FREDERICK, MD-A net lease bank traded here for $3.9 million. The transaction is illustrative of how popular net-lease bank assets have become to investors.
The property that traded is Columbia Bank, a 3,600-square foot institution located at 5211 Presidents Ct. Marcus & Millichap Real Estate Investment Services brokered the deal. The buyer is a developer and was repped by Joshua Ein and David Weber, investment specialists at Marcus & Millichap.
This transaction is a microcosms of a very popular piece of the net lease industry: bank assets. 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, the Boulder Group has reported--the lowest cap rate levels in this sector since 2004.
The cap rate compression was caused by increased demand for bank ground leases, Boulder Group says, which on average have an overall lower absolute dollar amount than fee simple assets.
Other reasons to like this asset class, according to the report: there is a lack of net lease assets leased to investment grade tenants with reoccurring rental escalations; also bank ground leases typically have multiple rental escalations in the primary term and renewal options, it said.
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, the Boulder Group said.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
