IRSA Propiedades Comerciales S.A.
Q2 2019 Earnings Call Transcript

Published: 22 Feb 2019

[Operator:]

Good afternoon and welcome to IRSA Commercial Properties Second Quarter 2019 Results Conference Call. Today’s live webcast, both audio and sideshow, maybe accessed through company’s investor relations website at www.irsacp.com.ar by clicking on the banner webcast start link. The following presentation and the earnings release issued today are also available for download on the company website. After management’s remarks, there will be a question-and-answer session for analysts and investors. At that time, further instruction will be given. [Operator Instructions] 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 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 conference over to Mr. Daniel Elsztain, Chief Operating Officer. Please go ahead sir.

[Daniel Elsztain:]

Thank you, good afternoon everyone and thank you for joining us today in our second quarter fiscal year 2019 conference call. We’re going to start on Page number 2 talking about our main events of the six months period. First of all, we have changed the financial statements due to the – we have to now file our financial statements adjusted for inflation according to regulations on the IAS and also local regulations. This has been very challenging for our team, accounting team, but we’re going to see these changes and we’re going to explain later when we talk our financial section. Regarding our operation – operational figures, we have been facing challenges on consumption as you know consumption as being challenged by inflation by the power of position of people. So we’re going to see that that ourselves in our shopping centers grew below inflation a little bit more than it was in the past. And also that we have been looking at occupation, in our shopping a small decrease in occupation, this six month, this number of 95% it looks like EBIT reduction, but we’re going to later that one big tenant that left, we’re going to explain it later. Regarding on the office segment, the demand is stable although the picture at the end of this quarter also because of expiration of some office tenants, its occupancy of 90%. And regarding CapEx, we have been finalized in the construction of the Polo DOT. There are building set that are building at the Polo DOT office with the total occupancy and we have acquired on Catalinas 14,000 square meters from our parent company IRSA at the value of about $60 million in November 2018 and we keep doing the construction of Alto Palermo shopping center. We’re going to explain this with more details a little bit more later. Regarding our adjusted EBITDA by segment, we can see that on the shopping centers, we achieved a total number of ARS 2.062 billion, although this is a decrease of 9.8% compared to last year. And remember that this is all adjusted numbers to inflation and nominal numbers it’s up of course. And in the office segment, we see an increase of 44% achieving ARS 414 million. This as you can see here is not totally remember that the offices are set in dollar terms, but we cannot see – we don’t see here the full amount of the evaluation, it’s about 100% because part of it is taking away from – with inflation. On the net income, we see a big drop. Remember that last year we have almost ARS 13.3 billion. This year we are having a net income loss of ARS 4 billion. And this is mainly explained by negative results in the change of the fair value of our investment properties and basically due to the inflation adjustment effect. So on Page number 3, we can see more details on the tenant sales year-over-year it’s a increase of 23.8%. By the way when we see on real terms, now we can see the full curve of real tenant sales for the – since 2017. We can see that in the first quarter, we were down 8% and in the second quarter, 16% that takes us for the six months period a reduction of 13% in real terms of sales. This is basically what I have been explaining inflation, difficult to achieve the power of consumption. And so having a really challenging for our tenants and also for us to achieve those sales. In terms of GLA, remember that by the end of last year we gave back the concession of Buenos Aires Design. So this reduce our portfolio from 340,000 square meters, the small reduction, now we have 332,000 square meters, but at the same time, we incorporated more – small pieces of GLA in between shopping centers. So, it’s only a reduction of 8,000 square meters overall, our portfolio. Occupancy, what I’ve been talking later, we have been running with very high occupancy levels for the past years and this year we need, we see a big drop, but the majority of this drop coming from 99% to 95% is explained by the space that we lost Walmart. We can sell the contract – we – Walmart at Dot Baires Shopping Centers. So, then they were not doing well in terms of sales and we were not happy about the attraction that they were causing to the shopping centers. So there was a penalty by them leaving the shopping center, we collected approximately the amount of two years and a half of rent as a penalty. And we’re going to use that money to transform this space and also not to have a loss in the between the time that they are gone, they are gone and we’re bringing the new tenants, we are bringing the new tenants in this segment. So, this has been very challenging time for our retailers, but basically due to the economy, if we would take away, would exclude the effect of the Walmart, overall our portfolio occupancy would have been 98.7%. So, it’s a very small drop from what we had last year, although we have been seeing some vacancy and some tenants that are facing challenging times. In the Office segment, on the right side of the page we can see, first of all the occupancy also, this is a big share – is a big share as of December. So, we also see a drop off from 94% last year to 90% this year. This is mainly explained by expiration of some tenants in one of the buildings. So, the picture in December looks, doesn’t look that good 90%, but if we take the overall as an average and we include here the new building of the in