In this episode, we interview Norm Gelfand of Dental Real Estate Experts! We discuss expanding your dental practice real estate, the ins and outs of leasing, landlord agreements, and more.
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- Expanding your dental practice with real estate
- The ins and outs of leasing
- What do attorneys overlook?
- Real-estate horror stories!
- The 61 vital points in a dental lease
- Agreements between owner, landlord, lender
- When buildings go into foreclosure
- What’s a latent defect?
- Protecting yourself as a tenant
- Reaching out to Norm:
- Get your lease looked at!
Hello, and welcome once again to the Dental Marketing Mastery series. This podcast is brought to you by DentalWebContent.com and New Patients Incorporated. I’m Howie Horrocks, the Founder of New Patients Incorporated, along with me once again, as my friend and partner and the President of New Patients Incorporated, Mark Dilatush.
Mark: Well, welcome, listening audience. This is Mark Diltaush, with the Dental Marketing Mastery series podcasts. I want to remind everybody listening to our podcasts that we have a sister Facebook group, it’s a closed group by invitation only you all are invited. It’s called Dental Marketing Mastery community, search for it on Facebook and invite yourself and we will likely approve you. And you’ll come in and follow up on their detailed conversations from these podcasts and from other things.
So today, we have a special guest, his name is Norman Gill fan, and he comes to us from a company called dental real estate experts.com and he comes to us, partly by chance, partly by the collision of multiple business events. Norman works with an awful lot of dentists who are looking for new lease space, new dental practice real estate, or establish practices. And we have a lot of those who are looking to expand, maybe expand into a larger space or expand into real dental practice real estate ownership. And I wanted to bring Norman into the mix with our podcasts because mean, we aren’t real estate experts. We don’t you know, we don’t have nearly experienced Norman has. But Norman knows an awful lot about the things to do and the things not to do. So. Norm. Welcome.
Norman: Thank you very much for the invitation.
Mark: You’re very welcome. So where are you physically located? Norman?
Norman: We’re in Austin, Texas.
Mark: Oh, it’s beautiful.
Norman: Oh, it’s the pearl of the South.
Mark: Yeah, it’s a it’s a it’s a it’s a bummer to drive around. I remember that. Traffic in Austin is probably second to LA. But um, but it’s beautiful there. So, Norman. You and I, you and I have chatted back and forth about, you know, mutual clients and some things that, that people just either they gloss over, they don’t pay attention to. And then some dentists, they’ll say, Yeah, but I have an attorney. And then some dentists will say is Yeah, but I have, you know, someone helping me like broker. So tell me, can you define those roles for the audience so that they have a clearer picture on who does what, and from what viewpoint?
Norman: Well, typically, a broker will help you with location. And supposedly economics, the economic negotiation and letter of intent. And that’s what usually stopped and they’ll say, Well, here’s the least give it to your attorney, and make sure it’s okay.
Mark: So what’s wrong with all that?
Norman: Well, what’s wrong with all of that, is that the lease is always shifted towards the landlord. It’s a landlords lease. And the attorneys know what’s legal, and enforceable because that’s what they look for legal and enforceable. But when it comes to the business, part of the lease, some of them are clue. Listen, sometimes you find a good attorney that knows something about what’s good business for a dentist, and what’s bad business or dentist in the lease.
Mark: Oh, okay. So, so really, I guess the middle ground would be someone who knows the, the legality and the enforceability. But someone who also knows the business of dentistry,
Norman: Right, I could give you some great horror stories because of what attorneys overlook.
Mark: Well, then let’s Yeah, I mean, our audience loves a good horror story. I mean, we share them all the time. So go ahead, give us a card. Give us an example.
Norman: I’ll give you, I’ll give you bunch of them Because the horror stories is what we really protect against.
Norman: So we’re representing somebody that wants to buy a practice in Chicago. Now, we’re only looking at the least that exists, because anytime you buy a practice, you’re buying into an existing lease,
Mark: Of course.
Norman: So when evaluating the lease, for the buyer, I see that there’s a recapture clause is, which means in the event of a transfer, or sale, the landlord can take back the lease, and the go shake directly with the new buyer, the practice.
Norman: That’s totally legal. But it’s bad business.
Mark: In other words, he would the attorney would just fly right by the attorney.
Norman: Well, in this case, it did anyway.
Mark: Right. Right.
Norman: And as a result, the seller had to drop his price $80,000 because the landlord raised the rent.
Mark: Also, this is a big deal. He had that in his lease. So this is a big deal. Just this one little clause is a really a big deal for anyone who owns a practice in leased space.
Norman: Absolutely. Okay.
