Today’s guest is Ben Reinberg.
Ben Reinberg is the CEO of Alliance, and has over 20 years of commercial real estate experience with over $500M in assets.
Show summary:
In this episode, Ben discusses his experience in investing in medical office spaces. He highlights the stability and demand of this sector, despite the complexities and nuances involved. He shares his strategies for adding value to these spaces and the importance of selecting investors who align with their values.
--------------------------------------------------------------
[00:00:00] Intro
[00:04:12] Opportunities in medical office spaces
[00:10:30] Barriers to entry in the medical office space
[00:11:24] Understanding the Medical Office Space
[00:12:27] Tenant Profile and Property Requirements
[00:15:04] Analyzing and Acquiring Medical Office Assets
[00:22:07] Qualifying investors
[00:23:44] Learning more about Ben and his fund
[00:24:34] Closing
--------------------------------------------------------------
Connect with Ben:
Connect with Sam:
I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.
Facebook: https://www.facebook.com/HowtoscaleCRE/
LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/
Email me → sam@brickeninvestmentgroup.com
SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson
Apple Podcasts: https://podcasts.apple.com/us/podcast/how-to-scale-commercial-real-estate/id1539979234
Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f
--------------------------------------------------------------
Want to read the full show notes of the episode? Check it out below:
Ben Reinberg (00:00:00) - Started seeing that more and more people were working remotely from home and at coffee shops. And I said, office space is going to eventually be a dying animal in certain regards. So there are certain tenants that need office space, like medical tenants. You know, law firms need. But even a lot of attorneys now are working from home. I know a lot of my colleagues and they they have an office, but they don't need as much space. So I started seeing this shrinkage of space from the internet. And then the pandemic hit and it became more prevalent. More people were saying, hey, we could do these zoom calls. Now we can. We don't need to meet face to face. We don't need a conference room. We don't need to have this expensive overhead. Right.
Intro (00:00:45) - Welcome to the how to Scale Commercial Real Estate show. Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something big.
Sam Wilson (00:00:58) - Ben Rosenberg is the CEO of Alliance.
Sam Wilson (00:01:00) - He has almost three decades of commercial real estate experience and over $500 million in assets. Ben, welcome to the show.
Ben Reinberg (00:01:08) - Sam, thank you very much for having me today. Happy Tuesday to you and pleasure to be on your show.
Sam Wilson (00:01:14) - The pleasure is all mine. Ben. There are three questions I ask every guest who comes on the show in 90s or less. Can you tell me where did you start? Where are you now? And how did you get there?
Ben Reinberg (00:01:24) - Uh, started back in Chicago, north suburbs of Chicago, uh, started syndicating commercial real estate. First deal was industrial deal then got into office and retail. And those are my expertise industrial office retail. And then we expanded within office. Now we acquire medical office, which is a large presence in our portfolio, Sam as well as veterinarian office. So where we sit today is started when I was young, in my 20s, and now I'm 53 years old and we've grown a portfolio and we've sold off a lot of our portfolio last five, ten years.
Ben Reinberg (00:02:02) - And now we're looking to grow again. And we've had staff, so we're scaling the company my company Alliance consolidate group of companies. It's Alliance Wkyc.com for anyone looking who we are. And we're the leaders in investing in medical office in the United States.
Sam Wilson (00:02:19) - That is fantastic. Been I've not had I don't believe any guests come on the show that specialize in what you do. So this will be this will be a fun conversation for me because I get to ask questions that are genuine, like curiosity. I have no idea how this how this space works, what yields are things like that. I guess before we get into the mechanics of what your core focus is, let's rewind maybe 2030 years. Can you break down some of the. Shifts in opportunity. I think this is something that we've been talking about a lot with a lot of different sponsors, is that not everything is golden forever. There's times to invest in certain asset classes and times to get out. What have you seen, I guess, across the last 20, almost 30 years of your real estate experience in the changing times of opportunity?
Ben Reinberg (00:03:09) - Well, I've seen a lot of change.
