Exiting the property market: A strategic guide for corporate landlords

As the UK commercial property landscape continues to shift, driven by interest rate pressure, ESG legislation, changing tenant demand, and growing operational costs, many corporate landlords are re-evaluating their long-term investment strategies. 

For some, the right move may be a full or partial exit from the market. 

This article explores key considerations for corporate landlords contemplating an exit, covering broad advisory issues such as asset valuation, tax optimisation, and corporate finance. I’ll highlight how a well-managed exit can protect value, reduce risk, and free capital for more strategic deployment.

1. Timing the exit: strategic or stress-driven?

Before discussing practicalities, it’s important to distinguish between voluntary strategic exits and forced exits which might be driven by creditor pressure or insolvency. Both require tailored approaches. 

• Strategic exits often arise when landlords wish to rebalance their portfolio, retire, or respond to structural changes in the market.
• Distressed exits may follow from cash flow challenges, covenant breaches, or declining asset values.

In either case, early advice is critical. A proactive exit strategy provides significantly more control than one driven by events.

2. Valuation: understanding the true picture

A clear understanding of asset value is the foundation of any exit plan. 

• Market valuations: engaging a RICS-accredited valuer ensures a fair, defensible figure for both asset sales and balance sheet planning.
• Break-up vs. going concern: consider whether the portfolio should be marketed in its entirety or broken into units. A piecemeal sale can often maximise value, but may delay closure.
• Impairments and write-downs: in distressed scenarios, be prepared to test assets for impairment. These adjustments can affect not only tax but solvency assessments.

3. Tax strategy: planning ahead

Tax is too often an afterthought, yet poor structuring can erode significant value on exit. 

Key areas of focus include: 

• Capital gains tax (CGT): understand exposure on asset sales, including any rollover relief opportunities if reinvesting.
• Corporation tax: final period trading profits or losses should be accurately calculated and adjusted.
• VAT on property: pay particular attention to option to tax arrangements and TOGC (transfer of a going concern) rules — especially when selling tenanted commercial premises.
• Distributions vs dividends: for solvent wind-downs, use of capital distributions under an MVL (members’ voluntary liquidation) may result in more favourable tax treatment than standard dividends. 

4. Corporate finance and restructuring: alternatives to exit

Not all exits require liquidation or sale. In some cases, financial or operational restructuring can reposition the business for survival or acquisition. 

Consider: 

• Refinancing: if debt is the primary pressure point, refinancing with specialist real estate lenders may provide breathing space.
• Joint ventures: selling part of the portfolio into a JV can unlock capital without a full exit.
• Group reorganisations: complex corporate structures often benefit from simplification before disposal or closure.

5. Company closure options: solvent and insolvent routes

There are multiple mechanisms to close down a corporate vehicle. The right path depends on the solvency status and asset/liability profile.

Solvent scenarios:

• A simple strike-off might be suitable for clean companies with no liabilities and where assets have been disposed of and funds distributed – though HMRC scrutiny is increasing.
• A members’ voluntary liquidation (MVL) can be a tax-efficient route for companies with significant assets or proceeds from disposals. An MVL requires the appointment of a licensed insolvency practitioner and therefore is more costly than a strike-off.

Insolvent scenarios:

• A creditors’ voluntary liquidation (CVL) might be used when liabilities exceed assets. Directors can initiate the process but must act in creditors’ best interests. If there is a property portfolio to deal with then a CVL may not provide the flexibility required to take control quickly.
• An administration may be a more appropriate route where there is a going concern business or tenants to manage.
• Receiverships are less common than in the past, but they can be useful still where secured creditors are seeking to take control of a distressed situation. 

Each route carries director responsibilities and early professional advice is critical in order to manage risks.

Conclusion: Control the exit, don’t let it control you

Whether your exit is driven by choice or circumstance, the key to protecting value lies in planning. A joined-up strategy covering valuations, tax, finance and exit planning is essential to avoid unnecessary leakage of value, mitigate legal risk, and maximise returns.

As a team, we work closely with property professionals, accountants and corporate boards to help navigate this process confidently.

If you’re considering an exit from the commercial property market, reach out for a confidential, no-obligation discussion.