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

Jarrell Golotti - Morgan Stanley.

Good afternoon, and welcome to IRSA's First Quarter 2017 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 and 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 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] 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..

Thank you very much. Good afternoon, everybody.

We are beginning our conference call of First quarter 2017 in page number two, and the main highlight for the quarter, you can see the financial and consolidated results, for the third quarter, we achieved revenue for almost ARS19 billion, and at last quarter we are dividing between Argentina and Israel 1.3 billion from Argentina and ARS17.4 billion from Israel.

At the EBITDA level, we have achieved ARS2.5 billion, ARS0.5 billion from Argentina and 2 billion from Israel. At the net income level the loss for the quarter 782 million pesos again of 36 small gain of [36%] small gain in the Argentine side and a loss of 818 million from Israel and attributable to [Indiscernible] loss of ARS577 million.

When we speak about Argentina business center we can see good results in the rental segment and Danny is going to explain deeper at all this growth that we have about the industry and properties growing at the reporters and comparing year-t-year. No results from sales and investment properties in this year comparing to last year [Indiscernible].

We are developing three big projects both Catalinas & Alto Palermo Expansion and there was a recent issuance of debt at EBITDA level $184 million at 7% and ARS384 million at [Indiscernible] almost 300 basis points.

We cancelled all the short-term debt and in Israel side The Israel Business Center, IDBD, the subsidiary DIC that is the low IDBD accepted an offer to sell the stake of 40% of ChemChina of Adama and for that reason it's going to receive soon a lot of cash at DIC level and during the first quarter of IRSA, IRSA acquired from IDBD almost 9% of the DIC shares for $26.7 million.

So now, I will introduce to Daniel Elsztain..

Thank you, Alejandro. Good afternoon everyone. On page number three, we can see some numbers about the shopping center portfolio. We can see that in this quarter we had a growth of 21% in pesos this is below inflation mainly explain by two factors, a small reduction of its acceleration of inflation and a small reduction in consumption.

Occupancy levels remains very high at the 98%. Our total G&A grew up for 1,000 square meters if they are very small growth incorporation of a few charts in basically two shopping centers. And so the stock remains stable, occupancy remains very high sales we are not pesos and we are stable in visitors, we are having about 110 million visitors a year.

The shops are performing that will be below what we estimated but still very good. On Page number four, the segment of office buildings we would see a very strong market, occupancy went to now we said that 100%.

There is no vacancy at all in our portfolio thee price of the square meter is $25 per months per square meter we see a small reduction compared to this previous quarters but this is mainly to explained by the leasing of two floors in our cheapest building.

It's not that the market is going down, it's contrary renewals, we are going up and we see the tragic rate stable and as trend going up. This again is a market that we collect in dollar they are little high in dollars.

When we see our portfolio, we started the year with about 79,000 square meters we have a small reduction by selling two floor storey at the Intercontinental Plaza building.

So now, we have 77,000 square meters, but when we finished the construction of the two new projects that we will speak a little bit later, we will be at a level of 123,000 square meters having about 12% of the market share of Buenos Aires City and [indiscernible] building.

Today we have an EBITDA of about $19.5 million in this segment in office and we estimate that by the end of the construction of this building are going to have an EBITDA of $34 million. On the following page, we can see also we started the demolition and so we have started the construction of an expansion of Alto Palermo shopping center.

Alto Palermo shopping center is our flagship in shopping. This will be an incorporation of 4,000 square meters of new GLA, will be an investment about $25 million; this is not only the construction of this expansion; it also includes the amount that we will invest to update the systems and our machinery in existing shopping centers.

Below the page, we can see also the render of the Polo Dot office building, which is the first building in our Northeast [Indiscernible] that we are just about to start, demolition is underway also. It's an office space adjacent to our shopping center; this location is the main intersection of the main two highways of the whole country.

This will be a the first building of 30,000 square meters of GLA, a total investment for this building will be approximately $55 million and we have leased so far about 75% of this building; we have the tenants and contract signed. We estimate that we will finish this construction for the fiscal year 2019.

Also in Catalinas neighborhood which is the best location in Downtown Buenos Aires; we are about to start the construction of the AAA building [indiscernible] for a total investment of $100 million, as total GLA of approximately 35,000 square meters. We also estimate that the opening of this building will be for fiscal year 2020.

In this building, [indiscernible] that we have no further sales from this building. On Page number six. We can see some figures on hotel; hotels are very small part of our portfolio. Nevertheless, we see that on occupancy remains stable, but prices going up and revenues are going up.

