June 26, 2025 • 44 mins
Is your dental lease a ticking time bomb? While most dentists focus on the cost of monthly rent, REAL DANGER lies buried in the fine print. In this episode of Dental Unscripted, hosts Michael Dinsio is joined by dental real estate expert Dan Gleissner of Ally Healthcare Real Estate in Colorado to pull back the curtain on the complex world of dental leases.
Discover why a general real estate agent isn't really equipped to handle a dental practice's most critical contract! Why is having a dental-specific real estate professional essential. Dan Gleissner breaks down the key agreement clauses every dentist needs to understand before signing, whether you're starting, buying, or renewing!!!
- The Exclusivity Clause: When is it worth fighting for, and when is it a waste of time and negotiation capital?
- The Assignment Clause: This could be the most important part of your lease. About half of first-draft leases have severe language that could prevent you from ever selling your practice. Some even allow the landlord to terminate your lease if you simply request to sell.
- Triple Nets (NNN): What are you really paying for? We demystify the "three nets"—property taxes, insurance, and Common Area Maintenance (CAMs)—and explain how these "pass-throughs" can dramatically inflate your costs.
- Lease "Gotchas": Learn how to protect yourself from sudden, massive bills for capital improvements like a new roof or HVAC system.
Dan Gleissner shares why you need to start reviewing your lease at least two years before it expires to maintain leverage. Don't let your lease dictate the future of your practice. Tune in for the expert advice you need to negotiate with confidence.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:03):
welcome to Dental Unscripted
for Mike Dinsio and Paula Quinn
break down the practice ownership journey
one episode at a time
starting up
buying and running a successful dental practice
(00:37):
all right all right
welcome back to another episode of Dental Unscripted
my name is Michael Dinsio
uh we also have uh
our other co host star of the show
Miss Paula Quinn
and today we're talking about all things dental leases
so super fun super fun topic
however it comes up all the time
(00:59):
somehow I get dragged into the conversation
yet there's a real estate person and an attorney
and all these people
and I get asked some of the most basic questions of a
of a lease and I don't wanna answer them
so I figured let's have a podcast and uh
bring in a professional that really knows this stuff
like it's their everyday job
(01:20):
so welcome to the show Dan Gleissner
Dan's been on the program before
welcome back my friend
thank you for having me
I'm not sure I want to answer those questions either
though haha
well it's your job
so you're gonna have to um
no man uh
welcome back we had
we had a great uh
episode the last time you were on
and I think just like Dan is
(01:41):
they're you know
they they're very
very important
and it gets overlooked and how important they are
and it's super important to have the right people
look at these things and
um you know
they're complex situations and so I
I think for any doctor that's um
buying or starting or even owns a practice and
(02:04):
you know their lease is coming due
all this stuff is really really important
um
and so thank you for being on the show and contributing
a little housekeeping if you're watching this
on startup unscripted or Dental Acquisition Unscripted
we're merging to one brand that's easy and simple
(02:24):
called Dental Unscripted and the goal is
is to have
episodes that don't just talk about start or buy
but also how to run your practice and tips and tricks
uh Paul and I just did one this morning about hygiene
if you if you caught that
how to boost your hygiene department
we've talked about culture in a practice
we talked about some leadership stuff
(02:45):
so all things that you guys need to be thinking about
if you are buying or starting
but also a lot of you own
now we love to have new content
so dental and script is the answer there
um okay
without further do
we're 3 minutes in and I know if I don't hit it quick
we're gonna lose you
and you'll turn it off on your way to work or home
(03:06):
so with all without further do Dan
why don't you give us a little bit about your
your new company
congratulations on launching your new uh agency want
want you to tell us a little bit about
like that and then we'll get into some fun lease stuff
yeah um
Allied Healthcare
Real Estate is a commercial real estate firm
we're based out of Colorado
we specialize in healthcare
(03:28):
I specifically work with dentists day in and day out
I've been in the dental field since 2008
that's it short and sweet
I love it um
I think it's really yeah
there's no there's no reason to mix words um
I think it's really
important to have a dental professional
obviously handle the situation
(03:48):
I I sometimes get into the whole well
I've got a buddy or
this guy has negotiated a couple dental leases before
I think he can do it
I cringe when I hear that
how would you respond to that
because no a real estate agent can't do this stuff like
(04:09):
and so like what are the risk
is that what you mean Michael
like yeah
like why why yeah
what like don't you catch if you're not
if you haven't done this you know yeah
there's there's a lot of nuance to dental lease
I mean the
the analogy would be like hey
my chiropractor should be able to clean my teeth right
they're both doctors how dare you go there
(04:30):
so but it's
that's that's the reality of it
so it's I mean
if you specialize in something
you're gonna know the ins and outs of
of it all
and then what it takes to put a project together
I mean if we're looking at a startup
there is a lot that goes on and uh
majority of it has to involve around the bank
so we have to understand the parameters of the bank
and negotiate with the bank
(04:50):
and get their blessing before we sign anything
a lot of commercial real estate
brokers will just go out and find a space
and get the doctor sign right away
because that's their job they don't understand
what's on the back end with financing
or do they truly care right
they're they just want to move on
get their commission and call on the next general
(05:11):
commercial real estate requirement yeah
no I
I
I'll never forget a comment from another broker and Dan
you know him
his name is Christian Gyle and he's out of Arizona
and we did a
a week of Shark Week with real estate folks
and he said that brokers have commission breath
all the time oh yeah
(05:33):
and I'll never forget that comment
um and it's so true
brokers can real estate professionals
brokers whatever you want to call them they
they have a job to do and they're trying to make money
and right they work for free until they
until they get paid and um
I think I think it's um
it's it's
(05:53):
it's it's the reality
and I I think it's great that you
I've started this organization that thinks something
thinks a little differently and um
what are some of those
ways I know you do lease renewals
I know you look at leases for for free as a service
like what are some of those things that you guys do
that won't require a fee but every doctor needs to do
(06:16):
oh yeah so a lease assessment
understand if you're where you are within your market
uh in general right now
the press does a pretty good job of saying
that commercial market is down right
if you hear about commercial real estate
you're thinking like
I'm gonna go steal a building right now for
for pennies and that's not the case
(06:36):
but sometimes it can be the case
it's variable right like I'm
I'm in Colorado
and I can get you a screaming deal downtown
I promise you a really
really good deal on a general office space
because there's vacant towers and
but do you want to be downtown
and if I'm a startup doctor
and I want to be on the north side
where all the growth is happening northeast
(06:57):
I can't get a piece of commercial real estate
it's not being built fast enough
it's at all time market highs
and the landlords are being super picky
so it's
it's understanding where you are within the market
I think that's first and foremost
understanding the value of your build out
and whether the landlord understands that value or not
uh because there is significance
(07:18):
I mean
we're talking about hundreds of thousands of dental
infrastructure that's
built into that space
that's different than the next door suite
uh it's understanding when your renewal date is
and how to leverage that we like to talk to tenants
two years out and put a game plan together
I mean if they're looking to go ground up
we probably need a little bit more time
but given the cost of construction
(07:39):
depending where you're at
ground up hasn't really been an option
in the past couple years so you guys have done a
you guys have done a great job helping me
and some of our clients um
specifically in Colorado
where you'll look at acquisition leases
and before we actually ink the deal
you'll give us some comparisons
(07:59):
you'll you'll take a
a look at a lease review if there's room for you
you're you're there
but if there's no room for you you'll
you'll sit on the sideline
and I love that about you
you've always done that uh
even at your previous company
and that's a huge service to the industry to me
to dentist I
I don't think people really appreciate good brokers
(08:20):
like you guys are in
the great information
you can offer without asking for a fee and um
knowing your lease and really getting into it matters
and and um yeah
it's awesome that you guys do that
so thank you for that let's
let's let's pivot
um and Paula
when you owned uh
(08:41):
you might not have even remembered any of
this stuff but uh
we're gonna cover one of the topics that was really
important to you when you sold your practice
and so if you remember any of this stuff
when you were looking at your lease
maybe you will maybe you won't
but I'd like to get into like
some of the intricacies of the actual lease that cause
people a lot of like the
(09:03):
you know I don't know anxiousness
I think everybody really thinks about the price
the price the price the price
the escalation the I
it just like I used to be a lender
they think about interest rates
the interest rate the interest rate
interest rate and there's a lot of other shit
they needed to be thinking about
other than just rate like payment terms and uh
interest only periods and how much working capital
(09:25):
like
there's so much more than just the dang interest rate
and I think that's what happens in your world Dan
