Good morning, everyone, and welcome to the IRSA Third Quarter 2019 Results Conference Call. Today's live webcast, both audio and slide show, may be accessed through the company's Investor Relations website at www.irsa.com.ar by clicking on the banner webcast/link.

The following presentation and the earnings release issued today are also 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].

Before we begin, I would like to remind you that this call is being recorded and information discussed today may include forward-looking statements regarding the company's financial and operating performance. All projections are subject 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 would now turn the call over to Mr. Alejandro Elsztain, II-Vice President. Please go ahead, sir..

Thank you very much. Good afternoon, everybody. We are beginning our third quarter fiscal year 2019. And if we move to Page number 2, we can see the main events for the nine first months of the year. We achieved ARS 13.8 billion adjusted EBITDA that is almost 7% increase comparing to last year numbers.

And if we compare it from Argentine side, we are achieving ARS 4 billion, that is a little drop comparing to last year number, almost 4%. And in the case of Israel, achieving ARS 9.8 billion, it is an increase of 12% to last year numbers. Remember that, every number that we are going to discuss today are numbers adjusted by inflation.

And here we can see that the Argentine rental EBITDA growth in Argentina was 7%, mainly driven by office and hotels, the two that are very related to dollars and the evaluation came to the country, that they've made a positive effect on the currency.

And in the case of the Israeli, the growth of 42% mainly because of the real estate EBITDA growth and this is because of some effects of IFRS, that Matias will explain later. But this is an explanation of changing the method of valuation of the delivery of the apartments of the residential.

If we compare just the pure rental, there was some increase, same stores increased and because of the new buildings that we are finishing, so the combination is positive too. So when we see related to the final, the net, there's a loss of ARS 9.1 billion comparing to heavy gain of last year in the nine months.

And they are attributable to our shareholders of ARS 8.8 billion. And the main two explanations are the lower results on the fair value of the properties and – in the case of Argentina and in the other case, it was because of Clal. So, these two are the main explanations that made the lower result year-to-year.

There are some things that we would like to share with the participants of the conversation, that there are some things that have happen after the 30 of March. One in Argentina, last week, we issued a bond of almost ARS 100 million, ARS 96.3 million of 10% fixed annual rate to refinance short-term debt, in IRSA in Argentina, we did that.

From the Israeli side, Clal achieved a control – IDBD is looking for the control permit, it's now under that process with the local authorities to take – to receive that permit for the shares – remaining shares that the company have. From other side, last week, we sold 10% of the shares to two private investors.

And today, we reduced the exposure to 44%, 20% directly and 24% through swaps. And yesterday, in PBC, we have issued a bond finally, we raised ILS 520 million at a fixed interest rate of 4.1% maturing in 2019 And this is just to refinance, this is exact number of refinancing of the this year debt. So that was [indiscernible] with a lot of demand.

So these are some news of the balance sheet after the 30th of March. So now I will introduce Mr. Daniel Elsztain..

Thank you, Alejandro. Good afternoon, everyone. On Page number 3, we'll see some figures of our shopping – some shopping malls and offices in Argentina.

Starting with the top-left corner, we're going to see that our total GLA was reduced a little bit by the end of the concession of the Buenos Aires Design Shopping Center, so now totaling 332, 000 square meters of GLA. Occupancy is below what we used to have in the past, it's now at 95%.

This is mainly explained by the wide vacancy generated by Walmart at Dot Baires Shopping. If we exclude that vacancy of Walmart, occupancy would have been 98.3%. There is some reduction, but not that so big as we can see here.

In the case of Walmart, we are working on making that big, big space into smaller space into smaller stores and we are working on to the construction and the leasing of the space during this year. On the bottom of the left side, we can see the growth of sales.

We see a growth of 29%, but if we do it in nominal terms, just in nominal terms, but if we do it in the real terms, it's a drop of 14.7% what we've reduced in the sales of our tenant. Excluding the effect of Walmart, because Walmart is not selling, the nominal terms would have been 32% – 31.2% and in real terms, 13.6% drop.

This is also affected a lot by the reduction in sales of electronics. Remember last year, we had the World Cup and also this year, there's no financing to buy these kind of products without financing, we can see that the drop in the sales of electronics is way higher than these numbers. So that's why we see these numbers affected.

And it's not that bad when we see the majority of our tenant that is clothing and food and beverage. On the right side of the page, we see offices. The stock is growing, and we can see that from the 83,000 that we had, now incorporated, 32,000 square meters at the Zetta Building at the Polo Dot office park.

And soon we're going to add another 30,000 square meters at the 200 Della Paolera in the neighborhood of Catalina. This is a big growth. I mean we're going to be growing about approximately 75% in our total stock of GLA.

