Ben Reinberg is the CEO of Alliance Consolidated Group, whose portfolio includes over $500M in medical, retail, industrial, and office properties. In this episode, Ben discusses the ins and outs of investing in medical and veterinary properties, how he does due diligence on investments, and what his new fund is targeting in 2023.
Ben Reinberg | Real Estate Background
- CEO of Alliance Consolidated Group
- Portfolio:
- Over $500M in AUM
- Based in: Newport Beach, CA
- Say hi to him at:
- Best Ever Book: The Power of One More by Ed Mylett
- Greatest Lesson: Make sure you secure long-term financing and have flexibility in your investments.
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TRANSCRIPT
Slocomb Reed: Best Ever listeners, welcome to the best real estate investing advice ever show. I'm Slocomb Reed and I'm here with Ben Reinberg. Ben is joining us from Newport Beach, California. He's the CEO of Alliance Consolidated Group, which raises capital from accredited investors. He has a history of acquiring office, industrial and retail properties. His current emphasis is on medical and veterinary real estate. They currently have a portfolio of over $500 million in assets under management. Ben, can you tell us a little bit more about your background and what you're currently focused on?
Ben Reinberg: Well, Slocomb, thank you very much for having me. It's such a privilege to spend some time with you and talk commercial real estate. There's nothing better in the world from an asset class than commercial real estate. So it's something that I love, and that I've spent almost 30 years doing.
I started this company while I was young man. I've built millions of square feet of office and industrial in my career. I'm an office, industrial and retail expert. We've bought and sold hundreds and hundreds of millions of dollars of real estate. We currently have about a half a billion, and that's going to grow significantly into the billion shortly over the next three years. And what we do now is we own and manage our own portfolio of medical and veterinarian properties throughout the United States.
So that's a little background on me. I started when I was in my early 20s, Slocomb, I'm now 53 years old, I'm still a young guy, and I've changed a lot, and my leadership team is outstanding. They have 200 plus years of experience in commercial real estate. So I'm very fortunate I have wonderful people that work for me, and they inspire me and help me grow as a person. I just really love what I do, and I think I have another 30 years left in me.
Slocomb Reed: Nice. Your bio begs a few questions, but the first one I want to ask is why focus now on medical and veterinary real estate?
Ben Reinberg: Well, I don't know if it's a now equation. I think it's more of 18 years ago we took a step back and we took a look at what was going on in the market, and then the recession was looming four or five years later. And we looked at and we said "What can we do to produce consistent cash flow and provide upside to our investors?" And one of my slogans is "The human body is never going out of style." And when the human body has never gone out of style, what tends to that? Medical. And that's when we started. So we started with various tenants, buying, developing, etc, and had tremendous success. And we carried that through to today.
Four years ago a colleague of mine called me and said, "Ben, you really should look at the veterinarian space. It's growing. A lot of households are having pets in their household." It makes a lot of sense. So we got into that business, and it's been wildly successful as well. And today, as we speak, we continue; we just launched a brand new $50 million equity fund for medical and veterinary properties, and we're probably going to grow that to 100 million, and then we're probably going to look at opening up a industrial fund, since we have a lot of industrial experience as well.
So a lot of great things happening at Alliance Consolidated, my company, and I'm really excited. We're adding new employees, we're doubling down on investments, and I'm just really excited for this year and the future.
Slocomb Reed: Nice. So it was pre-Great Recession that you guys decided to focus on medical, and then veterinary came along. And there are, I'm sure, some natural corollaries between the two. Human bodies never going out of style... Can you put some numbers behind why that focus made sense? Is it because picking one particular niche made it easier to owner-operate such a large portfolio? Or is it simply that you saw that niche outperforming the other ones available to you?
Ben Reinberg: We picked that niche a long time ago because we saw opportunities. We knew that people are going to need medical services. The government was talking about more looking at a plan like they have in Canada, socialized medicine at the time, and we looked at that and said there's a real opportunity. There's a lot of turbulence and chaos in the market and medical office space when we started, and look, over time now it's the hottest asset class, probably in the world, but especially in the United States.
So we just kind of saw the trend and said, "This is a good niche for us to look into." Our tenants have a large retention rate of staying at the property, which is great; it provides stability and cashflow. And we create upside through our expertise.
