Judges sometimes review and modify the expert’s calculations
Summary
The court uses the sales method instead of EBITDA. Only the accounts certified by the chartered accountant are taken into account in determining the amount of the eviction indemnity. The judges rejected the appraiser’s assessment of potential revenue after renovation work had not been carried out.
Hotel, Sales method. Total eviction compensation: €1,459,535 + €163,238 = €1,622,773
Calculating eviction compensation
Sales instead of EBITDA method
The low profitability of the business, which has only 16 rooms after renovation work, means that the gross operating surplus method of valuing the business should not be used. In this case, the judges opted for the sales-based method.
Only the accounts certified by the chartered accountant are taken into account.
The lessee company asked that the sales figures for 2011, 2012 and 2013 be taken into account, on the grounds that the eviction indemnity should be assessed at the date closest to the eviction, while the B. consorts pointed out that the accounting results for 2012 and 2013 had not been certified by the company’s chartered accountant. Relais Hôtel Esmeralda counters that the certificate issued by the company’s chartered accountant includes the sales figures shown in the accounting documents for both 2012 and 2013. The judges rejected the draft accounts, retaining only the sales figures for the years certified by the chartered accountant.
Judges reject expert’s assessment of potential revenue after renovation work not carried out
The court rightly rejected the appraiser’s approach, which consisted in assessing potential revenue taking into account the renovation work carried out on the premises, Relais Hôtel Esmeralda asked that this approach be retained, since it takes into account a probable but not certain renovation hypothesis, which in any case has not been carried out by the lessee, and consequently cannot be taken into account when assessing the hotel’s current value, unless this potentiality is taken into account at the same time as the excellence of the location when assessing the multiplier coefficient.
The multiplying factor usually used for 1-star hotel transactions varies from 3.5 to 4 times the average sales figure, depending on the expert; given the hotel‘s excellent location and renovation potential, a factor of 3.5 should be used, so that the main indemnity is set at : 417 010 € x 3, 5 = 1 459 535 €
Ancillary indemnities
Replacement costs
The rate of 10% applied to reinvestment costs is not seriously contested, as the B. consorts are asking that a rate of 8% be retained in the event of a renegotiation of the rate, given the amount involved in the transaction; however, this is a random element which cannot form the basis of a calculation, so that reinvestment costs will be retained at €145,953.
Disturbance of trade and social costs
The amounts of compensation for commercial disruption and social costs as retained by the court are not contested and will be confirmed. Relais Hôtel Esmeralda also seeks compensation for the portion of unamortized investments it is abandoning, in the amount of €267,001, without claiming relocation costs as such, which in any case would not be equivalent to the unamortized investments, so this claim will be rejected. Redundancy costs will be paid on the basis of receipts.
Total eviction compensation
The total eviction compensation therefore amounts to : 1 459 535 € + 163 238 = 1 622 773 €. COUR D’APPEL Paris June 11, 2014 n° 12/13816 , Pôle 05 ch. 03
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