O’Reilly Auto Parts is one of the largest specialty retailers of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States.
O’Reilly Auto Parts has been successful selling products to both do-it-yourself (“DIY”) and professional service provider customers. They were founded in 1957 by the father-son team of Charles F. and Charles H. O’Reilly in Springfield, MO. In 1993, O’Reilly went public under the symbol ORLY. Today, O’Reilly operates over 5,000 stores across 47 states. O’Reilly is growing rapidly, opening 190 stores in 2017 and plans to open 200 during 2018.
Net Lease Overview
O’Reilly Auto Parts stores make great net lease assets because of their leases, locations, and internet-resistant nature of their business. O’Reilly typically signs 15 – 20 year corporately guaranteed leases with rental increases during the primary term. Their leases may leave investors with landlord responsibilities, such as roof and structure. O’Reilly’s BBB credit rating provides for an investment grade guarantee behind the leases.
O’Reilly tends to operate in locations with strong real estate fundamentals. O’Reilly considers factors such as population density, economic strength and growth, nearby auto repair facilities, and traffic count. These aspects of property help ensure the success of new stores. O’Reilly will typically cluster stores in order to maximize the effect of initial promotional programs and achieve economies of scale.
Auto parts has and will remain resistant to the ‘Amazon Effect’. O’Reilly’s technically-proficient ‘Professional Parts People’ provide an advantage over internet retailers. This personal interaction will help customers find the right parts for any job and create a loyal customer base.
The O’Reilly and the other leading auto parts retailers have strong credit. All three are in the investment grade range.
Average Regional Cap Rates
At 5.08%, California had the lowest average cap rate in the nation, this is due to the high demand for properties in California. The Midwest had the highest average cap rate.
O’Reilly properties have typically sold slightly below the single tenant net lease (STNL) average.