Precision Guidance in Healthcare Real Estate
Reply
Tag Archives: hospital
Hospitals Employing Physicians: Is It Different This Time?
Around 15 years ago, physician practices were purchased by hospitals at compellingly high prices. Unfortunately for these hospital systems, within a matter of just a few years, the physicians were re-injected back into the community, largely because the hospital systems had not realized a return on investment. Fast forward to 2012, we hear similar stories about physicians becoming incorporated into a hospital’s network.‘
The reasons for hospital systems obtaining physician groups may be many. But, most conversations boil down to either a specialty or geographic play, whereby hospitals seek entrance or command of certain designated fields or locales. Also, with the establishment of healthcare reform, and impetus from both hospital and physicians for greater reimbursements, as well as a movement to adopt a more streamlined, technologically advanced care distribution model — we think this time may be different.
‘
Based on casual conversations, the motivations to join a hospital from a physician perspective is appearing much greater today than it was in the mid-90′s. A weakened economy, high employment or practice costs, entry barriers, a more savvy-consumer, and the potential for declining reimbursements, are among the top justifications that we hear from physician groups.
‘
There seems to be a greater number of differences in how the hospital systems are purchasing medical practices today, though, when compared to that of years past. Mainly, hospital systems are not offering to pay exorbitant prices, likely as a result of previous miscalculations. As for those that we speak with, many are not seeking to purchase practices outright (staff, equipment, management, real estate, in some cases). Instead, the hospital is offering employment compensation, with greater emphasis on incentives for productivity, to a select group of physicians for a number of years. Also, because reform will include greater regulatory oversight of physician purchases, this may be an incentive for hospitals to complete acquisitions prior to 2014, when the majority of reform’s initiatives take effect.
‘
The most common way that a physician practice group is absorbed by a hospital is through a method where physician owners and practice administrators keep an ongoing operation in place, essentially subjecting to less guidelines and oversight, but to assume some naming rights, some jurisdiction, as well as partnership for likely for potential future transaction.
As for the outright sale of a practice to a hospital, it may be achieved in several different ways. A hospital may purchase a practice’s tangible assets with physicians and staff as employees of the practice, whereby the unit is obtained as a separate entity. In another instance, the hospital may acquire the assets, physicians and staff to become employees of the hospital, in which the practice discontinues. As for unique circumstances, the staff becomes employees of the hospital, but the physicians remain separate.
A certain consideration should be made by physician groups as to the value of their practice to the hospital system. Because anti-kickback laws exist, the hospital cannot pay a physician group more than ‘fair value’ for their practice. Any payment that is beyond a certain amount could be considered a ‘kickback’ for services provided to the hospital. Also, keep in mind, the revenue generated by physicians for referrals outside of the practice itself are not considered in the valuation.
Another issue that comes from a practice purchase is that physicians are not relieved of their responsibilities. This is because the acquisition is commonly considered a separate operating division or profit center of the hospital. Consequently, the physicians compensation is still tied to the profitability of their previous medical practice. This provides troublesome if physicians are nearing retirement.
One last reminder, and a stark reminder of how this time may be different, is how the practice’s patients now can easily become part of hospital’s affiliated practice, especially with the advent of electronic medical records. In essence, the hospital now owns and operates all patient lists and records that have been accumulated by the practice group.
While I will leave you with the determination of whether it is better to sell, partner or lease with a hospital, MREA has established healthcare real estate professionals, accountants and attorneys to whom you have access. Contact us for our wide range of client responsibilities that incorporate business strategies with extensive real estate capabilities.
Hospital Real Estate Strategy: 2012 and Beyond
The following approaches, which are being implemented by hospitals and indicative of the strategies that our firm is undertaking, are beginning to take effect across the nation.
Monetization.
