IRSA's Q4 2025 Earnings Call: Contradictions in Mortgage Market, Dividend Plans, and Hotel Strategy

The above is the analysis of the conflicting points in this earnings call

Guidance:

• No near-term need to tap debt markets; current cash funds organic projects; could issue for accretive acquisitions.
• Expect peso interest-rate normalization after elections; high rates could weigh on consumption until then.
• Terrazas de Mayo occupancy expected to improve in coming months.
• Ramblas del Plata: aim to sell remaining 20 lots within 6–8 months; prices >$850/sellable sqm; richer swap terms.
• Manzana 35: plan to launch one tower Mar–May 2026, subject to election outcome.
• Plan to start at least one new DOT office building in 2026, adding ~15k sqm GLA.
• La Plata mall opening targeted for May 2027.
• Intend to continue dividends; proposal to AGM by month-end.

Business Commentary:

• Financial Recovery and Performance:
• IRSA reported a net gain of ARS 196 billion in fiscal year 2025, compared to a significant loss in the previous year.

• The recovery was driven by a solid performance in its shopping malls, with adjusted EBITDA growing by 10% year-over-year, and successful financial transactions, including a $300 million Series XXIV notes issuance.

• Shopping Mall Performance:

• Shopping Malls segment observed a 3.2% growth in tenant sales in the fourth quarter, with EBITDA and revenues increasing by 10% and 8%, respectively, in fiscal year 2025 compared to 2024.

• This growth was attributed to the incorporation of Terrazas de Mayo, which added almost 34,000 square meters to the portfolio, and stable inflation-linked revenues.

• Office Segment Stability:

• The Office segment maintained stable rents at $25 per square meter per month, with occupancy reaching almost 100% in the premium portfolio.

• Stability was maintained due to the company's strategic focus on premium properties and the absence of significant new construction activity affecting supply-demand dynamics.

• Hotel Segment Challenges:

• The Hotel segment faced challenges this year, with occupancy decreasing from 66% to 61% and reduced margins due to the appreciation of the Argentine peso against the U.S. dollar.
• Lower margins and occupancy were primarily due to macroeconomic factors, including FX fluctuations and reduced international tourism inflows.

Sentiment Analysis:

• Delivered net income of ARS 196 billion vs a loss last year; Shopping Malls EBITDA +10% YOY; premium offices near 100% occupancy; record $169M Shopping Mall EBITDA; returned to international markets with $300M 10-year notes. Hotels were challenged by FX appreciation, and elections add uncertainty, but management highlights portfolio resilience and inflation-hedged revenues.

Q&A:

• Question from Unidentified Analyst (BTG): With inflation easing and mortgages reemerging, how does this impact residential demand and land-bank monetization, and what do you expect on construction supply?
  Response: Mortgages are unlocking demand from existing stock with price gains; construction lags near term due to higher dollar labor costs but should pick up next year, with broader expansion dependent on bank funding/securitization.

• Question from Unidentified Analyst (Audience): How important are the October elections for IRSA, and do you expect stability in coming months?
  Response: Elections add uncertainty, but IRSA’s dollar-linked assets and inflation-hedged revenues make the portfolio resilient; growth projects require a more stable macro.

• Question from Unidentified Analyst (Audience): Will you tap domestic or international markets to fund projects, and how do you view interest-rate volatility?
  Response: No issuance planned as cash covers organic projects; could lever up for acquisitions; high peso rates could pressure consumption, with hoped-for normalization after elections.

• Question from Unidentified Analyst (Audience): Why did Ramblas del Plata reported sellable sqm change?
  Response: A prior deal was amended to a better-located lot, adding about $7M and ~5,000 sellable sqm, lifting total to roughly 111,000 sqm.

• Question from Unidentified Analyst (Audience): What pace do you expect for future Ramblas sales?
  Response: Sales are ahead of plan; target selling the remaining 20 lots within 6–8 months, with pricing trending above ~$850/sellable sqm and richer swap terms.

• Question from Unidentified Analyst (Audience): What is the strategy for the Hotel segment—divestment or partnership?
  Response: Not expanding; open to selling assets if attractive opportunities arise.

• Question from Unidentified Analyst (Audience): Is Manzana 35 advancing?
  Response: Plan to launch one tower between March and May next year, subject to post-election conditions.

• Question from Unidentified Analyst (Audience): Are you expecting to pay dividends this year?
  Response: Yes; intend to continue dividends, with the proposal to be submitted to the AGM by month-end.

• Question from Unidentified Analyst (Audience): Will you build new rental offices?
  Response: Considering starting at least one new office near DOT next year, adding about 15,000 sqm of GLA.