Net Lease Bank Research Report

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THE NET LEASE

BANK GROUND LEASE REPORT

BANK GROUND LEASE PROPERTIES

MEDIAN ASKING CAP RATES

Q1 2012 Q1 2013 Basis PointTenant (Previous) (Current) Change

Bank of America 6.00% 5.30% -70

Chase 5.60% 5.00% -60

PNC 5.95% 5.25% -70

Wells Fargo 5.80% 4.88% -92

All Bank Ground Leases 5.85% 5.00% -85

The above data refects bank ground leases with 15 or more lease

 years remaining.

BANK GROUND LEASE PROPERTIES

MEDIAN ASKING PRICE

MARKET OVERVIEW

Cap rates in the single tenant bank ground lease sector compressed by

85 basis points over the past year to a 5.0% cap rate. This represented

the lowest cap rate levels in this sector since 2004. The cap rate

compression was caused by increased demand for bank ground leaseswhich on average have an overall lower absolute dollar amount than fee

simple assets. Further contributing to such compression is the lack of 

net lease assets leased to investment grade tenants with reoccurring 

rental escalations; bank ground leases typically have multiple rentalescalations in the primary term and renewal options. Additionally, bank

ground leases historically have low default rates, require zero landlord

responsibilities and have a price point that appeals to wide array of 

non-institutional investors. Due to the absolute dollar size and loweryields associated with this asset type, the acquisition of bank ground

leases are favored by individual investors and 1031 exchange investors

rather than institutions. As a result of the aforementioned attributes,

bank ground leases are commanding a 225 basis point premium to thetotal net lease retail market sector.

Online banking has become more prevalent causing investors to have

concerns regarding bank properties; however there have been limitedclosures of free standing locations. As the presence of online baking 

continues to grow, the construction rate of new bank branches has

slowed when compared to the past few years. Although the increased

usage of online banking has caused some nancial institutions to reduce

their traditional bank branches, the vast majority of new locations are

relocations of inline branches moving to nearby freestanding branches.

The advantages that free standing bank branches have over inline

locations include superior security and convenience, higher visibilityand the ability to offer multiple drive through lanes. Free standing bank

ground leased assets historically have the lowest default rates in the net

lease sector and remain in high demand amongst investors despite the

evolving bank branch industry model.

Transaction volume in the bank ground lease sector remains

concentrated in properties with long term leases; however shorter

term ground leases with strong bank branch deposits will generatesignicant interest. Expect investor demand to remain high with interest

rates at their current level. Bank ground leases should remain a viable

option for typical xed income investors. The bank ground lease sector

will continue to demand a premium to the net lease retail market asindividual investors seek investment grade tenanted properties with

multiple rental escalations in the primary lease term.

Tenant Average Price

Bank of America $5,000,000

Chase $3,105,000

PNC $4,430,000

Wells Fargo $3,294,000

All Bank Ground Leases $3,500,000

Sector Closed Asking Spread (bps)

Bank Ground Lease 5.58% 5.25% 33

MEDIAN CLOSED

CAP RATE SPREAD

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THE NET LEASE

BANK GROUND LEASE REPORT

SELECTED BANK GROUND LEASE SALES COMPARABLES

BANK GROUND LEASE VS RETAIL NET LEASE CAP RATE TRENDS

Sale

Date Tenant City State Price

Cap

Rate

Lease Term

Remaining

Dec-12 Chase Bank Royal Palm Beach FL $4,800,000 5.10% 20

Mar-13 Chase Bank Peoria AZ $3,600,000 4.98% 16

Mar-13 Bank of America Warrenville IL $3,400,000 5.66% 11

Feb-13 Comerica Bank Surprise AZ $3,320,000 5.63% 16

Apr-13 TCF Bank Richeld MN $2,869,999 5.75% 14

Dec-12 Chase Bank Country Club Hills IL $2,290,000 5.52% 24

Dec-12 Wells Fargo Nashville TN $2,200,000 6.00% 15

Mar-13 Key Bank Thornton CO $2,190,000 5.70% 17

Mar-13 BB&T Knightdale NC $2,010,000 5.02% 13

Dec-12 Fifth Third Bank Franklin OH $1,306,500 5.74% 13

Apr-13 Associated Bank Machesney Park IL $1,180,000 5.93% 20

Retail Bank

Q1 2004 Q1 2005 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 20134.75%

5.25%

5.75%

6.25%

6.75%

7.25%

7.75%

8.25%

8.75%

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THE NET LEASE

BANK GROUND LEASE REPORT

Bank Total Number of Branches Credit Rating Market Cap (Billions)

Associated Bank 240 BBB $2

Bank of America 5,500 A- $129

BB&T 1,832 A- $21

BMO Harris 1,570 A+ $39

Chase Bank 5,600 A $182

Comerica Bank 489 A- $7

Fifth Third 1,325 BBB $14

Key Bank 1,088 BBB+ $8

PNC Bank 2,881 A- $34

Regions Bank 1,700 BBB- $11

TCF Bank 194 BBB- $2

TD Bank 1,168 AA- $73

Wells Fargo 9,000 A+ $193

COMPANY COMPARISON

FOR MORE INFORMATION

AUTHOR

John Feeney | Research Director

 john@bouldergroup.com

CONTRIBUTORS

Randy Blankstein | President

rblank@bouldergroup.com

Jimmy Goodman | Partner

 jimmy@bouldergroup.com

Chad Gans | Research Analyst

chad@bouldergroup.com

© 2013. 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 veried the information and we

make no guarantee, warranty or representation about it. This information is provided for general illustrative purposes and not for any specic 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.

MEDIAN ASKING CAP RATE BY LEASE

TERM REMAINING

Lease Term Remaining Cap Rate

20+ 5.00%

15-19 5.10%

10-14 5.50%

Under 10 5.65%

BANK GROUND LEASE SECTOR VS

NET LEASE SECTOR CAP RATE

Q1 2012 Q1 2013Sector (Previous) (Current)

Bank Ground Lease 5.85% 5.00%

Retail Net Lease Market 7.75% 7.25%

Bank Ground Lease Premium (bpm) 190 225