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Pontegadea has remit to invest €2bn a year from the Spanish retail powerhouse

In an unassuming side street in central London sits the UK office of a low-profile Spanish company that owns Amazon’s Seattle headquarters, a large chunk of Oxford Street and most of Inditex, the retail powerhouse.

Pontegadea is the personal investment company of Amancio Ortega, the founder and majority shareholder of Inditex, which is best known as owner of the Zara chain. Mr Ortega started out running a small family business making dresses and dressing gowns in 1963 but is now the world’s sixth-richest man, according to Forbes, and Pontegadea, founded in 2001 to invest his dividends from Inditex, has become a property buyer on a very big scale.

When the company started off, it had an annual pot of about €50m. Today, by contrast, “each year we have to invest around €2bn”, Roberto Cibeira, Pontegadea’s chief executive, told the Financial Times in a rare interview. “That’s what we get from our real estate and other investments plus the Inditex dividend.”

Pontegadea, which, like Inditex, is based near the north-western Spanish city of A Coruña, says it now owns more of London’s Oxford Street than anybody else. As well as Amazon’s Seattle HQ, it is also landlord of Facebook offices in the same city and properties on the Champs-Élysées, Madrid’s Castellana Avenue and Rome’s Via del Corso.

Late last year, it took advantage of the Brexit discount in the UK property market to make the most recent in a series of acquisitions in London — the headquarters of consultancy McKinsey for about £600m, one of five property investments it made across the world in 2019.

And yet Pontegadea has a dedicated investment staff of just seven, who are increasingly stretched as competition for property heats up, with investors on the hunt for returns.

According to Mr Cibeira, Pontegadea’s real estate portfolio has an acquisition value of about €13bn, making it by far the biggest operator in the Spanish market and outranking direct European competitors as well.

José Arnau, a close colleague of Mr Ortega’s who is vice-president of both Inditex and Pontegadea, acknowledges that the company needs to grow — the total headcount at Pontegadea and at Mr Ortega’s associated companies is barely more than 70. At the same time he adds that, with around 175,000 people working at Inditex, the 83-year-old Mr Ortega has little interest in creating a much larger organisation.

Pontegadea, which buys only freeholds and almost never sells, generates income from its investments of about €800m a year and has less than €1bn in debt.

Although it makes other investments, its biggest holding remains Inditex. Between them, Pontegadea and Partler, another Ortega company with the same management, own 60 per cent of the group, with a value of about €58bn. That yielded about €1.6bn in dividends last year. Mr Cibeira puts the overall value of the Pontegadea group of companies, which make charitable donations of some €100m a year, at about €70bn.

“The fact that our portfolio is so concentrated in Inditex has a big impact on the other kinds of investments we can make from a risk management [point of] view,” he said.

“We are not looking for enormous returns; we are looking for investments that protect us, that produce a constant cash flow and which maintain the value of the capital. We are also looking for investment that avoids a conflict of interest with Inditex — that means keeping a low profile.”

At present, he says, about 35 per cent of the group’s real estate portfolio is in the US, with another 30 per cent in the UK — essentially London — and 25 per cent in Spain.

“Because we come from retail, we know the importance of good location and 95 per cent of our properties are in prime areas,” he said. Pontegadea owned the sites of six flagship Apple stores, he added, more than any other landlord if stores in shopping centres were excluded.

But finding property that can produce the returns Pontegadea wants is becoming ever more difficult, largely because of the influx of institutional investors looking for yield in a world of ultra-low interest rates.

The retail sector is also struggling as never before — although Pontegadea insists this has caused it few problems, because it focuses more on prime retail and on offices.

Rising property prices in Spain and France have deterred Pontegadea from making real estate purchases in both countries for the past three years. But it has made some Spanish transactions in that time — in 2018 and 2019, the group bought minority stakes in Telxius, Telefónica’s telecoms infrastructure business, and Enagas, which operates Spain’s gas grid, for €379m and €282m respectively.

Meanwhile Pontegadea has continued to invest in property in the UK, partly because prices have been limited by Brexit.

“The financial industry in London is going to last,” said Mr Cibeira. “London has certain things no other city has.”

But he considers that the US and parts of the Asia-Pacific region — particularly Australia, Singapore and South Korea — are the most promising growth areas.

Pontegadea says its lack of debt and tiny size make decision-making and transactions much faster — its five-person board consists of Mr Ortega, his wife Flora Pérez, Mr Arnau, Mr Cibeira and the company secretary.

Mr Ortega remains executive chairman of Pontegadea, a post he has given up at Inditex, and is fully involved in strategic if not day-to-day decisions. But Mr Cibeira and Mr Arnau maintain the group will endure, despite the age of its owner.

“We have an enormous quantity of dividends that we have to reinvest and therefore we have a size that we never thought we were going to have,” said Mr Arnau. “Life has taken us here.”