Net Lease Dollar Store Report

net lease dollar store report

  1. The Boulder Group
    net lease dollar store report
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    Net Lease Dollar Store Report
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    • 1. THE NET LEASE DOLLAR STORE REPORT DECEMBER 2012DOLLAR STORE PROPERTIES MARKET OVERVIEWMEDIAN ASKING CAP RATES The median cap rate for single tenant net leased Dollar General and Family Dollar properties compressed by 16 basis points from the third Q3 2011 Q3 2012 Basis Point quarter of 2011 to the third quarter of 2012. This compression is derived Tenant (Previous) (Current) Change by the combination of historically low interest rates, a lack of investmentDollar General 8.40% 8.25% -15 grade assets available at a low absolute dollar amount and a surplus ofFamily Dollar 8.45% 8.28% -17 1031 exchange investors with low equity requirements. Investors are attracted to dollar stores tenanted by industry leaders, Dollar General and Family Dollar, as they offer long term leases to investment gradeMEDIAN ASKING CAP RATE tenants at a low absolute dollar amount. Dollar General and FamilyBY LEASE TERM REMAINING Dollar assets have an average asking price of $888,754 with an averageYears Remaining Dollar General Family Dollar price per square foot of $103. Dollar store properties are trading at a 7712-15 7.25% N/A basis point discount to the net lease market due to their geographical9-11 requirements within secondary and tertiary markets. 8.00% 8.25%6-8 8.50% 8.40% The retail industry shows strong consumer demand for dollar stores3-5 9.00% 9.00% evidenced by the rapid expansion plans of Dollar General and Family0-2 10.00% 9.25% Dollar in 2013. In 2012, Family Dollar increased new store development by greater than 50% and combined, Dollar General and Family Dollar constructed 1,100 new stores. Dollar store customers are attracted toMEDIAN ASKING PRICE the low cost of the goods sold as well as the convenience of the smaller Median Asking Median Price store format. Furthermore, dollar stores have increased their Tenant Price Per Foot competition with grocery stores as an increasing percentage ofDollar General $784,500 $87 consumers are purchasing grocery items at dollar stores each year.Family Dollar $993,008 $118 The standard new Family Dollar leases are double net for ten years with no rental escalation in the primary term, whereas the majority of newMEDIAN NATIONAL CLOSED Dollar General leases are triple net for fifteen years with a 3% rental escalation in lease year eleven. Therefore, new construction DollarCAP RATE SPREAD General assets are priced at an 89 basis point premium over new Tenant Closed Ask Spread (bps) construction Family Dollar assets. In addition, in April 2012 DollarDollar General 7.81% 7.51% 30 General’s credit rating was upgraded to BBB- (investment grade) fromFamily Dollar 8.76% 8.50% 26 BB+ by Standard & Poor’s. Transaction volume remains heavily concentrated in recently constructed dollar store properties; however stores located in above average markets with strong demographics remain in high demand. The single tenant net lease dollar store sector will continue to remain active as private investors seek properties with long term leases, investment grade tenants and attractive price points. www.bouldergroup.com
    • 2. THE NET LEASE DOLLAR STORE REPORT DECEMBER 2012DOLLAR STORE PROPERTIESON THE MARKET Q3 2012 Percentage Tenant (Current) of MarketDollar General 220 56%Family Dollar 172 44%DOLLAR STORE MEDIAN ASKING CAP RATE BY REGION N/A 8.10% 7.50% N/A 8.50% 8.25% WEST ST EA TH MIDWEST N OR MOUNTAIN SOUTH 8.25% 8.30% 8.00% 8.25% www.bouldergroup.com
    • 3. THE NET LEASE DOLLAR STORE REPORT DECEMBER 2012 COMPANY COMPARISON Dollar General Family Dollar Credit Rating BBB- (Stable) BBB- (Stable) Stock Symbol: DG FDO Market Cap $16 billion $7 billion Revenue $15 billion $9 billion 2012 Stores Built 625 475 Number of Stores 10,203 7,400 New Lease Type Triple Net Double Net Typical New Lease Term 15 years primary term with twenty years of options 10 years primary term with twenty-five years of options Typical Rent Increases 3% in lease year 11; 10% each option period None in primary term; 10% each option period FOR MORE INFORMATION AUTHOR John Feeney | Research Director john@bouldergroup.com CONTRIBUTORS Randy Blankstein | President Jimmy Goodman | Partner Chad Gans | Research Analyst rblank@bouldergroup.com jimmy@bouldergroup.com chad@bouldergroup.com© 2012. The Boulder Group. Information herein has been obtained from databases owned and maintained by The Boulder Group as well as third party sources. We have not verified the information and wemake no guarantee, warranty or representation about it. This information is provided for general illustrative purposes and not for any specific recommendation or purpose nor under any circumstances shallany of the above information be deemed legal advice or counsel. Reliance on this information is at the risk of the reader and The Boulder Group expressly disclaims any liability arising from the use of suchinformation. This information is designed exclusively for use by The Boulder Group clients and cannot be reproduced, retransmitted or distributed without the express written consent of The Boulder Group. www.bouldergroup.com
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