Real estate advisor Brian Fielding, provided commentary today on the acquisition of Dollar Tree’s acquisition of Family Dollar. He explained that both companies have been building assets that have been prominent in the net lease market. The merger will not only make Family Dollar’s real estate assets larger than the other major competitor, Dollar General, but one could reasonably expect that the consolidation could result in the closing of less profitable stores. Family Dollar had already announced its intention to close nearly 5% of its existing locations and while Dollar Tree has stated that it will continue to operate FD under its existing name, it is difficult to imagine that DG and FD stores in close proximity will not be consolidated under one of the brand names.
This merger and the previously announced store closings serve as a reminder to the net lease investor that the success of each store individually should be considered when seeking to acquire any asset. For while the corporation will likely stand behind the obligations of the remaining term on existing leases, the investor will not only face the prospect of having a “dark” store, but will likely have many challenges in convincing a replacement tenant that the site is a good one for other businesses.
Brian Fielding suggests that persons new to the real estate investing business follow the progress of Dollar Tree and Family Dollar and the company’s decision to close certain stores and open new ones. The business cycle that follows may be indicative of a trend that will be followed in other retail industries.