Dollar General Is on an Upward Path

Jonathan Hipp

There are many forces driving Dollar General to be an investor’s current pick in the net lease world. As of August 13, 2016, Dollar General operates 13,000 stores in 43 states with plans to open 900 more stores this year and 1,000 more in 2017.  In order to support this expansion, the company plans to hire 10,000 employees this fall.

A majority of their locations have absolute-triple-net leases in place. The lease term is generally 15 years with stated option periods of 5 years each with rental increases ranging from 5-10% when an option is exercised. The national average cap rates for Dollar General was 6.90% in Q3 2016, a decrease of 40 bps since Q2 2016. This was a result of many new build-to-suit transactions, which closed during the quarter.  Dollar General cap rates have steadily decreased since Q2 2014 as shown in the chart below.