3.65x MOIC on a 9-Year Medical Office Hold — Full Recap
Closed out a 9-year medical office hold in January and wanted to share the recap — a few things in this deal are worth talking about beyond the headline numbers.
**The deal:** Class B medical office in Parker, CO (Southeast Denver suburb). 13,821 SF, owner-occupied at acquisition.
**Headline numbers:**
- Acquired Jan 2017: $2.95M at an 8.25% cap
- Sold Jan 2026: $5.7M at a 7% cap
- 9-year hold, 3.65x MOIC, 18% IRR
**Sourcing.** Off-market direct mail using public assessor data. The owner was a pediatrics practice that occupied the building — we positioned ourselves as a professional landlord who could let the clinicians focus on patients instead of facilities. No broker, no bidding war, and a meaningfully better entry basis than we'd have gotten in a marketed process.
**The repositioning.** Original tenancy was weak. We replaced it over time with three quality healthcare operators — a behavioral health group, an orthodontist, and an ABA provider. The discipline point worth flagging: we ate elevated vacancy early rather than chase occupancy with whoever would sign. Painful in the short run, but it's the single biggest reason the exit cap held where it did.
**Headwinds we navigated.**
- Douglas County kept reassessing us upward. We protested every cycle and worked the county commissioner directly. Active tax management isn't glamorous but it materially protected NOI.
- Vacancy stretches during repositioning tested the underwriting. We held the line on tenant quality and it paid off.
**The exit.** We're a licensed broker so we ran disposition in-house. Clean DD package (full maintenance and financial records ready on day one) compressed buyer timelines. Buyer was a local 1031 exchanger on a clock — speed and certainty mattered more to them than squeezing the last dollar of price. The kicker was an assumable below-market mortgage that sweetened their yield and de-risked their financing. That combination is what got us cap rate compression in a market where most people are seeing the opposite.
**Lessons that traveled out of this deal:**
1. Off-market sourcing through owner-occupants is still underrated. The targeting is harder but the basis advantage is real.
2. Tenant quality compounds. Every quarter you hold a weak tenant is a quarter of risk you can't underwrite away.
3. Assumable, below-market debt is a disposition asset. If your loan docs allow assumption, treat it as part of the exit pitch — in a high-rate environment it's worth real basis points to the right buyer.
4. DD readiness shortens close timelines, which matters disproportionately to 1031 buyers.
Happy to go deeper on any of this with anyone working in medical office or thinking about a similar repositioning playbook. Glad to see this thread of the forum stay active.
Darren Nakos, CCIM
Recentric Realty Capital