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Spain's richest man bets billions on prime US real estate
AMANCIO Ortega is a Spaniard conquering the US in the 21st Century.
This month, the investment vehicle of the multi-billionaire behind Zara owner Inditex SA completed a US$72.5 million deal for a downtown Chicago hotel. That followed purchases within the past six months of a building in Washington's central business district and two Seattle offices leased by Amazon.com Inc for a combined US$1.1 billion.
Mr Ortega's US spending spree increases the value of his global property empire beyond US$13 billion, according to the Bloomberg Billionaires Index, giving him the biggest real estate portfolio among Europe's super-rich. Diversifying his fashion fortune to preserve his sizeable wealth, Mr Ortega has invested more than US$3 billion in US real estate over the past six years, acquiring landmark properties like Manhattan's historic Haughwout Building and Miami's tallest office tower.
"If I'm a billionaire investor trying to preserve my wealth for the long term, I'm looking at key buildings in major cities," said Alex James, a London-based associate partner at real estate broker Knight Frank's private client team. "Most billionaire clients we deal with are looking to buy in cash. They compete with major institutions - typically cash buyers, too - so it all comes down to price."
The economic stability of the US has made it a popular destination for foreign real estate investors. Cross-border acquisitions of US commercial property totalled US$94.9 billion last year, near a record high, led by Canadian, French and Singaporean buyers, according to Real Capital Analytics.
US property makes up the largest share of the real estate owned outside Spain by Mr Ortega's main investment vehicle, Arteixo, La Coruna-based Pontegadea Inversiones SL, regulatory filings show. In March, the firm paid US$740 million for the Amazon-leased properties, which the local county assessed at US$550 million, the Seattle Times reported. The deal is among Pontegadea's biggest and rivals what it paid last year to acquire a London office building from Blackstone Group LP.
"The Amazon deal is a statement as it's a major infrastructure office," Mr James said. "The difference between Pontegadea and a Blackstone or another private equity firm is that billionaire capital can afford to hold the asset for a lot longer. They won't have a five-year hold and then sell it off." A spokesman for Pontegadea and Mr Ortega's charitable foundation declined to comment.
Beyond the US, Pontegadea has invested in property around the UK, Canada and Mr Ortega's native Spain, focusing on major cities including Madrid and Toronto. In a rare move away from real estate, the investment firm agreed last year to acquire a stake in Telefonica SA's tower unit - Telxius Telecom SA - for 378.8 million euros (S$582.5 million).
Mr Ortega, 83, has a net worth of US$63.6 billion, according to the Bloomberg index, making him the world's sixth-richest person. Most of his fortune derives from his majority stake in Inditex, the world's largest fast-fashion clothing chain operator. Mr Ortega, unlike other multi-billionaires, funds his investment vehicles through Inditex dividends instead of pledging shares to finance loans for other acquisitions.
SoftBank Group Corp founder Masayoshi Son has pledged about a third of his holding in the firm, filings show, while Larry Ellison has pledged millions of Oracle Corp shares. Since Inditex's initial public offering in 2001, Ortega has received more than US$9 billion of dividends, according to data compiled by Bloomberg.
Once the world's second richest person, Mr Ortega's wealth slumped as Inditex's revenue growth stagnated. Its shares have dropped more than 30 per cent since hitting a record high two years ago.
"Revenue was growing 10 per cent a year about a decade ago, but they were less mature then in almost every market in which they now operate," Charles Allen, a Bloomberg Intelligence retail analyst, said in an interview. "The big market where they still remain quite small is the US."
Mr Ortega has spent most of his life in the garment business. The son of a railroad labourer, he started working in a clothing shop in the northwestern city of La Coruna at age 13. In 1963, he began making women's bathrobes with his siblings and soon-to-be first wife, Rosalia Mera. He opened the first Zara store in 1975 and incorporated Inditex, a holding company, a decade later.
Mr Ortega stepped down as Inditex chairman in 2011. He never had his own office, preferring instead to work alongside employees in the main design area, according to Zara and Her Sisters: The Story of the World's Largest Clothing Retailer by Enrique Badia.
"He comes across as very authentic," said Keith Johnston, CEO of Family Office Council, a UK network of about 100 family offices. "He's a man of the people." BLOOMBERG