Alejandro Elsztain - Second Vice President Daniel Elsztain - Chief Operating Officer Matías Gaivironsky - Chief Financial Officer.

Jarrell Golotti - Morgan Stanley.

Good morning, everyone, and welcome to IRSA's Fourth Quarter 2016 results Conference Call. Today's live webcast, both audio and slide show, may be accessed through the Company Investor Relations Web site at www.irsa.com.ar/ir by clicking on the banner Conference Call.

The following presentation and the earnings release issued last week are also available for download on the company Web site. 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] 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. Alejandro Elsztain, Second Vice President. Please go ahead, sir..

Hello. Good morning, everybody. We are beginning our conference call of the fiscal year 2016. And this is the first time that we're consolidating the results of IDBD that represents half of the year of IDBD. And if you go to Page number 2, we can begin speaking about the financial and consolidated results, where the revenues of the whole company was Ps.

32.6 million, which is coming, we divided. And what we try to divide between the two operations between Argentina and Israel to make easier to analysts and to investors from those ARS [4.4000] million came from Argentina and ARS 28,000 million came from Israel operation. And the EBITDA was a Ps. 6,200 million almost Ps.

3 million coming from Argentina and Ps.3.2 million coming from Israel. The net income of the company we achieved a loss of 1,082 -- Ps. 1,872 comparing to a gain of last year. Last year and these are the combination of a gain that Argentina brought Ps. 179 million came from Argentina and a big loss to Ps.

2 billion from Israel and attributable to the shareholders of IRSA, we achieved a loss of Ps. 1.2 billion. This is -- we try -- make easier the analysis of the two and we are going to show that majority of the losses came from non-cash things that happened to the balance sheet.

We talk about Argentina business center in this year IRSA sold 1.2% of commercial properties and we'll reduce our participation from 95.8% to 94.6% of the company. There were very strong results at the rental segment and the sales of investment properties during this year.

And we're beginning lot of new developments in the next year like the Polo Dot, Catalinas, and Alto Palermo expansion then Danny will explain later. We had the allocation of company structural debt and its commercial properties that is going to be maturing in 2023. And we issued a note very recently this week.

We issued a note of $184.5 million at 7% and Ps. 384 million at BADLAR plus almost 300 basis points. And this is going to cancel the existing debt.

At Israel business center we modified the tender offer obligation and the payments during March of 2016 and the listed IDBD and there was IDBD, the DIC company accepted a very good offer that we received from ChemChina to sell the 40% of the state that we own in ADAMA, and there was some very good news too about the issue of notes at 4.25% plus CPI at IDBD level, a long time ago we didn't issue on this was to refinance shortened and note issuance.

So this is very good move from Israel too. So I would introduce Daniel now..

Thank you, Alejandro. Good morning everyone. We'll start on page number 3 talking about the Argentina business center with a shopping mall segment. As we can see the figures for this fiscal year, we have an increase of sales of 34.3% and if we compare the same shopping centers it's 29.6% this is very high levels of sales.

Nevertheless, we did not reach the full amount of inflation that we have for this year. In terms of occupancy rate we are running shopping centers of 98% occupancy 98.4% exactly and this is really high, high levels of occupancy, which is attritional when we have some stores going up -- going out as a shopping or renewals whatever.

And in terms of visitors we are very stable. We are having about 112 million visitors we have a step that we can see from 2014 to 2015 and mainly this is explained by the opening of new shopping centers since then we're very stable and our shopping is still very attractive and we're having a lot of customers visiting our shopping centers.

On page number 4, we can see some office buildings numbers we finish this is fiscal year on the 98.6% occupancy, which is very similar to last year, but we can see that we went up from the previous quarter this is mainly explained, because at the end of the previous quarter we had some renewals and rolling on one of our building.

So now we're back to the levels of 98%, 99%, which is very high and we're very happy to have these levels of occupancy. The whole market is going up in terms of occupancy and also is going up a little bit in terms of pricing. On the bottom of this page, we can see our stock in terms of office space.

In December 2014, our portfolio was 10% of the market share of Buenos Aires CT on A-plus buildings since then and the total portfolio was 95,000 square meters.

Since then, do now we have sales for approximately in total of -- we had sales, so we will reduce our portfolio from 95,000 to 79,000 square meters, so we reduced the market share from 10% to 8%. We took advantage of high prices, low cap rates and those buildings that we wanted to get out to fly to quality.