Polo Dot the occupancy would have been 93%. And on top of that growth we have, the tenant left, we have demand on that segment – on that region so we believe that we should be coming back to the occupancy we had in the previous quarters. Regarding the price, we see a little increase from $26.5 per square meter to $27 per square meter on this quarter. And in terms of total GLA dedicated to the Office segment, we have 1.4% drop. We sold one floor at the Intercontinental building. And we see here our projection for the future. We are going to incorporate during this year on this fiscal year the Zetta Building, this is incorporation of 32,000 square meters. So by the end of this fiscal year we’re going to have 115,000 square meters of GLA in the Office segment. And by the end of the next fiscal year, we’re going to achieve 145,000 square meters of GLA in Office segment. This is a big increase of 74.5%. And we are happy that we have been investing in the segment that is dollar denominated. We’re happy that we have been investing, in this segment where we – remember we sold some offices in the past and we have been building at almost half of the price those that we sold in the past. So we are happy with the result. One building is about to open and we can see on the next page, Page Number 4, the Zetta building is fully leased. It’s already in the hands of our tenants. The two main tenants are Falabella Group and Mercado Libre, technology company in Argentina. Total GLA of 32,000 square meters and EBITDA is going to be approximately $9 million. We know the revenues, but we still don’t know that the cost of operating the building, fully operating building. So we’re going to know exactly EBITDA by the end of the fiscal year most probably. And work in progress is almost done. The tenants are working on premises., most probably they’re going to move in sometime during April and May. On the next page we can see the rest of the Polo Dot of this park. We are working on premise and construction design. We are not launching anything so far, but we have demand for people that they would like to establish their offices on this complex. So we’re very happy. And this is going to help a lot, the consumption at the shopping center. Next slide. On Page Number 6, we can see the 200 Della Paolera office building, it’s under construction. Remember that we acquired for $60.3 million, 14,000 square meters from IRSA, our parent company. The current ownership is 87% belongs to IRSA Commercial Properties and 13% of Globant. The building is under construction, it’s on time. So we expect that the finalization of this building will be somewhere by fiscal year 2020. And estimated EBITDA for this building, for our portion of the building is between $10 million and $12 million. That will depend on the finalizing rent that we’re going to get from tenants. The good news is we are receiving – this is the prospect for the building. And there’s no much new inventory on the CT and this quality. On Page Number 7 we can see that we go – we move forward with the expansion of Alto Palermo, our best performing shopping centers in terms of sales and in terms of rent per square meter and maybe the most successful in the region. We’re going to expand for 1,300 square meters of GLA, that approximately $28.5 million in construction and the opening is estimated for fiscal year 2020. This is not only the expansion but it’s also we are moving the food court from one side to another side of the shopping center. So it’s going to be – it’s not just an expansion but it’s a big transformation of the shopping center for the – with the new trends that we are seeing now in Buenos Aires. So it’s attracting to the new trends. We’re very happy and we expect these to be on time and with high demand. On Page number 8, we are showing here, we – remember we acquired a year ago a plot of land in the city of La Plata. La Plata is the fifth largest city in terms of population in Argentina. The land plot was about 78,000 square meters and we have capacity to develop approximately 100,000 square meters. We’ve got the permit from the city. In the city of La Plata, nobody could get permits for years and years. So finally we got the permits to build this. This is going to be a mixed use, some shopping center, office, residential hotel, we’re finalizing with permits. We are not announcing any construction so far. Once we finalize the project and if it makes sense, which it looks like it does, we’re going to see when is the right time to launch this project. It’s a great city. It’s a great location and the good thing is having the mixed use allows us to really make a good use of the land and also to do swaps. And collect money by selling some of the residential or the commercial that is not part of the shopping centers. Another note of this period is we have recently acquired Pareto. Pareto is a customer fidelity system. It’s 100 Digital. First, it was like an app that we were hiring services that they were giving us some fidelity to make discounts on our stores to track the consumers. And finally we realized that it’s the right tool to get engage with our customers. And we are – so far we have about 400,000 people that downloaded this app in a very short period of time. So it became one of the most downloaded in markets in Argentina in the recent months. We’re going to use this to make advertising to serve our customers, to know better our customers and also to get them and to try to sell and connect with them to those things that we did not sell in our shopping centers, only there. We can share more our tenants. We are also working here to do some services for companies. So we are doing some implementations on employees of companies. So overall we are very happy with this app and it’s a tremendous tool, along with our CRM, remember that we establish a launch in a CRM with Microsoft Dynamics. And having the two tools together are very powerful and we’re starting to see the good saving in terms of communications and the production of engagement and bring in more sales to our shopping centers. So now to see our financial results, Matias Gaivironsky, CFO of the company.

