Helping Healthcare Scale
Imagine you're friends with multiple CEO's of billion dollar organizations. You can call them anytime you like and ask them all that they've learned about real estate and investing, including some of their biggest mistakes.
That's the mission of this podcast, to teach the insider strategies used by the big guys to everyday healthcare operators in order to get access to the best strategies and real estate at the best prices.
If you need help finding the perfect location or you're ready to invest in commercial real estate, email us at podcast@leadersre.com.
Helping Healthcare Scale
Find Your Perfect Healthcare Property with Data-Driven Insights
A Guest Episode from Break of Day Capital | Dive into the transformative world of healthcare real estate with Austin Hair as we explore how data analysis can elevate your investment strategies. From understanding patient demographics to leveraging grocery anchor data, this episode is packed with insights that promise to change your approach to site selection in healthcare.
Austin, a seasoned investor with a fascinating background, shares how he transitioned from professional wakeboarding to investing in healthcare properties. Learn about tiering systems that align specific healthcare services with the right locations and why this strategic positioning can lead to increased success.
We also tackle the pressing issues of competition and inflation within the market. With insightful discussions on multi-tenant developments, discover how diversifying your portfolio can not only mitigate risk but also provide more stable returns. This is a must-listen for anyone looking to navigate the medical retail landscape effectively.
Curious to learn more and engage with our community? Be sure to subscribe to our podcast for future episodes, share your thoughts, and leave a review to help others discover this valuable content.
If you need help finding the perfect location or your ready to invest in commercial real estate, email us at admin@leadersre.com
Sign up for a FREE vulnerability analysis and lease renewal services
View our library on apple podcasts or REUniversity.org.
Connect on Facebook.
Commercial Real Estate Secrets is ranked in the top 50 podcasts on real estate
Hey guys on this podcast. I had the pleasure of being a guest on Gary Lipsky's podcast, break of day capital. Hope you enjoy.
Speaker 1:The process is essentially we look at all the data around the grocer anchors because they just have the best data. You essentially will look at the ideal patient or the ideal client that the business wants to have, you match that up with the grocer anchor centers and then you hear it right. So so like, for instance, in our world, if you're doing Medicare and Medicaid, a Walmart is going to be a tier one and a Whole Foods might be like a tier four. Like you might not need to go down to the, you're not going to pay the Whole Foods rent. But if you're doing PPO or private pay insurance, then you're going to be next to the Whole Foods or the Trader Joe's and stay away from the Walmarts, from the Walmarts.
Speaker 1:But either way, you create a like a, a tiering system, and then we kind of color coordinate those. So like tier one will be green and then we'll have them all the way on down to tier four. We overlay those on the Google earth map, okay, layer for that. So you get a visual of like, where's these cluster of like greens, and then we do a competition analysis. So then we look for, okay, what's your niche, what's your competition, be you're in urgent care or whatever We've worked with Starbucks and Chipotle and Panda and stuff like that on some deals but where's the least amount of competition and the highest amount of patients already going to? And then we try and find places in that location.
Speaker 2:Welcome to the Real Estate Investor Podcast. I'm your host, gary Lipsky of Break of Day Capital. I talk to leading experts to discuss a wide range of subjects, to educate investors on best-in-class practices, to build legacy wealth and positively impact communities. Let's jump in. Hey everyone, welcome to another episode of the Real Estate Investor Podcast. I'm your host, gary Lipsky, with Break of Day Capital. Be sure to join our Facebook group, asset Management Mastery, where we have a great community of thousands of like-minded individuals sharing resources and best practices. Today on the podcast we have Austin Hare. Austin had a career spanning over a decade as a professional wakeboarder and more recently as an America Ninja Warrior finalist. Very cool. He got into real estate with a unique blend of discipline and calculated risk-taking. Austin now shows others how to find locations that stack the deck in their favor and is focused on healthcare real estate backed by private equity groups. Thanks for joining us, austin. Can you start by telling the listeners a little bit more about yourself and what you do?