Mark: I’d that that’s not a horror story, you just you just saved or potentially helped thousands of dentists, that’s not a horror story. That’s you just told everybody what to look for. That’s good. Well,
Norman: let’s keep going for a couple of minutes. And you gotta do it, why? The lid, the vicious portions of the least is the most overlooked portion, most of the dentists, of course, the location is critical, and we help them find locations, right? economics. Sure, that’s very important, because that’s the upfront of money. They don’t ruin allowances at the free rent and all that sort of stuff. But what they miss is 61 vital points. That release, they can affect the value of their practice. Other example having here in Austin, our clients and endo Donna’s, and he was in a shopping center that was re that was foreclosed upon.
Norman: Now, a building is foreclosed upon. Typically, in most states, there may be an exception, but in most of the states that we’ve worked in, all the leases are void is no longer any leases. So now, the landlord can negotiate with the tenant on a new lease, or if the landlord is going to repurpose the building, you may not want a dentist in there. So now the dentist is out. And a place to practice and he’s got a huge loan, all because whoever did the lease did not put in an agreement between the landlord, the lender and the owner that day to honor the lease in the event of a foreclosure.
Mark: So basically, what you’re saying is the owner, the landlord, if they want, let’s say they had six tenants in one building, and they had an interested party wanted to come in and offer them double the rent. For all that space.
Mark: So the landlord says, You know what, I’m bankrupt. I’m going to claim bankruptcy, void all those leases, and then just lease out to the new party that wanted the space more than the other six occupants. Is that what you’re saying?
Norman: Well, what I’m really saying is, it happened right here,
Norman: as buildings go into foreclosure, because the developer didn’t have the right mix. He couldn’t get the right tenants,
Norman: reasons that buildings go into foreclosure.
Norman: Now, in this case, this particular shopping center had about six tenants in there, but it wasn’t enough to carry the shopping.
Mark: Oh, ok.
Norman: So the guy was still underwater.
Norman: He’s underwater,
Norman: Because there was not the right agreement in the lease. At then, a guy could lose his lease, the building repurpose for something else. Maybe they go on and make an office building an office thing out of the building
Norman: Now was maybe they the new owner had a son in law, who was a dentist, and would move into the space that he forced the existing tenant to vacate?
Mark: Sure, sure, sure.
Norman: Okay, we always protect against that eventuality is a matter of fact. My feeling is that unless you can get this kind of a clause of protection and the lease, you should walk the lease, don’t take it because it can future it can absolutely devastate a dentist because no place to practice. We’re a big loan, because it a build out the infrastructure and his credit shot because of the money he owes.
Mark: Yeah, no. And you know, not to mention, loss of business in during the transition.
Norman: Oh, yeah. Yeah,
Mark: No, I mean, okay. All right. That that was more like a horror story. Okay.
Norman: How about another horror story, I got loads of horror stories.
Norman: I’ve been doing this solely for dentistry for 17 years, right? Here’s ours, though. Are you saying?
Mark: No, I know, I know that. That’s why, you know, um, Howie and I, and all the advisors here? I don’t know, I guess we’re just, we’re like, you were just kind of protective, right of our clients,
Norman: you know, that’s what they hire you. That’s why you’re calling?
Mark: Exactly. So you kind of I guess you just want to help you just want to help them just want to protect them, you know, from doing so. And that? Will your what you do is not our expertise, right? So when we run into folks like you who have this, you have a special skill, this special niche to help protect our clients that that’s why it’s of interest to us. So I’m sorry, go ahead. Go ahead with your other horror stories, because I’m sure people wanna hear this
Norman: we did a deal in Charlotte. Yeah. So every lease says that the tenant cannot create a lien on the property you can to get rid of a lien, he cannot have a lien on the property because it clouds the title. So every lease will have that in it
Norman: Now, all the materials and manufacturers lien. So now, in this case, we had a contractor that was building out for a new dentist and the contractors, God eyes, put the drywall and with all sorts of kicks in it the drywall look like a look like to see in a storm. You know, you get it undulations throughout the drywall,
Norman: The contractor said, Hey, that meets industry standards, you got to take it that way. And really it was horrible. So in most cases, without the proper protection, the tenant will have to pay the contractor. There’s no lien on the building and then sue the contractor for the money that they had to give them for the band work done by somebody else. So they’re paying twice for it.
Mark: Sure. Right. Right. And a lot of times that those lawsuits end up being unrecoverable to some contractors because they just go wonder come up with a different name and they become somebody else overnight.
Norman: That’s very possible. And the fact is that an M&M lien can be protected in the contract. The ability to bond around the lien is something you negotiate with the landlord.
Norman: But every lease says you can’t have any liens on the property. And you see that’s legal for the lease to say that.
Norman: Many that’s
Mark: That’s why attorney wouldn’t pick it up.
Norman: Right, right. I mean, there’s, there’s all sorts of like, latent defects is a big thing. What’s a latent defect? You go to lease some space, then it goes; the dentists go to lease some space, and everything looks good. But there’s mold behind the drywall because the Chinese restaurant is the adjacent tenant, let’s say, or some kind of restaurant. Well, all leases that I have seen says you have to accept a space as is where is. Which means if there’s mold behind the drywall. It’s your problem. It’s not the landlord’s problem. See, that’s the shift of the risk.
