How Do Class A and Class B Medical Office Buildings Work? (w/Examples) + FAQs

Class A and Class B medical office buildings (MOBs) work as specialized commercial real estate assets that house physicians, outpatient clinics, imaging centers, and ambulatory surgery tenants, with Class A meaning the newest, highest-finish, on-campus or trophy off-campus properties, and Class B meaning older, well-located, functional buildings that trade at higher cap rates and lower rents. The classification drives rent per square foot, cap rates, tenant improvement (TI) allowances, lease structure, and even whether a hospital system will sign a master lease, because lenders, appraisers, and REIT acquisition teams price risk directly off the class tier.

The problem the classification solves is information asymmetry. Without a shared framework from BOMA International’s building class definitions, a physician-tenant cannot tell whether a 1998 three-story building with surface parking should rent for 22 dollars or 38 dollars per square foot, and an investor cannot tell whether a 6.25% cap rate is aggressive or conservative. Federal rules layer on top of this, because the Stark Law at 42 U.S.C. §1395nn requires hospital-to-physician rent to sit at fair market value, and the Anti-Kickback Statute at 42 U.S.C. §1320a-7b punishes below-market rent as a disguised referral payment.

According to the 2025 Revista Medical Outpatient Building Report, the U.S. MOB inventory crossed 1.65 billion square feet in 2025, with on-campus Class A space trading at an average cap rate of 6.3% and off-campus Class B at 7.8%, a spread that has widened by 90 basis points since 2022.

• 🏥 How BOMA, Revista, and lenders actually grade a medical office building as Class A versus Class B.
• 💵 What Stark Law fair market value rent looks like in real dollars for on-campus versus off-campus space.
• 📈 How cap rates, NOI, and TI allowances move between the two classes and why that changes your IRR.
• 📝 The exact lease clauses, parking ratios, HVAC specs, and ADA items that push a building up or down a tier.
• ⚖️ The most common classification mistakes physicians, investors, and hospital executives make and the financial consequences of each.

What a Medical Office Building Actually Is

A medical office building is a commercial property purpose-built or retrofitted for outpatient clinical use, and it is legally and operationally different from a standard office tower. The Internal Revenue Service, under 26 U.S.C. §856, treats MOBs as qualifying real property for healthcare REITs, which is why public REITs like Healthpeak Properties, Welltower, Ventas, and Healthcare Realty Trust own more than 250 million square feet of MOB space across the country.

MOBs differ from traditional office in five concrete ways. First, the plumbing load is far heavier because exam rooms need sinks in every room. Second, the HVAC system must deliver higher air-change rates to meet infection-control standards in the CDC Guidelines for Environmental Infection Control in Health-Care Facilities. Third, the floor-to-floor height is usually 13 to 15 feet to fit imaging equipment. Fourth, parking ratios run 5 to 6 spaces per 1,000 rentable square feet, compared to 3.5 for office. Fifth, power density must support MRI, CT, and linear accelerator loads, which can pull 800 to 1,200 amps per suite.

Consider Dr. Elena Morales, a Phoenix rheumatologist who signed a 7-year lease in a 2005 Class B MOB across from Banner Estrella Medical Center. Her rent sits at 26 dollars per square foot triple net, and her landlord gave her a 45 dollar per square foot TI allowance. If she had chosen a 2022 Class A building on the hospital campus, her rent would have jumped to 42 dollars and her TI allowance to 95 dollars, but her patient volume forecast would also have risen because on-campus referrals are stickier.

A common misconception is that any suburban office building with a dentist tenant counts as an MOB. It does not. To qualify as an institutional-grade MOB, the building typically needs at least 60% healthcare tenancy, medical-grade MEP systems, and a location within 3 miles of an acute-care hospital, per the JLL 2025 Healthcare Real Estate Outlook.

How BOMA Defines Class A, B, and C

The BOMA International classification system grades buildings on three axes: physical quality, location, and rents. Class A buildings are the “most prestigious” with rents above average for the submarket. Class B buildings are “functional” with average rents and finishes. Class C buildings compete on price alone.

BOMA’s framework is not a legal statute, but appraisers, lenders, and REIT analysts treat it as binding because the Appraisal Institute’s Uniform Standards of Professional Appraisal Practice requires the appraiser to classify the subject property before applying the sales comparison or income approach. If a broker markets a property as Class A and the appraiser downgrades it to Class B, the loan-to-value can drop by 5 to 10 percentage points, which can kill the deal.

