Medical Office Building purchase

[A.R Shakir]

I need some advice, there is a medical office building for sale, NNN, 1.4 million with 5.8% Cap and 3 year increase in rent per year with 5 years remaining. Its a pediatric office and has been there since 2006, the group was purchased by Banner Health(MD Anderson) and they have taken over the lease, and now the physicians are selling the building that was previously there own.

I find the location stellar but I am concerned about only a 5 year lease....Any thoughts on this?

[Ronald Rohde]

I think a 5.8 cap is reserved for properties with a very strong occupancy. If you think you can easily replace the tenant--at that rent--, then go for it you're indifferent as to the tenant.

Otherwise, offer a discount that reflects the reality of trying to re-let in 5 years...