Medical office building lending considerations, underwriting factors, and why MOBs matter for lenders and investors.
A Medical Office Building (MOB) is a property leased to healthcare providers, clinics and ancillary medical services, often located near hospitals or within health campuses. In CRE lending, MOB underwriting centers on tenant mix stability, payer mix (insurance and Medicare/Medicaid exposure), lease terms, and the impact of medical technology on space needs. Physical layout for exam rooms and specialized equipment influences TI costs and conversion potential. Lenders evaluate occupancy by physician groups, hospital affiliations, and reimbursement risk when sizing loans and setting covenants.
When packaging an MOB for financing, present tenant rosters, lease expirations, and any hospital affiliations or management contracts that support revenue stability. Include historical collection data and payer mix to demonstrate cash flow resilience. Lenders may require lower LTVs or additional reserves for tenant improvements due to specialized build-outs. Structuring can use longer amortization to match the durable cash flows of established medical tenants. Clear documentation of regulatory compliance and accessibility to referral networks strengthens the loan case for both sponsors and lenders.
MOBs are attractive to lenders because they often deliver stable, recession-resistant income tied to healthcare demand, but they carry unique operational and reimbursement risks that affect valuation. Specialized layouts and equipment can be costly to reconfigure, increasing downside risk if tenancy changes. Proper underwriting that assesses payer mix, tenant concentration and hospital relationships reduces surprise losses and helps match loan terms to asset realities. For borrowers and investors, understanding these dynamics enables access to appropriate financing while protecting lender interests over the loan life.