Early exit from an above market lease

Purpose – This paper aims to examine an unwinding of a lease obligation, where the in‐place rental rate exceeds current market. Design/methodology/approach – The paper examines some of the critical variables in mitigating lease obligations, and uses a case study of a 2003 transaction near San Jose, California to elaborate. Findings – After a 3 year period of vacancy increases and rental declines, the lease is a liability to a company with no projected need for the premises. The passive Landlord has little incentive to settle the lease in these market conditions, but is eager to avoid potential further credit erosion, and tests the market in a sales process. Originality/value – The paper provides information of value to all parties interested or involved in property leasing decisions.