Alejandro Elsztain - IIVP Daniel Elsztain - COO Matías Gaivironsky - CFO.

Federico Rey-Marino - Raymond James.

Good morning. My name is Stephanie, and I will be your conference operator today. At this time, I would like to welcome everyone to the IRSA Fiscal Year 2014 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions). Thank you. Mr.

Alejandro Elsztain, you may begin your conference..

Good morning everybody. We are beginning our conference call of the fiscal year 2014 results; and we begin in page number 2 about the main highlights for the period. We can see that the revenues of the company grew ARS2.8 million, which is a growth of 30% comparing last year numbers.

When we speak about the EBITDA, we achieved ARS1,400 million, this is almost 13% comparing to last year numbers. And there is one here, if we exclude the Rigby -- Rigby is the Madison property, the property in the United States, that last year, we revaluated when we bought and we begun to have the control of the building.

When we made this appraisal, we made a gain of ARS137 million. So if we exclude that effect of the revaluation and the consolidation of the Rigby building, the Madison building, the EBITDA grew 26.3% comparing to last year numbers.

At the net losses of the year, we are achieving ARS516 million comparing to a gain of last year, and the explanation is mainly done by the exchange rate and the net financial results that we are going to study deeper later with Matías, and explaining how this is affecting mainly in some assets, but not affecting the rest of the assets that we have still kept in pesos.

The operating results, the Shopping Center sales grew 29.2% annually and 30% quarterly. The office rent this is -- the square meter, at $25.2 per square meter, in line of previous quarter.

The vacancy is 1.6 in Shopping Centers and 1.4 in office buildings, that is almost full, and the sales of investment properties for ARS296 million, 50% higher of last year numbers. For this balance sheet, we have two projects under development.

One is the shop in Arcos, that is done and was ready in the last balance sheet too, and we are waiting for the final resolution, we had some comments that we are going to see later. And in the Shopping Neuquén, this is work in progress, we expect to open this fiscal year 2015, we are adding square meters to the company at Neuquén's province.

So I will introduce now to Daniel Elsztain.

Please, Daniel?.

Thank you, Alejandro. Good morning everyone. As Alejandro mentioned, we are showing strong operation figures. In page number three, we can see that sales in our Shopping Centers are about 30% increased.

We have the same stock in our Shopping Centers and hopefully that will change for the next quarter; and we have occupancy levels of 98.4%, which is a challenge there now to keep it up at that level, and difficult much.

Our sales in pesos grew up and our visitors, this year for the first time we finally reached for the number of 100 million visitors, but this just estimation in the year, and this is about 5% increase compared to last year. On page number 4, we see the rental segment on Offices.

Our vacancy is about 2.5 in the Premium portfolio, and you can see here, if you compare with the market, the market has about 8.1% vacancy, so we are doing better than the market, and also we are having the small decrease in the stock, because of the sales we have during the year, we have an increase in occupation now, as I told you, the vacancy is only 2.5, and leases are stable in dollars, which are 25.2, as Alejandro mentioned, and going up a lot in pesos.

Now talking about the upcoming projects, Distrito Arcos, new premium outlet that we are about to open. We finally have received a favorable sentence from the court this month, and now we are waiting for final permits due to the opening of this 14th Shopping Center of our company.

Its 100% built, the first phase, and its fully occupied and also we have all the leases of the second phase, which are only six stores, that also signed leases. This was the total investment of about ARS250 million across the year and half, two years that we have invested.

On page number 6, we can see also Alto Comahue Shopping, the Shopping Center we are building in the city of Neuquén. It's about a 10,000 square meters of G&A, 96 stores. We already have 30% of that contract signed, and we are negotiating contracts for the 63 remaining balance of the Shopping Center.

The full project, remember, is a mall, a supermarket that we already sold the land, a hotel that we already sold the land, and we still have a balance of about 10,000 square meters for residential or offices in that land.

You can see that on the pictures of the construction, and the estimated opening will be for fiscal year 2015, so it's going to be in the fiscal year. The approximate investment is about ARS250 million again. Construction is on time, leasing is doing well, so we are getting very good traction on the Shopping Center in the province of Neuquén.

Remember that Neuquén is the closest city to Vaca Muerta where -- of the new discovery of the shale oil in the country. There is a lot of activity on this city, in the country. Also, you can see on page number seven, on May of 2014, we finally acquired a store that is next door to our third Shopping Center, which is Alto Palermo.

In terms of sales, remember we have sales of $1,200 per month per square meter in the Shopping Center; and we have been buying -- I mean, we have a property next door to this Shopping Center for years, and we have finally -- we are able to buy the final store, the only remaining unit in the next door building.

