Daniel Elsztain - COO Matias Gaivironsky - CFO.

Good morning everyone and welcome to IRSA's Third Quarter 2015 Results Conference Call. Today's live webcast, both audio and slide show, may be accessed through company's Investor Relations website at www.irsa.com.ar/ir by clicking on the banner, conference call.

The following presentation and earnings release issued last week will soon be available for download on the company's website. After management's remarks, there will be a question-and-answer session for analysts and investors. At that time further instructions will be given.

[Operator Instructions] You will also have the possibility of sending a question via webcast by clicking the question to host tool. Before we begin, I would like to remind you that this call is being recorded. And that information discussed today may include forward-looking statements regarding the company's financial and operating performance.

All projections are subject to risks and uncertainties, and actual results may differ materially. Please refer to the detailed note in the company's earnings release regarding forward-looking statements. I will now turn the call over to Mr. Daniel Elsztain, Chief Operating Officer. Please go ahead, sir..

Hello, good morning, and thank you everyone for joining us on a third quarter results conference call. During this quarter exactly on March 17, 2015, we opened our 15th shopping center in Alto Comahue after years of years of promising, new shopping center is finally open.

We have solid channel sales growth during the quarter, we had good results in office and hotels during the quarter. Sales of investment properties were about 801 million pesos during the nine months of 2015 fiscal year. And on February 15, we did an additional impact endorsing for $105 million.

The summary of the financial results upto the nine months of 2015 we had revenues including the sales of investment properties for around 5.1 billion pesos, that is 135% more than the nine months of 2014.

The EBITDA of this period was about 2.1 billion pesos, it's a growth of 99.7% versus the nine months of 2014 and if we exclude the effect of the selling of the investment properties, the growth on the EBITDA was around 19%. Net income for this period was a loss of 163 million pesos versus the loss of 78.8 million pesos on the nine month of 2014.

Talking about operating results on the third quarter, we had a good - we can see on page number 3, a growth of 35.4% in the sales of our tenants, if we want to see this at same-store sales, its 31.3% increase and this is the effect of the inclusion of the two shopping centers.

We included Distrito Arcos, and Alto Comahue on this quarter so we went from a stroke of 311,000 square meters to a stroke of 333,000 square meters on this fiscal quarter. So our stock grew up occupancy remains very stable at very high numbers. This is including the two operating.

Sales went up and we have to be here to consider that on March we see a big increase and of course it's because we added new shopping centers and also because the holiday came instead of April last year we had the holidays on April, this year it came on March so we had these two effects.

And we are very stable, from visitors, we will see the number growing because we included no shopping centers. On page number 4, we can see the opening of the 15 shopping center in the province of Neuquen.

This about 9,500 square meters of DLA, 104 stores, at the closing of this we had almost 90% occupancies since then, we have been working and we are now about to sign the contract to have 95% of this shopping center occupied.

The shopping is big event on the city, we have seen very good sales, little bit above our expectations, and everyone wanted to see this new shopping, it's real big event, on the inauguration we are just getting good comments from tenants, good comments from the customers.

We still have here the next year expansion that is next to shopping center and we are working about what kind of percent we can do in this land.

During this fiscal quarter we also did the expansion of the food court in Rivera [ph] shopping in the province of Santa fe, we went from 51 stores to 65 stores, and the operating of this new food court and the moving of this was on January 15, and we increased about 1,100 square meters of the shopping centers.

There is a big transformation on the shopping center that we started when we brought the shopping center, and now we can see new brands, new customers, so we are very happy with the performance of this shopping centers. Again, this is a very small shopping center but has a very good future.

On page number 6, we can see also a small expansion that we did impact in our quarter shopping, this is in the City of Buenos Aires, we had an intervention on the certain level, the level of the food court, we replaced some food court stores for retail stores and we also grow in part of the mall.

So we included now - we did an expansion of about 700 square meters to the GLA, it's about 5% of the GLA increase, and this under development will be finished in the coming months. We have very high expectations because these shopping really change the perception.