Slocomb Reed: Tell us about that expertise. What does it take to specialize in medical and veterinary? Are there high barriers to entry? And I don't just mean capital-wise, I mean operationally, what are the barriers to entry to that real estate?
Ben Reinberg: Yeah, just to get into the real estate general scope is that every niche in the medical space has different licensing laws, different metrics of how a tenant's performing... So you really have to dig into the business. It's not just the real estate that we underwrite, it's also underwriting each business that's within the property.
Slocomb Reed: Ben, I want to ask about your underwriting expertise here. Let me phrase that question this way... I'm an apartment investor; the majority of our listeners are involved in apartment investing in some scale. So we know how to underwrite a property; we may not understand how to underwrite a business that is operating out of our real estate. What advice do you have for me if I decide it's time to jump into medical and veterinary real estate when it comes to underwriting businesses and underwriting the real estate?
Ben Reinberg: Well, you need to understand financial statements. That's critical. You need to look at historical financial statements of every tenant. Once you understand a P&L and a balance sheet, and the different ratios and metrics that create success in a business, that's when you can really start honing in on an asset class like this. Just like anything else; same thing with industrial - you've got to understand the financial statements. So it's no different.
Slocomb Reed: Specific to the medical industry, what sets apart the way that you read those income statements and balance sheets from the way that you would for other businesses?
Ben Reinberg: Well, like any other business, it's pretty comparable, Slocomb. I look at liabilities, I look at what type of retained earnings they have in the company, I look at historical trends in revenue, and what their expenses are. I look at their payroll, I look at, historically, was there any growth? Did they take on more debt because they invested in more equipment? So we look at all the respective line items on our income statement. And then we look at the balance sheet, and we see what's going on. What kind of reserves do they have? What has been their performance historically, over three to five years?
Slocomb Reed: This is all with regards to vetting your tenants.
Ben Reinberg: Yeah. Also, it gives you the ability to assess risk, and how you price your investments.
Slocomb Reed: What about the real estate itself? You mentioned all of your construction experience... Do you always build new? Or are you retrofitting buildings to meet the needs of medical and veterinary tenants? Or are they doing that themselves?
It runs across the board. We buy existing assets, sometimes we'll build, sometimes we'll retrofit... We call it doing a build out. We might reconfigure a building, we might add space to a building... We do all the above. We're like a seven-tool player, my company.
Slocomb Reed: Ben, I've personally acquired some fairly niche real estate a few times, and I have some friends here in Cincinnati who've have acquired niche real estate as well. Former elementary schools, churches, warehouses that were all going to need to be repurposed in order to be viable commercial real estate for some business to rent, or in order to turn around and sell that to an owner-operator out of their space. I'm asking this question because I've heard a variety of answers along the way. When you find an opportunity, whether it is real estate that you can redevelop, tear down and rebuild, or something that you can retrofit, when you are doing your due diligence on specifically the real estate, at what point are you looking to find your ideal tenant? Put another way - when you're acquiring real estate for the sake of tenanting with medical or veterinary purposes, are you getting the tenant first, and then looking for the real estate? Are you using your due diligence process to also vet tenants? Are you waiting until you've closed, and then building out to the specifications of a new tenant you'll go and find after you close? Within the acquisition of the real estate and the acquisition of the tenant, how do those things meld?
Slocomb Reed: Well, to me, it's just really straightforward. We can do all the above, but generally speaking, we'll buy an existing asset, especially for our new fund we just launched. We're buying existing assets. If we need to do some work, we will, but generally, there's tenants in there; there might be a vacancy. So most of our buildings are medical buildings where the tenant's already in place. Maybe there's some leasing that needs to be done. So if we do have a vacancy, and we need to retrofit or do some build out, we will accordingly, to customize to that particular tenants needs that's coming in.
Slocomb Reed: How much of your real estate is single tenant and how much is multi tenant?
Ben Reinberg: I don't know the exact ratio. That's a tough one. But we have a mix of both.
Slocomb Reed: Gotcha. I was envisioning - of course, my industry not being yours, but I was envisioning almost exclusively single tenant space. What do the multi-tenant spaces look like?
