IRSA Propiedades Comerciales S.A.
 
Unaudited Condensed Interim Consolidated Financial Statements for the nine-month period ended March 31, 2020, presented comparatively
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Legal Information
 
 
Denomination: IRSA PROPIEDADES COMERCIALES S.A.
 
Fiscal year N°: 130, beginning July 1, 2019.
 
Legal address: Moreno 877, 22nd floor, Autonomous City of Buenos Aires, Argentina.
 
Main business: Real estate investment and development.
 
Date of registration with the Public Registry of Commerce of the By-laws: August 29, 1889.
 
Date of registration of last amendment: October 29, 2018.
 
Expiration of company charter: August 28, 2087.
 
Registration number with the Supervisory Board of Companies: 801,047.
 
Capital stock: 126,014,050 common shares.
 
Subscribed, issued and paid up (in thousands of Ps.): 126,014.
 
Direct Majority Shareholder: IRSA Inversiones y Representaciones Sociedad Anónima (IRSA).
 
Majority Shareholder of the Group: Inversiones Financieras del Sur S.A.
 
Legal Address: Bolívar 108, 1st floor, Autonomous City of Buenos Aires, Argentina.
 
Main business: Real estate investment.
 
Direct and indirect ownership interest: 101,624,666 common shares.
 
Voting stock (direct and indirect equity interest): 80.65%.
 
 
Type of shares
CAPITAL STRUCTURE
Outstanding shares
Shares authorized for public offering
Subscribed, issued and paid-in
(in thousands of Ps.)
Registered, common shares with a nominal value of Ps. 1 each, 1 vote per share
126,014,050
126,014,050
126,014
 
 
 
 
 
 
 
 
 
 
 
1
IRSA Propiedades Comerciales S.A.
 
Unaudited Condensed Interim Consolidated Statements of Financial Position
as of March 31, 2020 and June 30, 2019
 (All amounts in thousands of Argentine Pesos, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
 
 
 
 
 
 
Note
03.31.20
 
06.30.19
ASSETS
 
 
 
 
Non-current assets
 
 
 
 
Investment properties
8
81,305,401
 
81,822,341
Property, plant and equipment
9
467,479
 
450,709
Trading properties
10
166,169
 
168,214
Intangible assets
11
1,060,003
 
550,364
Rights of use assets
12
561,745
 
 -
Investments in associates and joint ventures
7
4,470,351
 
2,179,251
Deferred income tax assets
19
79,499
 
97,617
Income tax and minimum presumed income tax credits
 
2,383
 
12,246
Trade and other receivables
14
4,187,525
 
661,123
Investments in financial assets
13
 -
 
610,335
Total non-current assets
 
92,300,555
 
86,552,200
Current Assets
 
 
 
 
Trading properties
10
 -
 
1,506
Inventories
 
36,707
 
39,231
Income tax and minimum presumed income tax credits
 
93,423
 
86,436
Trade and other receivables
14
10,348,976
 
9,243,052
Derivative financial instruments
13
5,961
 
7,613
Investments in financial assets
13
5,379,232
 
8,236,647
Cash and cash equivalents
13
2,633,311
 
5,695,217
Total current assets
 
18,497,610
 
23,309,702
TOTAL ASSETS
 
110,798,165
 
109,861,902
SHAREHOLDERS’ EQUITY
 
 
 
 
Total capital and reserves attributable to equity holders of the parent
 
49,609,951
 
52,130,781
Non-controlling interest
 
2,962,708
 
2,954,442
TOTAL SHAREHOLDERS’ EQUITY
 
52,572,659
 
55,085,223
LIABILITIES
 
 
 
 
Non-current liabilities
 
 
 
 
Trade and other payables
16
1,278,767
 
1,166,463
Borrowings
17
24,599,449
 
30,207,616
Leases liabilities
 
592,418
 
 -
Deferred income tax liabilities
19
18,483,188
 
17,823,382
Provisions
18
71,409
 
59,514
Derivative financial instruments
13
22,588
 
18,723
Total non-current liabilities
 
45,047,819
 
49,275,698
Current liabilities
 
 
 
 
Trade and other payables
16
2,559,941
 
3,410,259
Income tax liabilities
 
11,407
 
20,291
Payroll and social security liabilities
 
172,276
 
294,948
Borrowings
17
10,355,093
 
1,708,251
Leases liabilities
 
10,326
 
 -
Derivative financial instruments
13
33,659
 
18,381
Provisions
18
34,985
 
48,851
Total current liabilities
 
13,177,687
 
5,500,981
TOTAL LIABILITIES
 
58,225,506
 
54,776,679
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES
 
110,798,165
 
109,861,902
 
 
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
 
 
 
 
 
2
IRSA Propiedades Comerciales S.A.
 
Unaudited Condensed Interim Consolidated Statements of Comprehensive Income
     for the nine and three-month periods ended March 31, 2020 and 2019
(All amounts in thousands of Argentine Pesos, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
 
 
 
 
 
Nine months
 
Three months
 
Note
03.31.20
 
03.31.19
 
03.31.20
 
03.31.19
Income from sales, rentals and services
20
7,340,615
 
7,857,721
 
1,944,356
 
2,401,038
Income from expenses and collective promotion fund
20
2,489,000
 
2,675,854
 
827,265
 
784,003
Operating costs
21
(3,222,911)
 
(3,477,214)
 
(1,042,185)
 
(1,029,688)
Gross profit
 
6,606,704
 
7,056,361
 
1,729,436
 
2,155,353
Net gain / (loss) from fair value adjustments of investment properties
8
373,681
 
(10,478,732)
 
(1,855,978)
 
93,786
General and administrative expenses
21
(929,976)
 
(974,891)
 
(229,248)
 
(311,708)
Selling expenses
21
(500,084)
 
(503,464)
 
(113,624)
 
(155,929)
Other operating results, net
22
31,874
 
(401,432)
 
7,760
 
(356,734)
Profit/ (loss) from operations
 
5,582,199
 
(5,302,158)
 
(461,654)
 
1,424,768
Share of profit of associates and joint ventures
7
233,458
 
238,002
 
(62,956)
 
85,912
Profit/ (loss) from operations before financing and taxation
 
5,815,657
 
(5,064,156)
 
(524,610)
 
1,510,680
Finance income
23
377,665
 
100,591
 
167,990
 
18,878
Finance cost
23
(2,433,638)
 
(2,571,457)
 
(694,297)
 
(910,972)
Other financial results
23
(4,482,660)
 
(1,079,314)
 
(799,586)
 
(320,484)
Inflation adjustment
23
97,259
 
(74,378)
 
188,895
 
56,473
Financial results, net
 
(6,441,374)
 
(3,624,558)
 
(1,136,998)
 
(1,156,105)
Loss profit before income tax
 
(625,717)
 
(8,688,714)
 
(1,661,608)
 
354,575
Income tax expense
19
(1,045,302)
 
2,054,893
 
260,476
 
(60,970)
Loss profit for the period
 
(1,671,019)
 
(6,633,821)
 
(1,401,132)
 
293,605
 
 
 
 
 
 
 
 
 
Other comprehensive loss:
 
 
 
 
 
 
 
 
Items that may be reclassified subsequently to profit or loss:
 
 
 
 
 
 
 
 
Currency translation adjustment
 
(9,069)
 
 -
 
(9,069)
 
 -
Other comprehensive loss for the period
 
(9,069)
 
 -
 
(9,069)
 
 -
Total comprehensive loss for the period
 
(1,680,088)
 
(6,633,821)
 
(1,410,201)
 
293,605
 
 
 
 
 
 
 
 
 
Total comprehensive loss attributable to:
 
 
 
 
 
 
 
 
Equity holders of the parent
 
(1,762,294)
 
(6,837,351)
 
(1,351,121)
 
379,056
Non-controlling interest
 
91,275
 
203,530
 
(50,011)
 
(85,451)
 
 
 
 
 
 
 
 
 
Attributable to:
 
 
 
 
 
 
 
 
Equity holders of the parent
 
(9,069)
 
 -
 
(9,069)
 
 -
 
 
 
 
 
 
 
 
 
Loss per share attributable to equity holders of the parent for the period:
 
 
 
 
 
 
 
 
Basic
 
(13.98)
 
(54.26)
 
(10.72)
 
3.01
Diluted
 
(13.98)
 
(54.26)
 
(10.72)
 
3.01
 
 
 
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
 
 
 
 
 
 
 
3
IRSA Propiedades Comerciales S.A.
 
Unaudited Condensed Interim Consolidated Statement of Changes in Shareholders’ Equity
for the nine-month period ended March 31, 2020
(All amounts in thousands of Argentine Pesos, except otherwise indicated)
Free translation from de original prepared in Spanish for publication in Argentina
 
 
 
 
 
