Good afternoon, everyone. I'm Santiago Donato, Investor Relations Officer of IRSA, and I welcome you to the Second Quarter of Fiscal Year 2021 Results Conference Call.

First of all, I would like to remind you that both audio and slide show may be accessed through company's Investor Relations website at www.irsa.com.ar by clicking on the banner Webcast Link. The following presentation and the earnings release are also available for download on the company website.

After management remarks, there will be a question-and-answer session for analysts and investors. [Operator Instructions]. Before we begin, I would like to remind you that this call is being recorded, and the 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..

Good afternoon, everybody. We begin in Page #2, the main events for these 2 quarters, half of 2021 results. We can see about the net results. There is a drop this 6 months, 2021, having lost ARS1.2 billion comparing to a gain of ARS6.6 million last year -- ARS6.6 billion.

And when we see that related to -- attributable to controlling company, we see a better number. This year, we have a negative number of ARS0.6 billion comparing to last year lost ARS1.9 billion.

When we compare about our rental segments and about the adjusted EBITDA of the real estate activity of this year, we can see a jump from ARS4.5 billion of last year, we grow to ARS8 billion -- almost ARS8 billion. This is a growth of 77%.

And we can see in the rental segments, the office, the shoppings, we see a big loss -- a big drop, almost 75% loss year-to-year. And we have a big number that is related to sales and development, ARS6.7 billion are related to some sales in the company this semester. So hotels, it was almost closed, so a big drop of 170%.

So we are going to see a little more details on the numbers. But this is the main thing, is that growth mainly explained by the season and the virus. About this maintenance of the 6 months, the shopping malls reopened since October. We finally finished the building 200 Della Paolera, nice office building that was opened in December, and we went here.

We are now in this building. We are the first tenant. So we are occupying since December this beautiful building. And we had sales of offices during these 6 months over $170 million. The hotels reopened since December and one is really spending good time, the other 2 not so more. The one is Llao Llao.

We did an exchange of our debt, the notes that we have -- we were -- we exchanged them, and we did with an acceptance of 98%. Matias will explain it later. And finally, the distributed dividend in kind of IRSA Commercial Property shares in November for ARS484 million.

We can move to -- now to Page #3, and in here a short summary of shoppings, office and hotels. Our shoppings, keeping the same size, occupation going down, is 88% of occupation. It's mainly affected by the Falabella decision of leaving the country. This deal does not include Mendoza Plaza, that is going to happen probably next quarter.

But with that, we have a big drop there in tenants. They have only three places in our shoppings for the 14 shoppings, but these 3 places may be hold on their shoppings. And the one that is moving faster is in Della that we are occupying [indiscernible] and in Mendoza didn't come yet.

The shoppings are now under strict protocols and working well, having this problem of occupation of those big places, the rest is well occupied, and the sales are expected in our budgets. In the case of the office buildings, we increased our stake because of the opening of this building of the Catalinas Della Paolera. We went to 114,000 square meters.

Occupation here, in quarter 2, we are achieving close to 80%, and the average rent is a little lower than last year, close to $26 per square meter. Here in this, business is normal, the operation and the rent collection. And in the case of the shopping malls, collection was affected.

And after many measures that we took on the administration of them and some back, we did a lot of ways to them. Now the collection of the shopping centers is much better than the months of last year. And in the case of the vacancy of the office buildings, some of the effect, it was Falabella exit [indiscernible] project.

And for the others, it's the -- including the Catalinas building in our portfolio, and today, we are only renting 75% of that building, decreased the average of the rental of the whole segment. In the case of the hotels, we are the same number of rooms. Occupation, it's close to 8%. It's a small increase to last quarter.

And at the average rate, $175 per room. The shutdown did big damage on the shopping -- on the hotel, sorry, and the one that is now benefiting more is Llao Llao that since November opened the doors. And it's under the regulations and the protocols, but a lot of Argentinians are enjoying, and this is well occupied, levels of 80% this month of summer.

