Morning, everyone. I'm Santiago Donato, Investor Relations Officer of IRSA. I welcome you to the second quarter of fiscal year 2024 results conference call. First of all, I would like to remind you that both audio and a slideshow 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 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 that information discussed today may include forward-looking statements regarding the company's financial and operating performance. All projections are subject to risk 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. Matías Gaivironsky, CFO.
Good morning, everybody. We are finishing the first half of our fiscal year 2024. We very good result on the operational and financial. We will see the numbers later. During the first half, the tenant sales were very good and occupancy was higher than the year before. Also the hotels remain with a very strong and high occupancy. Our premium offices, we also improve occupancy. Also during the first half, we have a very active on real estate transactions, selling two floors of Della Paolera building, and we did a new barter agreement on one plot of land that Jorge will describe later. Also we finished the setup of a new trust for a very important building in downtown Buenos Aires. We finished with our dividend distribution that was some delay to, for the payment of our two series holders because of the regulation. We finish with everything, and we already distributed that. Santiago will enter in more details about our operational performance.
Thank you, Matías. Well, here we see the shopping malls figures. Well, occupancy have increased to levels of 98. This is maximum historical levels. After the all the impact of the pandemic, we finally reach our maximum levels. This is the same than previous quarter, than the first quarter of 2023. Sales grew 8% in real terms in the second quarter, compared to the same quarter of 2023. We are above 30% when we compare to pre-pandemic levels. This shows really good performance of our tenant sales in malls that surpassed inflation as of the first half of the year.
The second half, the ones that we are gonna present in the future, is gonna be a challenge, to keep these levels of sales, you know, given the acceleration of inflation due to the first measures of the new government after December and its impact on real wages and consumption. We expect slowdown in sales and in visitors in the next quarter, but we trust in the quality of the portfolio. We hope this is gonna be a short impact, that we soon recover our growth trend. Moving to the office portfolio. Here we can see that we kept selling some floors, as Matías mentioned. We sold the entire building, the Suipacha building and two floors of 200 Della Paolera at very good prices.
We have a portfolio of around 60,000 square meters, mostly A plus and A. We have only one building B category, that is Philips. The plan is in the future to recycle and position as a premium building in all that Polo Dot complex, together with the shopping and the Zetta Building and some other projects that the company owns there. When we see occupancy have increased to levels of almost 93% as the second quarter. And rents at stable levels. The devaluation has a positive impact on offices. You know that this is our dollar-linked contracts. The devaluation of the official FX to levels of 850 pesos per dollars. This is a natural hedge to the official devaluation.
The third rental segment, hotels, that is also a link to our, or a hedge to the valuation, is doing very, very well. We reach occupancy of almost 72% in the three hotels. Remember that we own Llao Llao Resort in Bariloche and two hotels in Buenos Aires, Libertador and Intercontinental. The rate per room average is in levels of $240 per room. Good performance both in Buenos Aires hotels and in Llao Llao. Tourism is strong, remains strong of both domestic and international. Regarding Della Paolera, we sold two floors during the last quarter. This is the case. We have already presented this in some conference calls in the past. This was a great investment.
We sold 86% of the building. Remember that we opened it in December 2020. It was a building that we thought in that moment for long-term lease. Finally, we saw a great opportunity to sell floors, a lot of demand. This is a very premium building. We sold 86%. We have obtained profits from sales of around $200 million in excess of what we invested. That was around $112 million between the land and the construction cost. We keep some floors there for a valuation of $32 million. The profit over investment we expect to be over 200%. Great case. The plan is to in the future now replace with new square meters again and develop new projects, mixed-use projects in the near future. For that part, I will give the word to Jorge Cruces, our CIO, for the real estate transactions of the period.
Thank you, Santiago. Good morning, everybody. In December, we signed a barter agreement transferring ownership of our land in Ezpeleta to a well-known land developer of Quilmes district. They have developed very successfully Quilmes Nuevo, they named this new development Quilmes Nuevo Dos. We will receive 40% of the development, meaning 125 single-family lots and 40% of the buildable square meters of the multifamily lots. Banco Hipotecario had acquired the main office building of the city's administration to build its headquarters. For a number of reasons, this never happened, this building was on sale. Currently, there is a reconversion program from commercial to residential with tax benefits. We gathered a pool of companies willing to take advantage of this program and invest with us in this great premium residential development.