For an example, Baylor Health Care System chose to extract capital from its existing medical real estate portfolio through a real estate monetization process. In addition to generating funds that could be used to support new strategic initiatives, the system’s leaders believed that the proceeds generated from the disposition of to-be-constructed and existing facilities would enable the organization to obtain more favorable debt yields, as the liquidity from the monetization was perceived as a positive offset to the new liabilities it will pose. In this case, the health system started the initiative by identifying and qualifying real estate advisors. The organization selected an advisory group that had the capabilities of analyzing both owned and leased real estate, had access to an extensive database of investors and developers, and was experienced in working with physician real estate owners. After running a competitive bidding process, the health system selected one group to acquire its real estate portfolio. The transaction generated a tremendous amount of liquidity for the health system and created a future real estate partnership. The formal transaction process also served to inform major healthcare real estate investors/developers of the health system’s growth strategy. Doing so has created a potential set of financing options for the organization’s future real estate development capital needs. Any monetization process does not come without its challenges, however, given the fact that several potential parties may become involved (health systems, developers, investors and physician group owners, international, etc) seeking to purchase the facilities, all with separate, unique objectives. Also, the time required for the ideal purchaser to perform due diligence is usually much longer than what is anticipated. However, if the purchaser is knowledgeable about keeping open transparency, it alleviates the concern that may be among the staff and physician groups who have knowledge of the potential transaction.
Renovation.
Another approach that which will save cost and time, one that we will see for years to come, is to renovate existing facilities rather than building new. Clear Lake Hospital recently decided to redevelop/expand the woman’s and children’s units as well as the Heart and Vascular unit. They are incorporating a new 150,000 square-foot facility Patient Tower with state-of-the-art operating rooms, pre-operating and recovery rooms plus a 30-bed adult ICU. As hospitals will continue their growth via acquisition or partnership with physicians, new facilities are necessary in a competitive healthcare arena. As hospitals slow their growth, they will monetize and either pay down debt, growth through outpatient facilities, search for other partnered projects or renovate other existing facilities.
Cost Control.
Materials costs are another area that hospitals will be more aware for expense control. As an example of this approach, a hospital that our firm has negotiated, sought bids for the development of a new satellite medical office building. The process yielded many proposals, but one developer’s proposal to use tilt-wall construction for the building, rather than a more costly method, was deemed more favorable than the others. The developer’s construction budget was approximately a moderate percentage lower than that of other bidders. After careful consideration, the hospital ultimately chose the developer for the project—with favorable results. By keeping the construction costs low, the facility has been able to attract tenants with market-competitive rental rates as well as construct a well built facility that will endure the elements.
Joint ventures.
Real estate owners have enjoyed attractive financing by using sizable portfolios of real estate as collateral for bank loans or lines of credit. Hospitals that partner with a real estate investment trust (REIT) or a private real estate company can also benefit from the partner’s core “real estate competency.” For example, real estate companies are able to bring services such as property management, development, and space planning services to the hospital’s assets. Some also are able to share savings related to the packaging of the medical facilities that they may acquire or develop, creating cost savings opportunities through economies of scale. As is typical of such arrangements, once the medical facility was completed, the real estate owner became the landlord and leases the facility back to the hospital, thereby allowing the hospital to simply play the role of tenant and focus on its core competency: providing healthcare services. This underscores the symbiotic relationship between real estate owners and their healthcare clients which will be more prevalent in the future as hospitals exit the real estate business. The owner-partner will rely on the medical tenants’ present and future credit quality for their own cost of capital, so they have an incentive to align their interests with those of their tenants. This relationship between the hospital and the real estate capital source allows the hospital to focus its funds on its core mission.
Robert S. “Bob” Lowery is Managing Partner with MREA | Medical Real Estate Advisors, a full-service Houston-based healthcare real estate firm.
