All Forum Posts by: Mostafa Koperly

@Mostafa Koperly what is the underlying property asset like?  is it in a high visibility area?  part of a current medical campus?  is med basically its only use case for filling with new tenants?  What kind of exclusives in the area does the current tenant have?  

In my experience strictly med buildings are generally developed in the same way as part of a campus or off the path a bit from the main retail corridor, so it really is only suited for that use.  We do Urgent cares all over the county and get pitched med office spaces all the time, and none fit our profile for visibility, for our use at least, only because we follow a more "retail" modeled approach to site selection, given the business type.  

My point being, whats the plan for after the current tenant leaves?  whats other use cases, if any?  Those are going to be my biggest questions when looking for something like this on or off the market.

Hi Mostafa,

The medical building opportunity at an 8% cap rate with an NNN lease sounds promising, especially given its proximity to major hospitals like Memorial and Kaiser. Here are some key considerations:

The Tenant Stability

• MSO Growth: The MSO is expanding westward and has acquired multiple businesses, which suggests growth. However, the absence of a renewal option in the lease could indicate uncertainty or strategic flexibility.
• MSO vs. DSO Trends: Like DSOs, MSOs often prefer continuity for patient retention, but they may be more flexible depending on market dynamics. Assessing how critical this location is to their expansion plans is essential.

The Investment Considerations

• Lease Expiry: With five years left on the lease, your strategy should account for potential vacancy risk. It could be worth engaging with the MSO or the owner to explore adding a renewal option or gauging the MSO’s future plans.
• Due Diligence: Investigate the MSO’s financial health and west coast strategy to better understand your risk exposure.

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@Mostafa Koperly

MSO's like DSO's look for opportunities to exploit nationwide because they are backed by PE.

@Mostafa Koperly Yes, banks will certainly lend on this. Many alternative lenders have internal guidelines that prevent against lending on assets with any commercial components. You don't often see this with banks, although their guidelines usually differ and in most instances offer lower leverage. Before you move ahead is there a particular reason why having this commercial space is important to the project or are you building this design because that's what the zoning requires? If its solely due to the zoning is this in a location where the commercial use makes sense? If the property is not on a main commercial corridor within the market it can be one of the best hardship cases to seek a use change variance. This is circumstantial and market dependent but something you should explore if this land falls under this category. I do this frequently in Philadelphia where I am located.

Another item to factor is cost. The building code will likely differ if this is a mix-use building. Fire rating, mechanical equipment and materials often change and are more expensive. Make sure this is factored in. In short, mix-use development requires a close eye on underwriting. I see a lot of investors get burnt because they are not aware of all that mix-use development entails. It's very different than residential.  

@Mostafa Koperly..I would agree at face value with @Robin Simon and your alluding to contact banks/CU's, but I can tell you credit markets for construction are tight.  I'm not saying you won't find it, but I wouldn't necessarily be expecting a lot. Just my $0.02

Yes, you should probably look at local banks and credit unions as best options for this type of project