Amancio Ortega’s RE Jewels In The Heart Of Madrid & BCN

26 March 2015 – Expansión

The largest shareholder of Inditex has an extensive real estate portfolio that includes properties and retail stores on the two most desirable streets in both cities.

They are the most sought-after streets in Spain for any real estate investor. On the one hand, Paseo de Gracia, in Barcelona, the star shopping street in the Catalan capital. On the other hand, the Paseo de la Castellana, in Madrid, an object of desire for any investor and a prime office location. As such, both have piqued the interest of Amancio Ortega, who owns more than ten buildings on the two thoroughfares.

Through Pontegadea, the company that the founder and majority shareholder of Inditex channels his investments through after closing his Sicavs, Ortega has purchased six buildings on the Catalan avenue and another five on the Madrid street.

In the case of the Paseo de Gracia, the most recent acquisition was made last year when Ortega purchased an office building located at number 1 on the street, on the corner with the famous Plaza Cataluña, for €44 million. This space, which has been leased to Banesto until now, will be converted into an Iberostar Hotel. A few months earlier, he acquired the commercial premises in the same building for €80 million, which are leased to Apple (see picture above). That US multinational is not Ortega’s only illustrious tenant; others include Fnac, Baker & Mackenzie, Burberry and Google.

In March 2012, Pontegadea acquired another building also on the Paseo de Gracia. In that case, Ortega’s company paid Sacyr €53.5 million for the building located at number 56. Measuring more than 9,000 square metres, it is leased to the British textile manufacturer Burberry. The Inditex owner is also the landlord of the building at number 93.

Madrid

The purchases made in the last decade have made Amancio Ortega one of the largest property owners on Madrid’s main thoroughfare: the Paseo de la Castellana. The owner of Zara joined the select club of property owners in that area in 2004, when he acquired number 92 (that same year he made a joint purchase with Metrópolis of an office building on the Paseo de Gracia, 16, which was converted into luxury housing). On the Castellana, Ortega also owns number 35, which he acquired in 2005; and number 79, the former headquarters of Axa, which he renovated to create a new office building with a shopping area, now leased to Fnac and Habitat.

But, undoubtedly, the jewel in Ortega’s crown in Madrid was acquired at the end of 2011, when he signed an agreement with FCC to purchase the Torre Picasso. He paid €400 million for the skyscraper that sits in the heart of the city’s financial district, just a few metres from the Paseo de la Castellana – a record figure for a single building, second only to the €815 million that the then Caja Madrid invested in the Torre Foster.

Nevertheless, it was not the first time that Pontegadea had paid so much in a real estate transaction. At the end of 2007, Amancio Ortega paid €458 million to Santander for the acquisition of ten buildings located in several Spanish cities, which included Castellana, 24 and Paseo de Gracia, 5.

These two great Spanish streets are just an example of Ortega’s extensive property holdings, which also include buildings leased to Inditex companies, such as for example Serrano, 23, in Madrid, which is leased to Zara. In the last full financial year (2013), Pontegadea’s assets were valued at €4,519.5 million and they generated a profit of €93.3 million, compared with €70.5 million a year earlier.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

BBVA & Ortega Will Need To Reach An Agreement To Sell Occidental Hoteles

9 March 2015 – Expansión

BBVA is the primary shareholder in Occidental. Through a number of investment companies, the bank controls 57.53% of the chain.

Amancio Ortega, the owner of Inditex, holds a 23.62% stake through his investment company Partler 2006. The other shareholders together control less than 20%.

The shareholders of Occidental Hoteles return to the market in search of a buyer, after the transaction with Barceló failed in December. Disagreements over price will be key to the divestment. (…). The investor duo, which together own more than 81% of the company, are again looking for a replacement. (…).

Plan

In 2007, the partners acquired Occidental from Mercapital and La Caixa for €700 million, including a debt of €229.5 million. The owners planned to invest €340 million to grow the chain and convert it into a world leader in the leisure segment, but that was suspended due to the economic crisis.

Over time, Occidental became a non-strategic investment and after restructuring the business and refinancing its debt in 2013, BBVA and Ortega launched a process to sell their stakes at the beginning of last year. (…)

According to sector sources, BBVA and Ortega were trying to sell at a price in line with what they paid eight years ago, however the offers they received included discounts of between 40% and 50%, given the investment required in Occidental’s hotels. At the last minute, an agreement with Barceló and CPG fell through; according to terms of the alliance between the two parties, the fund was going to assume the financial outlay and Barceló was going to take over the management of the hotels.

