Are you in the market for a medical office loan?

Rick Patel, GRP Capital President, has this to say about medical office financing:

“In many locations and markets, a medical office building is an excellent addition to a portfolio. And for many physician groups, owning their own medical office building is preferable to leasing. There are industry-specific considerations with a medical office building. We at GRP Capital have secured financing for a number of health care commercial real estate loans as well as mixed use buildings. If you are considering purchasing and require financing, I urge you to contact our office at the beginning of your process.“

Advantages of securing a medical office loan:

• Strength of the health care industry: With the aging of baby boomers, there is a growing demand for health care providers. This makes a medical office loan attractive to many lenders.

•Diversity of Locations is now Commonplace: In the past, lenders preferred financing health care commercial real estate that were on or near medical campuses (larger hospital facilities). These physicians often had privileges at the nearby hospitals and also were part of a referral network. However, many potential patients are looking for physicians closer to where they actually live. There has been a commensurate rise of medical office buildings in suburbs and even in underserved rural areas. Patients don’t necessarily see an advantage to being near the hospital. And with the rise of hospitalists, many providers spend far fewer hours on actual hospital campuses.

• What if you are the tenant? Health care providers often investigate becoming commercial real estate owners when they see a financial reason to stop renting and start owning. Perhaps you are ready to be in control of your own space and you are also looking for an investment. Or perhaps there is a related business who would make a tenant in an adjacent space in the building. Carefully consider the benefits of owning versus renting. There are financial considerations and management issues, too.

Do your due diligence!

• What can you afford? If you are moving from renting to owning, determine what the true costs of ownership will be. Be sure to include not just debt service (paying your principal and interest), but also insurance, maintenance, utilities and ownership association fees, if applicable.

• Be choosy about the building. Not every building is appropriate for medical care. The ceilings need to be high enough to accommodate appropriate equipment. You need adequate plumbing and a modern HVAC system for the best air quality. In general, it is easier to renovate a medical building into another usable space than to convert a space into medical-grade quality. This also means that your building would be likely to retain its value, as it would be appropriate for all sorts of buyers when you are ready to sell.

•Consider the needs of future patients: Is there good signage, so that the building is visible to patients? Is the parking sufficient for the number of patients who would be visiting? Is the building truly handicapped accessible or will you have to make major upgrades to be ADA compliant?

• Nail down insurance costs: Insurance costs are increasing in many markets, especially Sunbelt cities with the highest increase in health services demands. Call your trusted agent to obtain a quote for comprehensive coverage as quickly as you can. It’s important to make sure that insurance is affordable. If you don’t have an agent, ask the seller if they have been satisfied with their insurance coverage and contact their agent.

• Find out if there is an existing survey! When you are ready to purchase a property, ask the current owner for a recent survey. If one doesn’t exist, this could delay the loan process. We recommend current surveys for all new purchases.

Our GRP Capital team specializes in finding the right lender for each project. We save our clients time and money, as we research the best choices for their funding sources. Our experience allows our clients to find funding that is project-appropriate and will allow for sufficient cash flow. Whether you are looking to refinance or purchase, we would love to discuss your business plans with you. If you are considering becoming a first-time (or second or third time!) buyer, we can assist you.