Structuring a Lease-to-Equity Deal for a High-Growth Pet-Hotel Chain

A family office that owns several commercial properties entered conversations with Fetch, a flourishing dog‑day‑care and boarding operator that occupies one of its flagship sites. Fetch had outgrown its original location and wanted to channel cash into a second facility in a nearby area. To free up capital, the founders asked for a pause in rent. The landlord welcomed the growth vision but needed proof that exchanging rental income for an equity position would create more value than the steady flow of monthly lease checks.

Alehar was asked to supply that proof and to suggest a deal format that would protect both parties if the new site failed to meet expectations.

1. Financial evaluation

Our team gathered three full years of income statements, payroll records, reservation logs, and pricing history. Each revenue line was tied to the daily realities of occupancy, grooming add‑ons, and premium play packages, while cost lines captured labor shifts, marketing campaigns, and maintenance cycles.

With that foundation, we built parallel models. One reflected a scenario in which rent continued and Fetch financed the expansion entirely through a bank loan. The other assumed a rent holiday in return for a minority equity stake held by the landlord.

We projected guest volumes under cautious, likely, and ambitious growth settings and included sensitivities for wage inflation, digital‑advertising costs, and construction overruns. In the central case the discounted value of the equity exceeded the present worth of the forgone rent, although by a modest margin, while the upside case yielded a pronounced premium. A downside case showed the landlord worse off than under a traditional lease, making it clear that execution discipline would decide the story.

2. Risk assessment

The evaluation identified three pressure points.

• First, demand at the new site had to ramp quickly. Success depended on sustained digital visibility, referral partnerships with veterinarians, and a compelling grand‑opening calendar.
• Second, the labor market for pet‑care staff was tight, leaving margins vulnerable to wage spikes or overtime.
• Third, the build‑out required specialized construction. Even a modest cost overrun could erode equity value.

Each risk was traced through the model so the landlord could see its direct effect on the prospective return.

3. Deal structure

To balance ambition and caution, we proposed a phased arrangement. The landlord would pause rent for an initial period and receive a modest equity stake. Clear milestones tied to occupancy, customer satisfaction, and site‑level profitability would trigger the option to extend the rent pause and deepen the landlord’s stake. This design offered Fetch the liquidity it needed to order equipment and secure permits, while giving the landlord a trial window in which to observe performance before sacrificing rental income fully for equity.

Both sides embraced the phased structure. The final documents set out precise reporting duties and monthly check‑ins. Construction plans are now underway, funded largely by the rent savings, and the landlord is monitoring progress through dashboards derived from our financial model. The family office feels confident that the temporary loss of lease revenue will translate into a more valuable long‑term position. Fetch, for its part, has gained the breathing room to execute a carefully paced expansion without assuming excessive debt.

The engagement shows how narrative‑driven modeling, rigorous stress testing, and imaginative structuring can transform a simple rent‑relief request into a partnership that satisfies both growth‑minded entrepreneurs and yield‑oriented investors.