CA Immo International is exposed to the usual currency and interest rate risks in the course of its operational business. In order to limit such risks, the company operates a systematic financial risk management system.
Liquidity and financing risks can result from interest rate fluctuations in the company‘s external financing. However, this risk is low for
CA Immo International because of its high equity ratio and substantial liquid funds. Most of the loans raised are long-term, which is in line with the investment horizon for real estate.
In view of its target markets, currency risks also play a major role in CA Immo International‘s risk management system. The company therefore insists on pegging rents to a hard currency when acquiring a new property. Loans are largely taken out in the currency underlying the relevant lease. Exchange rate fluctuations can impact on results if rents are payable in foreign currencies or loans were raised in US dollars or Swiss francs. Noncash effects on the net income can result from the translation of individual financial statements of subsidiaries outside the euro zone. To hedge against the currency risk, CA Immo International has concluded forward exchange transactions for about 50% of a long-term US dollar loan in order to protect the loan repayment at the end of the term against any future exchange rate fluctuations.
In order to reduce the interest rate risk, CA Immo International uses a mix of long-term fixed-rate and floating-rate loans. In the case of floating-rate loans, derivative financial instruments (interest rate caps, interest rate swaps) are used as well. Without exception, such instruments are used only to hedge against the risk of interest rate changes arising from underlying transactions.