Executive Summary / Key Takeaways

• IRSA Inversiones y Representaciones Sociedad Anónima (IRS-WT) is undergoing a significant strategic pivot, transitioning from a period of conservative capital structure strengthening to an aggressive growth phase, capitalizing on a normalizing Argentine economy and a re-emerging mortgage market.
• The company delivered a strong fiscal year 2025, reporting a net gain of ARS 196 billion and achieving a record $169 million in shopping mall EBITDA, demonstrating the resilience and recovery of its core rental segments.
• IRSA's flagship Ramblas del Plata project is rapidly advancing, with significant land sales and swaps totaling approximately 111,000 sellable square meters, employing a capital-efficient model that leverages developer investment.
• A healthy financial position, characterized by low net debt ($184 million, 1x EBITDA) and a long-term debt structure, provides ample capacity for future strategic acquisitions and developments without immediate reliance on external funding for organic growth.
• While the company's "technological differentiators" are primarily focused on operational efficiency and sustainability initiatives like LED lighting and solar panels in malls, these efforts contribute to cost reduction and long-term value creation within its real estate portfolio.

A New Cycle for Argentine Real Estate

IRSA Inversiones y Representaciones Sociedad Anónima (IRS-WT) stands as a prominent real estate player in Argentina, with a diversified portfolio spanning shopping malls, offices, hotels, and extensive land bank developments. Its strategic journey has been shaped by Argentina's dynamic economic landscape, evolving from a historically investor-driven market, particularly since the 2001 crisis, to one now showing signs of a robust resurgence. This shift is underpinned by recent changes in lease laws and the re-emergence of a nascent mortgage market, which, despite current funding limitations, is driving increased demand and apartment price appreciation of 12% to 50% in various Buenos Aires neighborhoods.

The company's overarching strategy, rooted in its long-standing presence and dollar-denominated assets with inflation-hedged revenues, positions it to capitalize on this new economic cycle. While IRSA's core business is real estate development and management, its "technological differentiators" are primarily manifested in operational efficiency and sustainability initiatives. Over 90% of its shopping malls have transitioned to LED lighting, and solar panels have been installed in three additional malls, including Alto Palermo, Dot, and Distrito Arcos, alongside Mendoza Plaza. These efforts, though described as "incipient," aim to increase exposure to renewable energy and reduce the company's carbon footprint, with 80% of its carbon balance stemming from electricity consumption. These technological adoptions contribute to cost reduction, enhance operational efficiency, and align with global ESG trends, thereby supporting long-term value creation for investors.

In the competitive landscape, IRSA operates as a regional leader, distinguishing itself from global giants like CBRE Group (CBRE) and Jones Lang LaSalle (JLL) through its deep localized expertise and integrated approach across diverse segments. While global competitors offer broader service portfolios and advanced digital tools, IRSA's strength lies in its ability to tailor solutions for the Argentine market and leverage its established networks. Its diversified operations, extending beyond traditional real estate to include a significant stake in Banco Hipotecario , provide a unique value proposition and a buffer against market volatility, contrasting with more specialized players like Simon Property Group (SPG).

A History of Resilience and a Pivot to Growth

IRSA's history, dating back to 1943, underscores its resilience. The company established the IRSA Foundation in 1996 and acquired its hotel portfolio between 1997 and 1998. For over 28 years, a significant asset, Ramblas del Plata, has been part of its holdings. The period leading up to fiscal year 2025 saw IRSA adopt a conservative stance, particularly after the global pandemic, which was described as "a crisis for the company ever." During this time, the company prioritized strengthening its capital structure through debt reduction, share buybacks, and consistent dividend payments, distributing approximately $250 million in dividends over the three fiscal years preceding 2025.

Fiscal year 2025 marked a decisive pivot towards strategic growth and development. In the first quarter, IRSA acquired an 87,000-square-meter plot adjacent to its Alto Avellaneda shopping mall for future expansion. This quarter also saw the public unveiling of Ramblas del Plata, a transformative real estate project. The company successfully returned to the international capital markets in March 2025, issuing $300 million in 10-year Series XXIV notes due 2035, signaling renewed investor confidence. This strategic shift is now driving a new era of expansion.

Segment Performance and Operational Momentum

IRSA's fiscal year 2025 results highlight the success of its strategic initiatives and the recovery across its core segments:

Shopping Malls: A Record-Breaking Recovery

The shopping mall segment demonstrated a robust recovery, with adjusted EBITDA growing by 10% year-over-year and revenues increasing by 8% in fiscal year 2025. Tenant sales in the fourth quarter of fiscal year 2025 grew by 3.2% compared to the same period in 2024, although full-year tenant sales ended 2.8% below inflation. The portfolio's Gross Leasable Area (GLA) expanded significantly by 34,000 square meters with the acquisition of Terrazas de Mayo, bringing the total to over 370,000 square meters. Occupancy remained high at nearly 98%, excluding Terrazas de Mayo, which saw its occupancy improve from 81% at acquisition to 89% by year-end. This segment achieved a record EBITDA of $169 million in dollar terms for the last decade, with malls valued at $1.2 billion, representing approximately 7.5 times EBITDA. Management anticipates continued positive momentum, expecting improved tenant sales in the coming quarters as real wages recover.