Our stake of the investment will be of 20.5% of the reconversion cost, obtaining 14.7% of the square meters of the project. We estimate a total investment of approximately $50 million net. The development has 720 departments. That's studios, one-bedrooms apartments, and up to two bedrooms apartments. Has 220 car spaces, has amenities, rooftop, gym, co-working. I mean, it's a great development. It's a whole city block, right one block away from the Obelisk on the main avenues of Argentina. It's called Nueve de Julio. This is gonna be a very important project in Buenos Aires, and we are very proud to announce this development. Costa Urbana.
On November 15th, notarial deeds were signed, transferring ownership to the city of four plots of land and creating the 61 lots for IRSA to sell. With this act, we fulfilled the 2nd step in the process of creating the land registrations in the cadastral database of the city for issuing the titles of ownership and enable IRSA to transfer the plots. The 3rd and final step will be accomplished when we finish the roadworks and infrastructures for each block, enabling IRSA to officially transfer the ownership of the plots to third parties.
By the end of January, we have completed the submittal of all additional information and documents requested by City Hall for granting the approval of the project for the infrastructures and roadworks that configure the master plan of the development and updated assessments requested by the environmental authorities. We are looking forward to the convening of a public hearing. We expect the hearing to be held by the end of March. Well, thank you very much. Now, I'm going to hand over back to Matías.
Thank you, Jorge. I'm trying to turn on the camera, but I can't, Santi. If you can allow me to turn on the camera, I will put it. I start with the macro situation, trying to understand some of our results that has an impact due to the evolution of the effects and the inflation. As you know, during the last quarter, there was a devaluation of the official exchange rate from ARS 350 to ARS 800 from previous quarter that represent 131% increase against the 36% increase during the first quarter. If we see in real terms
The valuation in the first quarter was almost zero. Then in the second quarter was 51%. That will have an impact on our dollar-denominated debt when we have to convert it into pesos. Also, in our DCF model for the investment properties, where we have to assess the value for our malls, that will have a positive result. Regarding the other part of the portfolio, the offices and the land bank, remember that we measured that at the Dólar MEP, at the relative swap. If you see in the bottom right of the slide, you can see the real effects, MEP effects evolution, that during the first quarter we have a jump of 21% and now a decrease of 18%.
In terms of when we convert those properties into pesos, the result of the semester is almost flat, the 0.2 that you see there. Going to the next page. We can see the evolution of the EBITDA, the adjusted EBITDA increased by 54% during the semester. We can see good results in our malls increasing by 15%, the hotels increasing by 33.7%, and a decrease in the offices by 37%. Here we have a lower stock and the impact of the devaluation had an impact in this semester, will have an impact in the next semester since the invoices of our offices for December were sent before the devaluation.
The impact will come in the next quarter, that in pesos term, we will receive higher rents because of the devaluation. In terms of the EBITDA margin, will remain stable in the malls. In the offices, a slight decrease because of the lower stock, and hotels increasing from 35%-38%. Going to the next page. The operating income, leaving aside the fair value effect, increased by 47% from ARS 37.7 billion to ARS 55.5 billion . Here we have the first major impact on this semester, that is the change in the fair value of our investment properties, going from a negative result of ARS 92 billion last year to ARS 137.8 billion this year.
If we measure the properties in dollar terms, we will see mostly flat numbers, so it's not a positive evolution. This only is the impact on converting those dollars into real pesos adjusted by inflation. We have a positive result during this quarter. If the next quarter, the crawling peg of the effects remain at this pace of 2% and inflation at levels of double digits, that means that in the next quarter we will lose money in peso term. In dollars, there is no major changes. The next page, we can see the net financial results. We have a also important effect here from a positive number last year of ARS 19 billion to a negative number this year. This is related to the devaluation. You can see in the table below the net effects result.
We generated a loss this semester of ARS 94 billion. This is related to all our dollar-denominated debt. When we convert that debt into pesos at a higher number, that is the effect. Also, that part was compensated because all our liquidity was invested in dollar-denominated securities, so that has a positive result of ARS 57 billion. Also, the inflation adjustment has a positive effect of ARS 32 billion . If we see the net interest, we are posting better numbers and lower loss from ARS 13.8 billion to ARS 7.5 billion. This is because we have a lower leverage compared with the previous year.
