Real estate is an essential element of health care. Goran Musinovic, Vice President, Realty Trust Group, hosts a conversation with three real estate directors who offer insights into their health systems’ real estate operations. They discuss:
Goran’s panel includes Sara Seifried, Director of Real Estate Operations and Ambulatory Facilities, BayCare Health System, Tamia Kramer, AVP of Real Estate, Ardent Health Services, and Nathan Beckey, Director of Corporate Real Estate and Development, Children’s Health.
Listen to Goran’s other conversations with health care system real estate counsel and health care system real estate compliance officers.
Sponsored by Realty Trust Group.
To learn more about AHLA and the educational resources available to the health law community, visit americanhealthlaw.org.
Real estate is an essential element of health care. Goran Musinovic, Vice President, Realty Trust Group, hosts a conversation with three real estate directors who offer insights into their health systems’ real estate operations. They discuss:
Goran’s panel includes Sara Seifried, Director of Real Estate Operations and Ambulatory Facilities, BayCare Health System, Tamia Kramer, AVP of Real Estate, Ardent Health Services, and Nathan Beckey, Director of Corporate Real Estate and Development, Children’s Health.
Listen to Goran’s other conversations with health care system real estate counsel and health care system real estate compliance officers.
Sponsored by Realty Trust Group.
To learn more about AHLA and the educational resources available to the health law community, visit americanhealthlaw.org.
Support for A H L A comes from Realty Trust Group, a real estate advisory and services firm offering a full spectrum of real estate services, including advisory, development, transactions, operations, and compliance. Since 1998, RTG has helped health systems, physician groups, and property owners navigate the rapidly changing industry with growth strategies that gain market leadership and enhanced patient and physician experiences For better delivery of care, for more information, visit realty Trusts group.com.
Speaker 2:Welcome to today's podcast on insights from healthcare systems real estate directors. My name is Gorn Chevi. I'm a vice president and attorney at Realty Trusts Group, and I serve as the leader of RPGs real estate compliance service line. Today I have the privilege of serving as the moderator for our esteemed panel. Before I introduce them and start the conversation, I want to take a second to talk about healthcare real estate. And the goal of this podcast series Real estate is, is an essential element of healthcare. It is the place where healthcare services are delivered to patients, but beyond serving is a place to put patients and doctors when used effectively. Real estate allows providers to improve access to care, improve the patient and physician experiences, enter new markets, provide new services, gain market share, reduce costs, and generate significant revenues. It is always worth remembering that real estate often accounts for up to 30% of health systems assets on a balance sheet, and hospitals own approximately 75% of the nation's medical office buildings. In contrast to other types of real estate, however, healthcare real estate is heavily regulated. The Stark Law, the anti-Kickback statute, the False Claims Act, and a myriad of other healthcare statutes and reg regulations create a complex regulatory environment in which healthcare providers must operate daily. A course of action that may be perfectly acceptable in any other type of real estate transaction could in the context of healthcare real estate, result in serious regulatory violations and expose healthcare providers to significant liability, which can wipe out years of profitable business ventures. Given its large percentage of health systems, total assets, and its business and legal implications, real estate touches multiple departments and health systems, including real estate and property management departments, the legal and compliance departments, accounting and audit departments, and the C-Suite, just to name a few. Whenever RTG is engaged by health systems to help them improve their real estate functions, a common problem we find is the many of the aforementioned departments work in silos. Simply put, they fail to communicate with each other, and because they do not know what their respective responsibilities, goals, objectives, and challenges are, they do not operate as a strong cohesive team, which in turn has negative consequences on the real estate function. The goal of this podcast series is to help provide insights to our listeners about the, the respective responsibilities, goals, objectives, and challenges of the, the departments involved in real estate with hope that this will help facilitate the communication between the various departments touching real estate at their organizations. In the first part of the three podcast series, we gain valuable insights from health systems in-House Real Estate Council. In the second part of the three podcast series, we're gonna gain valuable insights from health systems real estate directors. Without further ado, let's begin by introducing you to today's panel. We're joined today by a superstar panel of real estate directors who work for some of the premier health systems across United States. Sarah Siegfried, who serves as director of real estate operations and ambulatory facilities for the BayCare Health System in Florida. TA Maya Kramer, who serves as AVP of Real Estate at Art and Health Services in Tennessee. Nathan Becky, who serves as director of Corporate Real Estate and Development at Children's Health in Texas. Welcome, and thank you all for taking the time to share your expertise with us today. To begin, let's go around to Horn and have you all tell us a bit more about yourselves and your roles in your respective organizations. Uh, Sarah, let's start with you.
Speaker 3:Hi, Goren. Thanks for having me today. Um, as you mentioned, my name is Sarah Cfre, director of Real Estate Operations and ambulatory facilities for BayCare Health System, which is located within four different counties in the Tampa Bay area. We are the leading non not-for-profit healthcare system throughout the Tampa Bay area with 15 hospitals, a two new hospitals, um, currently being constructed, which is very exciting. Um, on the real estate front, we own around 3 million square feet and then lease out in the community another million square feet. I have been with BayCare for 10 years, currently the director for the past three years. Uh, prior to that I was in the legal department as associate council, and then real estate council just moved my way over to being fully integrated into the real estate department. Um, the real estate department oversee at BayCare, oversees all leasing, property management, asset management, acquisitions, dispositions, uh, space planning, legal oversight over construction and leasing, and then the development and implementation of various, um, initiatives throughout the, the community. So thanks for having me.
Speaker 2:Great, thank you, Sarah, Nathan.
