With a recession looming, our financial reality is rapidlychanging. Markets that were once regarded asnecessarily viable investments are now becoming more andmore precarious. A good example of that increasing risk canbe found in commercial real estate. Once, commercial realestate was regarded as one of the more profitable and reliablevenues for investment. Now, with lending drying up, commercialreal estate is no longer a sure thing.
Recently, however, a development group out of NorthCarolina has brought a new kind of commercial real estateinvestment to San Antonio. Founded in 1983, Oaks DevelopmentGroup is a different kind of company with a focuson medical professional officebuildings. What sets OaksDevelopment Group apart isfinancial stability unheard ofin today’s real estate environment.This stability is achievedby developing a symbiotic relationship with tenants andinvestors.
According to Max Oaks,president of Oaks DevelopmentGroup, the secret toOaks’ success is the way thegroup "shares equity among the building’s key players –tenant,developer and equity investors."
Here’s how it works: healthcare providers sign a ten–yearlease at competitive market rates in an Oaks building. Withthat lease, they – as tenants – split 50% of the building’s ownership.No equity required. A remaining 25% goes to equityinvestors, with the final 25% staying with Oaks.
"We believe in helping our tenants be successful and inseeing that we all make some money in the process," saysOaks. "We prefer to own a little piece of a lot of buildings,build long–term relationships and have our tenant partnersfeel good about it all," he adds. To wit, Oaks owns more than40 buildings in six states, worth in excess of $400 million.
"I like the fact that I get to go back to the roots of my practice,"says by Kalin D. Kelso, M.D., a board–certified orthopedicsurgeon, who recently signed on as a tenant/partner inPost Oak Center North, Oaks’ Austin, Texas building. "I’ll beable to provide a more personal touch and better quality ofcare for my patients in this new space," he added.
Under Oaks’ model, tenants have the opportunity to financeequipment for their offices as part of their lease agreement,giving them the flexibility to bring in ancillary servicesand profit centers.
"We find that the model we’ve refined over the years isbeneficial to healthcare providers and business owners inmany ways," says Oaks. "Inaddition to giving them backcontrol, we take away the dayto–day headaches of propertymanagement while creatinga separate source of incomeand tax advantages for ourpartners through the positivecash flow generated by thequality of the property."
In San Antonio, Oaksrecently closed on propertyat Hamilton Wolf and Floyd Curl, where they expect to govertical on a 110,000 square–foot building. The company isexpected to close on a second property in Westover Hillsduring the second quarter of 2008. Oaks’ properties are exclusivelymarketed in Texas by MSL Investments principalSarah Teel.
Oaks Development Group has created a strong and stablemodel that thrives by giving its tenants ownership fromday one without the requirement for equity. "However," saysOaks, "our real success comes from the long–term relationshipswe’ve developed over the years. We believe in startingeach project with a client and ending with a friend."
