Andrew Dick

The Foundation Real Estate Model

The Foundation Real Estate Model

An interview with Ben Mingle from the Centurion Foundation, Inc.: In this episode, Andrew Dick interviews Ben Mingle, the Executive Vice President of the Centurion Foundation, Inc.  The Centurion Foundation, Inc., provides real estate development and financing solutions to health care providers.

Podcast Participants

Andrew Dick

Attorney with Hall Render

Ben Mingle

Executive Vice President of the Centurion Foundation, Inc.

Andrew Dick: Hello and welcome to the Healthcare Real Estate Advisor podcast. I’m Andrew Dick, an attorney with Hall Render, the largest health care focus law firm in the country. Please remember the views expressed in this podcast are those of the participants only and do not constitute legal advice. Today we’ll be talking about a unique way for nonprofit health care providers to finance sale lease back transactions in build a suit facilities using what we will refer to as the foundation real estate model.

Andrew Dick: The foundation real estate model may be a new concept for some of you, but it has been around for a while and more widely used in the higher education space. In fact there are several nonprofit real estate foundations that support other nonprofit corporations by providing low cost financing options for real estate transactions.

Andrew Dick: Centurion Foundation is one example of a foundation that can provide a variety of outsourced real estate functions including ownership, financing, and other real estate services for nonprofit health care providers.

Andrew Dick: Today we’ll be talking with Ben Mingle, the executive vice president of the Centurion Foundation. Ben, thanks for joining me.

Ben Mingle: Andrew, good morning. Thanks for having me.

Andrew Dick: Well, as a little bit of background, Ben, before we talk about the Centurion Foundation, let’s talk about you and your professional experience. You’re a certified public accountant with quite a bit of accounting experience and real estate experience. So, talk a little bit about your accounting experience.

Ben Mingle: Yeah, so after college, I worked for large national CPA firms in their advisory and assurance practices. All in that was about 11 years of my career. My main focus was real estate, so those were developers, REIT’s, joint venture entities, and then the rest of my practice surrounded health care institutions and banking clients. So, a flavor across the financing and real estate aspects coupled with healthcare.

Andrew Dick: Interesting, and you were with firms, I think KPMG, and ENY were two examples, correct?

Ben Mingle: Yeah. I spent the bulk of my time with Ernst & Young, but early on I was with KPMG.

Andrew Dick: Great. After you left the public accounting world, you spent some time working for a number of real estate investment and development firms. Why did you make the leap to real estate? How did that all play out?

Ben Mingle: Yeah, I think the transition for me started while I was in public accounting working with developers and working on different real estate projects is where I kind of saw my passion for real estate and watching the project come from an idea all the way out of the ground. Then I got an opportunity through a childhood friend of mine to go work for CBL. I grew up next door to some of the executives there and so I made the leap from public accounting into the real estate world kind of through that process.

Andrew Dick: So, Ben, talk a little bit about CBL, because that was a pretty significant opportunity. CBL is pretty well known in the real estate world, it was a real estate investment trust and tell us a little bit about what you were doing there.

Ben Mingle: Man, it was a great opportunity for me. It was right at the tail end of the big run, from 05, 06, 07 and into 08, 09, 010, so I got to watch the real estate landscape change a lot. I had a really unique roll where I oversaw a big chunk of the accounting department, but then I also was kind of the finance and accounting leader over the entire development portfolio for CBL. So, that meant all day day every day I was working on different real estate projects, figuring out how to get it financed, figuring out how to work out a broken deal, in the 08, 09 timeframe.

Ben Mingle: So it was really a transformative roll for me to take me from a CPA in professional practice to an actual, you know, an executor of projects from a finance and structuring standpoint.

Andrew Dick: Right, and CBL for those that may not know was a pretty significant REID that was owned and operated retail properties, right, Ben?

Ben Mingle: That’s right, they were, you know, at the time I was there they were probably the 4th or 5th largest retail property owner in the United States.

Andrew Dick: Okay, and then you made the move to Hutton Company, which, again, pretty significant real estate company. Tell us what they did and what you were doing for Hutton Company.

Ben Mingle: Yeah, so some of the executives at Hutton were folks that I’d worked with at CBL. Hutton was, at the time, probably one of the largest net lease developers in the United States working for household names like Wal-Mart, and Dick’s Sporting Goods, and Family Dollar, Dollar General, folks like that. It was a very entrepreneurial environment, which I really enjoyed and kind of got out of public company modeling to into just a pure development model. It was a great experience for me. They, at the time when I came in, the company probably had 200 million in assets and was doing a decent bit of volume, but while I was there we doubled and tripled couple years there in a row, we had a big program with Wal-Mart. So, it was an excellent time for me to be in that space.

Andrew Dick: So you were serving as one of the chief financial officers or the chief financial officer, doing quite a bit of strategic planning, finance, etc. Is that right?

Ben Mingle: Yeah, I was the CFO there, and we were going through that tremendous growth period, so my main job was to set the strategic plan so that we had enough capital to continue to develop for our client. So that covered the full suit of finance, tax, treasury, accounting, you name it, it was all encompassing.

Andrew Dick: Okay, and then you work for a couple years there and make the move to The University Financing Foundation, also known as TUFF, tell us a little bit about that transition and what you were doing for TUFF.

Ben Mingle: Yeah, so, back to Ernst & Young, again, through some relationships that I kept up through Ernst & Young I’d gotten to TUFF and over a long period of time I learned more about their business and really saw how unique it was and what a powerful solution that a 501C3 real estate foundation can provide to its clients and really felt like it was an opportunity to take my finance skill sets and use that in a way that had a bigger impact. So, I made the move to TUFF in 2017.

Andrew Dick: Then after working for TUFF for a while, you decided to move to Centurion Foundation, which is a little bit of a similar model compared to TUFF. Talk about how you decided to make the move to Centurion Foundation and what that was like, because it sounds like you were considering forming your own foundation to provide resources to nonprofit corporations, but then found Centurion. Tell us a little bit about that.

Ben Mingle: Yeah, so being at TUFF, they were one of the early 501C3’s and they were exclusively focused on higher education, so really kind of at the epicenter of that world. While I was there, I realized the solutions that exist in the higher ed space were really needed in the healthcare space. A lot of hospitals face many of the same kind of challenges that higher education institutions face, from a funding standpoint. So, really kind of saw that that opportunity and that need was there and was thinking that I would potentially set up my own foundation to focus exclusively on healthcare and as I was going through that process, I got introduced to Greg Grove and the Centurion Foundation. Greg had a background in healthcare, tax exempt financing, he had been an investment banker at the beginning of his career.

Ben Mingle: He had set up Centurion Foundation in 1996 with the mission of helping other 501C3 organizations deliver mission critical facilities. So, it was a fortuitous chance that Greg and I met. We worked together for over a year and really kind of honed in on what we thought the vision for Centurion could be and I decided to come on board in 2018 at Centurion.

Andrew Dick: Ben, Centurion Foundation, it’s headquartered in Atlanta, Georgia, it’s been around for a while. Talk about the types of projects that it has financed in the past and what your vision is going forward.

Ben Mingle: Centurion was founded in 96, like I mentioned earlier, with a very broad mission, and that broad mission was intentional so that we had the biggest opportunity to help the most organizations out there. That’s important for listeners on the call today to think about because we want to be able to look at many different types of transactions in healthcare and in other spaces and be flexible and be open to the needs of those clients. Our mission being very broad is really important.

Ben Mingle: Centurion has financed a number of projects in the past. When I say financed, some of the are ownership structures with leasing, like we’re going to talk about later today, and then some of those are more direct lending transactions. So the transactions include long-term care facilities, student housing in charter schools to date.