Offices: Stable Performance in a Streamlined Portfolio

The office segment maintained stability, with rents holding firm at $25 per square meter per month and premium portfolio occupancy reaching almost 100% (99.6%). Following strategic divestments, the portfolio now stands at 58,000 square meters. While EBITDA saw a reduction compared to the previous year due to the smaller portfolio, the underlying business remained stable in dollar terms. IRSA is now considering new office developments, with plans to potentially start construction of additional office buildings near the Dot shopping mall next year, adding around 15,000 square meters of GLA.

Hotels: Navigating Macroeconomic Headwinds

The hotel segment faced challenges in fiscal year 2025, experiencing lower revenues and occupancy. This was primarily attributed to the appreciation of the Argentine peso against the U.S. dollar and a reduced inflow of international tourism. Occupancy decreased from 66% two years prior to 60-61%, with rates per room also adjusting downwards, impacting margins. Despite these headwinds, the hotels continue to provide diversification to IRSA's rental portfolio. Management is open to divesting these assets if favorable opportunities arise, given that this segment has not been a growth area for the company in many years.

Residential Development and Land Bank: Unlocking Significant Value

IRSA's residential development and land bank monetization strategy is a key growth driver. The flagship Ramblas del Plata project, described as the "most important and ambitious real estate project in the history of the city of Buenos Aires," is progressing rapidly. The company completed 13 transactions, including cash sales and swaps, totaling approximately 111,000 sellable square meters, with a combined value of $81 million. This included selling two lots for $30.5 million and swapping 11 lots for $50.6 million. The average price for sales was nearly $800 per sellable square meter, with future prices expected to exceed $850.

The strategy for Ramblas del Plata is capital-efficient, involving land swaps with developers where IRSA receives a percentage (initially 25-26%, potentially rising to 30%) of the finished units, minimizing upfront cash investment. The environmental approval certificate for Ramblas del Plata was issued in December 2024, enabling infrastructure construction to commence in January 2025, with completion of Stage A infrastructure expected by July 2026. First building constructions are anticipated to begin within 10-12 months. Other notable residential projects include Edificio del Plata, with 76 units sold for $11.4 million at an average price above $4,000 per square meter, and Nuevo Quilmes II, which sold 41 lots for $6.3 million. The re-emergence of the mortgage market in Argentina, with credit needs in Buenos Aires City transactions increasing from 3% to 21% in less than a year, is a significant tailwind for these developments.

Stake in Banco Hipotecario: A Growing Income Stream

IRSA's 29% stake in Banco Hipotecario contributed ARS 13.6 billion to its results in fiscal year 2025. Notably, IRSA is set to receive ARS 18 billion in dividends from the bank, marking the first time in many years that the bank has paid dividends for two consecutive years. Banco Hipotecario (BHIP), a leader in the Argentine mortgage market with a 4% share, was also the first Argentinian bank to restore mortgage loans in the country.

Robust Financial Health and Strategic Capital Allocation

IRSA closed fiscal year 2025 with a net gain of ARS 196 billion, a substantial turnaround from a loss in the previous year. While the appreciation of the peso led to non-cash losses from the valuation of investment properties, the underlying dollar-denominated values remained stable, and shopping mall valuations actually increased by approximately $500 million in dollar terms.

The company maintains a very healthy debt position, with only $184 million of net debt, representing a conservative 1x EBITDA or 8% of assets. This robust capital structure, significantly extended with the $300 million Series XXIV notes due 2035, provides ample liquidity. IRSA does not anticipate needing to access capital markets for organic growth in the near term but remains open to increasing leverage for attractive acquisition opportunities, considering its current conservative ratios. The company also demonstrated its commitment to shareholders by distributing an 8% dividend and treasury shares equivalent to 3.6% of its capital stock in fiscal year 2025, with expectations to continue paying dividends in the future.

Outlook and Key Risks

IRSA's outlook is positive, driven by the anticipated normalization of the Argentine economy and the re-emerging real estate market. Management expects improved tenant sales in shopping malls as real wages recover and projects like Ramblas del Plata to continue their rapid commercialization, with infrastructure completion by July 2026 and initial building construction within the next year. The La Plata shopping mall is slated for a May 2027 opening, and the Manzana 35 towers are planned for launch between March and May 2026. The company is also exploring new ventures, including potential entry into the logistics sector, which it views as a growing business aligning with its expertise.

Despite this optimistic outlook, key risks remain. The electoral climate in Argentina continues to generate uncertainty and volatility, which can impact major investment decisions. High interest rates and a potential disappearance of consumer financing could negatively affect consumption. Furthermore, while the mortgage market is re-emerging, a lack of funding for banks and the absence of a securitization market could limit its full potential.

Conclusion

IRSA Inversiones y Representaciones Sociedad Anónima is at an inflection point, transitioning from a period of strategic consolidation to one of aggressive expansion. Its core investment thesis rests on its proven resilience in the volatile Argentine market, its strong financial foundation, and its extensive land bank poised for monetization. The record performance of its shopping mall segment, coupled with the rapid progress of transformative projects like Ramblas del Plata, underscores the company's operational effectiveness. While its technological edge is primarily in operational efficiency and sustainability, these initiatives contribute to a robust long-term value proposition. With a healthy balance sheet and a clear strategic roadmap to capitalize on Argentina's re-emerging real estate cycle, IRSA presents a compelling opportunity for discerning investors seeking exposure to a company with a strong track record and significant growth potential, provided the broader macroeconomic environment continues its path toward stability.