IRSA Propiedades Comerciales S.A. (IRCP) CEO Daniel Elsztain on Q1 2021 Results - Earnings Call Transcript

IRSA Propiedades Comerciales S.A. (NASDAQ:IRCP) Q1 2021 Earnings Conference Call November 18, 2020 9:00 AM ET

Company Participants

Santiago Donato - Investor Relations Officer

Daniel Elsztain - Chief Executive Officer

Matias Gaivironsky - Chief Financial Officer

Conference Call Participants

Álvaro García - BTG Pactual

Marcelo Motta - JPMorgan

Santiago Donato

Good morning, everyone. I'm Santiago Donato, Investor Relations Officer of IRSA Commerical Properties and I welcome you to the First Quarter of Fiscal Year 2021 Results Conference Call. First of all I want to remind you that both audio and a slideshow maybe accessed through company's Investor Relations Web site at www.irsacp.com.ar, by clicking on the banner webcast/link. The following presentation and the earnings release issued yesterday are also available for download on the company Web site. After management's remarks, there will be a question-and-answer session for analysts and investors [Operator Instructions].

Before we begin, I would like to remind you that this call is being recorded, and that information discussed today may include forward-looking statements regarding the company's financial and operating performance. All projections are subject to risks and uncertainties and actual results may differ materially. Please refer to the detailed note in the company's earnings release regarding forward-looking statements.

I will now turn the call over to Mr. Daniel Elsztain, who was recently appointed as our Chief Executive Officer. Daniel has been the company's Chief Operating Officer since 2011. Alejandro Elsztain, former CEO of the company will remain as Executive Vice President. Please Daniel, go ahead.

Daniel Elsztain

Good morning, everyone. It's a pleasure to host this call for the first time as CEO of the company. As we all know, we are leaving unique and very challenging times. But I'm very glad to that our company, our managers, and our teams made quick moves to protect our assets, our customers, and create value as well for our shareholders. So starting on page number two, we can see the main debate for this Q the first Q of 2021. On the left side, we have adjusted EBITDA grow of 157%. This is mainly explained by the sales and development segment of the company, we see 5 billion of the 5.18 billion explained by the sales and developments of office buildings mainly. We see a small reduction from ARS585 million to ARS381 million pesos in the office segment. This is mainly explained by the reduction in space for the offices that we sold. But nevertheless, we're going to rebuild this portfolio once we open the new construction that we will speak later of Catalinas. And we also see here, a big drop on the shopping mall segment of 109% down. This year, we see a loss in negative EBITDA of ARS150 million. This is a little bit better than the previous quarter, the previous quarter was a negative ARS250 million.

And the business is established and we will talk a little bit later that the shopping malls now are open and starting to produce income again. The same shopping sells, we see a reduction of almost 80% compared to the same quarter last year. But we see an increase with the previous quarter, fourth quarter of 2020 of 207%. This is mainly explained by the opening of shopping centers. Nevertheless, those openings were erratic because we had a lot of controls a lot of protocols and there were some openings and closings.

On the office portfolio, we see that the average rent was $26 per month per square meter, this is in line with our previous quarters and the occupancy is 92.8%. We have seen some moves in occupancy that we will discuss later, and then the office occupancy is 91.6%. Then we also have seen some reduction here mainly explained by two factors, we saw some decrease on the occupancy but also, the net effect of every square meter empty when we do that make a reduction in the portfolio has a bigger impact.

On the net income, we see that we have a growth of 330% net income achieved ARS13.2 billion in the first quarter when we see the net income attributable to controlling companies ARS12.3 billion, and this is mainly explained by higher results in the investors from the change in fair value of our investment properties. One comment that I want to make images will explain what we see on the sales I need and developments adjusted EBITDA is only for those assets that we were we sold and on the right side is the defect on the whole portfolio.

