CHICAGO—The market for net lease properties has been on fire recently, and a Walmart in suburban Chicago was just sold at the lowest cap rate ever recorded for a single tenant Walmart transaction above $5 million, according to Real Capital Analytics.

The Boulder Group, a net leased investment brokerage firm in suburban Northbrook, completed the sale of a Walmart ground lease located adjacent to Chicago at 5630 West Touhy Ave. in suburban Niles for $9,685,000 and a cap rate of 4.89%, Randy Blankstein, president of Boulder, tells GlobeSt.com. The store anchors Pointe Plaza, a 330,000 square-foot development that also features Ross Dress For Less, Walgreens, Fresh Farms International Market, Dress Barn and Babies 'R' Us.

Boulder officials did not disclose the identities of the parties involved in the transaction, but say the seller was a Midwest based real estate company and the purchaser was a high net worth individual from California in a 1031 Exchange. Blankstein and Jimmy Goodman, a partner of Boulder, represented both the buyer and the seller.

“Not many institutional investors were interested because most can't buy a property for a less than 5% cap rate,” Blankstein says.

He adds that the low rate for this property was largely a reflection of its superior location and how investors are flocking to top-tier markets like Chicago. The store was opened around 1999, one of Walmart's first attempts to tap into the Chicago market. Average household incomes within a one-mile radius are in excess of $107,000 annually. In addition, about 700,000 people live within five miles. Directly across the street from Pointe Plaza is Village Crossing, a 450,000 square-foot development that features Dick's Sporting Goods and many other national retailers.

Walmart has about nine years remaining on their ground lease, and although the lease features a 10% rental escalation in the first renewal option period and 5% rental escalations in the remaining options, Blankstein says “I don't think you could sell a Walmart with less than ten years on its lease for such a rate in a second-tier or third-tier city. That's a big reason the cap rate was so aggressive. You have to really believe in the renewability of the lease and the location, and because it was Chicago, people believed in both.”