DIALYSIS CENTERS? I CALL THEM PROFIT CENTERS

One of the things I love most about America is that people are rewarded for solving problems. Finding unmet needs before the rest of the world catches on isn’t easy. Figuring out how to profit from the opportunity is harder still. But it can be done, and I want to share one of my favorite investments with you, to illustrate how I look for opportunities.

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In my last post, I shared a detailed look at government spending and broke down how the US government spends over $1 trillion per year on medical benefits. That’s a boatload of money, and the fact that people have been fighting so much over health care spending is a sure sign of opportunity.

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The place where real estate intersects with health care is in medical facilities. At roughly $2,000 per day, in-patient care at hospitals is crazy expensive. That’s why I love specialized medical centers that reduce expensive hospital visits. When chosen well, medical facilities offer perfect real estate investments.

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First, some key medical trends: There are currently 46 million Americans over the age of 65 and the Department of Health and Human Services projects that this number will grow to 98 million by 2060. Furthermore, the American diet, featuring heavy intake of sugar, starch, fats, and fast food increases our collective risk for obesity and chronic diseases like diabetes. As much as I enjoy a burger and coke, they take a toll in the long run.

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This combination of aging and poor diet leads to a lot of kidney disease. It’s a sad condition, and I wouldn’t wish it on my worst enemy, but kidney problems are certain to continue growing. The only option for most people with kidney failure is dialysis. And these days, patients are far more likely to get their dialysis treatment at a specialized medical facility than at a hospital.

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Companies like DaVita and Fresenius are already building and operating dialysis centers all over the United States, and abroad as well. Offering dialysis outside expensive hospitals means people get the care they need at lower cost. Locating these centers isn’t even difficult. Wherever there are large populations of aging people who do not live close to a dialysis center, there lies an opportunity. The concentration of retirees in the American sunbelt is a perfect example.

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Full disclosure: I have already done quite a few deals with DaVita, and I could not be more thrilled with my investment. DaVita specializes in providing quality medical care, I specialize in real estate, and our partnership is a beautiful thing. For example, I recently purchased a $1 million building to convert into a dialysis center. DaVita signed a long term lease and invested $4 million of their money to modify the facility for their needs. With that kind of investment, I know they’re not going to leave for a very long time.

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When I look at a real estate investment, my biggest fears involve tenant turnover. A vacant property is like lighting cash on fire, and that problem is compounded when desperation to fill a space means accepting lower rents in the long term. On the other side of that coin, purchasing a property with a long term commercial tenant already committed to using it massively lowers the risk of the deal. The tenant’s willingness to invest their own capital in property improvements only increases my confidence. In addition, such partnerships make banks happy and thus lead to cheaper financing. It’s a double win, and dialysis centers are a great example of how I like to invest.

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This kind of deal is what I dream about at night. Commercial properties with long term tenants who are deeply committed to remaining in place are like the holy grail. And to top it all off, these deals help solve real problems and make a positive impact on people’s lives. Every time I close on another specialized medical facility, I’m popping the champagne. Luckily for us, this investment still has plenty of legs.

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Call me at 847-317-0077, email me at breinberg@alliancecgc.com, or tweet me at @benreinberg or @alliancecgc to submit us a property(s) for us to acquire. For further information on our approach to deals, please click here.

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If you have an interest in investing in our opportunities please give me a call. For further information on investing with Alliance, please click here.

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My Best,

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Ben

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