IRSA Inversiones y Representaciones SA (IRS) 2016 Q3 法說會逐字稿

Good day everyone, and welcome to the IRSA Third Quarter 2016 Results Conference Call. (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. Alejandro Elsztain, CEO, please go ahead, sir.

To correct, in IRSA, I am the Second Vice President. Good morning everyone, good afternoon, sorry. We are going to begin the first nine months of 2016, and we began in this period to consolidate IDBD results, since this quarter. Now, we are consolidating that with the three-month period lag of [their balance].

If you see about our financial consolidated results, revenues of the Group, consolidate in Israel, was at the level of almost ARS20 billion, and we divided to make it easier to investors and to analysts, into the Argentina Business Center and the Israel Business Center. So, in each of the lines, you are going to see both of the effects.

So, if we divide the revenues, the Argentine revenues were ARS3.2 billion, and in the case of Israel, were ARS16.5 billion.

At the EBITDA level, we achieved ARS4.4 billion. From those, ARS2.5 billion came from Argentina Business Center, and the ARS1.8 billion from Israel.

At the net income, we achieve a loss of ARS1 billion, and Argentina gave us a profit of ARS146 million, and from Israel Business Center we bring a loss of ARS1.2 billion.

If we talk about some events that happened at IRSA level, IRSA sold in this quarter 0.5% of IRSA Commercial Properties. Now we went from 95.22% to 94.74% of the shares of IRSA Commercial Properties. There was a very good result in the rental segment and sales and development during the last nine months. We did, this quarter, a sale of Catalinas Office, 14 floors to IRSA Commercial Properties, and the investment in Israel had many news on this quarter. There was a tender offer obligation. We modified the tender offer that we had in the past and we paid during March, we are going to explain you later, and at the same time, we de-list the company. IDBD is today 100% in the hands of IRSA and the hands of IFISA.

There was a debt issuance at IRSA Commercial Properties for USD360 million, first corporation went into the market, and with that, USD240 million went to cancel the inter-company loan that we have between IRSA and IRSA Commercial Properties.

So, I will introduce now, Daniel Elsztain, our COO.

Thank you, Alejandro. Good afternoon, everyone. On page number 3, we start with the Argentina Business Center, speaking about shopping centers. Our stock in shopping centers got a little increased by the addition of Alto Comahue Shopping. Occupancy remains very high, and stable at levels of 98.6%, almost 99%. Sales went up this quarter by 29%, or 25.4% if we measured same-store sales. This was a weaker quarter than the previous one, but this mainly had some effects on basically, that we had the new prices after devaluation, but with [all salaries] that changed in the month of April. So, we see a turn, a change also in this declining of the level of sales after this quarter.

In terms of visitors, we increased the amount of visitors, again, in the same shoppings, and also by the inclusion of Alto Comahue Shopping.

In the segment of office buildings on page number 4, we can see that we maintain our monthly lease price per square meter, but we see some reduction on occupancy. This is mainly explained by the oil and gas tenants. They reduced their amount of space. But, this is the picture at the end of this quarter. As of today, we are seeing that we have all the leases out, and this number will go back to the previous numbers that we had in previous quarters.

Also, at the level of IRSA Commercial Properties, we did a partial sale in September 2015 of about 6,000 square meters in the [Torre] Intercontinental Plaza. This is about a 5.2% cap rate, and we have a gain of ARS300 million, of a total sale of ARS324 million.

Also in February of this year, we sold another floor on this building, also with the parking, eight parking spaces, and we made sold for ARS41.5 million and recognized a gain of ARS38.6 million. We still have remaining in this tower about 6,000 square meters that are held for sale.

On page number 5, we can see some numbers regarding the hotels. We still have the three hotels. Occupancy went down a little bit, but nevertheless, because of we try to maintain the prices, average price per room, the ADR, we were able to increase revenues in pesos and also gross profit. So, besides the devaluation and the loss on [some part of occupation] we were able to maintain the revenues. And I think this is, after the devaluation and we're seeing our new trend of businesspeople coming to the country, and because of devaluation the country became a little bit more cheap. We see a new trend of people visiting Argentina. We believe this, even though this is small business, the future looks a little bit better than it was in the past.

