Five Below Credit Rating & NNN Cap Rate

Business Overview

Five Below is a specialty value retailer with significant presence across the United States. The company operates 1,700 locations and generates approximately $3.2B in annual revenue, demonstrating strong market position in the value retail segment. Five Below targets customers seeking fashion, accessories, electronics, home décor, and other merchandise at competitive pricing.

As a high-quality tenant for investment-grade NNN real estate portfolios, Five Below represents the type of reliable, cash-flowing asset that conservative investors seek. The company’s operational excellence, brand recognition, and financial stability make it an attractive counterparty for long-term lease agreements.

For investors evaluating NNN properties, understanding tenant creditworthiness and operational performance is essential. Our comprehensive NNN investing guide covers lease structures, tenant evaluation, and portfolio construction strategies for maximizing risk-adjusted returns.

Credit Rating

Five Below is not rated by S&P or Moody’s, but the company is considered investment-grade eligible based on operational strength, profitability, and market position. Many strong, publicly-traded companies are not formally rated by agencies; instead, their creditworthiness can be assessed through financial analysis. Five Below’s strong cash flow generation, market presence, and operational track record support an IG-eligible classification.

Financial Performance & Operational Metrics

Five Below’s $3.2B in annual revenue demonstrates significant scale within the specialty retail sector. With 1,700 locations across the United States, Five Below maintains a substantial footprint in competitive retail markets. The company’s revenue generation, store expansion strategy, and operational performance are critical factors for investors assessing lease quality and tenant stability.

For NR tenants like Five Below, understanding operational trends, same-store sales growth, inventory management, and management quality becomes important for credit assessment. Investors should request financial statements, detailed lease abstracts, store performance data, and competitive analysis as part of due diligence. Our investment grade guide outlines key metrics for assessing tenant quality across all credit ratings.

NNN Property Details & Economics

Five Below NNN properties typically feature:

• Property Size: 6,000‑8,000 SF (larger format for merchandise selection)
• Lot Size: 1.25‑2.0 acres
• Price Range: $1.8M‑$3.5M
• Cap Rate Range: 6.25%‑7.0%
• Lease Term: Typically 10 years with renewal options

The cap rate range reflects Five Below’s IG-eligible status with moderately higher yields relative to the strongest IG tenants. Investors should model steady rent escalations and plan for lease renewal discussions at the 10-year mark when evaluating Five Below properties.

Lease Structure & Tenant Obligations

Triple-Net (NNN) leases for Five Below properties allocate operating expenses, property taxes, and insurance to the tenant. This structure places significant responsibility on Five Below to maintain property condition and pay all occupancy costs. Investors should review specific lease agreements to understand:

• Rent escalation clauses and frequency
• Property maintenance and repair obligations
• Property tax payment responsibility
• Insurance coverage requirements
• Lease renewal options and terms
• Default and remedies provisions

Given Five Below’s IG-eligible status, lease terms should provide investors with reasonable protections while remaining competitive for tenant recruitment.

Geographic & Market Considerations

Five Below operates specialty retail locations across multiple states and markets. Property locations should be evaluated based on:

• Market demographics ‑ population density, income levels, age distribution
• Competition ‑ proximity to other retailers and discount merchants
• Economic trends ‑ local business activity and consumer spending patterns
• Strategic positioning ‑ visibility, accessibility, anchor tenant mix

For Five Below properties in particular, strong market fundamentals and foot traffic can enhance returns and provide investor protection if operational challenges arise.

Investment Grade Credit Rating Standards

Investment-grade status requires S&P ratings of BBB‑ or higher, or Moody’s ratings of Baa3 or higher. While Five Below is not formally rated, the company’s operational and financial profile supports an IG-eligible classification. This positioning offers several advantages:

• Broader institutional investor appeal
• Greater exit liquidity and resale potential
• Stronger refinancing availability and terms
• Portfolio diversification capabilities

Investors considering Five Below NNN properties benefit from the broader IG-eligible designation and associated market dynamics.

Risk Assessment & Due Diligence

NR tenants warrant appropriate due diligence. Key areas to investigate include:

• Financial trending ‑ revenue growth, margin trends, debt levels
• Competitive positioning ‑ market share, brand strength, customer retention
• Management quality ‑ track record, operational expertise, strategic direction
• Store-level performance ‑ sales per square foot, inventory turnover, comparable store growth
• Industry trends ‑ retail sector dynamics, consumer preferences, e-commerce competition
• Lease quality ‑ tenant creditworthiness, payment history, lease terms
• Environmental & legal ‑ Phase I ESA, title insurance, encumbrances

Given Five Below’s IG-eligible status, investors should conduct solid due diligence but may find the process more streamlined than for below-IG tenants.

Comparison to Investment-Grade Alternatives

For investors comparing Five Below to other IG-eligible tenants, evaluating sector, growth trajectory, and margin profile helps optimize returns. Conversely, for maximum credit safety, investors might compare Five Below to higher-rated tenants such as banks: Truist (A‑/A3), TD Bank (A+/Aa1), or US Bank (A+/A1).

Our complete tenant rating directory provides side-by-side credit ratings for all major NNN tenants, enabling investors to evaluate risk-return tradeoffs across the entire spectrum.

Frequently Asked Questions

What cap rates do Five Below NNN properties offer?
Five Below NNN properties typically offer cap rates in the 6.25‑7.0% range, reflecting the IG-eligible status with moderately higher yields relative to top-tier IG tenants.

How many Five Below locations exist in the US?
Five Below operates approximately 1,700 locations across the United States in the specialty value retail sector.

What is typical lease term for Five Below NNN properties?
Five Below NNN leases typically feature 10-year initial terms with options to renew. Specific lease terms should be verified in individual lease agreements.

What due diligence should I conduct on Five Below properties?
Conduct financial analysis of Five Below, review store-level performance data, verify lease terms, commission Phase I environmental assessments, analyze competitive positioning, and consider consultation with experienced commercial real estate professionals.

Contact & Resources

For questions about Five Below NNN properties or investment-grade tenant evaluation, contact our team. We also provide resources on 1031 exchange planning and portfolio construction strategies.