Brandon Donnelly
Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly.
Brandon Donnelly
Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly.
So this seems like a pretty cool strategy.
Amancio Ortega — who is the founder of the fashion brand Zara — is a ~59% owner of Inditex, which is the largest fashion group in the world and the parent company of Zara. This ownership stake sits in his investment vehicle Pontegadea and each year the dividends of Inditex result in many billions of euros being deposited into its accounts.
In 2022, it was ~€1.7 billion. In 2023, it was ~€2.2 billion. And this year, it is forecasted to exceed €3 billion for the first time. What Ortega has decided to do with these billions is diversify risk away from the fashion sector and preserve generational wealth through stable, income-generating real assets. In other words, the strategy is to go around the world, buy the coolest trophy assets, and build a wealth fortress.
For example, in 2022, Pontegadea acquired Royal Bank Plaza in Toronto for ~C$1.2 billion. This was one of the largest office building transactions in Canadian history and, as far as I can tell, it's the largest single-asset purchase made by the company to date.
This year alone, they've acquired an apartment building in Fort Lauderdale for €165 million, an office building in Barcelona for €250 million, and Hotel Banke in Paris for €97 million. This was their second acquisition in Paris this year, and hospitality seems to be a new push for the firm.
Having billions of euros show up every year to recycle into global real estate acquisitions is pretty neat in its own right. But I also think it's interesting to monitor where and what he's buying. Pontegadea is not trying to time the market or bet against short-term dislocations. They're methodically building a fortress of core assets in the world's top global cities.
Intuitively, we know what these core assets should be. But these intuitions are not always reliable. Prior to the pandemic, downtown San Francisco had one of the tightest office markets in the US. Today, it has one of the highest vacancy rates. I'm sure many investors would have labeled these same assets as core back in 2019.
Watching Pontegadea feels like a direct commentary on what he/they see as having enduring long-term value. And boy is it fun to watch.
One of my least favorite things about Europe is the experience of sitting on a cafe terrace and having someone smoking beside you while you're trying to enjoy a gelatinous pig foot from Au Pied de Cochon. (I kid; gelatinous pig foot isn't my favorite.)
So here's some news: France has just announced that, starting July 1, smoking will be banned from nearly all public spaces, including parks, beaches, public gardens, and bus stops. That said, the ban does not yet include cafe terraces. So I can still expect my gelatinous pig foot experiences to be horribly ruined.
Still, this is a giant step in the right direction, especially for a country with one of the highest smoking rates among OECD countries. As of 2023, the national average for daily smokers was estimated at 23% for adults aged 18 to 75. The region with the highest percentage of smokers was the southeast (~29.5%) and the region with the lowest percentage of smokers was Greater Paris (~21.9%).
In addition to varying by region, smoking is also strongly correlated with socioeconomic status. INSEE, France's national statistics agency, estimated the following daily smoking rates as of 2022:
42.3% of unemployed adults
33.6% of people in the lowest income tier
30.8% of people without a degree (baccalauréat level)
16.8% of people with higher education (above baccalauréat level)
But even among high-income groups, the rates are significantly higher than what you'd find throughout the rest of Western Europe, and in places like Canada and the US. We're in the 10-11% range. All of this is why the French health ministry is now aiming to create a generation "
So this seems like a pretty cool strategy.
Amancio Ortega — who is the founder of the fashion brand Zara — is a ~59% owner of Inditex, which is the largest fashion group in the world and the parent company of Zara. This ownership stake sits in his investment vehicle Pontegadea and each year the dividends of Inditex result in many billions of euros being deposited into its accounts.
In 2022, it was ~€1.7 billion. In 2023, it was ~€2.2 billion. And this year, it is forecasted to exceed €3 billion for the first time. What Ortega has decided to do with these billions is diversify risk away from the fashion sector and preserve generational wealth through stable, income-generating real assets. In other words, the strategy is to go around the world, buy the coolest trophy assets, and build a wealth fortress.
For example, in 2022, Pontegadea acquired Royal Bank Plaza in Toronto for ~C$1.2 billion. This was one of the largest office building transactions in Canadian history and, as far as I can tell, it's the largest single-asset purchase made by the company to date.
This year alone, they've acquired an apartment building in Fort Lauderdale for €165 million, an office building in Barcelona for €250 million, and Hotel Banke in Paris for €97 million. This was their second acquisition in Paris this year, and hospitality seems to be a new push for the firm.
Having billions of euros show up every year to recycle into global real estate acquisitions is pretty neat in its own right. But I also think it's interesting to monitor where and what he's buying. Pontegadea is not trying to time the market or bet against short-term dislocations. They're methodically building a fortress of core assets in the world's top global cities.
