Single-Tenant Net-Leased Auto Parts Stores: The Alternative Retail Investment, According to Hanley Investment Group Thought-Leader Jeremy McChesney
Single-Tenant O’Reilly Auto Parts Store Closes at Lowest Cap Rate of 2015
IRVINE, CALIF. – April 30, 2015 – (RealEstateRama) — According to Senior Vice President Jeremy McChesney at Hanley Investment Group, a nationally-recognized boutique real estate brokerage and advisory firm specializing in retail property sales, single-tenant net-leased auto parts stores are a viable alternative retail investment to fast-food and bank single-tenant net-leased investments.
In the last 10 months, McChesney has negotiated the sale of five single-tenant net-leased O’Reilly Auto Parts stores with an average cap rate of 5.62 percent. His most recent sale of a single-tenant net-leased O’Reilly Auto Parts, located in Northern California at 548 Grass Valley Highway in Auburn, sold for $2.6 million, representing a 5.31 percent cap rate, the lowest cap rate for an O’Reilly Auto Parts store to close in 2015 (per CoStar). The single-tenant absolute NNN O’Reilly Auto Parts store had 12 years remaining on the primary term of the lease. McChesney represented both the buyer and seller in the Auburn transaction. The other O’Reilly Auto Parts NNN single-tenant sales that McChesney closed were located in Montrose, CO; Texarkana, TX; Fort Payne, AL; and Evansville, IN.
“Due to our national network of investors and effective marketing strategies, we have been able to outperform the market for the sale of O’Reilly Auto Parts stores by nearly 60 basis points. The national O’Reilly Auto Parts stores average closing cap rate for the last 10 months,” said McChesney.
In the same 10-month period, McChesney closed four single-tenant net-leased AutoZone stores with an average cap rate of 5.78 percent. The properties are located in Raleigh, NC; Minooka and St. Louis, IL; and Fort Wayne, IN. “We have also been able to outperform the market for the sale of single-tenant net-leased AutoZone stores by nearly 30 basis points. The national AutoZone average closing cap rate for 2014 was 6.06 percent,” said McChesney.
“The auto parts store category continues to do well as many Americans are holding onto their cars longer,” said McChesney. “The average age of cars and trucks in operation in America hit a new all-time high of 11.4 years, up slightly from 11.3 years in 2013, according to a study by IHS Automotive. IHS forecasts that the average age of vehicles is expected to rise to 11.7 years by 2019.”
McChesney added, “Not only is the average vehicle in America getting older, the study also found that the country has a record number of vehicles in operation as the total topped 252.7 million in 2014, an increase of 3.7 million vehicles from 2013. The continued increase in the number of older vehicles explains why after-market auto parts retailers like O’Reilly Auto Parts and AutoZone have done so well in the last few years.”
McChesney also reports that as there are limited investment grade options priced below $2 million outside of dollar stores and quick-serve restaurants. “Auto part store properties remain in high demand among savvy net lease investors but values are quickly increasing,” McChesney added.
McChesney noted that he has a single-tenant net-leased 5,892-square-foot single-tenant net-leased O’Reilly Auto Parts store in Craig, CO, listed for sale for $787,000, with 10 years remaining on the primary term of the lease. He also has a 7,746-square-foot single-tenant net-leased AutoZone in Beloit, WI, listed for sale for $827,000 with 10 years remaining on the primary term of the lease; and a single-tenant 9,000-square-foot Goodyear Tire store available for sale for $3,120,000 in Port Jefferson Station, NY with 8 years remaining on the primary term of the lease.
About Hanley Investment Group
Hanley Investment Group Real Estate Advisors is a retail investment advisory firm with a $5 billion transaction track record nationwide, who works closely with individual investors, lending institutions, developers, and institutional property owners in every facet of the transaction to ensure that the highest value is achieved. For more information, visit www.hanleyinvestmentgroup.com.