and in the lease rates
so I wanna get out of the lease rate
let's not talk about lease rates
but let's talk about the other things
that you need to think about
when you're when you're looking at a lease
what are some of those things Dan
that you would like to highlight
I didn't give you much preparation so uh
(09:46):
in in typical unscripted fashion
but what do you get a lot of questions about
with these leases if they actually read the lease
oh yeah
it's understanding um
assignment language is is a big one
exclusivity is a big one uh
understanding uh
triple nets is is always a gotcha
(10:06):
and then especially if you're a business owner
and you've been in the space for more than a year
the triple nets will come up
and there's a lot of questions around that um
uh you know
a lot of the lease is gonna be attorney based
and there's always should be an attorney on the team
I'm not an attorney
my goal is to negotiate the business points
and get the business points
right in the lease and some of those teeter on illegal
(10:29):
and should they be talked about
in the letter of intent
the non binding letter of intent
and then those ideas then inserted into the lease
that will be legally reviewed
so it's
it's depending on where you're at in your career
what you're looking for
how to separate yourself or how to protect yourself
yeah well
let's hit the big one
exclusivity and assignments because I think
(10:51):
well what
what the hell is it I know what it is you
you tell everybody else what
what does that mean exclusivity and it's two topics
but let's hit them both yeah
so if you have an exclusive in the building
that means that no other
we'll say general dentist as the example
that no other general dentist can
can practice in that building
so you're it for for
the building and um
(11:12):
a lot of doctors get caught up in that
and it's important if you're looking at a retail space
so if you're in a strip center
you're likely gonna be spending more on rent
than you would in a general office building
and that's because you have signage
and that signage is you know free
quote unquote free marketing
so you have to pay for that right
that's the air quote free
(11:33):
so you'll get concessions like exclusivity for
other general dentist that can't practice in there
and that's because again you're already paying for it
and if another general dentist were to move in
then there's no
point in paying the additional rent to have it
so that's where it's standard
and we
we see that in strip centers or stand alone buildings
(11:54):
then we transition to a general office
or a medical office building
and we'll start with general office
where there could be a CPA
next door to a dental office
next to an attorney next to a chiropractor
and those lease rates tend to be a little bit less
and you don't get as much with that right
so there's no signage there's no nothing there
(12:16):
it's just you get office space
very cheap rent and you go uh
to have that exclusivity there is difficult
cause now you're hamstringing the doctor from
leasing the rest of the building
right
so or the the owner of the building your your hands
yeah
the landlord the landlord
so the landlord's not able to
to lease more of the building out
so they don't want to do that so um
(12:39):
and if you're driving by a general office building
you don't know if a dentist is in there or not
the reality of having a dentist right next door to you
and a patient walking by office a
when they're going to Office B and saying hey
I'm gonna switch my doctor is very very low right
it's that's a that's an astric type situation
so when negotiating business points in a office space
(12:59):
spend your time on lease rate
spend your time on free rent
spend your time on tenant improvement allowance
things that will actually help your cash flow and in
help separate yourself when you need the separation
versus you know
trying to have exclusivity
cause if a general Dennis was to be in that area
they're gonna be in that area
regardless if it's in your building or not
(13:21):
it could be a block
I almost think like if you switch dentist
you're probably gonna
wanna stay away from the building
you're probably not gonna wanna walk by your dentist
to admit you're probably gonna be like
I'm just getting out of this building in general right
I mean right
absolutely right yeah
you're gonna yes
you're not gonna go back you don't wanna be seen
you don't wanna have that awkward conversation right
right exactly oh
(13:41):
like slide her
away and like especially if you owe money
you're not going back right
Dan Dan
I've gotten I've gotten into weird
conversations about the exclusivity thing
where a general dentist wants to do Ortho
or wants to do some pedo some pediatrics
and they're fighting for this exclusivity
(14:04):
and then it starts getting real weird
where it gets very specific
like can't do children's trophies or like
like it starts getting real specific
and I've heard you correct it you debunk this
but I've heard the more specific it is
the more it hurts you kind of a thing
or do you want to stay broad
(14:25):
like what's the strategy there
because again GPS could ask for exclusivity
and then want to do clear liners
and next thing you know
you're in a lawsuit or whatever
so what what's the idea there
yeah so again
if if your business model is
general dentistry and orthodontics
and you want to advertise that on a on a sign
(14:46):
then you can negotiate for general dentistry
and orthodontics in a retail center
if you're in a medical office building
or office building again
the the chance that you get exclusive is very low
to begin with and and if you are going for that
you have to call out what your use is
general dentistry is a little tricky right
cause that means it encompasses all dentistry
whereas if you're pediatric or ortho or oral surgery
(15:09):
you're very specific in what you do
so you can't call out like hey
I I have this broad term
where I can do a whole bunch of different procedures so
uh it's
that's always a catch and it
I've seen it ruin relationships uh
within the market if they're in the same building
because again doctors have the right mindset of
they're trying to protect themselves
but this general dentist was already doing
(15:31):
child procedures to begin with
most likely right
it's gonna be a family practice and the
that general
dentist is gonna know where their boundaries are
and when to send off to a specialist
but if that general dentist was across the street
they'd still be doing the child trophies
and it's all you're doing is creating detention with
your partner in the industry
for no reason right
(15:52):
both practices can be successful
if a general dentist is
is stealing trophies from a pediatric dentist
and the pediatric dentist is not succeeding
it's not because of that general dentist right
there's other problems
yeah get
it gets very weird like I
I feel like uh
you know in the moment a
a lot of our clients a lot of your clients
(16:13):
they get caught up in the negotiation
and I feel like it's our job as professionals to just
like hey
let's take a step back and
and talk about what this actually means
for your business and I think
I think that's why they've hired us
but in the in the in
the world of negotiating
it's like you start narrowing down on this clause
(16:35):
and they're like well
what if I do want to get into Ortho
let's box everybody out it's like okay
let's just take a deep breath
but um yeah um
once it becomes more real
that's usually like the deals happening
especially if you're a startup
and you haven't owned your own business before
and you're about to go $750,000 in debt with a loan and
(16:56):
you know risk everything
push your chips all in to do this uh
that's when the narrow focus on one or two
it's emotional items really come out because it's not
it's probably not really the exclusivity
it's more along the lines of
it needs to be perfect in my mind
in order for me to move forward
so we have to take a step back and take a look at
(17:18):
look at the economics that you're getting
look at the area look at the demographics
look at this opportunity
you're about to start your own business in
and whether you have this exclusivity clause or not
it's really not gonna change how you do
no that's well said okay
let's pivot Paula
when you sold your practice
when you sold your practice
(17:40):
how would have it how would have it felt
I said that weird but how would have it felt
if you were trying to sell to
the doctor that you sold to
and the landlord said
I don't think so
that'd be a problem if the landlord didn't let you
give your lease to the next person
that'd be a problem yeah
(18:01):
I didn't even know that was possible
yeah that's what assignments are
so let's talk about assignments
my landlord was my landlord was super cool
like he didn't give a dude your land
your landlord was so cool
like half the stuff he didn't care
but but it is a real thing
I didn't know it was a real
I remember you saying something and I was like what
yeah he was like whatever sure
(18:23):
you know whatever yeah
so Dan how often do you see assignments being a problem
on the first draft lease and you read and you're like
dude that's not gonna work
like how how often does that come up
uh about half the time
the language is pretty pretty severe
so uh
sometimes there's language
in the assignment that if you request an assignment
(18:44):
the landlord can terminate your lease
so the whole immediately terminate
so wait I
so I was gonna ask you about some pit balls
of not having someone like you
and this is probably one of the biggest ones
they're gonna sign something and yeah
well it's back well it's back to being a
(19:06):
it's back to being a dental specific broker
if a residential broker was looking at this lease
they wouldn't think anything of it
but Dan sitting here thinking
this doctor's gonna sell it
some point right the whole point of having a commercial
space is to own a business
and that business is worth
as much as you can sell it for
or how liquid it is and
majority of the goodwill is tied up
(19:26):
within that location
so if if we don't have the goodwill
I don't know what we're selling for
it's gonna be a chart sale
so
now we're talking about pennies on the dollar versus
you know over production so it's
sorry I just Learned something
ha ha ha yeah so Michael handles all this I
I stay in my clinical world but wow
(19:49):
so so 50
55 0% of the time
they'll be an aggressive assignment clause
or favors the lender yes yeah
not that aggressive that's
that's more outlier type situation determination
