A framework for owners weighing refurbishment against sale-and-leaseback. We look at tenant covenant strength, site demand and exit timing.
Key takeaways
- Covenant strength and site demand outrank building condition.
- Sale-and-leaseback suits owners who want capital without losing occupancy.
- Redevelopment only stacks up where planning capacity is genuinely unused.
Framing the decision
Owners weighing refurbishment against divestment often start with the building. Start instead with the income: who pays it, how long they are committed, and how replaceable they are in that catchment.
A tired building with a strong operator on a long lease is usually a hold. A well-presented building with a short lease and a thin catchment is usually a sale.
When redevelopment stacks up
Redevelopment is worth modelling where existing floor area is well below permissible capacity, where adjoining uses support healthcare, and where you can stage works around a sitting tenant. Without at least two of those, the cost and vacancy risk rarely clear the hurdle.
Test planning capacity early with a pre-lodgement discussion. It is cheaper than a full feasibility study and often settles the question.
Sale-and-leaseback and exit timing
Owner-occupiers who want to release capital but keep operating can use a sale-and-leaseback, structured with a term long enough to attract institutional buyers. The lease terms you write become the asset you sell, so draft them before you go to market.
Where an exit is likely within three years, spend on presentation and documentation rather than structural change — that is where valuation responds fastest.
Want this applied to your asset?
Book a consultation and we'll share our view on your property, catchment and lease structure.
Book a consultation