The building in which this bookstore was located – the flagship store of the franchise – was sold to a new owner, based on the income from the bookstore lease which had just one year remaining until a scheduled market review. Unfortunately for the new building owner, the market review Determination showed that their advisors had failed to perform adequate due diligence prior to the purchase, which would have shown that the rent being charged was not consistent with the market.

The bookstore owner / tenant used a GEM Lease Analytics™ report in his submission to the determining Valuer. At the proposed rent (a continuation at the existing level), the entire franchise was at risk of going bankrupt. At Determination, market rent was set at $252,000 p/a, representing a $220,000 per annum savings, excluding escalations.

The lower rent meant that the bookstore would need to transact $2.75 million LESS per year in sales to generate the hurdle rate of return at an 8% Occupancy Cost benchmark for this business type. Without this lower hurdle on its flagship location, the entire franchise would have collapsed.