Part 2: Brokers Analyze Dollar Store Hybrid Concepts Market Disruption

InCommercial Retail VPs and Net Lease Experts, Michael Mintz and Ryan Wewerka, Expand on Changes and Disruptions in the STNL Industry with Connect CRE – Dollar Tree and Family Dollar Combo Store: Success and Market Disruption Continues

Single-tenant net-leased (STNL) product is being gobbled up by funds, 1031 investors and individuals alike. There is a clear desire for new credit-worthy product. Fortunately, the STNL market, dominated by dollar stores as of late, is quickly absorbing Dollar Tree Corp.’s new concept of a Family Dollar and Dollar Tree Combination store. The new store concept combines, under one roof, the characteristics that people love about each: Family Dollar’s great value and selection; and Dollar Tree’s “thrill of the hunt ” items.

Per Coresight Research, approximately 3,300 stores opened in 2020, with another estimated 4,000 to open in 2021. Of those 7,300 store openings, 3,150 or 43% of them are dollar stores. Dollar Tree has targeted locations for the development of over 3,000 stores in 2021 and beyond. The question on the minds of many investors is, are they a viable product that can be relied upon over the course of the lease term, or are they an experiment to be quickly discarded?

“Given Dollar Tree’s interest in continuing growth for new combo stores and redeveloping existing locations into combo stores, I believe the horizon is far off,” said Michael Mintz, VP of retail investment sales, InCommercial Property Group.

In its Q2 press release, Dollar Tree stated, “Combo Stores, on average, are delivering: 23% more sales; 31% more gross margin dollars; approximately 120% more cash contribution dollars, and reducing payback time by approximately 30%. New Combo Stores compared to similarly-sized Family Dollar stores are showing a sales increase of over 17%, and renovated or relocated Combo Stores are showing a sales increase of over 40% when compared to Family Dollar stores that have not been renovated or relocated.”

Although the data set is only a couple of years old, combination stores are not only surviving, they are also thriving and taking over market share. The investor market is taking notice and showing confidence with their wallets. While there has been cap rate compression in the STNL market over the past 20 months, combo store sales cap rates have compressed 85-125 basis points since the beginning of 2021.

“Dollar Tree will continue to focus on the growth of the Combo store. The 3,000-plus markets identified for new Combo Stores are only the tipping point for rest of 2021 and into 2022,” said Mintz.

Mintz and Ryan Wewerka of InCommercial are actively representing buyers and sellers of the combo store concept and will continue to monitor the progress and impact of them on the STNL marketplace.

Michael Mintz and Ryan Wewerka of InCommercial Property Group have been actively selling and analyzing these hybrid concepts nationwide on behalf of buyers and developers. InCommercial Property Group is based in Chicago and is a real estate brokerage firm and fund manager.

 

Read the Connect CRE article here: https://bit.ly/3b9DW16

Read their previous article on ConnectCRE here: https://bit.ly/3jPBaTZ

Brokers Analyze Dollar Store Hybrid Concepts

InCommercial Brokers and Net Lease Experts, Michael Mintz and Ryan Wewerka, Discuss and Analyze Dollar Store Hybrid Concepts with Connect CRE, as Dollar Tree and Family Dollar Turn the Investment Market on Its Head.


Family Dollar and Dollar Tree stores have seen staggering returns over the past several years, particularly during the pandemic when they announced more than 600 new store openings and, according to 2020 Annual Report, reported sales exceeding $25 billion for the first time. Following Dollar Tree’s acquisition of Family Dollar in 2015, the integration process saw challenges, but given the aforementioned growth and an exciting new concept that has shown promising results, the future looks bright for the discount store giant.

In 2019, Dollar Tree came up with a visionary hybrid concept. They introduced the Family Dollar and Dollar Tree combination store. The concept combines, under one roof, the characteristics that people love about each: Family Dollar’s great value and selection; and Dollar Tree’s ‘thrill of the hunt’ items.

In 2020, Dollar Tree trialed 50 of these next generation stores. According to Dollar Tree chief executive Michael Witynski, “The combination stores are more productive, produce higher gross margins, are better leveraging stores costs. Our goal is to have formats that leverage the best of Dollar Tree and Family Dollar brands to serve customers in all types of geographic markets.” Given the rapid ascension, Dollar Tree has identified 3,000+ markets for future growth. This accountment has been met with great enthusiasm by the triple-net and 1031 investment communities.

NEW CONCEPT INSIGHTS:

In February of 2021, Dollar Tree received an upgrade of its investment-grade credit rating from BBB- to BBB. Standard & Poor’s credits the upgrade to Dollar Tree’s resilient performance throughout 2020’s government-imposed shutdowns.

“With their new concept combined with an upgraded credit rating, Dollar Tree Inc. is operating with recession resistant, essential service product perfectly suited for investors seeking low risk real estate,” says Michael Mintz, VP of investment sales, InCommercial Property Group.

Michael Mintz and Ryan Wewerka of InCommercial Property Group have been actively selling and analyzing these hybrid concepts nationwide on behalf of buyers and developers. InCommercial Property Group is based in Chicago and is a real estate brokerage firm and fund manager.

Read the Connect CRE article here: https://bit.ly/3jPBaTZ

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