Given the situation, the shareholders of Occidental decided to suspend the process, although they are now resuming their search for candidates. And that is where the discrepancies arise over how to execute the divestment.

Ortega, who put an end to his adventure with the NH Hotel Group a year ago, is keen to accelerate his exit from Occidental, whose value may well decrease over the medium term, since there is no plan in place to allow it to keep growing. Meanwhile, BBVA is more reluctant and has put a (price) limit below which it is not willing to divest. Both investors have signed an agreement, which means that they will study any offers they receive.

The problem is that sooner or later, they will have to reach a consensus, since an agreement exists between the shareholders that links the approval of agreements in meetings to a favourable vote of at least 51% of the voting rights of Occidental.

Moreover, on an exceptional basis, for matters such as the appointment of the chairman, a minimum quorum of 66% is required. (…)

The hotel chain has now started to modernise its portfolio, which includes 13 hotels, most of which it owns. In recent years, Occidental has significantly reduced its portfolio – when BBVA and Ortega acquired their stakes, the group had 80 hotels and 18,500 rooms.

Original story: Expansión (by Yovanna Blanco)

Translation: Carmel Drake

UBS Strengthens Its Stake In NH Following Intesa’s Exit

2 February 2015 – Expansión

New movement in the share capital of the NH Hotel Group: the identity is now being revealed of the entities that purchased the 26.77 million shares – representing 7.6% of the hotel chain’s capital – that Intesa San Paolo sold just over a week ago. UBS is the first company to acknowledge that it took advantage of the Italian bank’s exit to strengthen its holding in NH; it acquired around 1% of the total capital – 3.48 million shares – on 23 January, according to CNMV records.

Together with the shares that it already held in its portfolio, the Swiss bank now owns 11,630,402 shares, representing 3.3% of NH’s capital. Intesa sold its shareholding for €113.8 million, at a price of €4.25 per share, which brings the total amount of UBS’s transaction to €14.81 million.

New shareholder profile

Following the acquisition, the Swiss entity becomes the fifth largest shareholder in NH, whose main shareholder is the Chinese conglomerate HNA, with a 29.5% stake. It is followed by the Inversor Hesperia Group (9.09%), Banco Santander (which become a shareholder in December after taking over 8.56% held by Hesperia, to which it acts as the main lending entity) and the fund THS (3.89%).

Almost all of NH’s share capital has changed hands in less than two years, following the exit of its traditional shareholders, such as Bankia, Amancio Ortega – the owner of the retail empire Inditex – and Intesa. NH’s share price was €4.39 at close of trading on Friday, down 0.23%. Its price has rise by 10.44% this year.

Original story: Expansión (by Y. Blanco)

Translation: Carmel Drake

Amancio Ortega’s Real Estate Offensive

2 February 2015 – Expansión

The owner of Zara has bought the former headquarters of Prisa. The founder of Inditex has allocated €1,215 million to the expansion of his non-residential asset portfolio in Spain since 2010 and is now the second largest investor, behind Merlin.

Amancio Ortega’s scouts are back out on the streets of Spain. The founder of Inditex resumed his real estate activity in Spain last week, with the purchase of Gran Vía 32, the former headquarters of Prisa, which is now being refurbished. The property will house the largest store of the fashion retailer Primark in Spain.

Pontegadea, owned by Ortega, acquired the building from Drago Capital for €400 million.

Through this transaction, the owner of Zara, who was advised by Aguirre Newman and Broseta, reactivated his real estate offensive in Spain. Since 2010, Ortega has spent €1,215 million on the expansion of his non-residential assets in Spain (office buildings and high street shops). Pontegadea holds these properties to benefit from their rental yields and to generate profits from their sale.

This outlay makes Ortega the second largest investor in non-residential assets during this period, according to data provided by Real Capital Analytics. He is exceeded only by Merlin Properties, the largest Socimi currently listed in Spain.

Pontegadea has also acquired properties overseas during this time, in the USA, Canada, France, Italy, Germany and Great Britain, amongst others. Altogether, the book value of his investment property amounted to €4,207 million in 2013, the latest data available. His investments outside of Spain amounted to €2,536 million.

The market value of these assets is unknown, but sources close to Ortega estimate it amounts to €6,500 million.

Most of his spending in recent years has been used to buy office buildings, as well as retail outlets and hotels. Pontegadea diversifies its risk across a variety of non-residential assets and has a more stable profile than other companies that invest only in a single segment, such as offices.

