Murs et fonds (property and business)

Selling a hotel “murs et fonds” means selling the property, or murs (literally “walls”), together with the business, or fonds de commerce, that operates it. The buyer becomes both owner and operator. The two alternatives are a sale of the property alone, to an investor who collects rent, and a sale of the business alone, to an operator who remains a tenant.

In the hotel sector

The property and the business are often held by two separate companies: a property company, frequently a French SCI, which leases the building to an operating company. They may also sit in a single company. The sale then takes the form of an asset deal (sale of the building and transfer of the business), a share deal (sale of the shares in one or both companies) or a combination. The choice depends on the seller’s tax position, the contracts in place and the buyer’s profile.

In a transaction

The price is a single figure, but its allocation between property and business must be justified. The two components are not subject to the same transfer duties, are not depreciated in the same way and are not financed on the same terms. The applicable rules should be confirmed with the notaire and the lawyer at the date of the transaction.

Two valuation approaches should reconcile. The first values the property by capitalising a market rent, and the business on EBE (the French measure of EBITDA) after that rent. The second values the whole on EBE before rent. Where the lease between the two companies is intra-group, its rent is restated to a market level before any comparison is made.

Not to be confused with

A sale and leaseback: the owner-operator sells the property and leases it back, keeping the business and the operation.

For a murs et fonds sale conducted off-market: selling a hotel.