How stupid/illegal/impossible is my idea?

Question

Basically my idea is as follows:

Project
The project will be a dental practice in a fairly wealthy suburban area which is projected to have good growth over the coming decade. The practice will be aesthetically pleasing inside and out- not the normal strip mall space with some operatories and an X-Ray machine stuck in there. The development will either be ground up (working with a contractor) or a building will be purchased and aesthetic improvements will be made.

Prospective tenants
Anyone with a DDS/DMD will be considered, but younger dentists fresh out of school (there is a dental school in the city) will be targeted. Dentists as far as I can tell are near perfect tenants as far as commercial real estate goes. Dental practices have some of the absolute lowest failure rates of any startup and dentists are necessarily educated and intelligent. Average income ranges between $150k-$400k+ depending on specialty. Basically, they're going to be writing the check every month unless they lose their hands in a ski accident or something.

Prospective agreement
15 year triple net lease based on a flat rate+ a small percentage of gross monthly sales.

Funding

The funding will come from equity raised via intrastate private placement. I'm thinking of two classes of shares, A and B, with total equity split between the classes by a ratio of lets say 15-85. They would differ in the following way:

A- The equity class transferred to me or a company wholly owned by me. Will represent my take of the cashflow for piecing everything together and dealing with tenant relations.

B- Equity class sold to a small number of private investors via private placement. The classes will be structured such that class B gets some minimum amount each month before class A gets anything. In addition, missed monthly payments must be payed to class B in subsequent periods before class A receives any.

In addition, a clause will exist which allows class B equity holders to sell their stake 10 years after the initial investment to myself or a company wholly owned by myself at a predetermined cap rate which fluctuates only with the interest rates at that point in time. The goal here is that it gives them very little to fear when it comes to risk related to lease expiration. The lease will be 15 years, their sell option will be at 10.

I believe this all complies with SEC/blue sky regulations.

Investors

My hope is to find private investors through self directed IRA company networking events and things of that nature. Small licensed "finders" would also be considered, but I doubt that they would do deals of this small size, and the fees would probably be sizable. (And it probably complicates the "not getting prosecuted for arcane securities law violations" thing) If you have any better ideas for this bit i'd definitely appreciate your advice!

Thank you everyone for taking the time to read all of that.

Aaron Mazzrillo · Answer

Every business started with a dream. It sounds like you have a general idea of what you want to do. I am sure there are lots of little details that will need to be worked out. If you focus, build a good presentation, and target the right audience I am sure you will get this off the ground.

Like the late, great Gary Halbert used to say, "You are one sales letter away from being rich."

Don Drofed · Answer

Limiting clientele like that isn't really a good idea in my opinion either. It's a bit like shooting yourself in the foot.

Don Konipol · Answer

They all seem to go quiet when asked how much money THEY are contributing!

Steve L. · Answer

Can you outline what you are providing beyond a typical dental lease-up scenario?

It seems like to me: you are picking the location? Factoring in the cost of equipment price into the lease?

The advantages this provides: you know your client, their start up cost is lower, a lot let decisions are required.

From my perspective the downsides: you are outlaying money for equipment that an expert should pick, you are limiting your clientele to dentists, your option is going to be compared to a typical lease up scenario with a lot lower of a monthly cost (TI, equipment is burdened by them), are you responsible to maintain equipment, your vacancy time could be huge?

I think the only way this makes sense is if you bought a commercial building that was previously a successful dental office and has all the equipment and TI in place that you has no basis in.

Don't you think someone would loan the dentist money before they would loan you the money?  I think it's a risk, if it takes you a year to find a tenant what is your plan B?

Kevin Yeats · Answer

Looking only at the cost side, how much will this project cost to get started through opening the doors (neglect the cost of raising the money with through a private placement or through a bank loan or borrowing from Uncle Ray and Aunt Tilly).

How much are YOU contributing?

Joshua E · Answer

Quick bump, sorry for the long OP!