A Smart Lease Strategy Turned A Disaster Into A Record Sale - Joshua Barnes

We walk through a commercial real estate turnaround where a long-term tenant vacates on bad terms and leaves a stripped, income-free shell that looks destined for a low sale. We share how a leasing-first strategy secures a national tenant, upgrades the asset, and drives a $1.625m auction result that changes the owner’s outcome.  
• Market rent assessment and good-faith lease offer  
• Negotiation breakdown and end-of-lease vacancy risk  
• Illegal fit-out removal and the real cost of make-good failures  
• Building a leasing strategy for a stripped fast food site  
• Using agent networks to reach national and international operators  
• Long-cycle negotiations with large corporate tenants  
• 10-year Pizza Hut lease and rapid refit to compliance standards  
• Auction campaign mechanics, enquiry volume, bidder depth and cap rate outcome  
• Why an agent’s role is advice that protects capital value  

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Transcript

Welcome And The Case Study

SPEAKER_00 0:00

Joining us back on the program is Josh Barnes from Movable in Newcastle. And we're delighted today that we're going to have a commercial real estate story. Josh, you have been on our program before. Welcome back.

SPEAKER_01 0:14

Thanks very much for having me back, Lee. I'm excited to be here.

SPEAKER_00 0:17

Yeah, you've got a great little case study that we're going to share today with one of your properties. Take us into the story of how it started, what type of tenant was in there before we get to the eventual sale.

SPEAKER_01 0:29

To give a quick summary, the story focuses on a property that had a long-term tenant in place that vacated on bad terms, stripped the property, left no left left the owner with no fit out, no income, and a potential sale result on the building at 800,000.

SPEAKER_00 0:46

What that's amazing. And for anyone who's been left high and dry in a commercial situation, you're locked, you can't do anything, the fit-out's gone. Uh, it's a specific tenant that you're gonna need.

SPEAKER_01 0:59

Absolutely. So the story begins, Lee, back in May of 2024, where a good client of

Rent Talks Break Down

SPEAKER_01 1:05

mine and a long-term client of Movable approached me about a property that he owns in Toronto. Uh the property was a humble pizza store, and the tenant had been operating from there for 25 years. They were coming up toward the end of their current lease and what indicate indicated that they'd like to stay at the property. So the owner was just getting my opinion as to what I think the market rent might be. Yeah, I had a look through the property, had a look at some fast food comparables, and we ended up at a rent estimate of about 90,000 plus outgoings plus GST per annum. In good faith, the the owner actually went to the tenant and said, Hey, I've had a market assessment on the rent at 90,000 per annum. Although, seeing as you've been such good tenants for such a long time, I'd like to offer you a new five-year lease at 78,000 plus GST.

SPEAKER_00 1:54

And to which the tenant responded.

SPEAKER_01 1:56

Well, this is where things got interesting, Lee. The tenant came back to us actually demanding a rent decrease, which isn't unusual for large corporate tenants. Although it did surprise us given that the owner had extended this offer to them in good faith. Um, we there was some back and forth from here, and ultimately it was decided that we couldn't come to an agreement, and we allowed the tenant to vacate at the end of their lease, which was in late 2024. The owner lives in Queensland, so we agreed on a vacate. We agreed on some make-good items, which included leaving the property in a clean and tidy condition. And the owner booked some flights to come down to Newcastle to meet with me at the property and discuss strategies, make sure the tenant had fulfilled their make-good obligations, and develop a strategy to get the property leased and achieve a

The Fit-Out Is Gutted

SPEAKER_01 2:45

good result. Where things got even more extraordinary is when we arrived at the property, we were greeted with nothing but four stripped walls and a roof. The tenant had illegally and improperly removed all of the fit out, gutting it, which absolutely astonished both myself and the owner. And we were standing there in what was an empty brick box looking at each other, absolutely amazed at what we were what we were seeing.

SPEAKER_00 3:11

Josh, that's just unbelievable. So they were just stripping it back to a bare shell. Was that allowed, not allowed, because you had a perfectly functioning business there before?

SPEAKER_01 3:20

Yeah, so so totally illegal and and improper. It was in violation of the lease. Uh, we believe the tenant did this to prevent the owner from letting the property to a competing business. But in any event, it was totally illegal and left the owner in a bit of a panic. Sorry, that at this point, the easy path would have been to panic, lower expectations, or sell the building. But rather than that, I I focused on developing a strategy to bring the building back up to standard and let to a proper tenant.

