Dialysis Centre NNN lease

[Arshad Hussain]

Hello,

I am very close to buying a dialysis center with a long term tenant on NNN lease. This will be my first investment and the amount of investment is making me nervous.

The biggest concern is what if tenant leave. I am in process of hiring a lawyer to review the lease but i think no matter how strong or favorable a lease is, the tenant has option of declaring the bankruptcy and restructure their organization (this is just my opinion). 

I talked to a friend who is a nephrologist and he says it is very very rare that any dialysis center who is in business for more than 5 years would move because all the patients are in that community and majority of the patients are long term patients. If they move they will have to built their practice from zero which take several years. I have also verified that they have enough space in the current location to grow their practice.

The numbers work out for me. Any input from the members of this group will be highly appreciated.

Thanks

arshad

[Jacob Franz]

Hey Arshad, DaVita is a strong tenant that is unlikely to file bankruptcy. However, that doesnt mean that they will stick in your building after the lease has expired. A tenant can always find a sweeter deal down the street or decide that there is a better location elsewhere. I would pay close attention to the market lease rate for your building. For instance, if the current tenant is paying $25 PSF but the market rate for comparable properties is $15 PSF, then you are going to have a very hard time replacing that rent if your tenant leaves. Buy deals that are at or below market rent so that you can mitigate your downside risk of having a vacant building down the road. I happy to jump on a call to discuss in more detail if that would be helpful.