Fred’s Super Dollar TENANT OVERVIEW


Net Lease Advisor Tenant Freds

Pros

  • 1/3 of locations operate full-line pharmacies
  • Most stores are occupied as fee simple leases, allowing for depreciation
  • Typically feature higher cap rates

Cons

  • Most locations are NN leases, so landlord would be responsible for roof & structure
  • Not as well known as competitors such as Dollar General, Family Dollar, etc.
  • Regionally isolated in the southeast

Tenant Description

Fred's Super Dollar is a discount general merchandise retailer and pharmacy operating mainly across the southeastern states.

Fred's Super Dollar stores offer net lease investors an attractive choice when compared to other discount property chains such as Dollar General, Dollar Tree, and Family Dollar. Newer Fred's properties are typically priced at 8.5% to 8.75% cap rates, slightly higher for older locations. Newly built retail stores are commonly constructed on 1.5 to 2.5 acre sites in small to mid-sized markets throughout southern states, improved with 16,500 square feet single tenant buildings that contain on-site pharmacies, drive-up windows and in some cases outside sales areas for seasonal merchandise. Fred's leases are typically 12-year NN with flat rents during the primary lease term, and increases during options.

Fred’s opened with one store in 1947 in Coldwater, Mississippi and today operates over 650 stores (including 19 franchised locations) - and is headquartered in Memphis, Tennessee. Fred's primarily competes against national, deep-discount chains Dollar General, Family Dollar, and Dollar Tree. In the past few years, Fred’s Super Dollar and other deep-discount retailers have taken some market share away from major discount chains like Walmart, as well. Most locations are in towns with populations of 15,000 or less. Fred’s has announced they will acquire at least 865 Rite Aid stores as part of a divestiture of Rite Aids in the the Rite Aid-Walgreens merger.

Fred's has attempted to differentiate itself from its rivals by:

• Operating a full-line pharmacy in nearly half (320) of its stores
• Operating a seasonal lawn and garden department
• Selling tobacco products

Fred's stores stock more than 12,000 items including nationally recognized brand name products, proprietary Fred's label products, and lower-priced, off-brand products. The company has two distribution centers, one in Memphis, Tennessee, and Dublin, Georgia.

Average Cap Rate
8.50%
12 mo avg with 10+ yr lease term
Average Property & Lease
Average Sale Price $500K - $2M
NOI $113,759
$/Square Foot $40 - $120
Building SF 16,000 - 19,000
Lot Size 2.5 - 3 Acres
Lease Term 12 Years
Escalations In Option Periods
Stock Symbol FRED
Credit Rating
S&P N/A
Moody's N/A
Average Cap Rate Trend
9.28%
2015
7.75%
2016
Rates reflect last 12 mos, short and long-term
Recent Sales Comps
Macon, GA 7.75%