Ben Reinberg (00:03:11) - The internet has had a drastic change on commercial real estate, and what I've seen from that is you look at retail as an example. So we just don't shopping centers and strip centers, and we don't own that type of product as much anymore. We've wound it down in our portfolio and sold them off. And the reason being is there's not as many retail tenants running around leasing space. Sam in different types of assets in the retail space. And so for us, we saw that and said, you know, we're going to move on to other asset classes. Industrial has been a great product through our career. The other thing that changed is when I was younger, we were buying General Office. We were we thought that we would own a tremendous amount of large office campuses around the country. That was a strategy we had. And then once we started seeing the internet became more prevalent, people were working more remotely. You look at what happened with Covid, which was a perfect example to what we thought was going to happen.
Ben Reinberg (00:04:12) - And you look at suburban office around the country, anywhere around the United States, there's a tremendous amount of vacancy. And so there is some opportunities where people are leasing space because they're doing remote hybrid work. Or if you're from Chicago, like where I'm from, Sam. Even though I live in California right now, one of the challenges is you go downtown Chicago, see so much vacancy in these large high rise skyscraper buildings. And it's also because not only because of Covid, but also they're shifting they're opening offices in the suburbs. But the suburban office market is really challenged. There's a lot of vacancy. Any new product needs to be absorbed if it's still out there. People are building new office like they have. And so that's an asset class that's drastically changed that and retail that I've seen in my in my career. We got into medical office about 19 years ago because we saw an opportunity to find a product in a space where we knew was never going to go out of style. You know, people need medical services and our tenant support those type of services for anyone, their families.
Ben Reinberg (00:05:20) - And we realized when that was the foundation. It's a very stable product with a lot of upside and a lot of demand.
Sam Wilson (00:05:26) - That is really interesting. What were some of the signs or the signposts along the way? That kind of because it sounds like you were able to exit the properties that you wanted to get out of before the bottom fell out on them. How were you able to accurately predict that and not get stuck holding the bag?
Ben Reinberg (00:05:45) - Just being a tenant in suburban office where our headquarters first started? Over the years, I saw that I saw the population growth changes in different areas of the country. And I started realizing, I started seeing that more and more people were working remotely from home and at coffee shops. And I said, office space is going to eventually being a dying animal in certain regards. So there are certain tenants that need office space, like medical tenants, you know, law firms need. But even a lot of attorneys now are working from home. I know a lot of my colleagues and they they have an office, but they don't need as much space.
Ben Reinberg (00:06:27) - So I started seeing this shrinkage of space from the internet. And then the pandemic hit and it became more prevalent. More people were saying, hey, we could do these zoom calls. Now we can. We don't need to meet face to face. We don't need a conference room. We don't need to have this expensive overhead. Right. And so over time, we started seeing it and we thought we're like, maybe it's going to happen. Maybe it's not going to happen. Sam I'm not sure. But I think over time, especially with this younger generation we saw, is growing up on technology. They're extremely comfortable with the remote and hybrid. They almost they almost demand it. So the work environments changed and that's changed in office space. And with retail, you know we see there is a growing presence of of different restaurant chains that have expanded. There's different niches. But we've seen a lot of our medical tenants go into retail centers to get the traffic counts and the exposure and get the walkability to go to their, their facilities.
Ben Reinberg (00:07:26) - So we're starting to see that. We see a lot of urgent cares in retail centers now, and we see a lot of physicians they're opening in retail centers because what they see is the mother might go and shop a couple of doors down and, you know, her kid might be at the doctor. And so there's a lot of benefits to being in a retail center for some of these folks out there that are that are patients of these physicians. And so we started seeing that trend as well. And it's going to be very interesting times as we grow older, Sam, to see like what's going to happen with retail, you know, what are going to be the key factors, like how is this going to affect brick and mortar, you know, is, you know, multifamily still has the ability to absorb tenants in a rising interest rate market. But when interest rates drop, more people buy homes. So it gets affected as well. So there's no rhyme or reason. It's it's where the opportunities are.
Ben Reinberg (00:08:21) - And we saw a long time ago there's an opportunity to medical and we doubled down on it and took advantage of it.
Sam Wilson (00:08:27) - I think that's great. I think that's great. Also finding something that is almost market cycle agnostic. I mean, I think that's one of the things that, you know, again, you talked to a lot of sponsors on this show and you see you see I see many different sponsors pivoting right now going, okay, you know, we had opportunity in this for the last 7 to 10 years. But you know, that's drying up. So now we're looking at other opportunities. But you've kind of found a spot that is again market cycle agnostic that in the medical office space. So let's take what remainder of time we have here and really dig in if we can. You know you've been in it for what, 19 years? I think you said in the medical office space.