Intuitively, we know what these core assets should be. But these intuitions are not always reliable. Prior to the pandemic, downtown San Francisco had one of the tightest office markets in the US. Today, it has one of the highest vacancy rates. I'm sure many investors would have labeled these same assets as core back in 2019.
Watching Pontegadea feels like a direct commentary on what he/they see as having enduring long-term value. And boy is it fun to watch.
One of my least favorite things about Europe is the experience of sitting on a cafe terrace and having someone smoking beside you while you're trying to enjoy a gelatinous pig foot from Au Pied de Cochon. (I kid; gelatinous pig foot isn't my favorite.)
So here's some news: France has just announced that, starting July 1, smoking will be banned from nearly all public spaces, including parks, beaches, public gardens, and bus stops. That said, the ban does not yet include cafe terraces. So I can still expect my gelatinous pig foot experiences to be horribly ruined.
Still, this is a giant step in the right direction, especially for a country with one of the highest smoking rates among OECD countries. As of 2023, the national average for daily smokers was estimated at 23% for adults aged 18 to 75. The region with the highest percentage of smokers was the southeast (~29.5%) and the region with the lowest percentage of smokers was Greater Paris (~21.9%).
In addition to varying by region, smoking is also strongly correlated with socioeconomic status. INSEE, France's national statistics agency, estimated the following daily smoking rates as of 2022:
42.3% of unemployed adults
33.6% of people in the lowest income tier
30.8% of people without a degree (baccalauréat level)
16.8% of people with higher education (above baccalauréat level)
But even among high-income groups, the rates are significantly higher than what you'd find throughout the rest of Western Europe, and in places like Canada and the US. We're in the 10-11% range. All of this is why the French health ministry is now aiming to create a generation "
Nationwide across the US, transit ridership is only at about 70% of where it was in 2019 before the pandemic. But this is not the case in all cities around the world. According to this recent Bloomberg article, Madrid, Hong Kong, and Paris are all above their 2019 ridership levels. Seoul and Shanghai are also close at just over 90%, and London is at 85%.
So this problem of fewer people riding transit seems to be a North and South American phenomenon. Rio de Janeiro is at 73%, Mexico City is at 70%, and San Francisco is somewhere near or at the bottom at 44%. The obvious explanations for this are that Europe and Asia are generally denser and less car-oriented, their return-to-office patterns have been much stronger (less WFH), and their governments probably care more about transit (and spend more money on it).
Broadly speaking, I think this is all true, but I'd love to know more precisely what's driving these differences. Because it's not exactly obvious. Consider, for example, Paris and London. Paris is at 103% of its 2019 levels, whereas London is only at 85%. Why is that? Both cities share a lot of similarities. They have a river that weaves through the middle, they're dense, they have lots of trains, and both are alpha global cities.
So why the delta? What exactly is Paris doing that is encouraging more transit usage?
Charts via Bloomberg
The majority of French people also seem to support this new public space ban; which maybe isn't surprising, given that the majority don't smoke.
Cover photo by Marie-Sophie Tékian on Unsplash
Nationwide across the US, transit ridership is only at about 70% of where it was in 2019 before the pandemic. But this is not the case in all cities around the world. According to this recent Bloomberg article, Madrid, Hong Kong, and Paris are all above their 2019 ridership levels. Seoul and Shanghai are also close at just over 90%, and London is at 85%.
So this problem of fewer people riding transit seems to be a North and South American phenomenon. Rio de Janeiro is at 73%, Mexico City is at 70%, and San Francisco is somewhere near or at the bottom at 44%. The obvious explanations for this are that Europe and Asia are generally denser and less car-oriented, their return-to-office patterns have been much stronger (less WFH), and their governments probably care more about transit (and spend more money on it).
Broadly speaking, I think this is all true, but I'd love to know more precisely what's driving these differences. Because it's not exactly obvious. Consider, for example, Paris and London. Paris is at 103% of its 2019 levels, whereas London is only at 85%. Why is that? Both cities share a lot of similarities. They have a river that weaves through the middle, they're dense, they have lots of trains, and both are alpha global cities.
So why the delta? What exactly is Paris doing that is encouraging more transit usage?
Charts via Bloomberg
The majority of French people also seem to support this new public space ban; which maybe isn't surprising, given that the majority don't smoke.
Cover photo by Marie-Sophie Tékian on Unsplash
Share Dialog
Share Dialog
Share Dialog
Share Dialog
Share Dialog
Share Dialog