Speaker 4:You bet. Thanks for having me today. Gorin, um, similar to Sarah, since we're all in the corporate real estate. Um, so I a, as mentioned, I'm the director of corporate real Estate and development for here at Children's Health. We're a local nonprofit, private pediatric health system here in north Texas. We have a variety of assets throughout Texas, but primarily Texas in both full-time and part-time capacities. Um, my role specifically within Children's is to oversee all things real property, all things real estate, if you, you will. So that's all anything really related to land and buildings, and that can conclude site selection, transaction management, property management, and everything in between as relates to easements, et cetera. Uh, we're a smaller team, but we do rely on the functional areas throughout the system. Um, similar to Sarah, we have a significant lease footprint and own footprint, probably two and a half million square feet combined, 95% of which is really lease assets where we find ourselves in a tenant capacity. Um, the variety keeps it fun. Um, we, we operate and occupy in medical office, corporate office, retail, shopping centers, vacant land, airplane hangers, distribution center, and data centers. So, um, the challenge is, is fun, the change is dynamic and, um, it it's a fun place to be. I've been here about eight years, so again, thanks for having me.
Speaker 2:Sure. Thanks Nathan. Tamaya?
Speaker 5:Yeah. Hey, go. Uh, great to be here. Uh, you mentioned, my name's Tamaya Kramer, and I am the AVP real Estate for Ardent Health Services. We are based out of Nashville, but we do not have any, uh, acute care facilities here in Nashville. Uh, we've got 30, um, different hospitals, um, and 280 outpatient clinics that are spread over about six different states. Um, as far as the real estate department, everything is, is pretty much handled as much in-house as possible. Um, we manage all of the negotiation of any leases, dispositions, acquisitions of real property. Um, we also manage all of the billing and collections, uh, for all third party income leases and complete desktop audits for any of our expense leases. Uh, we coordinate all of the fair market value reporting needs, um, in order to ensure compliance, um, as you mentioned at the top of the call. And, uh, we also, um, have a strategic objective for optimization of our assisting real estate assets. Sure. And we use different business intelligence analytic tools for that. Um, in addition, I'm, I've recently also, um, taken on, uh, managing the corporate workplace strategy. Um, and so with, with Covid, everybody is looking at, um, you know, a hybrid work environment, um, what are we gonna allow people to do as far as working remotely, um, and what does that do to our long, long term corporate footprint? Um, so that's been interesting over the last 18 months or so. Um, I come from a little bit of a broker background, um, used to, um, manage real estate transactions as a broker for healthcare clients, um, and have since come in house with Ardent, uh, as of about four years ago.
Speaker 2:Okay, great. Tamaya, it sounds like your organization has fully internalized, uh, real estate function. I e you know, pretty much all the things that you talked about are handled in-house.
Speaker 5:That's right. Yeah. We, we actually have a bit of a hybrid, so where we, where we can, we try to internalize and handle everything in-house, but, um, that's fairly new. Um, prior to me joining Arta in 2017, there was not a centralized real estate function at our corporate office. So everything was kind of handled, um, by each different facility. Um, that kind of made things a little inconsistent on how they were done. It also limited the visibility in the different transactions that were underway, um, at the corporate office, which is important not only from a compliance perspective, but also a business perspective. We need to make sure that we've got the money we need before we go and spend it. Right. So, um, you know, by me coming on board, you know, a lot of my initial days, um, in 2017 we're really just trying to get my arms around what was going on and trying to create processes and procedures, um, that made sense and that could be implemented across the board. Um, we, we handle all of those items I mentioned previously in-house. Now, if we have a large transaction, um, that is involving perhaps a reed landlord, somebody who's a little bit more sophisticated, I like to have some extra tools in my toolbox. And so we will engage a broker to assist us with those types of transactions. Or if we're looking for new space and we need somebody to get out there, it kind of beats the pavement right, to look for those opportunities. Um, we'll engage somebody to assist us with those, but it's also very strategic and that those don't typically cost us anything in order to proceed with those engagements. So, so we're, we're a very lean, mean machine, and we've gotta use our dollars, uh, smartly<laugh>.
Speaker 2:Sure. No, no. And that, so that's interesting. So before, before you joined, it was decentralized, and then when you joined, um, you know, it it, it became centralized. So I guess, you know, were you, were you hired sort of for the purpose of centralizing that function? Was that, you know, recognized within the organization that, that it needed to be centralized? Or is that something that you suggested once you, you know, came on board and saw, you know, how things could be improved, um, at your organization?
Speaker 5:Yeah, so, um, I was hired with the purpose of bringing this role in-house. Um, when I was originally approached about the, the role, it was actually in more of an outsourced capacity. I was approached by a former client who happened to work at Ardent and said, Hey, we really like how you did, um, you know, work for us when you were working at the broker. Is there any interest in your current broker taking over this role? And I said, well, I'm currently working at house for somebody. Um, have you thought about bringing this role in house instead of outsourcing to, you know, a brokerage firm? And, and they hadn't thought about it. And so at that point, we put some time on the books to, to talk about exactly what that would look like, and the leadership team was on board with that. They, they were excited about bringing it in house for all of the benefits that I mentioned previously and, and really just the visibility.
Speaker 2:Sure, sure. That makes sense. Nathan, I saw you sort of, uh, uh, nodding your head when, when Tama was, was telling her how the real estate function is, uh, staffed at her organization. What, what about your organization? How how's it worked there?