So now we are developing and we already launched these two big projects in office segment, one is Polo Dot, which is the first phase, and also Catalinas, that will put us in a situation, when we finalize these two projects, to have 125,000 square meters and that will be approximately a 12% of the market share at that time, not at today's time, but at that time holding incorporation of buildings by 2019.

The incorporation of these two buildings will increase about 80% our EBITDA. So it will be from today's $19.5 million to approximately $34 million. On the following page, we can see some pictures of these two projects. First, the Polo Dot is an investment of $55 million, GLA of 30,000.

As I mentioned, we still have here some more place to build but we didn't start and we didn't announce yet. The opening of this building will be for fiscal year 2019. Something amazing. We just started to move -- to do some demo because it's an old building that will be converted in a Class A building.

We already have signed two contracts on the building. So the majority of the building, 75% of the building is already leased. First time this happens ever in our history of -- in office segment. On the right side of the page, we can see the Catalinas office building project. This is an investment of about $100 million, total GLA of 35,500.

The opening of this building will be one year after the other one. On this building by December 2015, we sold to Globant, which is developing company in Argentina, the biggest in Argentina -- software developing, sorry. We sold four floors for Ps. 180 million that's plus $12 million that we will collect during construction.

Also on April 2016, there was a sale from IRSA to IRSA Commercial Properties for 16,000 square meters. The idea is to have a long-term lease on this space. Still IRSA will have -- has a balance of 14,800 square meters. The idea here is to hold or to sell that is yet not defined in the strategy, we will see would make sense.

The construction will start very soon. Estimation will be by the end of -- for fiscal year 2020. On the top left of the page, we also can see something, we already announced and we're in the middle of -- we just started construction. It's the expansion of Alto Palermo shopping. This is our flagship shopping center.

It's used to be the name of the company in the past. This is an expansion that will require an investment of approximately $25 million, this is new GLA of 4,000 square metes, and this is not only the investment for the expansion, it's also to upgrading the shopping center to new standards to their level that the shopping is done today.

We're very happy about this. We're actually getting a lot of demand from tenants even before we started construction right in the middle that we're starting construction, estimated opening for fiscal year 2018. And one comment I want to make, this is all the big projects that we have.

On top of this, we have a lot of small projects underway in an expansion of shopping centers, small construction, every center where we see an opportunity to add new square meters, we take it, because it's very profitable.

Area expansion we have in our shopping centers is, we don't have to build usually no parking, no food court, nothing new, but just the new store, so it's very profitable. On the following page, we can see the hotel segment.

This year, although, we see a reduction in the average price from $182 to $175 per room, the average price, remember that there's a big difference in the exchange rate. So the business is a little bit better. Nevertheless, it's very low in terms of total revenues and it's also very low when we compare with our whole portfolio.

By saying that the churn is good. We are coming from having zero returns or very low returns and this is growing a little bit on this year. We expect to have some better times in the future. Some sales and developments we had during 2016 starting from -- on the left side of the page with Dique IV office is a full building we sold.

It's about 11,000 square meters that we sold for Ps. 649 million at that time and that represented 9.5x book value, just to have an idea of the difference in between book value of our assets and the selling price that we achieved at that time and the same is for what we still have in our portfolio.

We sold also a partial sale on the Maipú building of 3,400 square meters, again, 8.5 times book value. That sale was for Ps. 123 million. And also we sold Isla Sirgadero in the province of Santa Fe. We bought sometime ago a big piece of land to have reserved and this time, we decided to sell. We didn't sign any good deal so far.

We had a good offer for 7.7 times our book value. So we took the opportunity, we sold, but we can't kept some rights to have a percentage of the future development on this piece of land too. Now on Page number 8, we can see some of the international things we were doing. On the Lipstick building, we still have our position.

We got the LEED Gold Certificate during this year. Occupancy went up from 92% to 97%, really the building is doing -- the best performing building in -- on Third Avenue in Manhattan, this is well-known in the market.

Prices went up from $65 per square foot to $67 per square foot per year, I'm sorry, it's meter here, so it's meter per month too, sorry, meter per month. And the NOI grew from $24 million approximately to $26 million approximately. The building is doing very well.

It really got back to the high iconic place that it always had, it's a special building built by [indiscernible]. It's back on the market as it is and we have high demand. Every space that we have empty, it's easy to fill it up. Page number 9, we can see our Condor Hospitality Trust investments.

The news that we have here during this fiscal year, we have a new partner that injected $30 million and it's in partnership, also it's part of the Board. They have three board members. The preferred shares, the ones that we exchanged from Preferred C shares that we have to Preferred D shares. Now the dividends are back.