On page number 6, we can see the sales that we have during this nine months in terms of size. We started with Dique IV. This was a -- we sold this tower, it is 11,000 square meters, a total value of ARS649 million and look at the difference, the gain that we show is for ARS587 million. So, this is 9.5 book value.

Also another sale is Maipu, a partial sale of 3,500 square meters approximately, we sold for a total of ARS123 million. Again, book value to price is 8.5 times book value, the price that we sold this unit.

And the last one is the piece of land in the Province of Santa Fe, we acquire this land some time ago with the intention of doing the development. We didn't -- we were not -- we didn't do the development, because we didn't see the market [here]. We were able to sell this piece of land for ARS37 million, again, 7.7 times book value, and we kept some rights for future development in this piece of land.

Page number 7, we announced during this nine months the start of construction. We didn't start yet, but we announced that we're going to start very soon, the construction of Torre Catalinas, this is a tower in one of the best locations in Buenos Aires and best locations in the country. This is a total GLA of 35,000 square meters, 30 floors, with 316 parking spaces, which will start during the next quarter. And then, delivery is approximately by the end of 2019.

So, after the announcement with this to sell, one we sold to an Argentinean company that operates worldwide. We sold to them four floors, for approximately ARS180 million, plus USD12 million that will be paid during construction. After this, we did an inter-company sold, we sold from IRSA to IRSA Commercial Properties, 16,000 square meters of GLA with its parking units, which is about 14 floors, floors from 13 to 16 and 21 to 30. Those that are in between, 17 to 20, are the ones that we sold to the other company. And the idea of the IRSA Commercial Properties to hold these floors for long-term lease. The price that was paid was -- include charges, the first charge was the land acquisition that IRSA Commercial Properties paid ARS455 million, approximately USD1,600 per square meter, and the construction will be paid -- and the remaining, the rest of the price will be subject to cost of construction.

IRSA still has 14,000 square meters in its portfolio, and the purpose is some to be leased, some to be for sale.

Now, talking a little bit about the investments, also it is under the Argentina Business Centers but it's not in Argentina, this is the building in New York, the Lipstick building. We can see here that occupation is going up. Now, we are running at 95.1%, but that was at the end of the quarter. As of today we have leases out, and we believe that we're going to be very close to 97%, 98%, in the next quarter. The new agreements -- I mean, we also see that the price per square foot has been growing recently, but the growth is not that much when we see the whole tower. But, the last tenants that we signed are in the order of [mid-80s] per square -- it says per square meter, it's per square feet. The price per square feet. And here, I make the comment, the price per square feet per year in comparison with the other ones that is price per square meter per month.

And the building also, during this nine months, got the LEED certificate, because -- their Gold Standard certificate, so it's best in environmental practices, and we are following this idea of getting LEED certificates also in other buildings in our portfolio.

Talking about Condor Hospitality REIT, that we have a portion, issue a new series of preferred D shares. That will happen in March 2016, with the injection of USD30 million from a new partner, StepStone. It's an investor from the West Coast of the United States, and they have some offices in New York. They injected USD30 million with this new preferred series, and we also converted our preferred C series into this preferred D.

The idea of the cash that was pertaining to the company was to buy out, to redeem the preferred A and B which already happened, and to have some cash for new acquisitions. The preferred D have the same coupon as the preferred C shares, but the preferred D are [obliged] to convert into common shares in the case of a new follow-on on the shares. So basically, we are very happy. We got a partner in this company, the company has a completely new team, new CEO, new CFO, new CAO, so new hotels under management and the portfolio is getting much better. So, the company is really now under a lot of changes, change the headquarters from Omaha, Nebraska to Washington, D.C. So, this is -- and we can see also that the price in the share is also going up, reflecting that the market is really looking at this company as back in the market.

So, now, I introduce you, go back to Alejandro Elsztain.

Thank you, Danny. If you go to page number 10, and we see about Banco Hipotecario, the results for the nine months were almost ARS200 million, almost 100% comparing to the numbers of last year. So, very good operational results. And there was a subsequent event, we brought this to the presentation because the Banco Hipotecario was able to acquire in an auction, a public auction, the Del Plata building, an office building that the City of Buenos Aires was using like a public building for their offices. That is an emblem, an historical memory of the city, and Banco Hipotecario was able to buy that. That is located on the most important avenue, the 9 de Julio, in front of our Obelisk. So, the main area of an area that it's very busy in transportation, it's one of probably the more full traffic of the country, and it's a Times Square area for Argentina. And the Banco Hipotecario bought that property for making the overhead for the office, the whole Banco Hipotecario. So, it's a very good move for our company to buy a property like that.