Share capital
Inflation adjustment of share capital
Share premium
Legal reserve
Special reserve CNV 609/12 (1)
Other reserves
Retained earnings
Subtotal
Non-controlling interest
Total shareholder’s equity
Balance as of June 30, 2019
126,014
3,211,192
9,167,337
126,729
8,760,914
70,566,481
(39,827,886)
52,130,781
2,954,442
55,085,223
(Loss) / profit for the period
 -
 -
 -
 -
 -
 -
(1,762,294)
(1,762,294)
91,275
(1,671,019)
Other comprehensive loss for the period
 -
 -
 -
 -
 -
(9,069)
 -
(9,069)
 -
(9,069)
Dividend distribution - Shareholders’ meeting as of October 29, 2019
 -
 -
 -
 -
 -
(693,730)
 -
(693,730)
(138,746)
(832,476)
Assignment of results - Shareholders’ meeting as of October 29, 2019
 -
 -
 -
 -
 -
(39,827,886)
39,827,886
 -
 -
 -
Changes in non-controlling interest
 -
 -
 -
 -
 -
(55,737)
 -
(55,737)
55,737
 -
Balance as of March 31, 2020
126,014
3,211,192
9,167,337
126,729
8,760,914
29,980,059
(1,762,294)
49,609,951
2,962,708
52,572,659
 
 
 
 
 
 
Reserve for future dividends
Special reserve
Currency translation adjustment
Changes in non-controlling interest
Total other reserves
Balance as of June 30, 2019
30,712,156
39,970,569
 -
(116,244)
70,566,481
Other comprehensive loss for the period
 -
 -
(9,069)
 -
(9,069)
Assignment of results - Shareholders’ meeting as of October 29, 2019
(693,730)
(39,827,886)
 -
 -
(40,521,616)
Changes in non-controlling interest
 -
 -
 -
(55,737)
(55,737)
Balance as of March 31, 2020
30,018,426
142,683
(9,069)
(171,981)
29,980,059
 
 
(1)
Corresponds to General Resolution 609/12 of National Securities Commission (“CNV”). Furthermore includes the effect for the standard change in investment properties as of June 1, 2011.
 
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
 
 
 
 
 
4
IRSA Propiedades Comerciales S.A.
 
Unaudited Condensed Interim Consolidated Statement of Changes in Shareholders’ Equity
for the nine-month period ended March 31, 2019
(All amounts in thousands of Argentine Pesos, except otherwise indicated)
Free translation from de original prepared in Spanish for publication in Argentina
 
 
 
 
 
Share capital
Inflation adjustment of share capital
Share premium
Legal reserve
Special reserve CNV 609/12 (1)
Other reserves
Retained earnings
Subtotal
Non-controlling interest
Total shareholder’s equity
Balance as of June 30, 2018
126,014
3,211,192
9,167,337
126,729
8,760,914
7,248,892
48,950,947
77,592,025
3,044,297
80,636,322
Adjustments previous periods (IFRS 9)(2)
 -
 -
 -
 -
 -
 -
(39,077)
(39,077)
 -
(39,077)
Balance as of June 30, 2018 - Adjusted
126,014
3,211,192
9,167,337
126,729
8,760,914
7,248,892
48,911,870
77,552,948
3,044,297
80,597,245
(Loss) / profit for the period
 -
 -
 -
 -
 -
 -
(6,837,351)
(6,837,351)
203,530
(6,633,821)
Dividend distribution - Shareholders’ meeting as of October 29, 2018
 -
 -
 -
 -
 -
 -
(956,158)
(956,158)
 -
(956,158)
Assignment of results - Shareholders’ meeting as of October 29, 2018
 -
 -
 -
 -
 -
63,369,724
(63,369,724)
 -
 -
 -
Changes in non-controlling interest
 -
 -
 -
 -
 -
(54,414)
 -
(54,414)
54,414
 -
Balance as of March 31, 2019
126,014
3,211,192
9,167,337
126,729
8,760,914
70,564,202
(22,251,363)
69,705,025
3,302,241
73,007,266
 
 
 
 
 
Reserve for future dividends
Special reserve
Changes in non-controlling interest
Total other reserves
Balance as of June 30, 2018
 -
7,313,002
(64,110)
7,248,892
Assignment of results - Shareholders’ meeting as of October 29, 2018
30,712,156
32,657,568
 -
63,369,724
Changes in non-controlling interest
 -
 -
(54,414)
(54,414)
Balance as of March 31, 2019
30,712,156
39,970,570
(118,524)
70,564,202
 
 
(1) 
Corresponds to General Resolution 609/12 of National Securities Commission (“CNV”). Furthermore includes the effect for the standard change in investment properties as of June 1, 2011.
  (2)  
See Note 2.2.
 
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
 
 
 
 
 
 
5
IRSA Propiedades Comerciales S.A.
 
Unaudited Condensed Interim Consolidated Statements of Cash Flows
for the nine-month periods ended March 31, 2020 and 2019
(All amounts in thousands of Argentine Pesos, except otherwise indicated)
Free translation from de original prepared in Spanish for publication in Argentina
 
 
 
 
 
Note
03.31.20
 
03.31.19
Operating activities:
 
 
 
 
Cash generated from operations
15
4,409,905
 
3,745,860
Income tax paid
 
(102,029)
 
(146,685)
Net cash generated by operating activities
 
4,807,876
 
3,599,175
 
 
 
 
 
Investing activities:
 
 
 
 
Capital contributions in associates and joint ventures
 
(38,900)
 
(37,150)
Acquisition of investment properties
 
(1,023,993)
 
(2,066,586)
Acquisition of property, plant and equipment
 
(101,086)
 
(75,220)
Advance payments
 
(928,945)
 
(3,504,050)
Acquisition of intangible assets
 
(22,291)
 
(120,918)
Acquisitions of investments in financial assets
 
(9,307,931)
 
(17,807,510)
Proceeds from investments in financial assets
 
10,642,850
 
18,375,171
Loans granted, net
 
(901,538)
 
8,172
Loans granted to related parties
 
(4,177,974)
 
 -
Proceeds from sales of interest held in associates and joint ventures
 
 -
 
5,652
Loans payment received from related parties
 
632,066
 
 -
Proceeds from sales of investment properties
 
16,708
 
 -
Collection of financial assets interests
 
428,894
 
461,255
Acquisition of subsidiaries, net of cash acquired
 
 -
 
(34,000)
Dividends received
 
151,502
 
6,213
Net cash used in investing activities
 
(4,630,638)
 
(4,788,971)
 
 
 
 
 
Financing activities:
 
 
 
 
Repurchase of non-convertible notes
 
(484,192)
 
(58,612)
Borrowings obtained
 
9,556,355
 
457,622
Borrowings obtained from related parties
 
 -
 
24,951
Payment of borrowings
 
(9,696,789)
 
(370,360)
Payments of financial leasing
 
 -
 
(12,006)
Payment of derivative financial instruments
 
 -
 
(759,321)
Pay of leases liabilities
 
(31,728)
 
 -
Proceeds from derivative financial instruments
 
426,776
 
1,299,387
Payment of derivative financial instruments
 
(427,109)
 
 -
Payment of interest
 
(2,714,054)
 
(2,582,101)
Dividends paid
 
(693,021)
 
(956,158)
Contrubution of the non-controling shareholders
 
(86,626)
 
 -
Short-term loans, net
 
678,048
 
200,992
Net cash used in financing activities
 
(3,472,340)
 
(2,755,606)
 
 
 
 
 
Net decrease in cash and cash equivalents
 
(3,295,102)
 
(3,945,402)
Cash and cash equivalents at beginning of period
13
5,695,217
 
7,687,315
Financial result of cash and cash equivalents
 
268,545
 
196,788
Inflation adjustment
 
(35,349)
 
(35,158)
Cash and cash equivalents at end of period
13
2,633,311
 
3,903,543
 
 
    The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
 
 
 
6
IRSA Propiedades Comerciales S.A.
 
Notes to the Unaudited Condensed Interim Consolidated Financial Statements
(All amounts in thousands of Argentine Pesos, except otherwise indicated)
Free translation from de original prepared in Spanish for publication in Argentina
 
1.
Group’s business and general information
 
IRSA PROPIEDADES COMERCIALES S.A. (“IRSA Propiedades Comerciales” or “the Company”) is an Argentine real estate company mainly engaged in holding, leasing, managing, developing, operating and acquiring shopping malls and office buildings and holds a predominant position within the Argentine market. IRSA Propiedades Comerciales was incorporated in 1889 under the name Sociedad Anonima Mercado de Abasto Proveedores (SAMAP) and until 1984 operated the main fresh product market in the Autonomous City of Buenos Aires. SAMAP’s core asset was the historical building of Mercado de Abasto, which served as site of the market from 1889 until 1984, when a sizable part of its operations was interrupted.
 
Since the Company was acquired by IRSA Inversiones y Representaciones Sociedad Anónima (hereinafter, IRSA) in 1994, it has grown through a series of acquisitions and development projects that resulted in a corporate reorganization pursuant to which the company was renamed Alto Palermo S.A. which was subrequentily changed to our current denomination.
 
As of the end of these unaudited condensed interim consolidated financial statements (hereinafter, financial statements), the Company operates 332,642 square meters (sqm) in 14 shopping malls, 115,640  sqm in 8 premium offices and an extensive land reserve for future commercial developments; operates and holds a majority interest in a portfolio of 14 shopping malls in Argentina, six of which are located in the Autonomous City of Buenos Aires (Abasto Shopping, Alcorta Shopping, Alto Palermo, Patio Bullrich, Dot Baires Shopping and Distrito Arcos), two in Buenos Aires province (Alto Avellaneda and Soleil Premium Outlet) and the rest are situated in different provinces (Alto Noa in the City of Salta, Alto Rosario in the City of Rosario, Mendoza Plaza in the City of Mendoza, Córdoba Shopping Villa Cabrera in the City of Córdoba, Alto Comahue in the City of Neuquén and La Ribera Shopping in the City of Santa Fe). The Company also owns the historic building where the Patio Olmos Shopping Mall is located, operated by a third party.
 
