THE NET LEASE AUTO PARTS REPORT Q4 2015 AUTO PARTS STORE PROPERTIES MEDIAN ASKING CAP RATES
MARKET OVERVIEW
Q4 2014 (Previous)
Q4 2015 (Current)
Basis Point Change
Advance Auto Parts
7.00%
6.35%
-65
AutoZone
5.98%
5.75%
-23
O’Reilly Auto Parts
6.35%
5.68%
-67
Tenant
MEDIAN ASKING PRICE
Median Asking Price
Median Price Per Foot
Advance Auto Parts
$1,645,083
$235
AutoZone
$1,796,949
$262
AutoZone (GL)
$1,553,398
--
O'Reilly Auto Parts
$1,759,000
$244
Tenant
PERCENTAGE OF AUTO PARTS STORES ON THE MARKEY BY TENANT
Percentage of Market
Tenant Advance Auto Parts
53.5%
AutoZone
16.9%
O’Reilly Auto Parts
29.6%
AUTO PARTS STORE PROPERTIES VS. RETAIL NET LEASE MARKET Q4 2014 (Previous)
Q4 2015 (Current)
Auto Parts
6.25%
5.98%
Market
6.50%
6.25%
25
27
Tenant
Auto Parts Premium (bps)
Cap rates for the single tenant net leased auto parts store sector decreased by 27 basis points from the fourth quarter of 2014 to the fourth quarter of 2015 to 5.98%. The decline in cap rates for the auto parts store sector slightly outpaced the overall net lease retail market which compressed by 25 basis points over the same time period. The auto parts sector, for the purpose of this report, is defined as Advance Auto Parts, AutoZone and O’Reilly Auto Parts as they account for the highest percentage of single tenant transactions of properties occupied by auto parts retailers. Auto parts store properties remain in high demand amongst net lease investors as there are limited investment grade options priced below $2 million with the exception of dollar stores. When compared to dollar stores, auto parts stores are typically located in primary and secondary markets near major retailers as opposed to tertiary markets. Cap rates for Advance Auto Parts, AutoZone and O’Reilly Auto Parts compressed to 6.35%, 5.75% and 5.68% respectively in the fourth quarter of 2015. The primary reason for the higher cap rates associated with Advance Auto Parts properties is a greater supply of older stores with shorter term leases in the market when compared to the other tenants. In the fourth quarter of 2015, Advance Auto Parts properties with less than 10 years of lease term remaining made up 50% of the overall supply. In comparison, leases of less than 10 years accounted for only 29% and 20% of all O’Reilly Auto Parts and AutoZone properties on the market. Additionally, Advance Auto Parts only signs 15 year leases for new construction properties, which is shorter than its competitors. O’Reilly Auto Parts and AutoZone typically sign 20 year leases. The retail auto parts industry continues to thrive as consumer demand for auto parts stores is increasing due to aging vehicles on the roads. A recent report by R.L. Polk & Co. and IHS Automotive shows that the average age of vehicles on the road has increased slightly to 11.5 years. The same study reports that the average age of vehicles is expected to continue to increase through 2018. Transaction volume in the auto parts sector should remain active as investors continue to seek this asset class due to the positive outlook and fundamentals associated with the auto parts industry. Recently constructed properties with long term leases should continue to be in the highest demand as these assets are the most sought after amongst 1031 buyers due to their lease term duration. Auto parts store properties with shorter lease terms located in areas with strong real estate fundamentals also remain in high demand with buyers seeking higher yields.
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THE NET LEASE AUTO PARTS REPORT Q4 2015
MEDIAN ASKING CAP RATE BY LEASE TERM REMAINING Years Remaining
Advance Auto Parts
AutoZone
O'Reilly Auto Parts
18-20
N/A
N/A
5.45%
15-17
6.00%
5.25%
5.70%
10-14
6.13%
5.75%
6.10%
6-9
6.74%
6.05%
6.50%
Under 5
7.15%
N/A
7.00%
SELECT SINGLE TENANT AUTO PARTS STORES SALES COMPARABLES Sale Date
Tenant
City
State
Price
Price S.F.
