Single tenant store investment

[Bee-Bee Liew]

Hi,

I would like to know if anyone can share with me the knowledge on the single-tenant store investment, such as the Family Dollar or General Dollar. What should I look for and how would I know if this is a good investment? Any feedback or info will be appreciated! Thank you!

[Mark Creason]

Bee-Bee,

Usually a Dollar Store, and to a lesser extent a Walgreens will drop in value the longer you own it.  A typical Walgreen's will have a 75 year lease without rent bumps.  The first 25 will be firm term.  You can get really good financing in the early years.  A developer of a Walgreen's could potentially get 100% financing when he builds the Walgreen's.  A new Walgreen's might trade in the 5s, whereas a Walgreen's in the last 5 years of the firm term might trade in the 9s and up.

With a Dollar Store, they may have rent bumps, but are usually built in rural communities or lower end urban and suburban communities.  They will be built with a brick front but typically a steel side and rear wall.  They usually pay above market rent for the location, so when the lease comes due, they have the owner over a barrel to renew.  I am sure if you ask Joel, he will tell you there are much better investments out there.

Mark