So there's a preferred dividend paid quarterly of 6.25% annual interest, that is back, that's reinstalled. So we are collecting the preferred dividends. The company has really had been a big transformation from economy and very low in hotels to select service hotels to up 100 MSA cities in the country of USA. So there were a few good acquisitions.

The management is completely new. New office is in Bethesda. So we can say that the company is completely a different company with a very good -- we expect good future. The S-11 form is already filed. And we expect there will be a follow-on very soon and more acquisitions to come.

If you turn to page number 11, we can see the Israeli business center and our investments -- sorry I kept the page number 10. The Argentine business center the financial about Banco Hipotecario. Here we have still the 30% -- almost 30% of the shares of Banco Hipotecario the results that Banco Hipotecario brought to IRSA this year was Ps.

257 million an increase of 80% comparing to last year numbers.

At the same time this year we were able to acquire one important building office building in middle of Buenos Aires this in front of the Obelisk and a very, very dense on traffic and this is going to be refurbished soon they're going to re-construct this building on a whole and in the middle of a very, very good location on Argentina.

And this we were able to acquire in this same year an additional 6% of Banco that's exercising the convertible loan that we bought before that is the second floor bank and this second floor bank of the country and the third largest on the right here in the local market. So today we have a 40% through IRSA and 60% for the Banco Hipotecario.

And our share of Banco Hipotecario valuation American value today represent $120 million, the stake of Banco Hipotecario at ISRA level. If we now just move to page 11, we can begin our discussion about the investment in IDBD. Here IRSA controls 68.3% of this company. We have invested up to now $550 million.

And here we spoke, but we're still trying to explain little more in here to explain about the company controls the largest telecommunication company the largest agrochemical that we're going to be probably be selling soon, I mean we are going to explain a little deeper now and the largest supermarket company too.

At the same time the controlling of PBC leading real estate company and farming company through Mehadrin in Israel, the controlling of the second insurance company of the country. And the company that is listed in Tel Aviv Stock Exchange.

On these last months, the main issues where the appointment of the acting CEO and CFO for IDBD and DIC for both of them together in March of this year there was a renovation of the tender offers the float appreciation the delisting and some bonds that they're beginning to appear in this company too.

There was an offer of to sell the 40% ADAMA of ADAMA $230 million that they're going to take help a lot at DIC level to cancel the loans of this company and we're going to explain in little detail that operation. And there was some very good and very important the issuance of debt at IDBD and DIC levels.

And here these are going very good news, because the companies are beginning to refinance after the investment of a lot of cash from Argentina.

Now the companies are beginning to issue at local market, but one of them is still subject to approval, because we are trying to share, there to pledge the shares of the Clal company that we run and we're still on that waiting for the approval from the supreme court of the country.

If you move to page number 12, a short description on some news that they're happening on the company's level about PBC that we're very bold is the 1.1 million square meters of income producing property we need to sell 1,200 residential units under construction this year.

The owned -- we owned 100% of HSBC building and 50% of Tivoli that is more in Vegas 45% of the stake in Mehadrin the leaders of citrus export at avocado in Israel. And there was some very good news about the expansion of debentures and look at what the rates the companies are achieving.

This is a bond of 10 years and we raised for 1.86% plus CPI so and we had a case of one other bond that we issue in a subsidiary that was at 3.16% for 7 years, no inflation. So this is the kind of the rates that operational companies are achieving at the local market.

And what they do with that? They're raising money and they're building a lot of new buildings in the case of PBC is under construction of a lot of office buildings through [indiscernible] and some retail through [indiscernible].

In the case of Shufersal, the largest food retailer, 275 stores, 530,000 square meters, 18 commercial properties, and three big warehouses, so this company is recovering a lot from the bad moments that it had in the past, today became stronger and very positive results last quarter.

If you now move to Page number 13, about Cellcom, the Israel's leading mobile communication operator, more than 2.8 million subscribers, market share of 27% of the country, and this is the evolution of the TV consumers and no business for Cellcom too. CLAL, CLAL is the only company that up to now we couldn't enter.

This is one of the leading insurance, pension and finance group, and over 43 billion assets under management. This is 15% to 20% of market share of the country. But in here, we couldn't enter to the company, still under the process of resolution of some or part of the government that it's asking us to sell.

This is under discussion and there was a big drop of the shares, and this is the main issue of our balance sheet. This is affecting our balance sheet a lot. We are showing the market price of the shares having 55% of the shares, because of that situation, with the Government of Israel, that is why we are showing that loss in this balance sheet.

If we move to Page number 14, we can see what happened on Adama.