The Company’s shares are traded on the Buenos Aires Stock Exchange (MERVAL: IRCP) and in United States of America on the NASDAQ (NASDAQ: IRCP).
 
IRSA Propiedades Comerciales and its subsidiaries are hereinafter referred to jointly as "the Group". Our main shareholder and parent Company is IRSA and Inversiones Financieras del Sur S.A. is our ultimate parent Company.
 
These financial statements have been approved by the Board of Directors to be issued on June 4, 2020.
 
2.            
Summary of significant accounting policies
 
2.1.         
Basis of preparation
 
The National Securities Commission (CNV), in Title IV "Periodic Information Regime" - Chapter III "Rules relating to the presentation and valuation of financial statements" - Article 1, of its standards, has established the application of  the Technical Resolution No. 26 (RT 26) of the Argentine Federation of Professional Councils in Economic Sciences (FACPCE) and its amendments, which adopt IFRS, issued by the IASB, for certain companies included in the public offering regime of Law No. 26,831, either because of its share capital or its non-convertible notes, or that have requested authorization to be included in the aforementioned regime. 
 
These financial statements for the interim periods of nine months ended March 31, 2020 and 2019 have not been audited. Management considers that they include all the necessary adjustments to fairly present the results of each period. Intermediate period results do not necessarily reflect the proportion of the Group's results for the entire fiscal years. 
 
IAS 29 "Financial Reporting in Hyperinflationary Economies" requires that the financial statements of an entity whose functional currency is one of a hyperinflationary economy be expressed in terms of the current unit of measurement at the closing date of the reporting period, regardless of whether they are based on the historical cost method or the current cost method. To do so, in general terms, the inflation produced from the date of acquisition or from the revaluation date, as applicable, must be calculated for non-monetary items. This requirement also includes the comparative information of the financial statements. 
 
 
 
 
 
 
 
 
7
IRSA Propiedades Comerciales S.A.
 
In order to conclude on whether an economy is categorized as a high inflation one, in the terms of IAS 29, the standard details a series of factors to be considered, including the existence of an accumulated inflation rate in three years that approximates to or exceeds 100%. Accumulated inflation in Argentina in three years has been over 100%. For this reason, in accordance with IAS 29, the Argentine economy must be considered as a high inflation economy starting July 1, 2018.  
 
Regarding the inflation index to be used and in accordance with FACPCE Resolution No. 539/18, it will be determined based on the Wholesale Price Index (IPIM) until 2016, considering the average variation of Consumer Price indices (CPI) of the Autonomous City of Buenos Aires for the months of November and December 2015, because during those two months there were no national IPIM measurements. Then, from January 2017, the National Consumer Price Index (National CPI) will be considered. The table below shows the evolution of this index during the period ended March 31, 2020, according to official statistics by Argentine Institute of Statistics and Census (INDEC) and following the guidelines described in Resolution 539/18: 
 
Price variation: 
03.31.20 (accumulated of nine month) 
 
36% 
 
 
As a consequence of the aforementioned, these Unaudited Consolidated Financial Statements as of March 31, 2020 were restated in accordance with IAS 29. 
 
2.2.         Significant accounting policies
 
The accounting policies applied in the presentation of these financial statements are consistent with those applied in the preparation of the information are described in Note 2 to the Annual Cosolidated Financial Statements from June 30, 2019 and implementing the IFRS 16: leases, from July 1, 2019.
 
IFRS 16: Leases
 
The standard establishes the criteria for recognition and valuation of leases for lessees and lessors. The changes incorporated mainly impact the tenant's accounting. IFRS 16 provides that the lessee recognize an asset for the right of use and a liability at present value with respect to those contracts that meet the definition of lease agreements according to IFRS 16. In accordance with the standard, a lease agreement is one that provides the right to control the use of an identified asset for a specific period. In order for a company to have control over the use of an identified asset: a) it must have the right to obtain substantially all the economic benefits of the identified asset and b) it must have the right to direct the use of the identified asset.
 
The standard allows an entity to exclude the short-term contracts (under 12 months) and those in which the underlying asset has low value.
 
The application of IFRS 16 generates an increase in assets and liabilities and a decrease in operating costs. Furthermore, amortizations and financial results generated by the update of the lease liabilities are increase.
 
2.3.         Comparability of information
 
The amounts as of June 30, 2019 and March 31, 2019, which are disclosed for comparative purposes, arise from the financial statements at said dates restated in accordance with IAS 29. Certain figures have been reclassified for comparison purposes in these Financial Statements.
 
2.4.         Use of estimates
 
The preparation of Financial Statements at a certain date requires the Group’s Management to make estimations and evaluations affecting the amount of assets and liabilities recorded and contingent assets and liabilities disclosed at such date, as well as income and expenses recorded during the period. Actual results might differ from the estimates and evaluations made at the date of preparation of these financial statements. In the preparation of these financial statements, the significant judgments made by Management in applying the Group’s accounting policies and the main sources of uncertainty were the same applied by the Group in the preparation of the Annual Consolidated Financial Statements of the information are described in Note 3 as of June 30, 2019.
 
 
 
 
 
 
 
 
8
IRSA Propiedades Comerciales S.A.
 
3.
Seasonal effects on operations
 
The operations of the Group’s shopping mall are subject to seasonal effects, which affect the level of sales recorded by tenants. During summertime (January and February), the tenants of shopping mall experience the lowest sales levels in comparison with the winter holidays (July) and during the period of Christmas’ Seasons (December) when they tend to record peaks of sales. Apparel stores generally change their collections during the spring and the fall, which impacts positively on shopping mall sales. Sale discounts at the end of each season also impact the business. Consequently, a higher level of revenues is generally expected in shopping mall operations during the second half of the year.
 
4.
Acquisitions and disposals
 
Barter transaction airspace
 
On October 25, 2019, the Company has transferred in a barter transaction the rights to construct an apartment building (“Torre 1”) to an unrelated third party on the airspace of the COTO Supermarket located in the Abasto neighborhood of the Autonomous City from Buenos Aires. Torre 1 will have 22 apartments of 1 to 3 rooms totaling an area of 8,400 square meters. The amount of the operation was set at USD 4.5 millions: USD 1 million will be pay in cash and remaining balance in at least 35 functional units of departments, representing the equivalent of 24.20% of the own square meters, with a minimum insured of 1,982 square meters.
 
 
Within 30 months of the signing of the contract, when certain conditions have been met, IRSA CP must transfer to the same unrelated third party the rights to build a second apartment building.
 
 
As of March 31, 2020 the results of this transaction amounts to ARS 274 million that are included in the line “Income from sales, rentals and services” and “Operating costs” of the Statements of Comprehensive Income.
 
Barter agreement Plot 1 - Caballito Tower
 
On December 23, 2019, the Company has transferred in a barter transaction the Plot 1 of the land located in Av. Avellaneda and Olegario Andrade 367, in the Caballito neighborhood of the Autonomous City of Buenos Aires, to an unrelated third party.
 
Plot 1 has an estimated surface area of ​​3,221 square meters in which a 10-story apartment building will be developed for a total of 11,400 square meters, a commercial ground floor for 1,216 square meters and a basement of 138 parking spaces (“Building 1”).
 
The amount of the operation was set at the sum of USD 5.5 million to be paid in future functional units of Building 1, which represent the equivalent of 23.53% of the own square meters, with a minimum footage insured of 2,735 square meters composed by 1,215.62 square meters of commercial destination, 1,519.68 square meters of residential destination and a certain number of parking spaces that represent 22.50% of the own square meters with that destination and never less than 31 units. The consideration is granted by a mortgage on Plot 1 and Building 1. The buyer has an option to acquire Plot 2 of the same property until August 31, 2020 and Plots 3 and 4 until March 31, 2021, subject to certain suspensive conditions. As of March 31, 2020 this transaction has not had impact on the profit and loss statement of the Company.
 
TGLT – Recapitalization agreement
 
On August 8, 2019, we entered into certain arrangements with TGLT S.A. (“TGLT”) providing for collaboration in TGLT’s financial restructuring and recapitalization. We participated in the recapitalization agreement whereby TGLT committed: (i) to make a public offer to subscribe Class A preferred shares at a subscription price of US$1.00 per TGLT share; (ii) to make a public offering of new Class B preferred shares which may be subscribed by (a) the exchange for ordinary shares of TGLT, at an exchange ratio of one Class B preferred share for every 6.94 ordinary shares of the Company and / or (b) the exchange for convertible notes, at an exchange ratio of a Class B preferred share for each US$1.00 of convertible notes (including accumulated and unpaid interests under the existing convertible notes); and (iii) to grant an option to subscribe new Class C preferred shares in a public offer for cash to be carried out if: (a) the public offer of Class A and Class B preferred shares are consummated and (b) a minimum number of option holders have exercised that option at a subscription price per Class C preferred share of US$1.00 (or its equivalent in pesos).
 
