Serving physicians to help them serve others
Projections are rosy for health care. The Bureau of Labor Statistics are fans, saying nearly four million new jobs will be added between 2008 and 2018 in the medical field.
Projections are rosy for health care. The Bureau of Labor Statistics are fans, saying nearly four million new jobs will be added between 2008 and 2018 in the medical field.
On the other hand, the American Medical News squashes the giddy celebration, saying that it’s not all good news. There will be attrition of healthcare providers through retirement and there aren’t enough replacements because there are too few medical and nursing students. And, don’t forget what unpredictable chaos impending health care reform may wrought.
Tom Weinhold isn’t overly concerned. He’s been focusing on the health care sector of the commercial real estate market for nearly 25 years. He agrees that there will be sweeping changes coming up—but it’s really no different than any other time, because change is always on the horizon.
Tom has had his fair share of ups and downs in medical. He shares his love of serving the health care field, the keys to success and what he expects in the future of the medical real estate field.
Generalist to Specialist
In commercial real estate, there are those who choose to be generalists and do anything that comes along; there are those who find a niche with opportunities. Tom Weinhold found a niche that he loved… or as he says, “… a niche that I stumbled into.”
Weinhold’s father founded a residential brokerage company in Phoenix in 1977 after he relocated from Ohio. Tom had moved to Phoenix in 1975, and Tom’s father asked him to secure his salesman’s license so they could build the company together.
It didn’t take long for Tom to realize that he wasn’t suited for residential real estate. “Residential is all about emotions; commercial tends to be more logical. It’s numbers, analysis, and whether things make sense for the business. By late 1978 I started selling investment apartments, then in 1979, I started into industrial real estate. By 1982, I had earned my CCIM designation.
Testing Commercial
“I succeeded in getting a job with one of the largest industrial developers at that time. After I earned my CCIM designation I bounced from one thing to the next. Ultimately, I discovered the health care niche.”
In 1985, Weinhold had listed a small land parcel for sale. He received a phone call from a surgeon who was asking about the property. He decided to turn off the computer and go to meet him. The doctor didn’t buy the land he’d called about, but he became Tom’s first important medical client.
Later that year the surgeon called on another piece of land near I-17 and the future 101 intersection. This did not lead to a deal either. At that time, Tom was serving as part of the leadership team of the CCIM. During one of the monthly marketing sessions, a member stood up and said that he had a surgery center for sale.
“I didn’t know what a surgery center was. But, I called my surgeon client and told him about it. His response was, “What would I do with a surgery center?” But, four days later, my client called back and wanted to see the center.”
The hospital the surgeon was working for saw an opportunity in the surgery center and had asked the doctor to help evaluate the property, then organize the physician owners to purchase and staff the center. Tom and his client first saw the center in early October and it closed on December 26. During those three months, Tom received a crash course in working with physicians.
By the way, Weinhold still has a relationship with his original medical client. “We play golf from time to time,” he says with a smile.
Specializing
Over the next two years, Weinhold had switched his entire business focus to health care. “I found that I liked working with doctors. They’re so bright, focused and deep down, they want to help people. Because they have not received business training, they protect themselves with layers of accountants, lawyers and advisors. I wanted to be part of that team and help them achieve what they wanted. My decision to jump into medical was also helped by the fact that there was virtually no competition.”
At first, Tom had few supporters. His wife expressed deep concerns about narrowing his focus, “She thought I was nuts. We were in the beginning stages of what turned out to be a deep recession (1986 – 1992) and she was questioning whether there was really that much business in this niche. But, if you do a good job for a doctor, they will sometimes refer you and then you’re already vetted. More importantly, if you do a bad job, they’ll tell 100 doctors and you’ll be out of business quickly.”
More recently, Weinhold has grown his team to include specialized support for client service, including a transaction coordinator to support the complex details of a lease or purchase, and a market coordinator to help track the market and property searches and listings. In addition, he is developing agents to help cover the growing metropolitan market.
Nuts and Bolts
“I work with doctors to secure space,” explains Weinhold. “My specialty runs the full gamut of the clinical office real estate market. One of the keys to working well with doctors is to give them as much information as possible so that they understand the process and can make fully informed decisions.”
Weinhold also makes certain that his doctors know the considerations they have to make when they’re looking at buying versus leasing their office space.
“A lot of doctors got into the office-condo craze. I explained to my clients that ownership means long-term commitment; it’s not a commodity that you can easily jump into and out of.
