Investors targeting properties in the bank sector are cognizant of the everchanging banking environment related to mobile banking and the evolving branch footprints. For example, net leased properties with short lease terms remaining or those with non-credit tenants may see larger swings in value than those with long term leases and credit tenants. hb```g``g`c` B@16) pM``]0hv=$BjI|4,]#1 40#qUQ$6(+@Z"L$Hc/ "UX.gHo & 17?`z7L/*? P` O%XVL F.1C hbYrP >|[l SRS National Net Lease has closed, year to date this year, 180 properties, up approximately 17% from this time in 2021, with over 230 properties under contract, also 14% higher than this time. Credit/debit cards processed by Authorize.net. Lenders want the broadest use provision in the lease. In the first quarter national asking cap rates in the single tenant bank ground lease sector decreased to 5.35%, according to the 2021 Net Lease Bank Ground Lease Report. : A high quality tenant like a national company with a strong credit rating comes with less credit risk, which pushes the cap rate lower. Typically, a ground lease lasts from 35 to 99 years. Strong activity throughout the sector shouldnt come as a surprise though. Average cap rates compressed by 56bps to 5.58% during Q1 due to increased consumer demand, as most grocery stores are comprised of strong, high credit tenants Kroger, Albertsons, Sprouts, Aldi etc. In Q2 2021, properties leased to Chick-Fil-A and McDonald's had cap. FNRP. There is evidence that cap rates have expanded further since then. Pleasure to work with and extremely knowledgeable, Assets America guided us every step of the way, The company is very capable, I would recommend Assets America, Assets America was incredibly helpful and professional, Assets America is a great company to work with, We were very pleased with Assets Americas expertise, Assets America helped us survive a very difficult time, Highly recommend them for any type of commercial financing, [contact-form-7 id="8901" title="Multistep Questions"], Starbucks drive-through shipping container store, Aircraft Financing Terms & Loan Complete Guide, Alienation Clause Everything You Need to Know, ARV After Repair Value Everything You Need to Know, Assignment Clause Everything You Need to Know, Average Daily Rate (ADR) Formula Complete Guide, Cap Rate Simplified for Commercial Real Estate (+ Calculator), Cash Coverage Ratio | Complete Guide + Calculator, Cash Out Refinance on Investment Property Complete Guide, CMBS Loans: Guide to Commercial Mortgage-Backed Securities, Commercial Real Estate Appraisals Everything You Need to Know, Commercial Real Estate Syndication Ultimate Success Guide, Contingency Reserve Everything You Need to Know, CRE Loans What Nobody Tells You About Commercial Lending, Cross Default Everything You Need to Know, Equity Kicker Everything You Need to Know, Full Service Gross Lease Everything You Need to Know, Gap Funding Commercial Real Estate Pros & Cons, Ground Lease Everything You Need to Know (+ Calculator), Guide to Floor Area Ratio, Floor Space Index & Plot Ratio, Hard Costs vs Soft Costs Commercial Real Estate Guide, Hard Money vs Soft Money Loans in Real Estate, Hypothecation Agreements Everything You Need to Know, Intercreditor Agreements Everything You Need to Know, Loan Proceeds Everything You Need To Know, Loss to Lease Everything You Need to Know, Mergers & Acquisitions Seller Intake Questionnaire, Mergers & Acquisitions Buyer Intake Questionnaire, MIRR Guide | Modified Internal Rate of Return (+ Calculator), Modified Gross Lease Everything You Need to Know, Operating Expense Ratio Ultimate Guide (+ Calculator), Partially Amortized Loan Complete Guide, Potential Gross Income Everything You Need to Know, Preferred Equity in Real Estate Complete Investors Guide, Preferred Shares Everything You Need to Know, Property Interest Everything You Need to Know, Restrictive Covenants Everything You Need to Know, Reverse 1031 Exchange Everything You Need to Know. Highly recommend them to anyone looking for financing. 2023 Commercial Property Executive. Expect this sector to continue to outperform other sectors as flight to safety and economic resistance remains to be a target for investors. He negotiated very aggressively on our behalf. During the first half of 2021, households will likely continue to self-quarantine and a wave of bankruptcies will increase the number of permanent job losses. As the previous paragraph described, they rose slightly in 4Q21, but at the outset of 2022, there is some uncertainty about what will happen. Further, QSRs typically offer a lower price point and a higher percentage of absolute NNN lease types for investors compared to other sectors. The also include absolute leases, percentage leases, and the subject of this article, ground leases. Tenants with less financial strength push cap rates higher because they present more credit risk. A propertys capitalization rate is a performance metric that provides real estate investors with information about its potential return on investment and risk profile. Accordingly, as banks implement their modern footprints and mobile banking strategies, bank branch closings have become more common. I don't think 39 is a magic number. Safer assets with high quality tenants like Walgreens, Dollar General, Amazon, Whole Foods, or McDonalds on long term leases are the gold standard for safety in a turbulent market so they may be less exposed to cap rate movement. Despite banks being challenged with keeping their distribution channels open due to social distancing logistics and compliance functions that were never designed for remote work, the average cap rate for bank properties sold in Q1 compressed by 50 bps compared to Q4 while average lease term increased by just 3 years. %PDF-1.7 % Typically, lenders balk at lessors maintaining an unsubordinated position with respect to default. In the retail sector, they inched up a few basis points to an average cap rate of 5.88% and in the industrial sector they averaged 6.77%. Today's low interest/cap rate environment enables parties to fix rent in a stable, long-term fashion. By subscribing or purchasing surveys, you agree to our Terms of Use in their