Now the near trend in shopping center in the city and everyone wants to come into the shopping center, we didn't have space, now we have space to bring new tenants, and we are very confident that the future of the shopping center will keep growing.

On page 7, we can see some information about our strong operation figures in office centers, in office space. Our portfolio by the end of the quarter was 112,000 square meter, till then we did - we sold some of this space, if you want to see the stock available office, it was reduced to 104,000 square meters, that is a direct reduction of 7.5%.

And our interesting is that our average list price has gone up. If you remember we talked about this in the previous calls that we had a strange levy, that the price could go a little bit high, and we are seeing that on our negotiations.

And also what we stalled, I mean remember we are trying to sell the non-core or both aspect we're seeing that the value of the rent is not as much as we can so that also help us to grow that little bit on the price of the average price value. So occupancy remains very stable, lease in pesos went up, and also in dollars went up.

Just had to have an idea, the top building - remember when we build the shopping center, we had a next store office and it was very difficult to get tenant for that building, today it's the opposite, we have more people interested to be in there in the building, that is the space that we have, so the latter increase rents and now let me inform you that we are about 15% to 20% high on price in dollars that the previous concept we have on the same building.

We didn't do the final as a second round of the listing but this is the trend we are seeing. On page number 8, we can see the transaction we bid after the closing of the quarter - of the third quarter, but after relevant operation we will disclose this information.

We did a partial sell of the Intercontinental Plaza building for 376 million pesos, a total area of 9 floors and 72 parking lots, the space that we sold is 8,470 square meters and we still have 14,000 square meters that we have on the building, plus the remaining parking spaces.

This give us a price per square meter about $5,000 and a cap rate of 5.5%. The recognition on our balance sheet will be at the moment that we put a deed [ph] that will happen from now till July, but we got all the money from the transaction, it's in our hand.

Remember that we had this building that was most recently transferred from IRSA to IRSA Commercial Properties. At the moment we did that transaction we were not able to recognize gains but now that we are selling this property, we can recognize the gain both, in IRSA Commercial Properties and also in IRSA and these are the figures that we can see.

At the level of IRSA Commercial Properties we at gain of 122 million pesos, and in IRSA, the gain that we will recognize will be a gain of 315 million pesos. So we are very happy with this scales, we will continue on looking for these opportunities, the cap rate is very low in Argentina and we have the opportunity to sell good offices and buildings.

Now we will talk about financial results. I introduce Matias Gaivironsky, CFO of the company..

Thank you, Daniel. Good morning, everyone. So going to page 9, we can see the breakdown in different segments of the company, we are very happy with the performance of our rental segment and in general terms, the rest of the segments all generate good results in terms of EBITDA.

So revenues grew 29% in shopping centers, 26% in offices, and EBITDA for shopping grew 28% and 31% for offices. Here we are excluding the effect of the cost for the transference of the office portfolio from IRSA to IRSA Commercial Properties that generates a cost of around 110 million pesos, we had explained from that calculation.

Sales and development also grew significantly in the nine months period, increasing by 368%, that is mainly because of the office buildings and the office floors that we sold during the nine months period that exclude the sale that we did in the last week of the Intercontinental Plaza that we'll recognize in the next quarter on the following one.

Offices grew at 13% and international - we hear include the sale that we did in of Madison building in the last nine months period. So EBITDA margin grew in offices from 69% to 71%, and shopping remain at the same levels, and around 78% on hotels, the same level than previous quarter.

So the breakdown between EBITDA of the company, shopping centers, build at segment number one of the company with 74% participation, that exclude the sale of Madison that we did in the last quarter. Going to page 10, here we include the results that we received from Banco Hipotecario.

This quarter we received from Banco Hipotecario 98.7 million pesos against 174 million pesos in the previous year, that is mainly due to financial results that demands generate last year against this year that was lower results from the financial side. All the operational figures remained very strong with very good results.

We received a dividend this January of 12.9 million pesos according to our stake but the demand [ph] at 242 million pesos.

And in the bottom of the slide you can see the evolution of the evaluation of our stake in Banco Hipotecario that went from $100 million in the previous year to $300 million in this year, so the performance of this year were very good than the last year. Going to page 11, here you can see the chart of IDB - of the structure of IDB.

