Retail Cap Rate - Grocery anchored, 100% occupied, 10 years of WALT, top of market rents, 175k SF, 3% escalations, NNN, national tenants, popular retail corridor
What type of cap rate would you ascribe to something like this? It seems like the best of the best type of center.
6.50%
6.5% seems about right
Yes, I'd say this, depending on location of course.
6 easily. Lots and lots of money chasing these types of deals with much lower return requirements.
Do you have any examples nationally that have closed at a 6 or close to it? We closed one at 6.75% that was similar to this center but not quite as good. Maybe B- if the center I'm describing is A+
Or could you share what types of returns you think people would require for something like this?
Where is it? Assuming its a good market I would agree at 6.00-6.50%
would want to know the quality of the rent roll and rents relative to market - given SF you could have one strong anchor and a bunch of smaller tenants vs. a few strong anchors, but given your WALT i’m guessing it’s closer to the latter (which would have it trade tighter)
finger in the wind but i’d probably say somewhere in the 6s, maybe trades wider if it’s in a A- / B+ market or if it has something funky to it. there’s a ton of money flowing into the grocery retail trade, esp for institutional quality assets with top credit tenancy
High quality tenants from national/regional brands. Oddly enough, most of the inline tenants have 10 year leases as well as the anchors which are between 10-15 years. This is brand new construction but the rents are at top of market. It just seems like a cash cow with minimal to no additional capital needed for the next decade.
got it - definitely would trade in the 6s, probably in the low 6s if it's a strong market. so long as there's a desirable grocer + a few strong non-grocery anchors I don't see why people wouldn't scoop this up in the 6.5 cap rate range, especially if it's a high growth / A+ market
only way I would see this trade wider is if some key anchors perform poorly and/or rents are way way above market. either one would cause occupancy costs to spiral out of control and increase early vacate risk. in that case smart buyers will either underwrite rent cuts or additional TI payments as inducements for tenants to renew, which would obviously put a cap on pricing
but given new construction / minimal foreseeable capex spend and high WALT, some buyer out there will scoop this up (and likely overpay) for the perceived stability
People are saying 6% for national credit retailers. Does this mean something like Class A industrial is a 6 or even 7 cap, and MF is like 7 or 8? If so, man... cap rates have expanded like crazy.
Since when does multifamily trade 100-200 bps wide of retail? Not following your logic.
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