SBA 504 Medical Office Feasibility Study in Arizona

Arizona's 504 medical offices, ranked and rooted in one county

Maricopa County accounts for 27 of the 42 SBA 504 medical office loans approved in Arizona from FY2017 to FY2026, a concentration that leaves Pima second at 6 and Mohave third at 3. The total is $39.1 million. Arizona is 7 among states for the class under 504, and medical offices hold 5 of 39 on the Arizona list. None of the loans carries a franchise brand: 0.00%.

Three development corporations of similar weight

Arizona Capital Source has 15 loans and $10.7 million; CDC Small Business Finance Corp. has 13 loans but the larger $17.9 million; The Mortgage Capital Development Corporation has 12 loans and $7.4 million. The middle one holds the largest dollar total of the three despite having fewer loans than the first. The median loan of $633,500 comes out at 0.94x against the national 504 median for the class, close to parity, and the central half runs from $310,000 to $1.0 million.

Years and outcomes

Approvals peaked in FY2022 at 10 loans and $12.2 million, and FY2019 shows 0 loans. Cancelled loans account for 9.4% of FY2017 to FY2024 approvals at a minimum, and 12.5% when loans not yet disbursed are counted. Arizona has no charge-off rate shown, because Arizona's early funded group falls short of what Loan Analytics' own presentation rule needs before it shows any rate; the absence says nothing about quality. Lenders reading this cell should look to the shape of the book instead: three similar-sized development corporations, a high concentration in one county and a cycle that crested in FY2022.

What an Arizona medical office study tests

The study should begin by naming the specialty and the physicians who will practice, since a surgical center, a primary care group and a dialysis operator carry different space needs and revenue. It should count patient demand in the trade area, including growth from in-migration, and the competing groups and hospital systems. Because 504 finances the building, the study must set the cost per square foot against a lease alternative and show that the practice could pay market rent on the space. Parking, access for patients with limited mobility and zoning for medical use belong in the site section. Coverage should hold if one physician leaves, and the appraisal will consider the general demand for medical space if the owner moves out.