Eviction compensation, rental value, business (goodwill), leasehold right… Key concepts that come back into play in the analysis of tourist residences, through a significant recent development in the sector.
Compagnie des Alpes (CDA) has just announced that it is acquiring a 33% stake in Terrésens, a major operator of upmarket hotel residences in mountain resorts. The value of the transaction: €6.9 million. This equity investment implicitly values Terrésens at a turnover multiple of 0.3x, a cautious estimate but one consistent with the sound economic benchmarks that should underpin any valuation of operating value or any valuation in the context of a commercial eviction dispute.
01A strong signal for eviction compensation in tourist residences
With 11 residences in operation (around 2,700 beds) and 9 under development, Terrésens is confirming its ambitions. But beyond organic growth, it is the valuation methodology adopted in this transaction that deserves our attention.
At Frerault Expertises, we have often warned against lease exit or eviction compensation proposals showing economic values disconnected from reality, sometimes as high as three times turnover. These practices, sometimes driven by strategic or speculative objectives, can seriously harm landlords, particularly those who do not have a clear understanding of the legal framework governing eviction compensation.
02A useful reminder: tourist residences are not hotels
A judgment of the Albertville Judicial Court (Tribunal Judiciaire) dated 21 April 2023 upheld a multiple of 3x turnover in the context of the main compensation. However, this isolated decision should not be generalised. It ignores the structural differences between a traditional hotel business and a tourist residence held under a commercial lease, where operating costs, the term of the rental contracts and actual occupancy rates are in no way comparable.
The CDA/Terrésens transaction thus supports a cautious reading: hotel multiples cannot be transposed. The replacement value of the business, the service charges and discounted future cash flows must remain the foundations of a professional valuation.
03Our role: defending fair value
We assist operators, investors, landlords and lawyers specialising in property law with their valuations, eviction disputes, commercial lease renegotiations and sales of businesses. Each assessment of eviction compensation is based on:
- concrete economic data (occupancy rates, net income, service charges)
- objective market comparables
- a rigorous approach combining the capitalisation of cash flows and an analysis of the leasehold right
For further analysis of the legal issues relating to specific commercial leases, particularly as regards the calculation of the main compensation, see our article on serviced residences, a contractual model often wrongly confused with that of tourist residences.
The replacement value of the business, the service charges and discounted future cash flows must remain the foundations of a professional valuation.
A question, a project?
Get in touch