Mark: Right, right, right,
Norman: Risk away from the tenant. But work on hard is to shift that risk. So if you have in a lease and it’s difficult to get; you gotta fight hard for your tenant for it. If you haven’t at least protection against latent defects or concealed defects. What that really says is if there’s a defect in the building that you could not determine by normal inspection methods, then that latent; that;s a latent defect. And that belongs to the landlord, if you negotiated properly in the contract.
Mark: Right, wow, this damn Yeah. And it sounds like on every case, and attorney would say, Yep, that’s legal and enforceable and just move on. They wouldn’t say, well, that’s not a good idea or a bad idea. That’s what you guys do. You guys, you guys look at him and say it’s a good or bad for my client? Not is it legal or not?
Norman: Yeah, well, I think we’re one of the few companies that really focus on protecting the tenant by shifting risk away from the tenant towards others. It takes a lot of time to negotiate that, but we feel is a good investment in buying relations to do all of that.
Mark: Now, so. So how did how does your firm How does it well, first of all, how does it dentist reach out to you? Norman
Norman: well, they can send us an email, they can give me a call, they can take a look at our website and click on something on our website that will send us an email.
Mark: Okay, so I so there for the folks listening to this dentalrealestateexperts.com is the name of the of the name of the website. And Norman once you tell everybody your email address
Norman: is NDL. Fan more difficult. Real Estate experts. email@example.com
Mark: dental RXP.com. OK, cool right now wonderful. And your phone number there
Norman: is 512-833-5300
Mark: So they call you so whether it’s a startup or a dentist that’s maybe looking to really go shape least or maybe looking for new space? or what have you, whatever the situation is. They call you they tell you their situation. And then how do you contract with them and how do you get paid?
Norman: Well, we are paid by the landlords brokers splitting his fee. A landlord appoints a marketing broker and pays him a percentage of the lease.
Norman: If the tenant does not have representation, that listing broker keeps the entire fee.
Norman: If the tenant has representation, which by law he’s allowed to, then that listing broker splits it up. And we enter into an agreement with our client that our fiduciary responsibility is to our client, even though we’re being paid through the landlord’s broker, we have a fiduciary responsibility to the client, and we can lose our license if we did do everything we could.
Mark: Right, right. So it’s very much so it’s not like the dentist has to take money out of their pocket.
Norman: Not at all. And historically, we usually save the tenant, somewhere between eight and 10% of the average sized price and we don’t charge for that saving.
Norman: We know that is inflated some
Norman: Atlanta. So we feel that that’s part of our job. Is it the best price that we can for the tenant?
Mark: What’s the most popular dental business life cycle? Where you see the most clients? Is it the startup the young dentist? Is it the you know, mid 30s, early 40s dentists looking for their first education?
Norman: There’s two, okay, the young dentist is starting out.
Norman: The second one is the dentist as about this. And that was his practice in 10 years?
Mark: Nah. Okay.
Norman: If you’ve been in this space, were 20 years like a lot of Dentists have. The demographics can change. The physical layout can be absolutely sure. Functional obsolescence, economic obsolescence, all types of stuff. What they do is they look for a spot that’s within a mile and a half or two miles of where their existing place was.
Mark: Yeah, a lot of that going on. Yeah.
Norman: with excellent demographics and so forth. They’ll either grow their practice from there with towards selling it when they retire.
Mark: Okay. All right. So it doesn’t. So this isn’t really necessarily for a startup. This is for almost anybody.
Norman: Oh, yeah. Thanks for buying a practice. You want to evaluate the existing lease? And many times renegotiate it. Oh, there you go.
Mark: Right. Right. So that’s, that becomes part of the excuse me, that becomes part of the transaction. That negotiation
Norman: is should be Yes,
Mark: yes. Okay. Well, Norman, I thank you. I think our listeners, thank you. I think I know, I just learned a few things. Um, boy, I’m real sure a lot of our listeners just, I bet you some of them are scrambling to go find their lease right now.
Norman: Right. Well, if someone has a question on their lease, they can send at least to me and I’ll take a look at it. We don’t charge to take a look at something if it’s just a matter of some counsel.
Mark: Okay, it’s the same with us. Yeah, we don’t. Yeah, we don’t we never charge for a phone call. Well, Norman, thank you. Thank you very much for your time today. Don’t be surprised if I bring you back. Because I think could we get feedback on these podcasts? People can ask us questions in the in the Facebook forum, and they often do you know and don’t be surprised if I asked you to come back on here and maybe we’ll go a little deeper into some more horror stories. That sounds like fun. Maybe around Halloween.
Norman: That’s good.
Mark: Yeah, maybe we’ll maybe we’ll do it then.
Norman: You’re happy to be on your program anytime. That is good for you.
Mark: Oh, thanks, Norman. Have a great one.
Norman: Thank you, sir. Bye Bye now.
Mark: Bye. Bye.