Shopping Centers length of Lease vs Cap Rate

1 Reply

When looking at a traditional shopping center with one to two key anchor tenants what length of time should be left on the anchor tenants' leases if you would purchase at the general market cap rate in middle america?

Question is not targeted enough. Do the 2 anchors have investment grade credit BBB- or better? Are there co-tenant anchor clauses with the smaller tenants?

Do the anchor tenants disclose sales for those locations? Any early termination rights in the lease? Does the lease allow subleasing to anyone or does the tenant need landlord approval? if it is subleased is original tenant guarantee still on the lease?

For guarantee of lease is it personal and corporate guarantee? If just corporate is it parent company for all stores, subsidiary of a few stores ,or just a single store?

Additionally you could not have corporate  but a small or larger franchisee.

The anchors might own their space. Sometimes the buildings attached with smaller tenants are for sale and the anchors own their spaces. If anchors lease it depends how much space they take up. Old style centers had 70% anchors and 30% small tenants. Now except for grocery centers that is being reversed. 70% smaller tenants and then a few small box anchors  that make up 30% of the revenue stream for the project.

Lot's and lot's of layers and variables go into what a retail property is worth including location, age of building and look, parking,lighting, access to property, sight lines, traffic lights, corner or off corner, traffic counts, population levels 1,3,5 miles, median income levels, etc.

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.