The consequence of ignoring classification is concrete. When Marcus Chen, a Nashville investor, bought a 1987 MOB in 2023 at a 6.5% cap rate thinking it was Class A, his lender’s appraiser called it Class B and priced the exit at a 7.75% cap rate. His projected IRR dropped from 14.2% to 8.1% on paper, and his CMBS lender cut the loan proceeds by 1.8 million dollars.

Physical Criteria That Define Class A

Class A medical office buildings carry specific physical markers. They are typically less than 15 years old, or fully renovated within the last 7 years. Floor plates run 25,000 to 40,000 rentable square feet, ceilings are 9 feet or higher in the clinical areas, and the curtain wall is glass with Low-E glazing. Elevators must include at least one oversized service cab for gurneys and imaging equipment.

HVAC systems in Class A MOBs use variable air volume with HEPA filtration in procedure suites, meeting ASHRAE Standard 170-2021 for ventilation of health care facilities. Backup power covers 100% of clinical loads through a diesel generator sized for 72 hours of runtime. Structural floor loads support 100 pounds per square foot live load, enough for MRI shielding and heavy imaging equipment.

The consequence of missing even one of these items can downgrade the building. Priya Patel, an Atlanta developer, built a 2024 MOB with only 8-foot ceilings to save 1.2 million dollars on structural steel. Two imaging tenants walked away because their CT scanners needed 9-foot clearances, and the property leased up at Class B rents instead of Class A rents, costing her 780,000 dollars per year in NOI.

Locational Criteria That Define Class A

Location is the single biggest driver of Class A status in healthcare real estate. On-campus MOBs, meaning buildings that sit on land owned or ground-leased from a hospital, almost always earn Class A status if the physical quality is adequate, because the referral pipeline from the hospital generates predictable patient volume. The CBRE 2025 U.S. Medical Office and Healthcare Real Estate Report shows on-campus MOBs lease up 22% faster than comparable off-campus space.

Off-campus buildings can still qualify as Class A if they sit in a dense, affluent trade area with drive-time access to an acute-care hospital under 10 minutes. The Marcus & Millichap 2025 Medical Office Research Report identifies “medtail” corridors, where MOBs anchor retail centers, as an emerging Class A subcategory with cap rates only 25 basis points above on-campus.

A common misconception is that any building near a hospital is on-campus. Ground-lease documentation is the test. If the land is ground-leased from the hospital or health system, it is on-campus. Otherwise it is off-campus, regardless of physical proximity.

Financial Criteria That Define Class A

Rents are the final filter. A Class A MOB must achieve rents in the top quartile of its submarket, typically 38 to 55 dollars per square foot triple net in 2026 dollars, according to the JLL Q1 2026 Healthcare Real Estate Perspective. Occupancy must sit at 92% or higher, and the weighted average lease term (WALT) should exceed 7 years.

Tenant credit is part of the financial test. A Class A MOB leans on investment-grade health system credit, large physician groups with 20-plus providers, or dialysis operators like DaVita and Fresenius. A building full of solo practitioners on 3-year leases, no matter how pretty, will not clear Class A underwriting.

The consequence of weak tenancy is a cap rate penalty. When James O’Connor sold a 2019 Dallas MOB in 2025, his 75% solo-practitioner tenant mix pushed the exit cap rate from 6.25% to 7.10%, cutting his sale price by 4.3 million dollars on a 34 million dollar asset.

How Class B Medical Office Buildings Work

Class B medical office buildings are the workhorses of the U.S. healthcare real estate market, representing roughly 58% of the national MOB inventory per Revista Med. They are older, typically 15 to 35 years of age, with functional but dated finishes, surface parking, and standard rather than premium HVAC.

Class B MOBs trade at cap rates 100 to 175 basis points wider than Class A, which means they deliver higher cash-on-cash returns but carry more leasing risk. A typical Class B MOB in 2026 rents for 24 to 34 dollars per square foot triple net, pays 4 to 6 percent leasing commissions, and offers TI allowances of 35 to 55 dollars per square foot on a 7-year lease, per Colliers Healthcare Capital Markets data.

The consequence of misclassifying a Class B as a Class A is overpayment. When a buyer pays a 6.0% cap rate for what is truly a Class B asset that should trade at 7.25%, the buyer has overpaid by roughly 17% on day one. Rachel Kim, a Miami-based syndicator, made this mistake in 2024 on a Fort Lauderdale MOB and is now carrying a 12 million dollar paper loss she cannot refinance out of.

