General Landlording & Rental Properties

User Stats

3
Posts
0
Votes

Renegotiating a Dollar General lease contract

Posted Aug 16 2022, 05:01

I recently inherited a Dollar General store from my parents. They owned the store for 20 years. Now the lease is up for renewal and Dollar General wants me to sign a contract for 6 years with no increase in rent. The property management team is encouraging me to do this, but no rent increase for 6 years sounds questionable to me. Does anyone have experience renegotiating lease agreements with Dollar General?

Greensboro, North Carolina

User Stats

2
Posts
0
Votes
Eric Westin
  • Investor
  • Milwaukee, WI
0
Votes |
2
Posts
Eric Westin
  • Investor
  • Milwaukee, WI
Replied Aug 16 2022, 05:35

Is there a way for you to contact me privately?  I own a few and have been through this.   Eric

User Stats

18,000
Posts
28,175
Votes
Nathan G.
  • Real Estate Broker
  • Cody, WY
28,175
Votes |
18,000
Posts
Nathan G.
  • Real Estate Broker
  • Cody, WY
ModeratorReplied Aug 16 2022, 06:03
Quote from @Kenneth Crawford:

I recently inherited a Dollar General store from my parents. They owned the store for 20 years. Now the lease is up for renewal and Dollar General wants me to sign a contract for 6 years with no increase in rent. The property management team is encouraging me to do this, but no rent increase for 6 years sounds questionable to me. Does anyone have experience renegotiating lease agreements with Dollar General?


Of course they don't want an increase! There's value to having a long-term tenant and no vacancies, but no increase means you could be 15-20% below market at the end of six years. Meanwhile, your expenses will continue to grow. If they are a NNN lease (they pay taxes, insurance, utilities, maintenance) then I would consider it. If you incur any expenses, then I would build in a small increase to cover the increase of those expenses over that time period.

User Stats

543
Posts
343
Votes
Rod Hanks
  • Insurance Agent
  • Dallas, TX
343
Votes |
543
Posts
Rod Hanks
  • Insurance Agent
  • Dallas, TX
Replied Aug 16 2022, 06:30

I would definitely get a commercial real estate agent involved and not negotiate directly with their corporate attorneys. The offer of 6 years with no rate bumps is a forewarning that they will take advantage of you if you are not familiar with commercial leases.

User Stats

4,415
Posts
2,461
Votes
Drew Sygit#2 Managing Your Property Contributor
  • Property Manager
  • Birmingham, MI
2,461
Votes |
4,415
Posts
Drew Sygit#2 Managing Your Property Contributor
  • Property Manager
  • Birmingham, MI
Replied Aug 16 2022, 08:17

@Kenneth Crawford did you ask the PMC team why theya re recommending you to sign this?

User Stats

277
Posts
165
Votes
John Mckee#1 Commercial Real Estate Investing Contributor
  • Investor
  • Fairfax, VA
165
Votes |
277
Posts
John Mckee#1 Commercial Real Estate Investing Contributor
  • Investor
  • Fairfax, VA
Replied Aug 16 2022, 08:52

6 years is an odd number. Doesn't seem like a longterm commitment. Ask them for 10 year with a 10% bump in year 5, and another 10% bump in year 10 which would be an option year. That's more in line with NNN properties.

If they are holding their guns to 6 years then yea you should get 2% a year.

User Stats

3
Posts
0
Votes
Replied Aug 16 2022, 11:04

The property manager said that the rent payment is always reliable but that this building is older and there are a few other stores nearby which if pushed on the lease agreement may push them to close the store. 

User Stats

1,484
Posts
3,727
Votes
Greg M.
  • Rental Property Investor
  • Los Angeles, CA
3,727
Votes |
1,484
Posts
Greg M.
  • Rental Property Investor
  • Los Angeles, CA
Replied Aug 16 2022, 11:47

Your two posts seem contradictory.

Your first post says you own a Dollar General store. The lease is up, so Dollar General wants you to sign a new lease. This makes it sound like a standard franchisee situation where you own a franchise, but lease the location from the parent company.

Your second post makes it sound like you are the landlord.

User Stats

3
Posts
0
Votes
Replied Aug 16 2022, 11:55

I own the land and the building and Dollar General leases it from me.

User Stats

2
Posts
0
Votes
Eric Westin
  • Investor
  • Milwaukee, WI
0
Votes |
2
Posts
Eric Westin
  • Investor
  • Milwaukee, WI
Replied Aug 16 2022, 12:59
Quote from @Greg M.:

Your two posts seem contradictory.

Your first post says you own a Dollar General store. The lease is up, so Dollar General wants you to sign a new lease. This makes it sound like a standard franchisee situation where you own a franchise, but lease the location from the parent company.

Your second post makes it sound like you are the landlord.


 Dollar General has no franchisees, and does not own real estate to lease to others. 

User Stats

277
Posts
165
Votes
John Mckee#1 Commercial Real Estate Investing Contributor
  • Investor
  • Fairfax, VA
165
Votes |
277
Posts
John Mckee#1 Commercial Real Estate Investing Contributor
  • Investor
  • Fairfax, VA
Replied Aug 16 2022, 19:31

It makes no sense to not have rent increases.  It ruins the value of your property.  It would be Hard to find investors to buy a NN lease with no rent increases and a short commitment of 6 years.