Why do you think Amancio Ortega invests in real estate crisis in bricks?
The owner of Inditex Group and one of the ten richest people in the world (according to Forbes magazine assigned to 23.921 million euros, equivalent to almost 2.5% of Spanish GDP) is buying real estate assets worldwide unique but especially in Spain in the middle of the apocalyptic collapse of the national real estate industry.
Your past investments have been buying in Madrid capital of the former headquarters of Axa , the former headquarters of terra and the headquarters of Caja Duero, and the emblematic building of Banco Santander and more recently the Picasso Tower , all in the ride de la Castellana. He has also acquired other properties in excellent locations in the capital as the Paseo de Recoletos, Ortega y Gasset, serrano, Montalban and Independence Square.
Should make us think that, interestingly, the group of Amancio Ortega begins to be more active, coinciding with the subprime mortgage crisis (between 2007 and 2009) and amid the U.S. housing market crash more than 700 million invested in emblematic buildings in chicago boston, the famous skyscraper on 59th Street in mahanttan, new york or epic super luxury hotel in miami, florida, while several shopping centers in Chicago and San Francisco, as well as the bank’s headquarters in Atlanta in washington . but lately buying activity has focused on … Spain!
It seems shocking that in the middle of a brutal recession in the housing sector, where there is widespread aversion to the brick that makes investments in real estate is not considered by experts as “radioactive” because of its potential danger, King Midas and the circulating zara , decide to buy property against the general opinion and no doubt many readers of this article …
But why do it? Why buy when nobody buys?
There are several answers, all obvious and none of them shared the common potential buyers:
1) Amancio Ortega purchase first because no one buys.
In the absence of demand he has a huge range of choice to buy the best properties. warren buffet paraphrasing “we must be greedy when others are fearful and fearful when others have their eyes full of greed”.
2) Second purchase for a mix “price / performance” adequate.
When no one buys the prices are very good. without excessive cuts to some so-called “vulture funds” pose, now the buyer can make trades in an excellent position not only price but also of funding due to the growing need for banks, savings banks and developers to clean their balance bricks.
3) For example, the Picasso Tower building which some experts was valued at more than 800 million euros in 2007 appears to have been bought at the end of 2011 at 400 million (price) and is estimated about 30 million per year in income from rents (profitability). The sum of the above is summarized in opportunity: buying the best and the best price with good funding.
4) But also for security purchase.
Unique real estate assets are a safe haven for money. effect in a time of extreme volatility in securities markets where investments in sovereign debt bonds are becoming less secure, unique assets due to its excellent location or special features are not as subject to the vagaries of the market and lose little value in the medium term, and also if the “bugs” of these properties are classified as prime, it also reduces the credit risk on interest on investment and asset income.
Other data for the security of real estate over other investments unique is that even Mr. Ortega prefers to enter the building earlier than other investment alternatives as demonstrated by his refusal to enter the capital novagalicia.
5) And finally purchase by investor perspective.
Except in the last years of the excesses of the Spanish housing bubble that was daily price climbing … brick or rather, real estate investment has always been considered a time horizon of the medium-long performance.
Benjamin Graham said “Mr. Market is a schizophrenic in the short term but regains his sanity in the long term.” In that sense it is important to have expert advisers to plan investments advisable to look beyond the moment in which we are and think that because “rain today is not necessarily going to rain tomorrow.
Might be a good time for potential investors, whether they should make reflection emulate, each in its scale, the founder of Zara.
Article written by Jose Parra-Brown, director general of main group.