but that we see that we'll call it 5% of the time uh
majority of the assignment is just saying uh
(20:09):
landlord's pure discretion whether you can do it or not
and what we're looking for is
we're looking for the levers
to have the assignment happen
so a lot of times we're explaining to the landlord
why this needs to happen right
because one day we will be able to sell the practice
or we'll need to sell the practice
so we have to have the opportunity to
so there's the assignment of just
(20:31):
moving the practice into someone else's name
and then there's the bigger issue
that most people get tripped up on
is the financial guarantee piece
whether we can get
whether we can get off the lease or we have to stay on
the tricky part
the tricky part is when you sell a practice
in your midterm so say you have five years remaining
(20:54):
and you have a five year option
so we have 10 years on paper
that practice is financeable
we hope that it's assignable right
we can get go from Doctor a to Doctor B
but does Doctor a have to stay on the lease
after the sale
and 50% of the time I'd say yes
so and it's
(21:16):
let's let I wanna ask one question on that Dan
is there ever an assignment of where it's specific
that it has to be another dentist
like not okay
a like business yeah
okay yeah
and usually like that is that usually a requirement
okay and I
and I want to bring this full circle because this
(21:36):
this idea of assignment so
so important let's back up
the landlords aren't jerks
I mean that some of them can be total jerks
but the landlords aren't jerks
they have a deal with Paula
Paula owns the practice
Paula's been paying her rent for years
they trust Paula now all of a sudden
because Paula wants to sell to Dan
(21:58):
they don't know Dan
but they have an agreement with Paula
so the landlord sitting back saying well
I signed a 10 year deal with Paula
I I don't necessarily
want to deal with Dan unless Dan is a good dude
and that's where the landlords are coming from
but wait but
but a contract is a contract and even if dance I mean
(22:20):
if dance has a contract he's in it
he can't not pay if he doesn't pay he can be sued right
so but yeah so professional
sorry Dan we're taking over in the
in the example that I'm buying your practice Paula
if you're retiring you're probably
you probably have
a net worth of a couple million dollars
(22:40):
I'm a brand new dental student
I've been practicing at a corporate office
for two years I have a negative net worth
that doesn't give the the landlord financial fuzzies
warm fuzzies security that I'm coming in
so it's like wait
I
I want the security of Paula because she's worth this
if something happens
she can pay for the lease cause at the end of the day
(23:01):
all I care about is for this land this
this payment to come in on this
on the space dance coming in
he's not worth anything I'm nervous
I got I got no teeth here
what do I do so that's yeah yes
so um
so that's the
the nuance of the negotiation at that point right
(23:22):
is what how can we bridge the gap
is it additional security deposit
is it Paula you have to stay on for 12 months uh
and then burn off is it that you
have to stay on the entire time for this five years
and then Dan will take over the option in year 6
so all that's going through the landlord's head
because all they care about is the money coming in
and how how can they secure it
(23:43):
so it's a lot of education with landlords about that
and it's it's always very touchy
because
it's such an emotional process to sell your business
like it's
it's your child and you think that you're done
but all of a sudden you have this least Lumen over you
right like I'm trying to go and it's one
and it's one of the last things that gets addressed
(24:04):
which it it almost should be one of the first things
but just by the way the cadence works and why the
the bro I'm a lawyer yeah
you gotta make sure you like the practice first
or it's like
there's so much stuff to figure out before
but I see what you're saying yeah
cause you get here and now like dance talking
there's this
there's this other thing and so like we're
(24:26):
what we're talking about is
I don't wanna get into acquisition stuff
cause that's exactly what we're doing right now
is kind of discussing acquisition stuff
but like when you sign a lease as a startup
or you're relocating and building your
your brand new beautiful office
you're an established doctor or start up someday
you you're gonna wanna transition it
to someone if
(24:47):
even if you're in distress
and you can't make your bills
you're gonna I had a a DOC in Colorado actually
she got she found out she was sick really quickly
after she opened her doors
she was stuck and we had to
we had to get her out of the situation
and she had zero sales but she had to do that
and having guys like Dan
the hell Dan probably was the one that negotiated
(25:08):
but I I think assignments so important
it's something to check the box it's it's a very again
rates are one thing
exclusivities another thing like this
these little things really need to be touched
we're 25 minutes into the show
I don't mean to keep going
but I really wanna cover something that you said
and that was
(25:29):
uh you know again
it's not just interest rate and escalation
but there's other expenses
and I have a hard time explaining it
because it comes down to hey look
we're renting this building from somebody
or this space from somebody
but now I gotta pay all their bills too
(25:49):
and they own the building
like how's that work
and it's such a I had a problem with that I
of course
everybody everybody does and then what's covered
and what's what is this yeah
what's covered
the roof the a a H back like what is this
and I and I think it it comes down to like well if
I'm paying you money
(26:10):
why aren't you taking that money and paying your bills
but that's just not how the lease world works
so so the question you
you said it Dan
what's triple net uh
Dan what's triple net
and how do you explain this ridiculous and why
why are we responsible yeah
so uh
yeah this is
this is a a long one
(26:30):
so uh
triple nets are a three pass throughs
essentially to the tenant
and you pay your prorated
share of each of these pass throughs
so the first pass through is property taxes
so
if you're in a building where it's 10,000 square feet
you occupy 2,000 square feet
you're paying 20% of the property taxes
for that building the next is property insurance
which is usually pretty small
(26:52):
but the insurance world has gone upside down
in the past couple of years
and we're seeing increases of insurance 100 to 250%
so it's a nominal fee right now
but it's still it's growing
so that prorate share is passed through
so property taxes on the building
and then proper insurance on the building
those are the two
the next one is the enigma of camps
(27:17):
so that's oh
so Cam is the third end right
well why do people okay
let's go to that
but some people pull that out for some reason
it's just how it's built or how
what they see how it's written
but it's it's
it's commonary maintenance
it's what
it is and it's what's it cost to run the building
landscaping snow removal
(27:39):
ha uh it could be if there's
common area restrooms
it could be supplies for the restrooms
it could be water for those restrooms
utilities for those restrooms
depending on the type of property it is
or how the lease is written
it could be roof it could be HVAC
it could be property management fees
could be property management assessment
it could be snow snow
(28:01):
could it be snow removal you said that
oh you did OK
it could be restriping the parking lot I mean
it's wild what it can all encompass
and each landlord's got it written differently
so depending on how the lease is written
and you wanna just watch out for the catch all
(28:22):
that everything is passed through
and you wanna understand the breakdown of that
triple net prior to signing the lease
like what is the landlord passing through
what's been the historicals the past couple of years
what percent has it increased
because what a triple net is
is
it's an estimated expense based upon historical years
so we'll say that a space is leasing for $30
(28:44):
that's how it's advertised plus triple net
so you you see $30 and you think that's a good deal
then
you come find out that the triple nets are really $12
a square foot
so now we're looking at a lease rate of $42 gross
and that's a marketing scheme that's
done like that on purpose
to attract potential tenants of the building
you're like oh
thirty's good I like that
(29:06):
then you find out the total gross
you're like oh
that's why it's advertised like that
this makes more sense so
that $12 is an estimate based upon either projections
or historicals
if it's a brand new building you're projecting
if it's historicals then you have data at least
and hopefully you're with an earshot
but what happens is January
go ahead
I get sorry
(29:26):
I didn't mean to cut you off there
I wanted you to finish but like I
I guess I'm thinking if so
so you said it and I just want you to say it again
um the landlord does give you a breakdown of how
of what that looks like before you sign it
that that happens if you ask you yeah
you can ask
(29:46):
they should be able to give you some of the buckets
to see what it all incorporates
I mean you could be opening Pandora's box because then
uh tenants think that they can
control some of those expenses
which will get to but in reality you can't right
that's the landlord's in it
to make a profit off their building
they're getting paid base rent
that's the market rate
(30:06):
and then those pass throughs are your expenses
so I have I'm a landlord for a home
and what I'm hearing is
I should buy a building because everything can be
passed through the tenant right
where I'm still responsible for everything
that happens to the house
I like the building idea better wow
(30:28):
yeah I
I guess I'm I
I guess I'm thinking here that like folks
I want you guys to think about this
so you you wanna look at this
because let's say Paula owns the building
cause that's
she just came up with a new business plan tonight
so Paula owns the building and I'm her business partner
which is a true story okay
(30:48):
so I own a small a snow removal company
and I have a contract with Paula
who happens to be my business partner
and I Jack up her rates on snow removal
and I cut her in on that profit of snow removal
so there the the triple net expenses can be
(31:08):
I've seen weird stuff before
like that scenario where expenses aren't respond
like they're not very solid