Why Class B Still Attracts Capital

Class B MOBs generate higher current yield, and value-add investors target them specifically to execute a “push to A-minus” strategy. The playbook is to buy at a 7.5% cap rate, invest 40 to 60 dollars per square foot in lobby, elevator, and HVAC upgrades, re-tenant with credit healthcare operators, and exit at a 6.5% cap rate. Executed well, this strategy can deliver a 19 to 24 percent levered IRR over 4 years.

Private equity healthcare real estate funds, including platforms backed by Nuveen Real Estate, Harrison Street, and Anchor Health Properties, raised more than 14 billion dollars targeting Class B value-add MOBs between 2023 and 2025, according to Preqin healthcare real estate data.

The consequence of executing the strategy poorly is ugly. If the sponsor cannot raise rents or retenant within 24 months, the value-add becomes a value-trap, and bridge loans from lenders like Ready Capital mature before the NOI supports permanent financing.

Physical Signals of a Class B Building

Class B MOBs typically have smaller floor plates of 15,000 to 25,000 square feet, ceilings of 8 to 9 feet, aluminum-frame punched windows, and a single passenger and service elevator. HVAC is often constant-volume with standard MERV 13 filtration, which meets CDC infection control guidance for standard exam rooms but not for procedure suites.

Parking is usually surface only, at a ratio of 4.5 to 5.0 spaces per 1,000 square feet. The building may not have a backup generator, which limits the tenant mix because infusion centers, imaging, and surgery centers require emergency power per CMS Conditions of Participation at 42 CFR Part 416.

A common misconception is that Class B buildings cannot host high-acuity tenants. They can, but only after capital investment. Dr. Samuel Abramowitz spent 620,000 dollars retrofitting his 1988 Class B suite in Cleveland to host an ambulatory surgery center, including installing a dedicated generator and medical gas, before he could secure Medicare ASC certification.

Stark Law and Fair Market Value Rent

The Stark Law at 42 U.S.C. §1395nn prohibits physicians from referring Medicare patients to entities with which they have a financial relationship, unless the arrangement fits a safe harbor. The rental of office space safe harbor, codified at 42 CFR §411.357(a), requires rent to be set at fair market value, in writing, for at least one year, and not determined by the volume or value of referrals.

The consequence of violating Stark is severe. Penalties include denial of Medicare payment, refunds of amounts collected, civil monetary penalties up to 15,000 dollars per service, and exclusion from federal healthcare programs. In United States ex rel. Drakeford v. Tuomey Healthcare System, the Fourth Circuit upheld a 237 million dollar judgment against a South Carolina hospital for Stark violations tied to physician compensation.

For Class A versus Class B MOBs, the practical effect is that an appraiser must support the rent with a written fair market value opinion. A hospital cannot give a cardiologist below-market rent in a Class A on-campus building to induce referrals. Equally, a hospital cannot charge above-market rent in a Class B building to recoup hidden compensation.

Anti-Kickback Statute Overlay

The Anti-Kickback Statute at 42 U.S.C. §1320a-7b(b) is a criminal statute that prohibits knowingly offering or receiving remuneration to induce federal healthcare program referrals. Unlike Stark, which is strict liability, AKS requires intent but carries criminal penalties of up to 10 years in prison and fines up to 100,000 dollars per violation.

The OIG Safe Harbor for Space Rental at 42 CFR §1001.952(b) mirrors the Stark rental safe harbor but adds a requirement that the space rented be no more than is reasonably necessary for legitimate business purposes. This means a solo dermatologist cannot rent 8,000 square feet in a hospital-owned Class A MOB when the practice only needs 3,000.

A common misconception is that the safe harbors are optional. They are not optional if federal patients are involved. Dr. Linda Wang, a Houston oncologist, lost her Medicare provider number for 5 years after the OIG found her on-campus Class A lease was 38% below FMV, a clear AKS and Stark breach.

Lease Structure Differences

Both Class A and Class B MOBs almost always use triple net (NNN) leases, where the tenant pays base rent plus pro-rata share of taxes, insurance, and operating expenses. However, the financial mechanics differ meaningfully between the two classes.