If we move to page number 12, we begin our explanation into the Israel Business Center. And because of the change on the consolidation, we can see that we -- because we change and now we are consolidating, we've begun to explain deeper the results about Israel operation. So, we -- I'm sorry, I'm beginning with page 11, and I'm coming back to page 10 later.

Investment highlights of the nine months. What happened at the Company level is, we have appointed a new, an acting CEO and CFO for IDBD, and DIC. So, this is very recent, and we are beginning to -- they became CEO and CFO, and now they are beginning to run the company since many few months ago.

During December, the sale process of Clal, our insurance company, was cancelled and that affected a lot the balance sheet and Matias later will explain how it is affecting our balance sheet of this quarter.

In January of 2016, Dolphin signed with IFISA an option to acquire 92 million shares of IDBD, at NIS1.64 per share, in a two-year period plus an interest of 8.5%, like an annual interest rate.

Later, in March of this year, we had to pay our tender offer obligations, and instead of paying what was an [NIS8] per share tender offer obligation, there was a strong negotiation and finally we were able to acquire all the float and directly to de-list the company, that the last price per share was NIS2.14. The way of replacing the NIS8 per share tender was through an acquisition with NIS1.25 per share in cash, NIS1.20 in Series 9 bond, and we made a premium or a bonus contingent for the shareholders that if we are approved to keep the control of this company, or we sell the Clal stake above 75% of the book value, they are going to receive an extra NIS1.05 per share. And so with that, we cancel, and there are no more further commitments for the Company. Now, the only commitment on the contingency we have to pay is these NIS1.05 in the case of the sale or the permission of Clal. So, this is up to now, IRSA invested USD515 million, and with that, we have the full control of the company.

If we move to page number 12, we can see a description of the assets. We began mainly with the [expression] of the PBC, the real estate, the more familiar for IRSA, where we have divided into -- in the right, we can see the income-producing properties in Israel. This is the main activity through a company called Gav-Yam, where we are involved directly at the Board level, Eduardo and myself. Here, this company has a portfolio of more than 1 million square meters under rental. Today, we are constructing, in the year 2016, 150,000 square meters of rental properties through this company in Israel and there a lot of land bank that we have in commercial properties. In the case of land bank of Israel, we have 700,000 square meters of development rights to make mainly more office buildings, more parks like the parks in [Gav-Yam], like the parks in Haifa or the parks in Herzliya.

In the residential in Israel, the company is running a company that is under construction of 1,200 units in a year, and development rights for making 1,500 units more. So, a big, and a very active residential company making apartments to sell on the country.

I go back in the income producing properties, and I would like to point something that happened very recently, that it's not here, but the case of why the Company's -- under a lot of construction, and we went to the market and we rate the bond at the local market, and we were able to achieve a rate of [1.85%] for 7 years plus inflation. So, we are doing a lot of construction at very low interest rates, and the [ILT] that we are achieving on the properties we are launching is between 8% to 10%. So, there is a big room to finance, so we went to the market and we took a very small portion. We offer -- we receive offers for NIS1.3 billion and we took NIS0.5 billion in that kind of interest rate. And with that, those [posits], we are building a lot of new buildings in the country.

So, these two are in Israel, so these are the income-producing and the residential in Israel. In the left, we can see the international activity. Main building in the international assets of PBC is the HSBC Tower in Manhattan, in Fifth Avenue, 80,000 square meters, 100% owned by PBC.

And, there is a big land reserve and projects under construction. This company is making 1,000 units a year, mainly in India, and has a lot of land bank. We are doing almost 27,000 square meters of office and commercial. This is mainly in Vegas, a project called Tivoli, that is office buildings and retail in Vegas, in Las Vegas area.