 
 
 
 
 
 
 
 
9
IRSA Propiedades Comerciales S.A.
  
Likewise, IRSA Propiedades Comerciales signed as a holder of convertible notes of TGLT an agreement for deferment of payment of interest payable as of February 15, 2019 and August 15, 2019 until November 8, 2019 and an option agreement which may be subscribed Class C preferred shares.
 
Finally, supporting the recapitalization plan, IRSA Propiedades Comerciales signed with TGLT a subscription commitment for Class A preferred shares under Class A Public Offer to make a contribution in kind of shares of the company La Maltería SA, 100% of its ownership, for an amount up to US$ 24 million and promised to exchange its convertible negotiable obligations into preferred Class B shares.
 
In turn, on November 22, 2019, TGLT held a bondholders of convertible negotiable obligations meeting in order to consider the modification of different clauses of the indenture in force at that date, and in line with what was agreed in the recapitalization agreement , IRSA Propiedades Comerciales voted in favor of the modifications.
 
Under the agreements described above, the successful consummation of the offer by TGLT, and having reached the thresholds of consent of the holders of convertible notes of TGLT, on December 11, 2019, the Company concluded the envisaged process in the recapitalization agreement and related documents through the subscription of preferred Class A shares, integrating them in kind through the contribution of the shares of the company La Maltería SA, 100% of their ownership and, likewise, proceeded to the exchange of the convertible note - including deferred interest and accrued interest from August 15, 2019 to December 11, 2019 - in preferred Class B shares.
 
In the last quarter, preferred shares were converted into ordinary shares, which is why IRSA Propiedades Comerciales begin to have significant influence, considering TGLT S.A. as an associated company.
 
5.
Financial risk management and fair value estimates
 
These Financial Statements do not include all the information and disclosures on financial risk management; therefore, they should be read along with Note 5 to the Consolidated Financial Statements as of June 30, 2019. There have been no changes in risk management or risk management policies applied by the Group since year-end.
 
Since June 30, 2019 as of the date of this Financial Statements, there have been no significant changes in business or economic circumstances affecting the fair value of the Group's assets or liabilities of the Group except for that the indicated in Note 27. Furthermore, there have been no transfers between the different hierarchies used to assess the fair value of the Group’s financial instruments.
 
6.
Segment reporting
 
The following is a summary analysis of the Group's business segments, corresponding to the periods ended March 31, 2020 and 2019. Additionally, a reconciliation between results of operations corresponding to segment information and the results of operations as per the statements of comprehensive income and total assets by segment and total assets according to the statement of financial position. The information by segments has been prepared and classified according to the businesses in which the Group carries out its activities, which are described in Note 6 of the Annual Consolidated Financial Statements as of June 30, 2019, with the exception of the incorporation of TGLT S.A. to the “Others” segment (Note 4).
.
 
 
 
 
 
 
 
10
IRSA Propiedades Comerciales S.A.
 
 
03.31.20
 
 
Shopping Malls
 
Offices
 
Sales and developments
 
Others
 
Total segmet reporting
 
Adjustment for expenses and collective promotion funds
 
Adjustment for share in profit/ (loss) of joint ventures
 
Total as per statement of comprehensive income
 
 
 
 
 
 
 
 
Revenues
5,345,191
 
1,697,952
 
294,601
 
57,981
 
7,395,725
 
2,489,000
 
(55,110)
 
9,829,615
Operating costs
(433,928)
 
(99,375)
 
(76,766)
 
(64,121)
 
(674,190)
 
(2,579,913)
 
31,192
 
(3,222,911)
Gross profit / (loss)
4,911,263
 
1,598,577
 
217,835
 
(6,140)
 
6,721,535
 
(90,913)
 
(23,918)
 
6,606,704
Net (loss) / gain from fair value changes in investment properties
(3,711,267)
 
3,330,544
 
955,439
 
53,976
 
628,692
 
 -
 
(255,011)
 
373,681
General and administrative expenses
(620,150)
 
(194,005)
 
(35,079)
 
(87,177)
 
(936,411)
 
 -
 
6,435
 
(929,976)
Selling expenses
(404,700)
 
(58,911)
 
(45,054)
 
(5,806)
 
(514,471)
 
 -
 
14,387
 
(500,084)
Other operating results, net
(47,038)
 
(25,473)
 
(2,369)
 
67,360
 
(7,520)
 
22,894
 
16,500
 
31,874
Profit / (Loss) from operations
128,108
 
4,650,732
 
1,090,772
 
22,213
 
5,891,825
 
(68,019)
 
(241,607)
 
5,582,199
Share of profit of associates and joint ventures
 -
 
 -
 
 -
 
64,486
 
64,486
 
 -
 
168,972
 
233,458
Profit / (Loss) before financing and taxation
128,108
 
4,650,732
 
1,090,772
 
86,699
 
5,956,311
 
(68,019)
 
(72,635)
 
5,815,657
Investment properties
44,747,017
 
32,432,160
 
6,763,533
 
255,339
 
84,198,049
 
 -
 
(2,892,648)
 
81,305,401
Property, plant and equipment
222,869
 
246,699
 
 -
 
 -
 
469,568
 
 -
 
(2,089)
 
467,479
Trading properties
 -
 
 -
 
166,169
 
 -
 
166,169
 
 -
 
 -
 
166,169
Goodwill
9,976
 
29,489
 
 -
 
85,547
 
125,012
 
 -
 
(39,465)
 
85,547
Right to receive units under (barter transactions)
 -
 
 -
 
716,341
 
 -
 
716,341
 
 -
 
 -
 
716,341
Inventories
37,423
 
 -
 
 -
 
 -
 
37,423
 
 -
 
(716)
 
36,707
Investments in associates and joint ventures
 -
 
 -
 
 -
 
2,229,918
 
2,229,918
 
 -
 
2,240,110
 
4,470,028
Operating assets
45,017,285
 
32,708,348
 
7,646,043
 
2,570,804
 
87,942,480
 
 -
 
(694,808)
 
87,247,672
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
03.31.19
 
 
Shopping Malls
 
Offices
 
Sales and developments
 
Others
 
Total segmet reporting
 
Adjustment for expenses and collective promotion funds
 
Adjustment for share in profit/ (loss) of joint ventures
 
Total as per statement of comprehensive income
 
 
 
 
 
 
 
 
Revenues
6,310,677
 
1,470,150
 
53,056
 
89,637
 
7,923,520
 
2,675,854
 
(65,799)
 
10,533,575
Operating costs
(516,945)
 
(72,727)
 
(37,430)
 
(102,493)
 
(729,595)
 
(2,788,449)
 
40,830
 
(3,477,214)
Gross profit / (loss)
5,793,732
 
1,397,423
 
15,626
 
(12,856)
 
7,193,925
 
(112,595)
 
(24,969)
 
7,056,361
Net (loss) / gain from fair value changes in investment properties
(15,129,847)
 
4,668,179
 
281,589
 
(206,241)
 
(10,386,320)
 
 -
 
(92,412)
 
(10,478,732)
General and administrative expenses
(688,137)
 
(143,434)
 
(65,260)
 
(80,137)
 
(976,968)
 
 -
 
2,077
 
(974,891)
Selling expenses
(425,482)
 
(61,183)
 
(9,600)
 
(12,691)
 
(508,956)
 
 -
 
5,492
 
(503,464)
Other operating results, net
(60,038)
 
(11,697)
 
(9,625)
 
(333,990)
 
(415,350)
 
12,676
 
1,242
 
(401,432)
(Loss) / Profit from operations
(10,509,772)
 
5,849,288
 
212,730
 
(645,915)
 
(5,093,669)
 
(99,919)
 
(108,570)
 
(5,302,158)
Share of profit of associates and joint ventures
 -
 
 -
 
 -
 
85,149
 
85,149
 
 -
 
152,853
 
238,002
(Loss) / Profit before financing and taxation
(10,509,772)
 
5,849,288
 
212,730
 
(560,766)
 
(5,008,520)
 
(99,919)
 
44,283
 
(5,064,156)
Investment properties
70,919,880
 
32,819,654
 
5,786,237
 
148,254
 
109,674,025
 
 -
 
(3,743,125)
 
105,930,900
Property, plant and equipment
244,403
 
212,906
 
 -
 
 -
 
457,309
 
 -
 
(2,573)
 
454,736
Trading properties
 -
 
 -
 
294,688
 
 -
 
294,688
 
 -
 
 -
 
294,688
Goodwill
9,976
 
29,490
 
 -
 
85,265
 
124,731
 
 -
 
(39,466)
 
85,265
Right to receive units under (barter transactions)
42,211
 
 -
 
 -
 
 -
 
42,211
 
 -
 
(927)
 
41,284
Inventories
 -
 
 -
 
 -
 
47,738
 
47,738
 
 -
 
2,891,776
 
2,939,514
Investments in associates and joint ventures
71,216,470
 
33,062,050
 
6,080,925
 
281,257
 
110,640,702
 
 -
 
(894,315)
 
109,746,387
Operating assets
142,432,940
 
66,124,100
 
12,161,850
 
562,514
 
221,281,404
 
 -
 
(1,788,630)
 
219,492,774
 
 
 
11
IRSA Propiedades Comerciales S.A.
 
7.
Investments in associates and joint ventures
 
The table below lists information about the Group’s investments in associates and joint ventures:
 
 
Name of the entity
 
% of ownership interest held by non-controlling interests
 
Value of Company’s interest in equity
 
Company’s interest in comprehensive income
 
03.31.20
 
06.30.19
 
03.31.20
 
06.30.19
 
03.31.20
 
03.31.19
Joint ventures
 
 
 
 
 
 
 
 
 
 
 
 
Quality Invest S.A.
 
