Spanish Billionaire Nets £200M Dividend As Bet On West End Pays Off

Amancio Ortega is the world’s sixth-richest man, but is legendary for his humility. Most days he still has his lunch in the canteen with staff at the A Coruña, Spain, factory of Inditex, the fashion giant that is the source of his $60B-plus fortune. 

Quietly and with little fanfare, as befitting his low profile — he almost never gives interviews — 84-year-old Ortega’s private investment vehicle Pontegadea has built up a London property portfolio which compares favourably to any in the UK capital, and which has been incredibly profitable. 

Pontegadea has paid out more than £200M in dividends to Ortega and his family over the past seven years, according to an analysis of Pontegadea UK financial reports by Bisnow. These results show that 2019 was its most successful year yet, with a £96M dividend paid out. 

Pontegadea’s portfolio was valued at £2.8B as of September, but since then it has bought the Post Building at the eastern end of Oxford Street for £600M, and this building was not included in the valuation.

At £3.4B, that makes Pontegadea’s portfolio bigger than Grosvenor’s London assets, which stand at £3.1B. Grosvenor has owned its London portfolio for more than 400 years, Ortega his for just eight. (He is still a ways behind the Crown Estate, which has an £8.2B London portfolio, some of which dates back to the 12th century.) 

Ponetgadea is essentially a family office, which invests the dividends Ortega receives from Inditex, in which he owns a 60% stake, and which counts Zara among its stable of brands.

The London portfolio is part of a wider global real estate investment business which had assets valued at $17B (£13.5B) at the end of 2019, with big holdings in the U.S. and Spain as well as the UK. It has a target of spending about $2B on real estate globally each year, although that might drop in the immediate future, as the pandemic means Inditex will likely to be paying out less in dividends. 

In a rare interview with the FT in March, Pontegadea gave an insight into its workings. It has a dedicated investment staff of just seven people, led by chief executive Roberto Cibeira. Ortega is on the company’s board, and is involved in its strategic decision-making. 

Its strategy is centred around security of income and capital preservation rather than looking for significant growth, Cibeira said. Once it has bought an asset, it very rarely sells. 

An analysis of Pontegadea’s UK portfolio by Bisnow shows the company has been laser-focused on the West End — the Adelphi Building, about 400 yards from Trafalgar Square, is as far east as it goes. With the West End’s high values and steady rental income, the district fits Pontegadea’s investment strategy perfectly. 

The company said in the FT interview that it is the largest single property owner on Oxford Street, having paid £600M for a building including a Primark flagship in 2015, as well as two other units that include Zara stores, for which it paid a combined £205M in 2013. 

Pontegadea made an abortive first foray into London property in 2005, buying an office building on Gutter Lane in the City for £45M in 2005. In 2014 it sold it for £40M, its only London sale to date, and the loss might indicate why it has stuck to the West End. 

It arrived in earnest in 2013 with the £400M purchase of Devonshire House, which was sold after Lehman Brothers' debt came due. In 2015 Ortega bought the St James’s HQ of Rio Tinto for £260M, and in 2016 he bought the multi-let Almack House, also in St James’s, for £225M. The Adelphi Building, let to a range of companies including Spotify, The Economist and Condé Nast, was bought from Blackstone for £550M in 2018. 

There is one anomaly in the portfolio: In 2018 the company bought a mixed retail and office block in Glasgow for £41M. But it makes sense in the context of one of the strategies outlined earlier this year: The main retail tenant is Apple, and Cibeira told the FT that with six flagship Apple locations globally, it is the world’s largest owner of Apple stores outside of shopping centres. 

Pontegadea UK’s financial results show the portfolio generated rental income of £79.3M in 2019, up 7% from the year before. The portfolio is estimated to generate £1B of income over the total life of the current leases. 

As is often the case with long-term private investors, there is only a small amount of debt secured against the assets, £350M. 

Earlier this year Cibeira said that even though Pontegadea had continued to buy in London after Brexit, the U.S. and Asia looked better prospects for investment than the UK in the immediate future. Given the uncertainty thrown up by the pandemic, it may not be buying much real estate at all in the next few years. It may take a while to catch up with the Crown in London, but in the meantime, Ortega is sitting on a portfolio that is the match to any in the capital.