Apart of that, PBC owns another listed company called Mehadrin, owns 47% of the shares, and Mehadrin is the largest grower and exporter of citrus and avocado of Israel. Mehadrin runs 5,300 hectares of cultivated land, and 1,400 of those are owned by the company. So, a big portion of that is owned by the company, so this is part of the company that is going to be transformed to urban, and every area that it's transformed from agriculture to urban change the value a lot. And this is something that happens every year. So, this company is the largest exporter of fruits of the country, main countries that is -- that we are exporting is Europe, [like area], but Russia, the United States, and Asia. This is the largest by far exporter of fruits of Israel, and we are beginning our thinking on doing this not only in Israel.

So, this is the main explanation about the real estate, about PBC, and subsidiaries Gav-Yam and Mehadrin. If we go to the right, we can see some figures about their supermarket company. This is the leader company, the largest food retailer of the country, 275 stores, all of them in Israel. 512,000 square meters of retail, 18 commercial properties, and 3 big warehouses of 85,000 square meters.

If we move to the next page, we can see the Cellcom assets, our cellular company. This is the Israel's leading mobile communications operator, with over 2.8 million subscribers. This is running 27% of the market share of Israel communications. In October 2011, the combination with 013 Netvision has created a one-stop-shop, offering communication fields including cellular, ISP, and domestic and international telephony service. This is the main cellular company of the country. In the case of Cellcom, [because] we have majority, we consolidate directly.

In the case of Adama, that is the leading manufacturer and distributor of generic agrochemicals. We are minority, that's the reason why we have an equity investee, and this has a lot of comprehensive product offerings, over 100 countries is the sell, implementing its strategy of growth through acquisition in LATAM, Europe and Asia. Production and formulation in Israel and Brazil, global marketing and distribution network consisting of 40 centers worldwide, strong post-merger integration capabilities, a partnership with a very important and big Chinese company called ChemChina, the one that recently is trying to buy Syngenta shares.

And finally, but this is in the main company in Israel, we made a summary because it is a very big holding. So, we brought just big, big companies and assets. Clal, Clal is our company, the Israeli leading insurance company, pension and financial group, provides comprehensive financial solutions including insurance, pension funds, provident funds, mutual funds and investments, employs over 4,000 insurance agents. The market share of the company is within 15% to 20%. Gross premiums amounted to USD2.5 billion -- assets under management over USD43 billion. And, the equity for this company is USD1.2 billion.

And here, because of the regulators and some regulations [are not] permissions that we are achieving on the company level, we are putting on our balance sheet at market value. And Matias will explain later what this is affecting our balance sheet of IRSA, now.

So now, I will introduce Matias Gaivironsky, our CFO.

Thank you, Alejandro. Good afternoon, everybody. Going to page 15, we have here an explanation of what we started this quarter. We started to consolidate on the results on IDB. Remember that we started on the net worth in the previous quarter. Now, we've started with our financial statement as well. We will use a lot of three months to consolidate IDB, because they have different legal framework to present information in Israel. For instance, they have 60 days to present quarter information, and we have here in Argentina 42 days. So, it's impossible to match with the same quarter so far, so we will work in the future to identify if we can change this. If not, we will continue to have a lag of three months. But, in the middle, we have to analyze subsequent events after they report it to us, and consider if we have to put the applications of those subsequent events in our financial statements as well. So, there is a little more complex, but it's the only way that we have to consolidate IDB.

So, for the idea to maintain the explanation of the different segments of the company, and to facilitate the reading of our financial statements, we separated the books in two. We will present information, we are presenting information, in two Business Centers: Argentina and Israel Business Center. In Argentina, we are including as well our international office and REIT investment, and the rest of the segments will be the same -- shopping centers, offices, sales and development, hotels, and financial and other -- that is not relevant anymore, but we still have some minor operations there.

And then, we have Israeli Business Center, where we have the real estate, that is mainly PBC, supermarkets, that is Shufersal, agrochemicals, that is Adama. Here, we don't consolidate Adama in IDB financial statement. We are recognizing results on our [VPP] and the equity method, but it's a segment in terms of disclosure. The same with telecommunication, that is mainly Cellcom. The insurance is Clal here, as well we are not consolidating Clal. Today, we have 55% of the company, IDB has 55% of Clal. But, the control of the shares, it doesn't belong to us. We have the shares in a trust, so the regulator in Israel haven't gave us the control permit. So, we maintain the shares in a trust, and we are not consolidating the results of Clal. And then, other segments are our minor segments for IDB.

