People always wonder why Tenants who pay cashflow positive rents simply don't buy the property themselves and tear up the Lease.
There is a multitude of reasons why, but the biggest one seems to be that in their opinion, their capital can be better employed in their business to earn greater money for the organisation.
Whether that belief turns out to be true or not is a matter for the future....
I have posed that very notion to many CFO's in organisations. I'd reckon about 80 to 85% all say it's a complete waste of capital to purchase the premises they operate out of, and would rather claim an instant tax deduction for all of the rent they pay in the year they pay it.
Only a very few support the notion of purchasing the premises, and they weigh in with things such as stability and a feeling of belonging, which obviously cannot be put into a cell on their spreadsheet. In the long run though, when they do, all of the young accountants coming through normally go "phew, they were wise to buy the place way back when for such a tiny sum....not having to pay rent sure does help the organisation in the lean times".
When it comes to business financials, I reckon it's hard task for management to make a property deal stack up. There would no doubt be great benefit in the longer term ownership of business premises, especially 10yrs down the track when the rents tripled.
Problem is, management have to justify their financial decisions and resulting impacts in the present day - not 10yrs from now. This is especially so if they're open to the scrutiny of being a public company. Private co's have more leeway depending on the owners opinion, but it's still a question of dollars now vs dollars later.
Whilst the purchase of the land and building may look good over a 10yr period, if management can instead earn 20% ROI on that same capital this year and for the next few financial years - they're going to be hard pressed to instead spend that capital/debt on the property which may only show a decent positive outcome for a 5-10 years.
'Hey Jim, why did we buy our warehouse property in the docklands for $10M last year when instead we could have commenced operations and built customer bases in Indonesia, Japan and Korea with that same amount of capital?'
Just my two cents.