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.

Cover photo by Zarif Ali on Unsplash

Bloomberg recently published this interesting piece talking about the death of clothing. The reasons are as follows: we’re spending more on experiences, as well as technology (tech spending surpassed apparel spending in 2010); casual dress in the workplace has become more widely accepted; fast fashion companies like H&M and Zara are putting downward pressure on prices; and social media influencers – instead of big companies – are now the ones showing us what to buy and wear.

Here is a graph from the article comparing experiences, apparel, and technology expenditures: 

The first thing I noticed is that experiences, while still increasing, haven’t really spiked since 1977, even though everybody seems to be talking about how social media-fueled Millennials are all about experiences. I was also surprised to see that the share of US employers that allow casual dress every day seems to be closing in on 50%. (Informal survey for the comments and for Twitter: Do you wear casual clothes to work? I’m a no.)

But perhaps the biggest contributors to this decline are fast fashion and low-cost manufacturing. Stanley Pignal – South Asia business and finance correspondent for the Economist – pointed out on Twitter that since 1982 inflation in US apparel was only 123% compared to 248% for overall CPI. So maybe a lot of the above reasoning is just a distraction.

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.

Cover photo by Zarif Ali on Unsplash

Bloomberg recently published this interesting piece talking about the death of clothing. The reasons are as follows: we’re spending more on experiences, as well as technology (tech spending surpassed apparel spending in 2010); casual dress in the workplace has become more widely accepted; fast fashion companies like H&M and Zara are putting downward pressure on prices; and social media influencers – instead of big companies – are now the ones showing us what to buy and wear.

Here is a graph from the article comparing experiences, apparel, and technology expenditures: 

The first thing I noticed is that experiences, while still increasing, haven’t really spiked since 1977, even though everybody seems to be talking about how social media-fueled Millennials are all about experiences. I was also surprised to see that the share of US employers that allow casual dress every day seems to be closing in on 50%. (Informal survey for the comments and for Twitter: Do you wear casual clothes to work? I’m a no.)

But perhaps the biggest contributors to this decline are fast fashion and low-cost manufacturing. Stanley Pignal – South Asia business and finance correspondent for the Economist – pointed out on Twitter that since 1982 inflation in US apparel was only 123% compared to 248% for overall CPI. So maybe a lot of the above reasoning is just a distraction.