How On-Campus MOB Financing Works in San Diego
On-campus medical office buildings represent the most defensible segment of the healthcare real estate market, and San Diego delivers a particularly compelling version of that thesis. The metro's major health systems, including UC San Diego Health, Scripps Health, Sharp HealthCare, and Kaiser Permanente, have built integrated campus environments where physician groups, imaging centers, and surgical suites operate in direct proximity to acute care facilities. When those buildings carry long-term net leases with health system guarantees, lenders treat the income stream with a level of confidence they extend almost nowhere else in the office sector.
The San Diego market reinforces that confidence structurally. Geographic constraints throughout the coastal and mid-county submarkets limit new deliveries, and occupancy across healthcare corridors has remained above 92 percent even as broader office fundamentals deteriorated nationally. Strong population growth in North County and South Bay continues to push outpatient care demand outward from legacy campuses, creating a second tier of on-campus and campus-adjacent assets in corridors like Carlsbad, Rancho Bernardo, and Chula Vista that now attract serious lender interest. The metro's large active-duty military and veteran population adds a durable, non-cyclical demand layer that many secondary markets simply do not have.
Program concentration follows the health system footprint. The tightest lender pricing and lowest leverage thresholds emerge on assets physically on or immediately adjacent to hospital campuses in La Jolla, Mission Valley, and downtown San Diego. Suburban campus extensions in Kearny Mesa and North County Inland offer competitive terms where the health system tenant relationship is clear and the lease structure is long-term net. Lenders are drawing sharp distinctions between these true on-campus assets and general medical office product, and sponsors need to position deals accordingly.
Lender Appetite and Capital Stack for San Diego On-Campus MOB
Life insurance companies are the most competitive permanent lenders for stabilized, on-campus San Diego MOBs with health system credit. In the current rate environment, with the 10-year Treasury in the low-to-mid 4 percent range, life company spread pricing for investment-grade anchored assets runs roughly 125 to 175 basis points over the 10-year, producing all-in rates that remain meaningfully inside what CMBS or bank lenders can deliver. LTV typically runs 60 to 70 percent, amortization is commonly 25 to 30 years, and prepayment is structured as make-whole or a step-down schedule. Life companies active in this market are selectively placing capital on stabilized assets where the health system guarantee is explicit and the campus location is verifiable.
CMBS is an active alternative for deals at $10 million and above where the health system credit is strong but not formally rated investment grade, or where the sponsor needs slightly higher leverage. Spread pricing for well-leased on-campus product falls in the 175 to 250 basis point range over the 10-year swap, with LTV up to 75 percent and defeasance as the standard prepayment mechanism. Pacific Premier Bank and Banner Bank are both active for San Diego MOB financing with credit-tenanted or health system-affiliated leases, particularly in the $15 million to $50 million range where relationship lending and local knowledge carry weight. Bank pricing typically lands 150 to 250 basis points over SOFR, currently near 3.6 percent, with floating-rate structures and three-to-five year terms.
For transitional situations, including lease-up, redevelopment, or a pending sale-leaseback, debt funds have stepped in aggressively in submarkets like Kearny Mesa and Rancho Bernardo where the business plan is clear and the permanent takeout is credible. Bridge proceeds are typically sized more conservatively, and sponsors should model a realistic path to life company or CMBS refinance before engaging bridge lenders in this market.
Underwriting Criteria That Matter in San Diego
Lenders underwriting on-campus MOBs in San Diego concentrate their scrutiny on four areas: the quality and structure of the health system tenant relationship, lease term remaining at loan maturity, building specifications, and local supply barriers. The tenant profile matters beyond the name on the lease. Lenders want to understand whether the occupant is a hospital-employed physician group, a health system-affiliated imaging or surgical operation, or an independent practice with informal campus access. The distinction drives guarantee structure and renewal probability assumptions in ways that move underwriting materially.
Lease term is not negotiable in the life company world. For the best pricing tier, lenders expect 10 to 20 year NNN leases with a health system guaranty and meaningful term remaining at loan maturity, typically at least five years. Shorter lease term or a guaranty limited to the operating entity rather than the parent health system will move a deal from life company execution toward CMBS or bank pricing. Building specifications also get scrutiny that general office loans do not receive. Medical-grade HVAC, reinforced floors sized for imaging equipment, hospital-level electrical capacity, and ADA compliance throughout are not negotiable for on-campus product. Lenders and their technical consultants will verify this during due diligence.
On the market side, San Diego's supply constraints are a genuine underwriting positive that experienced lenders recognize. The limited new development pipeline in core healthcare corridors, combined with high land and construction costs, creates a durable argument for income stability that supports aggressive pricing. Sponsors should be prepared to document the competitive landscape in their specific submarket and demonstrate that the health system's mission-critical dependency on the asset location is not easily replicated nearby.
Typical Deal Profile and Timeline
The sweet spot for on-campus MOB financing in San Diego runs from $20 million to $100 million for single-asset transactions, with portfolio and campus deals extending well above that. Sponsors that attract the most competitive capital are institutional or near-institutional operators with prior healthcare real estate experience, clean balance sheets, and an existing relationship with the health system tenant. First-time medical office borrowers face meaningfully longer due diligence timelines and should expect lenders to scrutinize their operating history carefully.
From signed term sheet to closing, a typical life company execution on a stabilized, investment-grade anchored asset in San Diego runs 60 to 90 days, assuming clean title, an organized diligence package, and no surprises in the environmental or property condition reports. CMBS executions run similarly. Bridge loan closings for straightforward value-add scenarios can compress to 30 to 45 days with an experienced debt fund lender. The most common timeline slippage in this market comes from lease document review, particularly when the health system tenant requires internal legal approval to confirm or clarify guaranty terms. Sponsors should build that contingency into their schedule before going hard on a purchase agreement.
Common Execution Pitfalls Specific to San Diego
The first pitfall is conflating campus-adjacent with on-campus. San Diego's healthcare corridors have produced a number of well-leased MOBs that sit near major health system facilities without a formal campus relationship, health system signage, or a corporate guaranty. Lenders are drawing that line precisely, and deals positioned as on-campus that cannot survive scrutiny will be repriced or declined during underwriting. Sponsors need to document the physical and contractual relationship to the campus before approaching lenders.
The second pitfall is underestimating environmental and geotechnical complexity in coastal San Diego submarkets. La Jolla, Mission Valley, and parts of Chula Vista carry site-specific environmental exposure that can delay or condition lender approval. Phase I reports that fail to address known site concerns, or that do not account for proximity to military installation corridors in the case of North County assets, create diligence delays that break timelines.
The third pitfall is approaching the capital markets with a lease guaranty that has not been confirmed by the health system's legal department. In several transactions in this market, sponsors have moved through early lender engagement based on LOI-level lease terms, only to find that the health system's legal review narrowed the guaranty or introduced carve-outs. That late-stage change reprices the deal and, in some cases, changes the lender pool entirely.
The fourth pitfall is ignoring the gap between life company and CMBS execution on deals that appear borderline. Sponsors sometimes pursue life company terms on assets where lease structure or tenant credit place the deal squarely in CMBS or bank territory, losing several weeks before accepting the right execution. An experienced broker provides that read early, before time and capital are spent on the wrong process.
If you have an on-campus or campus-adjacent MOB under contract or in predevelopment in San Diego, CLS CRE works with the full lender spectrum active in this market, from life companies and CMBS conduits to regional banks and debt funds. Our national medical office track record and direct lender relationships allow us to position your deal accurately and move quickly. Contact Trevor Damyan at CLS CRE to discuss your capital stack and review the full on-campus MOB program guide.