By Peter Colvin, Chairman, The SVN National Single Tenant Group
I’m often asked “why do I like Dollar General properties so much?” I have dealt with nearly every national brand and the answer is easy. Here are my Top 10 Reasons:
1. They are a great company. Not only are they very organized and efficient, they are nice people. I deal with many people at the corporate headquarters and all of them seem to be pleasant and helpful. This is rare. They return phone calls, respond to emails, return estoppel letters quickly and are open to early lease renewal discussions. They realize that if they treat their landlords well, they will be able to grow more easily. Their Dollar General Literacy Foundation donates millions of dollars to help at-risk children.
2. They are very strong financially. They continue to maintain an investment grade credit rating and a strong bottom line, even with tremendous growth. This is not easy.
3. They have real triple net leases. They are responsible for all costs. My clients enjoy getting mailbox money and not having to deal with any maintenance, especially clients that exchanged from multi-family and storage.
4. They are located in “normal” size and shape buildings. Their buildings are about 9,100 SF and rectangular. This gives me comfort that if they were to leave at the end of their lease, the buildings are very re-useable and should provide good residual value.
5. Their rent is low. With an average rent of $8.80/SF per year, it is not an inflated rate. This makes me feel much better about having to replace them at the end of their term and not having my clients take a big hit in rent, thus preserving their cash flow. Clients that purchase a 3,000 SF Taco Bell for $2M can lose 75% of their value if Taco Bell does not renew. Joe’s Taco (the next tenant) will pay about 25% of the rent that Taco Bell paid, thus a 75% loss of income and 75% loss of value. We don’t see this with Dollar Generals.
6. They renew and renew and renew. Dollar General invests nearly $400,000 of their own money into our client’s buildings and become part of each community to establish a long term relationship with their shoppers. The local shoppers depend on Dollar General for their weekly staple items and special purchases. Dollar General renews their leases over 98% of the time and they are not known to move across the street to get a better deal like drugstores that start with the letter “W” do.
7. The price point is good. The $1.2 to $1.6 Million price point is good for many 1031 buyers and project investors. This allows our clients to purchase a safe asset and preserve their cash flow for many years. Some of our clients own over 50 Dollar General properties. Many investors that need a $5M exchange will buy 3 Dollar Generals instead of a $5M drugstore. They have flexibility, safety and diversity as the result of having 3 locations.
8. Banks like Dollar Generals a lot and they are easy to finance. Many of our clients are able to get 75% LTV, even 80%. This is rare.
9. Liquidity. They are pretty easy for me to re-sell if our clients need cash or want to reinvest. They are about the most liquid real estate asset that I have ever seen.
10. There is a good selection. Due to Dollar General’s expansion, there are good choices for our clients. Many clients tell me they are not real concerned where they are located because they know that Dollar General puts a lot of research into site selection. These are just 10 of the reasons why I help so many people invest in Dollar General leased properties. I can sleep well at night knowing I given them good advice. They can sleep well knowing their money is safely invested. Peter Colvin
The SVN Colvin Team / 616-893-1398 / email@example.com / www.svncd.com