Speaker 4:Yeah, so, uh, along the same lines, um, when I accepted the role and kind of migrated from the capital project delivery team into the real estate function about six years ago, uh, it was similar. It was very compartmentalized. Um, it wasn't less of a sophisticated, centralized function. Um, in taking on the role. I think there was an opportunity to really create some standards and processes around workflow. You know, um, several things. We touched on the utilization of external resources, you know, internalized versus fully outsourced, et cetera, et cetera. I think, you know, for those listening, potentially some brokers and others wanting to get into the health healthcare space, there's just so much more around the transaction. You know, it's easy to execute a transaction, but everything that goes into the site selection, the sourcing, just the capital request process, the annual budget, you know, the capital pro, um, budgeting process, just the movement of resources throughout the system, um, you know, children's migrated and, and has become, uh, more sophisticated probably over the past several years as it relates to developing formal executive committees strategy to through execution of, okay, you know, bef within the real estate function. You know, I guess back up, I'm, I'm a licensed real estate broker. Uh, I've got in-house, uh, real estate, you know, agents, if you will, or an agent of transaction manager. So we're licensed within the state. We have the technical capabilities. But, um, as mentioned, you know, it's simply a function of time. And in some cases it's, uh, an, uh, a situation just depending on, um, the, you know, the benefit that third party brokers can provide. So, um, all that being said, you know, really from, we need to go let, let's enter this market, you know, just saying, let's go find a, we, we wanna be in this specific, these this specific submarket. We wanna open a primary care practice, you know, before we even start looking at space or even engage brokers. It's do we have a system level endorsement, um, across the system from those resources. And is, you know, supply chain, uh, a clinical component, you know, has the business, um, case been vetted and approved, and do we have capital to build the space? You know, the worst thing we can do is, you know, go lease a space and, and, and be stuck with it. Um, so, you know, in our case, you know, we've migrated from a, you know, kind of a,
Speaker 6:Uh,
Speaker 4:Siloed if you will, like, like someone, like you had mentioned a second ago, uh, to a centralized function of approvals, moving it through the system. But in our specific department, we run the full-blown site selection, uh, comparative analysis. Um, and then we manage within the dedicated resources of children's, you know, whether we need space planning, um, you know, just from a facilities management, you know, and then all the integrations between on, you know, do we use inside council or outside council? Do we need a third party broker? Do we not, um, do we need to bring in some third party engineers? Can we use our engineering team? Do we need to do security assessment? You know, the list goes on and on and on. But, uh, just, just moving it through the accounting, is it booked? How are we booking this lease is, you know, are we, uh, you know, bringing on, is this new space we're bringing on or is this a disposition? Um, so, uh, I think for the most part, uh, corporate real estate teams are pretty small, but they rely on dedicated resources throughout the system in various functional areas such as the accounts payable, accounts receivable, compliance tax, et cetera, et cetera. Um, but in our specific model, we'll engage a third party broker if there's a specialized expertise such as a data center where it's just getting out where there's true, uh, broker provided value. Uh, in some cases, um, you know, we can only, we know our needs better than anybody, and the only way we can meet those needs and understand what we need is to sometimes go do it ourselves, such as finding a, a second generation dental space within a specific submarket. Um, and in some cases, uh, working in partnership in conjunction with trying to create some incubator space, timeshares, you know, we want to, we need to be in this market one day a week. How do we go find and create those relationships with some local, uh, clinics and providers such that we can create a presence and, and basically use someone else's space<laugh>. So, um, there, there's not anything in it for a broker to go call a clinic and create a relationship with a primary care provider, such that we could be there and use half, three exam rooms, you know, twice a month. So some things we just have to do ourselves or we just wouldn't get there. So, um, having the centralized corporate real estate function is an absolute necessity. And then sounds like we're, we're kind of throttling where it makes sense to rely on third party resources.
Speaker 2:Sure. No, and it sounds like by internalizing that function, you've been able to sort of put real estate into conversation when broader strategic, uh, decisions are being made at, at, at the organization-wide level. So that kind of real estate has a, has a seat at the table.
Speaker 4:Yeah, that's right. So from a strategic perspective, you know, we're the ones that are keeping side on, you know, how much time we have left in lease, does it make sense to invest or reinvest from a capital refresh perspective? You know, are, are these three locations something we would like to consolidate, you know, let's hold off on, on doing. We're we're, we're, we're kind of steering capital for the system, um, as it relates to just what makes sense strategically based on the specialty, the service line or the location.
Speaker 2:Sure. That's great to hear. Sarah, what about your organization
Speaker 3:So much like Tame and, uh, Nathan? Um, we are centralized now. Uh, when I was onboarded at Bay 10 years ago, we were not, um, I would say within the last five years we centralize the function. And then three years ago is when I have been in this position a little bit different than Nathan. Sounds like they're driving strategy a lot. Um, on the brokerage front, we probably handle, so we handle different aspects of real estate, you know, different ways, right? So on the brokerage piece, we do use for tenant brokerage, outside brokers to find space. We have found that they have the connections in the market to be able to find the space that may not be listed, um, especially in those areas that are hot areas or areas that we're not in that we're just trying to break through. Um, the market, the beginning of this year, uh, prior to the beginning of this year, we did use brokers to negotiate some of our renewals on around 300 square feet of our renewals after an I intense evalu evaluation. We have insourced that, so on my lease administration team, so we have completely insourced our lease administration, um, keeping track of renewals, and we have an individual that sits on the lease administration team that coordinates with our brokers when we're finding new sites. But with our owned assets, we have, we have completely internalized, um, that aspect for facilities management, property management. Prior to the beginning of this year, we had outsourced with the head of C O V D, everyone, you know, re reassessed finances and what that looked like for the health system. And we came up with a plan to completely internalize that as well. So that's a little bit of a hybrid and not getting in too much of the weeds, hospital facilities takes care of some of our outpatient buildings, and then my ambulatory facilities team takes care of. So we work very closely together. So I, I would say we're al also in a season of centralizing, I, I always say that. So every month things seem to change, um, for the better as we try to work to be a health, what I always say, a healthcare real estate company within a health system, um, to try to try to make that happen. One thing, um, that's become a real focus for us this year is asset management. So looking at PNLs on our owned assets, when asked, um, our C C E O, what you know, is success for real estate, define success for real estate. Yeah. He said a, uh, he's also the, the former C F O. So it comes as no surprise that his answer was that we would have, um, a positive return on all of our buildings and we fill up our vacancies. So we've been really focusing on vacancies and vacancy and trying to get, um, solid PNLs for, for each of our assets. Sure. Um, when it comes to valuation, we have an outside appraiser mm-hmm.<affirmative> or outside appraisal firm company that does our valuations. We do keep that separate, um, to ensure compliance. We felt that that was the most conservative, conservative approach. So we have outsourced that function. Um, and that's What about attorneys?
