THE NET LEASE

BANK GROUND LEASE REPORT

MAY 2016
BANK GROUND LEASE PROPERTIES
MEDIAN ASKING CAP RATE

MARKET OVERVIEW

Q1 2015
(Previous)

Q1 2016
(Current)

Basis Point
Change

Bank of America

4.40%

4.70%

+30

Chase

4.00%

4.48%

+48

PNC

4.25%

4.58%

+33

TD Bank

4.00%

4.53%

+53

Other Banks

4.75%

4.91%

+16

All Bank Ground Leases

4.35%

4.75%

+40

Tenant

BANK GROUND LEASE PROPERTIES

MEDIAN ASKING PRICE

Tenant

Average Price

Bank of America

$6,023,525

Chase

$3,740,000

PNC

$6,650,000

TD Bank

$6,085,000

Other Banks

$2,647,000

All Bank Ground Leases

$3,481,000

The growing investor concern is over the future of physical bank

branches as banks continue to contemplate their brick and mortar
presence and implement new mobile banking technologies. A
recent report by Citigroup projects that one-third of all existing bank
branches in the United States could close within the next ten years1.
The main factor contributing to this prediction is the emergence of
new financial technologies that limits the consumers dependency
on the traditional bank branch through mobile technology and
expanded capabilities of ATMs. However, it is expected that those
branches located in affluent communities will have the strongest
likelihood future viability.
As a result of the changing bank branch environment, there is
controlled expansion nationally from banks resulting in limited new
construction bank assets. Despite the on market supply of bank
ground leases increasing by over 20% year over year, 72% of the
sectors supply consists of older properties with lessened lease
term. The median remaining lease term in the first quarter of 2016
for the bank ground lease sector was 11 years compared to 15
years in 2013.

MEDIAN ASKING CAP RATE BY

LEASE
TERM REMAINING

Lease Term Remaining

Cap rates for the single tenant bank ground lease sector increased
significantly to 4.75% in the first quarter of 2016 after reaching
a previous historic low of 4.35% one year ago. During the past
year, cap rates for the entire net lease retail market concurrently
decreased 22 basis points. For the purpose of this report, the bank
ground lease sector is comprised of both national and regional
banks, regardless of credit.

Cap Rate

20+

4.25%

15-19

4.50%

10-14

4.75%

Under 10

5.10%

Investor demand for bank ground leases will be stronger for assets
in affluent communities with strong deposit bases and properties
that exhibit strong residual value. Despite the overall challenges of
the changing bank landscape, investor interest will remain constant
as bank ground leases offer passive investment with no landlord
responsibilities to credit tenants and their leases frequently have
rental escalations throughout the primary lease term. With a
shrinking bank footprint, investors will be more selective in bank
ground lease acquisitions going forward.
1) CoStar: Silicon Valley Will Make Thousands of Bank Branches Disappear

www.bouldergroup.com

THE NET LEASE

BANK GROUND LEASE REPORT
MAY 2016
SELECTED BANK GROUND LEASE SALES COMPARABLES
Sale Date

Tenant

City

State

Price

Cap Rate

Lease Term Remaining

Oct-15

BB&T

Haymarket

VA

$7,500,000

4.75%

14

Aug-15

TD Bank

Miami

FL

$6,975,000

3.94%

13

Sep-15

Chase Bank

West Palm Beach

FL

$6,375,000

4.00%

19

Aug-15

Bank of America

Fredericksburg

VA

$6,000,000

4.68%

18

Apr-16

Chase Bank

Romeoville

IL

$4,900,000

4.27%

22

Nov-15

PNC Bank

Alpharetta

GA

$4,795,000

4.15%

20

Dec-15

Capital One

San Antonio

TX

$4,033,000

4.50%

12

Jan-16

Bank of America

Kissimmee

FL

$2,999,000

5.00%

Mar-16

PNC Bank

Arlington Heights

IL

$2,500,000

5.00%

25

Aug-15

BB&T

San Antonio

TX

$1,531,000

4.50%

Jul-15

Wells Fargo

Bradenton

FL

$1,425,000

5.69%

Feb-16

PNC Bank

Washington

IL

$1,300,000

4.73%

12

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

Q1 2016
Retail

www.bouldergroup.com

Bank

THE NET LEASE

BANK GROUND LEASE REPORT
MAY 2016
COMPANY COMPARISON
Tenant

Total Number of Branches

Credit Rating

Associated Bank

200

BBB+

$3

Bank of America

4,700

A-

$133

BB&T

2,139

A-

$25

BMO Harris

1,500

A+

$38

Chase Bank

5,100

A+

$212

Citibank

3,000

$121

Fifth Third

1,254

BBB+

$12

Key Bank

966

A-

$9

PNC Bank

2,616

A-

$42

Regions Bank

1,627

BBB+

$10

374

BBB

$2

TD Bank

1,300

AA-

$77

US Bank

3,133

A+

$69

Wells Fargo

8,700

$280

TCF Bank

MEDIAN CLOSED CAP RATE SPREAD

Tenant

Closed

Ask

Spread (bps)

Bank Ground Leases

4.87%

4.75%

12

Market Cap (Billions)

BANK GROUND LEASE SECTOR VS

NET LEASE SECTOR CAP RATE
Q1 2015
(Previous)

Q1 2016
(Current)

Bank Ground Lease Sector

4.35%

4.75%

Retail Net Lease Market

6.40%

6.18%

205

143

Sector

Bank Ground Lease Premium (bps)

FOR MORE INFORMATION

AUTHOR
John Feeney | Vice President
john@bouldergroup.com

CONTRIBUTORS
Randy Blankstein | President

Jimmy Goodman | Partner

Zach Wright | Senior Analyst

Scott Harris | Analyst

randy@bouldergroup.com

jimmy@bouldergroup.com

zach@bouldergroup.com

scott@bouldergroup.com

2016. 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