All Forum Posts by: Kristy Oshita

Hi Joel thanks for you thoughts.  Good point about the cost per sq foot being different based on size of building & if they have an elevator.  I agree regarding the lease to make sure parent co. is on it.

Building 1: There are 2 structures for this one.  Structure A Is 5500 sq feet and 2 stories, and has the medical tenant at around $38/sq foot.  

A second structure (B) comes with it that is occupied by 2 tenants.  Those 2 tenants (in structure B) pay closer to market rate of about $15/sq foot.  That building is about 10k sq feet.  

I guess I'm realizing now that, that reduces my risk slightly since only half of the revenue is based on very much above market rents.  Thinking worst case, if structure A tenants went belly up, if I were to rent structure A at $25 sq foot, the cap rate then is about 8.5% which isn't bad.  (Of course vacancy and additional TI would suck).

I have been primarily focused on building 1.  Building 2 which is optional to also purchase, is large & has a lower cost per sq foot.  That's around a 9.5% cap rate.

Building 2: 3 stories, 40k sq feet, and I believe comes out to $8.50/sq foot.  Their lease ends in 4 years, but they are putting in 1.5 million in renovations right now. 

I'm not sure what the elevator situation is for either.  That's a good one to confirm.  I've spoken with the broker about 3 times and just want to go back prepared with my questions.

I think to Chri's @Chris Cambridge point, I wonder if I can ask for them to renew building 2's lease now?  

What do you think is the best way to ask for financials or some proof of ability to pay?  Would that be tax returns or something else?  Is that something I can ask for before I put in my offer?

Thanks everyone in advance!

Thanks for your thoughts.  That's what I was worried about.  I'm going to check if the first building is indeed a 2040 lease (they are open to selling them separately) and if I can get financials on the company.  I'll update you when I find out. 

Thanks Bennet.  There is a chance the broker said one building is actually leased until 2040 (I have to double check), and the other one currently going through $1M in renovations paid for by the tenant, which would lead me to believe they will stay much longer also.  
But exactly like you said, there is a risk that it will be tough re-leasing - if they leave such as by going out of business.

Also if I sell before the lease ends (lets say 3 years left), I wonder how much of a discount we would have to give to the next buyer if they felt leasing it at the same rate would be difficult.

Hi I'm a multi family investor looking to move to investing in medical office buildings.

I'm looking at a package of 2 100% leased stand alone medical office buildings that has a terrific cap rate, north of 10%. They are both leased to the same tenant.

It seems the owner has paid for a million plus renovation for one of the buildings and in return the medical office signed a long lease at a high cost per sq foot. 

There are a lot of pros, but there are some risks I'm trying to figure out how to assess such as the tenant and if the cost per sq foot is inflated. 

I was wondering if anyone had advice evaluating a MOB for these risks?

Here are the pros

• Tenant has been at the buildings 5+ years and pay their rent
• The building is in great shape
• It's a NN, so it has some expenses but they are small costs
• I believe the recently renovated building has 10 years left on their lease.
• The 2nd building is undergoing a million plus renovation, paid by the tenants.  I believe there is 5 years left on their lease.

The Risks/Concerns

• The medical practice has been sold to a larger new company maybe 1.5 years ago.  The acquiring company seems to be aggressively expanding & has credible founders & board of directors.  It seems like a risk and a benefit.
  
• I was told that the seller is NOT related to the ownership of the medical practice.  Perhaps this is true now post sale.  However from my google'n I think that the owner of the building, was the owner of the medical practices before it was sold. 
• I believe he is now part of the new company.
• A medical lease back is common, I'm just not sure why they would lie about the owners relationship (but perhaps I'm wrong).
• The buildings are near a medium sized city, in the suburbs about 25 min to downtown.  Does it matter that the towns they are not high income areas, median house hold income is $45-50k?  The buildings are located off a main road in a retail strip.

• Is it normal to get some type of verification that a medical practice tenant is credit worthy and their operational income supports their rental payments?  If so, is there a company to get this report or do I ask the broker for tax returns or P&Ls of the practice?
  
• Is it normal that a renovated MOB could rent for $34-$38/sq foot, while retail rent is more around $15/sq foot in that area? 
• I tried to find medical leasing comps but couldn't find similar buildouts.  Nationally I saw renovated space for more like $22-$25/sq foot I think? 
• MOBs and Commercial RE are based on it's income, but how much do you take into account the area?

• Is there anything else I should be looking out for regarding MOB investments?
  
  Thank you in advance.

@Andrew Postell Hi Andrew, thanks for your guidance. I’m a bit new here so thanks for your feedback about another forum.  I was definitely thinking meet up, which I’ll check out when COVID  eases up.  Great idea with Facebook groups, I’ll definitely check those out also. Thanks again!

Hi I just moved to Atlanta from NYC, so I'm new to the area. I'm looking to buy commercial multi family in the Atlanta area now, maybe 4-8 units. I have strong credit, I already have properties I own and a good paystub. I would guess the price range is $700k-$2 Million.Does anyone have any recommendations for good commercial lenders? If you happen to even have the name of someone you recommend that would be great. Thanks in advance for your help!