Single-tenant net-leased auto parts stores are an attractive alternative retail investment to fast-food and bank single-tenant net-leased investments
CORONA DEL MAR, CALIF. – (RealEstateRama) — Hanley Investment Group, a nationally-recognized real estate brokerage and advisory firm specializing in retail property sales, announced today that Senior Vice President Jeremy McChesney completed the sale of two single-tenant NNN-leased properties occupied by O’Reilly Auto Parts in separate transactions with the same buyer to complete 1031 exchanges. The combined purchase price for both properties was $5,537,500.
“Single-tenant net-leased auto parts stores are an attractive alternative retail investment to fast-food and bank single-tenant net-leased investments,” said McChesney. Including these two O’Reilly Auto Parts stores, McChesney has sold 16 auto parts stores in the last two years.
“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 light trucks in operation in America is now 11.5 years, according to a study by IHS Automotive. Although new car sales of increased since the recession, IHS forecasts that the average age of vehicles is expected to rise to 11.7 years by 2018.”
McChesney represented the seller in the sale of a single-tenant corporate-leased O’Reilly Auto Parts store in Contra Costa County, Calif. Built in 1981 on .78 acres, the 8,037-square-foot store is located on a signalized-hard corner at 100 E. Cypress Road in the city of Oakley. The purchase price was $2,822,500, representing a cap rate of 5.25%. The buyer, a local private investor, was represented by Dan Diehl of Keller Williams Realty in Brentwood, Calif. The O’Reilly Auto Parts store in Oakley had over 11 years remaining on the primary lease term with increases every five years with options to extend.
“O’Reilly Auto Parts elected to execute a 10-year lease extension two years prior to the lease expiration date, speaking to the strength of this location,” said McChesney. “The property is positioned along Oakley’s main thoroughfare at the signalized intersection of Main Street and Cypress Road with ingress/egress available along both streets.”
In Taylor, Michigan, in association with JDS Real Estate Services, Inc., McChesney represented the seller of the O’Reilly Auto Parts in Wayne County. Built in 2007, the 8,000-square-foot single-tenant NNN-leased property occupied by O’Reilly Auto Parts store is located on 1.77 acres at 13224 Telegraph Road. Telegraph Road, also known as Highway 24, is a six-lane highway and is Taylor’s Main North/South thoroughfare with an average car count in excess of 66,000 cars per day. Over 185,000 people reside within five miles of the property with an average household income exceeding $56,000.
The purchase price was $2,715,000, representing a 6.25% cap rate. The buyer, an investor from northern California, was represented by Dan Diehl of Keller Williams Realty in Brentwood, Calif. The seller was a private investor from Los Angeles.
The Taylor O’Reilly Auto Parts’ building is a high quality concrete block and brick construction with 10 years remaining on the primary lease term. Like the Oakley store, O’Reilly had executed an early lease extension, according to McChesney. “With its outstanding location and the tenant’s long-term commitment to the site, the Taylor, Michigan O’Reilly Auto Parts store purchase represents a very aggressive closing cap rate for a Michigan property,” said McChesney.
“We were able to leverage the firm’s relationship with the buyer and his broker to place two properties that fit the buyer’s requirements,” McChesney added. “Once the buyer recognized the value opportunity of owning an O’Reilly Auto Parts store, he was interested in acquiring an additional property.”
McChesney expects that transaction volume in the auto parts sector should remain strong through 2016 as investors have a positive outlook of the fundamentals of the auto parts industry. “Existing properties with extensive history and newly-minted long-term leases should continue to be in the highest demand,” McChesney noted.
McChesney feels that these assets are the most sought-after amongst 1031 buyers due to the tenants’ long-term commitment to the location. “Auto parts store properties with shorter lease terms located in areas with strong real estate fundamentals also remain in high demand,” McChesney added. “Investors recognize that auto parts store locations have residual value as they are typically constructed as vanilla boxes which are easier to re-tenant in the event the tenant vacates.”
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.hanleyinvestment.com.