entirety including copyright provisions and the restrictions that accompany an ordinary annual subscription which represents a single site license, the use of which is limited to employees of a single office. At year-end 2021, the single-tenant industrial sector shattered records for both quarterly and annual investment sales volume. Year-End Inflation | Closed at 6.8% highest in nearly 40 years & forecasted to average 7% in 1Q/22, GDP | Expected to grow 4.0% in 2022, down from 6.9% growth in 2021. Just $159 per office (not per user) per year. As more people return to work and school, the need for C-Stores will increase. Property types include: Apartments; Student Housing; Health Care and Senior Housing; Gas Stations and Convenience Stores; Golf Courses and Country Clubs; Industrial Warehouses and Distributions Centers; Hotels and Motels; Mini Storage Facilities; CBD and Suburban Office Buildings; Retail Shopping Centers; RV and Mobile Home Parks; Schools and Churches; Residential and Office and Industrial Condominiums; Subdivisions and Business and Industrial Parks; and Land Leases. So, Assets America handled both the sale and the loan for us and successfully closed our escrow within the time frame stated in the purchase agreement. All of these leases provide benefits and drawbacks to the lessor and lessee. Accordingly, the landlord will usually charge lower rent on unsubordinated ground leases. It hasn't changed from 2021 but is up from 2018 when it was $1,220/mo. The RealtyRates.com quarterly Market Survey includes sales, rent, occupancy, and operating expense data, together with eepense ratios, cap rates and gross rent and effective gross income multipliers for seven core commercial property types including apartments; warehouses and distribution centers; flex/R&D facilities; CBD and suburban offices; and anchored neighborhood and community and unanchored strip retail centers. , the tenant pays base rent plus all of the costs associated with running the property. The lenders requirements for applying the condemnation proceeds and controlling termination rights mirror those for casualty events. However this might discourage lenders, who wouldnt be able to take possession in case of default. The average cap rate compressed by 39bps from Q4 to Q1 while the average lease term has remained at 9 years. However, short term leases with strong underlying real estate fundamentals will be in demand amongst certain investors who are willing to take on more risk through potential re-tenanting or redevelopment of a property., To view the full report: https://bouldergroup.com/media/pdf/Net-Lease-Bank-Ground-Lease-Report.pdf. They were excellent at communicating with us at all times and they were extremely responsive. Performance of c-store/gas stations will likely depend heavily on gasoline prices and sales. Despite the substantial shifts in consumer spending in 2020 and beginning of 2021 caused by COVID-19, US Retail and Food Service increased by 27.7% YOY as of March 2021, proving the resilience of the overall retail industry. This requires special endorsements to the regular owners policy. The C-Store/Gas station space remains to be a very active sector of net lease given the internet resistant foundation as well as being labeled as an essential business. There is a direct relationship between a net leased propertys value and its cap rate. Since the beginning of the pandemic, average cap rates have slipped into the high 5.0 percent range and at mid-year 2021, sat at 5.9 percent. The industry has shown resilience by successful technology improvements that benefit both bank businesses and clients. If they are the sole occupant, their share is 100%. The average cap rate for bank properties sold in Q4 decreased by 42 bps compared to Q3 while average lease term decreased by 1 year. Although single-tenant industrial activity remains far from record-setting levels, the sector continues to outperform within the net lease market and accounted for 47 percent of second quarter 2021s sales volume. It was great to have such knowledgeable and super-experienced, licensed pros in our corner, pros upon which we could fully rely. I highly recommend them to anyone needing commercial financing. CVS assets have seen an increase in trades as investors seek out to both purchase and sell quality sites in the wake of the brand announcing they will be closing 900 stores, starting in the Spring 2022. Starbucks concept is to sell decommissioned shipping containers as an environmentally friendly alternative to conventional construction. In actuality, investor demand for industrial product remains quite strong. Cap rates inflated by 32bps from 6.35% in Q4 to 6.67% in Q1. Of the four net lease types described above, single tenant properties with triple net leases are particularly popular with individual investors who want exposure to commercial real estate assets, but not the hassle of managing them on a day to day basis. Great experience. The RealtyRates.com quarterly Developer Survey includes actual and pro-forma discount rates for 22 sell-out property types including subdivisions, PUDs, business and industrial parks, and residential and commercial condominiums and co-ops. Unsurprisingly, lenders want the insurance proceeds to go toward the loan, not property restoration. As we look ahead, the trajectory of the pandemic and vaccine rollout will undoubtedly shape the 2021 economic landscape. The 10-year Treasury rate is expected to rise to at least 2% by the end of this year. matthew.mousavi@srsre.com, 949.698.1115 Cap Rate: 4.78% Truist Bank Sector: Bank Avg. On one hand, interest rates are rising. Tenant pays base rent plus their share of property taxes, insurance, and maintenance. We invite you to contact us for more information about our complete financial services. The firm provides a full range of brokerage, research, advisory, and financing services nationwide. Market activity greatly surpassed expectations in fourth quarter 2020 as investors rushed to close deals before year-end. The Boulder Group announced the release of its Net Lease Bank Properties Ground Lease Report today. 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