Structure follows the operating model.
A master lease can be useful when a credible operating business can create more value from a building than a conventional tenancy, but it is not a universal solution. The economics depend on rent, fit-out, working capital, demand, licence requirements, operator risk and the allocation of responsibilities.
Key questions
- Can the proposed use generate sufficient operating margin?
- What lease term is required to justify adaptation and fit-out?
- Who funds capex, pre-opening and working capital?
- How should rent step-ups, rent-free periods or turnover components be structured?
- What happens if the operator, concept or market changes?
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