Brent Simon describes how he is creating a way for DSOs to eliminate property management and dentists to sell their practices but be shareholders in a sale-lease-back scenario.
DSOPro: Tell us about your background and how you got involved in dentistry.
My father is a dentist, so I grew up with dentistry around the table. For a long time, I thought I would be a dentist. When I was 12, I’d help in my dad’s office after school or on weekends, making sterilization pouches, scrubbing instruments, etc. One day, he invited me into the operatory and said, “Do you want to see something cool?” And he did what I would later learn is reflecting a flap. First I felt very warm, then I felt very cold, and then I hit the floor.
About 10 minutes later, I came back “to” on oxygen and I thought, “Well, this isn’t going to be for me!” So, I focused on computer science in college and started my career in software development. I soon realized that wasn’t an exciting or passionate thing for me. It was a very head-down, separated-from-the-rest-of-the-world experience. And I love connecting with people.
So, I left and founded Best-Bite, which was a TMJ appliance company. We licensed and developed patents for TMJ appliances and grew that company to a significant size. Ultimately, it was acquired by Whip Mix Corporation. When the company was acquired, I decided to go to business school and get an MBA from Cornell University. After a few years in finance, I started to think dentistry really might be my highest professional calling.
At the prime age of 30, I decided to redo my undergrad, and be a freshman again at New York University. I was there for a while, but then I realized people were settling down, getting married, having children, and it would be a real struggle for me to make it through undergrad, dental school, and a residency and have a sustainable, balanced life at that age.
I was inspired by a conversation I had with Dr. Wayne Mortensen (founder of Mortenson Dental Partners), one of the greats in dentistry as a DSO leader and also as a human being. He said, “Brent, you think that the only person who practices dentistry in the dental office is the dentist. Not only is that incorrect, but it’s really narrow-minded because if not for the dental hygienists and assistants, the front desk, the office manager, the equipment service technician, the supply vendors, the people in accounting, the people in RCM, there really would be no dentistry being practiced today. Dentistry is a team sport. And if you don’t think you’re going to make it through dental school, then just find your way to get on a dental team.”
That was transformational for me. With that in mind, I leased a space in New Jersey, found a dentist interested in being an associate, got a second mortgage on my apartment in New York City, and built a de novo dental practice thinking, “Let’s see how it goes.” And it worked out great, so we got a second dentist and then the practice really got going.
I decided to open another de novo down the street with no investors involved, just a couple of small bank loans. That office did well, and again grew to two dentists, a bunch of hygienists, and a great staff. So, I decided to open another office. Next thing I knew, we were up to 10 offices, all de novos, a couple hundred team members and doctors, and we had a large group going. In the end, each office had three or four general dentists, two or three specialists, and four to six hygienists. And at last count, between all the offices, we had over 10,000 favorable Google reviews.
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We really focused on the organization being very mission, vision, and core-values driven. We would close eight days a year and let the team choose volunteer projects, like build a new playground at the YMCA, which we would fund and pay the team as if they were at work. Every month we also had team activities, like renting out a theater on a Sunday and inviting everyone’s families and friends to a movie night. We’d get a bunch of pizzas and have 500 people at the theater for a big party. It was amazing. We created a great culture.
We were very committed to encouraging the team to really get to know our patients. Team members might learn about sad or unfortunate things patients were going through. So, we empowered them to decide if they wanted to provide their dentistry for free that day and the patient would not receive a bill. The doctor was paid as if it was a fee-for-service patient. We never posted any of that on Instagram or Facebook. This is the first time anyone outside of our organization has heard that we did that! That helped create a really special environment and culture and made it an amazing place to work.
Over time, I saw the consolidation of dental practices and how that universe was changing. In 2022, we decided to merge with Dental365. We’d received many unsolicited offers to acquire our practices, which we honestly never considered, but we really liked Dental365. The defining moment we decided to merge with them was when Dr. Michael Fleischer, the Chief Dental Officer, asked if he could look at our patient charts. And he literally did. We looked at crown seats, endos, diagnoses, and treatment plans.
