IRSA Inversiones y Representaciones (IRS) is a top real estate developer in Argentina. Now the property developer is expanding abroad in an effort to diversify its portfolio.
The company owns apartment blocks, luxury hotels, office buildings, shopping centers and land for future commercial and residential development, mostly in Buenos Aires, where it is based.
IRSA started to build and diversify its portfolio in the 1990s with backing from Hungarian-born financier George Soros. It acquired and built Alto Palermo into the country’s biggest shopping mall operator and purchased a 30 percent stake in Banco Hipotecario, the biggest mortgage bank. IRSA is 63 percent owned by Cresud (CRESY), a large agriculture developer in Argentina.
Business has grown briskly as the Argentine economy expanded at 8 percent annual rates between 2003 and 2011.
Revenue was 739.6 million pesos ($170 million) in the six months ended Dec. 31, 2011, a 6 percent year-on-year rise led by a 32 percent surge in shopping center revenue. Income was 127.4 million pesos, up 11 percent on the year.
There are hurdles. Argentina’s economic growth this year is expected to slow to 4 percent while 25 percent annual inflation and rising public service costs will weigh on consumer spending, economists say.
IRSA has expanded into Brazil and the United States, buying the Lipstick building in New York City, among other properties.
More acquisitions are expected. This year it closed a $30 million investment in Supertel Hospitality (SPPR), gaining control of the Norfolk, Neb. real estate investment trust (REIT) with a 34 percent stake. Supertel owns 99 hotels in 23 states, mostly economy level properties such as Days Inn.
Analysts expect IRSA to help Supertel refocus on mid and upper-scale hotels using a strategy similar to Hersha Hospitality Trust (HT), a Philadelphia REIT.
IRSA bought 9 percent of Hersha in 2009 for $14.25 million and helped expand its portfolio to 80 hotels from 73 with purchases in Los Angeles, Miami, New York City and Washington, D.C. Hersha is selling 18 aging hotels in smaller cities to focus on mid- and upscale urban getaways.
Analysts like the growth potential of IRSA’s expansion bid, strong management and diversified portfolio, calling it a good long-term investment during the global economic downturn, despite any wobbles in Argentina.
The company next reports on May 14.
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