So, in terms of results for this quarter, for the nine-month period, going to page 16, I will explain the rental -- first, the Argentina business center. And here, the main segments are the rental segment that was very good results, 29% increase in pesos term. That here, includes the shopping centers, the offices, and hotels. So, we achieve ARS1.367 billion. Then, we have the sales and development segment, that we have this nine-month period ARS944 million of results, that is mainly the disposal of office building in Puerto Madero, what we call Dique IV. That is ARS587 million. Then, we sold some floors in the Intercontinental Plaza building, and some other office floors in Maipu building. So with that, we achieved the ARS944 million compared with the previous year, that we mainly sold some floors in the La Nacion building, and our building in Manhattan, on Madison and 34th.

Then the financials and others was a reduction from ARS163 million the previous year, to ARS81 million this year. The main inclination was that last year we had the Madison building recognition in this financial segment.

In page 17, something important to mention is we are presenting nine month period results, and in Israel we started to consolidate on the financial statements since December, or since December is the first quarter. So, when we talk about results of Israel, we are including only three months of results, not nine months like in Argentina.

So, we don't have a comparison with the previous year, because we started now. So, we are only presenting information for this fiscal year. Revenues, as Alejandro mentioned, achieved ARS16.5 billion, the gross margin was ARS3.6 billion, and the operating income ARS778 million. Remember that here, to compare with IRSA is not comparable at all, because of the different industries. We have more comparable is PBC, there is real estate, but the in Shufersal and Cellcom, we have much more revenues because we include here all the sale in the supermarket and selling Cellcom equipment and plans.

So, we will maintain this separation to facilitate the reading of the financial statement.

So, going to page 18, while I explain the operating income increase in Argentina and also we have Israel. So now, we have ARS3.1 billion pesos. The net financial -- so we have a very good operating income, leaving aside Israel. We generated very good operating income. So, that was compensated with lower financial results, more cost, that the main explanation here is on one side the FX losses on our dollar-denominated debt that was compensated with some of our liquidity that was abroad in dollars, and some hedge that we did in Argentina. So, the net financial cost for IRSA, the Argentina Business Center, was ARS535 million. The net financial cost was ARS628 million for Argentina.

Then, we have some costs when we repurchased our debt, that I will explain later. That is ARS160 million, and other fair value of financial assets of ARS12 million. So, that is the part, the most important part of Argentina, of the many different in Argentina compare with the previous year.

And then, we have ARS1.8 billion that came from Israel. From this ARS1.8 billion that we are consolidating here, all the debt of all the group in IDB, the main figure is reduction on the fair value of Clal, or the devaluation of Clal in our books. But, we have to recognize a loss of almost ARS1.3 billion and this is mainly because we are valuing our stake in Clal not at the equity method and not at the fair value of the company. We are using the value of the shares in the market.

And since there is a [trip] of the regulator that she can start to sell shares in the market, that was a collapse in the price of the shares and after the cancellation of the sale processing plan, the shares decreased a lot, and are not reflecting the real value of the company at all. The book value of the company and the price of the transaction that we have been discussing with some -- not we, because it was a process that was not managed by us, but by the regulator -- and was almost the double price of the shares to date in the market. So, we are reflecting today half of that value on the loss, on the reduction of the shares from -- that was ARS1.8 billion in the previous, or starting September, to ARS1.3 billion now.

Going forward, that will be a source of volatility in our results, because we will have to maintain our valuation at the value of the shares. So, if the shares go up, we will recognize a gain, and if the shares go down, we will recognize a loss.

So, finishing this, the net loss of the Company for this quarter was -- for this nine month period, was for Argentina, ARS164 million. This is the total, not the part of (inaudible) to our shareholders. Then, that was the -- sorry, that was the previous quarter against a gain of ARS146 million in this quarter, and then we have the loss that came from Israel for ARS1.2 billion, that the main part of this is the recognition of the valuation of Clal.

So, if we leave aside that, probably IDB will bring us positive results.

