MILWAUKEE—Net lease retail outlets continue to draw investors in, but banks remain the most sought-after investment. The Boulder Group, for example, a net leased investment brokerage firm in suburban Chicago, has just completed the sale of a single tenant PNC Bank ground lease located at 12821 W. Bluemound Rd. in Brookfield, WI, a suburb of Milwaukee, for $2,400,000.
According to a study released by Boulder last June, bank cap rates had compressed by 85 bps over the previous year to 5.0%. But cap rates for other retail remained above seven percent. “The cap rate compression was caused by increased demand for bank ground leases which on average have an overall lower absolute dollar amount than fee simple assets.”
Furthermore, few net lease assets have investment-grade tenants with built-in rental escalations. These types of leases are fairly common among banks, however, which also have very low default rates.
PNC occupies the entire 4,020-square-foot retail building that sits on a 1.18 acre Target outparcel. Bluemound Rd. is a primary east-west thoroughfare that experiences traffic volumes in excess of 41,000 vehicles per day. There are nineteen years remaining on this ground lease that features rental escalations.
Randy Blankstein and Jimmy Goodman of Boulder represented both parties in the transaction. The seller was a Midwest-based developer and the buyer was a private investor from the West Coast.
“The market for bank ground leases with investment grade tenants remains strong as investors are attracted to the typical long term leases with rental escalations,” says Blankstein, president of Boulder. Goodman, a partner of Boulder, adds that “core market single tenant assets with solid real estate fundamentals continue to be in the greatest demand.”
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
