UPDATED April 24, 2016, 10:03PM
The iconic Mercado Del Plata building at Carlos Pellegrini 251 (known as Edificio del Plata) on Avenida 9 de Julio in Buenos Aires and owned by the City, was purchased at auction by Eduardo Elsztain, chairman of Banco Hipotecario SA (BCBA: BHIP), Argentina’s premier mortgage lender, for $68 million.
Avenida 9 de Julio is the widest avenue in the world. Its name honors Argentina’s Independence Day, July 9, 1816. The avenue runs roughly 1 kilometre (0.62 mi) to the west of the Río de la Plata waterfront, from the Retiro district in the north to Constitución station in the south. The avenue has up to seven lanes in each direction and is flanked on either side by parallel streets of two lanes each. The initial phase of the avenue was inaugurated on July 9, 1937 and the main stretch of the avenue was completed in the 1960s. The avenue’s famous obelisk at Plaza de la República was built in May 1936 to commemorate the 400th anniversary of the first founding of the City of Buenos Aires.
The bank plans to consolidate and relocate all of its rented offices scattered throughout the city, into the centrally located building, which is to become its headquarters.
The bank was chartered in 1886, as the Banco Hipotecario Nacional (National Mortgage Bank) by a bill (Law 1804) signed by President Julio Roca. The bank pioneered mortgage lending on extended, low-interest terms in Argentina, and thus contributed to consolidating a modern Argentine economy. The bank was privatized in 1997.
Banco Hipotecario is 58.4% owned by Argentina’s national government through Banco de la Nación Argentina (the national bank of Argentina, and the largest in the country) and ANSES (Administración Nacional de Seguridad Social; or National Social Security Administration), and 30% owned by IRSA Inversiones y Representaciones SA. However, IRSA holds 46.6% of the voting shares and appoints the majority of the board, according to Moody’s Investors Service.
On April 22, 2016, a proposed offering of up to $200 million Class XXIX Tranche 2 debt issuance by Banco Hipotecario was rated B3 by Moody’s, and “carries a stable outlook. Revenues are well diversified, with fee income accounting for an important component of the bank’s earnings, which helps support income stability.”
“Hipotecario’s capitalization is strong,” added Moody’s. “Asset quality is adequate, as reflected in a non-performing loan ratio of 1.6%.” The rating action follows Moody’s decision on April 15 “to upgrade the government bond rating of Argentina to B3 with a stable outlook,” and a decision on April 21 to upgrade the foreign currency debt ratings of Banco Hipotecario and three other private Argentine financial institutions.
In addition to Banco Hipotecario, Elsztain is chairman of IRSA Inversiones y Representaciones SA (ADR)(NYSE: IRS), IRSA Propiedades Comerciales SA (formerly Alto Palermo SA) (NASDAQ: IRCP), Consultores Assets Management SA, investment bank BACS Banco de Crédito & Securitización SA, CRESUD (NASDAQ: CRESY), BrasilAgro Sp (ADR)(NYSE: LND), and IDB Holdings Corp, among others.
The bidding for Edificio del Plata was held at the auction hall of Banco Ciudad of Buenos Aires, involving three pre-registered groups of investors, two local and one foreign.
The base price was set at $42 million and took place directly between Elsztain, representing Banco Hipotecario, and railway tycoon Gabriel Romero, of the Emepa group which owns Ferrovias, who at the end of the sale only added that his limit was $68 million. “I have no bank backing me,” he lamented.
Meanwhile, Elsztain, who controls all the largest shopping malls in Buenos Aires, said he was “very happy” to have made the purchase, noting that “the emblematic value in real estate is all about location,” which in this case, is “hundred meters away from the Obelisk, where three subway lines and one metrobus pass by.”
“Our bank’s role is to provide buyers their first home, to accomplish and communicate that, there is no better storefront than this,” facing the “Avenida 9 de Julio,” from within a building “that not only has many square meters and allows us to consolidate all of Banco Hipotecario’s rented offices, but also allows us to have a giant (billboard) screen in front of the City that will allow us to communicate every day the value of the UVI (“Unidad de Vivienda” Housing Unit) and other things,” said Elsztain.
He also stressed that “the auction was won today, and today we’ll start consolidating all offices we have scattered, into one.”
“The auction was within the expected parameters, because the $42 million base was too low, I think it reached a fair price,” said the head auctioneer of Banco Ciudad in charge of the bidding, Ricardo Vitaliti. “The proceeding became somewhat complicated because of disparate bidding figures (buyers bid the sales price up by $114.000 or $116,000), while I expected more round numbers, but it is also true that $114,000 is a lot of money.”
He further commented that this was his personal record sale on auction: “In 2009 I sold the largest lot of Catalinas for $46 million, but having a sale of this size under the hammer is something to be proud of.”
Banco Ciudad president Javier Ortiz Batalla, said that the auction “has been a very transparent process, all participants were very pleased,” and stressed that “the final value of the sale has significantly exceeded expectations.”
The money to be received by the Executive branch of the City of Buenos Aires will be used to repay debt acquired for its relocation to the current headquarters of the City Government’s Head Office at Uspallata 3100 in Parque Patricios, a building designed by British architect Norman Foster.
The Edificio del Plata occupies half a block between Carlos Pellegrini, Sarmiento, Carabelas passage and Perón streets. It has 42,256 square meters, nine floors and three underground levels, and was re-opened in 1962, to house the offices of the Municipality of Buenos Aires on the upper floors, and a market on the ground floor.
In October 2008, during the administration of Mauricio Macri as Mayor of Buenos Aires, now the country’s President, an imposing gigantography of “Speed,” a work of artist Fabian Burgos, was installed on the facade of the building and reproduced in an area of 2992 square meters of micro perforated vinyl fabric. This started a series entitled “Art in La Plata”, which continued in March 2009 with William Ueno’s “Siesta” and in July of that year with Max Gomez Canle’s “Window.” In October 2009, “Terrace” by photographer Marcos López, followed. Finally, in June 2010 the gigantography of “Myths of my Childhood” by Antonio Seguí was mounted. In 2013, the gigantography of Pope Francis was erected on the building’s facade.
The Mercado del Plata, the first covered wholesale supply market in the City of Buenos Aires, was originally inaugurated on the site in 1856.
Carts from San Isidro, San Fernando, and the Conchas districts, among others, met at the market to sell their products consisting mainly of wood branches and beams, wood and reeds for ranches, watermelons, melons, peaches, wheat, corn, barley, canary seed, etc. Of those carts, some were parked, especially fruit and corn, and sold retail, placing lanterns on them at night.
As the population and city outer limits began to grow, the carts were relocated to the periphery of Buenos Aires. Between 1947 and 1962, the “Edificio del Plata” was built on the site.