What's going on with Dollar stores?

[Prithvi Sri]

I see several Dollar stores (Dollar General, Family Dollar, Dollar Tree, etc) on the market at somewhat attractive (7%-8%) price points with around 10 years in lease remaining. My question is, is this normal or is there a trend? I looked at the stock prices of the companies and they aren't doing bad. What gives?

[Cason Acor]

The cap rate is going to depend a great deal on a properties respective market. Dollar stores with good lease lengths but higher cap rates are typically located in secondary and tertiary markets, where a lot of people don’t want to invest. They might also not have favorable lease terms. Some might be double net instead of triple net, the rents could be undermarket, there could be deferred maintenance, etc. 

Long story short, cap rate and a company’s stock price performance do not always correlate.