Auto Store Properties

AutoZone, Inc. (NYSE: AZO), operates as a specialty retailer and distributor of automotive replacement parts and accessories. Its stores offer various products primarily to do-it-yourself customers for use in cars, sport utility vehicles, vans, and light trucks, including new and re-manufactured automotive hard parts, maintenance items, accessories, and non-automotive products.

The company also offers commercial sales programs that provide commercial credit, and delivery of parts and other products to local, regional, and national repair garages, dealers, service stations, and public sector accounts. In addition, it sells the ALLDATA brand automotive diagnostic and repair software, as well as automotive hard parts, maintenance items, accessories and non-automotive products on the Web at www.autozone.com. As of August 29, 2009, AutoZone operated 4,229 stores in the United States and Puerto Rico, and 188 stores in Mexico. The company was founded in 1979 and is based in Memphis, Tennessee.

AutoZone remains very strong within the current real estate and economic atmosphere, with a stable credit-rating outlook and a growing market share. AutoZone has benefited from the adverse economic climate as new car purchases remain low and auto owners perform "do-it-yourself" repairs. AutoZone's same store sales increased by 7.1% during the third quarter of fiscal year 2010. Earnings per share also increased 31.5% to $4.12 per share for 3Q.

Maintaining the highest credit rating (S&P: BBB) among the top three auto parts retailers has allowed AutoZone to attain a premium for their net leased sites in comparison to the competition. AutoZone operates on two different lease structures including ground leases and fee simple sales. Fee Simple locations operate on a 20 year corporately guaranteed NNN lease, which include 10% rental rate escalations at each of the usually three (5) year options. Ground Lease locations are structured on a 20 year term, with 10% rental rate increases every 5 years, depending on the specific site.

An AutoZone's footprint and design is typically a 7,000 square foot building situated on approximately 1 acre. AutoZone, being that they are a destination retailer can be situated on pad sites in major retail thoroughfares, to off main and main locations. Recent AutoZone transactions show the variance in price and capitalizaltion rates from to the peak in commercial prices back in 2007 and 2008. During the peak AutoZone Properties traded in the low-mid 6% cap rate range. Recently sold AutoZone stores and the current on market inventory, show new AutoZone properties are in the mid 7% cap rate range.

The AutoZone Market