50.00%
 
50.00%
 
1,995,613
 
1,773,832
 
182,880
 
89,740
Nuevo Puerto Santa Fe S.A.
 
50.00%
 
50.00%
 
244,497
 
294,769
 
(13,908)
 
63,113
La Rural S.A.
 
50.00%
 
50.00%
 
178,623
 
96,034
 
82,588
 
77,944
Associates
 
 
 
 
 
 
 
 
 
 
 
 
TGLT S.A.(5)
 
30.20%
 
 -
 
2,046,957
 
 -
 
(17,207)
 
 -
Tarshop S.A.
 
 -
 
 -
 
 -
 
 -
 
 -
 
2,417
Others associates (3)(4)
 
 -
 
 -
 
4,338
 
14,309
 
(9,964)
 
4,788
Total interests in associates and joint ventures
 
 
 
 
 
4,470,028
 
2,178,944
 
224,389
 
238,002
 
The table below lists information of the latest financial statements inssued by associates and joint ventures:
 
Name of the entity
 
Place of business / Country of incorporation
 
Main activity
 
Common shares
 
Last financial statements issued
 
 
 
 
Share capital (nominal value)
 
Income for the period
 
Equity
Joint ventures
 
 
 
 
 
 
 
 
 
 
 
 
Quality Invest S.A. (2)
 
Argentina
 
Real estate
 
163,039,244
 
326,078
 
365,758
 
3,932,249
Nuevo Puerto Santa Fe S.A. (1)(2)
 
Argentina
 
Real estate
 
138,750
 
27,750
 
(27,816)
 
469,042
La Rural S.A. (2)
 
Argentina
 
Event organization and others
 
714,498
 
1,430
 
175,236
 
272,642
Associates
 
 
 
 
 
 
 
 
 
 
 
 
TGLT S.A. (5)(6)
 
Argentina
 
Real estate
 
279,502,813
 
924,991
 
(26,932)
 
5,957,545
 
 
(1)
Nominal value per share Ps. 100.
(2)
Correspond to profit for the nine-month period ended at March 31, 2020 and 2019, respectively.
(3)
Represents other individually non-significant associates.
(4)
Includes Ps. 323 as of March 31, 2020 and Ps. 307 as of June 30, 2019, in relation to the equity interest in Avenida Compras disclosed in Provisions.
(5)
See Note 4 in these Financial Statements.
(6)
Correspond to loss for the three-month period ended at March 31, 2020.
 
Changes in the Group’s investments in associates and joint ventures for the period ended March 31, 2020 and for the year ended June 30, 2019 were as follows:
 
 
 
03.31.20
 
06.30.19
Beginning of the period / year
 
2,178,944
 
3,288,345
Adjustment previous periods (i)
 
 -
 
(39,077)
Share of profit / (loss)
 
233,458
 
(548,475)
Dividends
 
(36,364)
 
(422,694)
Other comprehensive loss
 
(9,069)
 
 -
Sale of interest in associates (i)
 
 -
 
(168,101)
Acquisition of interest in associates (ii)(Note 24)
 
2,064,159
 
 -
Irrevocable contributions (Note 24)
 
38,900
 
68,946
End of the period / year (4)
 
4,470,028
 
2,178,944
 
(i)
See Note 2.2 to the Annual Financial Statements as of June 30, 2019.
(ii)
Corresponds to the acquisition of TGLT S.A. See Note 4 to these Financial Statements.
 
 
 
 
 
 
12
IRSA Propiedades Comerciales S.A.
 
8.
Investment properties
 
Changes in the Group’s investment properties for the nine-month period ended March 31, 2020 and for the year ended June 30, 2019 were as follows:
 
 
Shopping Malls
 
Office and Other rental properties
 
Undeveloped parcels of land
 
Properties under development
 
Others
 
03.31.20
 
06.30.19
Fair value at beginning of the period / year
46,286,752
 
26,441,054
 
7,747,441
 
1,146,824
 
200,270
 
81,822,341
 
114,370,343
Additions
380,881
 
89,466
 
672
 
576,391
 
1,093
 
1,048,503
 
2,363,366
Capitalization of financial costs
 -
 
 -
 
 -
 
284
 
 -
 
284
 
91,411
Capitalized lease costs
13,447
 
5,649
 
 -
 
 -
 
 -
 
19,096
 
14,859
Depreciation of capitalized lease costs (i)
(6,957)
 
(4,822)
 
 -
 
 -
 
 -
 
(11,779)
 
(12,072)
Transfers
(6,397)
 
(309)
 
 -
 
 -
 
 -
 
(6,706)
 
73,322
Disposals (iii)
 -
 
 -
 
(369,239)
 
 -
 
 -
 
(369,239)
 
 -
Net (loss) / gain from fair value adjustment on investment properties (ii)
(3,743,520)
 
3,052,822
 
955,439
 
54,964
 
53,976
 
373,681
 
(35,078,888)
Decrease due to loss of control (Note 4)
 -
 
 -
 
(1,570,780)
 
 -
 
 -
 
(1,570,780)
 
 -
Fair value at end of the period / year
42,924,206
 
29,583,860
 
6,763,533
 
1,778,463
 
255,339
 
81,305,401
 
81,822,341
 
 (i)
As of March 31, 2020 the depreciation charge was included in “Costs” in the amount of Ps 11,475, in “General and administrative expenses” in the amount of Ps. 285 and in and in “Selling expenses“ in the amount of Ps. 19 in the Statement of Comprehensive Income (Note 21).
(ii)
For the nine-month period ended March 31, 2020, the net gain from fair value adjustment on investment properties was Ps. 373.7 millons. The net impact of the values in Argentine pesos of our properties was mainly a consequence of the change in macroeconomic conditions:
 
a)
Net gain of Ps. 19,713.7 millions as a result of an increase in the projected inflation rate plus GDP, with the consequent increase in the cash flow of shopping malls revenues;
b)
Net loss of Ps. 22,963.3 millions due to the conversion to dollars of the projected cash flow in Argentine pesos according to the exchange rate estimates used in the cash flow;
c)
An increase of 72 basics points in the discount rate, mainly due to a rise in the country risk component of the WACC discount rate used to discount the flow of funds, which generated a decrease in the value of the shopping malls of Ps. 2,244.05 millions.
d)
Net gain of Ps. 14,539.7 millons as a result of the conversion to Argentine pesos of the value of the shopping malls in dollars based on the exchange rate at the end of the period.
e)
In addition, for the impact of the inflation adjustment the Group reclassified by shopping malls Ps. 12,160.3 millions to Inflation adjustment.
f)
The value of our office buildings and other rental properties measured in real terms increased by 11.9% during the nine-month period as of March 31, 2020, due to a devaluation of the Argentine peso exceeding the inflation rate of the period.
 
  (iii)
Barter disposal of “Land Plot 1” of Caballito Ferro Land (Note 4).
 
 
The following amounts have been recognized in the statements of comprehensive income:
 
 
03.31.20
 
06.30.19
Revenues from rental and services (Note 20)
7,048,800
 
7,834,855
Expenses and collective promotion fund (Note 20)
2,489,000
 
2,675,854
Rental and services costs (Note 21)
(3,145,569)
 
(3,439,723)
Net unrealized loss from fair value adjustment on investment properties
(159,162)
 
(10,478,732)
Net realized gain from fair value adjustment on investment properties (i)
532,843
 
 -
 
(i)
Includes Ps. 3,648 and Ps. 341,580 for the monetary and non-monetary benefit, respectively, corresponding to the barter transaction of the Caballito Ferro land and Ps. 186,615 due to loss of control of La Malteria S.A.
 
Valuation techniques are described in Note 9 to the Financial Statements as of June 30, 2019. There were no changes to the valuation techniques. The Group has reassessed the assumptions at the end of the period, incorporating the effect of the changes in macroeconomics conditions.
 
9.
Property, plant and equipment
 
Changes in the Group’s property, plant and equipment for the nine-month period ended March 31, 2020 and for the year ended June 30, 2019 were as follows:
 
 
Other buildings and facilities
 
Furniture and fixtures
 
 Machinery and equipment
 
 Vehicles
 
Others
 
03.31.20
 
06.30.19
Costs
443,134
 
247,534
 
1,354,113
 
18,569
 
789
 
2,064,139
 
1,955,150
Accumulated depreciation
(234,409)
 
(160,819)
 
(1,200,320)
 
(17,882)
 
 -
 
(1,613,430)
 
(1,528,369)
Net book amount at beginning of the period / year
208,725
 
86,715
 
153,793
 
687
 
789
 
450,709
 
426,781
Additions
48,683
 
11,422
 
40,981
 
 -
 
 -
 
101,086
 
90,933
Disposals
 -
 
(2,030)
 
(4,893)
 
 -
 
 -
 
(6,923)
 
(1,731)
Transfers to right to use assets
 -
 
 -
 
(13,559)
 
 -
 
 -
 
(13,559)
 
19,233
Depreciation charges (i)
(11,793)
 
(10,155)
 
(40,686)
 
(517)
 
 -
 
(63,151)
 
(85,061)
Net (loss) / gain from fair value adjustment
 -
 
(129)
 
(554)
 
 -
 
 -
 
(683)
 
554
Net book amount at end of the period / year
245,615
 
85,823
 
135,082
 
170
 
789
 
467,479
 
450,709
Costs
491,817
 
256,797
 
1,376,088
 
18,569
 
789
 
2,144,060
 
2,064,139
Accumulated depreciation
(246,202)
 
(170,974)
 
(1,241,006)
 
(18,399)
 
 -
 
(1,676,581)
 
(1,613,430)
Net book amount at end of the period / year
245,615
 
85,823
 
135,082
 
170
 
789
 
467,479
 
450,709
 
(i)
On March 31, 2020 depreciation charges were included in “Costs” in the amount of Ps. 50,343, in “General and administrative expenses” in the amount of Ps. 12,322 and in “Selling expenses“ in the amount of Ps. 486 in the Statement of Comprehensive Income (Note 21).
 
