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

Talus To be Ortega’s Neighbour On Gran Vía

29 January 2015 – Cinco Días

Two buildings on the same street in Madrid have changed hands within just over a week of each other. The fund Talus Real Estate has agreed the acquisition of the building on Gran Vía 30 (on the corner of Calle Valverde) for €42 million. On Monday, the company Drago Real Estate announced the sale of its building on Gran Vía 32 to Pontegadea, the company that owns Inditex’s real estate assets and receives its dividends on behalf of Amancio Ortega, the founder and primary shareholder of the fashion group.

According to sources close to the negotiations, JLL and Aguirre Newman have participated in the sale of the property on Gran Vía 30, as advisory consultants. However, the companies involved did not want to confirm this information yesterday.

The same sources said that the buyer plans to refurbish the property. The fashion chain Sfera, owned by El Corte Inglés, has a store that occupies two floors of the building.

Talus Real Estate’s main executives are David Finkel and Jordi Moix and its headquarters are located in Madrid. According to the company’s website, before joining Talus, Finkel worked for Westbrook Parners, where he co-directed their business in London. Westbrook Partners is a real estate investment group that was founded in 1994, has offices in the US, London, Munich, Paris and Tokyo and has invested USD 10,000 million to date. Prior to that, he worked for the Japanese entity, Nomura and for iStar Financial, another international real estate investment group.

Moix has held senior positions in the Spanish real estate companies Reyal Urbis, Metrovacesa, Layetana and Habitat; he has also worked for IAG and Citibank. Currently, he is vice-president of FC Barcelona’s real estate business.

Gran Vía is trading up

The sale of the property on Gran Vía 30 is the latest in a series of transactions undertaken on the Madrid street that will change its appearance as it approaches its 105th birthday.

The fashion group Primark will occupy several floors of Gran Vía 32, when it opens its largest store in Spain there. Talus Real Estate will also refurbish the Gran Vía 30 building. In Plaza de España, the Chinese group Wanda will convert the Edificio España into a luxury hotel and shopping centre. Next to the building sold by Santander, the hotel chain Barceló will take over some of Torre Madrid to open another hotel.

Late last year, Axa Real Estate, a subsidiary of the insurance company Axa, acquired Gran Vía 37, where the fashion retailer H&M has its largest store in Spain and which used to house the Avenida cinema, for €80 million. Also last year, the Community of Madrid sold Gran Vía 20 for €20 million to Caja Rural de Almendralejo Sociedad Cooperativa de Crédito.

2015, another big year for real estate investment

With the sale of Gran Vía 32 and the upcoming sale of the Plenilunio shopping centre, the amount of investment in Madrid will amount to €800 million. According to sources familiar with the transaction, the sale of the shopping centre will reach a figure close to €400 million.

In 2014, investment in real estate in Spain amounted to between €6,000-€9,000 million, almost twice the figures recorded in the previous three years.

During the year ahead, Socimis, which revolutionised the sector in 2014, will continue to invest, as will investment banks, whereby replacing opportunistic funds. The liquidity injection announced by the ECB will boost the sector. The expected sale of Realia will be another major transaction. Industry experts are also drawing attention to investment in logistics platforms.

Original story: Cinco Días (by Alberto Ortín Ramón)

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