Speaker 2:Do you have, do you use outside law firms for real estate functions? Or is, is that also internalized?
Speaker 3:Yeah, that's a, I I completely skipped over that. And that was what I lived for the first, you know, solid five years of my daycare career. Um, we have four in-house real estate councils, but they work on a number. They're not in the legal department, they're on my real estate team. So they really coordinate the transactions, I would say, for any large project, and I know that's a vague answer we outsource. So from a bandwidth perspective, um, and any large purchase in sale, so purchase and sale or large lease document that is going to be on third party paper. We have a, obviously a ton of templates. So I think it's a hybrid. I guess it's probably a short answer for you.
Speaker 2:Sure. No, no. So, yeah, so it sounds like kind of the common theme is that, you know, the way you all have internalized your real estate functions is, I mean, it it's internalized for kind of a lot of the everyday things that have to be done, you know, within the real estate portfolio. But then if there's, you know, specific transactions, then, you know, some of that might involve externalized resources, be it real estate brokers or outside council, et cetera.
Speaker 3:Absolutely.
Speaker 2:Sure. Dami, for your organization, so what, what's the kind of, what's the goal and the, and the objective for the, for, for the real estate team? Like,
Speaker 5:So, um, you know, like, um, Holly was just saying, you know, there is a financial component to this role. Um, I actually report directly to the CFO of Ardent. So we are very similar in that respect and that all of our transactions need to make sense, um, you know, literally and figuratively. Um, but you know, I mean, outside of, of, you know, that financial drive, you know, the, the goals of the department are, uh, about fourfold. Um, maintaining compliance at all times is rule number one. Um, and then, you know, also making sure that our, our field, um, the folks at the facilities are educated as to what those requirements are. Um, I find that, you know, know when you, you can teach somebody to fish and they can, you know, feed themselves or you can just fish for them, right? Um, we can save a lot of time and resources by preventing problems at the outset. Um, so maintaining compliance is number one. Number two, um, adding value, the rent savings or other concessions, um, with every single lease transaction. And we actually calculate what that is. Um, so for every transaction we do, we, um, we will com uh, prepare a calculation of exactly what that value add is. Just like if a broker was managing the real estate for us. So we try to provide that same level of customer service to our customers, which happen to also be ardent employees. Um, you know, in addition to that, uh, third item is, we'll, you know, we like to assist the local market in achieving its strategic needs. Um, you know, whether that be for growth or optimization of what they already have. Um, and then the fourth, uh, goal of our department is just to maintain a professional and respectful relationship with all of our facilities and also any tenants that are on our campuses.
Speaker 2:Sure. That's great. Nathan, what about your organization? What, what, what are sort of the, the, the strategic goals and objectives of the, of the real estate function? And how do you define success in, in that function?
Speaker 4:Yeah, you bet. So within the corporate real estate function, and, and really within our division, it's to provide value to the organization in everything that we do. Um, in some cases, you know, I think we touched on the physician relations, um, and the financials both within, you know, the system itself. You know, it's very specific as it relates to the sub-market. You know, if we're dealing with, we'll call it on-campus medical office buildings, it's finding the right, the right mix for the campus in terms of service lines, growth, you know, the long-term vision for the campus. It's not necessarily, in many cases filling up a building as fast as you can, um, with any tenants, you know, and a lot of cases we turn down, uh, tenants that want to take space on our building cuz they're just not within our strategic vision of where we want the campus to be. Um, you know, our goal is to really be the connective tissue from a medical term between all the functional areas. We're basically the real estate experts. You know, everyone within the system calls us, and it could be the foundation is receiving, uh, you know, as has a proposed gift for multimillion dollars and they wanna rename a street. So they'll, you know, uh, our, our development team may call and say, Hey, what's it gonna take to rename the street? So I mean, we're down into, um, the minutia of, you know, the real property and how this street was named to, um, you know, some mineral interest we own in west Texas. Um, you know, where a northern Colorado, um, transmission authority is, is coming through our, our property and we need to sort through, you know, our estate within our mineral interests. So it, it's a great variety and our, our goal is really to serve our client, which is the system internal. And then secondly is, is serve our client on the third party, which is our providers that, that leave space. So to meet both of those needs, um, you know, having corporate real estate as a function is an absolute necessity. Um, in, in meeting, you know, Tim Tamia had mentioned, you know, meeting the providers needs and, and creating that kind of white glove experience. We do have an on-campus real estate administrator for one of our medical office buildings that can really help facilities management navigate both the compliance perspective and the needs of the provider. Um, you know, a a a field engineer may be very knowledgeable about the building, but doesn't have time to really interpret a 80 page lease as to, you know, what they can and can't provide. Same thing with environmental services. So I guess back to your original in question, uh, I probably skipped on is, you know, for the most part we're internalized, um, from a facilities management perspective. So if we're, if we're performing all these things ourself, we just have to be very cautious on what we provide and, and how we go about those from a compliance perspective and meet the expectations and obligations that are really spelled out within our legal agreement. So, um, we're a resource for everyone within the system, and we try to treat everybody, um, you know, as a client and that that's, um, across the system both inside and out. So, um, that's where we provide value. Our number one focus, um, is meeting those needs. Obviously the financials is, is absolutely, I wouldn't say number two, but equal. Um, the numbers have to work and it has to make sense and it has to be compliant. Um, we do use the third party evaluators to make sure we're kind of arms linked on fair market value, start compliance, et cetera, et cetera. Um, so we're just, we're really the, the goalie, if you will, for the system to make sure we don't do anything, uh, that, that would be non-compliant. We're kind of the eyes and ears for the system, anything related to real estate as to what's possible, uh, what's feasible and what's compliant. So, um, we, we want to kind of do the impossible, uh, but, but make sure that we're doing, we're going, we're doing the right things and, and we're keeping watch out for, um, the system.
