If you’ve got a Dollar General, Family Dollar, Dollar Tree, or a fast-food franchise in your retail property, you’ve got something a lot of buyers are specifically looking for: national credit tenancy.
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Document tenant credit: Confirm national tenant status and credit rating. Know whether corporate guarantee backs the lease. -
Calculate remaining lease term: Exactly how many years remain? Renewal options? Escalators in place? The remaining term directly drives cap rate. -
Research comparable sales: What have similar national-tenant single-tenant buildings sold for in your market? What cap rates were applied? -
Understand ground lease structure: If applicable, document ground lease term, escalators, and whether you or the tenant owns the building. Different valuations apply.
What credit tenancy means for value
A national tenant’s lease is backed by a corporate balance sheet, not a local business owner’s personal guarantee. If the individual store underperforms, the corporate entity still pays the rent. That security is worth real money in the form of a lower cap rate.
What supports premium valuations for credit tenants
- 15+ years remaining on original lease
- National credit tenant (Dollar General, Walgreens, Chick-fil-A)
- Annual rent escalators (2-3% standard)
- Strong location with high traffic/visibility
- Tenant-built and maintained (NNN structure)
What reduces credit tenant valuations
- Only 2-3 years remaining on lease
- Flat rent with no escalators
- Secondary location or limited visibility
- Landlord responsible for maintenance (gross lease)
- Renewal options at tenant discretion with rent reset
A single-tenant Dollar General on a 15-year NNN lease might trade at a 5.5-6.5% cap rate. That same building leased to a local retailer might be at 7.5-8.5%. On $80K of NOI, that cap rate difference is the difference between a $1.2M building and a $940K building. Same building, same rent, different tenant credit.
The reality check
Not every national tenant deal is a home run. I’ve seen owners who think having a Dollar General makes their property worth what an institutional investor would pay. Maybe, if the lease is new, the term is long, and the location is strong. But a Dollar General with 3 years left on the lease in a secondary market? That’s a different deal.
Lease term remaining is the single biggest factor after tenant credit. An 8-year lease gets a much tighter cap than a 2-year lease. Because at year 2, you’re basically betting on the tenant renewing. If they don’t, you’ve got a purpose-built retail box that needs a new tenant.
QSR tenants
Quick service restaurants (McDonald’s, Chick-fil-A, Wendy’s, etc.) are similar to dollar stores in terms of credit quality. The corporate guarantee is strong. But QSR buildings often sit on owned land with ground leases, which changes the underwriting. If you own the land under a QSR, the ground lease income is extremely valuable.
Seller takeaway
If you own a national-tenant single-tenant retail building, the remaining lease term is critical to valuation. Call Jim at 980-600-3839 to discuss what your lease structure means for your sale price.
I buy retail with national tenants in Charleston, Greensboro, and across the Carolinas. If you’ve got a credit tenant and you’re thinking about selling, the market for your property is strong. Let me know what you’ve got. 980-600-3839.
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