Operating evidence and financing
What this package helps you examine
Medical office combines a real-estate lease with business and use dependencies that may affect the durability of rent. The investor should separate property cash flow from practice economics while investigating hospital affiliation, ground leases and specialized space. The model is a screening tool; it does not establish provider reimbursement, licensure or the legal effect of a restrictive agreement.
Keep rent and practice performance separate
Begin with the executed tenant lease and actual collections. If the tenant is related to the owner, reconcile both sides of the rent transfer and the operating business's ability to pay. Tenant sales or reimbursement figures can help investigate credit but are not additional property rent. Obtain current tenant financial evidence where available and identify material concentration in a single practice, system or specialty.
Read the use and control dependencies
Investigate hospital affiliations, ground leases, permitted-use restrictions, transfer consents and rights that affect leasing or financing. Healthcare Realty's historical disclosure describes issuer properties with hospital-related occupancy and consent restrictions; these are examples, not assumptions for every medical office building. Counsel should establish the subject property's actual permitted users and mortgageability before the funding case relies on them.
Price specialized replacement space
Separate building systems from tenant-owned medical equipment and removable fit-out. A replacement tenant may need a different layout, power, plumbing or approved use, while the landlord continues paying carrying costs. Compare a temporary rent interruption with a durable rent reset. An interest-only bridge can change near-term payments but does not restore an unsupported long-term rent stream.
Use the workbook
- Use Assumptions!D5 for Base (1) or Downside (2), and the labeled scenario input rows. Enter source data in Lease Schedule!D10:L12; preserve formula cells and an untouched workbook copy.
- Use the source schedule to model tenant cash and replacement spending. The workbook does not certify medical-use permissions, hospital consents or practice financial capacity.
- Reconcile Operations to Summary. Apply the entered lender adjustment separately to the modeled cash flow. Sizing uses amortizing debt service, while first-year payments reflect the entered interest-only period.
- In Assumptions, replace illustrative value, LTV, DSCR, debt yield, rate, amortization and requested ceiling with the intended scenario. Review capacities in Debt and Funding. The smallest modeled capacity does not establish eligibility or approval.
- Closing equity includes the entered opening cash and restricted reserves. Additional operating cash need is measured after that opening cash, so do not add it twice. Inspect monthly cash and remaining principal at maturity.
- Read Review for model conventions and limitations. Save each scenario with its supporting evidence and date; actual lender definitions, legal rights and professional findings control the transaction.
Questions to prepare for a lender
Who is the actual rent obligor?
Executed lease, guaranties, entity names and tenant financial evidence.
Does the practice support the proposed related-party rent?
Separate operating-business and property cash-flow statements with eliminations.
What restrictions narrow the replacement-tenant pool?
Ground lease, hospital agreements, permitted-use clauses and counsel review.
Which improvements belong to the collateral?
Lease work letters, equipment inventory, ownership and removal provisions.
What would a replacement tenant cost?
Specific scope, bids, downtime and leasing-fee assumptions.
Does the loan plan solve a temporary gap or a permanent shortfall?
Base and stressed rent cases with documented repayment and sponsor support.
03 / Prepare
Build the evidence file
Use this as a preparation checklist. The lender determines the documents, definitions and review conditions for the actual transaction.
Cash flow and operations
- Rent roll with tenant legal names, specialties and related-party relationships.
- Complete leases, amendments, guaranties and collection history.
- Property operating statements and recoverable-expense reconciliations.
- Tenant credit materials requested and lawfully available for the transaction.
- Related-party rent and intercompany transfer reconciliation where relevant.
- Replacement-tenant rent, downtime and capital assumptions with support.
Property and collateral
- Ground lease and hospital or campus agreements affecting permitted use.
- Title, survey, access, parking and shared-service arrangements.
- Condition assessment for mechanical, electrical, plumbing and life-safety systems.
- Fit-out and equipment inventory showing ownership and removal obligations.
- Evidence of actual legal occupancy and relevant unresolved approvals.
- Environmental and other third-party reports requested by the lender.
Sponsor and execution
- Sponsor and manager experience with medical office tenants and specialized space.
- Ownership, borrower authority and guarantor documentation.
- Liquidity net of other practice, property and capital commitments.
- Tenant concentration and sponsor exposure to affiliated operating businesses.
- Transition plan if the principal practice leaves or changes control.
- Verified sources for improvements, carry and any required debt reduction.
Closing and funding
- Required landlord, ground-lessor, hospital or other consents identified by counsel.
- Estoppels and assignment documents requested for the actual financing.
- Accepted repair scope and any holdback or reimbursement conditions.
- Loan cash-flow definitions and covenants reconciled to property-only income.
- Payoff, title, insurance and closing-cost ledger.
- Dated conditions register distinguishing financial feasibility from legal acceptance.
Watch for these assumptions
- Do not capitalize tenant business revenue as though it were an additional property rent stream.
- A hospital affiliation can involve restrictions as well as credit support; inspect the executed documents.
- Specialized equipment may be leased or tenant-owned and absent from mortgage collateral.
- Payment relief during a vacancy does not prove the eventual replacement rent supports amortizing debt.
- Lower first-year TI and leasing-commission spending caused by delayed occupancy is not a cost saving. Obligations scheduled after month 12 fall outside this forecast and require separate funding analysis.
Before you rely on the result
- Identify the payer, guarantor and replacement-tenant restrictions before sizing.
- Keep practice cash, property rent and sponsor support in separate ledgers.
- Choose a temporary or permanent intervention based on the actual duration of the shortfall.
Scope and limitations
- Educational analysis; not a financing offer, appraisal, legal opinion or program eligibility determination.
- Workbook figures and thresholds are illustrative editable assumptions, not current lender quotes or universal underwriting standards.
- Document requests depend on the lender, transaction, jurisdiction and property; address unresolved issues with the relevant qualified professional.
Sources and applicability
These references support the stated asset and risk context. The questions and document lists are preparation tools, not a statement that every lender requires or accepts the same package. Actual contracts, applicable rules and the chosen lender determine the transaction requirements.
- Healthcare Realty 2024 Form 10-KItem 1A, health-system dependence and ground-lease restrictions · Checked 2026-10-21Historical issuer example; not a statement about every medical office property.