[Matias Gaivironsky:]

Thank you, Daniel. Good afternoon everybody. So moving to Page 11, I will try to explain the main impacts of the inflation adjustment. As Daniel mentioned, since Argentina achieve or surpass 100% inflation, accumulated inflation during the last three years, the rule established that all corporates should adjust their balance sheets on the – for inflation. So the CMV rule, they change, and all the corporates will start to present financial statements starting after 31 of December 2008. So we were one of the first companies to present the new information with inflation adjustment. And I will try to explain the main impacts in our financials and in balance sheet. First of all, we have to divide all the non-monetary assets and non-monetary liabilities and the equity of the company and we have to adjust that by inflation. Just to remember, the index of inflation, if you compare December 2018 to 2017 was 47.8%. So in our investment properties, when you divide – what we have in non-monetary assets, we have 80% are on investment properties and 20% are other assets. Regarding investment properties, we won’t see a change because we value the investment properties, not at a historical value, we value at fair value. So we don’t have to adjust by inflation, but you’re going to see a change in the impact on the result of the change in the fair value. So before we recognize it all the gain in one line that was called change in fair value of investment properties, and now in that line, you will only see their really effect of the change in pesos of the change in the investment properties. The rest will go directly to the line of inflation adjustment that is included in the financial results. Then in other assets; all that what we have are historical costs. Now we have to adjust by inflation. And you have to use the index from the last time that Argentina adjusted by inflation, that was February 2003 to today. And the index, the inflation accumulated on that year was around 800%. So part of the impact we have to recognize before, so it’s impacted in the – not in this year, is impacted in the previous year. And from now on you will see the difference in each of the years, until Argentina stop to adjust by inflation that we hope that happens soon. But our estimation is that probably for the next two years Argentina will adjust by inflation according to projections on inflation. So all the properties plan and equipment that – basically are our land dedicated to residential; now it’s adjusted by inflation. All the intangibles are adjusted by inflation. Then if you move to Page 12, we have the rest of the impacts that are in the liabilities and in the equity of the company. Most of our liabilities are monetary assets, like our debt, that is dollar-denominated. So it’s not impacted by inflation, but for instance, we have the deferred revenues that in our case is the key money or admission rights that we collect from the tenants, that we collect in advance and according to accounting rules, we have to accrue over the life of the agreements that that liability we have to certain inflation and then the revenue is recognized also with the inflation assessment. The other – this is probably a minor effect. The main effect in the inflation assessment is regarding our net worth. That’s our holders equity that you have to leave the impact directly with the inflation index. So that is an important effect that we have. And this is a loss for the company. So all the changes generated by assets are positive results. All the facts generated by liabilities, all the net equity is that generate a lot. Also it’s important that when you couldn’t for figures, but now we have to assess also previous figures to the current numbers. So all the figures as of December 31, 2017, where assessed it with the 47.8% to reflect the current for chasing power of the peso, and to compare apples with apples. So now you have the – when you compare in our financial statements, if you see a positive evolution is a positive evolution on top of the inflation, on an negative, of course it’s below inflation. So those are the main effects. You – we are updated in our website a presentation including all the facts on the inflation assessment on the main explanation. You can – if you have doubts, review that material that I think is helpful to understand the impact. When we go to Page 13 and see now how it looks, I received some questions from analysts about the previous year that they – the match with historical information that we presented last year is because of this. Now we have to assess those figures to the current numbers. So when you have to assess all the models including the inflation. So basically if you have – if you took our financial assignment of the previous year. First of all, you have to assess by inflation and those –and that year and then the result to assess to the current year multiplying by 47.8%. So it’s impossible for you to match that path information with the current numbers. So sorry for that, it’s not because of us, it’s because of the rule. You will start to have the story of the company again with the current numbers after we have the evolution of the inflation assessment. So going to the main results, so first of all, revenues you can see that we have a negative evolution 4.7% below figures of the last year in real term, I will explain the breakdown between shoppings and offices in the next slide. The cost decrease in real term 11%. Then we have one of the main effects is the change the fair value. You can see a positive figure last year, ARS 8.457 billion against a loss of ARS 6.4 billion this year. This is basically last year, we have the change in the tax treatment in Argentina that decreased the tax burden of the companies from 35 to 25, and we gave impact of that last year and also their evaluation generated a positive result