As you know, DIC owned 40% of Adama, but there was an agreement to sell this 40% to ChemChina, our partner, and this is because of the issue that ChemChina is intending to buy Syngenta and there was a price that was achieved for US$230 million in excess of the total loans that canceled some debt on the company, really what comes to DIC is a net of almost NIS 800 million, so almost US$200 million.

And this is up to now is not resulted on the balance sheet. This operation was done later to June 30. So this is a big gain that will come to DIC. If this is signed and we expect to being signed before October of this year. I will introduce now Matías Gaivironsky..

Good morning, everyone. So going to Page 16, we have here what we did regarding the consolidation of IDB. To remember the structure, now we are consolidating, we closed our fiscal year in June. IDB closed its fiscal year in December.

And we're using a three-month gap to consolidate their results in our financial statement due to the impossibility to have both at the same time, we will have a lag of three months going forward. So now we have consolidated our June figures with their March figures and we are using the six months further results.

So we will use, since we took control of the company in October last year to March this year, that is the six-month that we will include in our financial statements. So, as we mentioned previously, we separate the structure of our financial statements in two business centers.

One, Argentina, with the same segments than before, the shopping, the offices, the sales and development, hotels, international and financial and others. And the business segment in Israel, with a different segment, real estate, supermarket, agrochemical, telecommunications, insurance and others.

So that is the structure that we have in the financial statement and you have all the information segregated by each of the segments to facilitate the reading. So going to Page 17, we have the different results on the Argentina business center. So the rental segment went very good. We grew 3% from Ps. 1.3 billion to Ps. 1.8 billion.

Sales and development decreased a little 21%. That is mainly because of sales that we did last year compared with the sales that we did this year. Mainly remember that in fiscal year 2015, we sold Bouchard building, the Intercontinental and Madison.

This year we sold Dique IV, some floors of the Intercontinental Plaza, some minor floors in Maipú, and another plot of land in Santa Fe. So that is the comparison there. The financials on other degrees 66% from Ps. 146 million to Ps. 49 million.

This is the result that we basically, the result that we received from Banco Hipotecario that is a shopping lead Reit Condor and before September from IDB. So there are different components in each of the lines. In page 18, for the first time we are including this information that is the operating income and EBITDA from each of the segments in Israel.

We can see, here we don't have comparison, because this is the first time that we are including information going forward we will compare with the previous year, but since the first time this will include the current situation.

So PBC, the operating income you can see here it's all positive the EBITDA all positive figures something important to mention. This is not exactly the same information that you will see in Israel there are different accounting treatment in Israel than in Argentina is the same rule is IFRS, but inside IFRS there are different alternatives.

So for instance in PBC they recognized the investment properties at fair value. We have here all our book value, so going forward we have to segregate from that information and I want to say buildings to go to the book value historical and with amortization. So there are different accounting treatments in each of the segment.

So it's important to mention that these information won't be equal to the IDB information, but you can see here the trend it's EBITDA and NOI positive in all the business line in Cellcom there breaking is minus 71, but when you deduct from there the amortization goes to Ps. 1.4 billion EBITDA positive.

In page 19, so we described the operating income that grew from Ps. 2.5 billion last year to Ps. 3.4 billion last year to Ps. 3.5 billion this year. Some came from the Israel business center 720 the rest came from the Argentina business center.

Here again, this Argentina we have 12 month, IDB we have six months inside then the other important effect in the financial statement is the net financial results here you can see that we have a negative results from Ps. 942 million in the previous year that went to Ps.5 billion this year. So to open this information first you can see here that Ps.

1.8 million came from Argentina these 1.8 you have in the bottom left of the slide the break down, the net financial cost was Ps.1.2 billion that is the interest that we paid. And here we have other evaluations during this year. So in pesos term increase to 1.2 next FX losses Ps.

664 million, we have a revaluation that you can see in the bottom right from 9.1 to 14.8 at the end of this year. We hit at some, but not all so these we protect that with forward here in Argentina that generate a cash gain that compensate these FX losses that is not cash. Other fair value of financial assets generate a gain of Ps. 74 million.

On the other side, on the slide of the Israeli business segment we have Ps. 3.2 billion negative, part of this is the net financial cost of IDB Ps. 708 million and the rest is the fair value BADLAR. As Alejandro mentioned, the shares of BADLAR decreased 73% during this period from October to March 1 from 58 shekels per share that generate this Ps.

1.9 billion of losses that is again, is non-cash. So, we haven't sold anything to give you an idea, Clal is trading around 56% of book value that we believe that is not fair value, the real value of the company. But without these components we finished the net income with gain in Argentina of Ps. 179 million pesos Ps. 2.0 came from Israel.