Then on page 19, this is an important event for the Company. We refinanced the debt at the IRSA Commercial Properties level, so we launched a transaction combining IRSA and IRSA Commercial Properties, so IRSA launched two tender offers for our existing debt, the notes that mature in 2017 and 2020. IRSA Commercial Properties also launched a tender offer for the existing 2017 notes, and at the same time, we issued a new debt. So, with the proceeds of the new debt we issued USD360 million at an interest rate of 8.75%. The [yield] was 9%. So now, we have the maturity for 2023, and the use of proceeds, we use it to repay the previous inter-company loan with IRSA for USD240 million, and USD120 million went to cancel the existing, or the previous, 2017 notes at the IRSA CP level.

At the same time, the bondholders gave us a consent to eliminate most of the restricted governance at the IRSA level, so now the Company's structure -- the structural debt is at the level of IRSA Commercial Properties. We will see in the next page, the structure. IRSA will remain with low debt. We have the remaining 2017 notes, USD75 million for the next year, and the rest is for the 2020. So, it was an extension of all the structural debt of the group. We replaced inter-company loan with the market, clearing our debt structure, and elimination of the covenant that will remain. We will have covenants at the IRSA Commercial Properties level, but it's where we have the structural debt of the Company, so it makes much more sense for us.

On page 20, we have the debt amortization schedule, comparing the previous schedule and the current schedule. So you can see, in the upper part of the graph, that we eliminated most of the part of the amortization of the IRSA level, to -- and that were cancelled with the inter-company loan. And then, at the IRSA Commercial Properties level, almost all of our debt will remain in the long run for 2020 and 2023, so we don't have to be worried about next payments.

We received offers for almost USD1 billion, and we decided only to take USD360 million. We believe that the interest rate in Argentina will decline, so in the future we have this to use it if we want to access again to the capital market, and probably at a lower interest rate.

Page 21, this is something that we are presenting for the first time. This is the breakdown of the debt of IDB in the different subsidiaries. So, you can see here, how much debt we have in each of the vehicles. This was at December 31. Remember that after that, Dolphin made a capital increase, or a capital injection, in IDB. So after this, IDB received almost USD100 million, and with that the net debt of the Company is around USD680 million. DIC debt is USD1.174 billion, and Shufersal USD779 million, Cellcom USD974 million, PBC is USD2.442 billion, and others USD157 million. All the subsidiaries of IDB, the Shufersal, Cellcom, PBC and the others, are very healthy. As Alejandro mentioned, an example of PBC financing in the market at the [reasonable] interest rate comparable with the market there, 2%, 3% interest rate in Shekels.

And we remain focused in working in the debt structure of IDB, that here you have below the debt amortization schedule with amortization that we have for the next year. So, the level of debt is more concentrated in the short run, so we are working on keep de-leveraging the Company, and trying to extend the tenor. One subsequent event that is important to mention after the presentation of the December 31, this was a [treat] on the bondholders of one series in Israel, on one long-term series here, you can see the 2020 to 2025 debt that is USD272 million. There was a bondholders meeting that vote to accelerate the debt. That is not enforceable to the Company. They have to go to the court and approve in court. The Company believes there isn't any legal reason to accelerate the debt the Company was paying every single amortization, and was not in default in any moment. So, we don't believe they don't have confidence. They don't have any argument to go to the court, but that is important to mention.

So, with this, we finished the presentation. Now, we open to receive your questions.

(Operator instructions) The first question comes from Jorel Guilloty with Morgan Stanley. Please go ahead.

Good afternoon, gentlemen. My question is specifically on IDB debt. So, looking at your amortization schedule, you have USD160 million due this year, USD177 million due next year, and I was just wondering if you can provide some color as to how you intend to amortize that debt? Is it refinancing that you're looking into? Is it the sale of Clal? Just to get some more color on that near-term debt?

Okay, Jorel. For the debt of 2016, most of -- we almost have all the cash. We have only USD69 million remaining for this quarter, after the cash that was injected in the company. The company is working in different actions to sell non-core assets, probably will came most of the funds from there. And also, there is the potential sale of Clal shares that could cover this.