The main and subsequent events of that we saw here on this moment is we see that the opening of the shop is the shopping centers after COVID-19 lockdown as of October 20. All our shopping centers are open, again with some restrictions depending on the cities, but all of our shoppings are open as of today. Also, we had cells in the office segment for $170 million during the first quarter and sequence $128 million correspond to the first quarter and $42 million we will be shown on the second quarter. There was also debt cancellation for $140 million as of September 20th. And also the Board of Directors and the General Assembly of shareholders approved a dividend for ARS9.7 billion that will be effective on November 25th. And this represents a dividend yield of approximately 40%.

On Page number 3, you can see how we have been impact -- what we have done on regarding COVID-19 in Argentina. Remember that as of March 20, all our shoppings were close and the company decided to wait all billings and collections on base rent and all the commercial fund from April to September. This was just to support our tenants and prioritizing the long term relationship. We only have been charged and bill common expenses of the shopping center. And as of October, as we mentioned, 100% of our portfolio is operating and very strict protocols. On the right side, you can see that the common expenses only represented 20% of all the billing that we were doing previous the COVID-19 and the base rent as you can see that was 33% was waived. And now we have plans to start to build that once we recover from the situation of COVID-19.

On the office buildings, we have normal revenue collections during the lockdown period. Although, we have seen some companies made moves and some reduction in space nothing that really affected on this quarter. On the entertainment and convention centers, our operations are closed since March 20. All the fairs and events and conventions were postponed or canceled, and there is no certainty about the reactivation of this sector. We believe that during the year nothing will happen. We are just expecting to see how it's going to be the beginning of 2021.

In terms of expenses, we did a very good job. Our team was working in reducing all the expensive, the non-essential expenses and services. We had some cuts on social security taxes and other taxes that help us to reduce expenses. And also we have seen this quarter a payroll cost reduction approximately 20% of reduction of the staff of the company with no effects on the operation. And this is also excluding all the security and cleaning personnel that is hired to third parties. Regarding CapEx, we follow the construction of Catalinas in 200 Della Paolera and Alto Palermo was to spend the during the lockdown. And as of October, both construction were reestablish and with some protocols, but now they are working as they should.

On Page number 4, we can see, first of all, our CLA remains stable at 333,000 square meters of GLA, real GLA. We see some reduction in occupancy going to 92.8%. Remember pre-COVID we have seen a 95% occupancy and now we are running at 92.8%. We have seen a lot of stores closing in the city, in the streets and we have the same situation. Nevertheless, since the end of the quarter and for today, the team, the leasing team has been very active and the occupancy is recovering. In terms of sales, we see the big drop of sales falling to 90% or 93% in real terms. And since then we see a small increase going to a reduction of 71% or 79% in real terms. We see some recovery. Remember that we had some temporary closures and the initial fear of going out-of-home.

So we are seeing now that people is getting more used to getting out of the houses, getting people more comfortable about going to the shopping center and other places, because they don't see as a contagious places dislocations and we have been running with high protocols. So we expect a gradual recovery. And also, we are seeing that the government is doing incentives from consumption. And there is some expectation that tourism will come to Buenos Aires. As of today, Buenos Aires City is really, really cheap for everyone. So there will be some new permits for the surrounding countries to get into Buenos Aires City and the country, and we expect to have some consumption growing from that segment too.

On Page number 5, we see a time line how we reopen our shopping centers, starting for Alto Noa in the province of Salta, following by the rest of the provinces, Cordoba, Santa Fe, lately Neuquen. But in the middle since the opening, there were some closures in the province of Santa Fe for two weeks, in Neuquen also for almost three weeks. So we have ups and downs. The people is getting used to that. In August, we opened Distrito Arcos, our premium outlet in the city of Buenos Aires. And in October, near to the Mother's Day we -- finally, we're able to open the shopping centers in Capital Federal in the city center of Buenos Aires.

So now we have everything open. We have been running with very strict safety and hygiene measures with reduced hours, that helped us in some way to reduce costs but didn't make very easy operation. Now people is getting used to getting into the shopping center only one or two entrances. So temperature is measured. We give a cleaning instructions for people. We also have control of how many people can get into the shopping center, and we show the amount of people that is at the same time in the shopping center to fulfill all the restrictions and conditions that the city imposed to us. This is also -- this brings a lot of security to our customers and we have seen very good results. And as you know, there was a change in regulation. We were leading social [Multiple Speakers] we had a lockdown very recently that was released and now the lockdown was converting to social distancing. So that is helping to see more people on the street, more people coming to our malls and restrictions lifted in some way.

