EUROPE NEWS: Au revior, Monsieur Bazin

Sébastien Bazin, one of the most-established figures in European private equity real estate, has left the industry. Last month, the 51-year-old was named chairman and chief executive of the Accor Group, following 16 years at Colony Capital during which he led a series of diverse investments on behalf of the Los Angeles-based investment firm (see Eclectic times, below).

Interestingly, there was no fanfare by Colony, not even a statement, although that is not because Bazin was disliked. Despite two very public investment disasters – one in Accor itself and the other in hypermarket chain Carrefour – those familiar with the firm said Bazin left with his reputation as “an excellent CEO” intact. Indeed, during his time, realized investments across Colony’s European investments have delivered nearly a 2x equity multiple to investors.

Bazin didn’t begin his career in private equity real estate, but he came to the attention of Colony while he was chief executive of high-end hotel development group Immobilière Hôtelière – a role he took up in 1992. “Immobilière Hôtelière was a company whose debt Colony acquired from Credit Lyonnais,” one person recalled. “Tom Barrack was impressed.”

A long-standing associate of Bazin’s, however, offered a slightly less-glossed perspective. “He sold AmanResorts (a five-star luxury hotel chain) to Colony, which is how he got in,” the associate said. “Basically, it was very well sold. Once Barrack realized the investment was not going to perform as well as he would like, he called Sébastien and said, ‘You’d better come back and sort it.’ He is a very clever sales guy – a great trader and very wily.”

Described as “fiercely faithful to his friends,” Bazin also is said to be a fearless competitor when he wants to be – a creative thinker and one of the best negotiators. “He has the looks, the charm, the blue eyes – he will use everything to get his way,” added one friend. 

Those that know Bazin refer to his ability to climb the career ladder by making long-term friendships with people in high places. One person referred to a terrible incident in 1993 that actually led to a strong bond with Nicolas Sarkozy, who later became president of France. When Sarkozy was an ambitious mayor of the wealthy French town of Neuilly-sur-Seine, one of Bazin’s children was part of a group of 21 kidnapped from a local school. In the ensuing hostage crisis, Sarkozy himself was part of a negotiating team.

The other long-standing friendship Bazin has is with former school friend Patrick Sayer, the head of French investment company Eurazeo. It was Sayer who apparently asked Bazin to become chief executive of Accor. “Once you are within his fold, you are his mate,” added a source. 

From the time of his joining Colony in 1997, Bazin went about making some very successful investments on behalf of the main Colony funds. In 2001 and 2002, however, he decided to raise his own fund through a venture between Sayer’s Eurazeo and Colony. At just over €100 million, Colyzeo Investors I was a small fund, the performance of which was very good. The second fund, Colyzeo II, was much larger at around €1 billion, but unfortunately it became a disaster. Colyzeo II took big stakes in Carrefour and Accor, the shares of which subsequently tanked.

One person that has worked with Bazin said the investment in Carrefour suited Bazin because of his personal aspirations to become a member of the French elite. He wanted to be involved in a major French company because he “wanted a lot more influence, to be accepted. He has tried very hard to become a really important person in France.” The same person suggested he used Colony as a “horse” to exert influence. 

The Accor deal may have amounted to €1 billion, but Carre-four was the worse investment. Two years ago, Colony offered investors the opportunity to purchase some options in Carrefour from a dividend in Colyzeo II. The share price did rise substantially, so those that invested in the options are said to have done well, but the overall investment is a loss, sources said.

Indeed, while the Accor investment may have barely returned the original equity, the overall net asset value of Colyzeo II is said to be below 1x equity. The investments in Accor and Carrefour not only put a drag on returns, they even led to a landmark legal case for private equity that decided the extent to which a limited partner in a fund is entitled to documents relating to investments.

The Accor and Carrefour investments have been an obvious blow for Bazin, who has been unable to replicate the fundraising success of Colyzeo II. He did subsequently structure a joint venture with AXA Real Estate to buy data centers, but other plans to raise equity were dropped. With no fresh equity and no longer serving as president of Paris St. Germain, which Colony sold to Qatari investors in 2011, the man that “relishes publicity but doesn’t like to be interviewed” was looking for a way to ascend again via Accor.  

One might have expected that Bazin’s connection with Accor began when Colyzeo invested in the group in 2005. In fact, the relationship goes back much farther to the late 1990s, when Accor formed a company called ABC Hotels, in which it held 30 percent and Colony and The Blackstone Group each had 35 percent. ABC bought hotel assets previously operated by Accor from French conglomerate Vivendi, and the investment performed very well with returns of more than 20 percent.

That real estate deal helped Bazin strike up relationships with the senior members of the Accor board, which in turn helped him to understand the group intimately over a long period of time. No wonder that, upon his appointment as CEO and chairman of Accor, then-current chairman Philippe Citerne said he had “perfect understanding” of the group.

Accor founders Gerard Pélisson and Paul Dubrule added in a statement: “We have known Sébastien for more than 10 years. He has proven his commitment to this group, which we founded more than 40 years ago, and to its values.”

The game plan has always been to get Accor to become an ‘asset-lite’ group by selling off properties, which it has done to an extent. When Colony bought into Accor in 2005, it actively pushed the company to pursue a strategy of selling and leasing back its global assets and divesting its support services arm, called Edenred, in order to focus on the operating business. In 2010, Accor set a strategy of selling €600 million to €650 million in properties as part of a bigger plan to get rid of €2 billion of hotels between 2010 and 2013.

Upon Bazin’s appointment to lead Accor last month, there were immediate signs that Colony now senses a renewed opportunity. Barrack was quoted in the Financial Times as saying, “Sébastien’s move represents the perfect opportunity to optimize the company’s ability to drive a substantial enhancement of shareholder value.”

According to analysts, Bazin has his work cut out for him at Accor. However, for Bazin, the position at one of France’s best-known companies is a step in the right direction towards achieving the social status he has craved all his life.


Eclectic times

Bazin has led a diverse collection of deals on behalf of Colony

Colony Capital has made some eclectic investments during Sébastien Bazin’s tenure as head of Europe. They include buyouts and financial stakes in hotel chains Fairmont and Raffles, La Générale des Eaux, Club Méditerranée and Lucien Barrière Hôtels et Casinos, all of which capitalize on Bazin’s hotel expertise. The firm also has invested in France’s third largest furniture and electronic retailer, BUT SAS, and France’s themed restaurant chain, Buffalo Grill.

More quirky deals include buying into vineyards with Château Lascombes, sports facilities with Stadia Consulting and off-piste real estate such as the abandoned Paris swimming pool, Moliotor. There also have been big bets on data centers, an investment in two private hospitals in Geneva and a stake in Brownfields, which specializes in cleaning up contaminated industrial sites.