Cap Rate
Lease Term Remaining
Jan-16
O'Reilly Auto Parts
Aurora
CO
$3,435,000
$286
5.79%
11
Dec-15
O'Reilly Auto Parts
St. Charles
IL
$2,590,000
$358
5.79%
19
Oct-15
O'Reilly Auto Parts
Peoria
AZ
$2,565,000
$366
6.20%
8
Jun-15
Advance Auto Parts
Chicago
IL
$2,500,000
$250
6.00%
14
Dec-15
Advance Auto Parts
Warminster
PA
$2,500,000
$347
5.75%
15
Sep-15
AutoZone
Modesto
CA
$2,475,000
$365
6.15%
8
Dec-15
O'Reilly Auto Parts
Fountain Hills
AZ
$2,417,000
$373
6.00%
10
Mar-15
AutoZone
Overland Park
KS
$2,304,000
$343
5.00%
15
Jun-15
AutoZone
San Bernardino
CA
$2,275,000
$217
5.75%
10
Dec-15
Advance Auto Parts
Houston
TX
$2,257,000
$188
5.75%
14
Dec-15
Advance Auto Parts
Martinsburg
WV
$1,983,000
$283
7.95%
5
Jun-15
Advance Auto Parts
Freeport
FL
$1,938,000
$276
7.49%
7
Jul-15
Advance Auto Parts
Milwaukee
WI
$1,930,500
$321
6.20%
12
May-15
O'Reilly Auto Parts
Largo
FL
$1,715,000
$243
5.30%
19
Dec-15
Advance Auto Parts
Des Moines
IA
$1,710,000
$258
7.08%
5
Dec-15
Advance Auto Parts
Mechanicsville
VA
$1,699,000
$296
6.90%
7
Apr-15
AutoZone
Clarksville
TN
$1,594,000
$216
6.20%
11
Nov-15
Advance Auto Parts
Pontiac
IL
$1,512,000
$221
6.25%
15
Jun-15
O'Reilly Auto Parts
Bennettsville
SC
$1,414,000
$208
6.25%
19
Sep-15
O'Reilly Auto Parts
Spring
TX
$1,384,000
$203
5.55%
20
Jul-15
Advance Auto Parts
Tulsa
OK
$1,318,000
$188
7.70%
6
Aug-15
O'Reilly Auto Parts
Bennett
CO
$1,245,000
$195
5.75%
20
Sep-15
AutoZone
Johnson City
TN
$1,133,000
$120
6.25%
10
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THE NET LEASE AUTO PARTS REPORT Q4 2015 AUTO PARTS STORE MEDIAN ASKING CAP RATES
5.25% 6.30% 5.50%
T S A E H T R O N
WEST MOUNTAIN
MIDWEST
SOUTH 5.75% 6.00%
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THE NET LEASE AUTO PARTS REPORT Q4 2015 COMPANY COMPARISON Advance Auto Parts
AutoZone
O’Reilly Auto Parts
Credit Rating
BBB- (Stable)
BBB (Stable)
BBB+ (Stable)
Market Cap
$10 billion
$23 billion
$25 billion
Revenue
$9 billion
$10 billion
$7 billion
Stores Planned
150
202
200
Number of Stores
5,372
5,609
4,366
Typical Lease Term
15 year primary term with fifteen years of options
15 or 20 year primary term with twenty years of options
20 year primary term with twenty years of options
FOR MORE INFORMATION AUTHOR John Feeney | Vice President john@bouldergroup.com
CONTRIBUTORS Randy Blankstein | President
Jimmy Goodman | Partner
Zach Wright | Research Analyst
Scott Harris | Analyst
randy@bouldergroup.com
jimmy@bouldergroup.com
zach@bouldergroup.com
scott@bouldergroup.com
Š 2016. The Boulder Group. Information herein has been obtained from databases owned and maintained by The Boulder Group as well as third party sources. We have not verified the information and we make no guarantee, warranty or representation about it. This information is provided for general illustrative purposes and not for any specific recommendation or purpose nor under any circumstances shall any of the above information be deemed legal advice or counsel. Reliance on this information is at the risk of the reader and The Boulder Group expressly disclaims any liability arising from the use of such information. This information is designed exclusively for use by The Boulder Group clients and cannot be reproduced, retransmitted or distributed without the express written consent of The Boulder Group.
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