When you consider since we enter into the company we injected around USD500 million in the company, and most of the cash was to repay the debt. Since the beginning, we haven't sold any assets, so the assets remain the same, with much lower debt. And we haven't refinanced anything yet, so we have been paying any single amortization. So, we believe that the company will -- could start to refinance in the market, and extending debt from there will be a combination probably selling assets and refinance in the market. I think that will be the main source of funds for them for the future. There [isn't] any commitment from IRSA or from Dolphin today with the company, so we already financed or paid all our commitments. So now, the company are looking for the best way to refinance in the market.

But is the focus, then, to sell assets just at the IDB level? Or will they include assets at the IRSA or IRSA Commercial Properties level as well?

No, no. I am referring to IDB, not to IRSA.

Okay, and I was also wondering if you can provide some more color on the legal proceedings that are going regarding the bond that's due beyond 2020, the USD272 million in debt. So, what is the time frame for resolution that you expect for this issue?

I think it's a [noisy] process. They are threatening us without any legal framework, so this is the first time in my life that I see an acceleration without default or without any covenant or without any breachings in any financial clause. So, they have to go to the court. It does not belong to us. And then, a judge should approve or should reject that motion. But, the legal framework, I can't anticipate because depend on the justice there. But, it's not there is any clause or anything that gave them a legal framework to go to the court.

All right, thank you very much.

(Operator instructions) The next question comes from Alejandra Aranda with Itau, please go ahead. Go ahead, Alejandra. Your line is open. Perhaps your line is muted?

Hi, sorry. Good afternoon. I was wondering, two questions. The first one is, on the capital is -- on the Clal issue, is there any timing for the resolution of the court selling or not those -- that stake? And then regarding IRSA, if you could give us a little bit more color on the pipeline of CapEx on shoppings and sales and development?

Alejandra, regarding Clal, there was a framework that was established by the Insurance Commissioner in Israel. So, they are asking to sell the shares -- remember that we don't have the control of the shares, we only have the economical benefit. But, we don't control, and this process is not managed by us. So, the Insurance Commissioner gave an instruction to sell 5% of the shares. We have 55%. They gave an instruction to the trustee to sell 5% of the shares, that was not executed yet. So, probably we will see in the next days or weeks what happens. But, nothing happened yet with this 5%.

And then, the framework is to sell 5% every four months, and in the meantime we are working in trying to present an alternative proposal for this.

And Alejandra, regarding CapEx, at the IRSA level we are re-announce the -- on CapEx, the first (technical difficulty) which is approximately USD55 million investment, that will be in two years. We also announced the expansion of Alto Palermo Shopping, which is also [USD21 million] that will have a year-and-a-half, maybe two years of conclusion. Also, a small expansion in Soleil, [preview now that] for ARS22 million. And that's basically what we already announced. Plus, the construction that will start in the next year for the Catalinas project, that project will be part with CapEx and part with sales.

Okay, perfect. And for that last one, you don't have a guidance number?

We do have some guidance on the total construction, but we still don't know how much it's going to be paid by each part, so far. So, the total project will be about USD80 million total construction cost, and it will take more than two fiscal years. It will be around three fiscal years.

Okay. Okay, perfect, thank you.

(Operator instructions) We have a follow-up from Ms. Aranda with Itau, please go ahead.

Hi, yes, sorry. On that issue of the debt on IDB, would you be willing, if you don't tap the market, to inject the cash for those 64 (technical difficulty) dollars that you said you were short, to inject them through IRSA to IDB?

Alejandra, there is no formal commitment to us, so now the company's working in terms of financing by itself. So, that is the original plan that we have.

Okay, perfect.

Ladies and gentlemen, this concludes our question-and-answer section. At this time I would like to turn the floor back over to Mr. Alejandro Elsztain for any closing remarks.

Thank you very much. We are finalizing a good quarter, in the political things about Argentina, the environment of the business community is changing a lot, and we are launching a lot of new projects in many of the rental properties. The operation of the quarter was very good, and we made very good results. We cancelled the obligations in Israel and we began the consolidation of that too, we [de-listed] IDB.

So, we think it's a very good moment of the Company, and we expect the next quarter, the last quarter of the year, to keep very good numbers. So, thank you very much to everyone, and have a very good day. So, thanks a lot.

Thank you, sir. This thus concludes today's presentation. You may disconnect your lines at this time, and have a nice day.