The Mandate
A multi-specialty physician group consolidating four leased locations engaged Feasibility Study Consultant to prepare a third-party feasibility study supporting a SBA 504 financing request for a project located in Hennepin County, Minnesota. Total project capitalization fell within the $10M-$25M band. The capital provider, a SBA Certified Development Company, required documentation consistent with current program review standards. The analytical question put to the team: Did the consolidated patient-encounter volumes, lease-savings analysis, and 51% owner-occupancy threshold satisfy 504 program eligibility.
Engagement Scope
- Primary market area defined as a 10-mile drive-time
- Comparable supply set of 9 properties
- Demand model framework: patient-encounter consolidation and owner-occupancy economics
- Financial projection horizon: 10 years
- Site inspection completed; operator interviews where applicable
- Primary data collection through field reconnaissance and third-party market data
Methodology Applied
Primary Market Area
The PMA was defined as a 10-mile drive-time from the subject site, calibrated to the demand catchment behavior typical of medical office assets in Minnesota. The boundary captured the population, employment, and competitive supply base relevant to the subject's operating thesis.
Supply and Demand Reconciliation
The comparable supply set comprised 9 properties operating within the PMA or in directly substitutable submarkets. Demand was modeled using a patient-encounter consolidation and owner-occupancy economics approach over a 10 years horizon. The reconciliation tested whether incremental supply, including the subject, could be absorbed within the projection window without compromising stabilized occupancy assumptions.
Capture Rate Calibration
The subject's capture rate was calibrated against the absorption capacity of the PMA. The analysis concluded that PMA absorption capacity exceeded subject build-out by a factor of 1.4 across the projection window, with a stabilized capture rate of n/a.
Exhibit 1: Comparable Supply Set, Minnesota PMA
[Table or chart rendered in delivered report.]
Exhibit 2: Demand Projection Summary, 10 years Horizon
[Table or chart rendered in delivered report.]
Exhibit 3: Subject Capture Rate vs. PMA Absorption Capacity
[Table or chart rendered in delivered report.]
Analytical Conclusions
- Sponsor practice trailing-twelve patient encounters of 184,000 supported facility utilization assumptions.
- Lease-savings analysis identified $618,000 annual occupancy-cost reduction at stabilization.
- Owner-occupancy of 64% cleared the 504 program 51% threshold.
- Stabilized DSCR of 1.46x cleared the 504 program review threshold.
Deliverable
The delivered report ran 126 pages with 28 exhibits distributed across nine analytical sections, plus appendices documenting comparable supply data, demographic inputs, and financial projection assumptions. The document was prepared to the documentation standards of the SBA Certified Development Company. The corresponding SBA 504 review framework guided exhibit selection and supporting documentation.