Loans for medical office buildings

Investor or owner-user first

You are	Programs	What drives the terms
An investor with multiple medical tenants	Bank, life company, CMBS, credit union	Tenant mix, rollover, location relative to the hospital
An investor with one rated health system tenant on a long lease	Credit tenant lease, life company	The tenant’s credit and the lease
A practice buying or building its own space	Owner-occupied commercial mortgage (bank or SBA)	The practice’s cash flow
On a hospital campus ground lease	Leasehold financing	Ground lease term and consents
Developing a new building	Construction loan	Pre-leasing and sponsor equity

Programs ranked for an investor-owned medical building

Rank	Program	Wins when	Loses when
1	Bank	Local physician tenants, smaller buildings, quick close	Recourse, shorter fixed period
2	Life company	Health system tenants, on or near campus, low leverage	Small or independent-tenant buildings
3	Credit union	Smaller buildings, relationship pricing	Size caps
4	CMBS conduit	Non-recourse at moderate leverage	Rollover-heavy rent rolls, early sale plans
5	Credit tenant lease	One rated tenant, absolute net lease	Multi-tenant buildings
6	DSCR loan	Small buildings, speed	Rate

What lenders check on medical office

• Tenant type. Hospital or health system, a large physician group, or independent practices. Each has a different renewal and credit profile.
• On campus or off campus. Proximity to a hospital supports renewals and re-leasing. An off-campus building depends more on its own tenants and visibility.
• Specialized buildout. Imaging suites, surgery rooms, lead shielding and medical gas raise the cost to move, which helps renewals, and raise the cost to re-tenant, which hurts dark value.
• Lease structure. Net leases with expense recoveries are common. Lenders still check who pays for the specialized systems.
• Referral and ownership ties. Physician-owned buildings with physician tenants raise questions about lease terms at market. Lenders want leases at market rent.
• Rollover. Same office-style schedule: leases expiring during the loan term, by year.
• Ground lease. On campus, the hospital often owns the land; see the FAQ.
• Environmental and regulated waste. Medical waste handling is reviewed; former uses on the site matter as for any commercial property.

Sizing example (illustration)

An illustration, not a quote. A 30,000 square foot multi-tenant medical building valued at $10,600,000 with $690,000 of NOI (a 6.5% cap rate). Assumed lender tests: 65% LTV and 1.30x DSCR on a 25-year schedule at an illustrative 6.75%, and a 10% debt yield. These are assumptions for the example.

Test	Arithmetic	Loan
LTV	$10,600,000 x 65%	$6,890,000
DSCR	$690,000 / 1.30 = $530,800; / 8.29% constant	$6,402,000
Debt yield	$690,000 / 10%	$6,900,000
Loan	lowest test	$6,402,000 (60% LTV)

If one tenant pays a large share of the rent and its lease ends during the loan, expect a reserve or a lower loan, as on any office building.

Owner-user practices: the SBA and bank route

If your practice occupies the building, the loan is underwritten on the practice’s cash flow. Banks treat it differently from investor real estate. Loans on owner-occupied commercial property do not count toward the 300% CRE screen², so a bank near its investor real estate limits may still have room for your loan.

Feature	SBA 504 for a medical building	Conventional owner-user bank loan
Down payment	50% bank, 35% CDC, 15% borrower1	Bank policy
Occupancy	51% of rentable space1	Bank policy
Debenture size	$5,000,0001 maximum, standard	Bank’s own lending limit
Rate	Fixed on the debenture; October 2026 25-year effective rate 6.97%3, as published by CDCs	Negotiated

The full owner-user picture is on owner-occupied commercial mortgages and SBA 504 versus a bank loan.

Programs to avoid

• Agency and FHA multifamily programs. Not eligible.
• CTL on a multi-tenant building. The structure needs one rated tenant.
• CMBS for a practice that may sell or expand soon. Defeasance makes early exits expensive.