year high inflation as there's more dollars chasing, fewer products out there. So, Retail's going really strong.

but as a whole, commercial real estate's very healthy, very strong right now. it typically lags like a residential turn. Like let's say that housing prices start to come down. A lot of times commercial real estate prices don't come down for a solid year or two, or sometimes never, depending on what else is happening in the economy.

So, COVID provided a short window where for a season you can get a little bit lower lease rate, you get higher concessions to, to ink and sign up for, longer term leases to help landlords know that they were secure in that space or that building. And then once landlords realize that, hey, you the world's gonna continue and, there's a lot of money that's being thrown into the economy through, p p p or through stimulus , once landlords realize the market's gonna remain pretty strong and they've been pretty bullish.

And it's really just continued to be a landlord market for the most 

part. 

Mike Koelzer, Host: Colin, is there a class distinction of a typical doctor's office ? You mentioned industrial and so on. What distinction are most medical offices?

Colin Carr: So typically they, they just call 'em a medical office building or an M O b, that's very common. So you've got maybe a hospital campus that has a building or two that's just being leased out to healthcare providers or people that are related to the hospital or that want to be in a medical setting.

So that's a medical, that's a medical property. you do get into certain classifications where people will call it a [00:10:00] class A building or a class B or class C. That honestly is just a completely subjective way of analyzing a property. And so, you can get into some really stringent, like, is it a class double A, and like it gets into all sorts of random criteria, but again, most of the time it's pretty subjective.

 Like, if you went to a nice resort, you'd say, Hey, that was a first class resort. Well, was it four stars? Or did Forbes give it five stars? I mean, it gets a little

subjective to who's reviewing it, but typically you're talking about is it a medical building exclusively or is it a building that would accept medical?

Like you're seeing a lot of retail today where again, you have like a Chipotle or Starbucks and then you have a dentist at veterinarian, and then you have a pharmacy as well. And so that type of property, again, whether it's class A or class B, it gets a little subjective, but typically it's whether they'll accept medical or not, either by zoning and then.

If the owner will accept medical care and if they're a smart owner, typically they do, because medical has a very low default rate. and then the classes are really just, if you want to call it a Class A or class B owners love to call their own properties Class A, 

tenants like to be a little more subjective on

Mike Koelzer, Host: Right. If you go someplace, I'm just gonna pick a veterinarian. It's just something, not a pharmacy or physician, or not a pharmacy or medical doctor. If you go someplace and you're trying to pinpoint where you want to go, Are you safe just saying, I wanna be in a commercial zone, or is there, commercial and, residential and medical, or are you just safe saying, I'm in a business zone?

Colin Carr: Yeah. So that's a really good question. what I would tell you is that. Different states classify and have very different zoning laws. So for instance, you could be in a city if it's zoned commercial that encompasses anything that's healthcare or medical related. You could be in a, you could be in another city or another jurisdiction or county depending on what, sometimes the city takes at least sometimes the county takes the lead.

It depends on what you're dealing with. where they'll say, yes, it's commercial, but it doesn't have medical zoning or healthcare zoning. Or you can find it where they say it's commercial zoning. It allows for medical, but it doesn't allow for veterinary use. And so you can get into really specific stuff.

and then you can go even further where maybe the landlord has restricted the use. Like where they'll say, listen, I'll give you an example. you could have a commercial zoning that allows for medical, allows for veterinary, but if the, if in the retail center they have a PetSmart or a Petco, they might have an exclusive clause in their lease to where they will not allow any veterinary.

Or animal supplies or anything that has to do with animal health or supplies to be located in the center. So they could have an exclusive, or they could go as far as even having a deed restriction where they publicly record it in the county. So, the best piece of advice I can tell you there is that if you're looking at a specific submarket or city, you want to have an understanding of, am I good to go with my healthcare, use anything commercial, or do I have to get into a really specific, like, it has to be c1, c2, or c3, but if it's c4, it doesn't work.

and the best to do that is to work with a really qualified real estate expert, but also to work with a really qualified architect because they're the person that's dealing with the building department when they're going to submit plans and construction documents and engineering plans. And so having a good architect who's involved in the process earlier on is a key element because they can verify those concepts with the city or county.

And I'll tell you this, but before you ever sign a lease, you should have an architect that does verify, hey,the zoning for this property is acts, your use is acts. And so yes, we're good to go. Or, we have some concern because you do not want to sign a lease or buy a piece of ground or building only to find out that you can't actually occupy unless they have a massive change of the zoning or they remove a use restriction.

and we've seen that, we've seen people that have called us before and say, Hey, I bought this piece of ground, or I bought this building, or I signed a lease here and I just found out that my use is not allowed. What should I do? And like, you're in a, you're in a pretty tough situation in that scenario.

Mike Koelzer, Host: It's interesting to me that you said architect, because when I think of a building zoning, I'm thinking of dealing with the city, county, blah, blah, blah. And I don't think much about an architect, but 

I guess the architecture is the one that has to maybe draw the first permits and things like that. So , things are gonna hit the fan real early if you get the right person looking and not just have people nodding in agreement.

Colin Carr: Yeah, absolutely. I mean, some markets are what we call design build, and that's where the contractor has in-house architecture or they drive the arch architectural process. You're actually hiring a contractor who either in-house or they hired the architect kind of behind the scenes and they try to package the whole thing together.

like other markets, like, again, I'm in Colorado, design build is very rare. It's very rare that you don't have a separate contractor and a separate architect that are hired individually. There's very few design build firms in Colorado, and again, [00:15:00] other states you go into, like if you went into Alabama, it's very common for everyone to be in-house together, contractor and architect, one company.

It's almost always a design build. And again, I'm just, I'm speaking in generalities here. and so. In Colorado, the architect is the person who's hiring the engineers for the mechanical systems, the electrical, the plumbing. If it's civil, the architect is the person who recommends to the tenant or buyer, Hey, listen, we need to get these things engineered.

Here's who we recommend you work with, and you still have a chance to sign off on 'em, but you're following the lead or the recommendation of the architect at a high level. And then they put together the construction documents that are the two foot by three foot blueprints. Could be 40 pages, could be 80 pages, depending on how intricate that build out is.

And then they are the ones that are submitting them to the billing department to get permission to build what's been designed. The contractor will certainly get involved in that process. They should have been involved as far as pricing things out or bidding, stuff like that. But it's the architect who's dealing with the billing department in the vast majority of scenarios.

And then the billing department comes back and says, Hey, you missed this new commercial code where you don't have the right parking ratio or. this room is too small, or, hey, you have to have an exit this close to the lobby, or whatever it might be. They'll tell you what you can or can't do.