A Dirty Issue: The Handling of Medical Waste
The creation and disposal of medical waste should be addressed in a lease for medical office space. Generally, medical waste regulatory acts define what medical waste is and establishes methods for handling and disposing of waste. Each medical entity that is subject to such the act is typically required to register with a state agency, such as the public health department, and have a documented medical waste management plan. These acts contain specific requirements for the packaging, containment, handling, disposal and incineration of medical waste. Regulatory requirements typically treat medical waste differently from that of hazardous wastes. Accordingly, the types of hazardous wastes provisions in standard office leases usually include a supplement with a provision that specifically addresses medical wastes and the obligations of the landlord and tenant with respect to the disposal of the waste.
Commonly, the tenant that generates the medical waste is also liable for properly handling and disposing of the medical waste. Careful drafting by an attorney is necessary to ensure that the lease properly delegates the responsibility for disposing of this waste.
Even when the landlord assumes the responsibility for removing the medical waste from the building, the tenant often is required to store the waste it has generated within the premises until the landlord’s medical waste disposal company picks up the waste for the building. These obligations must be carefully detailed. Tenants should consider requiring the landlord to hold the tenant harmless once the landlord takes possession of the waste, such as when the waste is placed in a common area designated by the landlord to receive medical waste.
A very critical aspect of identifying each party’s responsibilities is determining what is meant by “medical waste” or “infectious medical waste” as the obligations for handling each may be somewhat different. Generally, medical waste is a more inclusive than infectious waste.
A lease should require the tenant to immediately separate any medical or infectious medical wastes, upon production or generation, from other types of office waste and place such waste in a container that is marked “biohazard,” “infectious medical waste” or the like. The drafted lease can further specify that the container be leak-proof, moisture-proof, puncture-resistant, or has the strength to resist, tearing, ripping, or bursting in the course of normal usage or handling.
Landlords commonly prefer that the tenant contract directly with an appropriately licensed medical refuse company which operates in compliance with all federal, state and local laws, rules and regulations pertaining to the removal and destruction of medical waste. This limits the liability of the landlord should a tenant fail to remove medical wastes. Our office has seen landlords protect themselves by adding language regarding the failure of a tenant to remove medical waste whereby including a provision that gives the landlord the right to remove the medical waste and then bill the tenant for the costs of removing such waste.
If the landlord agrees to dispose of medical wastes generated by the tenant, then the lease may create liability for the landlord beyond just the care of the medical waste itself. Such liability is based on the landlord’s control over the premises. If the landlord allows medical waste to be stored outside of a tenant’s space, then the landlord assumes liability for the ultimate disposal of such waste. Thus, the landlord needs to give contractual control over the medical waste storage areas to the tenants and prohibit storage of medical waste in common areas or other areas under the landlord’s control.
Additional issues can arise upon termination of a lease if the tenant has not removed all of its medical wastes. Under a nuisance theory, a landlord may be liable for hidden dangers of which a new tenant has not been informed.
If landlord is responsible for disposal, it is imperative that the landlord provide such information to janitorial services in a building. The landlord needs to ensure that these workers are adequately trained to recognize the containers that are marked for medical waste and to avoid handling the containers marked for medical waste. Additionally, such workers should be informed to recognize medical waste that may have been inadvertently left open and how to place such medical waste in an appropriate container or more likely a scenario; notify the tenant to do so. Indemnification provisions should deal with this as well.
Conclusion
Given the danger of medical wastes to the lease space, property and community if improperly disposed by a tenant or landlord, our office recommends working with a knowledgeable medical real estate brokerage and attorney to assist with several strategies of dealing with consequences of medical waste on real estate transactions.
Comprehension of a Medical Lease Contract
Statement: After auditing countless medical leases through our firm, its CPA and attorney partners, we want to make fully aware the consequences of any real estate agreement that is executed (signed).
On behalf of the associates of this firm, the declaration above is about as harsh and opinionated that we, as advisors, can be without crossing the line whereby disassociating ourselves in our mission to coordinate the healthcare real estate markets; physician, hospital, investor, owners.