It was the first time a DSO asked to look at our quality of care instead of just our P&Ls. As a group that was not insurance driven but was patient-care and patient-outcome driven, that really opened my eyes to what group dentistry could be instead of just high volume. It was like being part of a peer organization committed to elevating the level of care and professionalism of the providers. I was honored to merge with them and for them to be the stewards of my legacy, and our patients, practices and teams. It’s been a couple of years, but I’m still involved with Dental365. It’s worked out great.
Along the way, in parallel, I had been investing in real estate. When I was a kid, a friend’s dad had a company that made brass beds, and for some reason the industry wasn’t doing very well. So, he came up with the idea of chopping up his factory into smaller spaces and leasing them out and I thought, “Wow, real estate is really interesting.” So, I’ve been doing that in the background for years. Today, between general partnerships, limited partnerships and projects I’ve led, I have about one million square feet of real estate. That includes ground-up multifamily developments, large, anchored shopping centers, commercial high rises, and things like that. I’ve been very lucky to have two parallel careers.
DSOPro: Tell us about launching the Dental Real Estate Syndicate.
After transitioning to Dental365, I had a lot more free time than when I was sleeves rolled up in morning huddles at 6:30 a.m. and helping check out the last patient at 8:00 p.m. I wanted a way to combine my two professional interests, dentistry and real estate, and I saw something changing on the landscape. In the past, when dental practices were bought and sold, it was usual and customary for the real estate to transition with the practice. And as you know, dental practices become second- and third-generation spaces and the facility could be a dental office for 50 to 75 years.
But as DSOs became the primary acquirers of dental practices, because of the bank covenants and the mandates of private equity (PE) investors who support these organizations, buying real estate is not in the scope of what they do. It has a different return profile. It is not in the investment mandate of the healthcare fund. They don’t want it filled with real estate. And, when you own a lot of real estate, it’s very heavy on the balance sheet, which limits your lending capacity to acquire more dental practices and puts you at risk of foot-faulting bank covenants due to global debt coverage ratios and those kinds of calculations. So, now the primary buyer of dental practices doesn’t buy the real estate.
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The dentist selling a practice then must figure out who will buy the real estate. The DSO may not be thrilled to have the seller dentist as their landlord, that’s a complicated relationship. When it is time for a lease renewal or if there is some friction in the landlord-tenant relationship, it can be uncomfortable when that person is your dental partner or your dental associate. As a result of the confluence of these things, there needed to be a different buyer for the real estate.
In addition, when DSOs are buying the practice, they offer a value for the practice. Let’s say $2 million. In the old days, the dentist thought he or she was selling their practice for $2 million and their real estate for $1 million. Now, they’re sort of stuck because they sold the practice separate from the building. I think DSOs would benefit from a collaborator who is a professional institutional real estate investor who can quickly diligence a property, put together an offer in 24 hours, and reliably close quickly. This would allow the selling dentist to sell both their practice and the real estate.
Our goal in creating the Dental Real Estate Syndicate was to build an organization that has a couple of facets. One is we offer the best price for the office either on the front line with the DSO and buy the real estate concurrently with their practice purchase, or the DSO can write a single check for $3 million knowing they’ll get the practice and we’ll get the real estate and that the landlord-tenant relationship will be between the DSO and us. We do not buy the practice or get involved with practice operations.
Another facet is in the non-DSO world. Many solo practice dentists own their buildings and don’t enjoy being landlords. There can be a lot of friction between administrative, maintenance, and operational responsibilities. They may also find the building’s value has appreciated over the years and while they love the space, they’d rather have that money to pay for their kids’ college, buy stocks, pay down debt, etc. So, in the non-DSO transaction situation, we tell dentists, “We can buy your building and give you a long-term lease with lots of options. You can have the cash today and just be the tenant.” That really speaks to a lot of people for many reasons if it’s a good fit, timely, and convenient.
DSOPro: How long have you been involved in dental real estate?
I have been investing in real estate for a very long time. I have a very large portfolio, and between all the people I’m working with on this project, we have 3 or 4 million square feet of real estate. We’re all very seasoned, professional real estate operators. But the idea of creating a dental-specific real estate fund is unique, and new to us.