Ben Mingle: Centurion also has a sister 501C3 organization with some common board membership and that’s The Guardian Foundation. The Guardian Foundation has bene around since 89, and it owns and operates long terms care facilities, and it’s financed over 20 facilities throughout the United States.

Andrew Dick: That’s interesting. So, talk a little bit about your vision for taking Centurion to the next level and really focusing on the healthcare industry. What type of transactions will Centurion be focusing on in the healthcare space? New development projects, sale lease backs, all of the above, talk a little bit about what you’re out there chasing today.

Ben Mingle: I think the all the above comment kind of hits right in with us. We look at new development projects a lot, we also were looking at sale lease backs, you know, the focus for us is where the hospital is the anchor tenant for the project. So we can do a hospital, an entire hospital, a hospital wing, a medical office building, an outpatient clinic, a surgery center, a free standing ED, really any project where the hospital is the key anchor. We can have private docs and private use in the facility, but the key for the facility for us, is that the hospital is the main beneficiary of that facility.

Andrew Dick: Okay, let’s talk a little bit about the structure, because the foundation model has been around for sometime, but some of our listeners may not be familiar with the structure. Typically, you’re going to form a nonprofit entity, the hospital which needs to be, typically, a nonprofit hospital that would be the tenant in the project. Centurion could partner with, like on a build to suit project, a developer and help the hospital really shape the project from design to completion. Talk a little bit about some of the flexibility that you have in terms of you could help source architects, fee developers, et cetera.

Ben Mingle: Yeah, so I think the most important thing for people to hear today when we talk about this is the flexibility concept. We are not set with a particular model of this how we do a project. We look at each project, and more importantly, we look at the needs of the health system and crash the model to fit those constraints that mold the ask. So, in a typical transaction, we would expect to ground lease from the hospital, we would own the project, and we would lease the project back to the hospital system. In the case of a development deal, we would bring in a fee development, fee only developer, and they would work with us and work with the hospital to manage the architect and manage the design process and manage the construction process and ensure everything is completed in the way that you would expect of a building of that caliber. The flip of that is if the hospital has all those resources in house, the development resources, the hospital can manage the design of the building and manage selecting the contractor, we’ll be involved and help all along the way, but if the hospital wants to play in that role, that’s something that we’re open to.

Ben Mingle: So, in either case, if there’s a developer involved or not, Centurion would finance with taking that lease and that support of the transaction by the hospital due to lease. We would finance the portions of the building the hospital’s going to occupy with tax exempt debt, but then portions of the hospital that might occupied by for profit uses, we would finance with taxable debt. What we feel about this is that blend ultimately creates greater flexibility in how the hospital can use the facility, and it also creates the lowest cost to capital. We feel like that’s one of the key competitive advantages that we have.

Andrew Dick: I think you’re right, Ben, I think you’re right. I think the low cost of capital is where these nonprofit healthcare systems can really benefit from the Centurion model, and at the end of the, for example, if it’s a 25 lease, at the end of the lease, one of the benefits is the hospital owns the project at the end, is that right, Ben?

Ben Mingle: Yeah, I mean, when you kind of think about the key benefits, what we like to say is number one you’re working with another 501C3 that isn’t necessarily motivated by profit. So, we’re aligned, you hope to feel alignment in working with us from day one. We’re extremely transparent. You’ll know everything that we know, there won’t be any mystery as to how the transaction gets done. The second point that you just kind of mentioned is our goal is for the ownership of the facility to revert back to the hospital at the end of the lease term. Without getting into lease accounting on this call today, we can structure that in several different ways just to meet whatever desired structure the hospital wants, but through that, the hospital is ensured long term control of the facility.

Ben Mingle: Then, what I’d say about the rent structure is we can structure the rent in any manner that the hospital wants. So we could have a flat rent over the entire term, we can have built in increases, all of that is just to manufacture the lowest cost debt service, which equals lowest rent payment and we can structure that based on whatever their needs are for that particular asset and whatever their overall corporate constraints are.

Ben Mingle: The other benefit would be, generally, we’re going to be able to pass through real estate tax exemption, every state’s different, but generally we’re going to help be able to maintain that real estate tax exemption, so that’s critical. Then in the case of a development deal, we should also be able to help avoid sales tax on construction material.

Ben Mingle: So we kind of see those as our key benefits when the hospitals are thinking about ways that they’re going outsource and looking at us, comparing us to another alternative they might have.

Andrew Dick: I mean those are significant benefits. I know, Ben, over the years when I’ve represented healthcare providers, most for profit developers can’t bring those benefits to the table. So when I think about the Centurion model, some of my clients might say, well, why wouldn’t my healthcare system simply issue bonds itself to fund the project instead of using Centurion. I think the response is, well Centurion handles the issuance of the bonds and provides a turnkey solution that is often much more simpler for the health system to execute when compared to a bond issuance through a large health system. Am I thinking about that correctly?

Ben Mingle: Andrew, you’re right. I mean we would always say that hopefully the hospitals cost to finance is the lowest, but there could be other things that are constraining them. So, if they have a need not to have direct debt, then they likely are considering outsourcing, and what we would like to say is, Centurion or someone like us would be their next best option, because we’re also going to have effectively that really low cost to financing like they will have, but it won’t be direct debt. Then we also have the opportunity to simplify it for them, where they can just sign a lease and they have a development partner that we can work with together and they have some assurance that that development partner that they may have had some past experience with or one that I could introduce them to, has surety of execution.

Ben Mingle: So when you think about an operating lease benefit that potentially saves credit capacity for them to focus on other mission critical facilities or investments or initiatives and not potentially have to tie up their credit for whatever this project would cost them.

Andrew Dick: Yeah, I think that’s an important distinction, and I think some of my clients would say, you know, going through a bond issuance for a larger health system is a ton of work. A lot due diligence needs to be performed, where as with the Centurion model, it’s much simpler, like you said, more of sign the lease and you’re off to the races.
Andrew Dick: In terms, let’s quickly talk about build to suit transactions, I think we’ve mentioned some of the benefits but Centurion could act, when it provides a turnkey solution, it could engage architects, it could engage contractors, take some development risk, help with development selection if that’s needed. Isn’t that right, Ben, I mean one of the benefits is you can just provide the financing on one end of the spectrum, on the other end you could provide a turnkey development solution for the healthcare system. I am thinking about that correctly?

Ben Mingle: Yeah, that’s right. We like to think that we provide a solution that may be different than the way they’ve been executing projects and that we bring an institutional thought process to how a building should be designed. We’re going to listen, we’re going to make sure that building is designed to meet your needs, but we’re also going to be able to point out things that your internal team may not be considering just by, we’ll bring a national developer onto our team that’s developing across the country and that perspective, a lot of times, can help lower cost or refine the criteria for the building.

Ben Mingle: So, we bring that but we also bring the humility to know that some hospitals out there today are very dialed into the things that I just mentioned and they may want to be in total control and so we’re flexible either way. So, we work architects, we work contractors, we work with developers and attorneys, all day that’s the business of real estate, but we’re so flexible, that I think that, again, separates us from some of their other options that we’ll literally do this transaction in a way that they want to execute it versus the way we want to execute it.

Andrew Dick: That’s helpful. We’ve talked about build to suit transactions, let’s talk just a little bit about sale lease back transactions, because we know a number of healthcare systems over the last 10 years or more have decided to monetize some of their real estate assets for example, medical office buildings. Centurion can also provide a solution there as well, where Centurion comes in and becomes the surrogate owner of those assets, leases them back to the healthcare system. Ben, in terms of sale least back transactions, why would someone use Centurion over any other for profit real estate company, what are the benefits?