Speaker 1:Sure, yeah, I skimmed over it a little bit, but I was in wakeboarding for a long time. Essentially, I read the book Rich Dad, poor Dad, and then they were like Robert Kiyosaki was saying you got to get a house and invest in real estate and get renters and stuff like that, and so that's just what I did. I was lucky that it was 2011 and it was the bottom of the market. So I got a really great deal on a house and I got four roommates that wanted to wakeboard and it was a essentially it was a four bedroom house with the guest house, three roommates and a guy renting the guest house, and I was getting paid to live in the master suite with my own private deck or the lake two-story house with a pool and a hot tub, and it was great. So I was like man, this is pretty cool, but I didn't really actually see the light at that time. It was more like this is this passive thing, right? Because he really talks about, oh, make it passive income. And so, of course, I worked my butt off like remodeling that house and like fixing it up. It was always but it was quote unquote passive.
Speaker 1:So, anyways, I opened up some fitness centers as I was retiring from wakeboarding and I was, as I was, looking for new locations. That's when I met my partner now and he did a site selection analysis where we just looked at the competition and the demographics and I had pinpointed in my head that I wanted to be in Winter Park, which is like a cool kind of expensive area of Orlando, and I had thought to myself that I wanted to stay away from Kissimmee. But when he ran his analysis, it was actually it was the total opposite. Kissimmee was wide open, winter Park was super expensive and super saturated. So I found out you can't make good decisions without good data. Luckily, I ended up selling the gyms in 2019. And that was simply because I got in a disagreement with the franchisor. Thankfully, he was making it very difficult to do business and so I sold it right at the top of the market, right before COVID touched that bullet, and then my partner invited me to start working with him in commercial real estate.
Speaker 1:So now we do that process of site selection for healthcare groups Think of dental, derm, vet, behavioral health, urgent care, sub 10,000 square feet, but multiple locations who are growing. They needed an analysis. So we'll do the site analysis. We'll try and find out where to go. We broker the deal and when it's available to buy or develop, then we'll purchase it and develop it on their behalf, and so one of the things that we've been doing recently is a little bit more of multi-tenant development. So we've just been facing issues with inflation costs and, like doing single net, single tenant buildings have been really not conducive for pricing for our healthcare groups. So we do multi-tenant to help lower the base. And on the short-term rental and the residential space, I turned my houses that I bought from wakeboarding into short-term rentals and a couple of them actually converted into wedding venues as well. So that's kind of where we're at now and happy to go whichever that there's a lot of there. Happy to go whichever way you want.
Speaker 2:Very interesting story and pretty cool niche that you're in on the healthcare side. So what are some of the key data points you're looking for when you're trying to choose locations?
Speaker 1:So we there's you know a lot, of, a lot of different subscription sources that you can choose. We use one called Pitney Bowes. We just pay the subscription service for that and then we just do the analysis for free for our groups as long as we can broker for them. But really you can pay anybody to do it if you want to. You don't have to use us, obviously. But the process is essentially we look at all the data around the grocer anchors because they just have the best data. You essentially will look at the ideal patient or the ideal client that the business wants to have.
Speaker 1:You tier, you match that up with the grocer anchor centers and then you tier it right. So like, for instance, in our world, if you're doing Medicare, medicaid we a Walmart is going to be a tier one and a whole foods might be like a tier four. Like you might not need to go down to the, you're not going to pay the whole foods rent. But if you're doing PPO or private pay insurance, then you're going to be next to the whole foods or the Trader Joe's and stay away from the Walmarts. But either way, you you create a like a tiering system and then we kind of color coordinate those. So, like, tier one will be green and then we'll have them all the way on down to tier four. We overlay those on the Google Earth map. We're going to layer for that to get a visual of like, where's this cluster of like greens?
Speaker 1:And then we do a competition analysis. So then we look for, okay, what's your niche, what's your competition? Maybe your general practice dentist, or maybe you're an urgent care or whatever. We've worked with Starbucks and Chipotle and Panda and stuff like that on some deals. But like, where's the least amount of competition and the highest amount of patients already going to the least amount of competition and the highest amount of patients already going to? And then we try and find places in that location. We're still looking at things like traffic counts, like street visibility. Are there trees blocking the the view? Is it a ride in right out? A lot of the what I guess you'd call basic types of indicators for retail real estate very interesting.
Speaker 2:Have you tried this for, let's say, multi, multifamily or self-storage or some of these other asset classes?