But, speaking from the perspective of a landlord (lessor), the largest impediment that a landlord sees is the lack of commitment and foresight from the lessee’s principal founders with regards to their own organization’s goals and objectives. The landlord has to take into account that the necessary financial due diligence has been performed and the organization is prepared for the legal ramifications if ANY PART of the contract is broken. Thus, it is essential when provided any document that requires signature that it is taken to someone else for further review. Take it to your spouse, your associates, your financial partners, your attorney, your accountant, your shareholders. If your firm is fortunate enough to have real estate representation that will not charge you an arm or leg, take it to your broker.
Typically, the mistakes that we see from physicians (especially independents) is that of discounting the lease instrument and the level of sophistication and comprehension necessary to interpret this contractually-binding obligation effectively. As an example, if there are 10 items that are conveniently written to control one party of a transaction, does the other party know all 10, or just 5, or 2? Remember, it is already popular culture that a physician is not a savvy businessperson, which does not speak of their collaborative efforts. All kidding aside, it is of paramount importance to fully comprehending any contract or, at the least, obtain verbal or written interpretation through fiduciary relationships.
Now, for the really bad news.
The field of experts that truly understand medical contracts and can convey its purpose, as well as its fine print requirements to your organization, are few. Because most healthcare real estate real estate experts understand this, they will typically work for a 5 to 10 percentage premium over the traditional brokerage firm’s marketed commission or consulting fee. You may be fortunate to locate a highly skilled healthcare unit, but beware the temptation to accept their services for both sides of any transaction for reasons that I do not need to explain further.
To summarize, our readers should be acutely aware of the needs of their organization first, prior to contracting with any commercial or medical real estate agreement. They should also make sure they have brokerage or counsel that can perform the necessary tasks associated with YOUR transaction, which should be compensated by their firm. Until then, we can keep combing over the mistakes, some of which will cost our clients bankruptcy, until lessens are learned.
This article was written by Robert S. “Bob” Lowery, Managing Partner with MREA | Medical Real Estate Advisors.
Medicare and Medicaid (With Some Alarming Statistics)
Medicare:
- One of the top 10 Medicare billings, by dollar amount, is for the transport of a patient deemed not to be in a non-emergency situation.
- One of the top 5 Medicare billings, by dollar amount, is for cataract surgery.
- The #1 Medicare bill, by dollar amount, is for office visits by patients with medical problems that are considered low to moderate in severity.
Medicare is a federally funded and administered program that provides health insurance for older Americans and those who are disabled. Individuals contribute to Medicare during their working years, just as they do to Social Security. Since Medicare is a federal program, eligibility guidelines and services are much the same all over the country.
People eligible for the program include:
- most persons over the age of 65,
- persons with disability status, or
- persons with irreversible kidney failure.
There are a number of Medicare plan choices. Two of the most widely available plans are Original Medicare and Medicare Advantage.
Medicaid:
Harris County is by far the worst abuser of the Medicaid system in Texas. And, it does not appear like this will stop soon unless drastic changes take effect. As of December 2010, more than 80% of those on Medicaid were under the age of 19. Worse yet, of those children under the age of 19, approximately 50% were 5 years old or less. So, essentially, of every $1.00 that is allocated toward Medicaid 
reimbursements, $.40 is for a child not yet enrolled in school.
Medicaid is a health insurance program financed and run jointly by the federal and state governments for low-income people of all ages who do not have the money or insurance to pay for health care. The goal of the program is to provide medical and other health care services to eligible individuals so that they are able to remain as self-sufficient as possible. Medicaid is a state administered program. Each state sets its own guidelines, subject to federal rules and guidelines. Certain services must be covered by the states in order to receive federal funds. Other services are optional and are elected by states.
Services that are often provided are:
- health screening and services for children,
- hospital and physician services,
- laboratory services and X-rays,
- care in nursing homes or
- home health care services.
Medicaid eligibility in nearly every state is limited to:
- low-income children,
- pregnant women,
- families with dependent children,
- persons who are blind or disabled, and
- persons 65 or older.