Ben Mingle: Yeah, I think it first is rooted in our not for profit mission. I mean, when you look at a transaction with us versus a REID or another private owner, our ultimate goal in the way we will look at it is, how do we achieve sale accounting for the hospital, any gain recognition that they’re looking for, but then also structure that lease, that operating lease so that ownership will revert back to the hospital at the end of the lease term. Then, when you think about that and look at that over the life cycle of the building, you’re going to have a much lower cost of occupancy because our lease payments will be really calculated on the cost to finance and not the cost of the spread and the marketplace and what rental rates are doing today.

Ben Mingle: So, the hospital has a great opportunity to benefit over the long term because our lease payment could be fixed for effectively 20, 30 years, and a REID or other ownership model, that won’t be the case. Then, at the end, you know, we’re not going to be trying to negotiate a fair value buy out if the hospital ever wants to buy the facility back. Another big benefit in doing a similar transaction with us is, we’re likely to be able to maintain property tax exemption as well, so when they think about all those things and look at all of them, we feel like we’ve got a really compelling story when they’re thinking about potentially selling a building on a sale lease back basis.

Andrew Dick: Interesting. Talk a little bit about the lease terms, Ben, how much flexibility is there? Are we talking 15 year leases, 20 year leases, 30 year, or is it really however you structure the deal, I mean there can be flexibility there in other words.

Ben Mingle: Yeah, that’s the most important thing for the folks on the call to come away with today, is our flexibility and our willingness to look at many different structures. The simple answer is, we kind of look at it and think that the 20 year lease makes the most sense because it provides a really low cost to finance and then it also maintains a reasonable rent constant. You know, the shorter 10, 12, 15 year leases get pretty expensive on an annual basis. So, we really will look at anything though, and we’ll look at any structure whether it’s a public bond financing, a private bond financing, a CTL, or other source of capital. We have effectively all the different capital solutions available to us to work with in the Centurion platform.

Andrew Dick: You mentioned CTL financing for those listeners that may be familiar with that term or may not be, it’s credit tenent lease, CTL for short. Ben, some of the listeners may say, well, how is Centurion different than a CTL lender or how can you distinguish yourself between a traditional CTL transaction and what Centurion offers?

Ben Mingle: Yeah, so if a hospital’s thinking that they may be just put a CTL loan on the building versus selling it, there’s a couple other things that we provide that are compelling when they think about is, if there’s good tax exempt use in that building, then we should be able to finance the sale lease back with tax exempt debt and therefore lowering the cost of occupancy lower than a CTL rent loan payment. Then, it also typically would be indirect debt, because it would be an operating lease in that we hope, depending on the way your debt covenants are structured, can preserve some of your debt capacity.

Andrew Dick: Ben, in terms of, we talked a little bit about this earlier, as much as Centurion Foundation is focused on nonprofit healthcare systems, if those healthcare systems have a project that has mixed use, meaning some good 501C3 tax exempt use in the building but some for profit use or private use, maybe it’s a physician practice group that’s independent that happens to be in a medical office building. Does that limit your ability to underwrite a deal.

Ben Mingle: I think the short answer is no. We’re going to look at a couple different things on something that has for profit use. The first things we’re going to look at from our perspective is, is this facility helping achieve the mission of the hospital. So we’re going to make sure there’s a mission match and generally there will be. So we’ll need some form of C3 component in the facility to kind of accomplish that. Then, from a financing standpoint, we’ll look at, who are tenants today and which of those tenants are good C3 users and which of those users are for profit users. Then, we’ll look out into the future with the health system and ask question of what do you think will happen, you know, five, ten years down the road in this facility. Then, we’ll craft and mold the blend of taxable and tax exempt debt based upon those answers so that we can still accommodate for profit use in that building.

Andrew Dick: Great. Talk about geographic restrictions if any, will Centurion finance project in any state, or are you focused to projects in the southeast, since you’re in Atlanta, talk a little bit about that.

Ben Mingle: So, we’re having conversations right now in the southeast, and also in the west. So we’ll look at anything in the US and that kind of goes back to our flexibility comments earlier on, is we won’t have boots on the ground on the west coast, but we will partner with a developer if we need it or with the hospital system for boots on the ground. So we think that model keeps us nimble and flexible, so we’re not dictated by our own structure as far as looking at a different transaction.

Andrew Dick: In terms of other services that Centurion can provide, we’ve talked a lot about healthcare today, will you also look at higher education projects or projects that involve other nonprofits or are you just going to focus on healthcare?

Ben Mingle: Yeah, I think our main focus is healthcare. We have some university relationships, and we are looking at a couple different university projects, but our focus really is healthcare but we will, you know, an academic medical center is a good example of that. You’re blending the needs of a health system and a university, so we’re looking at some of those, and then other not for profits definitely fit in our scope, so we will look at any transaction or potential transaction that has a 501C3 use.

Andrew Dick: Great. Well, Ben, looking forward, five years from today, where do you see Centurion Foundation? What will you all be working on, is the outlook positive, I mean how much interest in this model has there been? Talk a little bit about that.

Ben Mingle: Yeah, I feel really good about where we are and where we’re going. I expect that in five years, this solution that we provide and that some others provide, will be a very commonly used tool in the healthcare space. I think it will be more of a household solution that hospitals can understand and use that to their benefit. So, I hope we’re still doing what we’re doing five, ten years from now. I just expect that there’ll probably be other people in this space and there’ll be a lot more prevalence of this approach.

Andrew Dick: Ben, how can folks connect with you and learn more about what Centurion is doing?

Ben Mingle: I think the easiest way is to just drop me a note, an email. It’s Ben, it’s bmingle@centurionmail.org. I think if they just drop me a note, I’ll be quick to follow up with them.

Andrew Dick: Great, hey, Ben, thanks for joining us on the podcast today. This is really good information for our listeners. I want to thank our audience as well for listening to the podcast on your Apple or Android device, please subscribe to the podcast and leave feedback for us. We also publish a newsletter call The Healthcare Real Estate Advisor, to be added to that list please email me at adick@hallrender.com. Thanks so much and have a great day.

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Coworking Space for Health Care Professionals

An interview with George Scopetta from WeShareMD about Coworking Space for Physicians and Health Care Professionals:  

In this episode, Andrew Dick interviews George Scopetta, the co-founder and CEO of WeShareMD. WeShareMD is a company that provides coworking space to physicians and health care professionals.

Podcast Participants

Andrew Dick

Attorney with Hall Render

George Scopetta

Co-founder & CEO of WeShareMD

Andrew Dick:                     Hello, and welcome to the Healthcare Real Estate Advisor podcast. I’m Andrew Dick, and I’m an attorney with Hall Render. If you’ve been following real estate news over the past year, you might have noticed that co-working space is really hot right now. Companies like WeWork are creating trendy space for tech start-ups and small businesses looking for a place to call home. A recent article suggests that WeWork is now being valued at $35 billion. Today we’ll be talking about co-working space for healthcare professionals and its impact on healthcare real estate.

Andrew Dick:                    If you’ve worked in healthcare, you know that hospitals have provided co-working space for physicians for many years. Now, the space offered by WeShareMD is not your typical hospital co-working space. WeShare is different. It’s high end space within MOBs for healthcare providers to use on an ‘as needed’ basis. Before we jump into the business, I’d like to welcome our guest George Scopetta. George is the co-founder and CEO of WeShareMD and the Managing Partner and founder of Medicus Partner Group. George, thanks for joining me.

George Scopetta:             No. Thanks for having me.

Andrew Dick:                    George, before we start talking about your business, give us a little bit of background about yourself. Where did you grow up? And what did you want to be when you grew up?

