Geneva Commons sits between a Target and a Home Depot

LAKE GENEVA, WI—Officials from Jones Lang LaSalle’s Corporate Finance & Net Lease Group say they have just completed on behalf of a Midwest developer the sale of the 55,077-square-foot Geneva Commons retail center in Lake Geneva, WI, to an Illinois-based institutional real estate firm for about $10.4 million. The developer finished the center late last year after it was 100% pre-leased to six national retailers that all took on long-term triple net leases. Investors from across the country showed interest in Geneva Commons, and the sale illustrates why cap rates for net lease properties have been sinking.

“The ability to lock in long-term, stable cash flow properties is very advantageous to investors right now,” says Matthew Berres, who led the JLL on this transaction. But the economic recovery has gathered steam rather slowly, and major retailers have not yet ramped up new construction to the levels seen just before the financial crisis, intensifying competition for the new assets that do hit the market. Furthermore, “with the financing you can achieve right now, you’re still getting an attractive yield at the end of the day.”

Prospective buyers for Geneva Commons included institutional investors, 1031 exchange buyers and family office funds. “We were able to leverage the [JLL] platform and generate interest from around the country. We had multiple offers on the property including ones from both the East Coast and the West Coast.”

And even though urban infill projects make up much of the activity in this sector, “there are other strategic locations and markets that retailers are taking a harder look at.” Geneva Commons was especially attractive due to its location. The development sits on Edwards Blvd. near the intersection of Rte. 12 and Hwy. 50 in the highly-affluent town of Lake Geneva, about 70 miles northwest of Chicago and 40 miles southwest of Milwaukee.

“It’s not just a summer destination anymore, most people live there on a year-round basis,” and it draws on the purchasing power of both metropolitan areas. In addition, high-traffic stores like Target and Home Depot sit on either of the new development.

TJ Maxx, Jo-Ann Fabrics & Crafts, DaVita Dialysis, Rue21, Kay Jewelers, and Great Clips occupy the four buildings at Geneva Commons and all have leases with built-in escalations and renewal options. “The developer could have separated the parcels,” Berres says, but “it made more sense from a price standpoint to package it as a portfolio.”

The project took several years to put together and complete, and the commitment to the location from the anchor tenants like TJ Maxx was key, Berres adds. “TJ Maxx was patient. They could have gone anywhere in Southeast Wisconsin. But they decided, ‘this is right where we want to be.’ That’s a very compelling statement for an investor.”