Other eligibility requirements must also be met.
Effect on Real Estate
As you hear from so many real estate practitioners, no one is entirely too sure. It certainly appears both legislative bodies are colliding on the issue, which is where any uncertainty in the sector resides.
The Different Types of Ambulatory Surgery Centers
As commercial real estate professionals, with a strong, unique focus in the medical arena, we are involved in communication with several types of medical real estate owners and operators in the Greater Houston area on a routine basis. Through our network of partners, vendors, physicians and hospital systems, we have had the privilege of a thorough comprehension of how the Ambulatory Surgery Center functions, thus creating significant value upon acquisition, disposition, and JV opportunities. We would like to dedicate this post to those that would like to increase their basic understanding of the Ambulatory Surgery Center (ASC).
First, the the ASC Safe Harbor regulations identify four different types of Ambulatory Surgery Center entities that may meet safe harbor protection. These four types of ASC’s include Surgeon-Owned ASC’s, Single-Specialty ASC’s, Multi-Specialty ASC’s and Hospital-Physician ASC’s. Each category has separate requirements that must be met in addition to the threshold requirements that are applicable to all ASC’s to meet the safe harbor.
Surgeon-Owned ASC’s
Owners of a surgeon-owned ASC may only include general surgeons or surgeons in the same surgical specialty. The surgeons must be in a position to make referrals to the ASC and to perform surgical procedures on the patients that they refer. Each surgeon owner must meet a variety of criteria, one of which is an income test for the previous fiscal year or 12-month period. Each surgeon must derive at least one-third of their total medical practice income from performing surgical procedures that require an ASC or Hospital surgical setting, not location. This structure does not require all procedures to be performed in the ASC in which they are an investor. However, when a surgeon’s annual revenues are calculated, at least one-third of the physicians medical practice revenues, must come from the surgeon’s performance of procedures that are listed, as Medicare covered services in an ASC. The surgical services may be performed in an ASC or in a hospital outpatient department and are not limited to the procedures actually performed in the surgeon-owned ASC.
Single-Specialty ASC’s
This safe harbor allows physicians within the same specialty, whether or not they are surgeons, to invest in an ASC to which they refer their patients and perform surgical procedures on patients in the ASC. Group practices composed of a single-specialty may also own as well as refer to their own ASC.
Multi-Specialty ASC’s
This safe harbor permits physicians, who are in a variety of specialties, to form an ASC and make referrals to the ASC. Physician investors in multi-specialty ASC must meet the one-third practice revenue test described above in relation to surgeon-owned ASC’s. However, unlike surgeon-owned ASC’s, physicians in multi-specialty ASCs must actually perform one-third of their ASC procedures in the ASC in which they hold an financial interest. This is commonly referred to as the “one-third/one-third” test. The reasoning behind this requirement is that in this category of ASC, the physicians are actually using the ASC as an extension of their medical office and this does not create significant incentives to generate referral revenues for other investors. Group practices, composed exclusively of physicians who meet the one-third/one-third test, may also invest in multi-specialty ASC’s.
Hospital/Physician ASCs
Under this safe harbor, a hospital, or several hospitals, must be an investor in the Ambulatory Surgery Center. The remainder of the investors must be physicians, or group practices, who meet the requirements for a surgeon-owned ASC. There are a number of additional requirements that must be met by physician/hospital ASCs.
If you are an investor or owner, operator or interested party, please provide a call to Robert S. “Bob” Lowery for assistance for Greater Houston Ambulatory Surgery Centers.
Factors To Consider When Selecting a Medical Location
“Location, location, location…” This wise old real estate adage does not just apply to buying a commercial real estate building, but is also relevant to healthcare groups who are looking to either relocate or expand to a new office. Whether you are moving your practice to another state or just a few blocks away from your current office, choosing the right location will become a vital strategy in the overall success of your organization.