Ben Reinberg (00:09:07) - We've been in the medical office for about 19 years. We started buying dialysis facilities when they were being scrutinized by the United States government, especially DaVita.
Ben Reinberg (00:09:19) - And we saw that and we said, you know, there's more kidney disease running rampant, more people are consuming fast foods and high. Cholesterol and have have rampant renal challenges. And we just said, you know what? This is a really good opportunity to look into this. And we did. And fortunately we we did very well with it. And I'm really proud of where this company has taken the medical office space. And our investors have done extremely well. And so we have a lot of investors from around the country and even the world that are investing in our medical properties with us, and they've just been incredible because of of just the opportunity.
Sam Wilson (00:10:01) - I'm taking this right off of your website here, and you have a statistic posted there that says from the change during global financial crisis, Q4 or actually since Q4 2006 through the trough, I'm not sure exactly what that means, but essentially it shows a 70% decrease in investment volume over, I guess, that period of whatever that period of time is maybe 2006 through now in medical office space.
Sam Wilson (00:10:26) - Does that ring true with you and if so, why is that?
Ben Reinberg (00:10:30) - Well, with us, it's actually the other way. I mean, we've doubled down and increased our volume, but a lot of folks have, um, have maybe not acquired, uh, medical office because the barriers to entry really need to understand. Sam, what are all the nuances, different licensing laws, what makes us successful? Ten is a specific medical office property. And what ends up happening is that people don't feel comfortable with it. And so we do. We spent a lot of time going through our learning curve, understanding medical office and what it meant. And what's interesting is, I would say the last five years, medical offices been very hot. There's more people that have come into our space because they realize it's stable cash flow with great upside.
Sam Wilson (00:11:19) - Got it. What are what are some of the barriers, would you say to entry in the medical office space?
Ben Reinberg (00:11:24) - Well, I would say it's understanding how to be able to talk to physicians, understanding what the metrics are in different facilities, what produces a great.
Ben Reinberg (00:11:37) - Medical business for these physicians and looking at where the opportunities as well. And so there's just a barriers to entry. It's a lot of experience. It's a lot of time to get your arms around the different niches in the medical office space. So every sector in in medical has different requirements, different metrics, different licensing, different success metrics. And so when you really understand the business, it creates a high barriers to entry. Because not everyone can just jump in. Yeah. You could jump in and buy a medical property. But you need to understand like what's the default risk. Why is my tenant gonna pay rent?
Sam Wilson (00:12:18) - Right. And it sounds like it sounds like every tenant has a very unique profile and building type that they want to lease from you.
Ben Reinberg (00:12:27) - That's correct. Mean. And the buildings have different construction to, you know, different power sources. Some need generators, some need certain electrical because they have certain equipment. Look at imaging facilities. Right. Facilities. They spent a tremendous amount of money.
Ben Reinberg (00:12:44) - Some of them have chillers. So they spent a tremendous amount of capital in the property. And you have to understand why. You have to understand how does that affect the real estate. What happens if the tent defaults on the lease? Can you release it? So you really need to understand the credit worthiness of every tenant. Sam. It's really important.
Sam Wilson (00:13:03) - Who is who is an.
Sam Wilson (00:13:04) - Ideal tenant for you guys? Is it is it a national medical corporation? Is it like you said, you know, talking to individual physicians? What's that? What's that tenant profile like that you guys really prefer to work with?
Ben Reinberg (00:13:18) - For us, it's really someone we could build a long term relationship with, someone that has that's credit worthy. Now. It could be small or a large national or privately owned, but it's on that it has a successful business that it really enhances the community of what their business is doing, you know, building deep roots. So, for example, you're in Memphis and if you went to orthopedic, you want to make sure that that orthopedic group or group of physicians that they're going to not default on the wrist are going to pay the rent, they're going to pay taxes, they're going to pay insurance, they're going to run their business from there.
Ben Reinberg (00:13:56) - What different about what's different about medical office is that the properties are very important to the revenue generating of the business because of some cases, the equipment. So take orthopedic. Let's say they have MRIs and and scanning equipment and x rays and all this equipment they need to invest in what ends up happening, Sam, is those that equipment and that property is critical to producing revenue. So we look for tenants that invest in the property. We look for tenants that have equity in their businesses or ability to support rent payments and it's entire process. We take our analysis through to see if there's a viable opportunity in that specific asset.