last year. This year because of the increase on the cost of capital in Argentina on the recession in Argentina and expected growth. In real terms, we have lower results, when you see the figure of the investment properties that increase, but remember that part of that result will go into the net financial results and the remaining is included here in this line, in the changing the fair value. So from now on, you will see here positive results, if we surpass inflation and negative results, if we don’t surpass inflation. Regarding net financial results, we have the breakdown in the coming slide and income tax is ARS 1.3 billion positive against ARS 2.6 billion positive. The current tax is that cash payments that we have this year is only ARS 57 million against ARS 311 million. Here what happened is that because of their evaluation, we are generating tax credits because all our dollar denominated debt is in dollars and that their evaluations generated a loss. The tax treatment is completely different, we got an inflation assessment is not allow by the law to assessed result by inflation – for inflation regarding our tax balance sheet. So it’s completely different. The treatment between the two balance sheets. So it makes a little more complex to understand this, but for the tax treatment is all historical information, nothing adjusted by inflation. Something important here to mention, if you saw the line two that is cost with the line five that is our SG&A. We included the line in the bottom of the slide that you can see the some. All our cost decreased 2%, compared with the previous year. If you see only the SG&A costs, you will see an increase of 30% that is on top of inflation. And if you see only the cost decreased 11% against inflation and also again the previous year. This is mainly because we reclassified some costs that we have between one line to the other. So for that reason, for us it’s important to include both together and calculate both to the how was our performance. In the page 14, here we have the breakdown of our net financial results. The line number four is the line – the new line, the inflation assessment that that here we consolidate all the positive and negative effects, and finally, we have a negative effect of ARS 191 million. But the main here, the main effect is regarding the foreign exchange differences. Last year, we have an evaluation of only ARS 1 – sorry, ARS 2 and 12% and this year we have like ARS 10, 30% evaluation. So that affected all our dollar denominator there, so we have to recognize a loss because of that. Then the rest of the lines also reflected the effect of the evaluations since our debt is pretty the same than the last year and all our debt is fixed interest rates. So the main effect is on the evaluation. If we move to Page 15, here we have the breakdown of our shopping malls and offices. We can see a very good performance, the office is growing 47% against the last year. Remember that our offices all the revenues are in dollars. The evaluation was 100% between one year and the other, but since we adjusted previous year by 47%, because why you don’t see in this line 100%, you only see 47% increase. Regarding shopping malls, we grew the low inflation, so our revenues decreased 6.8%. Basically explain but a lower tenant sales in real terms. So our adjusted EBITDA decreased by 10%, the EBITDA margin in levels of 75%, and in offices at around 80%. And our NOI decreasing shopping’s by 5.5% and offices increased by 50.7%. If you move to Page 16, we have the evaluation, not evaluation – the breakdown of our net asset value. And this is the value that that we have in our balance sheet, the value of each of the pieces of our assets. So we have shopping malls in $1.1 billion. Remember that field was much higher in the previous year, the fair value of that is reflected in our balance sheet. So the total gross asset value as of December was $1.785 million with a net debt of $335 million that resulting NAV of the company in $1.450 million. If we move to Page 17, we have the main financial metrics of IRSA Commercial Properties. The last 12 months EBITDA in dollar terms was $133.3 million. Here something important to – important disclaimer is that when we are using the or when we calculate the last 12 months, we are using an average exchange rate of the year. That means that the average exchange rate was 35, the current exchange rate is more in 39. So we will see going forward the rest of the effects of that evaluation. But since the company don’t disclose a forward-looking information. We are using the last 12 months as relevant metrics. The last 12 months NOI was $153.2 million, the adjusted FFO $82.9 million here one positive effect is that it will decrease in taxes because of the evaluation. The rest remaining in line with the previous year. So the evaluation rates, if you think that the information – the above information is that we are trading at an implicit cap rate of 17.3%. We are trading at a multiple EBITDA, multiple EV/EBITDA of 6.6, price-to-FFO of 6.9 price-to-NAV of 0.4 times. We’ll move to Page 18. Here we have the breakdown of our debt. There is no important development here. The debt remains stable, no new leverage, the cash position company is strong. We have more than $200 million in cash. The debt amortization schedule is flexible. We have the next payment in fiscal year 2021. In terms of debt ratio, the net debt to last 12 months EBITDA is 2.5 times. This increase compared with the previous figures, basically because of that reduction in EBITDA, since net debt was almost the same. Loan-to-value is 19%, the ratings stay the same, rating AA+. So with this, we finished the presentation. Now we open the line to receive your questions. Thank you. Floor is now open for questions. [Operator Instructions] The first question today comes from Gordon Lee with BTG. Please go ahead.