Competition
In the olden days, a doctor might have just placed a sign outside a window and started seeing patients. Nowadays, there’s a doctor on every street corner! How can you possibly position yourself so that patients actually come to you?
An obvious way is to survey the population-to-professional ratio for the specific area in which you are interested. Obviously, the lower the number of competing professionals, the less competition in the market. But, where exactly are your competitors located? How aggressive is their marketing? What kinds of marketing do they do? Is it effective?
This simple analysis may open up some overlooked and exciting opportunities for you. Professionals often overpopulate upscale areas, while rarely considering enormous opportunities that exist a few miles away in middle and even lower income neighborhoods.
Demographics
Research population statistics and determine whether the region of your choice makes practical sense for your organization. Given your profession and specialty, do you want to target men, women, young or old, blue or white collar?
Also consider whether or not the population is growing or declining – it has been easier to break into newer communities than mature ones where you would have to take patients away from practitioners who set up shop many years ago.
If you own an elective or cosmetic practice, you should also consider education and income levels, though be careful about the assumptions you make. For example, we know many highly successful plastic surgeons quietly performing impressive volumes of breast enhancement and liposuction surgeries in low and middle income neighborhoods where their competitors would not consider.
We like to suggest choosing a minimum of at least three submarkets to explore. You can get very detailed demographic research from our brokerage office regarding these potential submarkets. Also, we will provide you a detailed map of existing competitor locations, given your specialty, as well as a center per population. This will determine if this market is saturated or requires medical growth now and in the future.
Our clients have been discouraged by the data provided by chambers, local and political organizations as they often are dated, or biased. Most of the larger brokerage shops will subscribe to non-biased research and news to assist in location analysis.
Traffic Patterns
What are the major thoroughfares for business and residential commuters within a five-mile radius for your area? Where are popular businesses such as supermarkets and banks located? The most popular businesses attract potential clients for your organization. Also, upscale businesses can attract upscale clients – an example, Starbucks.
An issue many healthcare professionals do not consider is traffic patterns. This takes some research if you are going to attempt to locate yourself without brokerage assistance. But, you can go the city records for existing traffic counts around the sites you are considering. Or you can go out yourself and, literally, count the cars going down your street per hour, morning and afternoon. As a rule of thumb, 35,000 cars a day should be considered when evaluating a retail location, but what you are not privy to are the streets that have the potential for massive growth in the future. Also, remember that while we all despise sitting in traffic, the slower things move, the greater the visibility.
Something else you may consider is what side of the street is most convenient to your customer. If most of your patients make appointments in the afternoon hours and congestion is heavier going west, that is the side you choose. Another consideration is accessibility: No one likes having to U-Turn, especially in Houston.
Signage
If your practice is consumer-direct, frontage signage is crucial. So, once you’ve narrowed your choice to a few locations, check local regulations on outside office signs. Are there signage restrictions enforced by the landlord? If your customers cannot see you from the street, you may as well be invisible, so it may be crucial to negotiate for your sign’s visibility. But, what does signage matter when the street is inundated with them? Another negotiation point.
Additional items to consider:
Make sure you study at least five to ten sites in your targeted area. When chosen, consider the following:
- If you rely heavily on insurance, consider the employers in the area. As a tip, marketers often work to get an “in” with large local employers who offer favorable insurances to their employees.
- Does the building provide enough square footage for your use, or collaboration with other doctors. You may have expansion possibilities to consider.
- Does your potential location have well-lit, convenient parking for your patients as this is the #1 complaint?
- What is the image of the building, and how does it look? Some landlords take great pride in keeping their building clean and modern, while others simply let it depreciate to save money on costly expenses. Something to know, before you move in.
- Consider hospital proximity. Beyond the obvious convenience of locating close to the hospital, you also will likely benefit from the patient perception that you are located in a recognized healthcare area.
- If you are a specialist, it often helps to locate in a high density medical user building in close proximity to large, referring practices. For example, a landlord that we are familiar, will go out of her way to introduce physicians to one another. If you choose this route, remember that ground floors are best available space for medical users as 100% of the traffic will go right by your doorstep.