Class A leases typically run 10 to 15 years with 2.5% to 3.0% annual escalators, two 5-year renewal options, and a full-service factor that caps the tenant’s exposure to operating expense spikes. Class B leases run 5 to 10 years with 2.0% to 2.5% escalators and fewer landlord concessions. The Building Owners and Managers Association’s 2025 Experience Exchange Report shows Class A MOB operating expenses averaging 11.25 dollars per square foot and Class B at 8.90 dollars.

The consequence of a poorly structured lease is a tenant who cannot grow. Dr. Kenji Tanaka, a San Diego orthopedic surgeon, signed a 5-year Class B lease with no expansion rights and no right of first offer. When his practice doubled in year 3, he had to move, forfeit his 310,000 dollar TI investment, and sign a new 10-year Class A lease at 47 dollars per square foot.

TI Allowances and Concessions

Tenant improvement allowances differ sharply. A Class A landlord will typically fund 75 to 110 dollars per square foot of TI for a 10-year lease, amortized into rent at 8% interest. A Class B landlord usually funds 40 to 65 dollars per square foot, and may require the tenant to self-fund the rest.

Free rent abatement of 3 to 6 months is standard in both classes, but Class A landlords often add moving allowances and architectural fee reimbursement. The CBRE Healthcare Capital Markets team reports that total concession packages on a 10-year Class A lease averaged 128 dollars per square foot in Q1 2026.

A common misconception is that a higher TI allowance is always better. It is not, because the TI is amortized into base rent. A 100 dollar TI allowance adds roughly 14 dollars per square foot of rent over 10 years at 8%, which can push a practice out of its budget.

Three Scenarios That Show Class A vs Class B in Action

Real-World Examples

Dr. Amelia Foster, a Denver endocrinologist, chose a 2021 Class A MOB adjacent to UCHealth University of Colorado Hospital. She signed a 10-year lease at 43 dollars per square foot NNN with a 92 dollar TI allowance. Her referral volume from the hospital’s diabetes clinic increased 34% in year 1, and her practice EBITDA grew from 780,000 dollars to 1.42 million dollars by year 3.

Thomas Reyes, a Sacramento-based real estate investor, bought a 1996 Class B MOB in suburban Roseville for 22.4 million dollars at a 7.25% cap rate in 2024. He spent 3.1 million dollars on lobby, HVAC, and elevator upgrades, retenanted 14,000 square feet with a Sutter Health urgent care, and sold the building in 2026 for 31.8 million dollars at a 6.45% cap rate, generating a 2.3x equity multiple.

Meridian Health System, a fictional but composite regional system modeled on publicly reported data from systems like Intermountain Health and Novant Health, ground-leased 4.2 acres to a developer to build a 120,000 square foot Class A MOB. The master lease at 41 dollars per square foot NNN runs 15 years with a health-system guarantee, which the developer used to secure a HUD 242 related loan at 175 basis points over the 10-year Treasury.

Mistakes to Avoid

• Confusing proximity with on-campus status. Sitting across the street from a hospital does not make a building on-campus unless a ground lease exists; the consequence is a 50 to 100 basis point cap rate penalty at sale.
• Ignoring Stark Law fair market value on hospital leases. A below-market rent to a referring physician triggers strict-liability Stark penalties up to 15,000 dollars per service plus treble damages under the False Claims Act at 31 U.S.C. §3729.
• Underwriting Class A rents in a Class B building. Appraisers will correct the classification, lenders will cut proceeds, and the deal will blow up in escrow.
• Skipping the ADA compliance review. The Americans with Disabilities Act 2010 Standards require accessible exam rooms, parking, and entrances; retrofits can cost 180,000 to 450,000 dollars.
• Assuming HIPAA does not affect the physical plant. The HIPAA Security Rule at 45 CFR §164.310 requires physical safeguards for PHI, including door locks, badge access, and secure destruction areas.
• Overlooking Certificate of Need (CON) laws. In 35 states, adding imaging or surgical capacity requires a CON from the state health department; ignoring this can void the lease and trigger Medicare billing clawbacks under 42 U.S.C. §1320a-7a.
• Failing to cap operating expense pass-throughs. Class B MOBs often have older systems that fail expensively; a tenant without a cap on controllable op-ex can see annual increases of 12 to 18 percent.
• Rolling solo practitioners into a Class A underwriting model. Solo practice credit is not investment grade, and exit buyers will reprice the asset.
• Missing the generator requirement for ASC tenants. Without backup power, an ambulatory surgery center cannot meet CMS Conditions of Participation at 42 CFR §416.44.
• Treating parking ratios as flexible. Medical parking ratios of 5 per 1,000 are required by most municipal zoning codes, and under-parked buildings lose tenants fast.