On Page number 6, we see our office building segment. Starting -- comparing to the first quarter of 2020, we see a reduction -- on the first quarter of 2021, we were -- the reduction was mainly explained by the sale of Bouchard 710 and Boston Tower. We started last year with 115,000 square meters of GLA. Now we see 93,000 square meters of GLA. But we expect that by the second quarter of this year, we will be able to incorporate the new building that we are about to finish and we're about to move into that building. So that will increase our portfolio of 28,000 square meters, and we will be at very similar levels of GLA that we had on the same quarter last year. So we saw this quarter that the revenues coming from this segment reduced because everything we saw and we expect that, that will be compensated in the future because the incorporation of this building.

We see a small reduction in occupancy. As we mentioned, we had some notice of tenants reducing space. But it's also explained because the proportionate of every empty space into a smaller portfolio so both effects as explained 91.6% occupancy, and 53% occupancy on the B class segment. Remember here we had some occupied space on Philips mainly. But on the other building, on the building, as you remember, we have very low occupancy and that asset is in the least the for-sale assets. In terms of price, we are looking at very similar prices as we have on the first quarter 2020, a small drop. It was $26.6 per month per square meter and now we see $26 per month per square meter.

Here on Page number 7, we see the sales that we did, first, Bouchard 710, we sold the entire building, 12 floors, to an international company operating in Argentina, a total GLA of 15,000 square meters. The price that we achieved was $5,800 per square meter, achieving an $87.2 million, that's an IRR of 16% for this investment on this asset. In the case of Boston Tower, we had two different sales, one for six floors and one for seven floors, one 7,400 square meters and the other one, 7,100 square meters, totaling 14,000 square meters, 14,500, and we achieved a price of 41 million and 42 million on the second sale. And we can see here, we are achieving very good prices per square meters. And this money is really the one that we used to cancel our debt here of 140 million that we did.

On Page number 8, we see our projects under development. As we mentioned, 200 Della Paolera, the building is almost finished. We already give possession to tenants and owners. Remember we sold four floors of this tower during the past quarters and we have also given some possession for tenants to occupy the building. We expect that by the end of the year, the 2020 December, we're going to have some occupancy on the building already. It's a fantastic building, fantastic location, fantastic views. As you remember, it's a total building of 35,000 meters of GLA, which 28,000 belong to IRSA Commercial Properties. The work in progress is 97%. And as we mentioned, we're going to open on the second quarter of 2021.

The commercialization in progress is 61% and we have one more lease out for 2.5 floors. So it's going to be a very reasonable achievement given the conditions and what's going on with COVID all over the world. In terms of CapEx, we still have $7.7 million pending to deploy in the payments of this building. And in the case of Alto Palermo, we have a total construction of 3,900 square meters of GLA. The work in progress is 66% as of the end of this quarter. We estimate the opening for fiscal year 2021, by the end of this fiscal year. Total investment originally was projected at $28.5 million and we estimate there is going to be a reduction on this cost as the cost of construction is going down in the country. The total CapEx deployment pending in this construction is 8.2 million to finalize the construction.

So now to talk about our final results. Please, Matias Gaivironsky, our CFO.

Matias Gaivironsky

Thank you, Danny. Good morning, everybody. So if we move to Page 10, we have here a summary of our P&L. We finished the quarter with a gain of a net income of ARS13.3 billion attributable to our controlling interest it’s almost all the amount ARS12.3 billion. When we analyze the main drivers of our results, the first one came in the line for the change in the fair value. We have a positive result because our offices and our land bank because of the sump in the exchange rate that basically increased in the last quarter significantly, generated a positive result. That is the main explanation of this regarding our most, in dollar terms, remain stable and in pesos, we are valuing the shopping malls at the official exchange rate, so no significant change regarding the malls.