Speaker 1:No, we haven't done that. The reason being is like when my partner and I started working together in 2020, right when I sold the gym end of 2019, early 2020, we sat down and we were like, what asset class do we want to go into? And at the time it was like we know that healthcare is very recession resistant. Now it's like recession resistant, pandemic resistant, inflation resistant, and you didn't have as many developers going after those groups, even though the credit was great. So, according to the SBA, dental has one of the lowest default rates of all the businesses that they track and it was a lot more competitive to try and get our foot in the door with another retailer call it like a seven 11 or a Starbucks or something like that. So we took a roundabout way to do it focusing. And then the other reason is just the square footage size, so like we hadn't done a deal that big like a multi-storage, a self-storage unit is very big, a multifamily is like very big. So we're trying to stay within our niche, if that makes sense.
Speaker 2:Yeah, absolutely. I'm a big proponent of kind of staying in your lane. I see a lot of people in real estate if one asset class isn't doing good, they quickly jump into a different asset class and or offer all these different options and they haven't really built up like the data points and the skillset. They're just jumping in because something's not working right now. And there's something to be said about really, really focusing in Orlando is probably Florida would be a great place to focus on what you're doing.
Speaker 1:Yeah, we do. We do a lot in Florida. We do nationwide, but I would say Florida is our bread and butter because we live here, so it's easier. But the process is actually the same regardless of where you go we're using. The only difference is like physically driving the locations which we normally fly to a location anyways. But yeah, the fundamentals are all really the same. But to your point, florida it has been pretty good. Like you saw, some markets get oversaturated so Texas grew like too much too quick after the pandemic, even like Florida to like certain markets are getting hit right now. But really the reason Florida is suffering, if you looked at a residential real estate chart, is because there's certain areas that just got hit by the hurricane, like two years ago and even like earlier this year, that like still haven't recovered. So it looks bad on paper but there's still a lot of people moving into Florida and the population, like the demographics, are strong. That does make it, that does help it when you have a rising tide.
Speaker 2:Yep, absolutely. Besides all those checkpoints, are there other risk return ratio things that you're looking at to make investments safer?
Speaker 1:Yeah, so we've been burned just by the school of hard knocks. Right, like you, gotta, you can't. I thought when I read Rich Dad, poor Dad and 4-Hour Workweek and the entrepreneurial myth, that like, that was it. I read these three books and now I'm good to go. I can just retire at 22. But, like with everything, there's a big learning curve to it, and so, with doing like, in terms of answer your question about risk return, there was a. I'll just give you an example of a project that we did back in 2020.
Speaker 1:We were doing we had an assignment for an urgent care and it was in a lease summit and they'd been looking for this place for two years and we finally found a good. It was a bank of America building that has been vacant and it was for sale and the cost basis was like 1.1 million, which is a great deal for a good retail strip center, and, and so what we had to do? What we had to do was essentially line up two tenants because we had a lot of like, extra vacancy, like the urgent care wanted about half the space and the other part was going to be vacant. So two things happened. Number one the urgent care actually ended up like pumping the brakes a little bit and we kept pushing the seller. Eventually the urgent care is backed out, but at the time we had gotten Starbucks to express interest in giving us an LOI. So now we're in this kind of situation Okay, seller wants to sell, urgent care has backed out and we don't have a signed lease from Starbucks. But the building is a great cost basis. Lease from Starbucks, but the building is a great cost basis. Do we take the risk or not? And we had done the analysis and it came back really strong and all the analytics boxes were checked off. So we said, hey, let's just go for it. So, sure enough, starbucks did sign the lease and we ended up getting a 90 unit what's it called Physical therapist, who you know which had a really strong tenant, and so it ended up working like really well. This was like a grand slam.
Speaker 1:Now what happened was we, when they did that, when they came back and the city was doing it wasn't the, wasn't the phase one study, because we had already done that the phase one, environmental. I don't even think it was phase two, it was something else. But like they essentially came back and tested the parking lot and they said, oh, you got to totally redo this parking lot If you want to do a drive through Starbucks and we're like this is a drive-through bank of America and like, oh well, it's not up to code anymore. It being mind, you is built in 2000. You know four, it was only 15 years old and they changed the code that much.
Speaker 1:So we had to drop $300,000 out of pocket I think it was 320 grand. We had to come out of pocket collectively between the partners in order to resurface the parking lot and so, even with that happening, like we got it at such a good cost basis, even after the build-out cost for the new tenant and then doing this, like we're still averaging like pretty, like high teen IRRs. But that was one of the things we learned a lot. You got to make sure you're doing your due diligence process ahead of time so you can calculate that for that, because that would have added to the project cost, which would have added to the loan value, which would have meant we could have raised like more initially but less overall. So those are just the things that you learn from doing.