Occupation, the others, the one that is more effective is the Libertador and the International. We can move now to Page #4, and we can see the 2 big events or sales of 2 buildings, one Bouchard 710, the whole building, representing $87 million sale with a return -- rate of return of 16% in dollars, selling the square meter at $5,800 per square meter.

And some floors -- remaining floors on the Boston Tower, representing $42 million. So this is at $5,710 per square meter. We have no more remaining on this building and not the other one that is sold. And the cap rates we were selling were close to 6%. So we thought it was good to use financially instead of keeping those assets.

And from there, we can move to next page, Page #5, and we can see the image of the building that we finished that today is our new headquarters. We -- now we are using only 2 floors, and we are reducing our overhead. And we were using 4 floors in Moreno. Some of them went to [indiscernible], but it was a big decrease on the overhead too.

So now we are only using 2, the 8th and the 9th floor building. And this building is at 35,000 square meters. From those, we have remaining of 28,000, the rest were sold, and the occupation of those 28,000 is 75%, and tenants are coming. The only tenant today occupying the building is us.

This is a premium location building, sustainable, which we are looking for the category for lease, big on services, very modern in the design, open spaces, agile, really, one of the best buildings in Buenos Aires City today. Now I will introduce Mr. Matias Gaivironsky, our CFO..

Thank you, Alejandro. Good afternoon, everybody. So if we move to next page, we have the explanation of our investment in Banco Hipotecario. The main focus during the last semester was the restructuring of the debt. Banco Hipotecario refinanced the notes that expired in November 2020. It was a very successful exchange.

With that, we achieved a reduction of $200 million of debt and approximately $20 million in interest savings. So that will benefit the ROI going forward. The current focus on the strategy of the bank is through the liquidity and solvency. They have achieved good ratios in liquidity coverage and other ratios.

So the company is mainly focused on that, dealing with the current situation in Argentina. We can see the stock price remained low compared with the previous year. This is not so different than the rest of the banks in Argentina. If we move to Page 8, we can see the breakdown of our P&L.

As Alejandro mentioned, we are finishing the first semester of the year with a loss of ARS1.2 billion compared with a ARS6.6 billion gain of the last year.

If we exclude the line 14, the results from discontinued operations, that's basically the results on our investment in IDB, the result is almost ARS6 billion positive compared with ARS3.5 billion or ARS3,581 million loss during the last year.

If we see the main drivers of this gain, the first one is in the line 4, the change in the fair value of our investment properties. This is how we measure our properties quarter-by-quarter.

We can see that during the quarter -- in the left part of the table, we can see that during the quarter, we posted a loss of almost ARS17.5 billion, and the total gain during the semester is ARS9.2 billion.

That means that during the first quarter, we posted an important gain and now because of the different vials in the macroeconomic side, basically, we recognized this loss. Remember that in shoppings, we are performing DCF and on the comparable -- in the offices and in the land bank, we are using comparables.

So depending on what happens with inflation and the exchange rate, that will generate volatility in our books. The other important effect is in line 9. We can see that during the semester, last year, we posted a loss of ARS9.2 billion. This year is a gain of ARS1.2 billion, that I will explain in the next pages.

Income tax is also related to the change in the fair value of our investment properties. So we are not -- in the current taxes, it's almost 0. So all is a noncash effect. Something important that we mention every quarter is how our cost performed. And you can see at the bottom of the page, the total costs plus expenses, we are below inflation.

It was an important effort to control the costs. And Alejandro mentioned some cutting in our labor force. And as the inflation adjusted, we could control that, and you can see that the drop adjusted by inflation is 22% for the semester and 27% in this quarter. If we move to Page 10, here we have the breakdown of our net financial results.

As I mentioned, gain of ARS1.2 billion compared with a loss last year is related basically to what happened with the exchange rate that last year generated a loss of ARS5.5 billion. You can see in the bottom of the page, last year, the devaluation was 12% in real terms. This year it's almost 0, the devaluation.

