THE NET LEASE

BANK GROUND LEASE REPORT

MAY 2015
MARKET OVERVIEW

BANK GROUND LEASE PROPERTIES

MEDIAN ASKING CAP RATE

Q1 2014
(Previous)

Q1 2015
(Current)

Basis Point
Change

Bank of America

4.65%

4.40%

-25

Chase

4.50%

4.00%

-50

PNC

4.50%

4.25%

-25

TD Bank

4.35%

4.00%

-35

Other Banks

5.00%

4.75%

-25

All Bank Ground Leases

4.75%

4.35%

-40

Tenant

The above data reflects ground leases with 15 or more lease years remaining.

While overall demand has increased over the past year for net lease
properties, the supply of bank ground leases has decreased by 30%
since the first quarter of 2014. The shortage can be attributed to the
limited retail expansion plans for banking institutions. The lack of new
supply has led to increased competition amongst buyers as illustrated
by the Median Closed Cap Rate Spread chart. In the past twelve
months, the spread between closed and asking cap rates decreased
to seventeen basis points. Additionally, there was a 205 basis point
premium in cap rates for bank ground leases when compared to the
retail net lease market. The overall cap rate compression for this
sector can best be attributed to the supply shortage coupled with
a high demand for assets with rental escalations and absolute net
leases priced between $2 and $5 million.

BANK GROUND LEASE PROPERTIES

MEDIAN ASKING PRICE

Tenant

Average Price

Bank of America

$4,857,500

Chase

$4,028,749

PNC

$4,125,000

TD Bank

$5,737,500

Other Banks

$2,417,370

All Bank Ground Leases

$3,510,000

Bank ground leases with more than 20 years of lease term remaining
are in the highest demand amongst net lease investors. From the
first quarter of 2014 to the first quarter of 2015, these ground leases
experienced the greatest cap rate compression in this sector (40
basis points). It is rare for a bank ground lease to have a lease with
more than 20 years remaining as the vast majority of new leases are
for 20 years.

MEDIAN CLOSED CAP RATE SPREAD

Cap rates for the single tenant bank ground lease sector continued
their descent to a new historic low of 4.35% in the first quarter of 2015.
This signifies a 40 basis point decrease since the first quarter of 2014.
Furthermore, this represents the lowest cap rate across all net lease
sectors which The Boulder Group tracks. The bank ground lease
sector is comprised of both national and regional banks, regardless
of credit. Investor demand for bank ground lease properties remains
strong as banks are one of the few single tenant net lease properties
offering long term absolute net leases and rental escalations in the
primary lease terms. Additionally, many private and 1031 investors
look to this sector for safe and stable returns, as 90% bank ground
leases are leased to investment grade rated companies. This statistic
further contributes to the demand and cap rate compression within
the sector.

Tenant

Closed

Ask

Spread (bps)

Bank Ground Leases

5.06%

4.89%

17

Investor demand for bank ground leases is expected to remain

strong as investors are attracted to the security that this asset
class provides. Transaction volume should remain concentrated in
properties with long term leases; however shorter term ground leases
with strong bank branch deposits will generate significant interest.
With a shrinking supply of bank ground leases, competition amongst
buyers seeking assets leased to investment grade tenants with rental
escalations will continue.

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THE NET LEASE

BANK GROUND LEASE REPORT
MAY 2015
SELECTED BANK GROUND LEASE SALES COMPARABLES
Sale Date

Tenant

City

State

Dec-14

PNC Bank

Skokie

IL

Sep-14

Chase Bank

Thousand Oaks

Jan-15

PNC Bank

Jan-15

Price

Cap Rate

Lease Term Remaining

$5,600,000

4.38%

20

CA

$4,850,000

3.97%

18

Roswell

GA

$4,810,000

4.78%

20

Wells Fargo

Jacksonville

FL

$2,909,500

5.00%

10

Oct-14

Chase Bank

Jacksonville

FL

$2,640,000

4.35%

20

Nov-14

M&T Bank

Chambersburg

PA

$2,525,000

5.14%

10

Dec-14

Fifth Third Bank

Nashville

TN

$2,290,000

5.77%

14

Sep-14

Bank of America

Lithonia

GA

$2,100,100

5.10%

10

Oct-14

Regions Bank

Orlando

FL

$1,950,000

5.47%

11

Mar-15

TCF Bank

Kenosha

WI

$1,610,000

6.14%

13

Apr-15

US Bank

Bremerton

WA

$1,200,000

4.54%

18

BANK GROUND LEASE VS RETAIL NET LEASE CAP RATE TRENDS

8.60%
8.10%
7.60%
7.10%
6.60%
6.10%
5.60%
5.10%
4.60%
4.10%
Q1 2004

Q1 2006

Q1 2008

Q1 2010

Q1 2012

Q1 2014
Retail

Bank

www.bouldergroup.com

THE NET LEASE

BANK GROUND LEASE REPORT
MAY 2015
COMPANY COMPARISON
Tenant

Total Number of Branches

Credit Rating

Market Cap (Billions)

Associated Bank

225

BBB+

$3

Bank of America

4,800

A-

$163

BB&T

1,824

A-

$28

BMO Harris

1,550

A+

$42

Chase Bank

5,500

A+

$232

Citibank

3,280

$160

Fifth Third

1,302

BBB+

$16

Key Bank

994

BBB+

$12

MEDIAN ASKING CAP RATE BY

LEASE TERM REMAINING

BANK GROUND LEASE SECTOR VS

NET LEASE SECTOR CAP RATE

Lease Term Remaining

Sector

Cap Rate

Q1 2014
(Previous)

Q1 2015
(Current)

20+

4.00%

Bank Ground Lease Sector

4.75%

4.35%

15-19

4.45%

Retail Net Lease Market

6.75%

6.40%

10-14

4.70%

Bank Ground Lease Premium (bps)

200

205

Under 10

5.45%

FOR MORE INFORMATION

AUTHOR
John Feeney | Vice President
john@bouldergroup.com

CONTRIBUTORS
Randy Blankstein | President

Jimmy Goodman | Partner

Zach Wright | Research Analyst

randy@bouldergroup.com

jimmy@bouldergroup.com

zach@bouldergroup.com

2015. The Boulder Group. Information herein has been obtained from databases owned and maintained by The Boulder Group as well as third party sources. We have not verified the information
and we make no guarantee, warranty or representation about it. This information is provided for general illustrative purposes and not for any specific recommendation or purpose nor under any
circumstances shall any of the above information be deemed legal advice or counsel. Reliance on this information is at the risk of the reader and The Boulder Group expressly disclaims any liability
arising from the use of such information. This information is designed exclusively for use by The Boulder Group clients and cannot be reproduced, retransmitted or distributed without the express
written consent of The Boulder Group.

www.bouldergroup.com