Sam Wilson (00:14:44) - Do let's talk about the acquisition side of these acquiring these assets. What's what is that process like? I mean, to go out and see a facility potentially on market for sale. Let's just use that for an example. How do you even know if that's worth pursuing without then already having a tenant in mind? Or maybe you do.
Ben Reinberg (00:15:04) - Well, generally speaking, most of our assets have tenant tenants in the property.
Ben Reinberg (00:15:08) - Okay. Or we'll put a tenant in the property depending on the situation. But and the day we're going to underwrite the credit of the tenant, we're going to look at the rent compared to market. We're going to analyze and see what what it would, what the replacement cost of the property is. What are we paying per square foot. We're going to look at if it's a single tenant net lease property. What is the situation with the lease? Who's responsible? What. How does the tenant in the landlord delineate responsibilities in that lease. So we're going to look at those factors. We're going to look at vacancy rates. We're going to look at absorption rates in those submarkets. We're going to look at how long they've been there. What's the story. We're going to look at the dynamic of the physician group ages. Is this a bunch of physicians that are going to be retiring in five years? So we look at the business, we look at the real estate, we look how the real estate sits within the market and why they're there.
Ben Reinberg (00:16:06) - We look at is the business growing or are they going to be there for a long period of time? What happens if they leave? Sam? Are we going to then have an issue releasing it based on what we're paying, what the rent is? So we look at the real estate for miles and we look at the business. And that will allow us to determine is a survival asset, say, to invest in our brand new fund, the Alliance Medical Property Fund.
Sam Wilson (00:16:31) - Got it. What's a way that you. So you look at these assets. You look at all those things. You put them into your matrix. Okay? Is this an opportunity worth pursuing? But how do you add value in this situation? Or I guess maybe the one you mentioned there where you already have attended in place? What's a value add in the medical office space?
Ben Reinberg (00:16:49) - The value add is is a lot of different ways. There's value that's provided. One is we might have some vacancy that we lease that we pay for on the acquisition.
Ben Reinberg (00:17:00) - Some might be expansion of space. Another way is the credit worthiness of a tenant. We have a lot of tents being absorbed by hospital systems and private equity groups that have better credit than when we started. And also we also unleash renewals. We'll add value whether it's rent increases, whether it's annual escalations, whether it's certain clauses in the lease that we had removed and replaced, it could be reporting financial statements on an annual basis. There's a lot of different ways we might take a five year lease and make it a 15 year lease. And so there's different ways we always look at what's the outcome, what's the end value. And then we back into it and start figuring out what variables can we enhance a lease to add value.
Sam Wilson (00:17:48) - That's that's really, really interesting. It sounds it sounds pretty new. Not not nuanced, but very detailed in the way that you guys find creative ways to restructure these when you buy them in order to add value. And again, I think that goes back to what you were saying earlier about barriers to entry in the space, in that if you don't have that.
Sam Wilson (00:18:09) - In-depth understanding of how to structure these such to add value on the surface to a guy like me, I'd look at it and go, I have no idea, Ben, how to how to even remotely increase value in this property. So that's really cool. You've mentioned something here a few times that I want to circle back on, and you've mentioned default risk, but let's talk about that. It sounds like that is a possibility maybe in some of the things that you've worked on. Can you just speak to that a little bit.
Ben Reinberg (00:18:37) - Yeah. Default risk is basically when a tent defaults on their lease. And so we we basically are looking at what are what's the probability that they're going to honor their lease. Now defaulting is more than just well he didn't pay rent. He didn't pay his cam or or insurance or taxes. It could be, you know, someone poured gasoline on the property and little lit a match mean there's all different ways it could be we had some sort of insurance claim in the tenant didn't take care of it.
Ben Reinberg (00:19:09) - There's different clauses in that lease that can trigger a default. So you have to deal with good people. Integrity is everything. That's one of the core values of our company, Sam. And you have to have tenants that align with your values. And that's something that's so important to us because then you know you're going to pay rent. We don't like to chase people. So what I love about our physicians and the people we do business with, we don't. We only have to chase them. They pay rent because again, look at the premise. Their businesses are predicated on the success of that piece of commercial real estate. Where is it located? How does it function? You know, is the roof intact? No. Roof leaks, is it? How's the structure? How's the Hvac working? So. At the end of the day, when you look at all these facts, the real estate is so critical to providing and helping and assisting revenue generation for that physician group. And that's a really key factor, because that's when real estate becomes very valuable to that doctor group.
