On a $4.1m multi tenant clinic the TI reserve can eat the whole spread

Take an 18,000 sf clinic building, three tenants, 88 percent occupied, asking $4.1m. In place NOI as delivered is about $290k, so 7.1 percent going in, and a typical debt quote on that puts a buyer around 1.35 coverage in year one. The problem is rollover. Say 6,300 sf comes due inside 24 months, a physical therapy tenant at $27 psf and a two physician internal medicine practice at $29, neither with stated intent. If both leave, the re-tenanting math is $85 psf of TI on second generation medical space plus $12 psf of commission plus six months of downtime, call it $610k of capital against a $290k NOI. Even at a 60 percent renewal probability the expected cost is well north of a year of net income, and a lender in this scenario is only sizing a $150k TI and leasing reserve. Two things worth pushing on. First, what annual reserve per square foot are people actually carrying on multi tenant medical outpatient, because the $0.25 psf that shows up in broker models is obviously fiction next to $85 psf turns. Second, does anyone underwrite renewal probability differently for a small physician owned practice versus a system leased suite, and if so what does the delta look like in the model? A flat 65 percent for both is the common default and it is hard to believe.