So that affects our dollar-denominated debt. The net interest loss during the semester also is a drop of 17.1% in half 1 -- during the semester and during the quarter is 27.3%. Here, we have some decrease in our leverage. Also is the composition of our leverage that part of the leverage was with our subsidiaries, our commercial properties.

And on a consolidated basis, we really made the interest burn. So considering the 2 components and also the reduce in the leverage and in the interest rate, we generated this drop. Those are the main effects. Sorry, I missed the Page 9, that is the adjusted EBITDA by segment.

We can see in the shopping malls, the drop compared with the previous year is 76.2%, during the quarter is 47.1%. We are comparing here with a previous year that was normal. This year, remember, our shopping started to open during October -- September/October. So the drop at the beginning of the year was more important.

Now we are generating better results quarter-by-quarter. So we expect this number to improve during the next quarters. Fortunately, we have, again, a positive EBITDA last quarter. Remember, that was the first time that we posted a negative EBITDA in this segment. And now we are recovering. In the offices, we also see a drop.

This is related to the disposal of the 2 buildings that Alejandro mentioned, that, of course, we are comparing with a more square meters under production during the last year than this year. In terms of rate, it's almost flat. And in terms of occupancy, we have a higher vacancy that also is affecting the figures.

Going forward, with the incorporation of Della Paolera in the portfolio, we have almost the same amount of square meters. So probably we will recover part of this probably in the following quarters. The hotels is the same or probably worse than the shopping malls with operation very affected by the pandemic.

And sales and development is the result of the disposal of the 2 buildings, basically during the first quarter of fiscal year and we had one in the second quarter. If we turn to Page 11, here we have the breakdown of our net asset value. This is using all the numbers in our books. So all our investment properties at the official exchange rate.

So we have a gross asset value of $1.4 billion with a net debt of $323 million, that give us a net asset value of $1.1 billion. Compared with the market cap of the company, we are trailing with a deep discount or the NAV. In terms of the leverage, we have a 22% loan-to-value using all the metrics are book value.

Page 12, we have what we did during November. You remember that under the Central Bank Communication 7106, all companies with amortizations between October and March were forced to refinance their debt in order to be able to pay part of the debt using the official exchange rate. So we launched a refinancing in November that was very successful.

We had an acceptancy of 98.31%. So we are very happy on the result of this refinancing. It basically issued 2 new bonds with [indiscernible] final amortization due in 2023. If we see the Page 13, we have the breakdown of our debt today. With a net debt of $323 million, we've reduced part of our debt.

The debt amortization schedule is more diversified in the next 3 years. So with this, we finished the formal presentation. Now we open the line to receive your questions..

[Operator Instructions] [Indiscernible] has a question..

Do you hear me?.

Yes..

Yes. My main question would be current cash balance in order to face upcoming maturities. And I was wondering also that IRSA Commercial Properties distributed dividends in cash on the second quarter 2021.

Is that correct? And is this kind of cash available for IRSA right now?.

The IRSA Commercial Properties, in fact, distributed dividends during November. That was a dividend of ARS9.7 billion that finally we paid in dollars. And what we did with the proceeds that IRSA received was to cancel the intercompany loan. So instead of paying interest to IRSA Commercial Properties, there was a cancellation of debt.

So we used all the cash to reduce the exposure. There is still exposure. It's around $60 million of intercompany loan, and the rest we canceled. In terms of the cash available, IRSA still has the credit line with IRSA Commercial Properties that is up to $180 million.

So in terms of the amortizations, IRSA will need to deal with the liabilities that expire during this year, but as a backup line, we have the credit line with IRSA Commercial Properties..

Okay.

So in case of need, you would use again the intercompany credit line with IRSA Commercial Properties?.

You know that our strategy always is to finance each vehicle at its level directly, but one of the alternatives could be to use the credit line..

Okay.

And at best case scenario, you would try to roll over upcoming debt maturities, is that correct?.

