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As Store Counts Rise, Dollar General’s Cap Rates Could Hit New Lows

National Real Estate Investor

Dollar General has been on a winning streak, both as a retailer and as a net lease investment, since the economy began to recover in 2009. A number of factors are driving that winning streak as a retailer, but the company’s appeal as a net lease tenant is based on profitable operations and ambitious plans for expansion. What’s more, Dollar General recently unveiled strategic plans that will likely help it maintain its glitter in the eyes of net lease investors.

Dollar General already has an investment-grade corporate credit rating from rating agencies including Moody’s Investors Service (Baa3) and Fitch (BBB), so its properties add value for investors looking for bond-like real estate assets. The Goodlettsville, Tenn.-based chain’s stores have an average of 10.11 years remaining on their leases at the time of sale, well within the range that investors look for.

“The people who buy these properties are looking for bonds wrapped in real estate,” says Rich Murphy, managing director of Calkain Cos., a net lease brokerage and research firm based in Herndon, Va.

The retailer recently shored up its standing among stock investors by delivering strong financial results, and in March it released an outline of its strategic plans for growth. Moody’s also likes its financial policies, which include keeping low leverage relative to earnings before all major costs are deducted.

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Traci BidingerAs Store Counts Rise, Dollar General’s Cap Rates Could Hit New Lows

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