Why co-GP equity fits medical office
Co-GP equity is capital invested alongside the general partner in the sponsor's own share of a transaction. The co-GP investor shares in the GP's obligations and participates in the promote the GP earns for executing the plan.
Co-GP equity in medical office supports operators with health-system relationships who are acquiring or developing clinical space and need balance-sheet support for the GP contribution.
Medical Office market context
Medical outpatient buildings have separated from traditional office fundamentals. MOB occupancy reached 92.3% by year-end 2025 compared to 80.2% for conventional office, while MOB rents rose 6.2% versus a 3.4% decline in office rents over 2023-2025. Cap rates compressed from 7.47% at end of 2024 to 6.49% at end of 2025, signaling strong institutional demand.
The demand drivers for medical office are structural rather than cyclical. An aging population, the shift from inpatient to outpatient care, and health system expansion into community-based settings all support long-term occupancy. Healthcare job postings in medical and social assistance rose from 88,630 in mid-2020 to 205,437 by mid-2025, tracking service expansion.
Underwriting considerations for medical office
H Equities recognizes medical office as a standout asset class with durable fundamentals and needs-based demand. Our approach focuses on MOBs with strong health system tenancy, proximity to hospitals and population centers, and demographic tailwinds that support long-term occupancy. For co-GP equity specifically, the request is evaluated against the asset-level factors below and the structural questions that follow.
- Tenant credit matters enormously: the spread between a hospital-affiliated health system lease and a small specialty practice lease can be enormous in terms of risk.
- Evaluate reimbursement and policy exposure -- healthcare economics run through Medicare/Medicaid dynamics and insurer negotiations that can impact tenant stability.
- MOB deliveries have remained relatively stable (-5.3%) compared to a 54.1% drop in traditional office deliveries, but pockets of overbuilding exist in certain markets.
- Assess proximity to hospitals, major medical centers, and population density -- these fundamentals drive patient volume and tenant demand.
- Lease structures in medical office often include higher tenant improvement allowances due to specialized build-out requirements for clinical use.
- The operator's track record with the property type and business plan, including deals taken through a full cycle
- The joint venture terms: GP co-invest requirement, promote structure, fees, and major decisions
Situations where medical office sponsors use co-gp equity
Operators use co-GP capital when a joint venture or lender requires a meaningful GP contribution and the sponsor's balance sheet is spread across several deals, or when a growing operator wants to compete for larger transactions than its own capital allows.
- Meeting GP Equity Requirements: Joint venture agreements typically require the GP to contribute a meaningful percentage of equity. Co-GP capital helps sponsors meet this requirement when their own balance sheet is stretched across multiple deals.
- Scaling a Portfolio: Operators with strong track records who are growing faster than their personal capital allows. Co-GP equity enables sponsors to pursue multiple deals simultaneously without being capital-constrained.
- Balance Sheet Support: Provide the financial strength that LP investors and senior lenders look for when evaluating a sponsor. Co-GP capital demonstrates additional backing and commitment to the deal.
- Emerging Sponsor Partnerships: Talented operators building their track records who need a capital partner to help them compete for larger deals. Co-GP equity provides both capital and credibility.
Alternatives and structures nearby
Co-GP equity is part of the general partner's position, beneath LP equity, preferred equity, and all debt. It is the only structure here that shares in the promote.
For medical office, H Equities also publishes bridge loans, mezzanine loans, and preferred equity. The right choice depends on the senior lender's requirements, the sponsor's ownership goals, and how much of the plan's value has already been created.
Risks and trade-offs
Co-GP capital sits in the riskiest position in the stack and shares the GP's obligations, including any completion or carry guaranties. The promote only pays if the plan delivers, so the co-GP partner is underwriting the operator as much as the property. Misaligned decision rights between GP partners can slow execution, so the partnership agreement deserves the same attention as the loan documents.
How to start
Present the deal, your track record, and the GP equity need. We evaluate the sponsor as much as the deal itself. For medical office, include the rent roll or sales plan, the capital budget, and the exit assumptions. H Equities responds with questions or a view on fit, not an automated decision.