Cap rates for bank ground lease properties reached historic lows from Q1 2013 to Q1 2014, compressing 25 basis points to 4.75%. Demand remains strong for these assets due to long-term leases with investment grade tenants. A lack of new construction has led to cap rate compression, with properties over 20 years fetching the lowest rates at 4.48%. Bank ground leases continue to command a premium over retail net leases due to their quality tenants and characteristics.

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THE NET LEASE
BANK GROUND LEASE REPORT
MAY 2014
BANK GROUND LEASE PROPERTIES
MEDIAN ASKING CAP RATES
Q1 2013 Q1 2014 Basis Point
Tenant (Previous) (Current) Change
Bank of America 5.30% 4.65% -65
Chase 5.00% 4.50% -50
PNC 5.25% 4.50% -75
TD Bank 5.00% 4.35% -65
Other Banks 5.28% 5.00% -28
All Bank Ground Leases 5.00% 4.75% -25
BANK GROUND LEASE PROPERTIES
MEDIAN ASKING PRICE
MARKET OVERVIEW
Cap rates within the single tenant bank ground lease sector
reached their historic low after compressing by 25 basis points from
the first quarter of 2013 to the first quarter of 2014. The sector
is composed of both national and regional banks, regardless of
credit. Overall asking cap rates for the bank ground lease sector
were 4.75%, representing the lowest cap rate across all net lease
sectors which The Boulder Group currently tracks. Investor demand
for bank ground lease properties remains strong as banks are one
of the few single tenant net lease options with long term leases
and rental escalations in the primary terms. In addition, 95% of
the bank ground leases in the market have an investment grade
rating, further contributing to their appeal and low cap rates. The
cap rate compression experienced can be primarily attributed to the
lack of new construction properties available throughout the market
coupled with a high demand for this asset type. Investor demand
is best quantified by the closed cap rate spread of 23 basis points
which decreased by 10 basis points over the past year.
The primary challenge facing buyers of bank ground lease properties
remains the scarcity of product. Bank properties constructed in the
past two years only made up 16% of the market in the first quarter of
2014, a 6% decrease when compared to a year ago. A contributing
factor to the lack of new construction supply is that some bank
tenants prefer to own their real estate rather than engage in a long
termlease.Newconstructionpropertieswithlongtermgroundleases
are in the highest demand amongst 1031 exchange investors and
private buyers as they offer long term leases to investment grade
tenants with historically low lease default rates. Accordingly, bank
ground leases with twenty or more years of lease term remaining
experienced the greatest compression of 52 basis points in the past
twelve months.
Investor demand for bank ground leases is expected to remain active
as investors continue to seek this asset type. Primary demand will
remain concentrated in properties with long term leases; but with
cap rates at historic lows expect some investors to expand their
criteria to include shorter term ground leases with quality real estate
and above average branch deposits. The bank ground lease sector
will continue to command a premium to the net lease retail market
as individual investors seek investment grade tenanted properties.
However, with a lack of new bank properties the expectation is that
competition amongst investors for this asset type will continue to
increase.
Tenant Average Price
Bank of America $3,872,500
Chase $3,652,500
PNC $5,000,000
TD Bank $5,295,000
Other Banks $3,200,000
All Bank Ground Leases $3,652,500
Sector Closed Asking Spread (bps)
Bank Ground Lease 5.23% 5.00% 23
MEDIAN NATIONAL CLOSED
CAP RATE SPREAD
The above data reflects ground leases with 15 or more lease years remaining.

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THE NET LEASE
BANK GROUND LEASE REPORT
MAY 2014
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
Mar-14 TD Bank Gaithersburg MD $6,704,761 5.25% 13
Feb-14 Chase Bank Plainfield IL $4,775,000 5.23% 25
Feb-14 Regions Bank Maitland FL $3,986,000 5.69% 12
Dec-13 Wells Fargo Houston TX $3,940,000 5.43% 13
Feb-14 PNC Bank Melbourne FL $3,362,500 4.57% 25
Aug-13 BBVA Kingwood TX $3,025,000 5.45% 14
Feb-14 Bank Of America Elgin IL $2,975,000 6.70% 9
Oct-13 Chase Bank Schiller Park IL $2,740,000 5.00% 20
Apr-14 PNC Bank Brookfield WI $2,400,000 5.21% 19
Sep-13 Chase Bank Colorado Springs CO $2,400,000 4.79% 18
Jul-13 Regions Bank Tampa FL $1,540,000 6.15% 11
Retail Bank
Q1 2004 Q1 2006 Q1 2008 Q1 2010 Q1 2012 Q1 2014
4.50%
5.00%
5.50%
6.00%
6.50%
7.00%
7.50%
8.00%
8.50%

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THE NET LEASE
BANK GROUND LEASE REPORT
MAY 2014
Bank Total Number of Branches Credit Rating Market Cap (Billions)
Bank of America 5,100 A- $168
BB&T 1,825 A- $26
BMO Harris 1,570 A+ $44
Chase Bank 5,600 A+ $210
Citibank 3,729 A- $145
Fifth Third 1,313 BBB+ $17
Key Bank 1,028 BBB+ $11
PNC Bank 2,714 A $44
Regions Bank 1,705 BBB- $14
TCF Bank 427 BBB- $2
TD Bank 1,179 AA- $86
US Bank 3,081 A+ $73
Wells Fargo 9,000 A+ $258
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
Zach Wright | Research Analyst
zach@bouldergroup.com
© 2014. 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.
MEDIAN ASKING CAP RATE BY LEASE
TERM REMAINING
Lease Term Remaining Cap Rate
20+ 4.48%
15-19 4.75%
10-14 5.05%
Under 10 5.35%
BANK GROUND LEASE SECTOR VS
NET LEASE SECTOR CAP RATE
Q1 2013 Q1 2014
Sector (Previous) (Current)
Bank Ground Lease 5.00% 4.75%
Retail Net Lease Market 7.25% 6.75%
Bank Ground Lease Premium (bpm) 225 200