Ardian’s €315m Paris development deal signals strategic pivot

The Paris-based private equity firm’s investment in Pointe Amont de l'Île Seguin exemplifies a shift in strategy for its European fund series away from predominantly offices to more exposure to mixed-used properties.

Ardian’s investment in Paris’s Pointe Amont de l’Île Seguin, which it announced this week, is more than just one of the firm’s “largest investments to date”.

According to Stéphanie Bensimon, head of real estate, the commitment to the 570,000 square foot development also exemplifies how the Paris-based private equity firm is evolving the investment strategy of its real estate fund series from a predominantly office focus to a focus on mixed-use properties.

“All the trends we are seeing are enforcing the concept of centrality,” Bensimon told PERE. “People are increasingly wanting to do everything in the same place. Post-covid, this has been reaffirmed.”

Stephanie Bensimon Ardian. Source: Ardian
Bensimon: Optimistic the current inflationary environment will produce investment opportunities for Ardian’s funds

Ardian declined to divulge the equity it is committing to Pointe Amont de l’Île Seguin, but PERE has learned the total cost of the multi-purpose development is expected to run to approximately €450 million and Ardian is on the hook for 70 percent, about €315 million.

That contribution should be made from both equity and credit. Nonetheless, this scale demonstrates the extent to which the firm is keen to capitalize its strategy shift. The capital has come from its second fund, Ardian European Real Estate Fund II, which closed on €1.2 billion in January, meaning the deal has accounted for a significant proportion.

Indeed, PERE also understands, following the commitment, the fund is now more than 70 percent committed and a third vehicle is in the offing either towards the end of 2022 or in the first of half of 2023. Ardian European Real Estate Fund III does not currently have a fundraising target but it is expected to at least match the fundraising of Fund II.

Bensimon said when Fund III does materialize, the office exposure is likely to reduce to between 50 percent and 60 percent from approximately 80 percent exposures of Fund II and the firm’s debut vehicle, which closed on €737 million in 2018. She said the first vehicle is about 80 percent exited and is expected to be fully exited by the end of the year.

Ardian would not confirm performance numbers for the fund series but it is understood the first fund is currently projecting gross IRRs of 25 percent and a 1.8x equity multiple.

On the strategy pivot, she said: “Office leasing in covid has been good. But at the same time, if we want to focus on structural changes, we need to be focused on offices, but also on other things too.” Pointe Amont de l’Île Seguin, for example, comprises an office building of 172,000 square feet and offices in its main 236,8000 square foot building, but also shops, a cinema and art auditoriums.

Across Ardian’s funds, strategy remains repurposing obsolete buildings to ensure greater resonance with today’s occupiers and they are in line with contemporary sustainability standards. Bensimon believes the current recessionary and inflationary environment should continue to provide opportunities for deployment, even as increased construction and financing costs occur.

She said: “The financial markets will change in this environment with increasing interest rates. But there remain lots of structural change informing demand for space, which is currently missing in the current real estate markets.”

Pointe Amont de l'Île Seguin source: Ardian
Pointe Amont de l’Île Seguin: Ardian sees the project as an example of a mixed-use location likely to resonate with occupiers