 
 
 
 
13
IRSA Propiedades Comerciales S.A.
 
10.
Trading properties
 
Changes in in the Group’s trading properties for the nine-month period ended March 31, 2020 and for the year ended June 30, 2019 were as follows:
 
 
Completed properties
 
Undeveloped sites
 
03.31.20
 
06.30.19
Net book amount at beginning of the period / year
2,257
 
167,463
 
169,720
 
290,675
Additions
 -
 
14,484
 
14,484
 
15,162
Disposals
(64)
 
(17,971)
 
(18,035)
 
(1,191)
Transfers
 -
 
 -
 
 -
 
(91,458)
Impairment
 -
 
 -
 
 -
 
(43,468)
Net book amount at end of the period / year
2,193
 
163,976
 
166,169
 
169,720
Non - current
 
 
 
 
166,169
 
168,214
Current
 
 
 
 
 -
 
1,506
Total
 
 
 
 
166,169
 
169,720
 
 
11.
Intangible assets
 
Changes in the Group’s intangible assets for the nine-month period ended March 31, 2020 and for the year ended June 30, 2019 were as follows:
 
 
Goodwill
 
Software
 
Rights of use (ii)
 
Right to receive units (Barters) (iii)
 
Others
 
03.31.20
 
06.30.19
Costs
85,547
 
398,496
 
258,698
 
122,420
 
59,917
 
925,078
 
924,768
Accumulated amortization
 -
 
(136,108)
 
(178,689)
 
 -
 
(59,917)
 
(374,714)
 
(287,482)
Net book amount at beginning of the period / year
85,547
 
262,388
 
80,009
 
122,420
 
 -
 
550,364
 
637,286
Additions
 -
 
15,240
 
 -
 
593,921
 
 -
 
609,161
 
176,395
Disposals
 -
 
(4,424)
 
 -
 
 -
 
 -
 
(4,424)
 
 -
Transfers
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
(1,097)
Amortization charge (i)
 -
 
(93,331)
 
(1,767)
 
 -
 
 -
 
(95,098)
 
(87,232)
Impairment (iv)
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
(174,988)
Net book amount at end of the period / year
85,547
 
179,873
 
78,242
 
716,341
 
 -
 
1,060,003
 
550,364
Costs
85,547
 
409,312
 
258,698
 
716,341
 
59,917
 
1,529,815
 
925,078
Accumulated amortization
 -
 
(229,439)
 
(180,456)
 
 -
 
(59,917)
 
(469,812)
 
(374,714)
Net book amount at end of the period / year
85,547
 
179,873
 
78,242
 
716,341
 
 -
 
1,060,003
 
550,364
 
(i)  On March 31, 2020 amortization charges were included in “Costs” in the amount of Ps. 48,366, in “General and administrative expenses” in the amount of Ps. 45,826 and in “Selling expenses“ in the amount of Ps. 906 in the Statement of Comprehensive Income (Note 21).
(ii)  Corresponds to Distrito Arcos.
(iii) Corresponds to in kind receivables representing the right to receive residential apartments in the future under barter transactions (Note 14).
(iv) Corresponds to impaired goodwill of La Arena S.A..
 
12.
 Rights of use assets
 
 
 
03.31.20
Convention center
 
142,967
Stadium DirecTV Arena
 
397,082
Machinery and equipment
 
14,307
Shopping malls
 
7,389
Total rights of use assets
 
561,745
Non-current
 
561,745
Total
 
561,745
 
 
 
 
 
03.31.20
Convention center
 
(7,131)
Stadium DirecTV Arena
 
(11,048)
Machinery and equipment
 
(5,959)
Shopping malls
 
(9)
Total depreciation of rights of use (i)
 
(24,147)
 
(i)   As of March 31, 2020 the depreciation charge was included in “Costs”, in the Statement of Comprehensive Income (Note 21).
 
 
14
IRSA Propiedades Comerciales S.A.
 
13.
Financial instruments by category
 
The present note shows the financial assets and financial liabilities by category of financial instrument and a reconciliation to the corresponding line in the Consolidated Statements of Financial Position, as appropriate. Financial assets and liabilities measured at fair value are assigned based on their different levels in the fair value hierarchy. For further information, related to fair value hierarchy see Note 13 to the Financial Statements as of June 30, 2019.
 
Financial assets and financial liabilities as of March 31, 2020 are as follows:
 
 
Financial assets at amortized cost (i)
 
Financial assets at fair value through profit or loss
Subtotal financial assets
Non-financial assets
Total
 March 31, 2020
 
 
 Level 1
 Level 2
 
 
 
 Assets as per Statement of Financial Position
 
 
 
 
 
 
 
 Trade and other receivables (excluding allowance for doubtful accounts) (Note 14)
7,366,571
 
 -
 -
7,366,571
7,571,669
14,938,240
 Investments in financial assets:
 
 
 
 
 
 
 
  - Public companies’ securities
 -
 
75,699
 -
75,699
 -
75,699
  - Mutual funds
 -
 
293,197
611,637
904,834
 -
904,834
  - Bonds
 -
 
4,398,699
 -
4,398,699
 -
4,398,699
 Derivative financial instruments
 
 
 
 
 
 
 
  - Foreing-currency future contracts
 -
 
 -
5,961
5,961
 -
5,961
 Cash and cash equivalents:
 
 
 
 
 
 
 
  - Cash at banks and on hand
1,410,381
 
 -
 -
1,410,381
 -
1,410,381
  - Short- term investments
 -
 
1,222,930
 -
1,222,930
 -
1,222,930
Total
8,776,952
 
5,990,525
617,598
15,385,075
7,571,669
22,956,744
 
 
 
Financial liabilities at amortized cost (i)
 
Financial liabilities at fair value through profit or loss
 
Subtotal financial liabilities
 
Non-financial liabilities
 
Total
 
 
 
Level 2
 
 
 
 
 
 
Liabilities as per Statement of Financial Position
 
 
 
 
 
 
 
 
 
Trade and other payables (Note 16)
1,092,160
 
 -
 
1,092,160
 
2,746,548
 
3,838,708
Derivative financial instruments
 
 
 
 
 
 
 
 
 
 - Swaps of interest rate (ii)
 -
 
56,247
 
56,247
 
 -
 
56,247
Borrowings (Note 17)
34,954,542
 
 -
 
34,954,542
 
 -
 
34,954,542
Total
36,046,702
 
56,247
 
36,102,949
 
2,746,548
 
38,849,497
 
 
Group´s financial assets and financial liabilities as of June 30, 2019 were as follows:
 
 
Financial assets at amortized cost (i)
 
Financial assets at fair value through profit or loss
Subtotal financial assets
Non-financial assets
Total
June 30, 2019
 
 
Level 1
Level 2
Level 3
 
 
 
Assets as per Statement of Financial Position
 
 
 
 
 
 
 
 
Trade and other receivables (excluding allowance for doubtful accounts) (Note 14)
3,449,434
 
 -
 -
 -
3,449,434
6,817,690
10,267,124
Investments in financial assets:
 
 
 
 
 
 
 
 
  - Public companies’ securities
 -
 
530,563
 -
 -
530,563
 -
530,563
  - Mutual funds
 -
 
1,970,189
591,469
 -
2,561,658
 -
2,561,658
  - Bonds
 -
 
4,838,086
 -
916,675
5,754,761
 -
5,754,761
Derivative financial instruments
 
 
 
 
 
 
 
 
  - Foreing-currency future contracts
 -
 
 -
7,613
 -
7,613
 -
7,613
Cash and cash equivalents:
 
 
 
 
 
 
 
 
  - Cash at banks and on hand
4,118,064
 
 -
 -
 -
4,118,064
 -
4,118,064
  - Short- term investments
 -
 
1,577,153
 -
 -
1,577,153
 -
1,577,153
Total
7,567,498
 
8,915,991
599,082
916,675
17,999,246
6,817,690
24,816,936
 
 
 
Financial liabilities at amortized cost (i)
 
Financial liabilities at fair value through profit or loss
 
Subtotal financial liabilities
 
Non-financial liabilities
 
Total
 
 
 
Level 2
 
 
 
 
 
 
Liabilities as per Statement of Financial Position
 
 
 
 
 
 
 
 
 
Trade and other payables (Note 16)
1,303,043
 
 -
 
1,303,043
 
3,273,679
 
4,576,722
Derivative financial instruments
 
 
 
 
 
 
 
 
 
 - Bonds
 -
 
544
 
544
 
 -
 
544
 - Swaps of interest rate (ii)
 -
 
36,560
 
36,560
 
 -
 
36,560
Borrowings (excluding finance leases liabilities) (Note 17)
31,895,244
 
 -
 
31,895,244
 
 -
 
31,895,244
Total
33,198,287
 
37,104
 
33,235,391
 
3,273,679
 
36,509,070
 
(i)
The fair value of financial assets and liabilities at their amortized cost does not differ significantly from their book value, except for borrowings (Note 17).
(ii)
The maturity date is February 16, 2023 and it is associated with the loan obtained through its subsidiary, Panameriacan Mall S.A, with the purpose of paying for the work that is being carried out at the Polo Dot.
 