Speaker 2:Yeah, I'm shocked. How can a drive-through change from a bank to a Starbucks? It doesn't make any sense, but I know these communities have these kind of wonky laws and the use of it is very particular.
Speaker 1:Yeah, and I think another point about that I'll make, about what you're asking about risk return profiles that's actually a lot of what we focus on. What we're doing right now is focusing on the multi-tenant. So, like the example that I gave you, there's a small period of time where these dentists and these healthcare groups wanted single freestanding buildings because they could afford them. I think everybody would argue they want a freestanding building because essentially, you get three corners of marketing right, like you get everybody driving by each way, we'll see all three sides of it but you just have the least economies of scale. So a lot of developers don't like doing multi-tenant because it's riskier. Now, instead of finding one tenant, I have to find two. So when you get an assignment to do a development for a tenant, it's very risk averse and interest rates and real estate is just so high. We're pricing those guys out of the ability to be able to do single tenant. And so what we're doing is we're taking on the risk as developers because we've been building relationships for such a long time, like we've done other deals.
Speaker 1:We use health care as a way to get in or get our foot in the door with these other retail tenants. And now when we get an assignment from a retail tenant, we can bring in some of these other retailers that pay a little bit more rent. We can keep the healthcare rent a little bit lower and the investors still make a good return. So that's one of the ways that, like we're de-risking it, we're essentially we're de-risking it for the healthcare group, so they like that, they can pay lower risk. But then because we have existing, pitch that ahead of time. And so again, I'm not saying that you have to go work with us. Anybody can do these strategies. This is just a little peek behind the curtain at how we do it.
Speaker 2:Nice. So talk to me about the pros and cons of medical retail. We just went in through it a little bit, but are there other pros and cons that you're looking at?
Speaker 1:So it's interesting because you're in this asset class that is growing. The patient base is growing, the patient demand is growing, which is great. We've gone from $350 billion in annual spending as a country to like $2.2 trillion since like 1987. So it's like above the inflation rate and it's only going to get more and more because baby boomers are retiring and they're going to need increased cost of health care to keep them alive longer. And that's just the future, for better or for worse.
Speaker 1:But here's the caveat they are capped by either regulation or insurance reimbursements as to how much they can charge the patients.
Speaker 1:So you have an inflationary and, look, there's a lot of ways and we can talk about hospitals because they do a lot of shady stuff that I don't agree with.
Speaker 1:But, like in our niche, it's like these smaller groups that aren't really facing a lot of those, like we're not talking about the ambulatory $10,000 charges for whatever these are, just like your urgent cares and your dentist and your dermatologist, and you pay for what you get, right, you know what you're going to pay, going in to an extent.
Speaker 1:But the reimbursement rates are capped because the insurance companies, like, only will pay a certain amount and even in an inflationary environment, they're lowering the amount of the reimbursement. So you just have a tricky situation where a lot of these groups are getting squeezed because Medicaid and government reimbursements and insurance reimbursements are lowering but their costs are going up. So that's like the downside. But, like we talked about a second ago, if you can build a multi-tenant development, then you can help offset that. Now we've tried looking for second generation spaces, but we're talking about an industry where the patient demand is growing. There's just not a whole lot of second generation spaces. So it brings us back to doing multi-tenant developments as a way to counteract these problems that we're running into.
Speaker 2:Yeah. And then the disincentive nature of healthcare, which has to change at some point because the costs are just insane. Yeah, it's just gonna. The spending and the need for more and more facilities just keeps going up.
Speaker 1:Yeah, I mean, look, I'm as excited about it. I don't know. I don't know if anybody else is excited. I'm excited about the DOGE, the Department of Government Efficiency. I'm really excited for them to do a lot of cutbacks. We've got to cut all the spending, got to cut all the spending, all the excess spending and even and it manifests its way through healthcare.
