I just met with Eduardo Elsztain founder of Irsa and Cresud (stock symbols in NY, IRS and CRESY). The meeting was around 90 minutes long. Eduardo has put together the largest office building, land, hotel, residential and shopping mall company in Argentina that is made of three holding companies: Irsa, Cresud and Alto Palermo. Unfortunately he has assembled a complicated ownership structure in which some of his companies own parts of his other companies making the whole thing very confusing. Having said this there´s no doubt that the properties that are owned by this real estate holding companies are prime and that Eduardo is probably running the real estate company with the smallest debt to equity ratio in the world. As opposed to other real estate companies who are all struggling to refinance their debts Eduardo´s companies have very little debt (3 times cash flow) and they do not need refinancing. This is a short post and I don´t have time to explain why I felt that his shares were a good buy in detail but I did. Considering that these shares are 80% down and trading at probably 20c on the dollar in terms of asset value at current Argentine market prices I do think they are a steal and I will buy some. But I am convinced is that the way to get the most value over time for Eduardo is to start selling all the properties he owns and pay the cash proceeds to himself and his shareholders. It is clear that the market, at least now, gives a deep discount to his ownership structure.

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Manuel on November 19, 2008  · 


I hear from Argentinean friends and family that the real state prices in Argentina are due for a fall. I don’t know if down to 20% of current levels (I hope not!), but maybe the potential value loss is what the stock market is discounting on the share price of IRS and CRESY.

Do you have the same feeling or indication of an inminent real state crash in Argentina? Where do you think the prices could go in the near or distant future?



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Mark on November 20, 2008  · 

I see two sides to the market in Argentina. Earlier this decade the devaluation crises could easily be anticipated based on the wild party that was going on, where a European would feel poor while visiting BsAs, and without a real economic engine to grow the wealth of the country. The earlier Kirchner years were good for Argentina because the country needs a strong (and little bit dictatorial) leader. But the self-crowned family outstayed their welcome, and at the same time inflation has started to ravage the economy to the point where it is not longer good value to buy products (quality for clothes etc. is poor) while visiting. (Note: restaurants remain amazing value.) Since more than a year I have been expecting another crisis to hit Argentina. The one thing keeping the country afloat was the commodity and agriculture boom. However that leg has abruptly been kicked away. What is different this time, is that commodity resources and farmland are a real value which will not disappear, it is just a question of when demand will return. Therefore this crisis opens a good opportunity to invest in these sectors on the cheap (CRESY), but I would stay clear of the commercial sector (IRS). Disclosure I have a very small stake in CRESY (with a big percentage loss), waiting for a drop under $4.5 to add more.

Best Regards,
Mark (a Brit with an Argentine wife, living in Barcelona)

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