Speaker 2:Sure. Yeah. So it sounds like even though it, you know, it, it's important to, you know, run, run a, you know, profitable venture there, it, it, it's, it sounds like there's a lot more the value that's being provided there. And, and then when you're trying to determine, hey, are are we being successful? It's not just gonna be, Hey, is this particular building profitable, but are we also delivering all these other things that you, that you just talked about, uh, uh, to provide value to really ultimately the, the entire organization?
Speaker 3:I probably should clarify something to that, to that point. So when I was talking to our c e o with regard to our main objective, I think it's a goal that we have not in the past looked at our buildings from a financial perspective. Sure, of course. We are a real, like we said, a real estate company within a health system, and the provision of care and physician relationships are number one, beyond the financials. And that was made very clear too. I think one place that, probably a better way to say<laugh>, I probably made it sound like we only care about money and filling up our buildings, and that's it. And I don't care, we don't care about those positions or we'll put competitors in our buildings and, uh, I'll be very honest, that could not be further, uh, from the truth. Um, I would say a goal or defining success of where we have not succeeded in the past Sure. Would be an area of, um, financial management by building. So just wanna clarify that to make, because it's by, by no means our driving, driving force. Um, I don't wanna be fired because that would, that would not be good<laugh>.
Speaker 4:Yeah, yeah, that's right. So the saying is, you, without a margin, you cannot have a mission. So yes,
Speaker 3:<laugh>. Yeah. Yeah. I just wanted, I mean, cause these are been great responses and thinking of my response, I, I don't want it to, I, I wanna be clear that our, our main objective is not, uh, just to make money at all costs. Sure. Um, that couldn't be, uh, further from the truth, um, by any means. But one area we have struggled in the past, like I have said, has been asset management, financial management, um, and something that we're looking to, to do in the future for a goal defining success. One aspect of it,<laugh> for the real estate department.
Speaker 2:Uh, no, that, that makes sense. Well, so Sarah, what would you say is the biggest challenge, like with, with within your role and for the real estate department?
Speaker 3:Oh, gosh. Uh,<laugh>.<laugh>. Yeah. Put me on the spot.
Speaker 2:Yeah. Right there. Yeah.
Speaker 3:Probably balancing those two needs. Uh, uh, truly, so we have, we're a large organization, um, not as large as some, but, um, we're a large organization, so having a lot of input and a lot of bosses to answer to, right? So a tenant that may be able to lease our space for 10 years but doesn't make strategic sense, um, as a real estate developer, I would lease to them all day long. Right? Correct. Um, so that's probably our biggest challenge is of balancing those two needs mm-hmm.<affirmative> and remaining compliant. Right? So, I mean, not a challenge, but we are bound by the compliance issues that healthcare systems run into. Sure. So a lot of times we're looking at deals and a developer that's not healthcare related or healthcare owned could sign all day long and to explain to a physician group that just heard from a developer that they could get that deal. Right. But we can't, and they're a strategic partner for us, um, is, is a daily, daily challenge as well. So I would say balancing the, um, push and pull of being a real estate company within, within a health system subject to the regulations, subject to a lot of, a lot of input from the hospital operators, C O O C E O, um, which is good, right? That we're having visibility real estate, the real estate department has visibility at all of those levels. Um, but with it does come a lot of conversation.
Speaker 2:Sure. And so, so that, that's interesting. How, how do you, so how would you go about, you know, with physicians where they're getting, you know, uh, offered a deal from, you know, a third party developer that's not bound by the same, you know, regulations that a, that a health system, uh, is how, how do you go about explaining it to them and, and basically telling them, Hey, this, this is all that we can do because, you know, we have to comply with these applicable l you know, rules and regulations,
Speaker 3:So we really rely on our arms length, fair market value Yeah. Opinion, I mean, really just being very, um, straightforward with them. It, it is a conversation that we have, I would almost say every, every day. Yeah. Um, because it is hard to understand why we cannot deviate.
Speaker 2:Yeah. And do, once, once you present that to them, you know, do, do they understand? I mean, a lot of these folks have obviously been in the, in, in the industry for a while, you know, I mean, should, it's not, it shouldn't necessarily be that, that one thing, but, or is it the same,
Speaker 3:Uh,<laugh>? Well, that's probably no, they do not always understand<laugh>, um, by any means. And a lot of times if, um, no, I, I would say probably nine times outta 10, they don't understand, um, the constraints that we are under. We try to explain it in as positive of a, this is a protection for both parties, right? They're, you know, a lot of times it's not just, we're not just protecting the health systems, protecting the, the individual physician, physician as well, but, um, no, for the number of times that I've received a but I give you so much business, um, you know, explain<laugh>, I, we are not connected. I, that is, that con that conversation is nothing to do with our real estate. Yeah. Um, it's daily. It really is. It's truly daily.