The income tax, here we have, last year was a positive number, because remember that we recognized a loss in the fair value of the investment properties. The deferred tax was positive this year because we are posting a negative number... I'm sorry, a positive number in the investment properties. We have to recognize a deferred tax of that. That is the ARS 48 billion that you see in the center of the slide. With all those effects, the net result this semester went to ARS 146 billion compared with ARS 48 billion of last year.
Going to next page. We can see here the evolution of the rental EBITDA in dollar terms. The last 12 months were stable compared with the fiscal year 2023 at $166 million. That compared with pre-pandemic levels are very, very good numbers, 26% or 27% above the 2019 numbers. In the next page, we can see the evolution of our leverage. There was an impressive deleverage of the company since 2020, going to levels of $240 million. This is a completely unlevered company today with an LTV of less than 15%, a coverage ratio of 12x , and net debt to EBITDA of only 1.4x , and with a lot of properties and land bank that are not generating EBITDA. The company is the shape of our financial condition is best ever. Regarding our debt amortization scale, this is optimized in the coming years. The gross debt is $366 million. We are planning to refinance part of the fiscal year 2024 in the coming days, issuing a new bond, trying to extend the tenor, but also we have liquidity to serve our debt if we need.
The next page is related to our dividend distribution. Remember that we decided in October to distribute a dividend of ARS 64 billion . That was a dividend yield of around 12%. Sorry, it was ARS 67.4 billion that since we announced the distribution in October, there was a new regulation in Argentina that delay our process of payment to our GDS holders. We decided in the middle to preserve the money, investing that money in a money market fund, and not sending that money to Bank of New York to protect the funds of our investors. We obtained a change in the regulation and the CNV, the local SEC, allow us to pay, and finally, we paid in at the beginning of the year. Investors received in dollar terms 20% more than the original payment date in Argentina.
Regarding the share repurchase program, we launched the first one during the fiscal year 2023 that we finished in December. In July, we announced a new program of ARS 6.5 billion. From that amount, we already invested ARS 2.9 billion. We will keep buying back shares during the rest of the year. With that, we finish the formal presentation. Now, we open the line to receive your questions.
Well, now is the time for the Q&A session. If you have a question, please use the chat. We will take the questions in the order we receive them. Here we have our first question. Can you tell us more about your upcoming bond issue?
Well, we have some concentration of amortizations during the coming months. We are planning to tap the local market within a structure that we haven't defined, and we will announce probably in the coming days. Will be something similar on what we did at Cresud level at the beginning of the year. A new question. Do you expect that access to international markets will improve as the new government seek to cut the fiscal deficit and return the economy to growth? We hope so. We believe that... Well, Argentina was a little disconnected to the world in the past three years.
We hope that with the normalization of the economy, the companies are in very good shape in Argentina, so the problem is the sovereign ceiling and the cost of Argentine debt. We believe that if that start to normalize, then there will appear opportunities for corporates. There was an example of one, YPF that tapped the international market at the beginning of the year. That definitely will happen if Argentina normalize. In the case of IRSA, with the current status of our projects, we don't need to tap the international market for debt. The amortizations that we have are very limited. With the level of CapEx that we announced, we have the liquidity and the cash generation to finance the project, so we are not expecting. Of course, if the cost of capital starts to reduce, then we can accelerate our investment, process and maybe, we can tap the market, in the future. We are not planning that in the short term.
Here we have two additional questions on the financial side. One is, if the net debt position that we showed take into account the dividend payments.
Yes.
Yeah.
Yes. That is as of December, at the end of December, so already deducted the payment. The part that remain at the company level will make it out of our cash position in our terms of our disclosure. Yes, there was net debt after the deal.
What influences do you see by the FX liberalization for the pesos property's valuation in general and for IRSA specifically? The impact of the FX liberalization on real estate and IRSA in general.
Let me say something, Jorge, please add whatever you want. Always real estate in Argentina was a safe haven against devaluation and inflation. Real estate prices were always quoting dollars. All the properties was measured in dollars, it's not measured in pesos term. What you have to analyze is cost of construction, that maybe if we have an inflation in dollar terms, cost of constructions will be higher. That means that that can trigger prices of real estate up. During the last two years, we saw some decline in prices because of that. The cost of constructions was cheaper. I believe that this devaluation hasn't been an impact in the short term on real estate prices. Offices prices remain stable. I don't see an important impact on our portfolio. I don't know, Jorge, if you want to add something. You are in mute.