So we finished with the lots of Ps. 1.9 billion pesos attributable to our controlling shareholders Ps. 1.2 billion pesos.

Going to page 20, we have the breakdown of our debt one important development happened this week we were able to issue debt in the local capital market we issued two bonds, one $184 million at 7% rate three tenure and the other the same tenure Ps. 384 million pesos at BADLAR PLAST at 289.

So with this we were able to refinance all the short-term debt of the company. So we extended tenure to 2019. So, now the company we don't have any amortization in the short run, so we're prepared to keep growing.

Page 21, this is the breakdown of the Israeli IDBD debt, so the total debt as of March is over $692 million, you can see in the bottom left the decrease in the debt of IDB since we started our investment. So, most of the money that we injected in IDB went to cancel debt. So, we haven't sold assets these assets remain the same.

We will decrease the debt from Ps. 4.8 billion pesos sorry shekels to 2.8 billion shekels, so an important decrease in debt with the same assets. And regarding the debt amortization schedule still concentrated some in the short run.

So we're working trying to refinance these in the local market or selling some assets to reduce debt so maybe and to lead with the 2017 amortization, the 2016 is in cash so we have the cash in the company.

We're dealing with an authorization to pledge the shares of Clal, if we get that approval we will have the money to refinance or to cancel the 2016 debt.

And the 2017 debt we're planning or either to issue more debt or to refinance in the local market or to sell assets and also only if the company closed the Adama [ph] transaction DAC will be almost in conditions to start paying again dividends to IDBD so that is another source of flows that we'll have open hopefully this year.

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

Thank you. The floor is now open for questions. [Operator Instructions] Our first question comes from Jarrell Golotti of Morgan Stanley. Please go ahead..

Good morning gentlemen, so my question is regarding the debt amortization kind of specifically your need for 2017.

You mentioned that there were a couple of alternatives in order to finance that at the ADBD level, but what I was wondering is, will any financing or those capital needs are they just -- is there sources of those capital just going to come from IDBD or would you also consider further investments from IRSA Commercial Properties in order to fulfill those needs?.

Good morning, Jarrell. As I mentioned the sources to cover the debt of IDB are first the assets, we can sell assets. Remember that we haven't sold anything in Israel at the level of IDBD yet, second is to issue that in the local market, third is to receive dividends from the subsidiaries.

We can receive dividends either from Clal or from TASE, so we can't -- the companies will decide the dividend, but there are sources that we have open to refinance the debt in the market. So, we are not planning or we don't have any commitment to provide funds from IRSA to IDB..

Great.

My other question is regarding your development pipeline, so you've mentioned already that you have Alto Palermo expansion, you have Polo DOT but in the earnings release you have, if I remember correctly about 300,000 square meters of opportunity and I was wondering what would likely be next and what would it take for those developments to cure within the perspective pipeline that you have?.

Thank you for the question. We typically -- we just announced where we are launching. So there is no certain pattern of the future construction we are going to have.

What I can tell you is that we -- for this year we increased a little bit our typical construction growth and we already announced that we have a few projects that might be launching in the near future.

And I can tell you, most probably something on San Martin, something on the next phases of polo DOT and other potential expansion on shopping centers that we have, but we didn't announce them because they are not going to start yet, so we didn't announce them so, but they will be in the near future..

But is the issue more on the permitting side or is it more capital needs or is it just that it makes more sense to do it on a more prolonged basis?.

We always try to keep up supply with demand. So when we see the opportunity that it really makes sense that we have enough demand in terms of shopping center, we try to move head.

There is only one exception to that, which is [indiscernible] which is a piece of land that we have in the center of Buenos Aires, that if we get permits and this is the one that we see -- are still waiting for permits and so that case is really regarding related to permit, but on the other constructions or projects that we have, typically we will wait for the right time because we cannot, first of all we never we are not going to build everything at the same time and we typically, we put ahead what it makes more profitable..

Okay, thank you very much..

[Operator Instructions] It appears we have no further questions at this time. This concludes our question and answer section. At this time, I would like to turn the floor back to Mr. Alejandro Elsztain for any closing remarks..

Thank you very much. Just to finish. We had very good rental year.

Very profitable in refinancing here and in Israel and decreasing the level of debt, so -- and our assets every time are valuable and the interest rates are going down in Argentina and in Israel so we expect a very good path of growth to the two companies and we expect to keep doing the business in the two places of the world as big as we can.

So, thank you very much and have a very good day..

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