THE NET LEASE AUTO PARTS REPORT AUTO PARTS STORE PROPERTIES MEDIAN ASKING CAP RATES
MARKET OVERVIEW
Q4 2017 (Previous)
Q4 2018 (Current)
Basis Point Change
Advance Auto Parts
6.75%
6.75%
0
AutoZone
5.62%
5.47%
-15
O'Reilly Auto Parts
5.94%
5.80%
-14
Tenant
AUTO PARTS STORE PROPERTIES MEDIAN ASKING PRICE Median Asking Price
Median Price Per Foot
Advance Auto Parts
$1,351,250
$199
AutoZone
$1,795,632
$263
O'Reilly Auto Parts
$1,879,000
$255
Tenant
PERCENTAGE OF AUTO PARTS STORES ON THE MARKET BY TENANT Percentage of Market
Tenant Advance Auto Parts
56.3%
AutoZone
24.1%
O’Reilly Auto Parts
19.6%
Q4 2017 (Previous)
Q4 2018 (Current)
Auto Parts
6.19%
6.26%
Market
6.07%
6.25%
+12
+1
Spread (bps)
Cap rates for the single tenant net leased auto parts store sector increased by 7 basis points from the fourth quarter of 2017 to the fourth quarter of 2018 to 6.26%. 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. Despite the increase in cap rates, the median lease term remaining for the net leased auto parts sector increased by an additional year. The increase in cap rates can be primarily attributed to the high concentration of Advance Auto Parts properties on the market. The median asking cap rate for Advance Auto Parts is significantly higher than its peers; O’Reilly Auto Parts and AutoZone. The majority of the sector is comprised of Advance Auto Parts properties which experienced no change in their cap rates when compared to one year ago (6.75%). Conversely, cap rates for AutoZone and O’Reilly Auto Parts properties compressed by 15 and 14 basis points to 5.47% and 5.80% respectively. Transaction volume for the net leased auto parts store sector declined by approximately 13% in 2018 when compared to 2017. The decline in transaction volume can be attributed to investor concern that Amazon could impact brick and mortar auto part locations. Inversely, the overall net lease market saw transaction volume increase by approximately 4%. As the current auto fleet in the United States continues to age, demand for auto parts from consumers, garages and service stations should continue to grow. The 2018 Lang Aftermarket iReport, confirms that the average age of vehicles on the road increased to 12 years.
AUTO PARTS STORES PROPERTIES VS. RETAIL NET LEASE MARKET Tenant
2018
Q4
The low absolute price point of properties within the net lease auto parts store sector make these investments attractive to investors. Outside of dollar stores, there is a limited supply of net leased properties available under $2 million leased to investment grade rated tenants. Furthermore, auto parts stores are typically located in primary and secondary markets and their typical store footprint makes them easier to re-tenant. Transaction volume in the auto parts sector should remain similar to 2018 as investors continue to seek properties with investment grade tenants at lower price points. Auto parts store properties with shorter lease terms located in areas with strong real estate fundamentals also remain in high demand among buyers seeking higher yields.
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THE NET LEASE AUTO PARTS REPORT
2018
Q4
AUTO PARTS STORES MEDIAN ASKING CAP RATES
5.30% 6.45% 6.41%
WEST MOUNTAIN
NO
MIDWEST
SOUTH 6.00%
6.22%
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H T R
E
T S A
THE NET LEASE AUTO PARTS REPORT
2018
Q4
MEDIAN ASKING CAP RATES BY LEASE TERM REMAINING Years Remaning
Advance Auto Parts
AutoZone
O’Reilly Auto Parts
Under 5
7.75%
7.00%
7.05%
6-9
7.00%
6.28%
6.60%
10-14
6.22%
5.60%
6.08%
15-17
5.85%
5.35%
5.70%
18-20
N/A
5.25%
5.30%
SELECT SINGLE TENANT AUTO PARTS STORES SALES COMPARABLES Price S.F.
Cap Rate
Lease Term Remaining
$2,825,000
$379
5.47%
20
SC
$2,645,000
$379
5.75%
10
Cary
NC
$2,200,000
$317
6.75%
5
O'Reilly Auto Parts
Spanish Fort
AL
$2,155,500
$299
5.70%
20
Oct-18
AutoZone
Chesterfield
MI
$1,819,000
$238
6.35%
10
Sep-18
Advance Auto Parts
Austin
TX
$1,750,000
$250
7.68%
5
Sep-18
AutoZone
Lakewood
WA
$1,600,000
$296
5.23%
10
Sep-18
Advanace Auto Parts
Pueblo
CO
$1,480,000
$218
6.75%
11
Sep-18
Advanace Auto Parts
Palmview
TX
$1,300,000
$186
10.80%
3
Oct-18
O'Reilly Auto Parts
Defuniak Springs
FL
$1,125,000
$212
6.15%
13
Nov-18
O'Reilly Auto Parts
Monahans
TX
$1,050,000
$164
6.28%
10
Sale Date
Tenant
City
State
Nov-18
O'Reilly Auto Parts
Tamarac
FL
Aug-18
Advance Auto Parts
Okatie
Dec-18
Advance Auto Parts
Nov-18
Price
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THE NET LEASE AUTO PARTS REPORT
2018
Q4
AUTO PARTS STORES COMPANY COMPARISONS Advance Auto Parts
AutoZone
O’Reilly Auto Parts
Credit Rating
BBB- (Stable)
BBB (Stable)
BBB+ (Stable)
Market Cap
$13 billion
$22.9 billion
$27.7 billion
Revenue
$9.37 billion
$11.2 billion
$8.98 billion
Number of Stores
5,200
6,000
5,147
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 Senior Vice President john@bouldergroup.com
CONTRIBUTORS Randy Blankstein | President
Jimmy Goodman | Partner
randy@bouldergroup.com
jimmy@bouldergroup.com
Scott Harris | Senior Analyst
Jeff Weil | Analyst
scott@bouldergroup.com
jeff@bouldergroup.com
Š 2019. 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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