The other important line is in the line 7, the net financial results that I will enter in more details in the following pages. And also in the income tax, we can see in the line 10 the deferred tax that we are recognizing the future potential tax over the appreciation of our change in the fair value. Now every time that we appreciate our properties, we have to recognize a deferred tax on 25% on that amount.

If we move to Page 11, we can see the breakdown between the different segment. Shopping malls, we have here a loss in the adjusted EBITDA. I only -- remember besides the last quarter, only one-time in the crisis in 2002 on a negative quarter in this segment. Basically, we have our operations close during the last six months and this is the reason why we are recognizing losses. Remember that we typically operate this segment in an EBITDA margin of 75% on average. So after we recover the operation, we hope we can go back to those levels of margins.

In the office segment, we have also a drop 34.9% in adjusted pesos. So this is adjusted by inflation. Remember here the explanations are, we have three different drivers. The first one, in the previous year, we have an important devaluation in real terms. So all our agreements were in dollars or are in dollars and that generated a positive result last year. And this year, the devaluation was in real terms was almost zero, so that is the first component of the differences.

The second is a slight decrease in occupancy. And also the offices that we sold during the last quarter that generate also a lower level of revenues and in the comparison, we see the drop. The EBITDA margin, we are allocating a little more costs here to this segment, because in the formula we use part that is the revenues between the malls and the offices. And since we are increasing or in the comparison between shoppings and offices, we have now more revenues in offices. We are allocating a little more costs to this segment. And because of this, we see a drop between the last year of 85% to 71.6% this year. Finally, the sales and development segment, we see here the result of the asset sales. The offices that we sold generated positive results in the adjusted EBITDA. Remember that every time that we disclose the adjusted EBITDA, we are eliminating the results on the appreciation of the fair value. But when we sell the property, we recognize in the adjusted EBITDA that effect that is ARS5 million.

On Page 12, we have the breakdown of our net financial results. You can see on the bottom of the page, the evolution of the FX in Argentina. Last year, we have the [jump] in the FX from 42% to 57%. In real terms was an appreciation of 20%. And this year, you can see that in real terms the appreciation or the depreciation is almost zero. So for that reason, when we see the line two, the foreign exchange differences, we see better results. Last year, we have a loss of ARS6.3 million and this year it’s almost flat, almost zero, ARS90 million. In net interest loss, we have better results as well. This is related to the investment of our cash, our liquidity. The debt is almost the same because we can sell the $140 million in mid-September. So most of the quarter, we have the same debt than one year ago. And finally, in line three, we can see also a good result on the fair value of our financial assets. We used to value all our assets. We value all our assets, financial assets to market and this quarter, we recognized it again because of that.

If we move to Page 13, we have here the breakdown of our NAV and some ratios on valuation of our market value in the market cap of the company. We see that the net asset value, this is all valuing all the properties at the official exchange rate. So we see here an NAV of $1.5 billion. The last 12 months adjusted EBITDA, including the sales of our offices, totaled $132.1 million. If we exclude -- and we only consider the rental adjusted EBITDA, that number is $60 million. So when we analyze some valuation ratios, we can see that the cap rate of the company is 28%. Today, remember that include the disposal of the offices. So on the recurrent basis, this is lower. The enterprise value EBITDA is 4.1 times, price to FFO 2.5 times and price to NAV, only 20%.

If we move to Page 14, we can see the breakdown of our debt and the debt amortization schedule. The major event during the quarter was the cancellation of the $140 million note that expired in September. So now the net debt of the company before the payment of the dividends is $220 million. This will increase after we pay the dividend. That I will show in the next page. But the company remain with a significant amount of cash and equivalents in order to fulfill our business plan. When we see the net debt-to-EBITDA ratio that is today 1.7 times, this is considering the total amount of EBITDA. If we exclude the nonrecurring EBITDA, that ratio goes to 3.7 times. And also, it's important to mention that after the end of September, we also sold properties for $42 million. So that also will increase our liquidity and that is not included in this page.