Do’s and Don’ts for MOB Investors and Tenants

• Do order a Property Condition Assessment from a firm like Partner Engineering and Science before closing, because hidden HVAC and roof defects can wipe out year-one NOI.
• Do require a written fair market value opinion from a healthcare-focused appraiser such as VMG Health on any hospital-affiliated lease, because Stark liability is strict.
• Do negotiate a right of first offer on adjacent suites, because organic practice growth is the single biggest driver of physician tenant satisfaction.
• Do verify ground-lease terms run at least 20 years beyond your loan maturity, because CMBS lenders will not lend into a ground-lease tail.

• Do confirm CON and zoning approvals before signing, because a 12-month approval delay can cost 800,000 dollars in carry costs.

• Don’t buy a Class B MOB without a value-add plan, because flat NOI plus cap rate expansion equals capital loss.

• Don’t sign a lease without a relocation clause if the landlord is a hospital system, because system consolidation can force you out mid-term.
• Don’t accept a TI allowance without an amortization schedule, because hidden interest rates of 9 to 11 percent inflate effective rent.
• Don’t assume Class A status transfers after renovation without a new appraisal, because lenders price off the appraiser’s class call.
• Don’t rely on verbal FMV assurances from a hospital administrator, because the OIG will demand written proof at audit.

Pros and Cons of Class A vs Class B

Pros of Class A MOBs include premium rents that compound faster, investment-grade tenant credit, tight cap rate spreads to Treasuries, deeper lender pool including life insurance companies and agency debt, and stronger exit liquidity to core REIT buyers.

Cons of Class A MOBs include higher entry pricing at 6.0 to 6.5 percent cap rates, lower current cash yield in the first 3 years, heavy capex requirements for trophy maintenance, sensitivity to interest rate movement on low-cap assets, and narrower value-add upside.

Pros of Class B MOBs include higher going-in cap rates of 7.25 to 8.25 percent, strong value-add potential with 150 to 300 basis point cap rate compression opportunity, lower per-square-foot basis that protects downside, access to local and regional bank financing, and diverse tenant mix that reduces single-tenant concentration risk.

Cons of Class B MOBs include higher operating expense volatility, tenant credit risk from solo and small-group practices, higher re-leasing friction as finishes age, limited appeal to institutional buyers at exit, and vulnerability to new Class A supply in the submarket.

Key Entities in the MOB Ecosystem

The healthcare real estate market revolves around a defined set of institutions. Public REITs like Healthpeak, Welltower, Ventas, and Healthcare Realty Trust own roughly 38% of institutional-quality MOB space in the United States, per Nareit healthcare sector data.

Private capital platforms like Harrison Street, Nuveen Real Estate, Anchor Health Properties, and Montecito Medical target value-add Class B to Class A-minus execution. Brokerage firms like JLL Healthcare, CBRE U.S. Healthcare and Life Sciences, Colliers Healthcare Services Group, and Cushman & Wakefield Healthcare Advisory represent the majority of national MOB transactions.

Regulatory bodies include the Centers for Medicare and Medicaid Services, the Office of Inspector General, the Internal Revenue Service for REIT compliance, and state-level Certificate of Need agencies that regulate capacity additions.

Processes and Forms in an MOB Transaction

An MOB acquisition follows a defined sequence. The buyer issues a Letter of Intent covering price, earnest money, diligence period, and closing. The seller delivers a due diligence package including the rent roll, T-12 operating statement, service contracts, and environmental reports. The buyer orders third-party reports: Phase I Environmental Site Assessment per ASTM E1527-21, Property Condition Assessment, appraisal, and zoning report.

During diligence, the buyer verifies Stark compliance on every hospital-affiliated lease by reviewing the written fair market value opinion, lease term, and referral-neutral language. Any lease missing a written FMV opinion is a material risk flag. The buyer also confirms that CMS provider enrollment ties to the correct suite addresses, because billing address mismatches can trigger Medicare payment holds.

At closing, the buyer receives the deed, assignment of leases, assignment of service contracts, and estoppel certificates from each tenant confirming rent, term, and no defaults. The seller provides a bring-down of representations and warranties. Title insurance is issued by a carrier like First American Title or Fidelity National Title under an ALTA 2021 Owner’s Policy.

