Case Study
Tenant Concentration in a Medical Office Building
intermediateMedical OfficeLife company vs. debt fund~18 min
The Deal
You are underwriting Meridian Medical Plaza, a 40,000-square-foot medical office building anchored by Crescent Health Partners, a multi-specialty physician group that accounts for the large majority of in-place rent. The anchor's lease expires in just 18 months and carries no renewal option, while the building's smaller medical and healthcare-services tenants are stable with leases running three to four years further out. Two lenders — a life insurance company and a debt fund — have each circulated an indicative term sheet, and you must decide which one actually fits this deal's risk profile.
You’ll Practice
- Calculate tenant concentration from a rent roll and recognize when a single tenant dominates in-place income
- Identify lease rollover risk as the primary underwriting concern, distinct from occupancy or market-rent issues
- Calculate and compare DSCR under two competing loan structures
- Evaluate why a life insurance company's underwriting conditions can disqualify a deal that a debt fund would accept
- Match a deal's risk profile to the lender type best suited to underwrite it