so do you guys do do you look at that Dan
how does that like competitive
like it's like why are they why is there snow removal
thousand bucks a month
and it goes all the way into June
(31:30):
so it's so for our clients
we'll take a look at year over year
because the way the triple nets work are
it's an estimate
so we'll say the $12 a square foot landlord said hey
$12 for 2025 and 2026
all of a sudden come February January
they get a Bill for $6,000 of
(31:52):
assessments
and that's because the landlord reconciled their books
of what the actual expenses were for 2025
and if they were short tenant needs to pay up
PA Paula
we just got an email from Doctor Rock in Arizona
and he was pissed that he got that 5
(32:12):
600 dollar Bill
and it was because the landlord underpaid
his triple nets
and so he had to pay the difference because they miss
they misestimated it on the space
yeah so it's all it is is an estimate
what about whoever was in the building before
why weren't they responsible
why don't they would have got prorated
(32:33):
they would have got prorated if you leave middle yeah
so Doctor Rock for example
if he was in the building
uh February through December
he would have paid
February through December assessments
he wouldn't have paid for January
uh but that's
that's how that works
so that estimate is just an estimate
and then at the beginning of the year
they'll they'll reconcile their books
if they overestimate estimated
(32:55):
they'll get a credit on their account
if they underestimated the tenant has to pay
but you're looking if it
if you happen to get in a building
that was already there you're
you look at historicals you help the yeah
so it's like we're not there's no way we can
do we ask did you reconcile your books
do we ask them that
so they reconcile their books every year
(33:16):
uh it's just
whether or not they're cooked or not those books
so it's if they have the buddy
that is a snow removal specialist
that charges 500% of what market is
we're doing like
like we don't like we don't own snow removal companies
we don't know how much snow removal should cost
or shouldn't cost
(33:37):
so you're trying to take the landlord at their word
however like
so there's multiple things here with that though
cause if you're the landlord
you wanna have triple nets as low as possible
cause if you have vacancy
you're paying those costs
and if you if your expenses are through the roof
your tenants are pissed you
I mean that's not a good way to keep your tenants
(33:57):
so a smart landlord will not cook the books
they will keep running their business at a low
low cost to keep everyone happy
and when taxes come in which taxes are the lump
majority sum of the triple nets
at least the first n
the first n that you said is property taxes
and then as soon as they get their assessment
(34:20):
and if it's gone up
they should be contesting that assessment
but yeah it's
it's it's tricky and it's frustrating every single year
because every year you're gonna get that Bill
so it's almost
let's let's talk
I I love that
I mean this has been a fantastic conversation already
I can just send this podcast
(34:41):
to every startup that starts asking these questions
be like hey just just watch this
I'll save me a coaching call
and it'll be better than what the way I could say it
but I know enough to be dangerous Dan
help me out in talking about the big things
because I think the big things need to be discussed
and I'm thinking HVAC replacement I'm thinking roofs
(35:04):
how do you protect our lease sir
leases leases on oh shit
I just signed a lease and the H back
remember we had that happen here in a Z
we had that happen yeah
now we're talking about Arizona stuff not snow plow
let's go the other way H back
(35:25):
they're all the air conditioning going out
yeah because I've seen it don't Dan
don't you guys negotiate that out
or something like that no
it it depends on the on the property
so if you're in a medical office building
typically the HVAC's gonna be on the landlord
it's gonna be landlord's expense
general office building they could do an assessment
and charge back to the client for
(35:45):
some of those costs hopefully not a lump sum
it's just and then a retail space
the H back in the roof are typically on
on the tenant on the tenant
so it's trying to negotiate where you're not hitting
you're not getting billed for that capital improvement
all at once you're getting billed over the lifespan
of that H back unit so instead instead of you know
(36:07):
30 thousand
dollar Bill that's now spread out over 20 years
that's just part of the cost
so that makes sense
even though the H back may never go out
you're just paying right
prorata of the life of the life of that asset
so so you gotta
you gotta hire
crane operators to put these HVACs up on the roof
(36:28):
we saw one the other day Paula
and that that's expensive
and so to to replace an HVAC system on the
20th floor of whatever building is really expensive
not to mention the other H backs might be okay
but they could go out at any point
so now
now we have the crane operator there and paid for
so we might as well just do all of them
(36:49):
and then imagine all those leases
paying all of that one lump sum boom
and then you know
the the H vax good for maybe another 50 years
but that poor those poor LC's in that moment
had to pay for all of that
so if Dan's on the job
he's gonna try to spread that cost over
maybe 20 years or something
(37:10):
so that's something that you negotiate Dan or no yeah
no that's that's an item that we look for gotchas right
like we're trying to stay away from gotchas
we're if we're a startup
cash flow is is king for us right
we we have to minimize all of our costs as possible
so if a big gotcha pops up
then that's that could be really bad for us
(37:33):
so it's how do we minimize that risk
like can we first start by saying
hey landlord age backs 100% on you
and then in the negotiations and and go back and forth
and then end up at well
if a large capital improvement goes out
or need is needed
then we can spread that over the lifespan of that
that unit and it's
it's not fun cause you're still paying that Bill
(37:54):
but you're not paying that Bill in a lump sum
yeah so in the residential world
it's kind of called a special assessment of some sort
right
like a big thing that needs to be right like your HOA
you get the HOA dues but then a big
like an elevator goes out of your complex
that's like a special assessment
maybe some of you have heard that before
but same thing in the commercial world
(38:15):
um
yeah I mean
like needless to say like
there's a lot to a lease that you gotta look at
other than just simple base rents
but what I heard there was that base rent
is the actual profit for the landlord
and then their expenses are kind of covered in Cam
(38:36):
aka triple net lumped in
so you're paying all the expenses
and overhead of the landlord's building
including all of the improvements
and then the base rent is pure profit
that's what I heard yeah
assuming that's paid off right
the most you know
probably majority or overwhelming
landlords are in debt for their building
(38:58):
so that's paying for to cover their debt
and then anything remaining after that would be profit
love it
Paul any questions about that
I mean I know you're yeah
um Dan
I Learned a lot I mean
I'm just hoping
I'm hoping that
(39:18):
people don't associate this negativity with me
so when they see see me they're like
oh you're the triple net guy no no
I I think I'm a
you're the guy that protects them from making a
costly mistake when it comes
signing a lease with triple net yeah
I you know
(39:39):
I guess I found that over the years
the more people are educated about what they're doing
the faster they're running towards the deal
if if
if if you're being
if you're in a situation where you feel like
your broker isn't going through all this stuff um
maybe you need to give Dan a call
(39:59):
not that Dan
wants to get in the middle of a relationship
you already have but you gotta look at this stuff
it's important you gotta know your lease
you gotta know what options you have and don't have
and to Dan's point
in the very beginning of this conversation is
sometimes not all the deal points are important to you
so
don't die on the hill over something that's not really
important and maybe that gives Dan the ability to press
(40:22):
on something that is important
that's called a negotiation
I think
that's really important to understand the differences
so um
Dan any
any last kind of minute
last kind of thoughts about complexities of lease
and we covered a lot of really good stuff here
but any anything else you wanna say that
that kind of closes this topic up
(40:44):
yeah so
all of those conversations are the business end upfront
and then all those get inserted into a lease
and then you gotta go through it again
but from a legal ease perspective
which is you know
a completely different lens
so it is it's
it's a thorough process it
it shouldn't
you shouldn't get a lease and sign it within a week
in likelihood it's gonna take
(41:06):
you know
four to six weeks to get through that lease properly
and go back and forth with the landlord
would you say from the moment Dan Gleissner sends an LOI
to the moment it goes through your process
then legal like you just said
what's the average time frame for that
yeah two to four months
(41:26):
two to that's what I thought yeah
two to four months four months would be long
but it but for sure yeah
it could take that long okay
very cool um
thank you so much for your brain
your acumen your service to the industry
it's been it's been really good um
we will be putting Dan's information down below and and
(41:47):
uh and if
if you're seeing this on YouTube or any of the podcast
we'll put in the description links to get
get a hold of Dan like I said
it cost nothing to have Dan look at your lease
like literally nothing
so have a professional like Dan look at that lease
just to spell out everything that you're
you're dealing with
(42:07):
so that you know your lease really well
and what options you have and um
and make make the right decision
I and I will say for those of you that own practices um
or or folks that um
you know though thinking about making a change
one of the biggest things is
look at your lease
at least two years before it expires
(42:30):
because and Dan
I know you'd say the same
because what is Dan gonna do
with a lease that expires in three months
uh he's got no leverage with the landlord
but if if you approach Dan to review your lease
two years before it expires
he can do a lot with that
that time um
