Real estate companies are aggressively investing in the Argentina. According to Buenos Aires Habitat, “There is stability in the Argentine real estate market, due to the lack of mortgages and credit granted to buyers. This ensures that no property bubble is allowed to inflate and prices will remain the same in the future. In the long term, property investments will always resist economic crises. Despite the ups and downs of the Argentine economy, real estate prices have steadily risen.” In addition, according to Gaucho Group Holdings Inc. (NASDAQ: VINO), “Construction costs, now in pesos is roughly $70 U.S. dollar per square foot. So, it’s inexpensive to build. Plus, with cheaper labor, the time to build is now.” Other companies benefiting from the story include IRSA Inversiones y Representaciones Sociedad Anónima (NYSE: IRS), Cresud (NASDAQ: CRESY), Airbnb Inc. (NASDAQ: ABNB), and Jones Lang LaSalle Inc. (NYSE: JLL).
“It has been said that by 2027 Argentina will be seeing an average of 12.5 million visitors as tourists per year, widening the market for holiday rental properties, and perhaps providing an extra incentive to integrate Argentine real estate into your investment portfolio,” added CreimermanLaw.com.
Look at Gaucho Group Holdings Inc. (NASDAQ: VINO), For Example
Gaucho Group Holdings, Inc. (NASDAQ: VINO), a company that includes a growing collection of e-commerce platforms with a concentration on fine wines, luxury real estate, and leather goods and accessories announced the formation of Gaucho Development SRL, an Argentine holdings company slated to develop the Company’s recently acquired land holdings in the commercial and business districts of San Rafael, Mendoza and Córdoba. The Company estimates potential rental income of more than USD 260,000 annually, once development is complete.
As previously announced, last year the Company purchased land holdings in Argentina in an all-stock transaction valued at approximately $2.4 million. One of the property-lots is located in the San Rafael, Mendoza region of Argentina, and the other is located in the country’s second largest city of Córdoba, with the estimated fair market value of the combined properties totaling approximately $2.4 million. Both properties are also located on major thoroughfares, seeing significant foot and street traffic, and both with ample parking, a feature considered a rare benefit in Argentine cities.
Scott Mathis, CEO & Chairman of Gaucho Holdings commented, “We’ve already secured our first tenant (a well-known, multi-unit business that has demonstrated a long operating history in Argentina) with a ten-year lease at our San Rafael location. As part of the same property that is yet to be developed, there’s an adjacent area on which we intend to build a two-floor business center and commercial marketplace containing six units on the ground floor and two units on the top. Similarly, at our Córdoba property, we intend to develop a two-floor business center and marketplace containing four units on the ground level and five units on the upper level. As both these locations offer ample customer parking, generally a rare feature in Argentine cities, we believe we can set a premium on rental asking prices. Additionally, when we factor in an estimated inflationary increase annually, the numbers year-over-year may be significantly higher. We believe the valuation of the real estate was temporarily lowered because of the COVID crisis, which could allow for substantial appreciation in the years ahead.”
“Argentina’s challenging economic environment certainly has its negatives, but it can also provide extraordinary opportunities. It may serve us well to build in Argentine pesos, at the equivalent of USD 70 per sq. ft.—which includes paying labor in the devalued peso, and then further benefit from that scenario by leasing those properties in U.S. dollars. Our goal and model is to attempt to ‘produce in pesos, then sell in USD’ as much as we can. We believe we can duplicate this same model throughout Argentina’s biggest cities, such as Córdoba as well as Buenos Aires, for which we’ve already targeted multiple prime locations. One of our biggest strengths may ultimately be having the ability to leverage opportunities such as this because of our local, on-the-ground experience. Over the next 36 months, our goal is to invest 30 million USD under this same scenario. We are excited about the long-term opportunities this model may provide.”
Algodon’s Chief Operating Officer, Sergio Manzur Odstrcil, commented; “Due to the current USD to Peso conversion rates and its effect on labor and some materials costs, we are seeing historic lows in building costs—at values we have not seen in 30 years, so now is the time to build. We estimate it may cost approximately USD 650 per sq. m (USD 60 per sq. ft.) to build these commercial business centers which, when combined, total approximate 2150 sq. m (23,142 sq. ft.). We believe with the potential rental income we could make back our building costs in a matter of just a few years.”
Other related developments from around the markets include:
IRSA Inversiones y Representaciones, the leading real estate company in Argentina, announces its results for the Fiscal Year 2022 ended June 30, 2022. During the year, we concluded the merger between IRSA and IRSA Commercial Properties that has an effective date of July 1, 2021. The net result for fiscal year 2022 registered a gain of ARS 34,892 million compared to a loss of ARS 61,641 million in fiscal year 2021. Adjusted EBITDA reached ARS 27,427 million in fiscal year 2022, 49% higher than in 2019, not affected by the pandemic. Rental adjusted EBITDA reached ARS 15,782 million (ARS 12,248 million for Shopping Malls, ARS 2,443 million for offices and ARS 1,091 million for Hotels).
Cresud announced its results for the Fiscal Year 2022. We concluded a regional agricultural campaign with very good results, motivated by an active demand for grains, high commodity prices, mixed weather conditions and a more dynamic real estate market, mainly in Brazil. We planted 254,000 hectares and reached a grain production of 800,000 tons. Adjusted EBITDA reached ARS 47,739 million in fiscal year 2022, ARS 19,054 million from the agricultural business and ARS 28,685 million from the urban property and investment business, increasing 10% compared to fiscal year 2021. The net result for fiscal year 2022 was a gain of ARS 63,000 million, compared to a loss of ARS 40,179 in the previous fiscal year.
Airbnb Inc. recently released its Q2 shareholder letter, which noted, “Our Q2 results demonstrate that Airbnb has achieved growth and profitability at scale. From a growth perspective, we exceeded 103 million Nights and Experiences Booked, our largest quarterly number ever. We generated $2.1 billion in revenue, growing 58% year-over-year (or 64% excluding foreign exchange). Our revenue and GBV are 73% larger than in Q2 2019. Since the beginning of the pandemic, Airbnb has significantly outperformed the rest of the travel industry. From a profitability perspective, we had our most profitable Q2 ever with net income of $379 million—a nearly $700 million improvement from Q2 2019. We generated $795 million of FCF in the quarter—a nearly $1.1 billion improvement from the $(263) million FCF from the depths of the pandemic two years ago. More importantly, over the last twelve months, we’ve generated $2.9 billion in FCF, bringing our total cash balance to nearly $10 billion.”
Jones Lang LaSalle Inc. also announced second quarter 2022 earnings, with diluted earnings per share of $3.90, up from $3.82 in the prior-year quarter, and adjusted diluted earnings per share1 of $4.48, up from $4.20 last year. “JLL showed strong and resilient performance through the second quarter, with double-digit fee revenue growth across nearly all of our business lines,” said Christian Ulbrich, JLL CEO. “We continue to see significant growth opportunities and intend to strategically invest in people and technology through the cycle in areas of our business which we believe will drive outperformance in the coming years. Our investment-grade balance sheet and free cash flow allow us to make these investments while continuing to return capital to shareholders.”
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