But , the architect is the person who has typically, and again, not always, but typically the most familiarity or the closest touch with the billing department. And the billing department is the one who determines the zoning laws in most jurisdictions. So if there's a question of, Hey, the billing department has the guidelines, it's a little gray here.

I don't know if I can or I can't do this here. Architect contacting the billing department, getting it in writing, and then putting it in, writing to you as the tenant buyer is a very good pro tip to make sure that you don't ever find yourself in a scenario where you know you can't do what you thought you were gonna be able to do.

Mike Koelzer, Host: Most of the listeners have been through audits, in a pharmacy. And, telling an auditor, in 2020, that an auditor in 2010 said it was okay to do something, does not cut it. all that stuff's gotta be in writing.

 Colin, when I think, because I own my pharmacy, I owned the building and I was. AM was quite involved in the area, the zoning and things like that. When I think of most problems that businesses have had that haven't been able to go in, it seems to be parking slash drive-through problems.

It always seems like that in medicine it doesn't seem like you have that much of a problem because you don't have a big audience at one time. You've got patients every 15 minutes kind of thing. How much is parking a pain in the ass, for your stuff or is it not much because it's smaller offices?

Colin Carr: Yeah, so park parking comes into play in a lot of scenarios. and so, you have some jurisdictions, like if you're building a brand new building, like let's say you're in Colorado and you're building a brand new building, in most jurisdictions, they're gonna tell you the minimum parking ratio that you can build a medical space with, or a space that you anticipate could occupy a medical practice.

they're gonna say it has to be at least five parking spaces per 1000 square feet of leased space. So, or built space. So let's say you're gonna occupy a 2000 foot space. 2000 times five is 10 parking spaces. And what they're trying to account for is number first and foremost, you have the staff. So, before a patient even shows up, you're gonna have x number of staff that are gonna be, parking and showing up.

but then you have people coming and you have them going and you have the overlap. And so that's where you end up getting into some parking issues. It's not quite the same thing as having a restaurant and then you have the lunch rush where all of a sudden like a hundred people want to eat lunch there at one time, it's dead.

It blows up and then it goes dead again. but you know, again, so you've got x number of staff that are there. And then depending on, it just depends on the use. Like if it's an orthodontic practice, if it's braces, I mean they are scheduling, they've got four or five or six depending on the size of the practice.

patients, kids or adults in chairs and they're going between chair to chair. And so, I mean, it's not uncommon to have an orthodontic practice. Four or five kids in the waiting room, with family or patients or parents or whoever. to have four or five patients in shares to have a person or two getting an x-ray, have a person or two, like doing impressions to get a mold for a retainer.

I mean, you can have people coming, going, staying, and can get jammed up there too. So, typically,there's an ebb and flow of other practices or other patients or other, excuse me, other practices or other uses that don't have the same requirements. Like, again, maybe it's a restaurant.

Well, the dental practice closes between 12 and one, so they're not jammed at the same time usually give and take. but to answer your question, parking does play a major role in most healthcare practices. And you don't want to find yourself in a place where your patients can't find parking.

Cuz it will definitely hurt you.

Mike Koelzer, Host: Someone who's going to a medical [00:20:00] practice, arguably they're the ones that maybe don't have the energy or the physical ability to be, hundreds of yards away trying to find a spot and so on.

Colin Carr: Yeah, I mean, I can tell you,we are an office where our corporate office is located, about a hundred yards away from a major hospital. And that hospital has the main hospital system, it has the emergency room, et cetera. It's got four medical office buildings that are there.

And if you are trying to occupy space in two of them, you are gonna have to park. If you are a patient, probably a couple football fields away. Like and that's a really bad patient experience. If you want, I mean, if you are affiliated with the hospital and the patient has no choice but to come see you there because they had their surgery at the hospital or they're seeing you there, that's less of an issue.

But if it's voluntary, I can choose if I come to this doctor or practice yes or no, and they have to park literally like two, three. Football fields away. Like that's a terrible patient experience and nobody wants to do that because what happens typically in that scenario is they think they can park close.

They drive up to where they think the front of the building is and all of a sudden they can't find a space and they go to the next lot. They can't find a space, so they go to the next lot. And that results in people saying, this is a terrible experience.

I've not had to park this far away since I went to some pro sports game like 10 years ago.

And like, 

This is terrible. So I park parking definitely is a key factor that you wanna make sure that you fully evaluate. And it's not just what's happening now, it's what happens if they do lease the space next door to a really successful restaurant 

or,

parking now versus parking in the future is very different.

Mike Koelzer, Host: Yeah, that's a good point, someone might come and put a restaurant there, then you're screwed maybe for the first two hours of the day in midday and dinnertime, things like that.

Colin Carr: Yeah, I mean, I can think of, there's a building that's not that far from our corporate office, same thing where they put in, they put in a Mexican restaurant that's super successful and if you try to get there during lunch or anytime between like five o'clock to eight o'clock at night,it's almost impossible to find a parking space available.

I mean, this restaurant just exceeds all expectations as far as its success. And so, an urgent care went in right next door and there's times where there's not one single parking space in the entire center. Like you have to go park across the street or across the thoroughfare and again, create a really bad experience.

So, in that scenario, the landlord did make a combination cuz they realized that the. The Mexican restaurant was using way too much parking, so they did some reserve parking, which helped relieve a little bit of the issue for the urgent care. But you don't want to find yourself in that situation.

Mike Koelzer, Host: On a somewhat related topic, once in a while, like I know in our association , in our business association, there was a little bit of contesting because a couple restaurants wanted to go somewhat close to each other. And my advice to these people, well, they didn't really ask my advice, but if they did, here's what I would've told them.

the food courts in the malls now, and it plays on each other. In the airports, you go in, there's six, eight food spots there outside of the parking issue. Is there ever a reason why? Medical offices don't want to be close to each other. I mean, you see, like we talked about, all of a sudden there's a dentist, in somestrip mall or maybe some sports medicine or something like that.

Is all of that based on access and parking or are there other issues were,not psychological, but even marketing reasons where maybe somebody wouldn't wanna be with a lot of other medical offices versus on their own?

Colin Carr: Yeah, I mean, I would say to you that, depending on what your use is, you have to ask the question, am I okay if somebody has a similar use to me or is that a complete deal 

breaker for me?

and then if it's a complete deal breaker, then you want to search for properties that obviously don't have that use already, but you also want to then try to secure what's called an exclusive, in your lease, which meaning that you have the exclusive right to be the only pharmacy in the PR or in, in the property or in the center.

other healthcare providers don't care. So again, if you are a specialty animal hospital, you might say, I'm okay with a traditional animal hospital coming in here as well, because that's just gonna feed off of us and we'll feed off them, et cetera. Or you might say, no, I want nobody else here. If you're a chiropractor, you probably don't want a second chiropractor in the same center.