[Gordon Lee:]

Hi, good afternoon. Thank you very much for the call. Just a couple of questions on the operating side, first, I was wondering if you could share with us, what the rest of the year looks like – what 2019 looks like as far as renewals, move-outs, et cetera. And what you feel your retention rates will be and how confident you are that you can fill up any vacancies quickly given the backlog of clients that you’ve historically had, particularly on the retail side. And related to that on Dot Baires, I was wondering, if you could let us know how quickly you think that the Walmart space will be filled up. And whether you think that given that you’ll be filling it up with smaller tenants, with satellite type tenants, whether you think that average rental rates could actually go up as that space is filled? Thank you.

[Matias Gaivironsky:]

Thank you, Gordon for the question. Let me start with the Walmart space. I think that it would take us a full year to completely occupy. I mean this estimation, we still didn’t – we only negotiated and are about to do sign a contract with the Jim for a partial space of the Walmart. We are negotiating with the rest of the space. We have to work on the space. We are not only doing big stores but also small stores in that location. So I think it’s going to take us a full year. Regarding the total amount of rent, the small stores will pay more and the medium and large stores with pay in line with what Walmart paid. But as we’re going to have more collider space, I think that we’re going to have at the end of the day, at least for the first year, similar levels of rents of what we had with Walmart. It may be a little positive, but I would prefer to be conservative and tell you it’s going to be in line of what we had with Walmart. But overall, it’s going to be more attractive with center, because we are bringing attractive – and we want to bring attracted things for the shopping center. And remember that anyways, we have like two and a half years of that rent, including the penalty that we collected from Walmart. Regarding occupation for the balance of the year, on the office segment, there’s no problem, I think, the picture you are seeing is just because we lost to tenants in one building that there was within exploration time. We don’t see many, many people looking for expansions. Actually, we’re not looking for expansion, but we are – but it’s very stable and at the same time, we have, since the beginning of the year, we have been taking visits on the Catalinas project. So, it gives us the idea that on the office segment, it’s going to be stable at the levels that we can see today. On the shopping centers, it’s case-by-case. For example, the Premium outlets are doing very well and actually, we have no vacancies almost on those locations and the Premium shopping centers that we have in the case of Alto Palermo or Abasto, Alcorta. We always have people that they want to be in those shopping centers. So, the fact of the challenging year, maybe more on this side of some concessions in rents that’s not be with various concessions and none in occupancy, where we can see some occupancy decreases maybe on the dig shoppings on that. They are not in such great locations. One case, maybe the case of Mendoza that is one of our biggest shopping centers and we can have as of today, I think we have eight or nine vacated occupancy in the empty stores. And moving forward, yes, it’s going to be, if you read the newspapers, I mean it’s – the front page of the newspapers, the vacancy is seen one of the sides at the rest of the tends that country is going up, but we are managing to have a small vacancy in our shopping centers. And in terms of concessions, yes, we’re going to see some, but overall, our total revenues I would say, that it’s not significant. Also we have some good news in some of shopping centers for example, in the case of Colorado as we are opening this big building next to the shopping center, we’re going to have like 3,000 new people coming in and out every day from that building. So, it’s one-by-one and it doesn’t look that is going to be like a great year, but it also – that’s something that’s going to be so bad.

