From the Mall to the Cybermall (int'l edition)
Argentina's real estate czar wants to take shoppers online

Argentine real-estate mogul Eduardo S. Elsztain made a killing in the 1990s capitalizing on booming demand for prime office space and shopping malls in Buenos Aires. Now, he's staking his claim on today's hottest piece of property: the Internet. In May, Elsztain's Inversiones y Representaciones (IRSA) launched, a virtual mall some analysts say has a shot at becoming a Latin e-tailing powerhouse. ''Preparing my companies for the Internet culture dominates everything I do these days,''says IRSA's chairman.

In the 40-year-old entrepreneur's usual manner, he's moving fast. Over scarcely two years, Elsztain has picked up four Net-related businesses, including an ISP, and has seeded six other Web startups, among them Nasdaq-traded portal El Sitio and online brokerage International Ltd. But his most daring online venture by far is Altocity. He's betting that the crowds that mob his upscale shopping centers, such as the huge Mercado de Abasto in downtown Buenos Aires, will also flock to Altocity. In the first year alone, he's spending $36 million on developing and marketing the site.

Elsztain is also setting lofty goals. He and his team expect sales through Altocity to reach $100 million within four years--roughly as much as IRSA sells through one of its brick-and-mortar malls. That seems like a tall order considering that total e-commerce in Latin America amounted to $129 million in 1999, according to estimates by the International Data Corporation (IDC). Yet by IDC's own projections, that figure is set to soar to nearly $2 billion by 2003. Claudio Maulhardt, an analyst at ABN Amro Holding in Buenos Aires, notes that no other Latin e-tailer matches Altocity in the breadth of its product offering. ''It has the potential to be the first real business-to-consumer e-commerce success story in Latin America,'' he says.

Altocity has three of the attributes investors look for in an Internet startup these days. It has content: 70 retailers selling everything from computer printers to pullovers. It's got a powerful partner: Spain's Telefonica plunked down $24 million for a 50% stake in Altocity a full eight months before its launch. It has customers--or at least potential ones. IRSA's shopping centers logged more than 73 million visitors last year.

What's more, revenues are already trickling in. In exchange for handling customer service, marketing, and logistical responsibilities, Altocity collects a ''rental fee'' from tenants equal to 25% of each sale. That's a hefty cut, yet Altocity CEO Daniel Kielmanowicz thinks it's a small price to pay for regionwide exposure. The site is set to go live in Chile and Mexico within a couple of months; Brazil is next in line. ''Even your most successful Latin American retailer doesn't sell enough to develop a technology platform and pan-regional marketing image on their own,'' says Kielmanowicz. The big if is whether Altocity's partners will see enough of a boost in sales to justify the site's stiff fees.

BIG DIP. Altocity is set to go public within a year on the U.S. Nasdaq. Investors who can't wait can pick up IRSA's shares, which are traded on both the Buenos Aires bolsa and the New York Stock Exchange. The stock is trading at close to $23, its 52-week low. A biting recession in Argentina is mainly to blame for the slump, says Jose Costa Buck, an analyst at Merrill Lynch & Co. in Buenos Aires. In the nine months ended Mar. 31, IRSA's net income fell nearly 70%, to $10.7 million. Still, Buck expects a profit rebound as the economic recovery gathers steam.

Elsztain's rapid climb up Argentina's corporate ladder is legendary. While studying Torah in Brooklyn, N.Y., in 1990, this descendant of European Jews talked his way into George Soros' Manhattan office and walked away with $10 million to invest in Argentina's underdeveloped real-estate market. Check in hand, Elsztain returned to Buenos Aires and began assembling an empire that today totals some $500 million in assets. Besides IRSA, which has a market capitalization of $476 million, there's Cresud, a $100 million company with vast rural holdings.

Elsztain's dedication to business is surpassed only by his devotion to Orthodox Judaism. Associates recall that he turned down an invitation to dine with President Bill Clinton in 1997 because the event fell on Sukkot, a Jewish high holy day. Then there's the time he asked fast-food titan McDonald's Corp. to open a Kosher restaurant--its only one outside of Israel--as a condition for becoming a tenant at his Abasto shopping center. It's that same kind of chutzpah, friends say, that's likely to make him a success on the Net.

By Joshua Goodman in Buenos Aires

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From the Mall to the Cybermall (int'l edition)

RESUME: Eduardo S. Elsztain (int'l edition)

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