Yes. Again, like we did last year, also we have sales. If we sell some of our assets, of course, will be also cash. And going forward, you know that IRSA Commercial Properties, always the strategy was to distribute dividends. So if we are allowed to keep distributing, IRSA Commercial Properties will..

I don't want to monopolize the conversation. I will wait if someone would have any question as well..

Next question comes from Gordon Lee from BTG Pactual..

Well, two questions. I guess 1 is a bit of a follow-up to the previous one in terms of thinking about sources of liquidity.

I was wondering if you could let us -- if you could tell us what, if anything, in the portfolio is something that you're actively looking to sell to monetize at the moment? Or if the transactions that you did at IRSA Commercial Properties is enough as far as divestment of assets? And then the second question is, I was wondering, Matias, if you could maybe give us a little bit more detail on the, I guess, revaluation in the first quarter and then the markdown in the second quarter, what variables exactly? And what part of the portfolio was affected, simply just to get a better sense of whether we should expect volatility like this on an ongoing basis.

So there was something unique to the quarter or to the half that would have caused that markup and then that markdown..

Related to the realization, some of the assets at the IRSA level that could be on sale. As you know, Gordon, our investment in the U.S. was closed due to that and still starting opportunities of that realization in the international. From the local, the hotels [indiscernible] mainly the turnover is under the radar of some buyers.

So maybe not Llao Llao for sure, but some of the hotels could be under that position, too. So -- and some of the land banks are receiving swaps. You know that there is a lot of activity relating to residential. And we have a lot of lands that could be swapped and later to be sold through square meters.

So I think these are the 3 kind of ways that IRSA could be realizing..

Gordon, On the second part of -- second question, there is different assets. Now we have in the shopping malls, it's a DCF model that the main volatility that people have there is the change in the macroeconomic variables that we forecast is not so volatile than the rest -- the other part of the portfolio.

The other part, the main gain that we have during the quarter was that we started to use the blue-chip swap in order to value the offices and the land bank, considering that all the assets that we sold and all the assets -- the real estate assets in Argentina are trading at real dollars than in order to value in pesos term, we are using the blue-chip swap.

What happened after is that the blue-chip remained stable during the quarter. The exchange rate at the end of September was ARS138 and at the end of December was ARS180. And you have to adjust by inflation those numbers and the inflation between September and December was 11%.

That means that in real terms, if we measure in dollars, the portfolio remains stable, nothing changes. In pesos term, I mean, real terms, there was a drop because to have the same numbers, at least we have to increase our -- the value of our portfolio by 11%, and that was not the case.

In dollar terms, remained stable, and the exchange rate only changed like 1% instead of 11%. I don't know if I was clear..

Yes. No, that's perfectly clear. If I could just ask one follow-up then, just to confirm. So on an ongoing basis, going forward, you will mark up or down the value of the office portfolio with the blue-chip exchange rate.

But the NOI that you're translating on to your P&L from a quarterly basis will continue to be done with the official rate, is that right?.

Yes. Yes. And remember, Gordon, that we collect our revenues using the official exchange rate now. The rates are in dollars, but the tenants pay at the official exchange rate in all that blue-chip..

Well, if there are no more questions, we conclude the question-and-answer session. At this time, I would like to turn back to Mr. Alejandro Elsztain for any closing remarks..

Just to finalize the 6 months' comment, sales of the shopping centers after the lockdown are better than expected and we are seeing some shop incentives passing levels of inflation year-to-year. So we are happy on the -- how the shoppings are behaving. In related to the office, we opened in December Della Paolera, but the collection is going to come.

So this is a 75% contract signed, but not in the rental cash, we are going to see that in our numbers soon. In the hotels, to begin to see some of them with 80% or more gives us the flavor of the country is opening, and our assets are holding again. So -- and the financial position of the year is much better than last year.

So we closed the 6 months with good results and expecting the COVID won't affect again or close again. In the meantime, the company is behind it much better than the last 6 months..

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