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Summer Success for Dollar Stores

This summer has been particularly good to dollar stores.

By Jonathan Hipp | Updated on August 31, 2011

This summer has been particularly good to dollar stores. Popular retailers like Family Dollar and Dollar General continue to open new stores. S&P even raised Dollar General’s credit rating BB+ in late July. Despite the stagnant economy (or because of it) dollar stores are thriving.   

In order to continue capturing market share, the dollar store companies are relocating new stores in existing markets and opening new stores in new markets. These relocations and new stores offer real estate investors an opportunity to own hard assets with bond-like characteristics based on the long-term net leases signed by stable corporate tenants. The current capitalization rates (or yield) for these dollar store net lease assets are in the 8% – 9% range, depending on location, specific lease terms, and credit worthiness of the tenant. With Dollar Generals recent credit upgrade to BB+ Stable, the credit gap between Dollar General and Family Dollar (BBB- Stable) is shrinking.

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