Yes. I believe that in the short term, it's not gonna influence very much. As Argentina may recover, I suppose the whole real estate is gonna recover in Buenos Aires. The salaries are gonna recover. In the meantime, it may be a little bit higher, the cost of development, but then the people are gonna have better salaries to acquire real estate. It should be a steady process of real estate going up. In maybe just a little bit in the near future, not in the short future.
Next question. Can you give us more color on Del Plata building project?
Well, yes. It's a pleasure for you asking about the project. The project, as I said before, it's a whole city block, only a block away from the obelisk. Well, there you can see the pictures, right on Nueve de Julio, I mean, in that part of the city, it's like talking about Times Square. It's like in New York. You're close to everything, to the theaters, you're close to the subways, buses. You have great infrastructure. It's very nice to be there. As I said before, it's a whole city block, so it has a very big impact in the city. Behind that picture that we see right there's a pedestrian street.
Hopefully we're planning to develop the whole ground floor with restaurants and something very nice. It's gonna be a place where a lot of tourism that's gonna go there behind that building to have a cup of coffee or have a beer maybe. It's gonna be a building mostly for youngsters. There's a lot of studios. We're talking about people, not only youngsters, studying in universities in the city and right near to this property, but also for a lot of tourism. Tourism, not only from the country, like people from Córdoba, Rosario, Mendoza, that it's very comfortable to be there and to work there. Maybe people who come a couple of days a week.
Also, we estimate there's gonna be a lot of foreigners using the building. We don't know if foreigners are gonna be investing and buying apartments. Even though if Argentinians buy the apartments, there's gonna be a lot of foreigners using these apartments, maybe like Airbnb or just like monthly rents. There's a great pool on the rooftop. You can do running. There's a gym in the basement. You have another pool that's all year round. You have co-workings. You have living rooms. You have a place to watch cinema or to watch TV with other people. Even though it's not a co-living, there's a lot of amenities.
Mostly we're trying to make a project for youngsters that are mostly working all over the world. Buenos Aires is a great city. People love Buenos Aires to stay for a couple of weeks or a couple of months a year. We believe this is gonna be a very great project for youngsters who are willing to be in Buenos Aires for short terms during the year. Mostly there's gonna be a lot of people around Argentina who's gonna be buying these apartments. As I said before, it's very comfortable to be there because of all the subways and a lot of people of the rest of the country need to work in Buenos Aires.
We're really very happy with the project. Aisenson are the architects. They're quite well known in Argentina for these kind of big projects. We're soon going to be hiring the construction company. We're going to start building this building maybe in four or five months from now. I'm very enthusiastic with this project. I don't know if I sound too enthusiastic, if there's any more questions, I'm willing to add any more information regarding this trust with that the building.
Thank you, Jorge. If there are any additional questions, we give some minutes more. The presentation here, there's someone that asked if we can request a presentation by email. It's gonna be uploaded in the website. It's already there. You can see it or you can contact the IR team directly. If there are no more questions, we conclude the Q&A session and the presentation. Thank you for joining. I will turn back to Matías for his closing remarks.
Thank you very much, Santi. Thank you everybody to participate in the call. I believe, we have during the first semester an excellent numbers, excellent performance. We believe that, probably during the second half will be more challenging because of the new measures of the new administration trying to normalize the economy. There will be a slowdown in consumption. There was an acceleration of inflation trying to accumulate relative prices in the economy. There was an increase in inflation and will have an impact in real wages. Consumption probably will suffer during the next months, and we will see that in our malls.
I don't know in dollar terms, that will depend on what happen between inflation and the valuation, but maybe we will see better numbers in dollar terms but lower numbers in pesos terms. That we're gonna see in the next quarter or in the second part of the year. IRSA is very well prepared to face this new stage of Argentina. We have been preparing our capital structure, deleveraging the company, so we are ready for a new stage of Argentina. If there is a normalization, we are ready to accelerate our investment process and launch many, many projects that we have in our pipeline. We are very confident on our situation, and we expect to have, although weak consumption levels in the coming months, very good numbers on our financial situation. Nothing else to add on that. Thank you very much for your participation. We hope to see you in the next quarter.