I, I'm not kidding you. Same thing just from personal experience. There's a center that's not that far from our corporate office. three different chiropractors went into the same center and we didn't do any of those deals, thankfully, because we wouldn't do that. But all three of 'em were furious at each other, because they all went in at the same time.

I think maybe one of 'em was there first, but you don't wanna end up in that situation. Landlord didn't care cuz we're gonna get the rent, but that's not good for anybody. so, do you care if other people are there? if the answer is, yes, I do care, then you wanna try to negotiate an exclusive clause.

As far as being by other healthcare providers,I don't really see a [00:25:00] downside unless they're gonna be taking an exorbitant amount of parking. Like you mentioned, physical therapy. they're a heavy parkers. Like you can find, they might have one therapist and they might be seeing like three or four patients at one time.

They

got 

one person. Yeah. One person stretching on a b or on a bike getting warmed up. One person is getting seen by someone and they're getting put into a machine, or they're getting some ultrasound, and then one person's actually getting worked on, and then the next person's leaving. The next person's coming.

I mean, you can find a physical therapy clinic that might be in 3000 square feet, that's parking 25, 30 spaces. And so I think outside of parking, I don't really see a downside to most healthcare uses being by other healthcare uses. I see it as a positive person. but I'm sure there's outliers. I see more concern when it's traditional retail and all of a sudden, like, Subway restaurant drops in next to you.

they don't, they don't take care of them, like odor mitigation. They don't seal the DMI wall the way they're supposed to. and you can smell subway bread in your space 24 7. They don't care. It's the law of the strongest smell, which sounds hilarious, but if you have the strongest smell, you don't care.

All you smell in the subway is the subway bread. Well, you go two, three spaces over and all you're smelling is subway bread. Like you don't want to be there. yeah. I mean, we had a medical building where we put a bunch of clients in the building. Fantastic. They had one space in the building. They couldn't lease up very well.

The landlord ended up leasing it to a nail salon. And it's a centralized H V A C system. It's not like retail where each tenant has their own system.

And so you're sucking in the odors and then you're, recycling your own air. This was a central system and so they were sucking in all the air, all the chemicals, and it was going into other spaces and it made a lot of healthcare providers very upset.

So, um,Medical, on medical is usually pretty good medical with other retail, that's where you have to be more careful, especially if it's a centralized system or a central building.

Mike Koelzer, Host: In the business association, I remember we got up on a Saturday, it was gonna be like beautifying the district.

And I'm walking down the street, it looks like one of those prison workers. I got my jabber and my bag and my yellow thing on, and I'm over there cleaning up like subways, parking lots or walkways or something like that. I'm like, what the hell am I doing? And yeah, not everybody sees it the same way.

Colin Carr: Yeah, I mean there, some tenants just don't care. I mean, you get that with the restaurants. I mean, they'll take, they'll take their garbage out and it'll drip and it'll

stain in the sidewalks, and they just, they 

I don't care. They're just like, man, we're busy enough. they'll have a grease trap outside.

They'll have things that they don't care about. So, finding a landlord or a property manager that is really hands-on that does care about the quality, the property, that's a great place to start when you're evaluating properties. And then there are times when it makes sense to have additional clauses in your lease to make sure that if there is a default by.

Another tenant not being a good neighbor or the landlord not taking proper care or preventative measures to make sure the property doesn't get, just diminished in value or doesn't get beat up unnecessarily cuz they're not maintaining it. Those are things that are worth paying attention to as well.

Mike Koelzer, Host: You gotta be careful what you wish for because if you're going with the cheapest space to rent, there might be a reason why it's cheap to rent and maybe they're trying to get people in and before you know it, you've got that hairdresser next door or subway in there or something.

So I guess you kind of get what you pay for sometimes.

Colin Carr: Yeah. and I mean, you do the best you can and there's other times where you just, you can't really predict what's gonna happen. I mean, I can tell you if we're dealing with pediatric type uses and we're going into a retail center, we will tell the landlord, Hey, you can't put a, you can't put a liquor store in our store.

You can't, if it's a pediatric, dentist you can't put an adult related store. You can't put it in a vape store. You can't put in medical marijuana or a marijuana. I mean, like, we'll tell them, listen, like you can put it somewhere else, but you can't put it directly next to this use because it'll stigmatize that type of use.

and then other times, if it's high end cosmetics, the same thing. So, again, it's a lot of things to look at besides just is it the right square footage and can I pay the bill? There's a lot of other variables that are out there.

Mike Koelzer, Host: Colin, in our neighborhood now, you see a lot of different uses, this school now is apartments, or this bank is now the office for an auto body shop, things like that.

Have you ever come across either in your. path or someone else's where somebody tried to get cute with kind of like a remake of a building and it just didn't go so well.

Colin Carr: Yeah, I mean, you're seeing a lot of redevelopment today in a lot of, just repurposing I think is one of the, kind of the key buzzwords is repurposing, a use. yeah. We have something before where people try to convert something and something that's maybe up and coming or trendy and most times it does work, but there are times when it doesn't work.

There's times when it just falls flat. But I mean, you're seeing. [00:30:00] Large retail use is being converted to self-storage. you're seeing, you're seeing a lot of former retail spaces getting converted to medical. We're seeing a lot of that out there. A lot of former, just traditional off buildings getting converted to medical.

That's a pretty common theme out there. But yeah, there's times when, maybe somebody converted an offload into like, maybe let's say a call center and it worked for a while, but then once that call center vacates and they can't release it there, they have to repurpose it again.

But, yeah, the market will tell you pretty quickly what you can or can't do. And,you see industrial going into retail, you see a lot of industrial buildings getting converted into like breweries or restaurants, stuff like that. So, like, I mean, we've seen it all, like we've seen cremation facilities getting turned into like, like super trendy restaurants and self storage and you're just like, not sure how they came up with that one.

But, and then you're always seeing people trying to convert stuff to residential 

Mike Koelzer, Host: they've got these storage things now they're like eight, 10 stories tall. They look like fancy apartment buildings and it's just all storage. It's pretty crazy in the storage industry.

Colin Carr: it's a very interesting industry and I have a couple friends that develop self storage. I have a couple friends that buy and trade self storage. And it's a really fascinating world. I mean, if you have, if you have a home and you have a garage and you have a basement, like you don't pay much attention to that.

