Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The luxury group that owns brands Gucci and Saint Laurent has struck a deal to sell majority stakes in three of its high-profile Parisian real estate properties to French private equity group Ardian.
Paris-listed Kering said it would sell 60 per cent of the stake it holds in the properties on Paris’ famed Place Vendôme and avenue Montaigne shopping areas to Ardian for €837mn.
Kering will retain 40 per cent ownership, and receive guarantees its brands can continue to occupy the buildings.
Top luxury groups including Kering and bigger rival LVMH have spent billions on properties in major cities in recent years, in a fierce rivalry to secure limited real estate on the top shopping streets that project luxury groups’ carefully curated image of prestige and attract well-heeled shoppers.
For Kering this competition has come at a difficult time, however. It has lagged behind rivals as it invests heavily in creating a more premium offering to woo affluent clients. It has also struggled to improve performance at Gucci, its biggest brand that accounts for half of group sales and two-thirds of profits. Kering issued profit warnings last year, a rarity for big luxury groups, and its shares have fallen more than 38 per cent in the past year, giving it a market value of €27bn.
Competition for real estate requires tying up large amounts of capital potentially indefinitely. But Wednesday’s deal, which is expected to close in the first quarter of this year, will allow the group to free up some of its investment while keeping control of the properties.
“We are very pleased with this partnership, which allows us to secure for the long term highly prominent retail locations while preserving our financial flexibility,” said Kering deputy chief executive Jean-Marc Duplaix. Stéphanie Bensimon, Ardian’s head of real estate, said it was “a transformative approach to real estate strategies for luxury groups”.
Kering spent €1.3bn to acquire a large block on Via Monte Napoleone in Milan from US private equity group Blackstone last spring, in what was the largest European real estate deal for two years at the time. The luxury group also announced the $963mn purchase of a building at the corner of Fifth Avenue and 56th Street in New York last January, adding to a portfolio of flagship assets in other cities including Paris and Tokyo.
However, Kering has insisted it does not want to be managing a real estate portfolio as a business strategy, but rather that it makes the investments to support its labels.
“Once a brand is making over €3bn in sales, these [kinds of locations] become indispensable,” Kering chief executive François-Henri Pinault told reporters in February. But “just because a building is available in a premium location, it doesn’t mean we’ll buy it. We will take it only if it makes sense.”
The properties in Wednesday’s deal include the historic home of the Boucheron jewellery brand on Place Vendôme, which underwent a big renovation in 2018, and stores for Valentino and Balenciaga on Avenue Montaigne, just off the Champs Elysée. Both Boucheron and Balenciaga are owned by Kering. It bought a 30 per cent stake in Valentino in 2023.