Since the last quarter we had observed small increase in people making reservations and we can see that the revenues went up 65% going to ARS173 million and EBITDA from previous quarter losing ARS3 million, now we are up ARS8 million.

These are three five star hotels, two located in the city of Buenos Aires and one is in Bariloche which is the best resort of the country.

On the following page, we can see some business in USA, the Lipstick building in Manhattan, we can see occupancy levels of 97% and we are having a lot of activities, so we can also a little increase on this building.

[Indiscernible] per square feet per year this number to $67 per square feet per year also its stable, and we are now leasing at a range of mid 80s at the middle up of the tower.

The building is very nice, it's well maintained and everybody knows that this is the best building on Third Avenue and now the tenants are comparing this building to what they call that Plaza District building, it's an alternative to the Plaza District building.

On Condor, this is a Hospitality REIT, we have presently on this REIT for few years so far, and that’s what it double turnaround management completely changed.

The portfolio also changed from being a economy hotels very, very low-end hotels to select service hotel, now relevant events for this quarter that EBITDA now is at $4.6 million and with margins of 32%. There is the big transformation on the portfolio and the management is doing very well.

What we established the dividend that were paid in September $0.03 per share and we are also are collecting now the proffered dividend which is 6.25% annually. There was an two acquisition in the last quarter two Aloft hotels one Kansas and one in Atlanta. So now, to talk about some international investment portfolio, we have Matias Gaivironsky, CFO..

Thank you very much Danny. Good afternoon everybody. So going to next page Israel business center, the investment in IDBD, the latest development as Alejandro mentioned at the beginning, we are waiting for the closing of the ADAMA section.

DIC accepted an offer from ChemChina’ to serve the 40% stake for $230 million in access of the total debt on debt acquisition on that ADAMA, so we are expecting a free cash for DIC for around NIS800 million in the coming days.

Regarding Clal, the shares increased by 4% in the first quarter 2017 versus the last quarter, remember that here we value the positioning Clal at market value.

So we would reflect on a quarterly basis, the volatility of the shares in our financial statement, remember that previously we had important losses coming from Clal, because of decrease in the share. In this quarter, we recognizes a gain of ARS181 million.

Another important one regarding the issuance of debt of IDBD, remember that we issued debt to NIS325 million collateral by shares of Clal, unfortunately we went the justice to ask for permission on the shares on that additional work decline.

So we have to cancel the issuance that we already payback NIS244 million and the remaining the 26% of the issuances is still subject to approval to place Clal shares. Below IDB, all some companies taped the local capital market in very good condition. DIC’s debt maturing in 2025 at 5.7% interest rate, PBC NIS600 million, NIS503.95 maturing in 2019.

Park in CPI the same subsidiary of PBC [Indiscernible] that issued at NIS400 million at 3.1 [Indiscernible] 303.55 matured 2026. So this shows the liquidity in the Israeli market. So the company has good performance, has access to the market at very low interest rate.

Another important view during the quarter was that IRSA acquired from IDBD 8.8% of the shares if DIC, regarding when IDBD issued debt NIS325 million that profit will go to cancelled debt and unfortunately when we had to use that issuance we can't use that issuance so IDBD to sell assets.

And IRSA decided to acquire directly this taken DIC for approximately $26.7 million. So today DIC is controlled by IDBD with 67.6% of the share and 8.8% belong to IRSA. Going to page ten to breakdown of our financial statement. So here, you can see the main explanations of the different segments.

Remember that we decided to separate two business centers. One, Argentina business center and one Israel with idea to maintain explanation of each of the countries separately so you can have information separate between Argentina and Israel. So in rental segment the sales were strong at increase of 25% from ARS472 million to 590.

Sales developments you can see here a decrease from 352 minus 51 is basically because last year we saw some investment properties mainly floors in the Intercontinental Plaza office, office space and the Intercontinental Plaza and Maipu and plot of land in Santa Fe in ISRA [indiscernible].

The financials and other, you can see basically the center sold ASR33 million each of the ASR33 against ASR27 this year is basically the result that came from Banco Hipotecario that this yar we have a decrease from 71 to 31, a better result from [Indiscernible] that this year we have ASR16 million of positive result and decrease in Lipstick from ASR40 million to ASR60 million.

In Page 11, here we have the evolution of operating income and [indiscernible] from Israel remember that we started the consolidation of IDB in October 2016.

So here, you only have the results from the recent quarters and not a comparison from the last year so you can see that we have positive results on the operational slide in each of the segment in greater state supermarket and the telecommunication and 105 million decrease in other segment and a positive EBITDA in each of the lines.