But, if you're in between houses or if you're renting or if you're in an apartment or if you're moving, all of a sudden that can become a component that you just hadn't thought of. And so, in addition to like the standard self storage, you have all the new stuff like you just mentioned, then you get into all like the different pod world too, where, all of a sudden like a semi-truck shows up and drops off three or four pods, you fill 'em up and then they.

They come pull 'em up, and then they go stack 'em in some big warehouse until you're ready for 'em. But yes, storage is another one where it's not slowing down. Storage is a form of industrial real estate, but it's a specific specialty inside of industrial real estate, and it's not slowing down right now.

Mike Koelzer, Host: My wife and I built a house back in 2002. And I tell my wife, I say, I've seen, and I've paid for all the damn stuff that comes in just from Christmas.

all that crap. And , I know that stuff hasn't left our house, I know what's in here somewhere. And so we probably have six years left here and oh my gosh, you're just gonna dig and dig all these Christmases out of there.

There's just so much stuff that's gotta go.

Colin, somebody, rents space out. Let's say a pharmacy rents out space and let's say they don't do their homework and they don't go through a tenant advisor and so on. What's the first thing, what's the most notable thing that you could imagine kicking themselves about?

Colin Carr: Yeah, so typically the mistakes that pharmacists or any healthcare provider's gonna make when they take it, the do-it-yourself approach is they're gonna, they're gonna realize later, at some point in time that they did not achieve the most competitive terms possible. they're, they don't typically know that when they're signing the lease, they think they did decent enough and then they meet someone, like our company or whatever, and then we do a lease analysis for them and show them, what they're paying currently versus what they could have been paying, or what other tenants in the building are paying or should be paying.

And they realized they've been thrown away, like literally thousands or tens of thousands per year for the last, 3, 5, 7, or 10 years. The next thing they realized is that they didn't capitalize and capture the concessions that were available. If they were properly represented, they didn't get the right buildup, period.

They didn't get enough free rent. Once they opened, they didn't get free rent on a lease renewal. They'd say, well, I renewed my lease. And landlords don't do free rent on lease renewals. Yes, they do actually. They do free rent all the time to secure new leases. And so you, they find out that they didn't get the right concessions, they didn't get it's much money to renovate the space as they could have.

And so they had to use their own cash or they borrowed money and paid interest on it. So, a lot of times it's dealing with economics. It's the lease rate, the tenant improvement allowance or renovation allowance. it's annual increases, it's economic considerations. And it's not just on the new lease, it's typically on the lease renewal.

Even more so like, like. Number one transaction in all of commercial real estate is a lease renewal negotiation. Like every time you see a person go hang a new shingle as far as build a new building or move into a new space, that's great, but there's gonna be, oftentimes 10 or 10 times as many lease renewals happening.

And it's very common for landlords to tell tenants, well, we don't do lease abatement on lease renewals, or we don't lower lease rates on lease renewals, or we don't do free rent, or we don't do renovation allowances and all that's not true. That's literally just a landlord making a statement and then watching the tenant just bite off on a total lie.

You say, well, why would a landlord do that? Well, it's pretty obvious. The landlord said they didn't do anything. The tenant believes them. The landlord just says themselves like tens of thousands of dollars, sometimes hundreds of thousands of dollars. And the landlord's, [00:35:00] laughing silently all the way to the bank, and the tenant thinks, well, I did the best I could, or I pushed him as far as I could.

And it's like, no, you did really 

bad, actually. You did a really bad job.

Mike Koelzer, Host: Colin. What do you mean by the buildup?

What was that?

Colin Carr: So, if you're gonna build, be building out a new space, you've got a, you've got a timeframe. Where you're designing it, you're getting permits done, you're getting structures done. You should never be paying rent on a space you're not occupying. And then you actually have the window of time when you're actually swinging hammers, throwing up drywall, installing cabinets, et cetera.

Well, you can have that on a new lease. You can also have that on a lease renewal if you've been in a space for 10 years. I mean, you should be looking at, repainting ref flooring. You should be looking at, should I be upgrading my lights to like an l e d or a nicer light fixture? Should I be updating window coverings, millwork, check in, check out, all that stuff.

And so it's very common to get free rent for a buildout period. It's common to get free rent even after the offs are complete. just generic free rent as a concession of leasing space. but especially during a lease renewal process, it's very common to get free rent as a concession for signing a new lease.

Whether you're renovating and you need some time, to get the space cleaned up or remodeled or just as a concession. I mean, the question you have to ask yourself is this, if you moved outta the space and the landlord was starting from scratch leasing to a new tenant, what would they give that new tenant?

As a concession, you might not capture every bit, like every dime they'd give a new tenant, but you should capture some of those concessions. And again, that's where a lot of healthcare providers miss it, as they just assume that this doesn't happen on a lease renewal, so I'm not gonna ask for it. Or they ask for it and then they get the most obvious answer, which is no, they just believe it.

Again, of course the landlord's gonna say no. They just, you ask the question, they said, no, we don't do that. Or we have a policy, you believe them. And all of a sudden, like it's, you get stuck losing a significant amount of money. Like it's not that hard to figure out if an insurance company said, ah, no, we're not gonna reimburse that.

Like, I know we told the patient that, but we're not, you gotta eat the cost, doctor or practice owner, you would say, wait, what are you talking about? That's not how it works. Same thing commercials will say. Chipotle, Starbucks, Charles Schwab, Lockheed Martin, Chase Bank, pick the retailer or the office user.

Landlords aren't telling those tenants. We don't do these things. They know better. They will, however, tell a healthcare provider or practitioner, we don't do that. And the amount of times where the healthcare provider just goes, oh, well, at least I asked. Now I know. No,you didn't ask properly and you didn't do a good job with it.

you basically, you threw a softball to the landlord, they hit it over the fence and now you're sitting there saying, oh, I have nothing. No options. That's not how the game's played.

Mike Koelzer, Host: It's like me going shopping to Kohl's or something like that. And my wife will say, what do you mean you bought something at their price? at Kohl's, you have to buy 40% off. That's what the, that's what it is. And I don't know, that is some guy going there. I just buy what's there.

 Boy having somebody renew a lease, I mean, yeah, the landlord. They're gonna lose a couple months if they have to get somebody else in there. But the value of a landlord knowing that their tenant paid on time and they're not problems and all that kind of stuff. There's a ton of security for the landlord to make it work for that same person renewing.