George Scopetta:             So, I grew up in Miami, Florida, and when I was a kid I wanted to be an investment banker. And so, when I went to school, my focus was what I wanted to do. I kind of went the long way, in that I went to Law School and I ended up becoming a Tax Attorney and working as a Tax Attorney with Big Four for a couple of years and then I went into banking after that.

Andrew Dick:                    So, what was attractive about investment banking, and tax? What did you like about doing that kind of work?

George Scopetta:             I come from a family of entrepreneurs and of running businesses, and I always wanted to be in the corporate world. And so, that always attracted me because that was what my grandfather did; that’s what my dad did. And so that’s always what I wanted to do. Mainly because that’s what I saw growing up. And when I got into the corporate world, I realized I was very good at it, but I always wanted to do my own thing eventually.

Andrew Dick:                    So, you work in the corporate world for a number of years- in accounting and then in the banking industry, and at some point you met a physician, who ended up becoming your partner. Talk a little bit about that George.

George Scopetta:             Absolutely. I was in banking, I was turning around troubled financial institutions for private equity and we had sold our last bank. I was retained by the creditor committee of the holding company to basically, dissolve the rest of the holding company of the bank. And, at that time I was working from home. I had the opportunity to travel because I really didn’t have to be in an office every day, but I was still getting paid. And I came out to LA on vacation and my friend that I was visiting, had an investor event down in San Diego, so I decided to go with him because it sounded like a fun trip. And so I came down to San Diego and went to a baseball game as part of the investment conference, and I ran into a doctor- Dr Jean Schau. And we started talking and he started telling me about his office buildings that he had, and his ideas on lifestyle healthcare medicine, and how to integrate lifestyle medicine into the real estate. And I just thought it was the time, right after Obamacare was passed, and healthcare was a big issue at the time and I just thought it was a great idea.

George Scopetta:             I actually stayed a couple days extra, changed my travel plans and went and did some due diligence when I was here, and the more I looked at it, the more I liked the idea and the deal. And, so I ended up investing. And we started with one building at the time, and I took over the real estate company… well it wasn’t really a real estate company at the time, but it was like a guy that owned a building. And I made it a business. And we started medical office buildings here in San Diego. And we started with one and then we refinanced and bought another. Most of the stuff was value-add real estate. We bought 50% occupied buildings or 30% occupied buildings, turned them around, filled them, created value, created equity, and then moved on and bought another one with the equity that we built. And we’ve just built the business over the last couple of years.

George Scopetta:             WeShare came from that, in that James always had the idea for WeShare, and we’ve had it for the last three years, but we wanted to stabilize the real estate portfolio and get multiple locations out there. Because, the whole thing with the co-working space, it’s a good idea but if you just have one co-working space… the idea with the medical co-working space is really that we’re bringing the doctor to the patient. Not so much the co-working space aspect of it. And so I think that the real idea that we have, is that we’re creating a model with the multiple locations and the membership model that a doctor can basically, practice in any one of the locations, in any one of the markets that we have an office in. And I think that, that’s the attractive thing about our model versus just, “Okay, we’re just a normal co-working space. We’re gonna place one office in San Diego, open it up and people are gonna come, because it’s co-working.” It’s not that.

George Scopetta:             Our model’s more sophisticated in that, what we’re trying to do is change the way that doctors practice, because nowadays, you can’t… and I see it in my MOB business. You can’t really just plant a flag and hope that your patients are gonna come to you any more. That’s the one thing… I just spoke at a conference yesterday, and that’s the one thing that resonated with me from all the other conversations on the other panels, was everybody’s trying to figure out, how to bring medicine and healthcare to the patient in a different way. In that it’s home healthcare, concierge medicine, telemedicine… it’s all trying to bring the doctor over to the patient and not the patient to the hospital. And I think that, that’s what our model does, is it really allows a doctor to go and have access to different locations, to actually go out to the different patients. So, he’s traveling to the different locations, similar to concierge medicine, except they’re not going into the home, they’re practicing in an office that’s near the patient.

Andrew Dick:                    So, George, what does the model look like? I think some of our listeners will say, “Well, hospitals have had some type of co-working space for years, but it’s usually space in the back of a hospital, it’s really dated space… your model’s different. This is high-end space from what I can tell, and it’s space that a physician would think is very attractive, as well as a patient. So talk a little bit about the space- what it looks like when you walk in, and what makes it different from other options that are out there right now?

George Scopetta:             Oh, absolutely. I think that in all our MOB’s, in the real estate business, we always sought out to basically be the nicer option. We try to make the patient experience feel very comfortable. Our waiting rooms look like living rooms. They aren’t like the typical patient room, where it’s just a line of chairs and some old magazines from eight months ago. We try to make it look like a living room feel, with coffee and really nice plush leather couches that are comfortable. All the counter tops are granite counter tops, including in the patient rooms and everything like that. We try to make it look very comfortable, and one of the things that we do, is we have TV screens and stuff like that. Because really, when you walk in, you want the doctor to be the focus of everything, not WeShareMD. No one wants to know that they’re going to the doctor in a co-sharing space.

George Scopetta:             So we strive to put… when the doctor comes in and reserves the space for four or eight hours, we put his name on the TV screen behind the front desk and we try to make it look like it’s his office when he comes in and not like they’re coming in to a co-working space.

Andrew Dick:                    Okay. Talk a little bit about how the model works, George. You have a number of locations, how does a physician sign up to be a part of the co-working venture? Do they pay a membership fee and then pay for blocks of time? How does it work?

George Scopetta:             So, essentially, what ends up happening is any physician can go to our website and there’s a member log-in. You create a member log-in to our website and that member log-in will send you to our member site. It’s free to have a member log-in. We do have a couple of different options. We have a virtual office option, which allows you to use our address- our addresses of the different areas and to advertise this as the WeShare address as your office address. And that’s important to physicians because when they’re signing up and designating a location for their Med Mail, you have to have an address in an MOB. You can’t have your address as your house. You have to have an office, and so that’s super-important for doctors, because they can list this as the office that they practice in, and that’s $150 per month for the doctors.

George Scopetta:             Once they do that and they name WeShare as where they practice, they can rent rooms by… we have clinic blocks which are four hours, because that’s what typically what a clinic is. It’s usually a four hour clinic. So we have a morning clinic, an afternoon clinic and a evening clinic. And doctors can reserve four hours at a time, and they can log onto the site and all the scheduling is done online at the site. So if they log in, they can go schedule a clinic, click on the building that they want, click on the day, click on the time and then they pick if they want two offices, or one office, and a patient room, or two patient rooms. And then they check out and they pay. And you can pay with your credit card. So the doctors will actually get points now for paying for their space on their credit cards, if they want.

Andrew Dick:                    George, how far in advance, would a physician need to sign up for space?

George Scopetta:             They can sign up and reserve space within 24 hours of their next appointment.

Andrew Dick:                    And once they show up, George, I know that one issue that we run into with what we call timeshare clinics, over the years is some of the space needs to be turned over. So, if the physician’s there in the morning, and a different physician comes in, in the afternoon, I’m assuming that you have a receptionist, or a staff member that’s going to clean up the space and make sure it’s usable for the next user?

George Scopetta:             Yes, we have a receptionist, who’s… she’s not really a receptionist, she sits at the reception desk but she’s really the office manager of the office. And she’s there to greet you and the doctor when they come in. show them where their office is, show them where their space is and make sure that they’re comfortable and she or he is the presence at the front desk, that greets the patients when they come in, shows them what they need to do, and then when the doctor’s ready for them, she or he takes them back into the patient room for the doctor and sets them up. That person is also… after the four hours, is responsible for making sure the rooms are tidy and cleaned up and wiped down, so that when the next physician comes in, everything is perfect and as it should be in the different rooms.