Here’s the idea: the institutions that buy real estate at volume, such as the healthcare real estate investment trusts (REITs) or the healthcare real estate PE funds, like buying large boxes of real estate, 10,000-square-foot surgical centers, 30,000-square-foot hospitals, or even larger because they can acquire a lot of square footage and net income in a single transaction. Their interest is really to acquire cashflow. They haven’t been acquiring the typical dental office because it’s easier to buy one 30,000-square-foot building than 10-15 2,000-square-foot dental offices.
We are creating an exclusively dental-only real estate portfolio. Our thesis, which I think will predictably and reliably follow through based on talking to investment bankers and other folks in the industry, is that we will create a large portfolio of several hundred million dollars’ worth of dental real estate and the sum will be worth more than the parts when a healthcare REIT or healthcare-focused PE fund acquires that portfolio. And we are inviting the dentist to become a partner with us and go on the journey together when we buy the buildings, which is unique.
We will give the dentist a lot of cash in closing, but we also invite dentists to roll equity and become shareholders in the fund. The dentists will also receive a dividend. And ultimately, when the fund sells as a collective, as a shareholder the dentist will get what we call the “second bite of the apple.” We feel confident that the dividends, plus the initial cash at closing and again from the sale of the fund, will vastly exceed what a dentist might achieve from the sale of an individual building.
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Another thing is, I wear a different kind of hat depending on the type of property. As the landlord of multifamily buildings, I’m very concerned about creating an excellent community, making sure neighbors don’t have friction between them, etc. We make an effort to foster that community. When I’m the landlord in a shopping center, I’m very concerned that the parking lot is in good condition, the lights go on at night, snow is removed, and that the tenant mix is favorable and supports each other’s businesses.
When I’m the landlord in a dental office situation, my concerns are different. If the water pressure drops in a shopping center, it may take a couple extra minutes for the toilet to fill after flushing, or turning the knob further to get water in volume for washing your hands, but it’s not the end of the world. However, in a dental office, if the water pressure is depleted, that means no water is coming out of the high-speed handpiece or the air/water syringe is dry. That is a very serious issue, and that office is nonfunctional for the day. So, the idea of having a dental-friendly or dental-empathetic landlord is a material thing. Most dental tenants have had moments when their landlord didn’t really get why certain things are so critical to the operations of a dental office. By creating this portfolio after being a dental practice operator for more than 15 years, our organization can be a really supportive and collaborative landlord for dentists.
DSOPro: What other advantages are there to dentists who sell their building to your organization?
We are looking for great dental practices with beautiful facilities. We want a beautiful building with a great tenant who’s a reliable, high-quality, respected community member running a good practice. The practice buyer, which could be a DSO, continues to operate the practice. It could also be an independent group that wants to transition out of building ownership but keep practicing within it. The kind of leases we put in place could give the dentist control of the space for decades.
Part 2 of this article will appear in the May 16 edition of DSOPro.
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Brent has two professional passions: dentistry and real estate. Dental Real Estate Syndicate combines the two, allowing him to achieve his highest professional calling.
After completing his MBA with a focus on real estate finance at Cornell University, Brent founded Dental Care, a dental support organization that constructed healthcare facilities and supported hundreds of dentists and team members in multiple states, and whose mission was to “Improve the quality of our patients, teammates, and community member’s lives through dentistry.”
Fascinated by the design, construction, and operation of all types of facilities, Brent was the founder of East 11th Partners, a real estate investment company. As CEO, Brent was responsible for over one million square feet of property investment, including office buildings, shopping centers, apartments, and multifamily development. East 11th Partners has been recognized for leading the creation of spaces that are environmentally sustainable while generating meaningful returns for investors.
Brent is a member if YPO (Young Presidents Organization) and a two-time recipient of Inc Magazine’s “5,000 Fastest Growing Companies in America” award.
Dental Real Estate Syndicate
Dental Real Estate Syndicate is a well-capitalized group of dental and real estate professionals that unites the expertise of both specialties to offer the advantages of real estate investing at scale while ensuring private dental practices and Dental Service Organizations (“DSO”) maintain long-term control over their operating location. Dental Real Estate Syndicate unlocks capital for these dental real estate owners and eliminates their property management responsibilities, while the diversified portfolio provides tax-advantaged dividends and the opportunity for appreciation with lower risk. For additional information on Dental Real Estate Syndicate please visit DentalRealEstateSyndicate.com.
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