Finally, on Page 15, we can see here the evolution of our historical dividend distribution that we can see that over the years, IRSA Commercial Properties has been paid around $42 million on average of dividends. In the past years, in the recent years, the average went to only $21 million. So this year, we announced it in our shareholders' meeting approved a dividend of $9.7 million in pesos. We will pay that on November 25 and the payment will be in dollars. So all our shareholders will receive directly the dollars. And in order to divide the ARS9.7 million into dollars, we will use the exchange rate of Banco Nacion of the day before the payment.

So with this, we finish the formal presentation. Now we invite investors and analysts to ask questions.

Question-and-Answer Session

A - Santiago Donato

[Operator Instructions] The first question comes from Álvaro García from BTG Pactual.

Álvaro García

I have two questions, and congrats on some of the liability management you've done recently. And my two questions, the first one is on the office portfolio. In my mind, I have this number of roughly $30 million that, I'd say, the portfolio before asset disposals generated in terms of operating income. I was wondering if maybe you could help us think of a pro forma number post asset sales and including the development into next year? And then my second question, I guess, is for Matias, I guess it’s a tough question to answer. But how should we think of valuation in terms of the blue-chip swap and where that FX rate is today, and what specific consequences that might have for IRSA going forward? Thank you.

Daniel Elsztain

I will take the first part of the question regarding the offices income producing. Today, the EBITDA produced by the office segment is around $25 million. I mean what we would have is not today, now it was reduced because of the sales we had. And I expect that we're going to recover at the same amount. Because if you see the total GLA, it will be very similar and we have the majority of the building of the new building already leased at very similar levels at the range of $30 per square meters. So it's very similar of what we are selling. So I expect we will recover to the same place we had before we started to sell.

Matias Gaivironsky

The second part of the question, Alvaro, first, one clarification, the liability management was at the level of IRSA and Cresud, not at the level of IRSA Commercial Properties. But thanks for the congratulations. Regarding the -- if I understood your question regarding the blue-chip swap, remember that real estate in Argentina always was quote in dollars. So real transactions, the real price is fixed in dollars and then the currency could be pesos or other currency, but using the valuation of real dollars. That is basically in the offices and land bank and this is the currency that we are using to address the fair value in our financials. Remember that we -- every quarter, we have to value our properties at the fair value.

The shopping malls is a little different. The malls, since there are no transactions in the market, the last transaction that we saw in the market was like six years ago. So what we are doing there instead of using comparables, we are using DCF model. The DCF model since we generate pesos, we are not using the blue-chip swap. And this is why in our financial statement today, for instance, the shopping malls are valued below the offices, although, we have much more shopping malls than offices. So in terms of our books, we are very conservative on that. I don't believe that we could sell or we we'll decide to sell any properties at these prices. But there is no other methodology to address value on the malls.

So going forward, the the question here always is how much will be the effects for Argentina in the future. Now today we have a big gap between the official and the unofficial exchange rate or the blue chip. So far companies are able to serve debt at the official exchange rate, although, you know what happened in the last regulation of the Central Bank that force companies to refinance debt with maturities between October and March, that was the case of Cresud and IRSA. So the Central Bank, in that case, sold 40% of the dollars and asked the companies to refinance the remaining 60%. But this is only deferring the payment but the effects so far was the official exchange rate. So for instance, when we cancel on September the debt we paid all the -- we acquired the dollars at the official exchange rate. So at the end of the day, regarding how the effects will affect the company is -- the question is how much will be the effects in the future in Argentina? And I don't know if any of us has the answer.

Daniel Elsztain

Alvaro, small clarification on the first question. I mean, although we believe we're going to get to the same levels, we will not see the same levels of the $25 million this year, mainly because the building is not open the whole year, because it's going to be only for six months. We have free rent and we still have no full occupation. But we expect to see that.

Santiago Donato

Next question comes from Marcelo Motta from JPMorgan.

