Maximising the Value of a Commercial Asset
Maximising the value of a commercial asset takes more than routine oversight. Engaging a specialist commercial asset manager—someone who understands standard lease terms, market conditions, and effective negotiation strategies—can make a significant difference.
Their expertise ensures leases are aligned with the market, protect the landlord’s interests, clearly define responsibilities, and ultimately preserve the asset’s long-term value.
This case study showcases how our asset management team transformed two childcare centres in South Sydney, owned by a nationally recognised not-for-profit Landlord, by restructuring outdated leases to unlock substantial income and reduce risk.
The Situation
In Sydney’s high-demand Bayside Council area, two childcare centres (each licensed for approximately 39 children) were operating under outdated licence agreements.
- Tenants were paying just $1,100–$1,200 per child annually—well below the market average of $3,700–$4,000 per child, based on similar facilities across South Sydney.
- Agreements lacked standard protections and clear maintenance responsibilities, leaving the owner exposed to operational and financial risks.
The Challenge
The existing lease arrangements presented several issues:
- Under-Market Rent: Combined annual rent was just $93,600—well below market potential.
- Missing Protections: Key commercial lease clauses were absent, increasing landlord vulnerability.
- Unclear Responsibilities: Maintenance obligations were vague, risking costly repairs and disputes.
Our Approach
We were engaged to restructure the leases and bring the agreements in line with best practice and market benchmarks. Key actions included:
- Replaced outdated licences with formal commercial leases backed by clear Heads of Agreement.
- Negotiated rent uplift from $93,600 to $280,000 + GST per annum.
- Secured 10-year leases with market rent reviews from year six.
- Introduced stepped increases at 8% annually, achieving market rates by year two.
- Implemented a ratchet clause to prevent rent decreases at market review.
- Required a three-month bank guarantee and personal director guarantees.
- Upgraded tenant public liability insurance from $10m to $20m; added plate glass insurance to tenant obligations.
- Shifted maintenance of air conditioning and fire safety systems to tenants.
- Defined clear make-good obligations, including removal of fit-out, restoration, and repainting.
The Results
Our strategic lease restructuring delivered outstanding outcomes:
- Over $185,000 in additional annual rental income (from $93,600 to $280,000).
- Stronger lease protections and reduced landlord risk.
- Improved financial safeguards and long-term commercial certainty.
This outcome reflects the power of proactive asset management. By bringing outdated arrangements into alignment with market standards, we helped our client transform these assets into reliable, revenue-generating investments.
Secure Your Property’s Future
If you’re a landlord looking to improve returns, reduce risk, and future-proof your commercial property, now is the time to act.
Contact our Asset Management team today to learn how we can help you unlock hidden value in your lease agreements.