Strategic sublet converted into full lease cancellation

McKinsey needed to dispose of an entire floor of approximately 2,500m² at 140 West, Sandton.

The initial requirement was to secure a subtenant for the balance of the lease. However, as the rental had escalated above market, there was a risk that McKinsey would need to accept a discounted sublease and continue carrying a material shortfall for the remaining seven-year lease term.

The space was taken to market as a targeted sublet opportunity, with the objective of identifying a strong incoming occupier that could benefit from the existing location, building quality, and fitted office environment.

The process was managed through the market, with an external agent ultimately introducing the incoming tenant. The transaction was then structured to protect the landlord's income position while delivering a cleaner outcome for McKinsey.

Rather than concluding a discounted sublease, the transaction was negotiated into a full lease cancellation and replacement arrangement.

A full lease cancellation was achieved for McKinsey, removing the remaining lease liability across the balance of the lease.

Importantly, the landlord achieved a like-for-like rental outcome, preserving the income position of the asset without having to accept a rental discount.

The transaction removed an estimated R86.2 million in remaining lease exposure, based on 2,500m² at R280/m², 100 parking bays at R1,300 per bay, a seven-year remaining lease term, and 7% annual escalation.