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October 17, 2022

Transitioning Your Dental Real Estate

When transitioning your dental practice, you will also need to make decisions about your real estate. How to approach your real estate strategy depends on whether you own the property or not. Here are a few options to consider.

Transfer your lease to the buyer

If you currently lease your office space, the buying dentist will typically assume your existing lease. An experienced commercial real estate advisor can assist you in this process.

Ideally, you would have also used a broker when you signed the lease. Brokers can help you not only negotiate favorable lease rates and tenant improvement allowances, but they can also help position you for a smooth future transition. One way they can do this is by including an assignment clause that doesn’t require the landlord’s consent. An assignment clause ensures that the landlord will release you from your obligations upon completion of the sale and limit any required fees.

Sell your building to the buyer

If you own your building, you may consider selling it to the new owner at the same time as the practice sale. This decision may limit the number of potential buyers, as not everyone will be financially able to buy both assets. By selling your property with your business, you ensure a clean break from all aspects of your practice. Note that there are tax implications from your building sale that you will want to discuss with your commercial real estate advisor.

Sell your building to a third-party investor

You can also choose to sell your property to a third-party investor. You can do this before your transition and lease the space from the new owners until you decide to sell. A sale-leaseback enables you to set favorable lease terms and retain control of your location. Sellers also can obtain up to 20 to 40 percent more value than they would by selling a vacant space.

When transitioning your practice, you can also sign a long-term, triple-net lease with your buyer and then sell your real estate to a third-party investor. You will face the challenge of finding two separate buyers but will have the benefit of maximizing value. After both sales are completed, you will then be able to step away entirely.

Lease your building to the new owner

If you’re not ready to sell your building, you may consider signing a carefully crafted lease with the new owners. In this scenario, the property becomes a source of income for you, and you continue to maintain responsibility for property repairs, operating expenses and rent collection. A property manager can help with these tasks. Over time, the property may appreciate in value, enabling you to sell the space at a higher price in the future.

Menlo is the only firm in Arizona that is equipped to handle the transition of both your business and your real estate. Our team works with you to determine the best transition strategy to ensure you receive the maximum value for your assets. Please contact our dental real estate team to discuss your property transition strategy.

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