Marcelo Motta

The first one is regarding the shopping malls reopening. So when we look at the malls located in the country side, I mean, we saw the tenant sales. They were down maybe 40% to 45% on a year-over-year basis. And of course, when we look at the malls in Buenos Aires, they were close so sales were down almost 100%. So when we look at the preliminary data for November. I mean how has sales been recovered on the assets located in the Central Buenos Aires, so the the first question is that one. And the second one also on the malls is regarding delinquencies. I mean, how do you guys expect the ramp-up of rents to happen? I mean, will it be linked to sales performance? I mean, in the beginning of the call, I think Danny mentioned that you guys are planning to charge again the base rent once the situation is normalized. I mean, does it mean that maybe for the next six months or next quarter, rents will be more on a variable base or just trying to understand those two variables, the level of sales and the level of rental collection. Thank you.

Daniel Elsztain

First of all, I mean, we have to make a very big differentiation in the sales per store and the sales on the whole shopping. Because as everywhere else in the world, remember that not the whole amount of shops were allowed to open. For example, cinemas, food and beverage, entertainment, all those stores were not allowed to open even in the provinces of Argentina. So when we see the effect all over the shopping center is bigger than the effect in every unit. As you well mentioned, yes, we saw a reduction of 45% to 40% and a similar trend happened in Buenos Aires City that the first days are very complicated. People with a lot of fear to go to the shopping centers. But now we are seeing the similar patterns in Buenos Aires that we saw in the beginning of the provinces, but now the provinces are doing much better, that they were doing and better than Buenos Aires is doing in comparison to themselves.

So we have high expectations with the appearance of the vaccine people losing fear that we will be able to achieve. We hope and tourism some things in some shopping centers and the ones that are really good that we can come back to the levels of pre COVID. Remember, we have inflation on top of that. But I'm seeing in nominal terms, somewhere near to -- but this is only just -- it's a guess, it's an educated guess, by the end of of this fiscal year. And the same for the second part of the question, all our concessions, all our incentives not to lose tenants, all our work to protect the health of our tenants and to keep occupancy and good tenants, we have targets that are up to June of 2021. And mainly those incentives are based on collecting percentage of sales. As we mentioned, we waived the minimum rent that was part of the rent.

At the end of the day, it's not a big difference because remember that we have a minimum percentage and we're collecting in the majority of the cases percentages. But now because of the decrease in sales, yes, will have some impact and we are going to see that on our billing and collections. But yes, we're going to be related to percentage of sales in the maturity in the case, it's not in all of the cases, but as sales growth. Remember that we do it monthly, differently, many places in the world that they do in the sales per year as we collect sales per month, and we apply the percentage of sales per month. We're going to see our collections grow from now to June that we expect that we're going to be finished completely with all those concessions in our buildings.

Santiago Donato

Next question comes from Lorena Rage [ph].

Unidentified Analyst

Some of my questions were related to the one just asked. So just to be clear, you're not charging the fixed rent but just a percentage of sales, or you're going to start the percentage in June? Can you just clarify that, on the shopping malls…

Daniel Elsztain

Lorena, I mean in the majority of the cases, yes. Remember that we still have stores that were working during the lockdown. So in those cases, we do charge some minimum rent. And we have seen in the first moment of -- when we had the lockdown, many of our tenants were difficult to collect. So we made incentive plans and we did programs. So we start collections to go back to normality. And when we analyze the collections in the first two, three months, we were below the 100% of what we were building. And if you see the last month, the last two, three, four months, we were collecting more than we were billing because we made the program. So we put the tenants back into normality and we reduced the delinquency. And we have been very successful on that. It was difficult to explain to 1,000 plus tenants what we were doing and what we are trying to achieve for the future. But now we are back to normal and we are starting to see our delinquency going down very, very fast. And also to gaining new tenants for our shoppings.

Unidentified Analyst

And how do you explain some drop in occupancy if you're not charging mostly anything. Just people that decided to leave anyways?