Speaker 1:But largely it's like the hospital system there's like those hospital systems that are really have a lot of bloat and the medical benefit intermediaries, mbhs, wherever they're called, like all that kind of stuff drives prices, but we don't really actually get affected too much by that. In our space, like, we're dealing with a lot of the smaller groups. Sometimes the urgent cares they work with our hospital back, but sometimes they're just private equity backed. So we're not really we don't really have to deal with a lot of that bloat. So I think, even if the I think first of all, yes, spending does need to decrease, but even if it does decrease, like per charge or per appointment, like overall, like the amount, the frequency and the amount of healthcare needs that people have as they age, it's just it's only going to increase. So like, in that sense, like we're pretty convinced that it's just a very durable asset class to be in and it's like we're talking about risk and reward. It's just a very low default rate, right, because there's always such a need for it. You're never going.
Speaker 1:People were really worried about retail for a long time, like during the pandemic, and people were saying, oh, retail was going to die, people aren't going to go into the store anymore, blah, blah, blah, and you can't have some of those concerns. Now that ended up being wrong because retail did fine. It was like other industries, like office and some multifamily that really got hurt, but to the same extent like you're never going to be able to virtually do all of your healthcare needs. So you're just always like that. It's your body right, like as long as you have a body, you're going to have to go in somewhere. So that kind of keeps us like uh, pretty optimistic, like pretty bullish on their risk reward thing. So look, there's a lot.
Speaker 1:There's some deals that we see that like in the high 20, 30, like 30 irrs, that's not really us right. We're going safe, we're going risk adjusted. Like that's what we're going for and you can for everybody listening like you can decide the risk based on the credit of your tenant. Like you can figure that out. So if you're trying to develop your own deals or you're looking to invest in deals, like you can decide the risk based on the credit of your tenant. Like you can figure that out. So if you're trying to develop your own deals or you're looking to invest in deals, like you can see the credit worthiness of those tenants by asking for their financials. If they're not a publicly traded company, and then that should absolutely affect your willingness to work with them or even the rent that you want to get them to pay.
Speaker 2:Are there any particular markets that you love for the medical field that you feel like again, supply and demand and anything else that what are you seeing for 2025?
Speaker 1:Yeah, I think that Florida, the fundamentals are still strong. We're here, we're doing a deal out in Oregon right now that one is looking. So, yeah, it's hard to say. It's all got a pro and con right. We had to send a 200 page document to the city to do that, to get approval for that deal and, as a result, to do that to get approval for that deal and, as a result In Portland and, yeah, right outside of Portland, yep.
Speaker 2:Yeah, that was crazy, yeah, exactly.
Speaker 1:But, as a result, there's not as much development new development going on there, right, because we went through the headache. Now it's looking like that'll be a really strong return. So, yeah, I think, geographically, everywhere has like its pros and cons. We try and stay away from the really saturated metros like New York City and LA and downtown Chicago places like that. The rents and the cap rates the rents are really high, cap rates are really low. Prices are crazy. It's really hard for healthcare to make that work and for us as investors to underwrite that. So I would say that's our least exciting area, but otherwise it's feeling pretty bullish for 2025. People are originating new deals. Now that the election is in the rear view mirror, we have more clarity. Yeah, I think that there's a lot of investors that are looking to get involved with deals and there's a lot of groups that are looking to grow. So I'm feeling pretty good in general about the United States geographically.
Speaker 2:Absolutely and, yeah, I fully believe. Yeah, there's opportunity everywhere, even if there's a place with a ton of red tape and barriers to entry, that just means for the ones that are willing to put in the work and really understand the laws and navigate all that, there's some opportunity as well. So it don't really depends on your thesis of how you want to invest.
Speaker 1:Yeah, exactly, there's definitely something for staying in your lane, right? I wouldn't necessarily go to a place that was really hard to do business just because it was hard to do business, like we had a client giving us an assignment there in Oregon, which is what kicked off that whole process, austin.
Speaker 2:I appreciate you coming on the show and really providing a wealth of knowledge on the medical retail space. Where can listeners find out more about you and your company?
Speaker 1:Yes, we, I'm pretty active on LinkedIn. It's just awesome Like the city hair, like on your head. Yeah, if you reach out and try and get in touch there, that'd be great, all right.
Speaker 2:Awesome. Thank you, Austin. This is Gary Lipsky signing off. I'll be back next week with another informative episode on the Real Estate Investor Podcast To all of our listeners. Thanks for joining us and if you liked this episode, please head over to iTunes or Stitcher and subscribe and leave a review, as it will help us reach more people. And if you'd like to learn more about what we do at Break of Day Capital, head over to our website at breakofdaycapitalcom and sign up for our newsletter and fill out our investor application. We'll talk to you next week.