And regarding price, it's stable, we're finalizing this quarter, the third quarter of 2019 for $26.03 per square meters, this is real rent per month. There is no loss factor here. And everything that is common charges they pay on top of that. And occupancy is at 91% of our total stock.

It's stable, and we're working lots so I – on getting more occupation, this segment, as Alejandro mentioned, has been helped by the evaluation. And so the prices are set in dollars and we are collecting the same amount of dollars with less cost. So this is a business that is doing well, and we are growing in this business.

On the following page, we have some pictures and information about the Zetta Building at Polo Dot. This is a fully leased building, 80% to Mercado Libre and 20% to Falabella Group. As a credit tenant in the country, we invested approximately $50 million in the construction of this building, the parking and the park.

And the estimated EBITDA for this building, it's in the range of $9 million per year. This is approximately a cap rate of 15% on our investment. And we're very happy and we have high demand on this office park, [indiscernible] that we are still announcing. On Page number 5, we can see the hotels business.

I mean this has been very, very good for – since the evaluation and the introduction of the low-cost airlines in the country and more visitors, there's a lot of new visitors and tourists coming to the country. So we can see evolution in rate, now we are working with a rate at this quarter of $203, the average rate.

And the occupancies at levels of 69.3%, but what is really impressive is the growth in the EBITDA. Last year, the nine months of 2018, we had ARS 69 million and in nine months we achieved ARS 483 million. This is really impressive. This business is doing very well. And it's one of the one’s that is being helped by the evaluations.

Also on February 2019, IRSA acquired the 20% of the shares of the Hoteles Argentinos, it is the owner of the hotel known as Sheraton Libertador. So now IRSA owns 100% of this company. And since May of this year, this hotel is been trading – has been working as an independent hotel with the brand of Libertador Hotel.

And occupancy levels and the rate remain very stable. So we are learning really how to work and manage the hotel operations. And since, in the past it was managed by the people of Margate [ph]. Now it's our own team who is managing the building and the hotels and we're happy with this line of business in Argentina so far.

So now on Page 6 for Israel, Alejandra will continue..

We – here, we see the pictures that shows the shareholder – the shares structures, where we have every company. The only change and we are going to more spend time is in the Clal, that we sold a portion to some investors – local investors in Israel.

The rest, we have to keep working on the year to reduce one more layer, the concentration law that we spoke many times on the conferences that we need to comply with that. So we are working on that process in the year 2019, not to have the three layers on the DIC, PBC, Gav-Yam and Mehadrin side.

So if we move to next page, in Page number 7, we can see that from one side, we presented the control permit request on March 2019 and this is under process. We expect to receive that permit to keep the shares that we still own. From the other side, we sold some – 10% directly to two companies, two private investors, at a discount 47.7 per share.

And with – from other side, we're giving to them an option to buy more shares. And – so we in one side, we're trying to get permit and from other side, they are going to get a part of the 10%, 8% more shares like an option. And – so after the sale, IDB total exposure would reduce from 45% to 20% directly and 24% through swaps.

And we can see here, the evolution of the book value from one side and the market value, and how positive market reaction we saw there was an increase of the price of 20%, the three dates following the sale.

Because the one who's buying, one of the three, it was the former CEO for the more profitable and more famous company of the insurance of Israel, that is Israel Phoenix And this man that was running Phoenix for many years, is the one who's buying those options.

So this only that final of the two new investors, plus the new management coming to the company made that reaction on the market. So – but still we see that prices are 70% of book value, still a big discount to the real book value of the company. In the next page, we can see some of the pictures of buildings that we are finishing now.

We are doing eight projects of rental properties in GavYam of 194,000 square meters. And we can see on the right, ToHa building, 95% is already leased. And it's opening this year – now it's open. We are moving our office to that building, too. So this is a 57,000 square meters in Tel Aviv. We are doing the fourth building in Jharsewa.

We are doing lot in our logistics center in Haifa. We are doing another new building, and this is for Amazon, 100% rented by Amazon in Rehovot to the Weizmann Institute. The company is doing a lot of buildings and occupying – majority of them when they are ready are occupied. So the company is raising money, developing more.

So Israel is working well, and we are going to see the picture of numbers that Matias will explain to you later..

Thank you, Alejandro. Going to Page 9, we have here, the evolution of Banco Hipotecario, our investment, where we have 30% stake. The presented results that generated a loss for IRSA of ARS 533 million compared with a gain that we had last year of ARS 348 million. The main reason was the increase in a – in the provision of doubtful accounts.

So basically that was the main reason of the decrease in the results. When we see the evolution of other market volume to IRSA, remain 20% below, a little more 30% below of the last year of ARS 179 million was last year, our share now is now ARS 133 million at the end of the period.

