CG malls europe - Commerz Real

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Commerz Real Estate Master FCP – SIF
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT DECEMBER 31, 2009
3.2. Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order
to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure
to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares or sell assets to reduce debt.
Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated
as net debt divided by total capital. Net debt is calculated as total borrowings (including borrowings and trade and
other payables, as shown in the consolidated balance sheet) less cash and cash equivalents. Total capital is calculated as
equity, as shown in the consolidated balance sheet, plus net debt.
The gearing ratio policy during 2009, which was unchanged from 2008, was restricted to the following: As set in the
Private Placement Memorandum (Terms and Conditions of CG malls Europe) the Borrowing rate should on average over
any fiscal year not exceed 60% of the market value of the investment properties. Furthermore, short-term borrowing
entrance is limited up to 10% of the Gross Asset Value of the Group, mostly to satisfy short term liquidity requirements.
As at December 31, 2009 the Fund’s overall gearing ratio was 66.92% (December 31, 2008: 61.62%). The gearing ratio
includes two loan facilities that have been reclassified to short term liabilities because of covenant breaches or because
of remaining time to maturity of one year or less. The management of the Fund is already engaged in negotiations
concerning the extension/revision of both loan facilities and it estimates the probability of extending the loans to be
very high. The average overall gearing ratio in 2009 was 64.62% (2008: 61.62%). Therefore the limit of a 60% average
borrowing rate as set out in the management regulations could not be complied with.
Since the recent negative market fluctuations which mainly caused the increase in the overall gearing ratio are considered
to be temporarily and therefore the market values of the investment properties are expected to recover, the Fund is
expecting to meet the target borrowing rate restrictions in the near future. Furthermore it is expected that all credit facilities
currently disclosed as short term liabilities will be extended so that the gearing ratio for short term debt is expected
to decrease to zero percent in the near future.
The gearing ratios at the end of the reporting periods 2008 and 2009 were as follows:
2009 2008
in EUR in EUR
Trade receivables, gross of provision for impairment (note 6)
- Rent receivables 11,447,280 9,577,322
- Other financial assets 11,258,612 9,589,337
Prepayments (note 7) 5,087,085 4,900,497
Cash and cash equivalents 20,714,230 24,556,946