When an owner wants to pull capital out of a property they own, refinancing is usually the first idea on the table. It's familiar and the bank relationship already exists. But it's worth understanding what each route actually delivers, because the difference in both the amount and the consequences is larger than most owners expect.
What refinancing actually delivers
When you refinance a commercial property, you're borrowing against it. The amount you can extract is constrained by the lender's loan-to-value ratio, less whatever debt already sits over the property. In practice, that's a fraction of the market value, not the whole thing — and the fraction is set by the lender's appetite, not by what you need.
You also add a new debt obligation. The business takes on repayments, interest costs that move with rates, and usually a set of covenants that restrict what you can do — conditions around interest cover, gearing ratios, or limits on further borrowing. It is capital, but it comes with strings, and those strings can tighten at exactly the moment you'd least want them to.
What a sale and leaseback delivers instead
A sale and leaseback converts the entire market value of the property into capital. Not a fraction of it — all of it. There's no residual mortgage, no LVR ceiling, and no bank covenants attached to the proceeds. The capital is simply yours to deploy.
The trade-off is a lease obligation rather than a debt obligation. You pay rent instead of mortgage repayments and interest. Whether that's better or worse depends entirely on your situation — the relative cost, the term, your growth plans, and how you want your balance sheet to look. It is a real obligation, not a free lunch, and it should be weighed as carefully as any borrowing would be.
Debt versus obligation
Both structures create an ongoing commitment, but they sit on the balance sheet differently. Refinancing creates visible, traditional debt. A long-term lease creates a commitment that appears as a right-of-use asset and a lease liability under current accounting standards, rather than as conventional debt.
For some businesses and some lenders, this distinction matters a great deal; for others it makes little difference. It can affect how gearing and interest-cover covenants are calculated, and how prospective lenders read your accounts. Your accountant and financier are the right people to work through the balance-sheet implications specific to your structure — this is genuinely a take-your-own-advice area.
Flexibility and control
Refinancing leaves you owning the property. That matters if you believe the asset will appreciate significantly, or if you want to keep the option to sell, redevelop or exit later on your own timing. Ownership keeps that optionality open.
A sale and leaseback trades that flexibility for certainty: you have the capital now, and you know your occupancy costs for the lease term. For an established business in a purpose-built facility, occupancy certainty and a clean balance sheet are often worth more than property optionality — but that's a judgement call about your priorities, not a universal truth. The right answer depends on whether you're primarily a property investor or an operator who happens to own the shed.
Cost, term and certainty
It's also worth comparing the two on cost and certainty, not just on how much they release. Refinancing carries an interest cost that moves with the rate cycle, so the price of that capital can rise after you've drawn it — sometimes sharply. A sale and leaseback carries a rent cost instead, set on the lease and reviewed on a known basis, which makes your occupancy cost far more predictable over a long horizon.
There's a certainty point on execution, too. A refinance depends on the lender's appetite holding through to settlement, and terms can shift late in the process. Selling to a funded, permanent-hold buyer who decides in-house can offer a high degree of certainty once terms are agreed — which matters a great deal if the capital is earmarked for a deal with its own timetable. Whether you run that sale directly or through your own agent, the certainty comes from the buyer being a genuine long-term holder rather than from the channel you use to reach them.
When each one makes sense
Refinancing tends to make sense when you need a smaller amount of capital, when the business can comfortably service additional debt, and when continued property ownership remains strategically important to you.
A sale and leaseback tends to make sense when you want to maximise the capital released, when you want to eliminate property-related debt entirely, or when you're approaching a transition — succession, an acquisition, or a step-change in the business — and need the clarity that comes from a clean exit from the asset.
The bottom line
Think of it as a choice between borrowing against the building and converting the building into capital. Refinancing keeps the asset and a slice of its value, with debt and covenants attached. A sale and leaseback releases the full value and the property risk along with it, in exchange for a lease you'll live with long term.
Neither is automatically right — it depends on how much you need, how you feel about debt, and how important owning the real estate is to your plans. Model both with your own advisers before deciding. If a sale and leaseback looks like the better fit, we're a permanent-hold buyer and happy to walk through how it would work, whether you approach us directly or through your agent.