a lot of people a lot of people go to you Dan
I'm sure last minute and you're like what
(42:52):
you're screwed buddy
so yeah we have to find a turnkey option
in order to create leverage
but yeah it's you
we want to be on the offense versus the defense
and we want we want to assert our game plan
and maximize that through proper timing
yeah I love it
I love it well again
thanks so much Dan
folks please like subscribe
do all the things but Dan's information will be there
(43:13):
Paula
I think we've got a new business strategy at next level
so let's go buy some buildings
Dan you will represent us on that building
uh without further do
let's shut the program down
but thanks so much guys for your time today
alright alright
thank you
see you guys see you
(43:38):
thanks for listening let us know how you like the show
rate us on apple and Spotify
subscribe and follow for more
welcome to Dental Unscripted
for Mike Dinsio and Paula Quinn
break down the practice ownership journey
one episode at a time
starting up
buying and running a successful dental practice
(00:37):
all right all right
welcome back to another episode of Dental Unscripted
my name is Michael Dinsio
uh we also have uh
our other co host star of the show
Miss Paula Quinn
and today we're talking about all things dental leases
so super fun super fun topic
however it comes up all the time
(00:59):
somehow I get dragged into the conversation
yet there's a real estate person and an attorney
and all these people
and I get asked some of the most basic questions of a
of a lease and I don't wanna answer them
so I figured let's have a podcast and uh
bring in a professional that really knows this stuff
like it's their everyday job
(01:20):
so welcome to the show Dan Gleissner
Dan's been on the program before
welcome back my friend
thank you for having me
I'm not sure I want to answer those questions either
though haha
well it's your job
so you're gonna have to um
no man uh
welcome back we had
we had a great uh
episode the last time you were on
and I think just like Dan is
(01:41):
they're you know
they they're very
very important
and it gets overlooked and how important they are
and it's super important to have the right people
look at these things and
um you know
they're complex situations and so I
I think for any doctor that's um
buying or starting or even owns a practice and
(02:04):
you know their lease is coming due
all this stuff is really really important
um
and so thank you for being on the show and contributing
a little housekeeping if you're watching this
on startup unscripted or Dental Acquisition Unscripted
we're merging to one brand that's easy and simple
(02:24):
called Dental Unscripted and the goal is
is to have
episodes that don't just talk about start or buy
but also how to run your practice and tips and tricks
uh Paul and I just did one this morning about hygiene
if you if you caught that
how to boost your hygiene department
we've talked about culture in a practice
we talked about some leadership stuff
(02:45):
so all things that you guys need to be thinking about
if you are buying or starting
but also a lot of you own
now we love to have new content
so dental and script is the answer there
um okay
without further do
we're 3 minutes in and I know if I don't hit it quick
we're gonna lose you
and you'll turn it off on your way to work or home
(03:06):
so with all without further do Dan
why don't you give us a little bit about your
your new company
congratulations on launching your new uh agency want
want you to tell us a little bit about
like that and then we'll get into some fun lease stuff
yeah um
Allied Healthcare
Real Estate is a commercial real estate firm
we're based out of Colorado
we specialize in healthcare
(03:28):
I specifically work with dentists day in and day out
I've been in the dental field since 2008
that's it short and sweet
I love it um
I think it's really yeah
there's no there's no reason to mix words um
I think it's really
important to have a dental professional
obviously handle the situation
(03:48):
I I sometimes get into the whole well
I've got a buddy or
this guy has negotiated a couple dental leases before
I think he can do it
I cringe when I hear that
how would you respond to that
because no a real estate agent can't do this stuff like
(04:09):
and so like what are the risk
is that what you mean Michael
like yeah
like why why yeah
what like don't you catch if you're not
if you haven't done this you know yeah
there's there's a lot of nuance to dental lease
I mean the
the analogy would be like hey
my chiropractor should be able to clean my teeth right
they're both doctors how dare you go there
(04:30):
so but it's
that's that's the reality of it
so it's I mean
if you specialize in something
you're gonna know the ins and outs of
of it all
and then what it takes to put a project together
I mean if we're looking at a startup
there is a lot that goes on and uh
majority of it has to involve around the bank
so we have to understand the parameters of the bank
and negotiate with the bank
(04:50):
and get their blessing before we sign anything
a lot of commercial real estate
brokers will just go out and find a space
and get the doctor sign right away
because that's their job they don't understand
what's on the back end with financing
or do they truly care right
they're they just want to move on
get their commission and call on the next general
(05:11):
commercial real estate requirement yeah
no I
I
I'll never forget a comment from another broker and Dan
you know him
his name is Christian Gyle and he's out of Arizona
and we did a
a week of Shark Week with real estate folks
and he said that brokers have commission breath
all the time oh yeah
(05:33):
and I'll never forget that comment
um and it's so true
brokers can real estate professionals
brokers whatever you want to call them they
they have a job to do and they're trying to make money
and right they work for free until they
until they get paid and um
I think I think it's um
it's it's
(05:53):
it's it's the reality
and I I think it's great that you
I've started this organization that thinks something
thinks a little differently and um
what are some of those
ways I know you do lease renewals
I know you look at leases for for free as a service
like what are some of those things that you guys do
that won't require a fee but every doctor needs to do
(06:16):
oh yeah so a lease assessment
understand if you're where you are within your market
uh in general right now
the press does a pretty good job of saying
that commercial market is down right
if you hear about commercial real estate
you're thinking like
I'm gonna go steal a building right now for
for pennies and that's not the case
(06:36):
but sometimes it can be the case
it's variable right like I'm
I'm in Colorado
and I can get you a screaming deal downtown
I promise you a really
really good deal on a general office space
because there's vacant towers and
but do you want to be downtown
and if I'm a startup doctor
and I want to be on the north side
where all the growth is happening northeast
(06:57):
I can't get a piece of commercial real estate
it's not being built fast enough
it's at all time market highs
and the landlords are being super picky
so it's
it's understanding where you are within the market
I think that's first and foremost
understanding the value of your build out
and whether the landlord understands that value or not
uh because there is significance
(07:18):
I mean
we're talking about hundreds of thousands of dental
infrastructure that's
built into that space
that's different than the next door suite
uh it's understanding when your renewal date is
and how to leverage that we like to talk to tenants
two years out and put a game plan together
I mean if they're looking to go ground up
we probably need a little bit more time
but given the cost of construction
(07:39):
depending where you're at
ground up hasn't really been an option
in the past couple years so you guys have done a
you guys have done a great job helping me
and some of our clients um
specifically in Colorado
where you'll look at acquisition leases
and before we actually ink the deal
you'll give us some comparisons
(07:59):
you'll you'll take a
a look at a lease review if there's room for you
you're you're there
but if there's no room for you you'll
you'll sit on the sideline
and I love that about you
you've always done that uh
even at your previous company
and that's a huge service to the industry to me
to dentist I
I don't think people really appreciate good brokers
(08:20):
like you guys are in
the great information
you can offer without asking for a fee and um
knowing your lease and really getting into it matters
and and um yeah
it's awesome that you guys do that
so thank you for that let's
let's let's pivot
um and Paula
when you owned uh
(08:41):
you might not have even remembered any of
this stuff but uh
we're gonna cover one of the topics that was really
important to you when you sold your practice
and so if you remember any of this stuff
when you were looking at your lease
maybe you will maybe you won't
but I'd like to get into like
some of the intricacies of the actual lease that cause
people a lot of like the
(09:03):
you know I don't know anxiousness
I think everybody really thinks about the price
the price the price the price
the escalation the I
it just like I used to be a lender
they think about interest rates
the interest rate the interest rate
interest rate and there's a lot of other shit
they needed to be thinking about
other than just rate like payment terms and uh
interest only periods and how much working capital
(09:25):
like
there's so much more than just the dang interest rate
and I think that's what happens in your world Dan
and in the lease rates
so I wanna get out of the lease rate
let's not talk about lease rates
but let's talk about the other things
that you need to think about
when you're when you're looking at a lease
what are some of those things Dan
that you would like to highlight
I didn't give you much preparation so uh
(09:46):
in in typical unscripted fashion
but what do you get a lot of questions about
with these leases if they actually read the lease
oh yeah
it's understanding um
assignment language is is a big one
exclusivity is a big one uh
understanding uh
triple nets is is always a gotcha
(10:06):
and then especially if you're a business owner
and you've been in the space for more than a year
the triple nets will come up
and there's a lot of questions around that um
uh you know
a lot of the lease is gonna be attorney based
and there's always should be an attorney on the team
