The Inditex trophy asset index

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.

So this seems like a pretty cool strategy.

1 comment

Brandon Donnelly

5mo

Each year, the founder of Zara, Amancio Ortega, receives billions in dividends from his ~59% stake in the fashion group Inditex. What does he do with this money? Invest it in trophy real estate all around the world. https://brandondonnelly.com/the-inditex-trophy-asset-index