SPEAKER_00 3:56

And so, Josh, we've got a completely stripped-out shell, an owner who can't rent it to somebody else because there's no fit out. Uh, the choice to just sell it as

Leasing Strategy And Targeted Outreach

SPEAKER_00 4:05

is or go with your plan B. What did you do?

SPEAKER_01 4:08

Very quickly, I to ease the owner's concerns, I developed a leasing plan to bring the property to market. Despite it being stripped out, I was still confident we'd be able to find a user. The owner made some uh comments initially about just looking to sell the building and that it may be too difficult or too far gone. My my concern with this was he was leaving himself significantly short. I think that the property's capital value was almost halved by selling it as is. So I put together a strategy for him, which he entrusted us to list the property for lease. And we launched a great marketing campaign to attract high-quality national and international operators.

SPEAKER_00 4:51

What's the best reach of a campaign like that?

SPEAKER_01 4:53

Yep, so we do all the traditional things, put a signboard up, advertise online. But the real value of having a commercial agent that's worked in this space before is their contacts. Within a week, I had approached almost all of the big names in fast food. Toward the end of that same first week of marketing, we'd received confirmation that Yum brands had interested in the had interest in the site. Yum brands trade as a number of different businesses, but the business they had put forward to occupy this space was Pizza Hut.

SPEAKER_00 5:27

Wow. Continue on.

SPEAKER_01 5:29

Shortly after Pizza Hut commenced a feasibility assessment, we began introducing potential franchisees and initial negotiations began. Now, deals with national and international operators in commercial take a lot of time. So over about the next six months, I worked closely with Pizza Hut, their representatives, and incoming operators to progress the deal. Consistency and persistence are really, really critical with working with these guys and any large commercial tenant. So, Lee, by April of 2025, we've been negotiating with Pizza Hut for several months, as well as introducing other prospective tenants to the site. Now, the process with dealing with large commercial organizations and large international tenants can often take a lot of time. So I checked in with the owner again to share a few wins that we were having. And he shared with me during our conversation that tragically a family member of his had passed away. Having been negotiating for six plus months with, and now having negotiated with six plus months with these tenants, as well as some life events unfolding for him, he felt a bit overwhelmed. And at that moment, he didn't know what to do. I told him to take some time, consider his options, and come back to me with what he would like to see happen. Now, about two weeks after that conversation, the owner called me and and said he was considering selling the property as is. He asked my opinion as to what it might be worth, and I shared with him that given we had no tenant and no fit out, I think the value would likely be between 750 and 800,000. He asked me what I would do and what I recommended doing, and I suggested that we stick to the course, push through with his tenant, get a fit out done, and that would give him the optionality to sell the property for a much higher price in the future. Now, Lee, this is where I believe the role of an agent changes. We're not just facilitating transactions, but we're entrusted with assets that often represent a significant portion of people's net worth. I suppose it's very easy, given we do this every day, to forget what we are actually handling. And in some in some cases, it's people's livelihood. But that responsibility certainly isn't lost on me. The owner put his faith in me in this in this moment. And in turn, I committed to him that we would achieve a good result on this project.

SPEAKER_00 7:50

So, Josh, what was the deal that you were able to strike after pushing on with Pizza Hut?

Pizza Hut Commits And Rebuild Begins

SPEAKER_01 7:57

Yeah, so two weeks after that conversation about selling it again, we had Pizza Hut commit to a 10-year lease with a 10-year option at $87,500 plus GST a year in rent. From here, things began to move quite quickly. We had plans on the table for a Pizza Hut store. Within eight weeks, we the site was transformed. We had a brand new Pizza Hut store built to current corporate and compliance standard. They opened and began trading just in time for a strong Christmas period. Now, things were going really well. The owner, in an act of good faith, even paid the tenant's first electricity bill. And I heard from the owner again in February of 2026, which was about three months after the tenant had been in there trading and doing a fantastic job. He said that he was so grateful for what we'd done in transforming the property. But he said he'd still like to sell the property as he'd like to support his family with the money. So we put together a proposal to sell the site for him, and he engaged Movable alongside CBRE to take the property to market via an auction

Auction Campaign And $1.625m Result

SPEAKER_01 9:02

campaign. This was very exciting. We were working on a brand new store, a high quality tenant, a brand new lease, and we ripped straight into marketing. We did a four-week auction campaign where we had over 140 inquiries. Wow. In commercial, we don't tend to see that many inquiries unless the property is an absolute premium asset that lots of people are interested in owning. We had a good strong mix of both private investors and syndicates looking to buy the property. And we were getting pretty consistent feedback around the $1.35 to $1.4 million mark, which is a significant uplift from where we were even six months prior.