Ben Reinberg: What we do is anything is that you and your family would go to for medical services, that's what we own. So those are the uses in the property that we own, and that you can expect, that we'll buy within our new fund; you'll have the ability to see a wide variety of different uses in the medical office space and in the veterinary office space.
Break: [00:11:24.06]
Slocomb Reed: Transitioning the conversation a bit here, Ben, I know that you have acquired through syndications and funds... Are you targeting a defined hold period, like five years? Are you targeting an indefinite hold period when you acquire?
Ben Reinberg: Yeah, generally speaking, we -- our funds for example, even our syndications, we look to be in and out of investment within five years.
Slocomb Reed: Within five years. So speaking globally, not specifically to your investors, but globally - is there a targeted IRR or equity multiple then that you're shooting for?
Ben Reinberg: Well, generally speaking across all the asset classes, we're probably in the upper 20s in our career, which is spectacular. In medical office, we've averaged mid 20s IRR in our career. And with the new fund that we've just launched - and if any of your listeners want to invest in our new fund, feel free to reach out to us - we believe we're going to be probably somewhere between upper teens and low 20s on an IRR basis at the day. And that can increase too with what we're seeing in the market, because there's a lot of buying opportunities that are going to be forthcoming.
Slocomb Reed: We're wrapping up the first quarter of 2023 at the time of this recording, and you are setting up a fund now. What are the trends that you're seeing in your industry when it comes to transactions, sales right now, and where and what is it that you are targeting specific to 2023? Are there particular metro areas, and why would it be those metro areas? Are you more focused on suburban, rural, urban etc?
Ben Reinberg: To answer your question, our fund is set up, we have equity are a pouring in, we've already acquired assets within the fund. As we expand, we find a lot of off market opportunities. We invest, Slocomb, in what I call the smile states - if you drew a smiley face from Virginia all the way down - and then there's other states as well; Mountain West, parts of the West Coast we invest in as well. So we invest in a lot of the Southeast, Mid-Atlantic, South and Southwest throughout the United States.
Slocomb Reed: The smile states. That makes a lot of sense. Ben, within those smile metro areas, what locations most excite you, and then what property types or property sizes most excite you from an acquisitions perspective?
Ben Reinberg: Well, we look at 50,000 people in a five-mile radius, we look for population growth, we look for good healthcare policy markets, and we look at certain metrics that meets our needs, especially for this new fund. So when we look in these areas of the country, like the South, this is where population growth is. And population growth is great, because it creates job growth, which is great for the medical office industry, as well as the other asset classes in commercial real estate.
Slocomb Reed: So is it really just about how many people live within a five-mile radius? Are you looking for higher income, higher net worth areas? Would you call it suburban? Are you more focused on more densely populated urban areas?
Ben Reinberg: It just depends. It could be in the suburbs, it could be in the city, which is urban, and it depends on the asset class. Every deal stands on its own. So the reason why the 50,000 population radius and five-mile radius is important is because we look for density; to make sure there's enough patients, there's enough demand for services that will help our properties thrive, Slocomb.
Slocomb Reed: And then what about property size? Do you have a particular target? I'm envisioning a standalone dental practice, or an orthopedic surgery facility that could be 100,000 to 200,000 square feet. Are your acquisitions right now running the whole gamut, or are they focusing larger or smaller?
Ben Reinberg: Well, we look to diversify; especially with this new fund, we're gonna diversify. So generally speaking, you look at buildings that are 7,000 square feet as minimums. And that's generally the spot we play in. So usually the purchase price ranges from three to 30 million per acquisition.
Slocomb Reed: Last question here, Ben, before we transition the episode... Ben, going back to treating me as if I were going to be brand new to your industry. Let's say I've found a property that is fairly well suited to house a variety of niches within the medical space. Does it make sense for me as the real estate investor to be looking for someone who serves a niche that is not currently being served in the area? Or does it make sense for me to bring in something very similar, if not the same as another competitor in the area? Someone or a practice that focuses on a particular kind of surgery, for example. Is it better to be the only show in town, or is it better to be part of a cluster of practices that are providing the same type of service?
