Barrack Says Bazin Will Push ‘Asset-Light’ Plan at Accor
Colony Capital LLC founder and Chairman Tom Barrack said Sebastien Bazin, who is stepping down as Colony’s European investment chief to take the reins at Accor SA (AC), was the best choice to revamp the French lodging company.
“The missing chip in Accor is moving it to an ‘asset-light’ model,” Barrack, whose Santa Monica, California-based firm first invested in the hotelier in 2005 and now owns 11 percent, said yesterday in a telephone interview. “Accor has been lagging its peer group in share performance. Having Sebastien focus on Accor full time is a good thing, because he will definitely get the job done.”
Accor said yesterday that Bazin, 51, would take over as chairman and chief executive officer of Europe’s biggest hotel company as it focuses on reducing the proportion of properties it owns. Current Chairman Philippe Citerne has been appointed vice chairman and Yann Caillere, acting CEO since Paris-based Accor fired Denis Hennequin in April, will leave the company.
Hennequin was forced out after clashing with the board over the pace of the company’s plan to scale back real estate holdings. Bazin had long pressed the board to sell real estate and instead focus on managing and franchising properties, a strategy adopted by Marriott International Inc. (MAR) and Starwood Hotels & Resorts Worldwide Inc. (HOT) in the U.S. Such a plan would help buoy the company’s share price and lower its capital expenditures, he has said.
Accor fell 1.5 percent yesterday to 28.80 euros in Paris trading. In the past two years, Accor rose 24 percent, compared with gains of 56 percent for Bethesda, Maryland-based Marriott and 53 percent for Starwood, based in Stamford, Connecticut. The Bloomberg Europe Travel & Leisure Index climbed 43 percent.
According to Barrack, Bazin in recent years had spent much of his time trying to turn around Colony’s investments in Accor and Carrefour SA (CA), the world’s largest retailer after Wal-Mart Stores Inc. At one point, Colony faced hundreds of millions of dollars in paper losses on the $2.45 billion (1.83 billion euros) it sank into the two.
“Those were our two most challenging investments in Europe,” Barrack said. While the value of the Carrefour stake is less than Colony’s cost, the retailer is “well on its way to recovery.”
Accor, which is slightly profitable for Colony, remains a work in progress, Barrack said. The board asked Bazin to take charge after independent directors disagreed over other CEO candidates, according to Barrack.
Accor plans to operate 40 percent of its hotels under franchise agreements, 40 percent under management contracts and 20 percent under ownership or leases by 2016, it said in February. The company’s plan includes increasing its focus on emerging markets, reorganizing staff, selling some properties and cutting costs.
Charlotte Bourgeois-Cleary, an Accor spokeswoman in Paris, didn’t return a phone message seeking comment after regular business hours.
Bazin has been buying and selling real estate in Europe for Barrack since 1997. Colony has been an investor in Accor since 2005 and a clash over governance between the two led to the 2009 resignation of then-chairman Serge Weinberg and five board members. Colony and Eurazeo Capital together hold 21.4 percent of Accor, Eurazeo said on its website.
Accor is scheduled to release earnings results today before the market opens. In July, it said first-half revenue rose 1.8 percent from a year ago after it added 9,940 rooms. Most of the new rooms are operated but not owned by the company.
Colony, which oversees about $27 billion in assets, also said yesterday that Jean-Romain Lhomme and Nadra Moussalem, principals who joined the firm in 2000 and who are both 39, will succeed Bazin as co-heads of European operations.
The two will focus less on real estate investing than in the past and more on corporate private-equity and distressed investing, Barrack said. They will be deploying more than 2 billion euros Colony has earmarked for European deals over the next 12 months and 4 billion euros in the next two years.
“They are a good, young team and they are ready to step up,” Barrack said. “My view is that Europe is where the U.S. was in 2008. We think the next 12 months will be the best investment period we’ve seen in Europe since 1996.”