Strip center acquisition Chicago suburbs

[Jordan Ness]

Hola, BP community !   Am circling a short list of neighborhood strip centers to bid on in the Chicago suburbs $4-6 mln range, looking for an advisor/mentor who can help review the bid level relative to fair market values; am open if they want to invest equity in the deal though we have enough for the down payment already.  Also open to any consultative brokers who are very knowledgeable about neighborhood strip center values in Chicago suburbs who would want to act as a buyers broker to help us hone in on the correct comps for other area merchandise.  Please PM me if interested in either

[Joel Owens]

I can tell you over the years I have seen retail centers brand new with 35,000 in property taxes GA, TX I have seen same sq ft new build 55,000, IL same size over 100,000!

Taxes can be a killer to a property. National NNN tenants can absorb it for the right location and make up for it with stellar sales. Your smaller franchisee to mom and pop tenants can get crushed with high taxes because it makes overall CAM plus BASE RENT unsustainable for their business models to operate profitably.

When reviewing a retail center for purchase the HVAC on roof, roof, and parking lot are typically biggest capital items for replacement that impact the bottom line. Even if tenant pays back you could have to amortize for many years and wait to get back all or some payments.

You need to know CAM per ft in area for each center average. Tenants will look at ALL IN costs versus quality of the location.

Example 2 properties one might be 30 a foot rent for an A location but 12 CAM because of high taxes for 42 a foot. A B location might be 24 a foot rent and 8 bucks CAM for 32 a foot rent. There are a lot of variables. When you look at a property you need to be talking to retail property management companies or their take on the property and current operating costs with in place rents.

Centers are selling at higher caps in IL but for good reason. Taxes are high and some areas have net migration moving away from cold belt states that are more anti-business to more warm belt pro-business states. There is opportunity but have to be more careful.