what kind of returns are you currently seeing?

Question

I'm looking at passive investments of smaller strip malls populated with combination of chain retails and small local businesses, and with a larger shadow tenant (Walmart, Target, etc.).  What kind of returns (preferred, cash on cash, IRRs) are people seeing for these offerings lately?

Joel Owens · Answer

Retail center is depending on size. 3 million retail centers in good locations 6 to 7 cap rates but they are semi-passive and not completely passive like investment grade single tenant. In CA could be more like 4 to 5 cap rate for retail centers.

You go up in price to larger retail centers maybe 7 to 8 caps for 10 million dollar centers.

I am not seeing stabilized retail centers even close to 25% cash on cash but maybe half that for larger centers. Smaller centers maybe 7 to 10% cash on cash. STNL about 5 to 6% cash on cash best case and IRR 10% plus.

Now there can be value add retail where stabilized cash on cash and cap rate can be much higher but just like development this is more high risk and much more active role and investment. Without talking to you on the phone about your particular situation I could not recommend selections or if STNL or MTNL is even likely right for you.

Ronald Rohde · Answer

Smaller strip would be super risky, I'd want 25% CoC, low leverage. IRR in 50s

Anchor tenant retail is much stronger, depends on the grocery mix, if its a newer location, i'd be okay in the lower 15%, IRR high 20s