 
 
 
15
IRSA Propiedades Comerciales S.A.
 
The valuation models used by the Group for the measurement at different levels of hierarchy are no different from those used as of June 30, 2019.
 
The Group uses a range of valuation models for the measurement of Level 2 and Level 3 instruments, details of which may be obtained from the following table. When no quoted prices in an active market are available, fair values (particularly with derivatives) are based on recognized valuation methods.
 
Description
 
Pricing model
 
Parameters
 
Fair value hierarchy
 
Range
Foreign-currency contracts
 
Present value method - Theoretical price
 
Underlying asset price (Money market curve); Interest curve
 
Level 2
 
-
 
 
Foreign exchange curve
 
 
 
 
 
 
 
 
 
 
 
Swaps of interest rate
 
Discounted cash flow
 
Interest rate futures
 
Level 2
 
-
 
 
 
 
 
 
 
 
 
Investments in financial assets
 
NAV
 
Theoretical price
 
Level 2
 
-
 
 
 
 
 
 
 
 
 
TGLT Convertible Notes
 
Black & Scholes
 
Underlying asset price (Market price) - share price volatility and market Interest rate
 
Level 3
 
Underlying asset price 10 to 13, share price volatility 55% to 75%, market interest-rate 8% to 9%
 
Theoretical price
 
 
 
 
As of March 31, 2020, there have been no changes to the economic or business circumstances affecting the fair value of the financial assets and liabilities of the Group, that is indicated in Note 27.
 
14.         Trade and other receivables
 
The following table shows the amounts of Group's trade and other receivables as of March 31, 2020 and June 30, 2019:
 
 
03.31.20
 
06.30.19
Lease and services receivables
952,132
 
1,333,062
Post-dated checks
501,875
 
839,541
Averaging of scheduled rent escalation
629,130
 
723,272
Debtors under legal proceedings
328,393
 
308,321
Property sales receivables
19,591
 
40,826
Consumer financing receivables
16,441
 
22,299
Less: allowance for doubtful accounts
(401,574)
 
(362,725)
Total trade receivables
2,045,988
 
2,904,596
Loans
970,910
 
65,084
Advance payments
529,110
 
572,817
Others (*)
217,764
 
198,726
Prepayments
189,664
 
222,041
Other tax receivables
180,346
 
165,996
Expenses to be recovered
28,005
 
18,869
Guarantee deposit
1,823
 
1,742
Less: allowance for doubtful accounts
(165)
 
(224)
Total other receivables
2,117,457
 
1,245,051
Related parties (Note 24)
10,373,056
 
5,754,528
Total current trade and other receivables
14,536,501
 
9,904,175
Non-current
4,187,525
 
661,123
Current
10,348,976
 
9,243,052
Total
14,536,501
 
9,904,175
 
 (*) Includes Ps. 171,202 and Ps. 174,306 as of March 31, 2020 and June 30, 2019, respectively, consistent with the assumption of debt with the State Assets Administration Agency (AABE). (Note 17)
 
 
Movements on the Group’s allowance for doubtful accounts and other receivables are as follows:
 
 
 
03.31.20
 
06.30.19
Beginning of the period/ year
362,949
 
424,290
Additions (i)
141,085
 
115,739
Unused amounts reversed (i)
(29,253)
 
(49,480)
Used during the period
(2,570)
 
(7,789)
Inflation adjustment
(70,472)
 
(119,811)
End of the period/ year
401,739
 
362,949
 
(i)
As of March 31, 2020 additions and unused amount reversed charged were charged to “Selling expenses”, in the amount of Ps 111,832 in the Statement of Comprehensive Income (Note 21).
 
 
 
 
16
IRSA Propiedades Comerciales S.A.
 
15.         Cash flow and cash equivalent information
 
Following is a detailed description of cash flows generated by the Group’s operations for the nine-month periods ended March 31, 2020 and 2019:
 
 
Note
03.31.20
 
03.31.19
Net loss for the period
 
(1,671,019)
 
(6,633,821)
Adjustments:
 
 
 
 
Income tax
19
1,045,302
 
(2,054,893)
Amortization and depreciation
21
194,175
 
140,152
Net gain / (loss) from fair value adjustment on investment properties
 
(373,681)
 
10,478,732
Gain from disposal of trading properties
 
(241,530)
 
(21,675)
Disposals by concession maturity
 
6,923
 
1,731
Averaging of schedule rent escalation
20
(127,070)
 
(276,693)
Directors’ fees
 
73,065
 
189,976
Equity incentive plan
 
 -
 
351
Financial results, net
 
6,226,660
 
3,101,220
Provisions and allowances
 
152,979
 
167,077
Share of profit of associates and joint ventures
7
(233,458)
 
(238,002)
Changes in operating assets and liabilities
 
 
 
 
(Increase) / Decrease in trading properties
 
(14,485)
 
11,426
Decrease / (Increase) of Inventories
 
2,524
 
(4,109)
Decrease in trading properties
 
 -
 
21,904
(Increase) / Decrease in trade and other receiables
 
885,600
 
466,620
Decrease in trade and other payables
 
(850,274)
 
(1,745,220)
Decrease in payroll and social security liabilities
 
(122,672)
 
(139,778)
Uses of provisions and inflation adjustment
 
(43,134)
 
(56,989)
Impaired goodwill
 
 -
 
174,988
Loss for sale of associates and joint ventures
 
 -
 
162,863
Net cash generated by operating activities before income tax paid
 
4,409,905
 
3,745,860
 
 
 
 
03.31.20
 
03.31.19
Non-cash transactions
 
 
 
 
Decrease in intangible assets through an increase in trading properties
 
 -
 
1,097
Increase in properties plant and equipment through a decrease in investment properties
6,706
 
19,092
Increase in trade and other receivables through a decrease in trading properties
 
 -
 
962
Increase in trade and other receivables through a decrease in investment in associates and joint ventures
 -
 
410,487
Decrease in trade and other receivables through an increase in investment in associates and joint ventures
 -
 
7,958
Decrease in investment in associates and joint ventures through a decrease in borrowings
 -
 
7,977
Decrease in investment in associates and joint ventures through a decrease in equity
 -
 
39,077
Increase in investment properties through an increase in trade and other payables
 
43,606
 
 -
Increase in investment properties through an increase in borrowings
 
284
 
 -
Decrease in equity through an increase in borrowings (dividends)
 
52,120
 
 -
Increase in rights of use assets through a decrease in properties plant and equipment
20,265
 
 -
Increase in investments in financial assets through a decrease in investment in associates and joint ventures (dividends)
27,063
 
 -
Increase in investment in associates and joint ventures through a decrease in investments in financial assets
792,772
 
 -
Decrease in equity through an increase in trade and other payables (dividends)
 
709
 
 -
Decrease in investment properties through an increase in intangible assets
 
352,535
 
 -
Decrease in intangible assets through an increase in trade and other payables
 
4,424
 
 -
Currency translation adjustment
 
9,069
 
 -
Decrease in trading properties through an increase in intangible assets
 
234,335
 
 -
 
 
Increase in investment in associates through a decrease due to loss of control in subsidiaries
 
 
 
03.31.20
Investment properties
 
1,570,780
Income tax and minimum presumed income tax credits
 
2,133
Trade and other receivables
 
48,655
Deferred income tax liabilities
 
(344,233)
Trade and other payables
 
(3,820)
Income tax and minimum presumed income tax liabilities
 
(2,133)
Decrease due to loss of control
 
1,271,382
 
 
17
IRSA Propiedades Comerciales S.A.
 
16.         Trade and other payables
 
The following table shows the amounts of Group's trade and other payables as of March 31, 2020 and June 30, 2019:
 
 
03.31.20
 
06.30.19
Rent and service payments received in advance
1,275,557
 
1,041,783
Admission rights
1,103,867
 
1,364,863
Accrued invoices
281,454
 
410,722
Trade payables
334,279
 
207,120
Tenant deposits
96,705
 
103,795
Payments received in advance
46,689
 
65,211
Total trade payables
3,138,551
 
3,193,494
Tax payable
243,969
 
340,458
Others
148,405
 
171,075
Other payments received in advance to be accrued
68,247
 
74,623
Tax amnesty plans
8,219
 
386,741
Dividends
125
 
170
Total other payables
468,965
 
973,067
Related parties (Note 24)
231,192
 
410,161
Total trade and other payables
3,838,708
 
4,576,722
Non-current
1,278,767
 
1,166,463
Current
2,559,941
 
3,410,259
Total
3,838,708
 
4,576,722
 
 
17.         Borrowings
 
The following table shows the Group's borrowings as of March 31, 2020 and June 30, 2019:
 