I'm not an attorney
my goal is to negotiate the business points
and get the business points
right in the lease and some of those teeter on illegal
(10:29):
and should they be talked about
in the letter of intent
the non binding letter of intent
and then those ideas then inserted into the lease
that will be legally reviewed
so it's
it's depending on where you're at in your career
what you're looking for
how to separate yourself or how to protect yourself
yeah well
let's hit the big one
exclusivity and assignments because I think
(10:51):
well what
what the hell is it I know what it is you
you tell everybody else what
what does that mean exclusivity and it's two topics
but let's hit them both yeah
so if you have an exclusive in the building
that means that no other
we'll say general dentist as the example
that no other general dentist can
can practice in that building
so you're it for for
the building and um
(11:12):
a lot of doctors get caught up in that
and it's important if you're looking at a retail space
so if you're in a strip center
you're likely gonna be spending more on rent
than you would in a general office building
and that's because you have signage
and that signage is you know free
quote unquote free marketing
so you have to pay for that right
that's the air quote free
(11:33):
so you'll get concessions like exclusivity for
other general dentist that can't practice in there
and that's because again you're already paying for it
and if another general dentist were to move in
then there's no
point in paying the additional rent to have it
so that's where it's standard
and we
we see that in strip centers or stand alone buildings
(11:54):
then we transition to a general office
or a medical office building
and we'll start with general office
where there could be a CPA
next door to a dental office
next to an attorney next to a chiropractor
and those lease rates tend to be a little bit less
and you don't get as much with that right
so there's no signage there's no nothing there
(12:16):
it's just you get office space
very cheap rent and you go uh
to have that exclusivity there is difficult
cause now you're hamstringing the doctor from
leasing the rest of the building
right
so or the the owner of the building your your hands
yeah
the landlord the landlord
so the landlord's not able to
to lease more of the building out
so they don't want to do that so um
(12:39):
and if you're driving by a general office building
you don't know if a dentist is in there or not
the reality of having a dentist right next door to you
and a patient walking by office a
when they're going to Office B and saying hey
I'm gonna switch my doctor is very very low right
it's that's a that's an astric type situation
so when negotiating business points in a office space
(12:59):
spend your time on lease rate
spend your time on free rent
spend your time on tenant improvement allowance
things that will actually help your cash flow and in
help separate yourself when you need the separation
versus you know
trying to have exclusivity
cause if a general Dennis was to be in that area
they're gonna be in that area
regardless if it's in your building or not
(13:21):
it could be a block
I almost think like if you switch dentist
you're probably gonna
wanna stay away from the building
you're probably not gonna wanna walk by your dentist
to admit you're probably gonna be like
I'm just getting out of this building in general right
I mean right
absolutely right yeah
you're gonna yes
you're not gonna go back you don't wanna be seen
you don't wanna have that awkward conversation right
right exactly oh
(13:41):
like slide her
away and like especially if you owe money
you're not going back right
Dan Dan
I've gotten I've gotten into weird
conversations about the exclusivity thing
where a general dentist wants to do Ortho
or wants to do some pedo some pediatrics
and they're fighting for this exclusivity
(14:04):
and then it starts getting real weird
where it gets very specific
like can't do children's trophies or like
like it starts getting real specific
and I've heard you correct it you debunk this
but I've heard the more specific it is
the more it hurts you kind of a thing
or do you want to stay broad
(14:25):
like what's the strategy there
because again GPS could ask for exclusivity
and then want to do clear liners
and next thing you know
you're in a lawsuit or whatever
so what what's the idea there
yeah so again
if if your business model is
general dentistry and orthodontics
and you want to advertise that on a on a sign
(14:46):
then you can negotiate for general dentistry
and orthodontics in a retail center
if you're in a medical office building
or office building again
the the chance that you get exclusive is very low
to begin with and and if you are going for that
you have to call out what your use is
general dentistry is a little tricky right
cause that means it encompasses all dentistry
whereas if you're pediatric or ortho or oral surgery
(15:09):
you're very specific in what you do
so you can't call out like hey
I I have this broad term
where I can do a whole bunch of different procedures so
uh it's
that's always a catch and it
I've seen it ruin relationships uh
within the market if they're in the same building
because again doctors have the right mindset of
they're trying to protect themselves
but this general dentist was already doing
(15:31):
child procedures to begin with
most likely right
it's gonna be a family practice and the
that general
dentist is gonna know where their boundaries are
and when to send off to a specialist
but if that general dentist was across the street
they'd still be doing the child trophies
and it's all you're doing is creating detention with
your partner in the industry
for no reason right
(15:52):
both practices can be successful
if a general dentist is
is stealing trophies from a pediatric dentist
and the pediatric dentist is not succeeding
it's not because of that general dentist right
there's other problems
yeah get
it gets very weird like I
I feel like uh
you know in the moment a
a lot of our clients a lot of your clients
(16:13):
they get caught up in the negotiation
and I feel like it's our job as professionals to just
like hey
let's take a step back and
and talk about what this actually means
for your business and I think
I think that's why they've hired us
but in the in the in
the world of negotiating
it's like you start narrowing down on this clause
(16:35):
and they're like well
what if I do want to get into Ortho
let's box everybody out it's like okay
let's just take a deep breath
but um yeah um
once it becomes more real
that's usually like the deals happening
especially if you're a startup
and you haven't owned your own business before
and you're about to go $750,000 in debt with a loan and
(16:56):
you know risk everything
push your chips all in to do this uh
that's when the narrow focus on one or two
it's emotional items really come out because it's not
it's probably not really the exclusivity
it's more along the lines of
it needs to be perfect in my mind
in order for me to move forward
so we have to take a step back and take a look at
(17:18):
look at the economics that you're getting
look at the area look at the demographics
look at this opportunity
you're about to start your own business in
and whether you have this exclusivity clause or not
it's really not gonna change how you do
no that's well said okay
let's pivot Paula
when you sold your practice
when you sold your practice
(17:40):
how would have it how would have it felt
I said that weird but how would have it felt
if you were trying to sell to
the doctor that you sold to
and the landlord said
I don't think so
that'd be a problem if the landlord didn't let you
give your lease to the next person
that'd be a problem yeah
(18:01):
I didn't even know that was possible
yeah that's what assignments are
so let's talk about assignments
my landlord was my landlord was super cool
like he didn't give a dude your land
your landlord was so cool
like half the stuff he didn't care
but but it is a real thing
I didn't know it was a real
I remember you saying something and I was like what
yeah he was like whatever sure
(18:23):
you know whatever yeah
so Dan how often do you see assignments being a problem
on the first draft lease and you read and you're like
dude that's not gonna work
like how how often does that come up
uh about half the time
the language is pretty pretty severe
so uh
sometimes there's language
in the assignment that if you request an assignment
(18:44):
the landlord can terminate your lease
so the whole immediately terminate
so wait I
so I was gonna ask you about some pit balls
of not having someone like you
and this is probably one of the biggest ones
they're gonna sign something and yeah
well it's back well it's back to being a
(19:06):
it's back to being a dental specific broker
if a residential broker was looking at this lease
they wouldn't think anything of it
but Dan sitting here thinking
this doctor's gonna sell it
some point right the whole point of having a commercial
space is to own a business
and that business is worth
as much as you can sell it for
or how liquid it is and
majority of the goodwill is tied up
(19:26):
within that location
so if if we don't have the goodwill
I don't know what we're selling for
it's gonna be a chart sale
so
now we're talking about pennies on the dollar versus
you know over production so it's
sorry I just Learned something
ha ha ha yeah so Michael handles all this I
I stay in my clinical world but wow
(19:49):
so so 50
55 0% of the time
they'll be an aggressive assignment clause
or favors the lender yes yeah
not that aggressive that's
that's more outlier type situation determination
but that we see that we'll call it 5% of the time uh
majority of the assignment is just saying uh
(20:09):
landlord's pure discretion whether you can do it or not
and what we're looking for is
we're looking for the levers
to have the assignment happen
so a lot of times we're explaining to the landlord
why this needs to happen right
because one day we will be able to sell the practice
or we'll need to sell the practice
so we have to have the opportunity to
so there's the assignment of just
(20:31):
moving the practice into someone else's name
and then there's the bigger issue
that most people get tripped up on
is the financial guarantee piece
whether we can get
whether we can get off the lease or we have to stay on
the tricky part
the tricky part is when you sell a practice
in your midterm so say you have five years remaining
(20:54):
and you have a five year option
