Family Dollar for Sale

[Kris Gupta]

Hi All,

I made an offer to buy Family Dollar in December 2019. My offer was just a little less and the Seller accepted someone else offer that time.

2 days back I got the message form seller mentioning that the other buyer is not performing and this deal will be available and they are asking if I want to send my back up offer.

This has 5 year lease remaining and after this there are 4x5 renewal options with 10% increase

My questions are...

1> During the current lease term will Family Dollar continue to pay rent in this market? Can they stop paying or can they ask for rent reduction?
2> What are the chances that after 5 year they will renew the lease?

Thanks
Kris

[Joel Owens]

Hi Kris,

Family Dollar not as good credit as Dollar Tree and Dollar General. That is why their cap rates are generally HIGHER.

5 years left is usually an ALL CASH deal. STNL lenders want a minimum of 7 years plus on primary lease term remaining for the  best terms and rates. Also if this is a double net with lease coming to and end in 5 years likely tenant will want new roof, parking lot recoat, etc. to extend the option even if it doesn't say so.

Usually I get on a call with clients and go over their goals to find out whether a property might be a fit for them or not. I find buyers often do not understand the lender underwriting mechanisms for NNN STNL properties.