The businessman always acquires assets that have intrinsic value, due to their strategic location and because they have first-rate tenants. This allows him to generate an average annual yield of between 4% and 7%, according to market sources, at a time when interest rates are at around 0%.

In some cases, the Galician businessman’s company leases his non-residential assets to the various Inditex brands. Nevertheless, he also leases stores to Inditex’s competitors, such as in the case of the former headquarters of Prisa, which will be leased to Primark. His annual rental income amounts to around €200 million.

Pontegadea pays for the real estate assets it acquires with liquidity that it obtains from the clothing business, above all with dividends from Inditex. Ortega is the majority shareholder of the clothing business; he holds 58% of its total equity. The businessman also relies on debt from credit institutions to pay for his purchases. At the end of 2013, bank debt amounted to €748 million. The real estate company had mortgaged assets amounting to €1,237 million to support this debt.

“Ortega diversifies his assets and has a significant international presence in another sector. As an investor, he benefits by acquiring properties at the best time and he almost always pays in cash” and therefore buys cheap, explains Manual Romera, Director of the Financial Sector at IE Business School.

Pontegadea paid €400 million for the Torre Picasso, when valuations of the Madrid skyscraper prior to the sale were rounding the €800 million mark. Ortega’s offer prevailed over the one made by the American real estate giant Tishman Speyer, owned by the business tycoons Robert Tishman and Jerry Speyer. Pontegadea took ownership of the skyscraper that Esther Koplowitz, shareholder of FCC and the former owner, was loath to sell.

With the Torre Picasso, he is guaranteed rental yields of around 6%.

The real estate company is led by Roberto Cibeira and headquartered in A Coruña. The Board is support by Pontegadea executives in each country, including Marcos Fernández (US) and Manuel Criado (UK). In addition, Ortega engages legal counsel (Broseta) and real estate advisors, such as Aguirre Newman, which advised on the purchases of Torre Picasso, Gran Vía 32 and Rio Tinto.

Original story: Expansión (by Gemma Martínez)

Translation: Carmel Drake

Ortega Purchases Gran Vía, 32

27 January 2015 – Cinco Días

Amancio Ortega will be the landlord of one of Inditex’s competitors, the Primark Group. The founder of Zara has acquired Gran Vía, 32, the building in Madrid where the Irish company will open its flagship store in Spain.

A consortium of funds comprising PSP, APG, Phoenix Group and Sun Capital, led by Drago Capital, has announced the sale of Gran Vía 32 to Pontegadea, the real estate company owned by Amancio Ortega. PSP Investments – the public pension fund of the Canadian armed forces and one of the largest pension managers in this country – holds a 50% stake in Longshore (the company that currently owns the building); the management team of Drago Capital, the company that manages the assets, also holds a minority stake. The remaining 50% is owned by the real estate investment fund Drago Real Estate Partners, in which a number of companies hold stakes, including the Dutch firm APG (the largest pension fund in Europe), the British insurance group Phoenix Group (formerly Pearl Assurance) and the British investment company Sun Capital Partners.

Previously, the building was owned by Grupo Prisa, which sold the property to Drago Real Estate in 2008.

Spokemen of the various companies involved in the sale were not willing to disclose the amount paid, but sector sources estimate that the price would be around €400 million.

The building on Gran Vía 32 has a total floor space area of 36,376 square metres, divided into nine floors above ground, plus the ground floor and basement.

Four of the largest fashion companies in the world will share the building, and its new landlord, in Madrid. Gran Vía 32 already houses H&M, Mango and Lefties (Inditex) stores. The Irish chain Primark plans to open its largest store in Spain in the building at the end of this year, where it will have 9,000 square metres of retail space across three floors.

Primark is owned by the Associated British Foods group and now has 41 stores in Spain, after entering the market in 2006.

Madrid, Barcelona, London

Pontegadea, a company that also receives dividend income that Amancio Ortega earns from Inditex, recorded a profit of €93.3 million in 2013, an increase of 32% compared with 2012, according to information published in the El País newspaper last August, based on data extracted from the company’s accounts filed at the Commercial Registry.

The company recorded rental income of €98.5 million, an increase of €4.3 million. The volume of assets on its balance sheet amounted to €4,519.5 million. The company reduced its bank debt by €73.8 million down to €325.1 million.

In recent years, Amancio Ortega has invested in property in Madrid, Barcelona and London, although he has also done business in New York.

Pontegadea owns several landmark properties, including the Torre Picasso in Madrid, which it acquired at the end of 2011 from the FCC group for €400 million; and a building located on Manhattan’s West Side, which it bought at the end of 2013 for €69 million.

