CG malls europe - Commerz Real

Commerz Real Estate Master FCP – SIF
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT DECEMBER 31, 2009
3.1. Financial risk factors (continued)
The Group is exposed to property price and property rental risk. The Management of the Fund seeks to create a portfolio
that generates sustainable current income and provides investors with long-term appreciation of asset values. The
Fund’s main investment goal is to invest exclusively in dominant regional shopping centres with the aim of creating a
Portfolio diversified both by geography, with a focus on core markets, and by real estate type with a focus on stabilised
assets. Dominant regional shopping centres can create a quasi-natural monopoly within their respective catchment
area. Their size allows for configuration of an optimal branch and tenant mix, which is the key to maintaining competitiveness
in a fast changing retailers’ landscape. The geographic allocation of the investments is split in core and
emerging markets, with approximately 70% of investments targeted in core markets and the remaining 30% invested
in emerging markets. These splits will offer both upside potential for the investor while at the same time maintaining
the cash flow profile of a core product.
(ii) Cash flow and fair value interest rate risk
As the Group has no significant interest bearing assets, its income and operating cash flows are substantially independent
of changes in market interest rates.
The Group’s possible interest rate risk on interest payable arises from long-term borrowings (Note 8). Borrowings issued
at variable rates expose the Group to cash flow interest rate risk. Since all long-term borrowings are issued with fixed
interest rates, changes in market interest rates will as at December 31, 2009 not effect the Group to cash flow interest
rate risk. Nevertheless the Group has significant exposure to fair value interest rate risk.
(iii) Foreign currency risk
The Group has no exposure to foreign currency risks as all transactions are denominated in Euro
(b) Credit risk
Financial Statements
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing
to discharge an obligation. The Group has no significant concentrations of credit risk. Credit risk arises from cash and
cash equivalents held at banks and trade receivables, including rental receivables from lessees. Credit risk is managed
on a group basis. The Group structures the levels of credit risk it accepts by placing limits on its exposure to a single
counterparty, or groups of counterparties, and to geographical and industry segments.
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