Part of the reason I ask, Ben, is that if you look at Cincinnati from a geographic perspective, a lot of our hospitals are clustered in the middle of town. So within the five-mile radius that you were mentioning, I could name eight hospitals, if you're looking at Uptown, or the Clifton area. And then you end up going almost out into the suburbs in every direction before you find another hospital, because they're all clustered, and then all of the medical services surrounding those hospitals are clustered there as well. Would it be better for me to be looking for medical real estate there close to all of the hospitals, where all of the other medical real estate is? Or should I be looking at a place that from a geographic perspective is underserved with medical real estate? Does that question makes sense?
Ben Reinberg: Yeah, let me just take a stab at it. So we buy stuff near hospital, on hospital campus, as well as off hospital campus. Slocomb, it kind of just depends on the need, the demand, and the supply. It's all based on economics. And when you have tenants that serve a purpose in the community, that's what we look for - tenants that can build deep roots, or have deep roots in each of their respective communities.
Slocomb Reed: What are the biggest mistakes that you've seen investors make when acquiring medical and veterinary real estate early on?
Ben Reinberg: It's a great question. There's a lot of reasons. It's not having enough reserves; not underwriting the tenant properly; not understanding the dynamic of the physician group, if it's a physician group. It's really just not underwriting it properly and doing this respective due diligence. Now, anything can happen, and things can change, and change instantly at times; partnership disagreements, you name it. But at the end of the day, you've got to really dig in and do some deep-dive underwriting and due diligence on each of your investments.
Slocomb Reed: That makes a lot of sense. Ben, are you ready for the Best Ever lightning round?
Ben Reinberg: Yeah, sure. Go ahead. I'm ready.
Slocomb Reed: What is the Best Ever book you've recently read?
Ben Reinberg: I am reading right now "The power of one more" by Ed Mylett. I think that's a fantastic book, if you haven't read it. I'm in the middle of it right now and I really enjoy it.
Slocomb Reed: I've read it recently, actually, and I've been listening to his podcasts as well. Ben, what is your Best Ever way to give back?
Ben Reinberg: To serve people. What I do is I mentor a lot of people in the business. One of the things I've been doing, Slocomb, is teaching commercial real estate as well, to impact and create an impact in people that want to build wealth and learn how to invest in commercial real estate.
Slocomb Reed: Nice. Specific to your medical and veterinary real estate investing, Ben, what is the biggest mistake you've made, and the Best Ever lesson that resulted from it?
Ben Reinberg: I would say the biggest mistake I made is maybe a time not getting long enough financing on a deal. And markets have changed, and interest rates change, but... That was a long time ago. I think that's something I've learned. And then also making sure I have flexibility and put low leverage on investments.
Slocomb Reed: Yeah, it's an interesting time for you to say that you've struggled with not securing long term financing a long time ago. We're experiencing the interest rate hikes that we are now, and I know a lot of people are feeling that contemporarily, in their current investments. On that note, Ben, what is your Best Ever advice?
Ben Reinberg: My Best Ever advice is to be the best version of yourself. Work on yourself. Work on the inner game that goes on inside you every day, because that's your biggest competition.
Slocomb Reed: Awesome. Ben, where can people get in touch with you?
Ben Reinberg: Oh, that's easy. To see our website, go to alliancecgc.com. Or they can go to benreinberg.com for more information about me and my personal brand. They can also go to my podcast, "Ben Reinberg. I own it." We have celebrities and ultra high net worth folks from all over the world on our show. Incredible guests. It's just growing like a weed, our show, and I'm so excited for it.
And then I'll be teaching commercial real estate as well, and speaking around the country, and even around the world. So feel free to follow me on all the different social media platforms. Instagram, I'm @therealBenReinberg. As well I'm on TikTok, Facebook, you name it; every platform. That's the best way to engage with me. If you're interested in investing in the brand new Alliance Medical Property Fund, go on our website and reach out to us. If you'd like to build wealth, safe, secure and profitable returns, there's no better asset class than what we do.
Slocomb Reed: Awesome. And those links are in the show notes. Ben, thank you. Best Ever listeners, thank you as well for tuning in. If you've gained value from this episode, please do subscribe to our show. Leave us a five star review and share this episode with a friend you know we can add value to through our conversation today. Thank you, and have a Best Ever day.
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