Last year, Pontegadea purchased two buildings from Sareb – the property that used to house the headquarters of Banesto, in Plaza Cataluyna, Barcelona, for €44 million and the building that houses the Apple store in Valencia, for €23.5 million.

Recently, it also purchased Rio Tinto’s headquarters in London. At the beginning of 2013, it completed the purchase of Devonshire House, in London, a building that houses 16,000 square metres of offices and retail space. In 2006, it bought another building in London, 100 Wood Street, for GBP 140 million and in 2011, it acquired an office building on Oxford Street for GBP 220 million.

Original story: Cinco Días (by Alberto Ortín Ramón)

Translation: Carmel Drake

Amancio Ortega Pays €335 Mn For Rio Tinto Headquarters in London

8/01/2015 – El Pais

Spain’s richest and world’s fourth wealthiest Amancio Ortega has purchased the headquarters of multinational mining and metal group Rio Tinto located in the heart of London, reports Property Week. The founder of Inditex is said to have paid around £265 million, or €335 million.

The building, found at 6 St James’s Square, has a gross lettable area (GLA) of nearly 11.000 square meters. The transaction was nailed short before Christmas with a profit below 4%, the newspaper informs. Specifically, the buyer was Pontegadea, the real estate investment arm of Mr Ortega.

Rio Tinto redeveloped the building and named Cushman & Wakefield to market its headquarters in the West End inside a buy-to-lease scheme. The mining company is going to rent 70% of the property’s total space, 79.000 square feet (7.340 square meters), while the remaining 38.000 sq ft (3.530 sq m) will be left out vacant.

The purchase of the Rio Tinto headquarters is the second largest carried out by Amancio Ortega in London. Back in December 2013, the magnate bought the Devonshire House office building, one of the listed properties in the West End of London, for £400 million (over €500 million). Constructed in 1920, the office unit has 16.000 square meters and is situated within the fashionable district of Mayfair, a minute’s walk from the Ritz hotel. The property was the residence of the Dukes of Devonshire in the 18th and 19th centuries. Mr Ortega paid an astonishing price per square meter and one of the highest ever offered for such a type of historic building.

In 2006, the Spanish tycoon acquired the building at 100 Wood Street, also in London, for £140 million, and in 2011 he purchased an office unit in Oxford Street for £220 million.

Moreover, Ortega’s Inditex, worldwide known textile leader promoting such brands as Zara or Massimo Dutti, was the buyer of the property in the intersection of Oxford and New Bond streets, an area considered a high street of London’s center. In 2012, the firm paid £155 million for it.

 

Original story: El País (by Miguel Jiménez)

Translation: AURA REE

Amancio Ortega Lets His Barcelona Gem to Iberostar

24/10/2014 – Expansion

Iberostar increases its bet on the urban segment and allies with Amancio Ortega, the owner of Inditex, to settle in Barcelona. From 2016, the chain controlled by the Fluxa family is going to manage, while renting, a 4-star hotel located on the upper floors of the building belonging to Ortega’s Pontegadea and found at 1 Paseo de Gracia street, Barcelona.

In 2012, the holder of Zara bought the ground floor shop of the property, now let to Apple, for €86 million. In January this year, the businessman purchased the rest of the building, formely serving Banesto as its Catalonian headquarters, from Sareb.

According to sources with knowledge on the matter, initially Amancio Ortega planned development of a hotel on the upper stories but due to high cost, he opted for remodelling the now-empty property and handing it over to Iberostar.

Sabina Fluxa, vice-president of Iberostar, confirmed the intention of the firm to open a new establishment in Barcelona.

The four-star hotel would start operating in mid-2016.

Cooperation between Amancio Ortega and Iberostar is no novelty. In 2012, the partners paid €95 million for a five-Spanish-hotel portfolio to Thomas Cook. Although holiday accommodation is the main business of the hotel chain, it decided to bring some diversification to its asset pool.

Thus, Iberostar added several urban establishments in Santa Cruz de Tenerife (the Grand Hotel Mencey, 5*) and Hungary (the Grand Hotel Budapest), as well as in Madrid, London, Berlin and Rome.

At the end of 2013, Iberostar, the fifth biggest Spanish chain, owned over one hundred hotels in 13 countries. It earned €1.1 billion improving the previous year volume by 6%. The firm wants to double the number of its assets within 10 years and reach between 200 and 250 hotels.

 

Original article: Expansión (by Yovanna Blanco)

Translation: AURA REE