[Gordon Lee:]

That’s very clear. Thank you very much.

[Operator:]

[Operator Instructions] The next question comes from Gerald Ferrante with Morgan Stanley. Please go ahead.

[Gerald Ferrante:]

Good afternoon, gentlemen. I have two questions. One, you mentioned that there’s a likelihood of concessions in the rents now in 2019, I understood for your mall tenants. What’s – how would this manifest itself? Or are we talking about rent discounts as in a few months, where rent is forgiven or is this essentially a step downward in fixed rents and if so, what percentage downwards would that be? And then the second question is, thinking about funding going forward for possible future development or even your existing pipeline, how are you, in terms of your funding needs? So, are you covered for your development pipeline as it is, and how would you fund future projects such as you mentioned in your presentation that you recently approved La Plata? So my question is, I’m funding for your current pipeline and funding for future pipelines?

[Matias Gaivironsky:]

Thank you, Gerald. First of all the concessions are different across our portfolio, but you know, it’s not that we are looking for a big reduction. What we’re trying to do now is to keep occupancy up, if we are reducing the barriers of entry in the cases that we have empty stores. For example, when you come into one of our stores, the typical consolidation you have to pay key money commission, marketing cost. So, the barrier to entry is very high. And now as we see that the cost of capital is very high and people is not really tend to try these new ventures on opening stores. We are reducing those barriers. Where – I mean more what we need, of course. I mean we’re doing in the way of pop-up stores. What is the pop-up store? It’s the six months store that we – it’s not that it’s way more cheaper than the typical rent that we’re doing the store, but the barriers of entry, the amount of capital you have to put in advance. It’s way less than for the typical of our contracts. So by doing that in those shopping centers that we have more empty stores and we see that, if it is what we are trying to do also concessions is when and also when we one case is that the key money is not at the highest levels as we were collecting in the past. But it’s not that we are reducing rent. We are not reducing percentage of rent, and we don’t see that. And if I have to tell you that the amount of the part that we have as of today, I will tell you that we have no more than 30 cases. And also all the concessions, I mean we track – I mean our team tracks very, very, very much what about concessions and all the – the crates that we do to tenants that it’s very in compared to our total revenue it’s a very small portion of revenues. Joel, regarding the second part of the question about how we can sign until how we will find a future expansion. First of all, the company has a strong cash position. So today we have $200 million of cash, and also the cash generation of the company remained very stable. So we – as I showed the FFO of the company last year was – the last 12 months was $83 million. So the company still generate a good levels of cash, and has a strong cash position, so we don’t see a according to what we have in the pipeline, any neither for new financing.

[Operator:]

[Operator Instructions] The next question is a follow-up from Gordon Lee with BTG. Please go ahead.

[Alvaro Machado:]

Hey guys, it’s Alvaro Just a quick follow-up on the foot traffic at the most. I was wondering if you can talk about – on average in your shopping portfolio – in your retail portfolio on a year-over-year basis, what is foot traffic done at your different models we’ve seen. Dot Baires and Alto Avellaneda were a little weaker than the portfolio average. But if you can comment as a whole, what has the traffic done a year-over-year? Thank you.

