Auto Store Properties

Advance Auto Parts, Inc. (NYSE: AAP), the second-largest sector retailer, operates within the automotive aftermarket industry, which includes replacement parts (excluding tires), accessories, maintenance items, batteries and automotive chemicals for cars and light trucks. Advance Auto operates as a specialty retailer of automotive parts to do-it-yourself (DIY) and do-it-for-me (DIFM) or commercial customers in the United States, giving customers access to thousands of parts that are available on a same-day or overnight basis at low prices.

Advance Auto Parts is committed to growing and improving the company through sale productivity, operating margins, free cash flow, and return on capital. Advance Auto also continues to develop and acquire new sites that meet their real estate requirements and business strategy. Adverse economic conditions, has helped the entire sector, and has been the catalyst to many new developments.

Do to the current economic climate the outlook for Advance Auto Parts is positve. Both Moody's and S&P improved their credit outlook for the company. Standars & Poor's upgraded the company to a "BBB-" credit rating, reflecting the companies recent profitable operating performance. Financial results show that for the 1st Quarter 2010, ending April 24th, 2010, sales increased by 8.7% and same store sales increased by 7.7% year over year.

Maintaining a high credit rating (S&P: BBB-) among the top three auto parts retailers has allowed Advance Auto Parts to attain a premium for their net leased sites in comparison to similar properties with weaker corporate guarantees. Advance Auto Parts operates primarily on one type of lease. The common lease structure is of 15 years in length with an additional two to three (5) year options, which include 10% rent bumps. The lease is NNN in type or nature, where Advance Auto is responsible for the taxes, insurance and common area maintanence. The landlord responsibilities include the capital repair and replacement to the slab, foundation, structure, parking surface, HVAC and the Subsurface Pipe.

An Advance Auto Part's footprint and design is typically a 7,000 square foot building situated on approximately 1 acre. Advance Auto parts being that like AutoZone, are a destination retailer can be situated on pad sites in major retail thoroughfares, to off main and main locations. Recent Advance Auto Parts transactions show the variance in price and capitalization rates from to the peak in commercial prices back in 2007 and 2008. During the peak Advance Auto Properties traded in the low-mid 7% cap rate range. Recently sold Advance Auto Parts and the current on market inventory, show new AutoZone properties sell in the low to mid 8% cap rate range.

The Advance Auto Parts Market