Colin Carr: Well, and that's the dichotomy. Like that's the thing that's interesting is the landlord does not wanna vacant it space. They don't want to go, they don't want to go roll the DiUS on someone that's never been in their case, they know with the current tenant who you are, they, you've been paying your rent on time faithfully for five years, 10 years.

They know what they're getting in that bargain. And so would a landlord rather have no downtime and, a proven commodity or they wanna roll the dice, hope they get the space released in six months, 12 months, 18 months, maybe not have the same relationship, maybe have someone who's not as strong financially have to put a lot more money into the space to, to remodel it.

I mean, the landlord doesn't want the tenant to move out. And so this is the dichotomy where it's the best deal for the landlord to renew the tenant, yet they treat that tenant on the lease renewal worse than they treat a brand new tenant. The interesting thing is that they'll try to charge 'em higher rents, then they could get, if it was a brand new deal, they'll give 'em less concessions.

And then they typically, again, don't do it like with a hammer. They're not hitting you with a hammer over the head. They're not, typically like swearing at you and like trying to make you like, have a huge hey, a red flag alert, like this is not a good deal. They're doing it respectfully.

They're doing it cordially. they're complimenting you. You've been a great tenant. We wanna take care of you. All the while they're giving you worse economics and less concessions than they get a brand new tenant. And the person who's the sign of the leaser who's handling it typically just bites off on it.

And that's the most common area where healthcare providers [00:40:00] just really just blow it. They just think, oh, I asked, they said no, or I asked and they said yes to these things. Like that's another one too. They'll ask for a little bit here, a little bit there. They'll get it and they'll say, okay, I really did a good job.

And it's like, no, like again, in this scenario, you asked for 5% off. You got it. You should have gotten 40% off. And so yes, you got better than nothing, but you laughed a lot on the 

Mike Koelzer, Host: Or I better not ask again because I already went there and they gave me 5%. And if I ask for something else, you know, and I think of pharmacy calling, and I've been in pharmacy a hell of a long time and dealing with insurances forever. And probably about, I don't know, five years ago I had some medicine that the doctor wrote for, I think it was something for headaches or something like that.

And, In pharmacy, you send the medicine through and you get something back. It says you need step therapy or a prior authorization or something like that. I'm like, okay. You jump through the hoops. And then finally I got a reply back from the insurance company.

It says, excluded product. And I thought, all right, I'm done. And so I went to the doctor like a month later. They're like, how is that new medicine? I never used it. It said excluded. They said, well, that's just the first exclusion, you know,if you went back and did this or that. Don't stop until you get the second exclusion.

 That nurse knew because they dealt with it all the time. And the landlord is using all kinds of negotiating tricks. And unless you're in the ballgame, like you guys are, the tenant thinks that they're putting the landlord out too much.

Colin Carr: yeah. No, that's exactly right. and people will say, well, how do I avoid that? Well, one of the best ways you can avoid it is by working with someone who understands how the games are played. Because honestly, in most centers, we're saying, listen, this is a contingency of you getting a client or a new deal done.

Like you're, we're not gonna put somebody in your space if you're not gonna do X, Y, and Z. So yes, in some element we're asking, but it's really a contingency 

of you doing a deal with our client. The other thing too is, when you're negotiating in commercial real estate with like three or four landlords simultaneously, which that's how most commercial real estate deals get done, residential as a contrast.

You go up there and you choose a property, you submit a contract, and then if the seller accepts, you're locked and loaded and you're off to the races on one property. In commercial real estate, you're typically negotiating, with a non-binding letter of intent or a non-binding request for a proposal.

And it's customary for you to be negotiating with three or four landlords or sellers simultaneously. and people say that's kind of different. Well, it is, but it isn't. I mean, think about it. You're talking about the lease rate, but you're also talking about the annual increase in the tenant improvement allowance and the free rent package, and then all these other economic concepts.

And then you get into concepts like, who's paying for the janitorial or who's taking care of the parking lot? Can I get an exclusive right for my use? And you have all these non-economic, but they're business deal points that get negotiated. You can't do that with just one landlord. If you're doing it with just one landlord, you're missing the boat.

And if you do that, You don't have a very good perspective on the market. Whereas if I'm negotiating with three or four landlords for a client and one landlord comes back and says, well we don't do free rent. It's like, well, what do you mean you don't do free rent? The other three landlords you're competing with have given us six months of build out and then three months free upon opening.

you're not competitive, like you're gonna lose the deal because you're not competitive. You're not even having to ask for it. It's a request based upon what other people are willing to offer. And so that's another big difference in commercial versus residential or just picking one property, if you're talking to your current landlord and you haven't gone to the market yet.

You have no clue what else is out there. You're talking to your current landlord and the only compass you have are what other tenants in the property are paying. 

That's a really bad place to be.

 Yeah. If everybody else is doing it, it's like, well, you're all in a sinking ship, Yeah, that's 

exactly 

right.

It's like, well, the water's only up to my waist. Same here. That's not too bad. Then that's not too bad. It's like, no, listen, you're supposed to be on, you're supposed to be on dry ground right now. So, yeah. that's another big mistake we see healthcare providers making is, they'll go to like a lunch and learn, or they'll go to a study club or they get a couple buddies that they, talk to or they're connected with on social media, or they play golf with, and they'll just throw out a question, Hey, what are you guys, what are you guys seeing over here?

And they get a perspective, but it's very rarely a really good perspective. it's what they're familiar with, but it's typically not what's best practice.

Mike Koelzer, Host: All right, Colin. So let me see if I got this. So in a business, if I'm gonna go start a pharmacy, I wanna be within a half mile of somewhere. Maybe, maybe I've got three or four choices in a house. People fall in love with the house and they want that one. They're typically not doing a good job of looking at three of them.

Is it just because of. The nature of that, or are you saying that there's a [00:45:00] different agreement with the three potential buildings versus what a private citizen does with a residence?

Colin Carr: Yeah, so there's a couple differences. So just starting out, if you're looking at houses we're looking at what are we really negotiating like. There's more than just, there's more than just meets the eye, but the main concepts are what's the purchase price? You want $800,000 for the house?

Am I gonna give you 800? Am I gonna come in low at seven 50 or am I gonna overpay and go eight 50? Cause I'm competing? So you have the purchase price. The next thing you have is the timeframe. How fast can you close? And then you get into the third part, which is, are there contingencies? Am I gonna do a home inspection?

Those are the things that are there. And then you can get into concepts like, can we do a contingency where I have to sell my house first, et cetera. but typically you're talking about what's the purchase price of? How fast can you

close? Like that's what we're working with here.

