Interest rate risk

Interest rate risk stems from market-related fluctuations in the interest rate. This risk affects both the level of financing costs and the fair value of interest hedging transactions concluded, which influences the company’s earnings and equity. Moreover, where new loans are agreed or loans are extended in particular, there is a danger that credit margins will rise substantially. The base rate was cut from 1.5 % to 1.25 % early in November 2011 and again to 1 % at the start of December in a bid to combat the worsening recession. According to the latest interest rate forecasts, the base rate is likely to remain at its present level of 1 % until the end of 2012. Swap rates (which have stayed highly volatile as the critical situation persists) are also unlikely to rise significantly.

CA Immo generally opts for a mix of long-term fixed-rate and floating-rate loans; in some cases, the latter are secured by means of derivative financial instruments (interest rate caps/swaps), which without exception are used to hedge against the risk of interest rate changes arising from underlying transactions. With the incorporation of Europolis, the risk of rate changes is 60 % hedged on all variable-rate loans of the CA Immo Group. Continuous monitoring of the interest rate risk is imperative. No risks constituting a serious and sustained threat to the company exist at the present time. Sufficient provisions have been formed for all risks identified.

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