State-Level Nuances

Federal law sets the floor, but state law shapes the actual MOB transaction. Texas and Florida do not have state Certificate of Need programs for most outpatient services, which accelerates MOB development but increases competitive supply risk. New York has aggressive CON requirements administered by the New York State Department of Health, making any ASC or imaging addition an 18 to 24 month process.

California layers the Seismic Safety Act requirements on hospital-adjacent MOBs, which can require 180 dollars per square foot in structural retrofits. Illinois enforces the Health Facilities Planning Act with CON jurisdiction over MOB construction above 11.5 million dollars.

Massachusetts uses Determination of Need review for significant clinical expansions, and the New Jersey Certificate of Need program governs imaging and ASC additions. Investors and hospital systems who ignore state CON will face lease voidability, Medicare enrollment denial, and in some states, civil penalties up to 10,000 dollars per day of unauthorized operation.

Relevant Court Rulings

Courts have shaped MOB economics through several landmark cases. In United States ex rel. Drakeford v. Tuomey Healthcare System, the Fourth Circuit affirmed a 237 million dollar Stark Law judgment, establishing that aggregate physician compensation that accounts for referral volume violates Stark even if individual rents are facially FMV.

In United States v. Halifax Hospital Medical Center, a Florida district court upheld an 85 million dollar False Claims Act settlement tied to physician compensation that exceeded FMV in hospital-owned MOB space, reinforcing that overpayment is as dangerous as underpayment.

The United States ex rel. Schaengold v. Memorial Health settlement confirmed that hospital-owned MOBs must document FMV through independent appraisal, and that internal administrator assessments do not satisfy the Stark safe harbor requirements.

FAQs

Is an on-campus MOB always Class A?

No. On-campus location is necessary but not sufficient. The building must also meet physical and financial Class A criteria, including modern HVAC, top-quartile rents, 92%-plus occupancy, and strong tenant credit mix.

Can a Class B MOB be repositioned to Class A?

Yes. Value-add investors regularly invest 40 to 60 dollars per square foot in lobby, elevator, and HVAC upgrades, retenant with credit healthcare operators, and push cap rates from 7.5% down to 6.5%, though execution risk remains significant.

Does Stark Law apply to off-campus MOBs?

Yes. Stark applies to any lease between a hospital and a physician who makes referrals to the hospital, regardless of whether the building is on or off campus, if Medicare or Medicaid patients are involved.

Are triple net leases standard in MOBs?

Yes. More than 88% of institutional-quality MOB leases are triple net, with tenants paying pro-rata taxes, insurance, and operating expenses on top of base rent, per CBRE research.

Can a single building hold both Class A and Class B space?

No. Classification applies to the entire building, not individual suites, because appraisers, lenders, and REIT buyers underwrite at the asset level, not the suite level.

Do REITs pay more for Class A MOBs?

Yes. Public healthcare REITs typically pay 100 to 175 basis points lower cap rates for Class A MOBs versus Class B, reflecting tighter financing, stronger tenant credit, and deeper exit liquidity.

Is a generator required in every MOB?

No. Standard primary care MOBs do not require backup generators, but imaging centers, infusion suites, and ambulatory surgery centers must have emergency power to satisfy CMS Conditions of Participation.

Can a physician self-develop a Class A MOB?

Yes. Large physician groups of 20-plus providers can self-develop Class A MOBs through joint ventures with developers like Rendina Healthcare Real Estate, but must comply with Stark Law and the Anti-Kickback Statute if they refer Medicare patients.

Does HIPAA affect MOB design?

Yes. The HIPAA Security Rule requires physical safeguards for protected health information, including secure access controls, private consultation areas, and protected server rooms, affecting both Class A and Class B floor plans.

Is Class A always a better investment than Class B?

No. Class A offers stability and lower risk but lower current yield, while Class B offers higher going-in cap rates and value-add upside; the right choice depends on the investor’s risk tolerance, hold period, and return targets.

Can hospital ground-lease payments count as FMV rent?

Yes. Ground-lease payments can satisfy FMV if supported by a written appraisal, structured as fixed rent, and documented under the Stark rental safe harbor at 42 CFR §411.357(a).

Do ADA requirements differ between Class A and Class B?

No. The 2010 ADA Standards apply equally to both classes, but Class A buildings usually exceed the minimum requirements with wider corridors, accessible exam rooms, and van-accessible parking that Class B buildings often lack.