Answers · Setting the leaseback rent
How is the rent set in a sale and leaseback?
Direct answer
In a sale and leaseback the rent and the price are two sides of one deal. The rent is set at a fair market level for the premises, and that rent — divided by the agreed yield (cap rate) — sets the purchase price. A higher sustainable rent supports a higher price, but also a higher ongoing cost to you.
Because the buyer prices the building off its income, the rent and the price move together: agree a rent that reflects what the premises would genuinely command, apply the yield the asset warrants, and you have the value (rent ÷ yield = price). This is why the rent isn't an afterthought — it's central to what you receive for the building.
There's a balance to strike. Setting the rent too high inflates the headline price but saddles your business with an above-market occupancy cost — and an unsustainable rent can unravel at the first review. A fair market rent gives you a sound price and a cost you can carry long-term. A straight, permanent-hold buyer works to a fair market rent and transparent reviews rather than an engineered number, which is what keeps the arrangement durable for both sides. This is general information, not advice.
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