But the capital markets dislocation and credit crunch are havinga mild impact on this favored sector of real estate, with emphasisfor greater returns now shifting to class A properties, accordingto speakers here last week at BOMA's 2008 Medical Office Buildingand Healthcare Facilities Conference.

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If there's one area of general concern in the sector, manyindustry executives pointed to class B and C properties, especiallythose located off-campus.

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"There is a valuation adjustment off-campus," said Brent Tharp,senior vice president of medical properties for GE HealthcareFinancial Services "What you're seeing off campus is a return tothe norm, the statistical norm. There is a 50 to 100 basis-pointdifference in cap rates compared to one year ago."

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Financing is available for class A off-campus assets, pointedout Jeff Piehl, director of Cushman & Wakefield's seniorhousing/healthcare industry group. He also noted an emerging trendof many developers competing to deliver class A properties offcampus, but close to the main hospital.

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Piehl said new off-campus construction is mostly A, with class Band C off-campus being trended out. "Class B and C will be a slowto dead market for the rest of the year," he predicted.

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