Speaker 2:Sure. Sure. Tamara, what about you? What, what, what are some of the biggest challenges that you face, uh, in your, you know, everyday role and in, I guess, real estate in general?
Speaker 5:Yeah. So I, I mean, I'm gonna echo what Sarah said. You know, it, it's really just managing expectations on, you know, what, what we can and we can't do and why. And, you know, one of the things that I, I explained to our tenants a lot when they get pushed back on, well, hey, so Ms so-and-so's gonna be able to do this for us over here. Why can't you do it? Um, you know, we rely on our fair market value reports, just like, like Sarah does. And what I explain to these folks is, is we're protecting not only ourselves, but we're protecting you as well, because we both have to adhere to these regulations. Um, you know, you could be, uh, you know, have your hands slapped just like we can. So, you know, it's really a protective mechanism for all of us. And the beauty of that is, is they never have to worry about being overcharged for something because we have to maintain fair market value. And so that's how I approach those conversations. And more often than not, it alleviates those concerns and we're able to get comfortable and move on in the transaction. Um, I would say that, you know, uh, another huge challenge, um, in our role here is just comple uh, uh, collecting complete information. So, you know, Nathan mentioned part-time leases, and those are very, they're, they're, um, important to all of our various campuses because we may not have a specific specialty on that campus, but by offering space on a part-time basis, we can, you know, uh, recruit and have somebody, um, uh, that does conduct that specialty come to our campus and provide that to the community. Um, the problem with that is there are so many boxes that you have to check with a part-time lease. Um, everything has to be accounted for. Um, the square footage has to be ticked and tied. Um, nobody can get access to something that isn't already documented in, in the lease. You have to be able to control any other areas. So for instance, if, if they're leasing, you know, four exam rooms, if there's a fifth exam room that better be locked, you know, we cannot leave it available for somebody to have access to it if it's not part of their lease. We have to itemize out every single furniture fixture and equipment item, I mean, down to the staplers and the trash cans. And if we don't have complete information, the fair market value will not be accurate, and therefore the lease will not be accurate or compliant. So I'd say one of the biggest challenges is just making sure we ask all of the right questions so that we get that complete picture so that we can ensure that the lease, um, is complete, accurate, and compliant. Sure.
Speaker 2:Nathan, one of the things that we heard in the, in the first episode when we were talking to the real estate council is that, you know, one of the challenges they have is that sort of the real estate. And when, whenever transactions are taking place, the real estate almost becomes an afterthought for their organizations. And they're sort of left with having to review, you know, a bunch of, you know, real estate legal documents within a relatively short period of time. And that can sometimes result in, you know, delaying the closing of the transaction, et cetera. It, it, it doesn't sound like that'll be an issue at your organization, but, um, you know, I, I guess some of the common complaints that we hear is that sometimes one of the challenges for the real estate function is that it's not, you know, considered, you know, when strategic decisions are, are, are taking place. Um, any comment on that?
Speaker 4:Yeah, no, that makes sense. I think we're all, I don't think we all we're, we're saying the same thing. You know, the corporate real estate function is managing real estate for a company that's not in the real estate business.<laugh>. Yeah. So, you know, systems exist to treat patients and provide care. They're not in business to make money in real estate or run a development company. So, uh, yes. Um, you know, that's, that, it's interesting you bring that up from the first podcast as relates to these acquisitions. So, you know, strategically we may be acquiring a certain specialty that comes with private practices that need to be then evaluated. Um, to Tam's point, you know, uh, you know, there's just so much that goes into it that I think a lot of people probably listening to this podcasts don't realize, you know, just the acquisition. How do we get these, these specific specialties on campus? You know, from a timing perspective, we've acquired these two, we want to get'em on campus part-time. What does that look like? What space is available? So I I absolutely echo to me's point or comment around, you know, just the complexity down to the stapler and the trash can is absolutely the case. And these timeshares, you, you were, you had, you know, where we were a second ago is, you know, the challenges is these, the smallest of space is in many times the most complicated of space. It might be a provider or a surgeon that's literally leasing an office inside the hospital, uh, but has access to resources, uh, services. You know, you just have to think through, okay, this surgeon is in this office, he has access to the printer, he has office access to his computer. There's a value on the internet, there's a value on the shredded, um, the, you know, the biohazard waste. And all of a sudden, you know, this picture on the wall has a value. Everything has to be inventoried. So we'll literally have to spend thousands of dollars essentially as an insurance policy, as, as bad as that sounds to just keep us compliant. Let's inventory every single thing in the space, the chair, the trashcan, the desk, the computer. What is the value of the, it's it, you know, in these valuations, it's a tri-party. What's the value of the provider and the prac and the practice? What's fair market for that? What's the value of the physical assets? Uh, both every through an inventory and a fair market of all the equipment? And then what's the real estate value in terms of just physical improvements in, you know, fair markets? So those blended rates just to get a four hour block of time can far exceed the, probably the revenue from that could ever be obtained from the specific block or the timeshare. But, um, I don't wanna say it's necessary evil, but it's a seed that that does grow over time and, and has its rewards. Um, you know, there, I guess there was a couple things you'd mentioned and where we were second in terms of challenges, time and resources I think is our biggest thing in communication. You know, we'll have functional areas that say we really, we wanna open up a practice, you know, in this submarket, can we look, start looking for space? Okay. Um, a you know, we or we wanna shut this clinic down and go build new space. Okay. Um, do you have the ability to get capital? Cuz we see that it's not within the budget. Okay. That puts it outta year. Um, you know, the, the design time, the build time that's gonna put it out another year plus permitting. So a lot of times these decisions we have to educate our, our in-house that, you know, we need to be