Medical Office Today
Tom says the office-condo market is currently over-built. “There’s too much space on the market—physicians that bought at the top of the market and who might not have gotten their practice going to sustain the debt are finding that you can’t sell it for what you paid for it, or even close. But, if you designed your strategy to go 10 to 15 years, then you should be okay.
Every practice has their own needs, and they want to custom design their clinic space to best suit their practice; this means that any future office condo buyer will have to spend additional money to modify the space, which affects its value at the time of sale.”
Physicians are once again favoring leasing, which allows for a commitment as short as five years (shorter in some cases). Again, the uncertainty of the future is weighing heavily on the real estate decision.
Renegotiating Leases
It’s not a given that landlords will automatically renegotiate leases. Many people don’t understand the factors that go into whether a landlord will renegotiate or refuse. Tom explains, “If you have two years left on your lease and you’re not interested in buying, but want to be in practice seven years down the road, then we approach the landlord and ask for a renegotiation. Why don’t we cut the rent today and add five years to the lease, and make it win-win for both parties?”
“Some landlords feel that it’s appropriate. Others feel that in two years, we’ll be through the worst of this market and they don’t want to undercut the future value of their property. And a lot of people are looking at values and are asking if they’ll return to anywhere close to where they were, or have we permanently reset the values to a lower amount? If it’s a reset, then you’d be better off to cut your loss now and lock in a current tenant. It all depends upon the landlord’s perspective.
One knowledgeable owner has run the numbers and he makes more money leaving his building 80% occupied and not spending money on improvements. These landlords are thinking, “Unless I can do a new deal at relatively modest cost, I’m better off at 80% vacancy.”
I have another case where the landlord believes values have reset, he decided that keeping the tenant is better. He’s reduced the lease by 30% and has allocated $15 a square foot to refurbish a space, while adding seven years to this tenant’s lease.”
Healthcare’s Health
“I think we’ll be lucky to get through 2010 as well as we did for 2009,” Weinhold states.
“Everybody thinks that health care is the last refuge, but health care reform is a huge problem that has continued in the national dialog. Physicians are convinced that their revenue might be cut, so they’re looking at where they can save money. The second or third largest line item is real estate overhead. They’re also looking to transition to electronic medical records (EMR) to cut staff expense.
Currently physician’s have to deal with up to 60 different insurance plans with their own reimbursement process, paperwork, etc. With healthcare reform, they might have a single payer but then the payer has the control. Either way, the fear of lower reimbursement in the future is overwhelming to the doctors.
Some of the older physicians are just fed up and are telling the younger ones that they’re crazy to get into it. Technology and regulations keep changing. The younger docs are hearing that older doctors were used to making $400K, and today the best you can do is $125K - $150K a year.
The younger guys want to be physicians and they’ve never made $125K and it sounds pretty good to them. And the younger physicians grew up with technology, are embracing EMR and seem eager to innovate and find new ways to deliver healthcare effectively. And, there’s the general public who believes doctors are rich. Some do well, but if the public had to put up with what physicians do, they’d never do it.”
Leisure
Tom Weinhold works to serve, and to live. He is a lifelong learner with many interests including traveling with his wife, Vera; golf, hiking and archery elk hunting.
Having the opportunity to travel with his wife and see different parts of our great country and the world, has given Tom a broader historical perspective, and appreciation for other cultures. Hiking and golfing are convenient ways of getting outdoors, but archery hunting is an especially great way to rejuvenate.
Weinhold believes that “Archery elk hunting is much like what I do in business. The odds of you succeeding are against you. When you’re archery hunting, you must get within the elk’s defense system. They have great sense of smell, eyesight and hearing and they’re always on alert. You have to be patient and you don’t always have success.
But, it’s not always about getting an elk that makes a hunting trip successful. I truly enjoy being in nature. I’ve seen things while I’ve been hunting that I wouldn’t see sitting on the couch or working. One night I saw and heard six bull elk bashing trees and bugling at each other for more than an hour. I never got a shot, but I got to witness one of the more incredible sights in nature.”
Key to Success
What’s most surprising about Tom Weinhold is that despite all of his knowledge, skill and success the things that are most deeply rewarding are the relationships he’s built in this business. The doctors that he’s had the pleasure of working for and with matter to him. “My personal philosophy is always do the right thing, put the client first, and you won’t have to worry about getting to sleep at night.”
Sure, the nuts and bolts of the business have to be logical and make sense. But deep down inside, the connections he’s forged in medical are deeply personal, which is likely the key to his continued success.
tom.weinhold@naihorizon.com