Ben Reinberg (00:20:13) - So that day, the the retention rate is in the upper 80s on renewals rates. Well, it has low default risk. And so it's a safe, secure investment where you can create upside. And that's why our investors love about the Alliance Medical Property Fund.
Sam Wilson (00:20:28) - I want to hear more about that. I've got one. One last question. Just just curiosity from my own kind of mental picture of what you guys work on and do. Is there is there a particular size of property that you say, hey, this is the sweet spot for us. I mean, can you talk to that to me a little bit about that? On the size of facilities you're working on?
Ben Reinberg (00:20:46) - Well, generally speaking, we typically see square footage of 7000ft² or more for a medical facility that we look at, that's generally speaking what you that or more in the square footage. Generally we look for deals over $3 million to get our capital out. So we play in a space about 3 to $25 million per acquisition. That's historically where we play.
Sam Wilson (00:21:08) - Got it very, very cool I love it. Well, it's been here the last couple of minutes that we have talking about the medical office fund. Can you give us kind of the details on it on here on the show, or is that something we have to come to you guys directly for?
Ben Reinberg (00:21:21) - Well, I would suggest if you are interested, if you're a passive investor, go to a. SI.com and you can learn more about it. And you can follow me and you could you can invest with us now and we'll get you more information. But basically it's going to be a portfolio of medical and veterinarian properties. We've acquired every five properties in the fund and spinning off great returns. And our average it's a call fund. Average investor typically puts $250,000 or more. You have to be accredited and you have to be able to invest when we call the capital and we have to honor your commitment. So what we do, Sam, is we qualify, we interview our investors. We don't just let anyone invest in the Alliance Medical Property Fund.
Ben Reinberg (00:22:07) - It's a privilege. And by doing that, we want to make sure we're a good fit for your portfolio and that your good fit for us and a good fit is people that honor our values and that are going to be responsive and that are going to be true to their word. And that's really important to us because we have a lot of investors we've never met in person for decades that investing with us that have been wildly successful. So we're going to interview folks out there and make sure that they're qualified, investing what this alliance is not for everyone. You know, we expect people to honor their words. We expect people to be responsive and respectful. And we're going to give you a seven star experience and white glove service if you invest in the Alliance Michael Property Fund. But again, we don't chase people. We are doing what we say we're going to do. We're going to acquire properties and great properties and provide great cash flow with upside. But that day is you're going to have to come to the table and align with us because we're looking for long term relationships.
Ben Reinberg (00:23:11) - And so we spend a tremendous amount of time qualifying our investors and making sure that they're a good fit for us and our team.
Sam Wilson (00:23:21) - That's fantastic. Ben, thank you for taking the time to come on the show today and really break down the medical office space. Investment opportunity. Talked quite a bit about the fund, the way you guys find and add value, the barriers to entry. This has been certainly insightful for me and I have enjoyed it. Just one more time. If you don't mind sharing with our listeners how to learn more about you and your fund, what's the best way to do that?
Ben Reinberg (00:23:44) - Learn more about me. Go to Ben Ryan. I'm on all the social media platforms. You can also listen my podcast, Ben Rosenberg hyphen. I own it, it's growing. We have celebrities in ultra high net worth individuals come on our show from success. Its significance. If you're a passive investor and you want to build wealth for you and your family, look no further. Go to the Alliance Consolidate Group of companies website.
Ben Reinberg (00:24:10) - My company, go to Alliance seatgeek.com and you can click a button that says invest with us. Fill out a form, we'll have someone reach out to you and you can learn more about investing in the Alliance Medical Property Fund and see how we can generate a lot of wealth for you and your family.
Sam Wilson (00:24:29) - Ben, thank you again for your time today. I certainly appreciate it.
Ben Reinberg (00:24:32) - Thank you Sam, great seeing you.
Sam Wilson (00:24:34) - Hey, thanks for listening to the How to Scale Commercial Real Estate podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well. Rank higher on those directories. So appreciate you listening. Thanks so much and hope to catch you on the next episode.