[Matias Gaivironsky:]

Thank you. Yes. The foot traffic is one of our concerns and we are very focused on bringing all the time people and more people to our shopping centers. It’s the fact that because people is not that in the mood of going out and conception, we have seen a reduction in foot traffic. And our business estimate for that is not only the amount of people coming into the shopping centers, because it’s not that accurate, but the tickets that we do produce in the shopping center and it hasn’t been reduced in the past. So, we are now working a lot on doing, working different our marketing. We are producing new events. We are doing things in the shopping centers to attract against shopping centers and also remember that the tenant mix is changing, not only here, but all over the industry reducing some retail too much written to food and beverage, entertaining and having fun in the sensors. So that the concept of security that we provide in our shopping centers that we believe that we will remember that people is collected, we have new prices with all salaries. So, we expect that that will change soon. We don’t know it’s going to be a volatile year for elections, but we’re working on keeping the foot traffic and bringing new things that are attracting in our shopping centers to keep them updated.

[Alvaro Machado:]

Great. Thank you.

[Operator:]

The next question comes from Guilherme Mendes with JPMorgan. Please go ahead.

[Guilherme Mendes:]

Hey guys. Good morning and good afternoon. Sorry everyone. Two questions from our side. The first one is the Pareto application; you mentioned the functionalities related to some discounts. So, a client can see some updates regarding the malls. But do you guys consider developing a marketplace inside the application. So, it has been seen some Brazilian players, starting to do something like that. So, I was wondering if you’re considering to the marketplace using the malls as an inventory. And second question is regarding the La Plata development, just to make sure if you’re opening the expected CapEx for the development? Thank you.

[Matias Gaivironsky:]

Thank you, Guilherme. Good question regarding La Plata. We have realized that it’s the great tool to get communication and to get into pockets of our customers. So, so far, we have been doing discount turns, tickets, we’re working on permit parking and also to say that we are working now on the adopting. So, you can pay with this application in our stores and not only in our stores. the marketplace is something; I mean I wouldn’t say the marketplace, but also the omnichannel of – an omnichannel, it’s something that we are facing that it’s something that it’s all over the industry, where you cannot only sell in your physical stores, but you have to have also your web or your e-commerce and all the ways that you can serve your customers. So what we are seeing today, you’ll see these all over the world, you go to a store, you want to buy a pair of shoes the size that you want is not on the store and they cannot sell in that store, you cannot buy the product and get it tomorrow in your house or in the same store that you pick it up. So we’re working with different tools that we have found on getting that done. It’s not going to be exclusively on Pareto, but we’re going to have many forms of achieving omnichannelity in our shopping centers and specifically to serve the way our customers we serve. We have done a partnership with one Spaniard company that is bringing this solution and we also have Pareto and we have one of the bigger processors here in the country so we can work all together and not exclusivity on Pareto, but yes, you’re not seeing most probably on Pareto some of these new ways of buying or serving our customers. And regarding the CapEx for Falabella, I think it’s little bit early to say because we just got the permit and we know what we can do. The good news is that we asked for a lot, we received permission to do alone. So now the location is fantastic and we really can make something that is very, very good. We are not planning here on the permits that we were looking for to do like an indoor shopping center. On the contrary, we are working on an outdoor shopping center and that as you know reduces a lot of investment. We are not planning underground parking so also it reduces the cost of investment but we did not have a total amount of investment, what I can tell you that it’s not going to be like in the case of Polo Dot like a massive investment but good and efficient investment in Falabella, although we don’t have the numbers yet.

[Guilherme Mendes:]

Hey, that’s perfect. Thank you.

[Operator:]

This concludes the question and answer session. At this time I would like to turn the floor back over to Mr. Daniel Elsztain for any closing remarks.

[Daniel Elsztain:]

Well thank you so much, as we said this is going to be a volatile year for the election. We also expect that can cause also some good news, but the company keeps rolling. We believe in the potential of real estate. We survived many challenging times in the past. The company has done very good investment in the past and we are very happy that those investments which we build recently are producing like in the case of the office building of Polo Dot. And we also believe that we have a very solid cash position that the prospect of the agriculture, however it also gives us some potential good news in the near future. So we are – I wouldn’t say that we are optimistic, but we have a very good team that they serve – that they had been working in this challenging environment. So we’re going to keep working on that sense and we expect to have you in our next call and produce with a good year for the fiscal year 2019. Thank you very much. Good afternoon.

[Operator:]

Thank you. This concludes today’s presentation. You may now disconnect your line at this time and have a great day.