When you get into commercial real estate, you've got the, you've got the lease rate if you're leasing, which. Over 90% of health providers lease. We usually say 80% lease, but it's actually even higher than that. But, 80 to 90% of healthcare providers are leasing their space. Well, you've got the square footage.

Okay? You might have one space that's 2001, that's 1,701, that's 2300 square feet. Well, you could actually afford to pay more per square foot and the smaller square footage and maybe have a lower overall monthly rent. You get into the, you get into the operating expenses, like, well, this property wants $20 a square foot for the lease rate, but their operating expenses are only seven.

Well, the other one wants $20 a square foot, but their operating expenses are $14 a square foot, cuz they have a higher tax assessment. And there's other things that are happening there. So you have the lease rate, you have annual increases, you have operating expenses, you have concepts like are you providing janitorial, are you providing utilities?

you get into all these right things. So there's just more to negotiate in a commercial transaction. And then it's not just a matter of the homeowner saying, yes, we'll take it or no, we won't take it. You get into concepts like, will the landlord's lender allow you to do this deal?

Like you get into asking the landlord, I need five months free for build out. I need four months free upon opening, I want you to cut me a check for $140,000 to help pay for a portion of the build out. I want to do a 10 year deal. You want me to do a seven year deal, or vice versa. You can just get into all these other variables that are there.

I want you to commit to me that you'll never lease from another pharmacist ever again. Well, I have to decide if I'm willing to do that or not. So there's just all these other considerations and really what it comes down to is the landlord. And you have to live together for the indefinite future.

And the landlord, if they wanna sell the property in the future, which every landlord's a seller, at some point in time, every property for sale at some dollar figure. Will the next landlord want this deal? Whereas again, in a residential area, I'm gonna sell my house to you. I'm never gonna see you again. Like I, I'm, maybe I see you in the future, but odds are you buy, I sell, we exchange keys and that's that.

In commercial real estate, you're committing together for a seven or 10 or 15 year relationship, and there's just a lot of variables that are there. So in order to get to that place, you're gonna pick multiple landlords. You're gonna go through multiple rounds of negotiations. It's very common to go 2, 3, 4 rounds of negotiations with 2, 3, 4 landlords.

And then the beauty of that is several fold. If you're the tenant or buyer, and that's the process you just engaged in, you're not gonna wonder at the end of that process, if you left money on the table, you're not gonna wonder if you should have pushed harder in a certain area because you saw what three or four other landlords were doing.

You did push harder multiple times, and the landlords are expecting you to push hard if you're in a competitive environment and you're professionally represented. They're used to this type of situation happening where it's just different In residential,it's a lot more factual and business and commercial than it is in residential.

It's a lot more emotional. so, just the different rules of engagement, if you will.

Mike Koelzer, Host: In speaking of rules, I think you mentioned, is it truly a different kind of contract? Are they called something different? 

Colin Carr: Well, if you're submitting an offer in residential, you're typically submitting an actual contract, which you've signed, and if the seller signs it, it's a 

binding agreement. You're under contract.

Mike Koelzer, Host: I gotcha.

Colin Carr: Yeah, if you're doing commercials, you're typically submitting a non-binding letter of intent or a non-binding request for a proposal.

and then once you move forward, like again, you might go to lease a house and you might get like a seven or 10 page lease, but if you're leasing a commercial property, it's typically gonna be like a 30, 40, 50, 60 page document.

There's just so many more variables that are there,

Mike Koelzer, Host: So 

many more variables. You've gotta have more room for that whole process to keep circling a few times.

Colin Carr: Yep, absolutely. So again, I'm not putting down residential residentials. 

There's A tremendous skill set in residentials as far as listing properties, maximizing price. There's really good residential agents, but residential agents typically are not doing commercial commercials, typically not doing residential unless it's for their personal use.

just a different process. And so a lot of people have done a residential deal where they talk to one [00:50:00] seller or. Offer on one property. Then they try to bring that, like that process or that, that system of doing things into commercial and then they try to do it by themselves and they end up in a place where, sure, you can get a transaction completed.

But did you just lose $200,000? Probably.

Mike Koelzer, Host: Years ago, my wife and I were looking for a cottage and my brother had gotten one and I had some money. I was probably jealous. And so we went out looking for a cottage, and the real estate agent said, look, just sign this.

And they said, Mike, I can get you out of this deal if you don't even like the kind of spoons they have in their silverware drawer, something like this. I said, all right, if we can get out of it, I'll do it. So she calls me up. And I put a thousand dollars into it, and she calls me up.

She said, we have a little problem. The land next door does not perk, meaning that you couldn't have septic on it, and we're city folk, so this is new to us. So I said, well, that's no good. We wanted the cottage and the land next door. I said, let's get out of this. She said, we can't. I'm like, you could get me out for not having the right spoons, but you can't get me out if I can't even put a septic thing there.

She said, we didn't put that in the contract. I said, why am I the one losing a thousand bucks here when it seems like nobody else did their homework? She's crying now. She said, listen, maybe we can split the thousand dollars. She said, I'll pay 500 of my money and you just pay 500 of your money.

I said, alright, fine. She starts crying again. I'm like, what are you crying for? She's like, I don't have $500.

Colin Carr: Oh, geez.

Mike Koelzer, Host: Long story short con, I wouldn't want that lady doing my deal with business. There's just so many layers of things,

Colin Carr: Yeah. No, there, there really are. And so having someone who's qualified, who understands what they're doing, they have experience, they live in that world, it's no different than why you go to a healthcare provider versus just trying to self-diagnose or self-treat. It's why you go to a pharmacy and have them.

Mix the ingredients themselves and give you the finished product versus you trying to do it yourself. I mean, technically could you order certain things? Sometimes yes, sometimes no. But you just, you would never fathom doing that. Just because you can do it in commercial real estate doesn't mean you should.

The question isn't whether you can get a deal done. Like that's not the end objective, like that's part of the objective. But the objective is getting a deal done in the right property, the best property that's available for your requirement with the most competitive terms economically with your business.

Protected at the highest level. So, people all the time say, well, I can call on properties. Like, well, yes. I mean, I used tell people, like my son now is,

Mike Koelzer, Host: 

Colin Carr: years old. I'd say My, well, my son knows how to use a phone at seven years old. He can call on properties, he can write, he knows what numbers are.

Like, he can call on property to say, is this, is the property available? anybody can say, send me a proposal. Anybody can say, would you take less or would you give more? Like, that's not the skill set. So is the skillset the right property? Were there other properties that made more sense?

Could I leverage one landlord against another landlord? Did I protect myself when it comes to all the legalities with the business, economics and business terms? So that's, at the end of the day is it worth it to you to get the best terms possible, et cetera. Not missing a better property, not getting taken advantage of, not having costly pitfalls and delays.

