What returns are LPs expecting on multi tenant retail?
Any LP groups here? I am just trying to figure out return expectations on multi tenant retail (2010 and newer). Everything I am looking at is trading around a 5 cap. Are LPs satisfied with this? Most of these deals are with franchised tenants or smaller operators, but in mid tier markets. I don't know what the IRR expectations have been lately. Its tough to get a 20%+ IRR on a 5 cap, where the rents are already market level and its hard to add more value.
Disclaimer* Im not in retail.
What waterfall economics are you using? I assume you're buying core - core+ centers if there is no value add or mark to market in rents. Maybe look at some more opportunistic deals.
To answer you question - a 17- 25% IRR sits the best with LPs.
Some of the opportunistic deals are priced at a 5 cap assuming market rent and occupancy. Even if I make improvements, the sales price is pricing it in.
so a 5% on proforma yr 1? whats the cap on t12
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