filings.toolsItem 7A. Quantitative and Qualitative Disclosures About Market Risk
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company’s primary market risk exposures are interest rate risk and foreign currency exchange rate risk. The following table presents the Company’s aggregate fixed rate and variable rate debt obligations outstanding, including fair market value adjustments and unamortized deferred financing costs, as of December 31, 2017, with corresponding weighted-average interest rates sorted by maturity date. The table does not include extension options where available (amounts in millions).
| 2018 | 2019 | 2020 | 2021 | 2022 | Thereafter | Total | Fair Value | |||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Secured Debt | ||||||||||||||||||||||||||||||||
| Fixed Rate | $ | 85.4 | $ | 2.4 | $ | 136.9 | $ | 156.1 | $ | 155.6 | $ | 246.4 | $ | 782.8 | $ | 781.8 | ||||||||||||||||
| Average Interest Rate | 5.63 | % | 5.29 | % | 5.31 | % | 5.39 | % | 4.05 | % | 4.43 | % | 4.83 | % | ||||||||||||||||||
| Variable Rate | $ | - | $ | 100.0 | $ | - | $ | - | $ | - | $ | - | $ | 100.0 | $ | 99.6 | ||||||||||||||||
| Average Interest Rate | - | 2.60 | % | - | - | - | - | 2.60 | % | |||||||||||||||||||||||
| Unsecured Debt | ||||||||||||||||||||||||||||||||
| Fixed Rate | $ | - | $ | 299.5 | $ | - | $ | 497.6 | $ | 494.9 | $ | 3,302.4 | $ | 4,594.4 | $ | 4,599.6 | ||||||||||||||||
| Average Interest Rate | - | 6.88 | % | - | 3.20 | % | 3.40 | % | 3.54 | % | 3.71 | % | ||||||||||||||||||||
| Variable Rate | $ | - | $ | - | $ | - | $ | 1.7 | $ | - | $ | 1.7 | $ | 1.9 | ||||||||||||||||||
| Average Interest Rate | - | - | - | 2.28 | % | - | 2.28 | % |
Based on the Company’s variable-rate debt balances, interest expense would have increased by $1.0 million for the year ended December 31, 2017, if short-term interest rates were 1.0% higher. The Company has not, and does not plan to, enter into any derivative financial instruments for trading or speculative purposes.
The Company’s revenues and equity in income (including gains on sales and impairment losses) from its foreign investments in U.S. dollar equivalents and their respective local currencies are as follows (in millions):
| 2017 | 2016 | 2015 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenues from consolidated in USD: | ||||||||||||
| Mexico | $ | 0.3 | $ | 0.6 | $ | 1.9 | ||||||
| Chile | $ | - | $ | - | $ | 6.7 | ||||||
| Revenues from consolidated in local currencies: | ||||||||||||
| Mexico (Mexican Pesos “MXN”) | 5.7 | 11.3 | 28.2 | |||||||||
| Chile (Chilean Pesos “CLP”) | - | - | 4,264.9 | |||||||||
| Equity in income/(loss) from unconsolidated joint ventures and preferred equity investments in USD: | ||||||||||||
| Canada (1) | $ | (1.3 | ) | $ | 152.6 | $ | 409.1 | |||||
| Mexico (2) | $ | (0.3 | ) | $ | (3.6 | ) | $ | (1.6 | ) | |||
| Chile (3) | $ | - | $ | - | $ | 0.9 | ||||||
| Equity in income/(loss) from unconsolidated joint ventures and preferred equity investments in local currencies: | ||||||||||||
| Canada (CAD) (1) | (1.7 | ) | 199.5 | 540.1 | ||||||||
| Mexico (MXN) | (6.3 | ) | 29.2 | (24.0 | ) | |||||||
| Chile (CLP) | - | - | - |
| (1) | Includes impairment charge of $3.4 million (CAD 4.3 million) related to the pending sale of a property for the year ended December 31, 2017. In addition, includes gains of $141.9 million (CAD 185.9 million) and $373.8 million (CAD 439.9 million) on disposition of equity interests for the years ended December 31, 2016 and 2015, respectively. |
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| (2) | Includes equity losses of $5.2 million and $0.8 million for the years ended December 31, 2016 and 2015, respectively, related to foreign investments for which the reporting currency is denominated in USD and not subject to foreign translation exposure. |
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| (3) | Included in the year ended December 31, 2015 is the release of CTA of $0.8 million in equity income. |
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The following table presents the Company’s foreign investments in their respective local currencies and the U.S. dollar equivalents:
| Foreign Investment (in millions) | ||||||||
|---|---|---|---|---|---|---|---|---|
| Country | Local Currency | U.S. Dollars | ||||||
| Mexican real estate investments (MXN) | 53.4 | $ | 4.8 | |||||
| Canadian investments (CAD) | 18.2 | $ | 14.6 |
Currency fluctuations between local currency and the U.S. dollar, for investments for which the Company had determined that the local currency was the functional currency, for the period in which the Company held its investment resulted in a cumulative translation adjustment (“CTA”). This CTA was recorded as a component of Accumulated other comprehensive income (“AOCI”) on the Company’s Consolidated Balance Sheets. During the year ended December 31, 2017, the Company substantially liquidated its investments in Canada and as such, recognized a net cumulative foreign currency translation gain of $10.0 million. The Company had previously substantially liquidated its investments in Mexico. As a result of the substantial liquidation of the Company’s foreign investments, any future currency changes, which could have a favorable or unfavorable impact, will be recognized in Other (expense)/income, net in the Company’s Consolidated Statements of Income.
Item 8. Financial Statements and Supplementary Data
The response to this Item 8 is included in our audited Consolidated Financial Statements and Notes to Consolidated Financial Statements, which are contained in Part IV Item 15 of this Form 10-K.
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