Interest rate hedging
The Group contracts an important portion of its financial debt at a floating rate. If debt is contracted at a fixed rate, conversion often follows to floating rate. This allows the Group to take advantage of low short-term rates. However, as financial charges are exposed to the risk of hikes in the rate, the policy of the Group consists of securing interest rates over a rolling period, of a minimum of three years, for a minimum of 50% of the debt.
In this way, the Group partially cushions itself against the effect of a sharp upturn in these rates. The reasoning behind this policy is that as rents are contractually indexed, an increase in inflation affecting nominal rates would have a favourable net impact on the Group's net result, but only after a time lag of several years.
The cover period of a minimum of three years was chosen on the one hand to offset part of the depressive effect this time lag would have on the net income, and on the other hand to forestall the adverse impact of any rise in European short-term interest rates that is not accompanied by a simultaneous increase in inflation.
Finally, a rise in real interest rates would probably be accompanied or quickly followed by a revival of the overall economic activity, which would give rise to more robust rental conditions and subsequently benefit the Group's net result.