Andrew Dick:                    George, what type of physician is ideal for this arrangement? Is there a certain type of specialty like dermatology, or primary care, or does it really run the gamut?

George Scopetta:             I think it really runs the gamut. I mean, everyone asks me this question and says, “Is this for specific doctor types?” And it’s “No.” We offer regular offices, and we offer a typical 10 x 10 examination room. And so, really, with the type of set up we have, it kind of accommodates… there are certain specialties, like super specialty that may need some specialized equipment that they can’t get into the space. But, it pretty much runs the gamut from everybody. So, I think it accommodates… the partner’s a doctor and he’s like, “This type of set up will accommodate pretty much 80% of all doctors out there.” And that’s what we strive for, is to accommodate everyone.

Andrew Dick:                    George, what about mid-level providers? In my world, we work with nurse practitioners and physician’s assistants. Could they rent space as well?

George Scopetta:             Absolutely. I don’t say that it’s just for doctors, I say it’s for healthcare professionals. I think that there are a number of nurse practitioners and other healthcare providers out there, that this space is attractive to. And we’re open for everyone, as long as they’re licensed to practice their craft.

Andrew Dick:                    And George, talk a little bit about add-on services that are available, so if a physician or a mid-level provider wants to lease some space, do they have the option to rent storage space or rent a nurse or a technician? What are the other add-on options?

George Scopetta:             Absolutely, so we have conference rooms in the space, so if you’re practicing telemedicine, we’re set up to actually do that. We have storage space in the space, including lockers… so you can lock up your equipment so you don’t have to lug it around from your house to the office. And we are going to start providing nurse practitioners or MA’s really, for an additional charge, so that doctors if they want the help of an MA for their clinic, they can rent that out for an additional charge as well. And we’re gonna continue adding other services. I think that we have a full McKesson account and so, if doctors want specific supplies and they want to order some specific items to have available when they come, I think that we’re gonna start doing that as well.

Andrew Dick:                    Well, that sounds great. It sounds like, when you set one of these clinics up George, there’s some risk that you’re taking. How do you know that physicians will continue to come back, because it sounds like it’s an arrangement between WeShare and the physician, or the healthcare provider. It’s really on-demand whenever the provider needs it. Is that right? And how do you make sure hat they come back? Is it the quality of the space and the services?

George Scopetta:             I think it’s the quality of space and the service. And that’s what I’m counting on. I think that we offer something that’s not available in the marketplace and not available to them. And so I really think that it’s sticky in the fact that they have the access to the multiple locations. They have the access to the really nice medical space, and the other options in the market, especially in the major metropolitan areas, are really bleak. And so I really think that we offer a tremendous service. And that’s what brings people back. I think what makes us attractive, is that there is no obligation. You don’t have to sign a five year lease. You don’t have to sign a 10 year lease, which nowadays with the changing healthcare system, you never know what’s gonna happen… the doctors don’t know what’s gonna happen, five, 10 years down the line. And to be committed and locked into a liability that long, that’s really tough. And to be locked into a liability in one location- make it or break it, that’s a tough proposition.

George Scopetta:             I think that what we offer them is a unique value. Because of the multiple locations and the high end space, that ‘re gonna come back. And that’s what I’m counting on.

Andrew Dick:                    George, how many locations do you have? Where are they at and what’s the plans for future growth around the country?

George Scopetta:             Absolutely. So, we currently have offices in Mirarmar- San Diego, UTC- La Jolla, Temecula- Antonides, and then we have two under construction right now which should be open by the end of the year in Oceanside and right on Tricity hospital campus, and in La Mesa on the Campus of Grossmont hospital. So we pretty much blanket all the major medical markets here, in San Diego. I think, in the future, we’re in the process of closing our seed round right now, and we’re in talks on expanding into Orange County, LA, San Francisco, and Seattle.

Andrew Dick:                    And George, will these new locations be in buildings you own, or a mixture of buildings you own and other space that you lease from unrelated landlord?

George Scopetta:             I think that the new locations are in spaces that we would negotiate with landlords.

Andrew Dick:                    Well George, this is a very interesting concept. I think it’s one that certainly will gain traction. How can folks learn more about you and your business?

George Scopetta:             Absolutely. They can go to the website at www.WeShareMD.com or they can look me up on Google- there’s a lot on there about me and my business. Or they can go to my real estate site at www.medicuspropertygroup.com if they want to learn more about my real estate business.

Andrew Dick:                    Well George, thanks for joining us today. We wish you and your company, the best in the future. And I want to thank our audience for listening to the podcast on your apple or android device, please subscribe to the podcast and leave feedback for us. We also publish a newsletter called the Healthcare Real Estate Adviser. To be added to the list, please email me at adick@hallrender.com. Thank you and please remember that the views expressed in this podcast are those of the participants only, and do not constitute legal advice.

 

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Health Care Real Estate Data

An interview with Mike Hargrave from Revista about Health Care Real Estate Data: 

In this episode, Andrew Dick interviews Mike Hargrave, Principal with Revista, about health care real estate data.

Podcast Participants

Andrew Dick

Attorney with Hall Render

Mark Hargrave

Principal with Revista

Andrew Dick:                    Hello and welcome to the Health Care Real Estate Advisor Podcast. I’m Andrew Dick and I’m an attorney with Hall Render. Have you ever wanted to look at market rental rate data for MOBs in Charlotte, North Carolina, or construction data for hospitals in Atlanta, Georgia? Well, you’re in luck. A company called Revista offers this information to its subscribers, the resources online and most of the services are offered on demand. Think of a Google maps type search where you can identify medical office buildings around the country in various metro areas. Today we’ll be talking with Mike Hargrave at principal with Revista about big data for healthcare, real estate assets and how he and his partners decided to start the company. Mike, Thanks for joining me.

Mike Hargrave:                 Well thanks for having me, Andrew. I appreciate the opportunity and I’m excited to chat with you here.

Andrew Dick:                    Well Mike, before we talk about Revista let’s talk a little bit about your background and how you ended up where you are today. Where are you from? And once you got out of college, what was your first job?

Mike Hargrave:                 Well, I grew up in Montgomery County, Maryland, in a nice neighborhood there. And I ended up going to college at the University of Maryland where I earned my undergraduate degree. I eventually went on a few years later to earn my Master’s in Business Administration from Loyola College in Maryland. When I graduated from the University of Maryland, I went about the process of looking for a job and I had actually accepted a position with a financial services company at that time. My mother, who was living in Colorado at the time as a recruiter and consultant within the healthcare kind of longterm care sector had called me and was a little frantic one day. She went up to her, her boss who was with her in Colorado and asked if she could move back to Maryland and open up an office.

Mike Hargrave:                 And her boss told her no. So she called me frantically and desperately wanted to move and so we decided to go into business together. Let me go ahead and back up a little bit though. My mother is really the reason that I got into the business of healthcare real estate. She prior to her doing the recruiting and Colorado, she was a registered nurse and she worked as a director of nursing and then a regional director of quality assurance for a company ManorCare Health Services. Many of us may know ManorCare. They just got sold to a ProMedica Health System and did that big real estate transaction with Welltower. But she was working for, for ManorCare traveling all around the country doing quality surveys and regional quality assurance for their nursing homes.

