THE NET LEASE BANK GROUND LEASE REPORT BANK GROUND LEASE PROPERTIES MEDIAN ASKING CAP RATE
MARKET OVERVIEW
Q1 2018 (Previous)
Q1 2019 (Current)
Basis Point Change
Bank of America
4.53%
4.50%
-3
Chase Bank
5.00%
5.00%
0
PNC Bank
4.50%
4.55%
+5
TD Bank
4.95%
5.35%
+40
Other Banks
4.84%
5.15%
+31
All Bank Ground Leases
4.63%
4.84%
+21
Tenant
The above data reflects bank ground leases with 12 or more lease years remaining.
BANK GROUND LEASE PROPERTIES MEDIAN ASKING PRICE Tenant
Average Price
Bank of America
$4,070,000
Chase Bank
$4,280,000
PNC Bank
$2,528,900
TD Bank
$6,306,000
Other Banks
$3,235,400
All Bank Ground Leases
$3,850,000
The above data reflects bank ground leases with 12 or more lease years remaining.
MEDIAN ASKING CAP RATE BY LEASE TERM REMAINING Lease Term Remaining
Cap Rate
20+
4.78%
15-19
5.03%
10-14
5.27%
Under 10
5.75%
2019
Q1
Cap rates for the single tenant bank ground lease sector increased by 46 basis points to 5.30% in the first quarter of 2019 compared to one year ago. In the past two years, cap rates in the bank ground lease sector increased by more than 65 basis points while net lease retail cap rates increased by only 8 basis points. For the purpose of this report, the bank ground lease sector is comprised of both national and regional banks, regardless of credit. Transaction volume for single tenant bank branches decreased by more than 9% in 2018 when compared to 2017. This can be primarily attributed to the concern among investors regarding the future need of brick and mortar banking facilities. Additional concerns from investors include high rents that are typically above their current submarket levels and difficult to repurpose buildings. Bank branch expansion remains limited, causing the supply of properties to be saturated with seasoned leases. The median remaining lease term for bank ground leases dropped below 10 years for the first time since The Boulder Group began covering the bank ground lease sector. The typical bank ground lease investor prefers longer term leases which in turn has lowered the demand for this asset class due to the current supply of shorter-term leases. Accordingly, the significant cap rate premium historically associated with the bank ground lease sector compressed to 97 basis points. Five years ago, the bank ground lease sector regularly saw a 200 plus basis point premium over the net lease retail sector. Investor demand for bank ground leases will remain fragmented. Some will be seeking assets with long term leases, strong branch deposits and a lease with a tier one financial institutions. While others will be focused on residual real estate with in-place rents comparable to the surrounding area. However, the expectation is that interest in bank ground leases will remain lower than other net lease investment classes.
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