 
 
Book Value at 03.31.20
 
Book Value at 06.30.19
 
Fair Value at 03.31.20
 
Fair Value at 06.30.19
Non-Convertible notes
 
31,472,917
 
29,004,508
 
27,567,930
 
28,868,372
Bank loans
 
2,388,743
 
2,328,520
 
2,097,088
 
2,115,965
Bank overdrafts
 
778,433
 
298,619
 
778,433
 
298,619
AABE Debts
 
171,202
 
174,306
 
171,202
 
174,306
Loans with non-controlling interests
 
143,247
 
89,291
 
143,247
 
89,291
Finance leases
 
 -
 
20,623
 
 -
 
20,623
Total borrowings
 
34,954,542
 
31,915,867
 
30,757,900
 
31,567,176
Non-current
 
24,599,449
 
30,207,616
 
 
 
 
Current
 
10,355,093
 
1,708,251
 
 
 
 
Total
 
34,954,542
 
31,915,867
 
 
 
 
 
18.         Provisions
 
The following table shows the movements in the Group's provisions at March 31, 2020 and June 30, 2019 categorized by type of provision:
 
 
Labor, legal and other claims
 
Investments in associates (*)
 
03.31.20
 
06.30.19
Balances at the beginning of the period / year
108,058
 
307
 
108,365
 
118,340
Inflation adjustment
(35,684)
 
 -
 
(35,684)
 
(47,781)
Increases (i)
73,445
 
 -
 
73,445
 
82,473
Recovery (i)
(32,298)
 
 -
 
(32,298)
 
(20,600)
Used during the period
(7,450)
 
 -
 
(7,450)
 
(23,935)
Others (*)
 -
 
16
 
16
 
(132)
Balances at the end of the period / year
106,071
 
323
 
106,394
 
108,365
Non-current
 
 
 
 
71,409
 
59,514
Current
 
 
 
 
34,985
 
48,851
Total
 
 
 
 
106,394
 
108,365
 
 (*) Corresponds to investments in associates with negative equity.
 (i)
Additions and unused amount reversed charged were charged to “Other operating results, net”, in the Statement of Comprehensive Income (Note 22).
 
 
 
 
18
IRSA Propiedades Comerciales S.A.
 
19.         Current and deferred income tax
 
The details of the Group’s income tax expense are as follows:
 
 
03.31.20
 
03.31.19
Current income tax
(23,145)
 
(65,754)
Deferred income tax
(1,022,157)
 
2,120,647
Income tax - (loss) / gain
(1,045,302)
 
2,054,893
 
Changes in the deferred tax account are as follows:
 
 
03.31.20
 
06.30.19
Beginning of the period / year
(17,725,765)
 
(24,050,187)
Income tax
(1,022,157)
 
6,324,422
Decrease due to loss of control
344,233
 
 -
Period / year end
(18,403,689)
 
(17,725,765)
 
Below there is a reconciliation between the income tax recognized and that which would result from applying the prevailing tax rate to the profit before income tax:
 
 
03.31.20
 
03.31.19
Loss for period before income tax at the prevailing tax rate
187,715
 
2,606,614
Tax effects of:
 
 
 
Rate change
1,216,491
 
1,254,831
Fiscal transparency
100,914
 
(274,543)
Share of profit of associates and joint ventures
70,037
 
71,401
Non-taxable profit, non-deductible items
9,089
 
 -
Result from sale of subsidiaries
(385,693)
 
(337)
Difference between provisions and affidavits
48,333
 
 -
Non-tax loss carry-forwards
(82,887)
 
 -
Inflation adjustment
(512,121)
 
(1,554,694)
Tax inflation adjustment
(1,694,994)
 
 -
Others
(2,186)
 
(48,379)
Income tax
(1,045,302)
 
2,054,893
 
 
Law No. 27,541 of social solidarity and productive revival in the framework of Argentine public emergency, published on December 23, 2019 introduced some modifications to different taxes and the creation of the tax for an Inclusive and Solidarity Argentina (PAIS).
 
The main modifications affecting the Group in relation to income tax are the following:
 
● In the first and second fiscal year beginning after January 1, 2019, the gain or loss from tax inflation adjustment will be charged one sixth in the determination exercise and the remaining five sixths in the following fiscal periods;
 
●
The applicable rate to companies for the third year beginning after January 1, 2018 is increased from 25% to 30%.
 
20.
Revenues
 
 
03.31.20
 
03.31.19
Base rent
4,285,436
 
4,699,887
Contingent rent
1,397,451
 
1,243,805
Admission rights
684,697
 
753,911
Parking fees
279,142
 
351,174
Averaging of scheduled rent escalation
127,070
 
276,693
Commissions
142,437
 
179,278
Property management fees
83,730
 
98,791
Others
48,837
 
231,316
Total revenues from rentals and services
7,048,800
 
7,834,855
Sale of trading properties
291,815
 
22,866
Total revenues from sale of properties
291,815
 
22,866
Total revenues from sales, rentals and services
7,340,615
 
7,857,721
Expenses and collective promotion fund
2,489,000
 
2,675,854
Total revenues from expenses and collective promotion funds
2,489,000
 
2,675,854
Total revenues
9,829,615
 
10,533,575
 
 
19
IRSA Propiedades Comerciales S.A.
 
21.         Expenses by nature
 
The Group disclosed expenses in the statements of income by function as part of the line items “Costs”, “General and administrative expenses” and “Selling expenses”. The following table provides additional disclosure regarding expenses by nature and their relationship to the function within the Group.
 
 
Costs (ii)
 
General and administrative expenses
 
Selling expenses
 
03.31.20
 
03.31.19
Salaries, social security costs and other personnel administrative expenses (i)
1,012,053
 
319,279
 
52,377
 
1,383,709
 
1,538,589
Maintenance, security, cleaning, repairs and other
1,112,371
 
84,121
 
1,278
 
1,197,770
 
1,305,468
Taxes, rates and contributions
328,421
 
6,639
 
289,832
 
624,892
 
707,914
Advertising and other selling expenses
472,128
 
 -
 
26,875
 
499,003
 
463,435
Directors' fees
 -
 
278,424
 
 -
 
278,424
 
284,270
Amortization and depreciation (Notes 8, 9, 10, 11 and 12)
134,331
 
58,433
 
1,411
 
194,175
 
140,152
Fees and payments for services
39,091
 
130,203
 
11,853
 
181,147
 
179,118
Allowance for doubtful accounts (additions and unused amounts reversed) (Note 14)
 -
 
 -
 
111,832
 
111,832
 
129,594
Leases and expenses
79,511
 
21,060
 
1,931
 
102,502
 
107,299
Traveling, transportation and stationery
20,810
 
14,731
 
2,691
 
38,232
 
51,585
Bank expenses
3,959
 
15,416
 
 -
 
19,375
 
25,462
Cost of sale of properties
18,036
 
 -
 
 -
 
18,036
 
1,191
Other expenses
2,200
 
1,670
 
4
 
3,874
 
21,492
Total 03.31.20
3,222,911
 
929,976
 
500,084
 
4,652,971
 
 -
Total 03.31.19
3,477,214
 
974,891
 
503,464
 
 -
 
4,955,569
 
(i)
For the nine-month period ended March 31, 2020, includes Ps. 1,216,089 of Salaries, Bonuses and Social Security and Ps. 167,620 of other concepts. For the nine-month period ended March 31, 2019, includes Ps. 1,475,349 of Salaries, Bonuses and Social Security and Ps. 63,240 of other concepts.
(ii)
For the nine-month period ended March 31, 2020, includes Ps. 3,145,569 of Rental and services costs and Ps. 77,342 of Cost of sales and developments. For the nine-month period ended March 31, 2019, includes Ps. 3,439,723 of Rental and services costs and Ps. 37,491 of Cost of sales and developments.
 
 
22.         Other operating results, net
 
 
03.31.20
 
03.31.19
Canon
73,162
 
34,967
Interest generated by operating credits
44,758
 
47,853
Management fees
7,834
 
12,082
Loss resulting from disposals of property plant and equipment
(2,593)
 
(1,724)
Loss from sale of associates and joint ventures
(5,784)
 
(173,397)
Others
 -
 
(26,581)
Donations
(44,356)
 
(82,161)
Lawsuits (Note 18)
(41,147)
 
(37,483)
Impaired goodwill (Note 11)
 -
 
(174,988)
Total other operating results, net
31,874
 
(401,432)
 
 
23.         Financial results, net
 
 
03.31.20
 
03.31.19
- Interest income
377,665
 
100,591
Finance income
377,665
 
100,591
- Interest expense
(2,270,102)
 
(2,391,141)
- Others financial costs
(163,820)
 
(180,316)
Subtotal finance costs
(2,433,922)
 
(2,571,457)
Less: Capitalized finance costs
284
 
 -
Finance costs
(2,433,638)
 
(2,571,457)
Foreing exchange, net
(3,503,690)
 
(2,964,211)
- Fair value (loss) / gains of financial assets at fair value through profit or loss
(1,030,480)
 
1,352,034
- (Loss) / Gain from derivative financial instruments
(36,112)
 
527,718
- Gain from repurchase of non-convertible notes
87,622
 
5,145