Daniel Elsztain

Yes. I mean, you can see two different decisions. Once those that decided that they wanted to close everything the first day and in the first, I would say two, three weeks, we saw some tenants that completely reduced the stores, empty the operations, fire people and so that was the first trend. The second trend was people that they knew because of the reduction in consumption, that they're going to have to make some reductions to survive and decided to close some stores. We had -- I mean, always the more affected shopping centers are the weakest. So we see also the same pattern. And those brands that they know that they couldn't survive with all those stores open, they made decisions and that's why we see some reduction in our occupancy. Nevertheless, that we were only charging the common charges, they decided to make the decision to survive. Remember that they're going to have -- on top of rent, they have to pay the merchandise that they had and they need the merchandise, the sellers and employees. So for their own health, they decided to make some reduction in size and footprint.

Unidentified Analyst

And then on the pickup in consumption, you mentioned you have high hopes on the vaccine and tourism. But what about one of the other big drivers that is the macro situation in Argentina. Do you expect -- I mean, you see the COVID impact as the main driver for the drop in traffic at the malls in consumption and not so much the macro situation?

Daniel Elsztain

Well, the COVID and the lockdowns, I mean that was the main effect. I mean, I don't want to know -- I think nobody knows what's going to happen in Argentina in terms of macro. But today, people -- I mean, there is money on the street. It's not that there's lack of money today in the street. So I think there is some consumption ready to be done. But it's very difficult to predict and we can see anything. I mean, more people really consumption or people reducing because there are many incentives driven by the government. We have [Indiscernible] we have [Indiscernible]. And so we depend on what the government is going to do. Nevertheless, tourism is going to be a reality. The loss of fear is another reality. People that is not leaving the country is another -- a third reality. I mean, Argentina -- rich Argentinian and the high class Argentinian, typically go out of the country, Miami, Europe, Uruguay. And this year, there will be many restrictions and fear also to go out. So that consumption will happen Argentina. Where? We don't know, but we expect to cut some of that consumption.

Unidentified Analyst

And just one more on the leverage. Do you have a target leverage for like maybe the end of this fiscal year, taking into account the leverage without the one-offs, like the 3.7, try to reduce that. Do you have a target for that?

Matias Gaivironsky

If you see the evolution of our debt, it was almost the same always. We were in the $500 million gross debt. This quarter, we canceled $140 million. So now our structural debt is $360 million. The ratio will be a consequence of the EBITDA and I believe that we are seeing the worst part of the crisis now. We have in EBITDA that we are showing the recurrent EBITDA, six months of a closed operation. So after that disappear in the future, we will see an evolution or improvement on the ratio. But at the end of the day, here I like to see two different drivers. The first one is, as always, the leverage that is net debt to EBITDA. But on the other hand, you have the LTV of the company, so the assets against the debt. And I believe that the 12.5% that is the loan-to-value on the currency that is extremely conservative for a real estate company. So I can't tell you what will be the ratio, because that depends on the EBITDA but we are not planning to increase the leverage.

Unidentified Analyst

And if I might, just a quick one on the dividend. This is more for IRSA, I know, but since it's the same management. Is there a specific use for the dividend that IRSA will receive from IRSACP?

Matias Gaivironsky

It's basically, Lorena to cancel the intercompany loan. IRSA canceled now around $100 million of debt and basically, IRSA use the credit line between IRSA commercial property. So basically, what we will do, IRSA won't receive new money, we will cancel the intercompany loan.

Santiago Donato

The last question comes from Ignacio Ferreyra [Technical Difficulty]. I think we lost Ignacio. Well, we close the Q&A session, then Ignacio I'm open if you need to call me to do your question. Thank you all. I will now turn back to Mr. Daniel Eslztain, our CEO, for any closing remarks.

Daniel Elsztain

Thank you, Santiago. Well, we are closing the first quarter of 2021. We still have had a lot of uncertainty, but we are building the basis to keep growing. We are improving our shopping centers. We have newer and better portfolio of offices and we are looking at lots of opportunities in the country. We expect that consumer is going to grow. The fear to COVID is going to decrease as the vaccine and people get used to. So we expect to keep producing good results. Thank you everyone for participating in this call. Our team of IR is always available for further questions and clarification. Goodbye to everyone.