Family dollar shopping center

7 Replies

Hello BP community,

I have an interesting deal in front of me 25 miles north of a Major city in the Carolinas. It is a 40,000 sq ft shopping center that has a vacant food lion(recenetly moved out grocery store), a family dollar, chinese food place, papa johns, nail salon and a H&R block. It is fully leased except for the grocery that recently moved out. My plan is to convert the grocery store into smaller suites and lease it all as a typical shopping center effectively chopping the grocery store into smaller sections. My biggest fear is the family dollar moving out when there lease ends in 16 months. There is a stand alone Dollar General right next door. The traffic count is 15,000 cars per day. What research would you do to see if the family dollar is planning to stay? I called the location and the store clerk said there was an "okay" amount of traffic through the store and was currently checking someone out when i called. I am purchasing the place at a discount so that is also to be considered. Estimated day time population is 4500 within a one mile radius and 50,000 withen a 5 mile radius. What do yall think?

I would consider worst case scenario. Let's say Family Dollar moves out, can you still afford your expenses? If that is the case, by all means go for it

Theres a lot of fear and uncertainty if you can't replace that anchor spot. The other tenants really want traffic from that type of tenant. What is your broker relationship in that area?

@Michael Sura

Supermarket was an “anchor” tenant driving in traffic and enabling the other tenants to experience more walk in trade. Even if you’re successful attracting small tenants to the divided space there won’t be an anchor tenant draw, and your rental rates will be severely discounted. With online shopping, Amazon Prime delivery, etc., there is a continuing decline in demand for retail space. The price you believe is a discount purchase price may not be that at all. It’s estimated that the value of a retail property with 75% vacancy and no anchor tenant possibility is half or less than a fully occupied center.

You need to check the leases for co-tenant anchor clauses. Some have if anchor goes out they can reduce rent temporarily by 50% and if new anchor not in place within 6 months to 1 year then they can terminate lease early.

Also a 40,000 sq ft shopping center if all the roofs need replacing count on hundreds of thousands of dollars. If roof has rocks that need to be sucked off first and not just a layer but down to decking could cost even more. Seal coating a parking lot with new striping in the 6 figures. If it has to be milled down then can be a huge expense.

What are market rents for the area for those box size tenants? If rent is real low and you can't raise it much even after outlaying tons of cash for upgrades then the juice usually isn't worth the squeeze.

15,000 cars a day isn't much. That is usually a small suburban town on the fringes and the cut off for most tenants to go into an area. Most times strong suburban is 30,000 cars a day to 60,000 cars a day. On rare occasion above that but above 60k a day is mostly for highway interstates.  

Originally posted by @Michael Sura :

Hello BP community,

I have an interesting deal in front of me 25 miles north of a Major city in the Carolinas. It is a 40,000 sq ft shopping center that has a vacant food lion(recenetly moved out grocery store), a family dollar, chinese food place, papa johns, nail salon and a H&R block. It is fully leased except for the grocery that recently moved out. My plan is to convert the grocery store into smaller suites and lease it all as a typical shopping center effectively chopping the grocery store into smaller sections. My biggest fear is the family dollar moving out when there lease ends in 16 months. There is a stand alone Dollar General right next door. The traffic count is 15,000 cars per day. What research would you do to see if the family dollar is planning to stay? I called the location and the store clerk said there was an "okay" amount of traffic through the store and was currently checking someone out when i called. I am purchasing the place at a discount so that is also to be considered. Estimated day time population is 4500 within a one mile radius and 50,000 withen a 5 mile radius. What do yall think?

Family Dollar usually reports sales, ask broker/seller for 3 years of sales and see how they are trending, what are FD total occupancy costs? Demising a space for smaller suites can be very expensive, and you are speculating on finding these tenants after work is done, you may be better off getting one tenant to take the space and then doing the work (this will also likely be expensive, but less and hopefully credit tenant). I would expect the other existing tenant to lose traffic and sales with Food Lion closing, FD does a nice amount of groceries (unless their lease doesn’t allow it) and they may do better now with Grocery closed. Reach out to me directly if you want ideas on possible replacement anchors.