constantly thinking three years out, we're coming up on a renewal. Let's think three to five years out. Is this a strategic location we want to be in? And in some cases, you know, the clinical manager or the, you know, we'll call it the operations manager, can't make those decisions cuz it's hinging upon the capital plan for the year. You know, if we can get dollars committed for the following year, then we'll be in position to build out a new space, take down a lease, et cetera, et cetera. But a lot of times a renewal might be up within three months of blessing that such that you have to do a two year renewal. Okay, well we just committed another two years. It comes back around and before you know it, you've got a handful of leases sneaking up on you that you end up doing these two year kick the cans. Unfortunately, well, we're not sure it's a marginal program. It's a great market. We know if our rent goes up or our expenses go up or if we have to go get capital, it's gonna kill the deal. So in some cases we might end up doing over a series of eight years, like four, two year renewals, where if we knew we were gonna stay there eight years, we would've invested in the space and, and replace the flooring, replace the ceiling time, replace the rooftop units, and, and made it a better space such that it was livable. Sometimes we find ourselves that time is our enemy and capital is our enemy, and we end up having to be forced to do these, these patch jobs that if we had a little bit more ability to get further out that we could, you know, and, and it's not that it's anyone's fault, I think it's just the nature of our industry's dynamic. Things are constantly changing. Priorities are constantly changing. And then strategically, you know, competitively within each market things are changing. And not to mention legislation and, and when legislation changes, all of a sudden we have to change our market. We need to get into this market out of this market, into this specialty. Let's renovate, let's get new equipment. So it, that's what makes it fun and that's what keeps me in it. It's just constantly changing. Um, um, you know, both from, uh, across the board, both clinically with new technologies, legislatively with new requirements and just the types of space we're dealing with, um, is, is all over the map. And, and especially on multi both parties to the transaction, being a landlord and playing property manager and then putting our tenant hat on and then having to kind of, you know, um, work with the landlord to play property manager back to us. So we have to just wear multiple hats all day long, um, on a weekly basis. Um, that, that just keeps a variety. But I think that's our biggest thing is, is just time and, and communication that, you know, these are, we need to, to be constantly thinking three years out. So we try to get in front of our functional leaders for each specialty and say, Hey, let's start thinking three years out. Be be thinking about this location as to where you want to be because it's gonna be here before you know it.
Speaker 2:That makes sense. Um, Tamaya, do you all have compliance training, uh, real, like with specific real estate compliance training at your organization?
Speaker 5:No. Yeah, we, we do not have any real specific compliance training. Um, I will tell you that we visit with our chief compliance officer on a fairly regular basis. Um, so we don't have anybody coming into this role cold, right? They already have healthcare compliance, uh, experience as it relates to, um, you know, real estate, uh, stark anti-kickback, et cetera. So, so we'll do refreshers on a pre pretty regular basis. But as far as a formal training program, no, we do not have that. And as a matter of fact, I'd like to ask the other participants on this call if they're aware of any type of out of the box type training that's available for that type of thing. Because even if, you know, we don't necessarily need it in our real estate department, it would be nice to have that information to be able to send out to the facilities, right. To help with that education process, um, so that they understand what those guardrails are.
Speaker 4:I'll, I'll jump in.
Speaker 3:Okay. Nope, go ahead. We probably have a better answer, Nathan. I was gonna say, I don't have anything out of the box. We've put materials together in the legal department as it relates to certain aspects of not real estate related compliance issues. Um, but if there is an out of the box, I would be fully on board as well. We've been working on trying to put materials together, but I'm not aware of, so that was not a good answer, Nathan. Hopefully you have a better answer.
Speaker 4:Yeah, no, I, I think, you know, some of the basics I think to, to me is point, you know, the, the, our in-house council and those, you know, outside council firms we're working with are highly specialized in the medical world. Um, we do have a recently formed office of physician relations where we are running through all of our contracts through, in addition to sourcing slash contract management as a repository, it runs through this compliance arm, um, as well that does ask additional questions that maybe we're not asking or fully vetting during maybe the LOI or the engagement process, both as tenant and landlord, you know, who owns this facility, do they do business with our system? Um, you know, and just goes through the checklist of what is, what are the relationships behind the scenes that really aren't on the front of this basic of these basic business terms. So, uh, the long story short, yeah, we don't have a formal annual refresher that the corporate real estate has to, you know, check all the boxes, you know, do you, you do you, uh, you know, as a refresher, there are resources out there if you Google it, that various forums and continuing education, there's some PowerPoints floating around with it, kind of refresh you on the basics. Um, but we, I feel like we are, are working with them so regularly and so often they're really front of mind. Um, and our, our legal team does, uh, occasionally set time aside to just run things through. But, um, yeah, no, if there's a, if there's a official CEU of, of compliance or, you know, going through Stark and those type things as a refresher, as an annual refresher, yeah, I think it's definitely, there's definitely value to be there, uh, to be had, I think for all of us.
Speaker 2:I guess finally, appreciate all the, all all the insights. I guess just fun. Final question. You know, we, we, we, you know, part one of the goals of this series is, is to talk about, you know, the, the communication interactions between the different departments and the real estate department. And we, we kind of talked about, uh, Nathan with, you know, all the communications you have with, with the various departments within your, um, organization. But, um, in terms of the communication that goes between real estate, legal, you know, compliance, uh, you know, do you all have open lines of communications within your respective organizations? And if so, what kind of tips could you provide to, you know, the listeners, you know, as to how they can, you know, help keep those, uh, lines of communications open between the various departments of touch real estate?