- Most consumer direct practices (e.g., family practice, general dentistry, etc.) can benefit greatly from being visible, and generally should avoid upscale medical buildings. Instead, consumer direct practices should generally choose either free-standing buildings (with signage and street frontage) or even retail center locations.
- If your group chooses a retail location (strip center or mall), the greater your visibility, the more you will pay a landlord. But, keep in mind that the extra rent that you are paying is simply a marketing expense, which you can and should evaluate on a return on investment basis.
- You should talk to your accountant about the relative advantages of owning vs. leasing your office space. We have several examples for buildings in the Greater Houston area and would provide you our analysis without charge. Beyond the obvious tax and income issues, make sure you consider the tradeoff between long term investment potential vs. short term cash flow, flexibility versus hassle factors, personality, etc.
- Finally, make sure you use common sense here. No kidding, a podiatrist once called us in desperation after relocating to the second floor of an office building which did not have a functioning elevator. Doctors already have the stigma of poor business decision-making – this request did not help their case.
Mastering the Art of Commercial Real Estate Negotiation
In commercial real estate, we are constantly honing our negotiation skills. Our ability to negotiate will be put to use, not only in the process of creating an offer and working diligently to get it accepted, but also with your contacts, brokers, buyers, sellers, landlords, tenants, vendors, and lenders. In any situation where there are more than two interests, we know that negotiations will take place in order to satisfy everyone’s goals.
Many people fear negotiation, usually due to a lack of experience. But, once they begin practicing, over time it becomes progressively easier, and may even become fun! Negotiation is filled with tactics and problem-solving, used to yield the best results for each party. Being a good negotiator is very important to our business, especially in a challenging economic environment.
There are different negotiating styles that work for some people, and not others. For example, some find success with a very strong, even intimidating approach in negotiation. This method is successful on occasions where the other party is easily intimidated or extremely motivated to relinquish their position. Personally, I prefer to use a straight forward approach, whereby I am prepared, informed and persuasive. As I have anticipated the questions and concerns the other party may have, I find it easier to answer them. This helps me to clearly and confidently negotiate terms. As a result, closing deals is often easy and fun. It is true that different styles should be used in different situations, so study others who negotiate and develop a style that works best for you.
In commercial real estate brokerage, as in most businesses, it is best to yield to an agreement that is win-win, meaning both parties are satisfied with the results at some level. If the strongest concerns of each party are addressed and a solution results, the agreement is of mutual benefit to both parties.
If you are not familiar with negotiation, I suggest that you take a class, purchase a book (I just completed ‘Essential Negotiation’ from The Economist), or find a seminar that covers the basics of negotiation. There are many generic tips and tactics that will sharpen your negotiation abilities and make it easier for you to get what you want out of an opportunity.
In commercial real estate, there are specific negotiation tactics that can be written into contracts. Many of these tactics require some creativity and are specific to certain situations. Don’t be afraid to get creative; after all, this is where commercial real estate becomes exciting.
We are always making an effort to sharpen our negotiating skills, and shape our strategies to increase our clients’ bargaining power. Having a few extra tricks up our sleeves to help influence a deal in your favor does not hurt either.
When Buying or Leasing a Property, Select a Broker that…
- Choose a broker who represents your interests, not a landlord / seller to avoid a situation of dual-agency.
- Select a broker specializing in tenant or buyer representation.
- Select a broker who has experience in your area of the city.
- Select a broker who has experience in representing your type of organization.
- Choose a broker that has a clearly defined and coordinated plan to achieve your goals.
- Choose a broker with a high degree of responsibility and communication skills.
- Choose a broker who has the necessary tools and support you will require for the highest level of service.
- Choose a broker that you trust and you connect with personally, but also one you can deal professionally.
Original Post by Robert S. “Bob” Lowery, here.