Going to Page 12, with these we finish the explanation of the operating expenses that increase from ARS724 million last year against ARS1.1 billion this year 700 coming from Israel and 448 coming from Argentina.

The other were important effect it's a net financial results where we have an increase in losses from $437 million against ARS1,474 million this year ARS1,056 this year.

[ASR1056] (Ph) million came from Israel and 418 came from Argentina so the main explanations in Israel are this net financial cost ARS1.3 billion and again ARS181 million that is for a market value of Clal.

And then in Argentina we have a higher interest expenses, because of the devaluation the last year we have accrue interest at a exchange rate on average of nine and this quarter the average was 15.15.

And also next FX losses because we have a revaluation of $0.30 during the quarter from 15 to 15.41 so with these products the main explanation of the net financial results on with these we finished with a net income apart from ARS316 million to ARS782 million attributable to our employees and shareholders ARS577 million of losses.

In Page 13, we have the breakdown of our debt so during the quarter we were able to refinance all the short-term debt of IRSA issuing two notes one in dollar at 7% interest rate $184.5 million and another in pesos in ARS384.2 million have rather that's last 299.

With that, we call the remaining 2017 notes so now in the graph you can see the blue lines are the debt what were most in 2019 and 2020.

Regarding IRSA in the Page 14, we have the evolution of the debt since we started our investment in IRSA they decrease significantly by NIS2 billion standing at NIS 2.785 billion and data amortization schedule for the year, the remaining payment is NIS 154 million and the rest material between 2017 and 2025.

The net debt of the company stands at $728 million. So with this, we finish the presentation now. We are happy to receive your questions..

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

My question is basically pertaining to the landbank; we know that you have a couple of projects that you have already started expansions and Greenfields but you have a very extensive landbank including Solaris and Santa Maria.

And what I was curious to know is, has there been any update on say permitting or financing or anything of that sort as it pertains to the landbank and more specifically for the Solaris plot?.

Yes, we have a great landbank, maybe the best in the country and we are working now in two end at [indiscernible] Solaris and Santa Maria, working with the city to see if we can get finally approvals for those projects; nothing to be communicated, but we are working hard..

Okay and as I understand it there was recently a Shareholders Meeting where the capacity for the global notes offering was expanded, I believe to $500 million.

I was wondering the expansion of that capacity, what was the motivating factor that you are looking at potential acquisitions later on or is it development or what drove this?.

Jarrell, you know that the systems here in Argentina you need to have the [indiscernible] you want to issue something, with the left issuance the capacity of the company to raise money if we need; what is at full capacity.

So if we need to issue a new debt we have to ask for shareholders approval so the idea was to have the approval, but without any specific plan in the coming months.

So the company is not thinking in issue more debt in the next month, but if something appear or we want to I don't know, to finance a CapEx or acquisitions or whatever, we will have the flexibility to raise money in the market..

All right. Thank you very much..

The next question comes from [indiscernible] Please go ahead..

Hi good afternoon.

I have two questions if I may, the first one is regarding IDB, I was wondering now with this issuance that you made, you would expect to top that market you would expect to top at that market again, to pay next year's amortizations or it will good with that? And then my second question is regarding the cost mainly on the shopping mall side.

How do you see the cost evolving and there anything that you could do in order to compelling the increasing cost while we wait for activity to pick up?.

[Alejandra] (Ph), regarding IDB, as I mentioned that IDB issued that in the market where the idea to have the proceed to cancel or the amortization for this year, after the recession from the Supreme Court to place the Clal share, IDB now is working in other structures to try to top the market again with another structure.

The company is working, so we expect them to show some [indiscernible] in the coming days. But the idea is still the company will find other sources of final to cancel the debt amortization scale. Regarding the cost..

Yes. Regarding the cost Alejandra, on the numbers we are showing now is the one-time effect that is store that is not in the shopping center that is across the street from [Indiscernible] shopping center that we have delinquency and it's under legal process to collect that money. So that’s mainly the biggest cost that we have on this quarter.

Going forward and talking about cost, yes we can manage to make some reductions in cost and the services that we get through the shopping center but we are not planning to grow that down because that then is difficult to recover and we are expecting the next will be little better than what we are seeing now..

Okay. Thank you very much..

[Operator Instruction] Showing no further questions, this concludes the question-and-answer session. At this time, I would like to turn the floor back to Mr. Alejandro Elsztain for any closing remarks..

So that’s to finish our conference call of the quarter. The companies are in the middle of big development everywhere in Israel, in Argentina they are developing and refinancing. And so we are sitting on a very good and strong portfolio of profits. So we thank you everybody and we see you next quarter. Thank you very much..

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