so we have 10 years on paper
that practice is financeable
we hope that it's assignable right
we can get go from Doctor a to Doctor B
but does Doctor a have to stay on the lease
after the sale
and 50% of the time I'd say yes
so and it's
(21:16):
let's let I wanna ask one question on that Dan
is there ever an assignment of where it's specific
that it has to be another dentist
like not okay
a like business yeah
okay yeah
and usually like that is that usually a requirement
okay and I
and I want to bring this full circle because this
(21:36):
this idea of assignment so
so important let's back up
the landlords aren't jerks
I mean that some of them can be total jerks
but the landlords aren't jerks
they have a deal with Paula
Paula owns the practice
Paula's been paying her rent for years
they trust Paula now all of a sudden
because Paula wants to sell to Dan
(21:58):
they don't know Dan
but they have an agreement with Paula
so the landlord sitting back saying well
I signed a 10 year deal with Paula
I I don't necessarily
want to deal with Dan unless Dan is a good dude
and that's where the landlords are coming from
but wait but
but a contract is a contract and even if dance I mean
(22:20):
if dance has a contract he's in it
he can't not pay if he doesn't pay he can be sued right
so but yeah so professional
sorry Dan we're taking over in the
in the example that I'm buying your practice Paula
if you're retiring you're probably
you probably have
a net worth of a couple million dollars
(22:40):
I'm a brand new dental student
I've been practicing at a corporate office
for two years I have a negative net worth
that doesn't give the the landlord financial fuzzies
warm fuzzies security that I'm coming in
so it's like wait
I
I want the security of Paula because she's worth this
if something happens
she can pay for the lease cause at the end of the day
(23:01):
all I care about is for this land this
this payment to come in on this
on the space dance coming in
he's not worth anything I'm nervous
I got I got no teeth here
what do I do so that's yeah yes
so um
so that's the
the nuance of the negotiation at that point right
(23:22):
is what how can we bridge the gap
is it additional security deposit
is it Paula you have to stay on for 12 months uh
and then burn off is it that you
have to stay on the entire time for this five years
and then Dan will take over the option in year 6
so all that's going through the landlord's head
because all they care about is the money coming in
and how how can they secure it
(23:43):
so it's a lot of education with landlords about that
and it's it's always very touchy
because
it's such an emotional process to sell your business
like it's
it's your child and you think that you're done
but all of a sudden you have this least Lumen over you
right like I'm trying to go and it's one
and it's one of the last things that gets addressed
(24:04):
which it it almost should be one of the first things
but just by the way the cadence works and why the
the bro I'm a lawyer yeah
you gotta make sure you like the practice first
or it's like
there's so much stuff to figure out before
but I see what you're saying yeah
cause you get here and now like dance talking
there's this
there's this other thing and so like we're
(24:26):
what we're talking about is
I don't wanna get into acquisition stuff
cause that's exactly what we're doing right now
is kind of discussing acquisition stuff
but like when you sign a lease as a startup
or you're relocating and building your
your brand new beautiful office
you're an established doctor or start up someday
you you're gonna wanna transition it
to someone if
(24:47):
even if you're in distress
and you can't make your bills
you're gonna I had a a DOC in Colorado actually
she got she found out she was sick really quickly
after she opened her doors
she was stuck and we had to
we had to get her out of the situation
and she had zero sales but she had to do that
and having guys like Dan
the hell Dan probably was the one that negotiated
(25:08):
but I I think assignments so important
it's something to check the box it's it's a very again
rates are one thing
exclusivities another thing like this
these little things really need to be touched
we're 25 minutes into the show
I don't mean to keep going
but I really wanna cover something that you said
and that was
(25:29):
uh you know again
it's not just interest rate and escalation
but there's other expenses
and I have a hard time explaining it
because it comes down to hey look
we're renting this building from somebody
or this space from somebody
but now I gotta pay all their bills too
(25:49):
and they own the building
like how's that work
and it's such a I had a problem with that I
of course
everybody everybody does and then what's covered
and what's what is this yeah
what's covered
the roof the a a H back like what is this
and I and I think it it comes down to like well if
I'm paying you money
(26:10):
why aren't you taking that money and paying your bills
but that's just not how the lease world works
so so the question you
you said it Dan
what's triple net uh
Dan what's triple net
and how do you explain this ridiculous and why
why are we responsible yeah
so uh
yeah this is
this is a a long one
(26:30):
so uh
triple nets are a three pass throughs
essentially to the tenant
and you pay your prorated
share of each of these pass throughs
so the first pass through is property taxes
so
if you're in a building where it's 10,000 square feet
you occupy 2,000 square feet
you're paying 20% of the property taxes
for that building the next is property insurance
which is usually pretty small
(26:52):
but the insurance world has gone upside down
in the past couple of years
and we're seeing increases of insurance 100 to 250%
so it's a nominal fee right now
but it's still it's growing
so that prorate share is passed through
so property taxes on the building
and then proper insurance on the building
those are the two
the next one is the enigma of camps
(27:17):
so that's oh
so Cam is the third end right
well why do people okay
let's go to that
but some people pull that out for some reason
it's just how it's built or how
what they see how it's written
but it's it's
it's commonary maintenance
it's what
it is and it's what's it cost to run the building
landscaping snow removal
(27:39):
ha uh it could be if there's
common area restrooms
it could be supplies for the restrooms
it could be water for those restrooms
utilities for those restrooms
depending on the type of property it is
or how the lease is written
it could be roof it could be HVAC
it could be property management fees
could be property management assessment
it could be snow snow
(28:01):
could it be snow removal you said that
oh you did OK
it could be restriping the parking lot I mean
it's wild what it can all encompass
and each landlord's got it written differently
so depending on how the lease is written
and you wanna just watch out for the catch all
(28:22):
that everything is passed through
and you wanna understand the breakdown of that
triple net prior to signing the lease
like what is the landlord passing through
what's been the historicals the past couple of years
what percent has it increased
because what a triple net is
is
it's an estimated expense based upon historical years
so we'll say that a space is leasing for $30
(28:44):
that's how it's advertised plus triple net
so you you see $30 and you think that's a good deal
then
you come find out that the triple nets are really $12
a square foot
so now we're looking at a lease rate of $42 gross
and that's a marketing scheme that's
done like that on purpose
to attract potential tenants of the building
you're like oh
thirty's good I like that
(29:06):
then you find out the total gross
you're like oh
that's why it's advertised like that
this makes more sense so
that $12 is an estimate based upon either projections
or historicals
if it's a brand new building you're projecting
if it's historicals then you have data at least
and hopefully you're with an earshot
but what happens is January
go ahead
I get sorry
(29:26):
I didn't mean to cut you off there
I wanted you to finish but like I
I guess I'm thinking if so
so you said it and I just want you to say it again
um the landlord does give you a breakdown of how
of what that looks like before you sign it
that that happens if you ask you yeah
you can ask
(29:46):
they should be able to give you some of the buckets
to see what it all incorporates
I mean you could be opening Pandora's box because then
uh tenants think that they can
control some of those expenses
which will get to but in reality you can't right
that's the landlord's in it
to make a profit off their building
they're getting paid base rent
that's the market rate
(30:06):
and then those pass throughs are your expenses
so I have I'm a landlord for a home
and what I'm hearing is
I should buy a building because everything can be
passed through the tenant right
where I'm still responsible for everything
that happens to the house
I like the building idea better wow
(30:28):
yeah I
I guess I'm I
I guess I'm thinking here that like folks
I want you guys to think about this
so you you wanna look at this
because let's say Paula owns the building
cause that's
she just came up with a new business plan tonight
so Paula owns the building and I'm her business partner
which is a true story okay
(30:48):
so I own a small a snow removal company
and I have a contract with Paula
who happens to be my business partner
and I Jack up her rates on snow removal
and I cut her in on that profit of snow removal
so there the the triple net expenses can be
(31:08):
I've seen weird stuff before
like that scenario where expenses aren't respond
like they're not very solid
so do you guys do do you look at that Dan
how does that like competitive
like it's like why are they why is there snow removal
thousand bucks a month
and it goes all the way into June
(31:30):
so it's so for our clients
we'll take a look at year over year
because the way the triple nets work are
it's an estimate
so we'll say the $12 a square foot landlord said hey
$12 for 2025 and 2026
all of a sudden come February January
they get a Bill for $6,000 of
(31:52):
assessments
and that's because the landlord reconciled their books
of what the actual expenses were for 2025
and if they were short tenant needs to pay up
PA Paula
we just got an email from Doctor Rock in Arizona
and he was pissed that he got that 5
(32:12):
600 dollar Bill
and it was because the landlord underpaid
his triple nets
and so he had to pay the difference because they miss
they misestimated it on the space
