IRSA Investments: Tapping into a building boom

Rating:

You wouldn’t guess it from looking at the country’s average of over 8% in annual GDP growth in the past few years, but economic conditions in Argentina are about as gripping and imbalanced as a glass of over-oaked Malbec wine.      

Rising inflation, high export taxes, and a lack of (or perhaps wariness toward) credit and controversial government fiscal policies have taken a bit of the shine off the relatively wealthy South American country’s recent rebound from its 2001 to 2002 economic implosion.

Amazingly, however, these factors have done nothing to slow the boom in building houses, condos, shopping malls, hotels and office buildings that the crisis set in motion. In fact, the real estate sector grew by an estimated 8.3% in 2007, and the best part of it is that it’s all being driven by private investment from individuals with soaring incomes rather than through mortgage lending (unlike certain other recent housing bubbles). 

One company that has diversified broadly in this capital-driven building bonanza is the profitable emerging markets fund darling Buenos Aires-based IRSA Investments and Representations (NYSE:IRS) — a dual citizen of the U.S. and Argentine stock markets and parent of shopping mall and credit card operator Alto Palermo S.A. (Nasdaq:APSA).

The $825-million market cap company has a range of real estate businesses and subsidiaries that buy, sell, develop and renovate retail, commercial, office and residential properties in high-growth and upscale areas of the country. It boasts occupancy rates over 98% in its shopping center and office holdings and has building projects in affluent neighborhoods too numerous to detail here. Suffice it to say, business is booming.

On the top line, at least, IRSA’s results for the nine months ended March 31, 2008, do indeed reflect impressive demand. Revenues for the development and sales segment were up 338% to $55.8 million compared with the same period in 2007, while . . .

For access to the full article, you must be a registered member - it's FREE.

Already a member? Please log in below