What do you buy for the man who has everything? For Amancio Ortega, the world’s second-richest person by a long shot, the question is instead “How do I hold onto what I already have?”
The news leaked late Friday afternoon that Ortega, acting through his family’s investment arm, had again swooped in and paid a jaw-dropping sum for a slice of Miami real estate. His latest prize was downtown’s Southeast Financial Center, Florida’s tallest office tower at 55 stories and a landmark in Miami’s skyline. The deal was won with a $517 million all-cash bid.
But while market watchers here applauded Ortega’s purchase, saying it shows Miami is still a magnet for foreign investment, the Spanish billionaire’s motivation for a deal as large as this is more practical — capital preservation.
Sources told The Real Deal that just like the Blackstones and Prudential Financials of the world that do business internationally, Ortega’s wealth — Forbes pegs his net worth at $74 billion — is subject to currency devaluations and other volatile factors that his investment team must consider.
His strategy, as chronicled by a trail of record-breaking property deals over the past year, is deceptively simple: buy the biggest buildings in the biggest cities and hold onto them. Anchoring one’s wealth in real estate is an age-old tactic to hedge against the swinging financial markets.
The first of his high-profile purchases appears to have been in 2011, when he stepped down as chairman of his clothing conglomerate Inditex. As Bloomberg reported, he outgunned Tishman Speyer Properties that year with an all-cash $556 million offer for Madrid’s Picasso Tower. The all-cash offer became somewhat of a calling card for Ortega, who leverages his immense wealth to beat out competitors.
It’s a game plan he used to win the Southeast Financial Center at 200 South Biscayne Boulevard, sources said, though it’s unclear what other investors were in the running.
Some of Ortega’s other notable purchases: a historic building in New York’s Soho neighborhood for $145 million last year, San Francisco’s Tiffany Building for $135 million in September, and the Cepsa Tower in Madrid for $550 million in October.
Published reports figure his portfolio now encompasses some $10 billion worth of properties in New York City, London, San Francisco, his home country of Spain and other international locales.
“When you travel around the world and look at the best assets in every gateway city, you will find that he’s the preferred buyer,” said Michael Comras, president and CEO of Comras Company, who sold an entire block on Miami Beach’s Lincoln Road to Ortega last year for $370 million.
But for all the headlines his purchases garnered around the globe, Ortega is known as a somewhat reclusive figure. The 80-year-old grew up as the son of a poor railroad worker in Spain and built a clothing empire after founding Zara in 1975, eventually beating out even the likes of Warren Buffett on the Forbes wealth ranking. He rarely grants interviews to the media, dresses relatively casually and is said to live in a modest Spanish home.
Flashy or not, Ortega’s past dealings certainly came into play with his purchase of the Southeast Financial Center.
When JPMorgan Asset Management first began shopping the property this summer with HFF’s Manny de Zarraga and Herman Rodriguez, there were no email blasts offering walkthroughs or fliers handed out to the public. A source with knowledge of the deal said specific buyers were courted, including Ortega.
“It’s a very well-defined universe of players,” said the source, who declined to be named. “Anybody who is approached is targeted directly.”
A quick glance at the building shows it met Ortega’s criteria: with 1.2 million square feet of rentable space, the Southeast Financial Center is Miami’s biggest office tower, overtaking the Miami Center by roughly 400,000 square feet. And with office developers still competing with condo builders for land in the downtown area, a new tower of that size isn’t likely in Miami’s immediate future.
In the fall, after Ortega’s investment arm took a more serious interest in the offer, commercial brokerage CBRE was brought on to handle much of the due diligence. Price negotiations, however, were undertaken by the billionaire’s investment team.
Tim Gifford, a managing director at CBRE, said Ortega has a small group of real estate, finance and legal experts based in the U.S. that handle these deals on behalf of the billionaire’s investment company, Ponte Gadea.
Even with the sky-high price tag, Ortega appears to have gotten a good deal for an asset that’s 88 percent leased with coveted tenants like law firms and financial groups, Colliers International Executive Vice President Stephen Rutchik said.
The Southeast Financial Center purchase broke down to roughly $450 per square foot, Rutchik said, while the SunTrust building at 777 Brickell Avenue sold for a higher $485 per foot last year. The tower at 800 Brickell Avenue traded for an even larger $533 per foot in May 2015.
“To buy an iconic tower at prices that are down from last year,” Rutchik said, “it makes a great deal of sense.”