Bank of America Tenant Overview
Pros
- Investment grade tenant
- Leases afford rental increases throughout the primary term, many with annual rental increases
- Generally well located, either as out parcel to grocery anchored shopping center or urban city center
Cons
- Retail banking industry outlook on necessity of physical locations is evolving
- When located as a part of a shopping center, some use restrictions may apply
Earnings Highlights
- Net income rose 19% to $7.4 billion, or $0.88 per diluted share, compared to $6.2 billion, or $0.73 per diluted share for Q2-22
- Revenue, net of interest expense, increased 11% to $25.2 billion – Net interest income (NII) up $1.7 billion, or 14%, to $14.2 billion ($14.3 billion FTE)(C), driven primarily by benefits from higher interest rates and loan growth
Tenant Description
Bank of America, (NYSE: BAC) is an American multinational banking and financial services corporation headquartered in Charlotte, North Carolina.
Bank of America did not emerge unscathed from the banking crisis and great recession but the strength of its deposits and dominance in market share along with its highly visible locations in both urban and suburban settings have helped Bank of America hold the interest of net lease investors. Generally, Bank of America sites are on 1.00 acre plots with improvements of 4,000 to 6,000 square feet and are sold as unsubordinated ground leases* to net lease investors.
*In a ground lease, the investor/landlord owns the ground and the tenant constructs the building at costs of around $1.3mm and retains ownership of the building until lease termination. The tenant leases the ground from the investor/landlord and on the tenant's default or other termination of the lease; the building becomes the property of the investor/landlord. Ground leases are extremely passive investments and generally sell at 50 to 125 basis points below the average cap rate for NNN "fee simple" ownership of ground and structure transactions leased by the same tenant.
The Bank of America ground lease is attractive to investors because they typically have an initial term of 15 to 20 years with up to five (5), five (5) year renewal options. In addition, the Bank of America ground lease provides rent increases of 10-12% every five (5) years.
Bank of America Corporation is the second-largest bank in the US by assets, holding $2.35 trillion. Bank of America has a relationship with 99% of the US. Fortune 500 companies and 83% of the Fortune Global 500. The company is a member of the Federal Deposit Insurance Corporation (FDIC) and a component of both the S&P 500 Index and the Dow Jones Industrial Average.
Bank of America has operations in 35 countries. It provides services ranging from investment and corporate banking to investing and equity execution services. In the United States, Bank of America serves approximately 66 million customers and small businesses with 4,300 retail banking offices and approximately 16,300 ATMs. Bank of America's online banking serves 36 million active users, including over 26 million mobile app users.
| Average Sale Price | $4,456,900 |
| NOI | $212,778 |
| $/Square Foot | $715 - $1,075 |
| Building SF | 4,000 - 6,000 |
| Lot Size | 1.00 Acres |
| Lease Term | 15 - 20 Years |
| Escalations | 10-12% Every 5 Years |
| Stock Symbol | BAC |
| Midlothian, TX | 4.19% |
| Charleston, SC | 4.25% |
| Germantown, TN | 4.80% |
| Rancho Cucamonga, CA | 5.33% |
