ROADMAP: Purchasing a Dollar General

1. Finding the Right Property for You

Online databases such as Crexi and Loopnet are a valuable resource for anyone exploring commercial real estate. They offer access to large inventories of commercial properties nationwide, making it easy to search and evaluate opportunities.

On the listings page, there will be an Offering Memorandum (OM). The OM has all the information related to the building, the area in which it is located and all the financial metrics. Key factors to assess when determining if it meets your business' needs include build date, rent schedule and overall area strength.

NN vs NNN

Dollar Generals come with two different types of leases, NN & NNN. NN means that you, the landlord, are responsible for exterior maintenance, such as roof, parking lot, HVAC, and lawn care. NNN is a passive, hands-off investment.  

You will find that NNN Dollar Generals are higher in price, and have a lower capitalization rate (cap rate) due to less overhead. Capitalization rate is the rate of return on an investment. It can be calculated by dividing the Net Operating Income (NOI) by the list price.   

2. Engaging in the Deal

To submit an offer, create an account on Crexi/Loopnet, and you can submit a Letter of Intent (LOI) or message the broker on the listing page to submit one for you.  

Once the seller accepts the LOI, you will move on to the Purchase and Sale Agreement (PSA). This, unlike the LOI, is a legally binding document.

Once the PSA has been executed by both parties, within 30-60 days (in accordance to the timeline set by the PSA), you will work through due diligence and the close process.

Consider Broker Representation

Deciding whether to hire a commercial real estate broker depends on your experience and the complexity of the deal. Brokers can help navigate deal basics such as pricing, leases, due diligence and negotiations. There can be advantages to working with established brokers who carry relationships with sellers and developers, giving their clients access to quality deals that are not shared on public sites.

Determine Finance Options

Cash

______________________________________

Pros:

• Faster process - no loan approval times or bank-specific bureaucracy, can close immediately

• No interest payments

• Less risky to the seller

Cons:

• Must do your own due diligence without the oversight of a bank

• Immediate financial obligation

• Requires more investors to supplement cash flow

Bank Financing

______________________________________

Pros:

• Not required to pay the full amount up front

• Banks will assist in due diligence

Cons:

• Lender-specific bureaucracy, including loan approval time

• Interest obligations

• Banks may set insurance rates

3. Performing Due Diligence

Select a Commercial Title Company

Once you have an executed Purchase and Sale Agreement signed by both parties, you will want to select a title company. They will provide title search and title insurance services, hold escrow funds, and coordinate the closing process. They will provide instructions on how to submit your earnest money deposit, if required by the contract.  

Next, you will want to begin collecting the following due diligence documents from the seller, along with any documents your lender is requiring (if applicable) These documents will help you better understand the financial aspects of being a Dollar General landlord - rent amounts, maintenance and repair responsibilities, tax and insurance costs, etc.:  

• Estoppel

• Original Lease and Lease Amendments

• Survey

• Existing Title Insurance Policy

• Deed

• Property Tax information from the appropriate city/county/etc. that the property is located in, including clarification in the lease that Dollar General reimburses

• Current Insurance information,  including clarification in the lease that Dollar General reimburses or property is enrolled in the National Insurance Program (NIP)

• Maintenance and Repair contact list, including lawncare and snow removal, maintenance log, and current warranties

4. Closing on a Property

Once you have reviewed all the due diligence documents and have completed necessary third-party inspections (such as title search, appraisal, environmental study, survey, etc.), you will have a complete understanding of the property and the financial obligations that you’ll have as the landlord. 

If you decide that this property is a secure investment for you, you can let the inspection period expire, and proceed to closing.  

As a buyer, you will want to enlist the assistance of a closing attorney or closing company to assist with closing coordination. Their role is to draft an accurate closing statement, assist the seller with deed preparation and signing, collect documents and funds on the day of closing, disburse proceeds, and record documents as needed to legally transfer ownership. Engaging with a professional that is experienced in commercial real estate closings can make the process seamless. The title company you used can likely help with this, or will be able to suggest someone who can. 

5. Onboarding with Dollar General

Once the closing process is complete, you will want to alert Dollar General that you are the new owner, so that all future rental payments, reimbursements, and maintenance notices will come to you. Compile an onboarding packet, including the following documents and information, an submit to LLVendor@dollargeneral.com to complete the change of ownership process:  

• Unrecorded deed 

• Executed Assignment of Leases/Rents 

• W9 of owning entity 

• Change of Rent Payee 

• DG Legal Notice Change of Landlord