Mike Hargrave:                 She was recruited out of ManorCare and recruited to help start up a new nursing home company a relatively young nursing home company back then called Integrated Health Services, which was based in Hunt Valley, Maryland. She became their corporate director of nursing or quality assurance, I guess they called it and really helped integrate it from a clinical perspective, develop a lot of their programming at the time. This was in the late ’80s, early ’90s. And at that time there was a big movement in the skilled nursing industry to prepare for subacute care. Basically, it was a higher intensive level of care than traditional nursing homes would, would normally give. Basically the nursing homes at that time, were going after increased medicare reimbursement. They did that by renovating their therapy departments and putting in more expansive rehab areas. Companies like Integrated Health Services, specialized in things like ventilator care and ventilator rehab.

Mike Hargrave:                 So she helped develop a lot of those programs and helped take integrated health services public back then. But she ended up leaving and going to start a recruiting business out in Colorado with a company that was an existing company. And then eventually she expressed an interest in coming back to Maryland. That’s when she called me and because the company did not agree to that, she called me. I was just graduating from college, and we devised a plan together to start our own sort of consulting/recruiting business that would specialize in the mostly post acute business. At that time, there wasn’t a ton of assisted living companies out there. I think Sunrise was just getting started. This is 1991 or 1992. And so we spent the next 10 years or so, 11 years doing corporate recruiting and executive level recruiting for companies that were involved in the skilled nursing business as well as the post acute business.

Mike Hargrave:                 And we did some work for of the large behavioral health companies back then and even hospital companies. So that was really a sort of my segue into kind of the healthcare real estate side of things. I had a finance background going into starting the business with my mother and I sort of specialized on the consulting and then recruiting and with the finance side of things. So I became networked with a lot of finance people, CFOs and acquisitions people and lenders and investment people. And so I had a really good background back then in terms of the finance and investment side of the healthcare business and also the real estate side of the business. So when we wound down our recruiting business in 2003, I believe, it was an easy segue for me at that point to kind of get involved in the finance side of the business. So that’s kind of a long winded background I guess through and just after college there Andrew.

Andrew Dick:                    Mike, this is interesting. When your mom calls you about this opportunity, you already had a job offer. Did she have to convince you to come start this new business or was the opportunity it really attractive to one, start your own business but two, to work with your mom?

Mike Hargrave:                 Yes. Good question. Well, my mom was very successful not only when she was working with Integrated and ManorCare before that, but also in the recruiting business, she was doing quite well. And so it was really, I mean I’m just graduating from college and I accepted a more or less entry level job in financial services and I was very interested in that field. Um, I believe I would have done quite well in that field. But it was really a no brainer to help put this venture together with my mother. And it was very quickly successful. We were hitting the ground running and the first really 90 days and we had to start hiring people within the first, I think the first year of operating and we moved to offices and I mean, we quickly became a big name in the industry. And it was really because of my mother at that time, she had a lot of existing relationships and so I was able to dovetail on a lot of those relationships and then eventually establish my own.

Andrew Dick:                    You work with your mother, you build this business for roughly 11 years. And then at some point did you and your mom decide that you both wanted to do something different or how did you end up making the leap from the recruiting business to NIC? And when I say NIC, the National Investment Center, which covers or represents the interest of seniors housing and various longterm care facilities.

Mike Hargrave:                 If everyone recalls in 1997, the Clinton White House and Congress passed the 1997 Balanced Budget Act, which really fundamentally changed medicare reimbursement back then for the skilled nursing companies. Prior to the BBA, medicare was really a cost based reimbursement system, which meant that the nursing homes would figure out all their costs of operating the medicare beds and departments and areas of a skilled nursing facility and then basically submit that for reimbursement as long as they were, were accurate and honest, they would get a check back. The BBA changed that to more or less a per diem based system meaning, so instead of all of your costs going towards being submitted for medicare, medicare would now instead, pay you X number of dollars per day per diagnosis.

Mike Hargrave:                 So if it was a hip replacement and you need to rehabilitation for a hip replacement medicare, depending upon what region you are in, would pay the nursing home X number of dollars per day, for a defined period to care for a resident like that. And it really the net result back then, there’s a lot of different figures. But the net result was for the year following the BBA, the average medicare rate went down by about 25% year over year. So that’s the average daily rate for medicare. And the skilled nursing companies back then were in high growth mode. Most were like the largest ones were publicly traded on the New York Stock Exchange. And they had high equity prices and they had a high levels of debt as well.

Mike Hargrave:                 With the change in reimbursement, the skilled nursing companies quickly found that they were more or less underwater and really headed in a bad direction. Many of the stock prices plugs for most of the companies, several of them went into bankruptcy. And there was generally a lot of distress in a skilled nursing industry really by 2010, 2011. I believe I saw a report back then at about one quarter of the entire industry was in bankruptcy because of the changes in reimbursement. Medicare eventually raised the rates a little bit from there, but the damage was done and the industry was fundamentally changed back then. So a lot of these companies that ended up going bankrupt where our clients. And so we ended up taking a hit ourselves during that period. And in 2002, 2003, my mom decided to retire and we decided just generally just to wine the business down. And that’s where I found the opportunity with NIC.

Andrew Dick:                    So you move over to NIC and that seems to be a good fit based on the connections that you’ve made working with your mom and the longterm care industry. And so what did you do for NIC?

Mike Hargrave:                 Well, I joined NIC in 2004 and I joined them to lead a new division that they were starting, a new product. They were starting called NIC Map, which was at that time, a database of skilled nursing and a long term care and assisted living and retirement community properties that we were covering, I believe at that time, the top 25 metro areas. And really I was familiar with NIC before that and had been in touch with them. So it was really, along with my contacts. It was an easy transition. I really understood and bought into the mission of NIC. NIC is a not for profit 501C3, and really their mission is they have this, sort of, or had back then this theory that, and really it wasn’t a theory, it was actual fact that does the skilled nursing and assisted living industry and retirement community industry was largely a cottage industry.

Mike Hargrave:                 There wasn’t a lot of ton of, institutional investment capital that went into the business. And so NIC had this mission of really propping up the industry and promoting its merits. And the way that they saw that, that would happen is through regular reports on the sector. And eventually that merged into this database called NIC Map which I was brought on to lead and grow. Uh, so I joined them in 2004 and worked there until, I believe 2013.

Andrew Dick:                    Okay. So NIC Map is somewhat similar to what you’ve created it Revista isn’t that right? Where you could look at data, for example, for a skilled facility, whether it be number of beds, who the owner is, transaction prices, et cetera.

Mike Hargrave:                 Right. So NIC Map was always envisioned as being a regular database of all the senior housing properties located in basically most of the major metro areas of the United States. They tracked skilled nursing, assisted living, independent living retirement communities like CCRCs. They had all kinds of different cuts on data. After about a year or two, they started tracking construction then they were tracking rents and occupancies really from the beginning. They started tracking construction a few years after they started and then they transitioned into sales transactions through a relationship that NIC had established with real capital analytics which is still in place today, I believe. So it was very much like a typical real estate data service that you might see in commercial real estate, except it was specialized and cut for kind of the seniors housing and care industry.

Mike Hargrave:                 And during my time there, it grew from 25 initial markets to eventually a 100 markets. And I believe there are up to well over a 100, I think 50 markets now. I haven’t checked it recently but it’s a growing data service. The users of that data, they sold it through annual subscriptions. The users of the data are typical users that you see in many real estate data services. They’re appraisers and the lenders and investors and owners. Even the occupiers like the operators use the NIC Map data a lot as well. So it’s a growing data service and it’s pretty similar to or at least somewhat similar to what we’re doing at Revista with a different product focus.

Andrew Dick:                    So Mike lets talk about you work for NIC for eight plus years and then at some point you decide with some other colleagues at NIC to start Revista. How did you come up with the idea and really what prompted you to start this new venture?

