Retail Done Right (Case Study)
Dissecting a retail deal that delivered a 23% IRR - and why it's not a unicorn
Today’s case study might look like a unicorn for two reasons:
It’s refreshingly transparent about what actually happened (and for the love of all that’s good, LPs, you need to demand transparency, here’s why);
A 23% IRR with a 3.8x equity multiple isn’t exactly a 2025 market norm.
Except — it’s not a unicorn. Because this GP has repeatedly executed this exact scenario. Over and over again, over the course of a couple of decades. Today, we’ll dissect an actual deal, and see what went right.
For those of you evaluating retail deals, I’ve included one of my go-to AI prompts at the end of this post.
But before you grab your lab coat…
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Deal or No Deal?
Just a friendly reminder: this is for educational purposes only, not financial advice. Numbers, location, and details have been changed to keep the sponsor’s identity confidential.
The Deal at a Glance
Asset class: Neighborhood shopping center (retail)
Size: 50,000 SF (anchor tenant: national retail chain)
Location: A fast-growing suburb, secondary market in the Southwest.
This post will help you evaluation deal location:Acquired: 2019
Hold period: 6 years
Capital structure: Straightforward deal, one class of equity, financed with a 7-year loan at 65% LTC. For more on capital structure:
Business plan: Value-add via lease-up, tenant mix upgrade, operational efficiencies, and deferred maintenance cure.
What They Did Right
The GP’s value-add strategy wasn’t Earth-shattering, but it was executed well. Here’s what they did:
Rebuilt the rent roll: GP negotiated stronger leases and re-anchored with a national retail chain. Contractual base rents up ~28% from acquisition.
Deferred maintenance clean-up: spent about $250K in repairs and improvements, making the property functional and marketable.
Cost controls: operational expenses trimmed without cutting into tenant or shopper experience.
NOI growth: increased by ~50% over the hold period (CAGR ~5.8%).
Why NOI growth is important to track:
The Exit
The property was acquired in 2019 at a 7.25% cap rate. By the time of sale, the team had achieved roughly 75 bps of cap rate compression, exiting at about 6.5%. The buyer? Institutional capital, drawn to a fully stabilized asset in a high-growth submarket.
Yes, some of the returns came from cap rate compression, but one could make a strong argument the GP made the property more attractive to an institutional buyer by stabilizing it, and brining in higher quality tenants. There is a lot to be said about selecting the right location, as well.
Returns came in at:
~23% IRR
3.8x equity multiple (gross)
Are you having FOMO yet??
Takeaways for LPs
Value-add in retail isn’t just lease-up: it’s the combination of better tenants, better lease terms, and operational discipline.
Cap rate compression is a gift, not a given. It worked here because the sponsor bought well, executed consistently, and sold into strong demand. Caveat emptor: when it works the other way, things get ugly:
Boring can be beautiful. This deal didn’t require any magical tricks on the surface - but simple isn’t always easy. The debt was well-matched to the business plan: no surprises with floating interest rates re-adjusting upward (and given the loan was near term-end, we’ll assume prepayment costs were minimal).
If you’re looking at retail opportunities yourself, here’s one of the AI prompts I use to speed up my analysis (for a deeper dive on how I use AI, read this):