The Boulder Group’s Research Department has released a new research report providing comprehensive numbers and analysis of the activity in the National Net Lease Auto Parts Property Market.

1. THE NET LEASE
AUTO PARTS STORE REPORT
MARCH 2014
AUTO PARTS STORE PROPERTIES
MEDIAN ASKING CAP RATES
MARKET OVERVIEW
Q4 2012
(Previous)
Q4 2013
(Current)
Basis Point
Change
Advance Auto Parts
7.25%
7.20%
-5
O'Reilly Auto Parts
6.55%
6.00%
-55
AutoZone
6.50%
6.00%
-50
Tenant
MEDIAN
ASKING PRICE
Tenant
Median Asking
Price
Median Price
Per Foot
Advance Auto Parts
$1,509,000
$216
O'Reilly Auto Parts
$1,743,000
$245
AutoZone
$1,750,000
$256
PERCENTAGE OF AUTO PARTS STORES
ON THE MARKET BY TENANT
Percentage
of Market
Tenant
Advance Auto Parts
57.4%
O'Reilly Auto Parts
22.1%
AutoZone
20.5%
AUTO PARTS STORE PROPERTIES
VS. RETAIL NET LEASE MARKET
Q4 2012
(Previous)
Q4 2013
(Current)
Auto Parts
6.53%
6.22%
Market
7.25%
6.85%
72
63
Sector
Auto Parts Premium (bps)
Cap rates for the single tenant net leased auto parts store sector
compressed from the fourth quarter of 2012 to the fourth quarter of
2013 by 31 basis points. 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 transactions within
the auto parts sector. The cap rate compression was derived by the
limited supply of investment grade assets priced below $2 million, which
is the value of most properties tenanted by these retailers. For assets
priced below $2 million, there are more private and 1031 exchange
buyers that are able to pay a premium over institutional buyers. Despite
the combined auto parts sector’s 500 new store openings in 2013, the
supply of auto stores decreased in the net lease market by 5% from
the fourth quarter of 2012 to the fourth quarter of 2013. This can best
be attributed to the fact that the companies own an increasingly higher
percentage of their locations.
While cap rates for the entire net leased auto parts sector decreased by
31 basis points from the fourth quarter of 2012 to the fourth quarter of
2013, cap rates for Advance Auto Parts remained near levels from the
previous year. AutoZone and O’Reilly Auto Parts experienced the greatest
cap rate compression, 50 and 55 basis points respectively. These
tenants have more desirable lease structures for investors as AutoZone
and O’Reilly Auto Parts typically sign 20 year leases as opposed to
Advance Auto which typically signs 10 or 15 year leases.
A significant event in the auto parts sector occurred after the conclusion
of the fourth quarter of 2013. In January 2014, Advance Auto Parts
closed on its $2 billion acquisition of General Parts International, which
includes the CARQUEST and WORLDPAC brands. This acquisition makes
Advance Auto Parts the largest supplier of automotive aftermarket parts
and the largest distributor of import automotive parts in North America.
This acquisition balances the Do-It-Yourself (DIY) and Do-It For-Me (DIFM)
markets for Advance Auto Parts, a strategic move as the DIFM market is
experiencing two times the growth of the DIY segment.
Transaction volume in the auto parts sector remains heavily concentrated
in recently constructed properties with long term leases. Auto parts store
properties with shorter lease terms located in areas with strong real
estate fundamentals also remain in high demand. The single tenant net
lease auto parts sector will continue to remain active as private investors
and 1031 exchange buyers seek properties with long term leases,
investment grade tenants and attractive price points.
www.bouldergroup.com

2. THE NET LEASE
AUTO PARTS STORE REPORT
MARCH 2014
MEDIAN ASKING CAP RATE BY LEASE TERM REMAINING
Years Remaining
Advance Auto Parts
O’Reilly Auto Parts
AutoZone
18-20
N/A
6.00%
5.90%
15-17
6.41%
6.25%
5.96%
10-14
6.64%
6.75%
6.20%
6-9
7.23%
7.00%
6.31%
Under 5
7.82%
N/A
6.84%
SELECTED SINGLE TENANT AUTO PARTS STORE SALES COMPARABLES
Sale Date
Tenant
City
State
Price
Price SF
Cap Rate
Lease Term
Dec-13
Advance Auto Parts
Fort Lauderdale
FL
$2,899,930
$406
6.72%
11
Nov-13
O'Reilly Auto Parts
Phoenix
AZ
$2,650,000
$221
6.56%
5
Sep-13
AutoZone
Las Vegas
NV
$2,575,000
$348
6.38%
9
Jun-13
AutoZone
Palm Springs
CA
$2,335,000
$432
6.28%
10
Sep-13
Advance Auto Parts
Lawrenceville
GA
$2,272,972
$325
7.40%
9
Dec-13
Advance Auto Parts
Cumming
GA
$1,905,000
$276
6.35%
15
Sep-13
Advance Auto Parts
Cameron
NC
$1,850,000
$268
6.45%
15
Oct-13
O'Reilly Auto Parts
Princeton
WV
$1,480,000
$205
6.28%
20
Jun-13
AutoZone
Paradise
CA
$1,475,000
$225
7.21%
4
Aug-13
O'Reilly Auto Parts
Colorado Springs
CO
$1,310,000
$187
7.19%
7
Nov-13
O'Reilly Auto Parts
Tucson
AZ
$1,130,000
$161
8.83%
2
Jul-13
AutoZone (GL)
Olive Branch
MS
$1,075,000
N/A
6.63%
6
Jun-13
Advance Auto Parts
Clinton
IN
$1,032,000
$147
8.43%
5
Oct-13
AutoZone (GL)
Milwaukee
WI
$925,000
N/A
5.95%
11
Jul-13
AutoZone
Yorkville
IL
$1,900,000
$257
6.99%
14
www.bouldergroup.com

3. THE NET LEASE
AUTO PARTS STORE REPORT
MARCH 2014
AUTO PARTS STORE MEDIAN ASKING CAP RATES
6.53%
6.75%
6.75%
ST
EA
H
RT
NO
WEST
MOUNTAIN
MIDWEST
SOUTH
6.25%
6.52%
www.bouldergroup.com

4. THE NET LEASE
AUTO PARTS STORE REPORT
MARCH 2014
COMPANY COMPARISON
Advance Auto Parts
O’Reilly Auto Parts
AutoZone
Credit Rating
BBB- (Stable)
BBB (Stable)
BBB (Stable)
Market Cap
$9 billion
$10 billion
$18 billion
Revenue
$6 billion
$6 billion
$9 billion
2013 Stores Opened
242
239
181
Number of Stores
3,696
4,135
5,210
Typical Lease Term
10 or 15 year primary term with
fifteen years of options
20 year primary term with fifteen years 20 year primary term with
of options
twenty years of options
Typical Rent Increases
Not in primary 7.50% increases
in option periods
10% in lease year 11 and each option
period
Not in primary 10%
increases in option periods
FOR MORE INFORMATION
AUTHOR
John Feeney | Research Director
john@bouldergroup.com
CONTRIBUTORS
Randy Blankstein | President
rblank@bouldergroup.com
Jimmy Goodman | Partner
jimmy@bouldergroup.com
Zach Wright | Research Analyst
zach@bouldergroup.com
© 2014. 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
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