Mike Hargrave:                 Sure. Well NIC, so when we worked at NIC and even from my time before, we had lots of relationships with lots of different healthcare, real estate investors or different types of debt and equity providers to the sector. So the four of us that started Revista, each of us left NIC individually and not at the same time. So my partner, Elisa Freeman, who runs our event and all of our marketing left NIC I believe first. And then followed Hilda Martin. My other partner left maybe a year or two later or something like that. And then I left after Hilda and then Jim Leavy, who is our fourth partner, he left just after me. There was a fair amount of turnover in general at that time at NIC but we all left for various different reasons and we still are all to this day on good terms with everybody back at NIC.

Mike Hargrave:                 We got together really in, I believe it was early, or the summer of 2013. This was just after I had left NIC. We got together and had some meetings and discussed the fact that we had thought that there might be an opportunity to start a data service that would specialize more or less in healthcare real estate. So in medical office buildings and hospital real estate and other types of healthcare real estate that kind of, not necessarily what NIC tracks, but stuff that investors that have holdings in that space would be interested in tracking. So we touched base at that time with a few investors that we knew from my experience in the past and our experience in the past and we set up conversations, set up meetings, kind of spent about six to eight months doing due diligence all across the country in terms of we went around these companies and we said, “Hey we’re thinking of starting a data service that would track healthcare real estate. If we were to do that how would you want it to look??

Mike Hargrave:                 So, that’s where we learned things like that a lot of the companies in the sector currently were expressing to us that really there wasn’t a resource like NIC that really covered kind of healthcare real estate. That a lot of the firms use some existing real estate databases but we’re expressing that these databases specialized more or less in commercial real estate and they didn’t really have a focus at all and had not great coverage of healthcare real estate.

Mike Hargrave:                 So a good example is most commercial real estate databases, their filters are suburban office and core business district. And within healthcare real estate, what drives value is not core verse of course businesses, directors or suburban locations. It’s really how close to the hospital campus it is, how affiliated with the hospital it is. What types of tenants are in the building. Those things really drive value in healthcare real estate. And you really couldn’t pry that out from any of the commercial real estate databases. So the bottom line on that is, during our travels in, during our conversations, we found that in fact that there was a thirst for this type of information. That there was that company’s very much, if we would have listened, if we had listened to them and developed a database using filters that they recommended to us, that there was in fact a lot of opportunity to create something of value in the sector.

Mike Hargrave:                 So we also asked about the conference side at that time. And we found that there were a number and are still to this day, a number of smaller events. I think some of the news publications put on conferences throughout the sector. But there was really not a premiere kind of investment focus conference, similar would NIC had back in the senior housing and care industry. So with that we spent about six months kind of doing due diligence and we collectively decided at that time that we would make a go at it. So we put together a plan to make that happen and that’s where it all started.

Andrew Dick:                    So Mike it sounds like Revista really compliments the NIC Map data in that it covers other asset types that NIC probably isn’t tracking. Like you said, for example, the medical office buildings or on campus versus off campus, pure hospital, general acute care hospitals, Ltax or rehab hospitals. Is that right?

Mike Hargrave:                 Right. Our core property type that we track is the traditional or even newer version of medical office buildings or outpatient buildings. That’s the predominant part of our database. But we also track the hospital real estate. We also track, some post acute real estate, we track acute rehab, long term acute care hospitals. We’re going to be making a push into the behavioral hospitals sector. We currently track transactions there. There’s a lot of activity in that sector and it’s just a matter of time before we have a good existing inventory of all the behavioral health hospitals in our associated real estate in our database. So, that’s the area that we focused on. It doesn’t bump them into either skilled nursing or assisted living or any of those types. We may in the future examine those. But at this point we have no concrete plans to really diverge from the property types that we’re in right now.

Andrew Dick:                    So Mike talk about how, I mean there had to be a huge undertaking to build this database. Where do you get the data from and how do you put it all together?

Mike Hargrave:                 Well it’s a tremendous effort to build a real estate, an existing real estate database. And it’s quite expensive. So we spent almost a year of building a database. We were lucky enough in our initial travels to these large companies that several large companies agreed to sponsor us financially starting in 2014. So we had some monies to help pay for the development of the database in the research. But it wasn’t easy. It wasn’t like starting a database of residential housing where you can just go download all the assessment information on residential housing and bam, you’ve got an existing database and you can just go at it. I mean the assessor officers do a good job telling you whether it’s a single family home or a multifamily resonance, number of units, square footage, all that kind of stuff. But when it comes to healthcare, real estate, it’s completely different.

Mike Hargrave:                 There’s very little information in the public records that signifies that a building would be medical or even a lot of the hospital campuses, you can imagine the hospital they’re not for profit. And so that the local assessors looking at these monstrosities of buildings on these hospital campuses don’t always have a high level of interest in measuring what they look like or measuring the square footage or even when they were built. I mean, there might be 30 different buildings on an average hospital campus.

Mike Hargrave:                 And the hospitals themselves have historically done from a real estate perspective, not a very good job of parceling out the different buildings that are on their campus. So there, you could have the main hospital building and you could have maybe five medical office buildings, that are either attached or not even attached to the hospital, but are on campus. And yet they all have the same parcel. They all have the same address. And it’s very difficult a lot of times to really figure it out. What buildings are what with the hospitals and the systems. And so we spent literally an entire year just building our database of medical buildings. And it was very difficult. And it took a lot of effort. We leveraged several existing databases of health care practice locations. We scoured bond filings. We leveraged the hospital location lists like that via their website or even via newsletters and things like that.

Mike Hargrave:                 So that whole process took us about a year and that was really just to identify all of the medical buildings, whether they’re medical office buildings and are on campus. Are they affiliated with the local hospital or not? Just identifying and developing a directory of those buildings all throughout the United States took just about a year. And when we were done doing that, what we had is we had an existing database of about 37,000 medical office buildings. And these are buildings that, we qualified each of those buildings as a medical office building. And what that meant was we determined that the building was either purpose built or converted into for medical use. That the vast majority of the tenants in the building, if not even all of the tenants were healthcare practices involved in specific types of healthcare delivery?

Mike Hargrave:                 So as a for instance if it’s a health insurance company that has their regional headquarters in a building. That to us that’s not a medical office building. If it’s a counseling center that’s not a medical office building. A lot of school based clinics are in office buildings. And those aren’t medical office buildings. Typical medical office buildings that we track would have,, primary care or cardiology, the typical physician type practices that you’ll find in what most of us consider to be a medical office building. And so that was sort of the result of that first year of building a database of these 37,000. And there were almost 20,000 other types of buildings that we cataloged in our database as well at that time. So it was a big, it was a huge effort, it took a lot of resources and we were very lucky that we did get support in the very beginning. And we really owe a debt of gratitude to these initial sponsor partners that really helped us through that period.

Andrew Dick:                    So Mike when you sent me a couple of reports and it was really interesting to look at all of the data that’s available through your database. For example, you sent me a property view for a specific medical office building in Seattle and you could look at who owns the building. Look at what the most recent sale transaction when that occurred. There was a list of comparable buildings in that particular area along with rental rate data. And I’ll tell you the amount of information in the report was impressive. And so I’m guessing that appraisers and investors they want access to this information. Because it’s been my experience over the years when I hire an appraiser to come up with rent comps or to confirm a sale price for a medical office building, that data is hard to come by. It seems to be closely held and if your bank hires an appraiser that doesn’t do a lot of work in this area, you can be at a real disadvantage. And so I’m guessing, Mike, that appraisers and lenders and brokers all want this information because it seems to be closely held. Is that right?

