O’Reilly Auto Parts TENANT OVERVIEW


Net Lease Advisor Tenant OReilly Auto Parts

Pros

  • Investment grade tenant
  • Corporate guaranteed
  • Generally well located in both urban and suburban settings
  • Recession resilient industry

Cons

  • Some NN leases hold landlord responsible for roof and structure

Earnings Highlights

Earnings Summary
  • Q2 2020 comparable store sales increase of 16.2%, total sales growth of 19.4%
  • 57% increase in Q2 2020 diluted earnings per share to $7.10
  • Q2 2020 Net cash provided by operating activities increased $712 million or 84%

Tenant Description

O'Reilly Auto Parts (NASDAQ: ORLY), is one of the dominant retailers in the auto parts sector.

O'Reilly’s continues to be an attractive investment for investors due to their long term leases (15 - 20 years), periodic rent increases, two (2) - four (4) five-year renewal options, and investment grade rating. The automotive sector remains an investor favorite, as tenants like O’Reilly, show they can be successful in good and bad economic times. This resilience demonstrates the continuous demand in the automotive sector regardless of other factors.

O’Reilly Auto Parts was founded in 1957 as a single store in Springfield, Missouri and its headquarters are still located there. As of June 30, 2020, O’Reilly’s has grown to 5,562 stores in 47 U.S. states and 21 stores in Mexico.

O'Reilly sells an extensive line of new, aftermarket and remanufactured automotive parts, maintenance items, tooling supplies, accessories, automotive tools, and professional service equipment. For years, it has focused on a dual-market strategy catering to both the "Do It For Me" (DIFM) professional service providers (PSPs) as well as "Do It Yourself" (DIY) individual consumers. This dual strategy contributes to O'Reilly's success and is one of the competitive advantages O'Reilly has over its competitors, along with its strong distribution network.

Auto parts store properties remain in high demand among net lease investors as there are very few investment grade options that are priced below $2 million with the exception of dollar stores. The retail auto parts industry continues to thrive as the age of vehicles on the road continues to increase.

Average Cap Rate
5.54%
12 mo avg with 10+ yr lease term
Average Property & Lease
Average Sale Price $2,268,449
NOI $124,939
$/Square Foot $270 - $290
Building SF 7,000 - 7,500
Lot Size 0.5 - 1.5 Acres
Lease Term 20 Years
Escalations 5-10% Every 5 Years
Stock Symbol ORLY
Credit Rating
S&P BBB+
Moody's Baa1
Average Cap Rate Trend
5.91%
2019
5.82%
2020
Rates reflect last 12 mos, short and long-term
Recent Sales Comps
Medford, OR 6.04%
Statesboro, GA 5.65%
Bakersfield, CA 4.90%