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 exposure is interest rate risk. The Company periodically evaluates its exposure to short-term interest rates and will, from time-to-time, enter into interest rate protection agreements which mitigate, but do not eliminate, the effect of changes in interest rates on its floating-rate debt. The Company has not, and does not plan to, enter into any derivative financial instruments for trading or speculative purposes. 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, 2018, with corresponding weighted-average interest rates sorted by maturity date. The table does not include extension options where available (amounts in millions).
| 2019 | 2020 | 2021**** | 2022**** | 2023**** | Thereafter | Total | Fair Value | |||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Secured Debt | ||||||||||||||||||||||||||||||||
| Fixed Rate | $ | - | $ | 104.5 | $ | 150.7 | $ | 151.2 | $ | 11.9 | $ | 24.1 | $ | 442.4 | $ | 434.9 | ||||||||||||||||
| Average Interest Rate | - | 5.47 | % | 5.39 | % | 4.05 | % | 3.23 | % | 6.85 | % | 4.97 | % | |||||||||||||||||||
| Variable Rate | $ | - | $ | 50.0 | $ | - | $ | - | $ | - | $ | - | $ | 50.0 | $ | 51.5 | ||||||||||||||||
| Average Interest Rate | - | 4.23 | % | - | - | - | - | 4.23 | % | |||||||||||||||||||||||
| Unsecured Debt | ||||||||||||||||||||||||||||||||
| Fixed Rate | $ | - | $ | - | $ | 483.2 | $ | 495.9 | $ | 347.7 | $ | 2,959.0 | $ | 4,285.8 | $ | 4,028.8 | ||||||||||||||||
| Average Interest Rate | - | - | 3.20 | % | 3.40 | % | 3.13 | % | 3.59 | % | 3.49 | % | ||||||||||||||||||||
| Variable Rate | $ | - | $ | - | $ | 95.7 | $ | - | - | $ | - | $ | 95.7 | $ | 97.6 | |||||||||||||||||
| Average Interest Rate | - | - | 3.31 | % | - | - | - | 3.31 | % |
Based on the Company’s variable-rate debt balances, interest expense would have increased by $1.5 million for the year ended December 31, 2018, 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):
| 2018**** | 2017 | 2016 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenues from consolidated in USD: | ||||||||||||
| Mexico | $ | - | $ | 0.3 | $ | 0.6 | ||||||
| Revenues from consolidated in local currencies: | ||||||||||||
| Mexico (Mexican Pesos “MXN”) | - | 5.7 | 11.3 | |||||||||
| Equity in income/(loss) from unconsolidated joint ventures and preferred equity investments in USD: | ||||||||||||
| Canada (1) | $ | 3.2 | $ | (1.3 | ) | $ | 152.6 | |||||
| Mexico (2) | $ | (0.7 | ) | $ | (0.3 | ) | $ | (3.6 | ) | |||
| Equity in income/(loss) from unconsolidated joint ventures and preferred equity investments in local currencies: | ||||||||||||
| Canada (CAD) (1) | 4.5 | (1.7 | ) | 199.5 | ||||||||
| Mexico (MXN) (2) | (12.9 | ) | (6.3 | ) | 29.2 |
| (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 $0.8 million (CAD 1.0 million) and $141.9 million (CAD 185.9 million) on disposition of equity interests for the years ended December 31, 2018 and 2016, respectively. |
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| (2) | Includes impairment charge of $0.6 million (MXP 11.0 million) related to pending sale of land parcel for the year ended December 31, 2018. In addition, includes equity losses of $5.2 million for the year ended December 31, 2016 related to foreign investments for which the reporting currency is denominated in USD and not subject to foreign translation exposure. |
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At December 31, 2018, the Company’s foreign real estate investments in their local currency had an aggregate carrying amount of 39.7 million Mexican Pesos (USD $4.1 million). Currency fluctuations between local currency and the U.S. dollar for the Company’s foreign monetary assets and liabilities result in foreign currency gains/losses which are recognized in Other income, net in the Company’s Consolidated Statements of Income. During the year ended December 31, 2018, the Company recognized a net foreign currency loss of $0.2 million.
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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