The bank is still working in some different fronts, trying to strength the liquidity of the bank and strength of the balance sheet and reserve the cash flow on short-term. if we move to Page 11, here we have the – our financial statements for the nine months period.

So on the right; you have the total of the period that we achieved a loss of ARS 9 billion, compared with a gain of ARS 10.5 billion in the period year.

The main reason here is in the line four, that you can see the change in the fair value, mainly in the part of Argentina, the Argentina business center, that decreased from a gain of ARS 5.8 billion in last year to ARS 5.9 billion gain – sorry ARS 5.9 billion loss during this year. Remember that all our figures now our adjusted by inflation.

So if our investment properties are not matching the evolution of the inflation, we will generate a loss. And we surpass inflation, part of the gain will go to the inflation line and the remaining will go to this line in the cangue in the fair value.

Then when we see the rest of the lines, in line number eight, we have the results from associates and joint ventures. That here in the Argentina part, we basically have the loss in Banco Hipotecario.

And then we compare with the previous year, we used to have the gain on the bank and also, a gain in the – in our investment in Lipstick Building, that generated a gain because of restructuring of the debt last year. The net financial results, I will enter in more details in the following page.

In the income tax, last year, we used have the change in the tax regime in Argentina, that generated a gain on all our deferred taxes, that you can see in the line 12. That the last year, in the Argentina business Center, we gained ARS 5.5 billion against ARS 2.2 billion of this year.

So if we move to Page 12, we can see the adjusted EBITDA by segment of Argentina and Israel. So started in the top part in Argentina business center. We have the shopping malls that decreased by 14% compared with the previous year, this is below inflation.

Basically, the explanation here is that the loss in the purchasing power of the people that generated lower consumption in our malls as Danny explain.

So we have lower results from – lower revenues, from that part that we have complement in our agreement, plus some agreements that we signed in the short run or shorter terms and that generated lower commissions as well compared with the previous year.

In the offices, the results were great, 88% above the inflation, here we have also the incorporation of this building that we started to generating results since this quarter, so we generated ARS 140 million in the quarter. So that is one of the reasons of our increase.

But the rest is because we collect revenues in dollar terms and with the evolution in pesos, we are generated much better result. The hotels has a similar dynamic, where we have our revenues in dollars and the cost in pesos.

Or with the evaluation and a higher occupancy rate, we increased our EBITDA to ARS 483 million compared with ARS 69 million of the previous year, that is a jump of 600%.

And the sales and development lower results, basically, this year, we haven't sold significant properties against last year, that we sold mainly Puerto Madero, sorry no Puerto Madero, Baicom. Sorry, it's not Puerto Madero, it's Baicom. Regarding the Israeli business center, as Alejandro mentioned, we increase in real estate by 42%.

This also included change in the accounting rules. Now we are recognizing results from some of our properties of residential. So compared the – comparing the commercial real estate in shekels that is stable against last year. To compare results on Israel, you have to consider also the real – the evaluation between the shekel and the peso, that was 22%.

So that is the evaluation on the nominal numbers, the 22% should be the shekels against pesos. In Telecommunications, it's a decrease of 0.6%, basically, because of the lower results in the – in our ARPU in the revenues per user. And then in the other line, it's basically our cost in the holding companies, that is 26% above the last year.

Page 13, we have the consolidated results. In – when you see the main two drivers, one is the nominal exchange rate that we have the evaluation in Argentina, 51%, against 22% last year, that affected in Argentina business segment all our dollar-denominated debt.

And in the Israeli business center – segment, we have two drivers, one is the evolution of Clal shares, that last year increased 7% in the period against a decrease of 2.3% in this period, and also a swap that we did last year with the DIC debt that generated losses in the last year.

You can see that in that line five, that last year we have a loss of ARS 4.1 billion. So when you see the total net financial results, we finish with a ARS 13 billion loss against ARS 11.7 billion in the last year. Going to Page 14, we have the net debt and the net amortization schedule.

Here you can see the net amortization schedule as of March, after that, last week, we did a new issuance in bonds – of bonds of IRSA, that we raised ARS 96.3 million, so now we have part of the 2020 amortizations, we refinanced to the next year. We issued a 1.5 years bullet bond at a 10% interest rate. So with this, we finish the formal presentation.

Now we open the line for Q&A..

I am seeing no questions at this point. Mr.

Elsztain, would you like to move to closing remarks?.

Just to conclude, we are finishing nine months, next is the final fiscal year 2019. We keep doing business – building all over the world, developing where the thing deserves the effort. So the company is going to dilute those costs – those revenues that are going to come in the margins of the company.

So we are very optimistic on the future of the company. So thank you very much to everybody and have a very good day. Bye..

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