So to expand the Shopping Center next door over Avenida Santa Fe which is the main entrance of the Shopping Center. We are now doing all the project, facility expansion and looking for permits, so hopefully we will be able to expand this famous and great Shopping Center in Alto Palermo.

We paid for this store and they will allow us to expand for 3,000 square meters, we paid $3.8 million.

Alejandro?.

If we go to page number 8, we can see about our investment in Avenida. Avenida is an e-commerce company that was created in 2013, and recently, this company obtained two big investors from abroad, one is Tiger and one is Naspers, those are two big investors for the internet business, and has sold the company after a few months.

Remember, that we began this story in August, where we acquired 23% with ARS13 million investment, that was August of 2013. In July of this year, we exercised our call, and we increased our stake to 33.3%, paying ARS10 million.

So in July, a few days later, few investors came, and they invested injecting $15 million plus $1 million more, so today the company is with $16 million on cash on the company, and we decided to sell almost for the same price we paid for $2.2 million abroad, so we recovered the money we invested, and we kept almost 17% of the company, that intends to be the e-commerce for Argentina.

Today this company began with ARS500,000 of sales per month, now is selling more than ARS6 million per month, and having this capital, this company will grow dramatically, and we are investors almost by free, and expecting this company to become the -- like Amazon of Argentina.

So we are very happy of the success of this story, that in few months, was able to find and achieve that buying, organizing, and selling late and having one of the best names on the industry, and probably this will bring a big difference to the rest of the investments on the industry in Argentina. So we are very glad of this announcement.

I will talk now to Daniel, that he will explain us about the properties, sales, in this fiscal year..

Thank you, Alejandro. On page number 9, we can see the sales we have on our investment property, and that's the main reason for the decrease in the stock on the Office segment. You can see that we sold Bouchard Plaza about 4,500 square meters for a total of $23.7 million, representing about $5,280 per square meter.

This is a Class A building, and also we sold about 1,900 square meters in Pirelli, which is the neighborhood of Retiro, for a total amount of $6.7 million representing $3,460 per square meter. This is just to give you an idea the good prices we are getting on both -- on Class A building -- on Class A price and Class A buildings.

On page number 10, we can see -- we acquired from Cresud, the Estancia La Adela, which is a firm in the locality of Lujan, and this is about 60 kilometers from Buenos Aires.

We believe that we can make here a confirmation as we did in different times in the past in IRSA converting a farm into a residential area, having the proximity to the City of Buenos Aires.

This will be future development, if we can have any clarity that we can share, that we believe the proximity to the city is fantastic and if you can see in the pictures, there is some trees that were planted as [indiscernible] for the last year, so now we [indiscernible] closer to them, to get to develop, that's why we bought it, and we paid ARS201 million representing $2.4 per square meter.

This is very cheap if you compare what we can make in this place. Going to international investments on page number 11, we can see on the Lipstick Building, we have been doing well in terms of occupancy. We finally overcame the 90% penetration that we have now, we are at almost 93% occupancy, with the rents going up.

We recently signed three new leases of about 2,000 square meters, and now at the average of $65 per square meter. If we did by the foot, now we are signing contract leases about $70 a foot per year and this data, we can give you that number [indiscernible].

But the building is [indiscernible], its tenants are very happy and occupancy is going up, and everything [ph] to everyone. We finally sold our 1 million remaining shares of Hersha at an average price of $6.74 per share, so we have no longer any questions on Hersha. We still have on Supertel -- are investing in Supertel.

Finally, we are seeing better results on the last six months on -- on this year, and there was a new issuance of shares, that it was at the price of $1.60, and with that new issuance, we were able to convert -- not to convert, but just to replace the new conversion price that we have for our preferred C-series, so now we could convert our preferred Cs into common share at this price of $1.60 per share.

Also, you can see on page 12, we recently went into an agreement to sell our property on Madison 183. We -- just to give you an idea, when we first came in, we invested $85 million in 2010. We went into contract to sell this building to Tishman at $185 million. There as a debt of $75 million that will be cancelled.

Remember, we originally had a debt of $60 million, then when we bought out our partner, in 2012, we increased that debt to $75 million, and now we still have that $75 million that will be transferred at [indiscernible]. We expect to close this sale by the end of September.

We are working on compliance with all the agreed terms, and we will do it by the end of the month. Then selling at $185 million represents a cap rate of 3.8% at today's income of this building. So now going to International and introducing Matías Gaivironsky, CFO of the company..

