Capital Markets

Capital Markets: Manage your loan’s interest rate risk

Capital Markets: Manage your loan’s interest rate risk

There are ways borrowers can protect themselves from potential rate increases By Erik Tellefson For a relatively stabilized asset class like medical office buildings (MOBs) – where the primary increase in cash flow is often via rental escalators – it is important to be able to manage interest rate risk while still being able to […]

Capital Markets: Consider risk-adjusted pricing

Capital Markets: Consider risk-adjusted pricing

Lenders that offer it can be a good option for medical office building financing By Erik Tellefson Risk-adjusted pricing is pricing that is commensurate with a lender’s level of perceived risk in a transaction. Typically, the lender’s level of perceived risk for the purposes of risk-adjusted pricing is related to leverage or the amount of […]

Capital Markets: Better together

Capital Markets: Better together

The advantages of loan consolidation through refinancing and recapitalization By Erik Tellefson Thanks to the many disparate sources of capital now available to medical office building investors, borrowers can often find themselves with multiple individual loans, frequently from different lenders. Often an investor will use a different financing source for construction loans, a second financing […]

Capital Markets: The importance of basis in MOB loans

Capital Markets: The importance of basis in MOB loans

Understanding the implications of property age, location and specialization By Erik Tellefson Commercial real estate wisdom generally states that “there is no bad loan, only a bad basis,” and that still largely holds true—especially in medical office lending.

Capital Markets: MOB expense reimbursements

Expense reimbursements in leases have an impact on loan underwriting, terms By Erik Tellefson Medical office building (MOB) leases include expense reimbursements, which is the amount or percentage that the lessee pays the landlord for building expenses. The amount and type of the reimbursements are effectively whatever can be written into the lease. However, there […]

Capital Markets: MOB bridge loans provide flexibility

Shorter-term bridge lending options are an important borrower consideration By Erik Tellefson Bridge loans, as defined for this article, are typically shorter-term (three years or less) financing instruments that allow for a particular borrower or asset event to occur prior to a sale or more normalized financing.

Capital Markets: MOB equity recapture opportunities

Capital Markets: MOB equity recapture opportunities

Borrowers can benefit from recapitalizing via debt on under-levered assets By Erik Tellefson Medical office building (MOB) loans that reach maturity or their freely pre-payable period are often under-levered.

Capital Markets: MOBs with a high number of tenants

It’s important to use a lender with medical office experience when financing By Erik Tellefson Medical office buildings (MOBs) with a high number of tenants (average 1,500 square feet or less per tenant) are often found in metropolitan statistical areas with high population densities where space is at a premium and the subject tenancy utilizes […]

Capital Markets: Financing higher-acuity MOBs

Selecting a lender with healthcare expertise is paramount for those properties By Erik Tellefson In the current healthcare real estate landscape, medical office buildings (MOBs) that contain a higher acuity component, such as an ambulatory surgery center, surgical hospital or linear accelerator are becoming more prevalent.

Capital Markets: On-balance sheet fixed-to-float

Loans with these terms help to align the loan to the borrower’s business plan By Erik Tellefson A borrower’s business plan for an individual asset that requires flexibility after a certain period of time, coupled with the borrower’s desire to manage their interest rate risk, is a relatively common occurrence with medical office building (MOB) […]

Capital Markets: Extension options provide flexibility

Loan terms with extension options make it easier for borrowers to manage timing By Erik Tellefson The length of time between a loan closing and its maturity (loan term) is an important consideration when evaluating lending options. A loan term that is too short may not allow for the borrower to execute on its business […]

Capital Markets: ‘Lease-up’ MOBs have loan options

Capital Markets: ‘Lease-up’ MOBs have loan options

Financing can be structured to fund tenant improvements, leasing commissions By Erik Tellefson There are various financing opportunities depending on the stage of a medical office building (MOB), whether during construction/renovation, “lease-up” or stabilized. For example, MOBs with in-place tenancy of 65 to 80 percent, and a lease-up component for the remainder of the space […]

Capital Markets: Assumable loans increase options

A lender’s flexible structure and approach should be important for borrowers By Erik Tellefson Assumable loans generally allow for the debt to be assumed by another party, typically at the lender’s discretion and in exchange for an assumption fee. While an assumption provision may seem insignificant relative to more key loan terms like rate, term, […]

Capital Markets: Medical office building single assets versus MOB portfolios

An aggregation strategy can add diversification that is often accretive By Erik Tellefson Medical office buildings (MOBs), likely more so than many healthcare real estate assets, are often a single-asset real estate class. MOBs are often sold, purchased and financed as single assets, with the ultimate aggregation strategy goal of the purchaser being to put […]

Capital Markets: Financing ‘trophy’ MOB assets

It’s important to consider a lender’s expertise among other factors By Erik Tellefson The definition of a “trophy” medical office building (MOB) asset is relatively hard to pin down. But real estate professionals typically consider trophy assets as MOBs with large square footage (over 250,000 square feet), strong tenancy, solid space usage, and striking visual […]