Spanish billionaire Amancio Ortega has a problem most of the world’s super-rich don’t.
Every year, the biggest shareholder of Zara owner Inditex SA has to rapidly invest the billions of euros he receives from the world’s largest retailer of affordable fashion — or face the prospect of handing over a chunk of those proceeds in wealth taxes.
As the continued success of Zara swells Ortega’s coffers with ever-increasing flows of dividends, deploying that money quickly is becoming a challenge. Just last week, Inditex announced a 29% jump in its payout, handing the 86-year-old tycoon close to €2 billion ($2.2 billion).
Ortega, who controls 59% of Inditex, has to invest that amount within the year because of the legal and fiscal rules that govern family offices like his Pontegadea.
Spain, whose government is headed by the Socialist Party, is the only country in the European Union to have a full-on wealth tax. Under the nation’s law, wealthy residents are exempt from that politically controversial levy only if their family offices put their income to work within the 12-month window and in assets considered to be “economic activity.”
“It's quite unique because there are not many other similar examples in Spain with that level of wealth,” said Leon Fernando Del Canto, a London-based barrister who works with wealthy Spanish individuals.
Over the years, the tax constraint has resulted in Pontegadea plowing Ortega’s Inditex dividends — more than $12 billion since the company’s 2001 initial public offering, data compiled by Bloomberg show — into carefully chosen assets, mostly urban real estate.
The purchases have given Ortega such iconic properties as New York’s Haughwout Building, the Southeast Financial Center in Miami, Toronto’s Royal Bank Plaza and The Post Building in London. Other assets have left him with prime residential and commercial real estate in cities from Barcelona to Seattle — buildings that count Facebook, Amazon.com Inc., Zara, and even rival Hennes & Mauritz AB among tenants.
All that has catapulted the self-made fashion tycoon into one of the biggest real estate owners in Europe. The assets were valued at €15.3 billion in 2021, the most recent data available show, putting them above the holdings of UK billionaires Hugh Grosvenor and Charles Cadogan. Pontegadea has since spent more than $2 billion on at least 10 properties across North America and Britain, according to data compiled by Bloomberg.
Although Ortega has diversified his investments into other assets that qualify, people familiar with the running of Pontegadea said finding appropriate targets with its ever-swelling receipts is increasing becoming difficult.
While several Spanish regions led by the opposition have created rebates that either lower the wealth tax or eliminate it, Galicia, where Ortega is based, imposes a levy of as much as 2.5%. That’s on top income tax, VAT and other such charges.
To avoid paying the wealth tax, family offices like Pontegadea can buy assets such as real estate and energy infrastructure or stakes of at least 5% in publicly listed companies. Mutual funds and cash aren’t considered “economic activity” and don’t qualify. If they can’t invest all of the dividends within the year, the wealth firms can negotiate an extension as long as they can prove they’re close to sealing a deal for a part of the receipts.
For Ortega, who declined to be interviewed for this article, the issues he is contending with now are a far cry from those he faced when he started out in the 1960s.
The son of a railroad worker, Ortega and his wife at the time — a seamstress — began producing housecoats and selling them door to door. He then went on to build one of the world's biggest fortunes from quickly spotting popular catwalk trends and turning them into affordable high-street garments. His mega operation now has stores around the world and a market value of about €92 billion. Revenue in the year ended Jan. 31 was €32.6 billion.
The billionaire entrepreneur, who’s notoriously media-shy, continues to be closely involved in management decisions at both Inditex, where he has a desk on the Zara Women floor, and at Pontegadea. He sits on the boards of both firms. His 39-year-old daughter Marta from a second marriage is now the non-executive chair of the retailer. Sandra, his oldest daughter, 54, is Spain’s richest woman through her stake in Inditex.
Despite Pontegadea ramping up its investments in recent years, most of Ortega’s fortune still comes from his majority stake in Inditex. The company’s stock has whipsawed since hitting a record high in 2017, when Ortega became the world’s second-richest person. With a net worth of about $66 billion, he is now ranked No. 15, according to the Bloomberg Billionaires Index.
“It's not easy in Spain to do what he has done when you don't come from a traditional Madrid family,” said Del Canto, whose namesake legal firm has an office near A Coruna, a rain-swept, seaside city in northwestern Spain where Ortega founded his textile empire.
The huge growth of Pontegadea’s real estate portfolio over the past decade, along with its diversification push, have transformed the little boutique firm. Led by Chief Executive Officer Roberto Cibeira, who joined in 2003 from auditing firm Arthur Andersen, it has about 80 employees, with the bulk of them based in central A Coruna.
Inditex’s own headquarters are in Arteixo, just outside the city. The rest of Pontegadea’s staff is spread across the world, including in the US and South Korea, with most of it focused on real estate, although a small team now looks at infrastructure and energy businesses.
In the early days, Pontegadea employees had to scout out prospective deals. Now, a stream of investment bankers comes knocking on its doors, pitching ideas and forcing the firm’s earlier advisers to go head-to-head against large US institutions, people familiar with the matter said.
In 2018, the company put money into a telecom infrastructure firm. Then came a gas pipeline operator, electricity transmission companies and logistics centers.
The diversification hasn’t all been smooth sailing. Less than three years, after Pontegadea acquired 10% of Telefonica SA’s telecom towers operator, the phone company and investor KKR & Co. decided to sell the firm, forcing Pontegadea to divest too. The family office doubled its money but wasn’t happy to be left with added capital that needed to be deployed, according to two people familiar with the matter. Officials for the family office declined to comment.
Then, in 2022, it splashed more than $700 million on US logistics centers. It was Pontegadea’s first foray in the space and not a well-timed one, coming at the peak of the industry’s business cycle, the people said. But it was done because the firm needed to work within a stringent time frame.
This year, the company tried to acquire a stake in Iberdrola SA’s Spanish renewable energy business but didn’t make it past the long list of prospective buyers, according to the people. Lacking staff with expertise, its offer was way too low, they said.
With even more money continuing to pour in, Pontegadea’s spending challenges are only likely to grow, though it's unlikely Ortega will complain — at least not in public.
“Ortega minds his own business,” said Del Canto. “He keeps quiet politically.”