IRSA Inversiones y Representaciones Sociedad Anónima (NYSE:IRS) Q1 2024 Earnings Call Transcript November 7, 2023
Santiago Donato: Good morning, everyone. I’m Santiago Donato, Investor Relations Officer of IRSA, and I welcome you to the First Quarter of Fiscal Year 2024 Results Conference Call. First of all, I would like to remind you that both audio and slide show can 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 are also available for download on the Company website. After management remarks, there will be a question-and-answer session for analysts and investors. If you want to make a question, please use the chat. 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. Matias Gaivironsky, CFO.
Matias Gaivironsky: Thank you, Santi. Good morning, everybody. So we are starting our fiscal year 2024 with very good results. Our shopping malls keep surpassing inflation and occupancy keep improving. Regarding our hotels, we have a very strong EBITDA during the quarter and very good occupancy. Offices also has a slight recovery in occupancy. Also, our real estate activity was very strong during the quarter, with the disposals of three floors of the 200 Della Paolera building, the Suipacha building, the first office building of IRSA and Quality that was the owner of a plot of land in the San Martin in the province of Buenos Aires. During the quarter — after the quarter in October, our shareholders’ meeting approved a dividend payment that represented around 12% of yield.
That dividend was paid in Argentina in the last days, and there is still pending, the distribution to our GDS holders that we will see later. So I introduce Santiago Donato, our IRO, to follow the presentation.
Santiago Donato: Thank you. Well, here, we can see the evolution of the quarter of the shopping malls. Here, we can see portfolio occupancy increased to levels of 98%. Remember that during the pandemic, we have some vacant surfaces of big tenants like Falabella, Garbarino and Walmart, mainly because they left Argentina. Well, it took us some time to recover that, but we are now in our historical highest levels of occupancy that has been very, very stable ever at levels of 97%, 98%. So we are very glad about that. In terms of sales, we keep — we kept growing in real terms. We are 10% up in the quarter compared to the same quarter of last year and 34% above the pre-pandemic levels of 2020. This is explained mainly by the April segment, the ticket of April and more visitors in our malls.
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So we are seeing very good levels of consumption, the same trend as we saw in the fiscal year 2023. On the next page. On the office segment, well, we sold during the quarter, we kept selling some floors of offices, the entire Suipacha building and one floor of [indiscernible] Della Paolera building. And then subsequently, we sold two additional floors. So we currently manage approximately 62,000 square meters of GLA, mostly A plus and A, the only building of B category is the Philips building in the Polo Dot complex. The rest are all premium buildings, which occupancy increased to levels of almost 89% with an average rent in dollar per square meter of 26, which is quite stable compared to previous quarters. Finally, on the hotel — on the rental segment, hotels, keeps doing great.
Occupancy is very, very high at levels of 66% in the three hotels. Remember that we own two hotels in Buenos Aires, Libertador and Intercontinental, and we own 50% of the exclusive resorts in the south of Argentina and Bariloche, the LlaoLlao Resort. The average is very high occupied, with rents — with rates per room that are growing in almost $270 per room the portfolio. Then here we have a breakdown between Buenos Aires hotels that recovered from the previous figures, both in rates and in occupancy and the LlaoLlao that is doing great, is almost fully booked. It’s a great place for local high-income tourism and also international tourism, with rates that are reaching almost $530 per room. So the three rental segments are doing very well.
We hope we can sustain these indicators in the next quarters. For the sales and development segment, I will turn to Jorge Cruces, our CIO.
Jorge Cruces: Good morning, everybody. When we sold the [indiscernible] building, at $6.75 MEP. It had a gross leasable area of 11,465 square meters, and it was a quite moving experience to sell because it was our first office building that we had acquired in the year 1991. It was a Class B building. It was vacant at the moment, and we are continuing with our strategy of flight to quality. So it was good for us to sell it at the moment and it was vacant. Otherwise, it’s much easy — much, much more difficult to sell if it’s halfway rented. We also sold Quality Invest. We had — the 50% of the stock capital, we sold it at $20.9 million. And this had a — it used to be from British American Tobacco, and it was a land plot in San Martin.
For a very big development, it was 16 hectares big, and it had — half the plot was constructed, and we prefer to concentrate and to focus all our efforts in Costa Urbana now that it’s approved and most — with today’s economy, it’s much more better. It’s better for us to focus at something premium and big and important like Costa Urbana. We also sold three floors in 261 Della Paolera. One floor first in August, it was sold at $12.1 million, and that was the ninth floor. And then we sold two floors, floor #28 and 29 at $14.9 million MEP. In both cases, there were big companies. They’re even tenant of ours in the shopping malls, and we were all very happy. We still have four floors left that we may be selling in the next year looking forward.
Last but not least, Costa Urbana. In regards to the master plan of the development, we have submitted for final approval of the project for infrastructures and roadworks that configure the master plan of the development, fulfilling the law requirements. As soon as the authorities grant approval, we will file in the working permits with the town hall and the utility companies. Respecting the master plan for the public park, the architectural and landscape draft of the public park was submitted for approval. Previously, the [principals] of the [site] team of West A and [PALO Architecture] held a meeting with the authorities and made a full presentation of the master plan for the public park. About being able to sell plots, we have submitted the final draft of the notarial deeds for transferring ownership to the city.
38 hectares of the [Poly Park] and free lots along Espana Avenue. This is the process of creating the land registrations in the industrial database of the city for issuing the titles of ownership and being able to sell and transfer the plots. As to environmental public hearings, we are working on the update of studies to be submitted as requested by environmental authorities, and we are looking forward to the convening of the public hearing by the Environmental Protection Agency. So let me turn over once again to Matias, our CFO.
Matias Gaivironsky: Thank you, Jorge. So going to Page 9. To understand our financial results. First, it’s important to understand what happened with the inflation and devaluation of the official exchange rate and dollar MEP. If we see in the center of the page, the inflation during the quarter was 35% against an inflation last year of 22%. So in real terms, during the quarter, we have a slight devaluation of the peso. On the left part, you can see the 1% devaluation in real terms against an appreciation of 4% during the last year. And regarding the dollar MEP, there was a real devaluation of 21% from 650 to 789 against an appreciation last year. That will have an impact basically in two lines: one, the fair value of our investment properties and the second, regarding the FX differences on our — that affect our debt.
So going to Page 10. More on the operational side, we can see what happened with our adjusted EBITDA. So we have very good numbers and real terms. Shopping malls increased by 22%. Offices decreased by 4%. That is related to the lower stock of square meters that we have after the disposals. And in the hotels, we have a 34% increase compared with the previous year. So if we see our rental EBITDA, the increase is 21% above the previous year. Regarding margins, we can see an improvement in margins in basically in shopping malls and in hotels. Shopping malls reaching almost 80% of margin — 77 — sorry, 77.7% margin. And in hotels, 35.2% above the previous year. And a slight decrease in offices that is related also because our lower stock of square meters.