Good morning everybody. Thank you, Daniel. Going to page 13, here we have the latest investment that we did in IDB, that is a holding in Israel, its one of the largest holding companies in Israel. We closed the transaction during May of this year.

According to the transaction, we invested around $140 million in Dolphin, that is the vehicle that we are using to invest in IDB. IRSA control 86% of Dolphin today. IDB is holding that has participation in different industries.

Here you can see that the main companies of the holdings are PBC, that is a real estate company; Super-Sol, that is a supermarket chain; Cellcom that is the second operator of telephones, mobile telephones in Israel; Adama, that is agrochemicals, and Clal, that is an insurance company.

We entered into partnership between Dolphin and Extra Holding to control IDB; it’s a 50-50 investment. So together with Extra, Dolphin controls 57.8% of IDB today, the rest of the holders that came from the restructuring of the previous or the former parent company of IDB, that today are shareholders of IDB.

This company is listed in the Tel Aviv Stock Exchange since May, and we decided to value our investment in Dolphin and in IDB through market value. So today, we are recognizing a loss of around ARS516 million because of the decrease on the price of the shares between the day that we invested and the price of the shares today.

After the closing, we did a capital increase in IDB for ILS325 million that was fully subscribed, it is a Dolphin and Extra subscribed around 70%, and the rest of the shareholders subscribed 30%. So today, as I mentioned the stake in IDB is 57.8%. We are very excited about this investment.

We believe that there is a very good opportunity in the medium and long term, so we are not expecting results in the short term of this investment, and we decided to value -- add market value, set to be conservative and reflecting the evolution of the shares in this investment.

Going to page 14, you can see our investment in Banco Hipotecario, remember that we control around 30% of Banco Hipotecario. This year, the results that came from Banco Hipotecario were ARS184.4 million, that is compared with ARS59.9 million of the previous year.

Banco Hipotecario had this fiscal year, very good results, mainly due to financial spreads and the portfolio results; and this year, Banco Hipotecario paid a dividend of ARS30 million compared with the previous year that paid ARS100 million.

In the graph of -- in the bottom, you can see the evolution, the orange bars are the evolution of the market value of our stake in dollar terms. So this year, the shares increased from $191 million to $132 million.

Going to page 15, here you can see the evolution of the different segments on the operational side; so you can see that Shopping Centers in revenues grew 26%, Offices 17%. We have a decrease of around 30% in sales and development, 47% increase in Hotels and International increased 122%.

When you go to the EBITDA line, you can see evolution of 20% in the Shoppings. This year we have a onetime effect that the company is implementing and a stock plan for all the employees of the company. So we are recognizing the cost of that plan in this fiscal year, in the last quarter of the fiscal year 2014.

So excluding that effect, the EBITDA of the shopping center line grew 26%, in line with the previous quarters. In the offices, increased 23%, in sales and development 39%, and decrease in the hotel -- although this is a percentage compared with the negative losses of the previous year.

This year we have better results of ARS25 million, and International, a decrease of 95%, that is mainly the consolidation of Madison that we recognized the previous fiscal year and this fiscal year, we are not recognizing the gain.

Remember that, we -- as Daniel mentioned, we are in the process of selling the Madison building, and we have in our books, the previous appraisal that is $147 million, and we are selling the building of $185 million. So we will recognize the difference upon the closing of the transaction.

In the EBITDA margins, here you can see a decrease in margin levels in Shopping Centers from 75.5 to 73; but as I mentioned, this considers a onetime effect of the implementation of the stock plan. Excluding that effect, the EBITDA margin increased to 77.2%, that is in the line of the previous fiscal years.

The breakdown of the EBITDA, shopping center still the most important cash flow generator of the company, with 68% of the total EBITDA. Going to page 16, and this probably is important to understand the losses that we have in this fiscal year.

This fiscal year, the exchange rate evolution we suffered in Argentina, the devaluation of 50.9% against the dollar, compared with the devaluation of 19% in the previous year. That generated FX losses to the company, because we have most of our debt in dollar terms, and we are recognizing all the difference against our debt.

But we are not recognizing any gain on our assets. Remember that real estate in Argentina was always quoted in dollars -- had correlation with the dollar. So all the assets we maintain at historical pesos without any assessment against inflation or against market value.

In the bottom of the slide, you can see an example, an evolution of the A Class office prices in Buenos Aires, and you can see that prices in dollar terms is still strong, with good evolution.

So when you see the net income line with losses, that is mainly reflected only in devaluation, but in pesos term the company, if we recognize all the gain from depreciation of the assets, in pesos terms, you will see strong gains. So that is the main effect, going to the page 17, we have to understand why we lost the ARS560 million this fiscal year.