yeah so it's all it is is an estimate
what about whoever was in the building before
why weren't they responsible
why don't they would have got prorated
(32:33):
they would have got prorated if you leave middle yeah
so Doctor Rock for example
if he was in the building
uh February through December
he would have paid
February through December assessments
he wouldn't have paid for January
uh but that's
that's how that works
so that estimate is just an estimate
and then at the beginning of the year
they'll they'll reconcile their books
if they overestimate estimated
(32:55):
they'll get a credit on their account
if they underestimated the tenant has to pay
but you're looking if it
if you happen to get in a building
that was already there you're
you look at historicals you help the yeah
so it's like we're not there's no way we can
do we ask did you reconcile your books
do we ask them that
so they reconcile their books every year
(33:16):
uh it's just
whether or not they're cooked or not those books
so it's if they have the buddy
that is a snow removal specialist
that charges 500% of what market is
we're doing like
like we don't like we don't own snow removal companies
we don't know how much snow removal should cost
or shouldn't cost
(33:37):
so you're trying to take the landlord at their word
however like
so there's multiple things here with that though
cause if you're the landlord
you wanna have triple nets as low as possible
cause if you have vacancy
you're paying those costs
and if you if your expenses are through the roof
your tenants are pissed you
I mean that's not a good way to keep your tenants
(33:57):
so a smart landlord will not cook the books
they will keep running their business at a low
low cost to keep everyone happy
and when taxes come in which taxes are the lump
majority sum of the triple nets
at least the first n
the first n that you said is property taxes
and then as soon as they get their assessment
(34:20):
and if it's gone up
they should be contesting that assessment
but yeah it's
it's it's tricky and it's frustrating every single year
because every year you're gonna get that Bill
so it's almost
let's let's talk
I I love that
I mean this has been a fantastic conversation already
I can just send this podcast
(34:41):
to every startup that starts asking these questions
be like hey just just watch this
I'll save me a coaching call
and it'll be better than what the way I could say it
but I know enough to be dangerous Dan
help me out in talking about the big things
because I think the big things need to be discussed
and I'm thinking HVAC replacement I'm thinking roofs
(35:04):
how do you protect our lease sir
leases leases on oh shit
I just signed a lease and the H back
remember we had that happen here in a Z
we had that happen yeah
now we're talking about Arizona stuff not snow plow
let's go the other way H back
(35:25):
they're all the air conditioning going out
yeah because I've seen it don't Dan
don't you guys negotiate that out
or something like that no
it it depends on the on the property
so if you're in a medical office building
typically the HVAC's gonna be on the landlord
it's gonna be landlord's expense
general office building they could do an assessment
and charge back to the client for
(35:45):
some of those costs hopefully not a lump sum
it's just and then a retail space
the H back in the roof are typically on
on the tenant on the tenant
so it's trying to negotiate where you're not hitting
you're not getting billed for that capital improvement
all at once you're getting billed over the lifespan
of that H back unit so instead instead of you know
(36:07):
30 thousand
dollar Bill that's now spread out over 20 years
that's just part of the cost
so that makes sense
even though the H back may never go out
you're just paying right
prorata of the life of the life of that asset
so so you gotta
you gotta hire
crane operators to put these HVACs up on the roof
(36:28):
we saw one the other day Paula
and that that's expensive
and so to to replace an HVAC system on the
20th floor of whatever building is really expensive
not to mention the other H backs might be okay
but they could go out at any point
so now
now we have the crane operator there and paid for
so we might as well just do all of them
(36:49):
and then imagine all those leases
paying all of that one lump sum boom
and then you know
the the H vax good for maybe another 50 years
but that poor those poor LC's in that moment
had to pay for all of that
so if Dan's on the job
he's gonna try to spread that cost over
maybe 20 years or something
(37:10):
so that's something that you negotiate Dan or no yeah
no that's that's an item that we look for gotchas right
like we're trying to stay away from gotchas
we're if we're a startup
cash flow is is king for us right
we we have to minimize all of our costs as possible
so if a big gotcha pops up
then that's that could be really bad for us
(37:33):
so it's how do we minimize that risk
like can we first start by saying
hey landlord age backs 100% on you
and then in the negotiations and and go back and forth
and then end up at well
if a large capital improvement goes out
or need is needed
then we can spread that over the lifespan of that
that unit and it's
it's not fun cause you're still paying that Bill
(37:54):
but you're not paying that Bill in a lump sum
yeah so in the residential world
it's kind of called a special assessment of some sort
right
like a big thing that needs to be right like your HOA
you get the HOA dues but then a big
like an elevator goes out of your complex
that's like a special assessment
maybe some of you have heard that before
but same thing in the commercial world
(38:15):
um
yeah I mean
like needless to say like
there's a lot to a lease that you gotta look at
other than just simple base rents
but what I heard there was that base rent
is the actual profit for the landlord
and then their expenses are kind of covered in Cam
(38:36):
aka triple net lumped in
so you're paying all the expenses
and overhead of the landlord's building
including all of the improvements
and then the base rent is pure profit
that's what I heard yeah
assuming that's paid off right
the most you know
probably majority or overwhelming
landlords are in debt for their building
(38:58):
so that's paying for to cover their debt
and then anything remaining after that would be profit
love it
Paul any questions about that
I mean I know you're yeah
um Dan
I Learned a lot I mean
I'm just hoping
I'm hoping that
(39:18):
people don't associate this negativity with me
so when they see see me they're like
oh you're the triple net guy no no
I I think I'm a
you're the guy that protects them from making a
costly mistake when it comes
signing a lease with triple net yeah
I you know
(39:39):
I guess I found that over the years
the more people are educated about what they're doing
the faster they're running towards the deal
if if
if if you're being
if you're in a situation where you feel like
your broker isn't going through all this stuff um
maybe you need to give Dan a call
(39:59):
not that Dan
wants to get in the middle of a relationship
you already have but you gotta look at this stuff
it's important you gotta know your lease
you gotta know what options you have and don't have
and to Dan's point
in the very beginning of this conversation is
sometimes not all the deal points are important to you
so
don't die on the hill over something that's not really
important and maybe that gives Dan the ability to press
(40:22):
on something that is important
that's called a negotiation
I think
that's really important to understand the differences
so um
Dan any
any last kind of minute
last kind of thoughts about complexities of lease
and we covered a lot of really good stuff here
but any anything else you wanna say that
that kind of closes this topic up
(40:44):
yeah so
all of those conversations are the business end upfront
and then all those get inserted into a lease
and then you gotta go through it again
but from a legal ease perspective
which is you know
a completely different lens
so it is it's
it's a thorough process it
it shouldn't
you shouldn't get a lease and sign it within a week
in likelihood it's gonna take
(41:06):
you know
four to six weeks to get through that lease properly
and go back and forth with the landlord
would you say from the moment Dan Gleissner sends an LOI
to the moment it goes through your process
then legal like you just said
what's the average time frame for that
yeah two to four months
(41:26):
two to that's what I thought yeah
two to four months four months would be long
but it but for sure yeah
it could take that long okay
very cool um
thank you so much for your brain
your acumen your service to the industry
it's been it's been really good um
we will be putting Dan's information down below and and
(41:47):
uh and if
if you're seeing this on YouTube or any of the podcast
we'll put in the description links to get
get a hold of Dan like I said
it cost nothing to have Dan look at your lease
like literally nothing
so have a professional like Dan look at that lease
just to spell out everything that you're
you're dealing with
(42:07):
so that you know your lease really well
and what options you have and um
and make make the right decision
I and I will say for those of you that own practices um
or or folks that um
you know though thinking about making a change
one of the biggest things is
look at your lease
at least two years before it expires
(42:30):
because and Dan
I know you'd say the same
because what is Dan gonna do
with a lease that expires in three months
uh he's got no leverage with the landlord
but if if you approach Dan to review your lease
two years before it expires
he can do a lot with that
that time um
a lot of people a lot of people go to you Dan
I'm sure last minute and you're like what
(42:52):
you're screwed buddy
so yeah we have to find a turnkey option
in order to create leverage
but yeah it's you
we want to be on the offense versus the defense
and we want we want to assert our game plan
and maximize that through proper timing
yeah I love it
I love it well again
thanks so much Dan
folks please like subscribe
do all the things but Dan's information will be there
(43:13):
Paula
I think we've got a new business strategy at next level
so let's go buy some buildings
Dan you will represent us on that building
uh without further do
let's shut the program down
but thanks so much guys for your time today
alright alright
thank you
see you guys see you
(43:38):
thanks for listening let us know how you like the show
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