Again, it's saying eventually yes, maybe you can treat yourself eventually, yes, maybe you can diagnose yourself eventually, yes, maybe it'll go away, but you just, it's just not how you handle medicine or healthcare. You shouldn't be handling real estate much differently.

Mike Koelzer, Host: Colin, I know you don't represent the seller, but is there any time where a and I always think of sellers for some reason because I'm both a tenant to myself and a landlord to myself, but I always think of myself as a landlord being more of the,scrooges, the sneaky guys and so on. Is there ever a time though when the landlord has done something really stupid, like really cut themself short?

Colin Carr: Yeah, no, I mean, we don't like to list properties and put a sign in front of buildings, but we advise sellers all the time. We have clients that become landlords or sellers all the time, and we still give them advice. We can still help them transact to some extent, but yeah, I mean, again, there's a fine line between.

not giving away too much and then not coming in too short to where you lose a deal. And again, nobody knows the exact striking point, otherwise nobody would ever miss a deal. Like, so there's, you want to be competitive and you want to offer terms that are competitive, but you don't want to give away too much.

Like, everyone, this is kinda like, like the pendulum swings in different directions and you wanna try to capsule it as, as much in your favor as possible. But yeah, I mean, if you don't take good care of your property and you don't take care of the tenants the way that you'd wanna be taken care of, you can lose great tenants and you can end up having more downtime.

It's kinda like, like [00:55:00] staff or employees. Like if you don't take care of your employees at the right level and then you have to then rehire and retrain. And having that ramp up period, like it probably would've saved you money just to pay them more and take care of them versus going through that whole process, et cetera.

So you can be on the side of the landlord where you're not taking good care of your property, you're not doing what you're supposed to be doing. you can try to be too cheap and not reinvest in property, not maintain H V A C systems, roofs, parking lots, like you gotta put money into the property.

and then on the other side too, you could also get scared or operate in fear that if you don't do this, you're gonna lose a deal or lose a tenant. And that's where I get it helps to have a really good advisor. Cause they'll say, listen, like they've run the cops, they've seen the market and they would say, listen, we have the best property at this rate.

If it's not, this person would be the next one. Like, let's not give away the farm to make this deal. Let's not be afraid. This is the last opportunity you're gonna have to make a deal 

this year. let's wait. And so getting 

good counsel I think is really important.

Mike Koelzer, Host: Yeah. We had a restaurant next door to the store, and the landlord and the tenant were always fighting with each other. And I guess the last time they were fighting over like a $3,000 H V A C unit upstairs or something. And because they couldn't figure that out, the tenant left and moved into a building which was not as cozy for a restaurant.

Their business went under and the landlord who had the restaurant never ended up getting anything good in there to pay that rent anymore. And so, like both businesses failed basically because of like a $3,000 agreement on the H V A 

Colin Carr: Mm-hmm. Yes. What happens all the time, honestly, landlords will draw a line to the sand, say they won't do something out of spite or just because they think they get away with it and then they lose deals. Like, I mean, so when I say this has happened hundreds of times, I'm not exaggerating. There's been literally hundreds of deals that I've personally been involved with on a lease renewal where a landlord wouldn't do something that was fair that they would've done for another tenant because they thought they could take advantage of the current tenant on a renewal.

And we just said, look, we are gonna relocate, we're gonna take the tenant to another property, and you're gonna end up spending three, four, or five times the amount of money to get a new deal here between downtime, between the free buildup period, the ti allowance, et cetera. And there's been so many times where our landlords will just draw a line in the sand and they think they have the upper hand and they don't, and then all of a sudden they get a vacant space, and then they call you three, four months in begging you to bring them the next tenant.

It's 

like,

We talked about this like six months ago or a year ago, and again, you took an arrogant, overly confident approach. So yeah, I mean, you can definitely find landlords that get, get really arrogant and they make really bad decisions. So again, you wanna be, it's fine between being confident and being arrogant.

And again, it's an imperfect standard. There's a very fine line between being too aggressive in a negotiation and not knowing when to say when. So again, hopefully with good advisors, with factual information on your side, it helps you. Like, for instance, if you're a tenant or a buyer and you've got three or four other properties and you like two or three of 'em just as much as you like this one and they're way more aggressive, then yes, you have the ability to get a lot more aggressive in your negotiation.

Conversely, if you're looking at four properties, And let's say one is the clear winner, the other three are pretty average or pretty subpar. You gotta be a little more delicate. How hard you push that top

property,

so that you don't lose the deal. And so again, it's the same thing on the landlord's side too.

If you know you've got a couple competitors, your space has been vacant for six months or a year, whatever it is, and you are already at a disadvantage, you better be careful how aggressive you get with that tenant.

Mike Koelzer, Host: Well, sadly, you mentioned, the landlords can kind of take advantage of a current tenant that's trying to renew. it's kind of like the advice they give now to workers, you know, they say to really make more money, you're probably gonna get it by going to another job, you know, to really go up a big notch.

because frankly, a lot of the employers think they can sort of raise you up gradually and maybe not hit the market rate.

Colin Carr: Yeah, we spend all time with employees and it's tough, it's a tough balance to strike. It's, you want to pay people, very fairly, you wanna reward them. But also , you can't throw bad money at people as well. 

Mike Koelzer, Host: Colin, you mentioned 10% own or buy the new buildings and 90% rental. That makes sense to me. What are some of the reasons behind that ratio?

Colin Carr: Yeah, so I would give it a disclaimer on that first and just say every market's different. For instance, if you're in Grand Rapids, you're gonna have a higher percentage of people that own in Grand Rapids than you are gonna have if you are in Los Angeles as an example. So each market's different, but as a whole, the amount of healthcare providers that own is usually around 10 to 20%.

The amount that leases is 89%. The reasons are several fold. Number one, there is less [01:00:00] available for sale than there is for lease. So when you go to the market and you look around, there's usually a lot less property for sale than there's for lease. you get into other concepts, like, do you have land available where we can continue to develop new property?

As you get into the outskirts of different suburbs or as you're, as you're in a less dense or popular area, the more land that's available offers more opportunities to buy a piece of ground and build your own building. And a lot of times that speaks to maybe more competitive pricing as well too.

But if you're in like, let's say Orange Cal, orange County, California, just south of Los Angeles, like, there's just, there's no more land available. You have the ocean to one side and you are surrounded on the other side, by either an air force base, or it's already built out on the other two sides.