The rest of the lines, evolution, we have better results in the Shopping Centers, in office, in sales and development and the hotels, all the business generate, all the segment lines generate good results in pesos term. Then in the International line, you have here -- this is the comparison between the previous fiscal year and this fiscal year.

In the previous one, we have the results of Madison, the consolidation of Madison that we don't have this fiscal year; and in this fiscal year, we are recognizing the loss from the recognition of market value of IDB, that generates ARS516 million. This is the other important effect that we have this fiscal year.

The rest of the lines are -- the profit in the other segment is the Banco Hipotecario, mainly taxes that reflect the credit that we have for the losses that we are generating. Going to page 18, here you have the breakdown of our debt.

Our debt remains -- net debt at $555.6 million, that is higher than the previous fiscal year, because we used to have more cash from the -- when we sold the Hersha shares that we invested in IDB. So that effect in the net debt line, is the increase for that reason. In the ratios, we maintain conservative ratios, net debt-to-EBITDA of three times.

Remember, that not all of our assets are generating EBITDA, so this is only 60% of the assets, so with those numbers, we have a ratio of three times and net debt to net assets around 46.1; but net assets, we are considering at book value, that of course is not reflecting the real value of the assets.

Although with the real value of the asset, this figure is much lower. Other financial highlights during the fiscal year, we paid a dividend of ARS250 million.

This fiscal year we launched and we bought back shares of IRSA, we have about 0.84% of the shares with our share repurchase plan, and we also after the fiscal year, we cancelled one seller debt that we used to have when we acquired Soleil, so we cancelled $12.6 million after the closing of the fiscal year.

So those are the main highlights on the financial side. So now we invite everyone for questions..

(Operator Instructions). Your first question comes from the line of [indiscernible] with Morgan Stanley. Your line is open..

Good morning gentlemen. My first question is, I think I heard you guys say cap rate for Madison 183.

Could you repeat that?.

Yes cap rate, let me go -- you can see on page 12; cap rates; net income of [indiscernible] cap rate of 8%..

Okay.

And what is the expected use of proceeds for that asset?.

We are considering different opportunities. We did from 2008, when we started to invest abroad Argentina, we probably will reinvest that money abroad Argentina.

So we will grow both organically in Argentina, through the cash flow generation of the rest of the project, and with the proceeds of the selling or the [indiscernible] of any of the assets abroad Argentina, probably we will reinvest abroad, in the current projects or another..

Okay.

And I just wanted to get a color on how you see shopping center sales going forward, considering the current macroeconomic situation in Argentina? Do you expect it to stay in line with what you have seen over the last 12 months? Do you expect it to decline a bit? Just basically, your notion of where do you think its going?.

We believe we will see the trend similar as the value [ph] today. There is a chance that we will not be able to keep up with inflation, but nevertheless, we see that the people -- interesting to buy Shopping Center, and the government is incentivizing (sic) consumption. So we don't see any major change in the trend for the short term.

Although with the political things in Argentina, you never know..

Your next question comes from the line of Federico Rey with Raymond James. Your line is open..

Yes hi. Good morning everybody, thank you for the call. I have a question regarding the Shopping Center business. I would like to understand, according to my numbers, I can see that there is a reduction in the EBITDA margin for the Shopping Center business. If you can give us a more [indiscernible]? Thank you..

Thank you, Federico. The main effect here is the implementation of stock plan for all the employees of the company. So we are in the process of approving with the local SEC. That plan, we are recognizing this fiscal year to effect. That is roughly, we will distribute up to 1% of the shares of Alto Palermo between employees.

Its not -- probably we will distribute less than 1%, but the effect on the cost of the company is around ARS45 million. So that is the effect that is one shot, that is not cash, is not all cash, because some of the shares we had, but we are recognizing due to the accounting rules in this fiscal year.

So that is one shot that we won't repeat in the future..

Okay.

So you would be expecting an improvement in EBITDA margin for shopping malls, right?.

Yes definitely, when you exclude that effect from the margin, this fiscal year we have around 77% of margin that is in line with the previous fiscal year..

Okay. Thank you very much..

Okay. (Operator Instructions). I am showing there are no further questions at this time. I would turn the call back over to the presenters..

So we would like to thank everybody. We are closing very good year, if we talk about the generation of cash in the businesses.

Not very good at the net income, because of what we explained on the conference; and we are very optimistic about the company doing, growing, investing in the land bank we have, and rotating our portfolio, when we see other opportunities. So thank you very much, and we will see you next quarter. Have a nice day. Bye..

This does conclude today's conference call. You may now disconnect..