The median asking cap rates for single-tenant net leased auto parts stores compressed between Q4 2011 and Q4 2012. Advance Auto Parts saw the largest decrease from 7.9% to 7.25%. Demand remains strong for properties with long lease terms to investment grade tenants like Advance Auto Parts, AutoZone, and O'Reilly Auto Parts. The auto parts sector trades at a 72 basis point premium over the broader net lease market due to quality tenants and long leases.

1. THE NET LEASE
AUTO PARTS STORE REPORT
AUTO PARTS STORE PROPERTIES MARKET OVERVIEW
Cap rates in the single tenant net leased auto parts store sector
MEDIAN ASKING CAP RATES compressed from the fourth quarter of 2011 to the fourth quarter of
2012. The auto parts sector, for the purpose of this report, is defined as
Q4 2011 Q4 2012 Base Point Advance Auto Parts, AutoZone and O’Reilly Auto Parts, which are all
Tenant (Previous) (Current) Change investment grade companies as rated by Standard & Poor’s. The cap
Advance Auto Parts 7.90% 7.25% -65 rate compression was derived by the combination of a lack of available
AutoZone
(1)
7.05% 6.50% -55 newly developed assets and the limited availability of investment grade
(2) assets below $2 million in the net lease market. The auto parts sector is
AutoZone (GL) 6.28% 5.75% -53
one of the only segments within the net lease market experiencing
O'Reilly Auto Parts 7.01% 6.55% -46 robust growth with over 500 auto parts stores opened in 2012. Despite
the sector’s ongoing expansion plans, many of the new stores will not be
brought to market as the tenants own a high percentage of their
MEDIAN ASKING PRICE locations. Demand for auto parts stores is strong as they offer long term
leases to investment grade tenants and are typically constructed as
Median Asking Median Price vanilla boxes which are easier to re-tenant in the event the tenant
Tenant Price Per Foot vacates.
Advance Auto Parts $1,460,000 $209
AutoZone (1) $2,050,000 $278 Fee simple auto part stores have an average asking price of $1,767,570
(2) with an average price per square foot of $251 as opposed to ground
AutoZone (GL) $1,180,000 – leased AutoZone properties which have an asking price of $1,180,000.
O'Reilly Auto Parts $1,792,711 $266 Properties in the auto parts sector are trading at a 72 basis point
premium to the net lease market as a whole due to the quality of the
tenants and the length of their leases for newly constructed assets.
PERCENTAGE OF AUTO PARTS
STORES ON THE MARKET BY TENANT The retail industry shows strong consumer demand for auto parts stores
Percentage in the current economy as consumers are repairing their vehicles
Tenant of Market instead of purchasing a new vehicle. A recent report by R.L. Polk & Co.,
Advance Auto Parts shows that the average age of vehicles on the road has increased to 10.8
59.7%
years and the average length of vehicle ownership has increased to 71
AutoZone (1) 12.5% months. The $118 million retail auto parts sector is viewed favorably as
AutoZone (GL) (2) 9.7% the amount of older vehicles on the road continues to grow and the
O'Reilly Auto Parts 18.1% number of “Do-It-Yourself” consumers increases.
Transaction volume in the auto parts sector remains heavily
AUTO PARTS STORE PROPERTIES concentrated in properties with lease terms of over ten years remaining.
VS RETAIL NET LEASE MARKET Auto parts store properties with shorter lease terms located in larger
markets with strong demographics also remain in high demand. The
Q4 2011 Q4 2012
Tenant (Previous) (Current) single tenant net lease auto parts sector will continue to remain active
as private investors seek properties with long term leases, investment
Auto Parts 7.03% 6.53% grade tenants and attractive price points.
Market 7.72% 7.25%
Auto Parts Premium (basis points) 69 72
(1) Fee Simple
(2) Ground Lease
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2. THE NET LEASE
AUTO PARTS STORE REPORT
MEDIAN ASKING CAP RATE BY LEASE TERM REMAINING
(2)
Years Remaining Advance Auto Parts AutoZone (1) AutoZone (GL) O'Reilly Auto Parts
18-20 N/A 6.50% 5.50% 6.25%
15-17 6.85% 6.75% 5.75% 6.50%
10-14 7.00% 6.78% 5.87% 6.73%
6-9 7.53% 6.80% 5.90% 6.80%
Under 5 8.73% 6.80% 6.50% 6.90%
(1) Fee Simple
(2) Ground Lease
SELECTED SINGLE TENANT AUTO PARTS STORE SALES COMPARABLES
Price Lease Term
Sale Date Tenant City State Price Per SF Cap Rate Remaining
Jul-12 AutoZone Slidell LA $2,077,000 $282 6.50% 14
Jul-12 AutoZone Phillipsburg PA $1,620,500 $220 6.85% 17
Jan-12 Advance Auto Parts Machesney Park IL $1,520,000 $248 7.25% 15
Jun-12 Advance Auto Parts Clayton GA $1,425,000 $204 7.60% 7
Jun-12 O'Reilly Auto Parts Battle Creek MI $1,253,000 $174 7.25% 17
Feb-12 O'Reilly Auto Parts Roanoke VA $1,200,000 $200 7.00% 14
Jun-12 O'Reilly Auto Parts Muskegon MI $1,100,000 $183 7.09% 15
Oct-12 Advance Auto Parts Nelsonville OH $705,000 $128 7.20% 12
The above sales comparables are fee simple transactions.
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3. THE NET LEASE
AUTO PARTS STORE REPORT
AUTO PARTS STORE MEDIAN ASKING CAP RATES &
PERCENT OF MARKET BY REGION
Median Asking Cap: 6.64%
Percent of Market: 8%
Median Asking Cap: 7.00%
Percent of Market: 43%
Median Asking Cap: 7.00%
Percent of Market: 5%
WEST A ST
HE
RT
MOUNTAIN
MIDWEST NO
SOUTH
Median Asking Cap: 6.60%
Percent of Market: 11%
Median Asking Cap: 7.00%
Percent of Market: 33%
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4. THE NET LEASE
AUTO PARTS STORE REPORT
COMPANY COMPARISON
Advance Auto Parts AutoZone O'Reilly Auto Parts
Credit Rating BBB- (Stable) BBB (Stable) BBB (Stable)
Market Cap $5 billion $13 billion $10 billion
Revenue $6 billion $8 billion $6 billion
2012 Stores Built 130 193 180
Number of Stores 3,727 5,029 3,896
Typical Lease Term 10 or 15 year primary term 20 year primary term 20 year primary term
with fifteen years of options with twenty years of options with fifteen years of options
Typical Rent Increases Not in primary term; 7.50% Not in primary term; 10% increase in 10% in lease year 11 and each option
increases in option periods option periods period
FOR MORE INFORMATION
AUTHOR
John Feeney | Research Director
john@bouldergroup.com
CONTRIBUTORS
Randy Blankstein | President Jimmy Goodman | Partner Chad Gans | Research Analyst
rblank@bouldergroup.com jimmy@bouldergroup.com chad@bouldergroup.com
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