Capittal's view: should I sell the property with the business or separate it first?

Quick answer

Capittal's view is that in most mid-market deals it makes sense to separate the industrial property from the company before launching the sale process, because the buyer pays an EBITDA multiple for the business and does not want to tie up cash in real estate. The seller keeps the property in a sociedad patrimonial (asset-holding company), leases it to the buyer at market rent and turns an illiquid asset into recurring income.

Why does the buyer not want to buy my industrial unit?

The buyer of an industrial company buys cash flow, not square metres. A fund or a trade buyer values the business by applying a multiple to recurring EBITDA. If there is a two-million-euro property inside the company, that buyer has to pay out an extra two million that generates no operating return.

This has three practical consequences:

• The financial buyer needs more equity for the same deal, which lowers its IRR and its appetite on price.
• Acquisition bank debt is sized on the EBITDA of the business, not on the value of the property, so the real estate ends up funded with the buyer's own cash.
• Many trade buyers have an explicit policy of not acquiring real estate outside their core activity.

The usual outcome is that a property inside the company reduces the number of candidates and complicates financing. It does not raise the price.

How does the property distort the multiple and net debt?

The property breaks the arithmetic of a multiples valuation. The formula is: equity value = multiple × EBITDA − net financial debt + cash. If the unit sits inside, its value has to be added as a non-operating asset, and that is where the argument starts.

There are three friction points:

• EBITDA is inflated. The company pays no rent because it owns the premises. That rent saving stays in EBITDA and is multiplied by 6, 7 or 8 in the valuation. It is a cost the buyer will indeed have to bear from day one.
• Mortgage debt contaminates net debt. If the unit is mortgaged, that debt is deducted from the equity price even though it funds an asset the buyer does not want.
• Book value is not market value. A unit depreciated over twenty years is carried well below its real value, and the seller finds out too late.

Separating the property beforehand forces a real rent into the profit and loss account. EBITDA goes down, but it becomes the EBITDA the buyer is actually acquiring. That number survives due diligence.

What three routes do I have to separate the property?

There are three usual routes and each has a different profile of cost, timing and risk.

Route	What it involves	Main advantage	Critical point
Sale to the owner's own sociedad patrimonial	The operating company sells the unit to an asset-holding company owned by the shareholder, at market value	Fast, simple and with clean documentation for the buyer	Triggers a taxable capital gain in the operating company plus transfer costs; the purchase has to be funded
Partial demerger (escisión parcial)	The real estate branch is spun off into a new company with the same shareholders	It can qualify for the tax-neutrality regime and defer the impact	Requires a valid business reason and long timescales: plan, publication and registration
Selling it together with the business	The buyer acquires the company with the property inside	No prior reorganisation cost and a single transaction	Shrinks the buyer universe and moves the real estate debate into the price negotiation

Selling everything together still makes sense in two cases: when the property is genuinely strategic and irreplaceable, and when the seller wants full liquidity and a clean break from the sector. Beyond that, separating first widens the number of offers.

How is the post-closing lease negotiated?

The lease decides whether the separation works or backfires on the seller. The buyer is not buying the property, but needs certainty that it will not lose it. The seller wants stable rent and a solvent tenant for years.

These are the points that are genuinely negotiated:

• Committed term. The buyer will ask for several years of guaranteed minimum term, plus renewal options in its favour.
• Market rent. This point is non-negotiable. A below-market rent artificially inflates the EBITDA of the company being sold and the buyer will adjust for it in its valuation. An above-market rent destroys EBITDA and lowers the price the seller itself receives.
• Rent indexation. Reference index, review frequency and caps on increases.
• Allocation of costs and works. Who takes on structural maintenance, IBI (local property tax), insurance, licences and fit-outs for the activity.
• Guarantees and exits. Deposit, bank guarantee, early termination clauses and what happens if the buyer resells the company to a third party.
• Right of first refusal. Many buyers ask for pre-emption rights if the seller later decides to sell the property.

It is worth having a market rent report for the area before negotiating. Without that support, the discussion about rent ends up being a discussion about the price of the company.

What tax costs do I have to analyse before deciding?

Separating a property is never free and the cost can change the decision. These are the items to quantify before moving anything:

• Capital gain under corporate income tax. If the operating company sells the unit, it is taxed on the difference between the sale price and its net book value. In heavily depreciated properties that difference is large.
• VAT or ITP (transfer tax). The transfer is taxed under one or the other depending on whether it is a first or a second supply and on whether the VAT exemption can be waived. The cost difference between the two scenarios is very material and deserves a specific prior analysis.
• Actos Jurídicos Documentados, AJD (stamp duty). It applies to deeds subject to VAT and its rate varies by region.
• Plusvalía municipal (local land value tax, IIVTNU). It is triggered by the increase in land value and can be calculated under two different methods; it is worth comparing both.
• Régimen FEAC (the Spanish tax-neutrality regime for reorganisations). This is the special regime that allows tax to be deferred in demergers and other restructurings. Applying it requires the transaction to respond to a valid business reason and not to have tax fraud or avoidance as its main purpose. Preparing a sale and tidying up the family assets usually fits, but the reason has to be well documented and from the outset.
• Effect on the family business tax relief. Taking the property out changes the composition of the balance sheet and may affect tax benefits the shareholder had been applying.

The taxation of these transactions depends on the autonomous region and on the specific circumstances of each company, so the figures only emerge with the real numbers on the table. At Capittal we work on this part with the tax specialists at NRRO, the group we belong to, in parallel with the design of the deal.

When should I do it: before the process or during the sale?

Before. The separation of the property should be completed and notarised by the time the sale process is launched, not negotiated in the middle of due diligence.

The reasons are specific:

• A demerger has its own corporate and registry timescales that do not compress just because there is an offer on the table.
• A reorganisation carried out during the negotiation raises red flags in due diligence and the buyer will ask for specific indemnities for the tax risk.
• The valid business reason is far easier to defend when the reorganisation is earlier and independent of the process, not a piece tailored to the buyer.
• The accounts need to show at least one financial year with the rent already booked. That way EBITDA is real and not a debatable pro forma.
• Changing the structure mid-process reopens the price negotiation and gives the buyer an excuse to revisit its terms.

Timing of the separation	Effect on the process	Risk
12-24 months before going to market	EBITDA already normalised with real rent and a clean structure in due diligence	Low
Just before launching the process	Correct structure, but no track record of booked rent	Medium: the buyer will adjust with a pro forma
During due diligence	Delays the timetable and reopens the price negotiation	High

What is the next step if the property is inside my company?

The first step is to put a number on both things: what the business is worth without the property and what the property is worth on its own. Until those two figures exist, the decision is being taken blind.

At Capittal Transacciones we prepare a confidential, no-commitment valuation that separates the value of the business from the value of the real estate asset, estimates the impact of market rent on EBITDA and anticipates how a trade buyer or a fund will read that structure. We are a mid-market M&A boutique with deals in the 3 to 250 million euro range and eight offices in Spain: Barcelona as headquarters, Madrid, Girona, Lleida, Tarragona, Palma, Zaragoza and Valencia. The analysis is carried out directly by a partner, and the tax side is reviewed with NRRO within our own group.