Mike Hargrave:                 That’s exactly right. And we’ve actually, it’s interesting Andrew, but we’ve had conversations with some banks that use our data and they’ve expressed that exact sentiment that they had wished that all of the appraisals they got in or all of the due diligence they got in, that those firms just use our data because we have a really quick and easy access to rental rate comp information sales transaction comp information and other pertinent information that really zeroed in on the types of real estate that they’re looking at. And so it’s that’s why we started the databases ’cause we felt that there was really a void of this type of information. Or if it was out there, it was very clunky to go get, you had to leverage either different data sources or you had to piece together information from a data source that you already used.

Mike Hargrave:                 And it was maybe you were relying on broker reports in an area, things like that. And so the database that we have is really meant to provide an easier way to access that type of information and it’s custom made for healthcare real estate. And that’s really what our goal was from the very beginning.

Andrew Dick:                    So from what you’ve sent me, it looks like you have the ability to look at specific properties. You also can pull market view or metro reports that show different trends and comps within a certain metropolitan area. For example, Charlotte, North Carolina. And then you also sent me some information about construction reports. Now what’s involved in a construction report? Are we looking at construction costs trends, number of new construction projects within certain areas, or all of the above?

Mike Hargrave:                 Really all of the above. So in addition to our existing database, we started in 2015 tracking construction as well as transactions. It was our opinion back then that, there wasn’t really a good existing construction database out there. I know a lot of, I know the dodge data is out there. But we started tracking construction, the types of information we tracked. We didn’t approach it from competing with it with the dodge which specializes in getting as much information on a project as they can. So as early as they can so that the trades people can help bid on projects. Our approach and tracking construction has really measured up at the market level and let our subscribers know how much is under construction and what that translates to in terms of inventory growth over the next 12 months.

Mike Hargrave:                 And is it leased up or is it not leased up and what are the rental rates on these projects, and who are the active developers. We really approach it from more of a market risk type tool development thing. So that’s kind of how it will look at construction in a market. But we do track both medical office as well as hospital construction.

Andrew Dick:                    So Mike if someone wants to get more information about the day that that’s available, what do the subscription models look like?

Mike Hargrave:                 So we sell our data on an annual basis. So a company comes in and they say to us, we’re interested in looking at your data service. We want to buy a license to it. We would sell them a license and they get a certain number of users and that would enable those users to log into our data service and begin using it so they can run reports. All the data in the data service, it’s a interactive meaning you can pull up a report and click through to different properties or click through to different areas or even click through to other reports. You can filter the data as you want. Our database underlying databases is continually updated with things like rents, vacancy rates, sales transactions, construction information, any changes in ownership, we catalog immediately.

Mike Hargrave:                 So our users can pull this information up through a property view report and as long as they have username and password access they can do that at any time, even at midnight in one night. So that’s kind of how are our access works.

Andrew Dick:                    And if someone wants a trial subscription, that’s an option as well. Correct?

Mike Hargrave:                 Yeah. So we do have if people go to our website revistamed.com and they register in the upper right hand corner, there’s a link to sign in/register. If they do that, their email will be in our system and they’ll have an email and a password and they can search our property database. They generally can’t download reports other than just a few property reports. But you’ll at least get a taste for the types of information and types of data that we have in the system. And then if you’re interested from there, you just give us a call or send us an email and we can set up a demo or have further discussions and sample reports and then quote pricing as well.

Andrew Dick:                    Great. And I’ll tell you, I was really impressed Mike with the data you sent to me. I mean just the volume of data. I think some of my clients could use it when they’re trying to set rental rates with physicians. And an on campus MOB for example this data would be really valuable. As we wrap up here, I want to make sure we spend just a minute or two talking about your conference. You mentioned it earlier, but Revista has an annual conference. This year it looks like it’s in February in San Diego. Mike, talk just a little bit about that and what someone can expect if they attend the conference.

Mike Hargrave:                 Sure. So our conference, again, my partner, Lisa Freeman she worked at NIC for a number of years before even I got to NIC and she really developed a NIC’s conference into what it really has become, which is kind of the industry’s premier finance and an investment conference for the seniors housing industry. So we have more or less a similar type of vision for healthcare real estate. It was our supposition that there really wasn’t a conference that was squarely focused on finance and investment within healthcare real estate. And so that’s what we’ve aimed to produce. It’s an annual conference. So we’ve held these since 2015 and they’ve grown significantly each year since we’ve had the inaugural event. So last year the conference was in Miami, Florida. This year it’ll be in San Diego, it’s the first week of February and it’s going to be held at the brand new Intercontinental Hotel in downtown San Diego, right near the water.

Mike Hargrave:                 The hotel just opened in August. So it’s San Diego newest luxury business kind of hotel that’s in the city. So we’re very excited to be there. It’s going to be warm weather. There’ll be a golf tournament the first day, networking sessions and then we start our general sessions the afternoon of the first day and then programming continues the for the next day. So there’s great educational sessions. The sessions are a little different than you’ll find at some of the normal healthcare real estate events. They tend to focus on real estate. They tend to focus on finance. We focus on construction and we try to fold in different data sources and different information factual, statistical information that can help fuel some of the discussions that happened at these sessions.

Mike Hargrave:                 You also have, because it is a finance oriented conference, you have a growing part of the audience that is interested in attending for the deal making side of things. And so there are a lot of all of the suites are reserved and different you know, the hospitality rooms are all reserved. And there’s a lot of different investment meetings, a lot of different deal making meetings that happened during the conference. And that’s where a lot of the audience or a lot of the participants end up. And it’s been told that you have to fill your dance card quickly at our conference. And so for those that are thinking of attending, the suggestion is to look at our attendee list or you can access it after you register online and start making your meetings sooner rather than later and then you’ll have a nice successful conference.

Andrew Dick:                    Great. Thanks Mike. So looking forward, where do you see Revista in five years from now?

Mike Hargrave:                 So five years from now we have a lot of, to be honest with Andrew, we have a lot of growth straight ahead of us in this sector. It was a little surprising to us quite frankly, that the sector didn’t have a premier kind of investment conference. It was a little bit surprising to us that the sector didn’t have a dedicated focus data service. So we’re still growing our data service. We’re still growing our conference. We see just a ton of growth ahead just there. As we grow over the next few years, we may start to look at folding in some other fringe types of property types. I mentioned earlier behavioral health hospitals were now that there’s a decidedly a lot of activity in that sector, both construction wise as well as transaction wise, we are going to start tracking that.

Mike Hargrave:                 We might build out our coverage of acute rehab as well as Altax. We do track transactions on those property types now. We may move into some of the more post acute settings that are out there as well. But we’ll always stay close to kind of where we’re at right now. It’s a very large sector. I mean, when you total up the hospital as well as medical office sector, I mean, you’re talking about a real estate sector that has about a trillion dollars in current value. And so it’s a very large sector and there’s just a ton of information that we can mine even into the future that helps really prop up the real estate value of these properties and really helps create a good transparency and good information on these properties moving forward. So the bottom line is we have a lot of growth ahead of us, just where we are. We may dip our toes into a related sectors but by and large, we’re going to be focusing on what we have just in front of us here.

Andrew Dick:                    Great. So Mike, how can our listeners contact you if they have questions about your data service?

Mike Hargrave:                 Well, they can send me an email. My email address is mike@revistamed.com. Our website is www.revistamed.com. And we’re located in a Arnold, Maryland. And our phone number is 4439498794.

Andrew Dick:                    Great. Well, Mike, thanks so much for joining us today. This was a great discussion and I’ve certainly learned a few things. I want to thank our audience for listening to this podcast. On your Apple or android device. Please subscribe to our podcast and leave us feedback. We also publish a newsletter called the Healthcare Real Estate Adviser. To be added to that list, please contact me at adick@hallrender.com and remember the views expressed in this podcast are those of the participants only. And we thank you for your time and thank you for listening.

 

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