Tenures on IDB worked out in February, we did an additional investment of $105 million, so we participated in the rights offering that IDB did in February. So therefore holding [ph] increased the stake to 49%, [indiscernible] of our Chairman has piece of stake on pursuit to buying company of IRSA did an investment that acquired 12.5% of IDB.

And our partner, [indiscernible] you remember that we had started this investment with a 50-50 partnership with him. He doesn't participate in the rights offerings or he will dilute it, and today the current stake is 16.2%.

Having said that, it's important to mention that today there is an arbitration proceeding in Israel, we are starting on arbitration proceeding because our partner is claiming towards certain issues that he believes that he has the right to acquire more shares from our recent investment.

So that of course we don't think that he is right, so we are in that arbitration proceeding that will take place in the next month in Israel.

Besides that, we - after the closing of this nine months period, we did an additional finding, an irrevocable proposal to the Board of IDB that mainly the main terms of that proposal was that Eduardo Elsztain should be appointed as Sole Chairman of IDB, and IDB commits to advance the obligation to exercise serious warrant number 4 that were issued by IDB, remember that that has a strike of 1.66 today to give you an idea the price of the shares of IDB is 1.58 to almost at the money [ph].

So we commit to advance the proceeds of 1.50 that originally was planning to exercise during the month of July, so we commit to advance that obligation to May.

Also we commit to make a future capital inspection for upto 100 million shekels that is roughly $25 million, subject to certain conditions, this is like an underwriting commitment but is not clear the final whistles of that. So this proposal was approved by the Board of Directors of IDB.

So that is - that a subsequent event that happens in the last week.

Going to page 12, here we include evolution of the IDB share quote in the Telereva [ph] stock exchange and from here you can see that since our investment the shares of IDB reduced significantly and we have decided to recognize our investment in Israel or our investment in IDB according to the market value.

So we are recognizing the losses from this evolution. In the last period that we closed and we recognized that resulted price of the share was 197 cents and today at the end of the quarter was 134.4 cents, and that's the rate additional losses that were recognized in this quarter.

So [indiscernible] here you can see the main explanations of the financial statement, the main impact were IDB on taxes, that is below the operational line. On the operational results we have strong results in all the business segment, shopping centers increased by 223 million pesos, that is 33.7% higher than the previous year.

Offices, the result was 64 million pesos lower than the previous year, that is mainly because of the transfers of the assets from IRSA to IRSA Commercial Properties where we have to recognize the cost of 110 million pesos, so excluding that effect we have positive results, and also we lower stock we review our stock of offices, and even though we have better results on the segment.

Sales and development, very good result, 357 million pesos more than the previous year, that is mainly because of the sales of office buildings and office some floors that we saw in the nine month period.

Hotels were slightly lower than the previous year, in line was $4 million pesos lower than the previous year, that is mainly because of reduction in the occupancy of our hotels from 71.4% in the previous year to 68.2% this year.

And then in IDB, our international segment, we recognized losses 432 million pesos lower than the previous year, that is mainly IDB. So the total recognition of losses from IDB is around 900 million pesos, that are included in this line in the international line.

Other is 47 million pesos lower than the previous year, this is mainly because of the results from Banco Hipotecario as I've explained that we received lower results from Banco Hipotecario from 164 million pesos in the previous year to 98.7 million pesos in this year.

Then the other important effect is the net financial results where we have positive difference of 384 million pesos and this is mainly because of the evolution of the exchange rate. In the previous year we have a huge devaluation and this year the exchange rate remains stable, so we are not recognizing the same losses than the previous year.

And in taxes the main effect is Madison, where have to pay taxes because of these full of forwarding basement in Madison. So going to page 14, here you can see the breakdown on the debt amortization schedule of our debt.

IRSA standalone remains with very low level of debt, the net debt is around $90 million, remember that we transfer the assets of the office assets to IRSA commercial property, so IRSA has today a credit of $246.4 million, it's accredited with IRSA Commercial Property and the structure was created to match the debt between the international debt of IRSA with this credit.