So, supply and demand drives that, that. Question or that decision? Should I own, should I lease? And then also just, people's needs change. So you might say, Hey, I only need this many square feet right now, but in 10 years I'm gonna want a lot more. It's not like residential where, you know, you buy a starter home, then you upgrade.

Everyone needs a home. If you buy a building and build it out for a pharmacy, the first question is, if you wanna sell the future, do you really wanna sell it to another pharmacist? If you're gonna stay in the area, probably not. You probably don't want to do that. And so you typically wanna limit who you're selling it to, if you're gonna stay in practice and stay in business.

And that vicinity someday when you sell it. Yeah, you wanna sell it to the same use for the highest and best use typically. so just flexibility is another reason why people would lease versus own. Another reason is just economics. For instance, you might say, I don't want to put a hundred thousand dollars down or $200,000 down.

Or, I'd rather lease and only put a one month security deposit down. I'd rather have flexibility that I can relocate in five or seven years. you might say, I want to get free rent during the buildout. I wanna get free rent. Once I open, I want to have the landlord pay for a portion of the buildout.

Economics can drive you to leasing very quickly because there's a lot of concessions and incentives for you to do a long term lease. And then on the other side, owning is very attractive because number one, you're done dealing with landlords. You become the landlord so you don't have to deal with a new negotiation every five, seven, or 10 years.

number two, you get to build equity. Every time you cut a check each month to your mortgage lender, your net worth goes up. Your balance sheet goes up, and you increase in your economic status. you also pick up additional tax deductions when you own commercial real estate, you get to depreciate the assets minus the land.

And so you pick up additional tax deductions to where you pay the government less, either monthly or quarterly, depending on how you pay your taxes. And so you might pay more to own the property, but you might pay less in taxes, et cetera. So, you have the upside of appreciation. Historically, real estate, commercial real estate increases in value annually.

Even when there's a dip, it might dip down. But historically, over a 20 year period of time, or 30 or 40 years, what have you, the real estate's worth more now than it was 10 years ago or 20 years ago, or 30 years ago. and. hypothetically, and history tells us this, that real estate will be worth more in 20 years than it is today.

So you, you have tax deductions, you have principal paydown, you have appreciation upside, and then you also have the fact that you're, you become the landlord and you eliminate those types of discussions and issues and

you know, if there's a problem, you're not trying to get someone else to fix it, you fix it.

Mike Koelzer, Host: 

Colin. So our listeners are driving up to their home or to their business, and they're gonna maybe think about us for five minutes or something like that.

What might a pharmacist do and let's say a pharmacy owner, what might they do in five minutes, whether it's contemplating on something or signing up to a website or getting a subscription to something, what's something that they would maybe do for a few minutes as they're done listening to this?

Colin Carr: That's a great question. So the first thing that I would tell pharmacists is just realize what's on the line. , I don't like to make more of something than it is. I also don't like to make less of something. This is a transaction where you get one crack at it every 5, 7, 10 or 20 years, depending if you're leasing your owning.

If you miss, make a mistake, you don't get a mulligan. You don't get a do-over. You sign a bad lease, you're locked into that for the next, again, 5, 7, 10 years or 20 years on a purchase, what have you. So, it's not a matter of I made a mistake, I learned from it, and I'll just fix it next month. There's a lot on the line and you don't wanna lose tens of thousand dollars.

You also don't wanna lose your time, cuz your time's very valuable. You'd be way better off to put your time inside the pharmacy or inside your business than you would spending 30, 40, 50 hours of your time trying to finagle a deal through hiring expert representation and letting them protect your interest.

Just like you go to a doctor or specialist, let them use their specialization to put you in the best place possible. So, Number one, realize what's on the line. Number two, higher professional representation. And then number three, when you go to [01:05:00] market, look at options for the lease, and look at options that purchase.

Don't assume you know what's best before you get there. You might say, I have to own. But that might be a dramatically inferior location or property. And you might have a business that does way less than revenue because it's not the right location, it's not the right feel, it's not the right synergy with other people.

So look at options the least. Look at options to purchase, and then make sure that your agent is negotiating with multiple landlords or sellers simultaneously so that when it comes time to choose the property and move forward, you're not wondering, should I have looked at more property? Should we have negotiated harder?

Did I leave a hundred thousand dollars in the table between these concessions and these economic terms, et cetera. And at the end of the day, you're gonna have peace of mind. And so getting the deal done, it's step one, getting the deal done with the best terms possible. Step two, getting the deal done with peace of mind is step three.

You shouldn't be sacrificing any of those. You should be able to get all three of those in any transaction. And so if you handle the process with the, with the value that you should place upon it, you're gonna be in a much better position.

Mike Koelzer, Host: Colin, I could have had a whole conversation about your business, how you have grown and worked with your agents and the commissions and all that kind of stuff. That's all fascinating. But in the meantime, you've got agents around the country that can reach out to your office and I know Grand Rapids has somebody representing your office and so on.

Pretty much anybody has coverage if they wanna reach out to your company.

Colin Carr: Yeah. So, we're licensed in almost every state in the country. we're actually gonna be licensed in every state, by the end of the summer, which is a really unique status. there's very few people in the country that have that status, so we're excited about that.

But we transact in, in all 50 states plus dc. So if you have a requirement and you're in, whether you're Boston, whether you're Seattle, whether you're Texas, like we can help you, whatever city or state you're in. The best way to get a hold of us is our website, and that is carr.us. So it's c a r r.us.

Upper right hand corner, you can click to find an agent and you can just begin the conversation with someone and tell 'em, listen, I'm looking at buying my facility, or I wanna do a startup, or I wanna start scaling into multiple locations. Whatever situation you have,you tell them what you want to do, what you're trying to accomplish, and then they'll help you, and start the process officially.

You don't want to be behind the eight ball on this one. You don't want to be in a place where you have a lease coming up for renewal in two months, and then you're just starting to call someone because you don't have time to move.

Like you, the clock has run out on you. It's like a sports analogy where you keep the ball away from the other team and they don't have a chance to either throw it or shoot it or what have you. So, starting the conversation with somebody who knows what they're doing, who's an expert in your area, is gonna position you for the highest level of success.

And then you wanna start at the right time as well.

Mike Koelzer, Host: Hey Colin, it was cool to look around the background on this stuff finding what's going on with things like this. Very cool stuff. thanks Colin. Thanks for joining us and, and, 

Thanks for helping our pharmacy, brothers and sisters and making sense out of all this. I look forward to keeping in touch.

Colin Carr: Sounds great. Thanks Mike. Appreciate it.

Mike Koelzer, Host: Thanks, Colin.