Speaker 4:So from a communications perspective, it really just depends on what it is. Again, if it's a clinical manager and an offsite, you know, we have, we've built relationships of trust. You know, we try to make our presence known. We have an offsite, we're, again, we're a small team. We have an asset manager slash property manager that kind of makes the rounds, makes hisself known, Hey, if you've got issues make, we can't fix something we're not aware of, we can't address something we're not aware of, uh, we self-perform just using environmental services. For example, you know, we had a call a couple weeks ago, Hey, the landlord's doing a really, really terrible job cleaning this building. What can we do? Can we get our own, uh, you know, environmental services team to start cleaning this specific clinic? So those type discussions, um, I think it's really up to the, the leader of whoever's overseeing those buildings and the corporate real estate team to just remind the users, remind your, your system because there's constantly new people coming and going. New clinical managers, sometimes we don't even know, oh, there's a new clinical manager, this person left that, hey, just wanna let you know we're here. If there's anything related to the, the, the facility that you think needs to be addressed, you know, we're here as a resource for you for all physical property. We can put you in touch with our six help system. Here's our processes in place. If it involves landlord, this is just in, just let you know we don't know'em in this building. If it involves landlord, let us know. Maybe it's pest control, maybe it's security, you know, they'll call us for every little thing, which is good. And then we just kind of connect the dots. Again, we're the connector. Um, we're not the security team. I'm not cleaning buildings myself, I'm not, you know, but we connect. So all those various functional areas and we're the resource. So it's like, Hey, I need help with signage. I need an egress map. Um, you know, we're doing a mock survey, how do I get that? So we'll connect'em with our space planner and our life safety team. All right, let's get some signage in place. Um, or, or engineering may call us as a resource as well, Hey, I'm on this offsite, I noticed a landlord's not doing this. You know, do you want me to call? Or, you know, so just that ongoing dialogue. Um, there's really, there's no, you can't really do it on email. And I think we struggle with email. It's just picking up the phone sometimes and saying, Hey, we're here for you calls for anything. But at the same time, you know, we have roughly 65 locations. If you're, you know, if you're up to 2000 locations, you're, your process may look a little bit different. We're a little bit smaller, a little bit more nimble, and potentially a little bit more high touch. Um, but the advantage of keeping that internalized resource and where we've found value is, again, from the facilities management perspective. These are children's building engineers going out and checking and fixing the drippy faucets, um, such that the clinical managers can call'em and say, Hey, next time you're out here, can you fix this for me? Versus saying, using a third party, uh, you know, institutional facility manager where it's like, Hey, I, I come out there every three weeks and it, I'm not gonna change my schedule. So again, I think it's just that relationship with everybody just reminding people, Hey, I know you're new in accounting. I know you're new in finance, we haven't met, but here's what we do. Here's how we provide value. The insurance team, um, accounts payable, I mean, the list goes on and on and on.
Speaker 2:Sierra, as somebody who has, you know, worked with the real estate department and also the legal department, you know, how, how does that communication interactions work between real estate and legal within your organization?
Speaker 3:Well, real estate and legal have, uh, with regard to real estate, legal have combined forces, right? So within one department now using, um, outside council. But, um, we have a lot with regards to lines of communication across the organization. We have a lot of work groups. We've probably overscheduled meetings. Um, so I just met with one market leader this morning, went through all of his buildings, went through the, uh, large facilities, projects that are going on. So I, I would say that our lines of communication are really through these different work groups. But of course, I mean, we email probably too much too, you know, like constantly or picking up the phone to work through, um, certain situations. To Nathan's point, we are high touch as well. So having the facilities team at the site all the time, we have a lot of tenants to just call our facility team members on their cell phones.<laugh> trying to get away from that and trying to really centralize that or process, put processes around that. Um, but those lines of communication are extremely important, um, obviously as well. But I would say probably our lines of communication are through work groups with regard to legal and compliance. It's more centralized, um, within our operation in the real estate department. Um, and then working with outside council, we have compliance council, and then we also have, um, transaction council. So we do have different outside councils that we're, we're working through.
Speaker 2:Sure. And finally, Tamaya with you, do you all have work groups? Um, just like Sarah mentioned?
Speaker 5:Yeah, so we'll have periodic meetings, uh, with various departments, but you know, my approach with our department is really just to be as proactive as possible with that communication. So, you know, when you think about the transaction that you're working on, who needs to know about that transaction, right? And then making sure that every single one of those people, those departments is included in that distribution. Um, it, it kind of goes both ways. Um, you know, we, we rely on, um, timely and accurate communication from all of those departments as well. You know, in order for me to be able to get a new site up and running, I mean, I need at least a one year runway and sometimes, you know, educating folks to, to that the amount of time it takes to get a real estate done, deal done, um, it, it's, it's a real challenge. But, you know, we try to just maintain constant communication with all of these different departments from legal to compliance to accounting to make sure we're actually paying for the things that we contracted for, um, you know, our audit department. And I would add risk management to that because a huge part of real estate is making sure that we are not, um, taking on any additional liability, um, that we shouldn't, and that the tenants are compliant with those types of requirements. We've actually, we had a hospital that was hit by a hurricane and, um, every space was destroyed, and some of those tenants did not have, um, insurance for their personal property, and it, it was a problem. And so unfortunately, you, you learn right as, as you go through these things and you try to put protective mechanisms in place to prevent them in the future. Um, but sometimes you have to learn the hard way. Um, so yeah, we rely on constant communication and we try and be as proactive and transparent with each other as possible. We're on the same team.
Speaker 2:Sure. That's great. Well, I definitely wanna thank each of you, um, for participating in today's podcast. I've learned a lot, um, and I'm sure our, uh, listeners will as well. Um, thank you all for, uh, taking your time.
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