So that generate a lot of efficiencies in terms of having the debt in the operational company. So we transfer most of the debt to IRSA Commercial Properties.

And today at the IRSA Commercial Properties the level of debt is very low, here we include a ratio that is not the best way to see but we analyze the EBITDA self-divided by nine EBITDA, and multiplied by 12, this is not the right way to do it because in this quarter we have to transfer the office portfolio that only generate results for three months, not for the whole period but is the easiest way to sit and even though the result is on - the net debt EBITDA is only 2.3X EBITDA.

So with this we finish the presentation. So now we open to receive your questions..

Thank you. The floor is now open for questions. [Operator Instructions] Your first question comes from the line of Gaurav Gulati [ph]..

Good morning, gentlemen. I was curious to know a little bit more about the investment in IDB that you announced and was approved by the Board of Directors on May 6.

I was wondering if all these commitments go through the 150 million shekel warrants and the commitment for 100 million shekels of capital injection, what does that mean in terms of your ownership stake for IDBD - for IRSA's ownership stake.

And also, would it go beyond 50% and require consolidation of the balance sheet?.

The investment was divided into - the proposal was to advance a commitment to exercise what our number for, so what are number for - we committed to exercise 150 million, so that will go through that instrument and the other part, the 100 million shekel, it's a new commitment and the structure probably will be a new capital increase in IDB.

It's not defined yet the way that we will inject the money and from which vehicle. In fact the proposal of toll free is to - the commitment is from dosing or any vehicle that Eduardo [ph] is in control. So it's not defined yet how we will inject that money.

Regarding consolidation of IDB is something that is not defined it, according to the current situation we have 49% of IDB so it's not necessary to consolidate but of course if we change that threshold, probably under the current IFRS rule, we could consolidate IDB but that is not defined yet how will be inject the money, so it's not clear if we will participate - IRSA will participate upto 49% and the rest of investment will come from third parties or if IRSA will inject that money, so that is not clear yet..

Okay. My second question is regarding your office properties, if you look at the earnings release for IRSA Commercial Properties, and I compare to IRSA, the new guys, I see that the EBITDA margin is about 60% for IRSA for the office properties, and its closer to almost a 100% for IRSA Commercial Properties.

So I was trying to understand why it does - I mean I know there is different set of office building but the majority are the same.

So I was just trying to understand if there is something accounting wise that is different there and what is accounting for the difference in margins in one - for one set of assets and for the similar set of assets in another company?.

The answer is the cost - regarding the margin is the cost when we transferred the assets we haven't transferred the cost yet, according to our agreement we will transfer the cost since April 1. So probably since April we will start to see the same margins in both companies.

Today the - in IRSA we have some assets that are held for sale, so it's alone 14,000 this quarter mirror [ph] that is still under IRSA level, and haven't been transferred to use at Commercial Properties. So that is the reference why we have some additional square meters on a consolidated basis but regarding margins the main reason is that.

Also there is an accounting effect that we divide our corporate services or our corporate cost into the different segments depending on certain ratio.

So some of the corporate cost of IRSA is allocated to the segment of properties, when we transferred that to IRSA Commercial Properties we haven't did that so far, so most of the cost of the corporate services of the IRSA Commercial Properties who are allocated to this shopping center segment.

I'm probably it's something that we will review in the next quarters..

Okay. Thank you very much..

You're welcome..

And there are no more questions at this time. And this concludes the question-and-answer session. I would like to turn the floor back over to Mr. Daniel Elsztain for any closing remarks..

Okay, thank you. So we see on this fiscal quarter that we keep looking, that we are doing well with the latest, good occupation, we are looking also very low cap rates but what we know and we desire, how we will take advantage of that - we took advantage of that.

And we are also thinking what will end soon, and so we think what's a very good year, we finish the same way. And we hope to see you all in our next call that we would - fiscal year in September. Thank you very much for participating. See you soon..

Thank you. This does conclude today's presentation. You may disconnect your line at this time, and have a nice day..