A tenant mix that looks stable on rent roll hides a referral dependency the cap rate never sees

That referral chain is the whole underwriting problem and almost nobody checks it pre-LOI.

What I want to know before anything: does the PT operator have any out-of-network or self-pay volume that survives independently?

Saw this exact setup on a four-suite building in Joplin I almost closed on in 2022, and the broker literally listed "diversified tenant base" in the OM.

What finally surfaced it was calling the PT practice's billing company directly, and they let slip that 80-something percent of active patient files had the surgeon's NPI on the referral line. Cap rate was priced at 7.1, should have been closer to 9 given the single-source exposure.

Who's actually doing that referral due diligence on the buy side, because I have never once seen it in a seller's disclosure package?

The assumption doing the most work in a two-tenant MOB like this is that a signed lease equals an independent income stream, and the cap rate math never challenges it. What actually matters is whether suite B could survive a cold start, meaning zero referrals from suite A, and the answer is almost always no for a PT practice at that scale. The diagnostic question I would run before LOI is simple: ask the PT operator what percentage of new patients in the last twelve months came through a physician in the same building or the same system. Anything above forty percent and you are looking at one effective tenant regardless of what the rent roll says.

The piece that gets missed more often than the referral dependency itself is the lease structure interaction. If suite A has a co-tenancy clause or an early termination right tied to building occupancy, and suite B goes dark after the surgeon leaves, you could hit a trigger that lets suite A reduce rent or exit, compounding the loss rather than containing it. Those two clauses together create a cascade that a cap rate calculation built on stabilized collections never prices in.

What does the PT lease term look like relative to the surgeon's, and does either lease have a renewal option that resets the exposure window?