SPEAKER_00 9:44

So, Josh, the campaign's flying along. The property's looking amazing, the tenants staying for 10 years. What was the next part of the campaign?

SPEAKER_01 9:52

Yeah, so fast forward to auction day. I've had two opens by this point and had plenty of people through from all over the country, Lee. As well as doing some video walkthroughs for investors, both local and international. And if we fast forward to auction day, we had an absolutely full room. In addition to this, we had buyers over the phone and bidding online. And we had a total of nine registered bidders locked in to participate on the day. The vendor came down from Queensland to meet us in the auction room and to see it unfold. He mentioned to me before the auction lee that his dream price would be around 1.5 million, noting that we had feedback around 1.4. Now the auction commenced and it was strong. We were getting bids, things were moving, everyone was participating, and the owner's reserve was met quite quickly. From there, that the bidding kept going, and we ended up seeing a result of 1.625 million. For listeners, that that represents a 4.85% cap rate. Buyers were so confident in this asset that they were willing to pay an absolute premium for it, and it far exceeded the owners' expectations.

What Great Agents Actually Do

SPEAKER_00 11:01

So, Josh, what was the learn for you in one working with CBRE? Because that's a you know a new part of the game for you. You quite often work alone or as movable as one of Newcastle's premier commercial teams. But what was the big learn for you along the whole way?

SPEAKER_01 11:18

Well, the big learn for me, Lee, was that we really are advisors as agents. Um, it's important we give appropriate and accurate advice to ensure that owners make the best decision they can when they're looking to lease or sell their commercial asset, because small dis seemingly small decisions can have massive impacts on the total capital value of the property. In terms of working with CBRE, that that was certainly a rewarding experience for me. I've had the pleasure of working with them several times, and they really do a fantastic job of running an auction campaign. Being able to co-market with CBRE certainly helped the owner and certainly maximized the total inquiries we were able to capture, show through, and have on the day. I think the owner was absolutely over the moon with the result we achieved, and um, so was I.

SPEAKER_00 12:07

You look at that, so many agents would have said, oh well, we'll sell it as is, uh whack it on the market for 900, we'll get you 880 for it or maybe 850, and the job's done, and they move on to the next transaction. And this is this skillful part of real estate about our job is to protect the asset and the asset and the owner. And in an unfortunate situation, then for the owner losing a family member, suddenly this comes through. And yes, you had a lot of negotiation to get the lease right, but that's our job, Josh. And just for our residential agents listening to this in commercial, and Josh, you're 23 years of age putting these deals together, and this is not one you've done quite a few of these big property transactions, but working on the leasing and the selling side at the same time is the life of a commercial agent.

SPEAKER_01 12:57

It certainly is, and and the impact you can have to people's results at the end of the day is largely why I do it. I was fortunate enough to catch up with the owner afterwards for lunch, and he he shared a lot of stories, wisdom, but ultimately he was very thankful. He he said that if not for our advice and if not for me pushing him to continue on with this, he likely would have sold six months prior and left 800,000 on the table. So the fact that he could use this money to support his family, it changed his life, I really do believe.

SPEAKER_00 13:27

Yeah, 100%. And well done. And this is a good lesson for everyone listening to this in any style of real estate that you sell. Don't be too quick to just get rid of it when there could be way more in there. But the great agents had that depth. And Josh, you're on very good fees to do this. This is the opposite of what we see in the world of real estate when there's a rush to the bottom, and you got an outstanding result.

SPEAKER_01 13:51

Thanks, Lee. Yeah.

SPEAKER_00 13:53

Well, Josh, excellent to have you back on the program. What's your final thoughts on this deal?

SPEAKER_01 13:58

I think it's important, Lee, to note that in real estate, not just commercial but residential, also, things can go wrong. And it's in those moments that vendors need to ask themselves, is their agent just doing the job in disposing of the asset, or are they standing beside the vendor as an ally to achieve the strongest possible result?

SPEAKER_00 14:17

Absolutely, couldn't agree more. And what you've done here is just outstanding. Joshua Barnes, known as Barnesy, thank you for joining us.

SPEAKER_01 14:26

Thank you, Leigh. I appreciate the opportunity.