Note 3 – Operations in Foreign Currency

We have significant assets in Australia and New Zealand. To the extent possible, we conduct our Australian and New Zealand operations (collectively “foreign operations”) on a self-funding basis where we use cash flows generated by our foreign operations to pay for the expense of foreign operations. Our Australian and New Zealand assets and liabilities are translated from their functional currencies of Australian dollar (“AU$”) and New Zealand dollar (“NZ$”), respectively, to the U.S. dollar based on the exchange rate as of June 30, 2017. The carrying value of the assets and liabilities of our foreign operations fluctuates as a result of changes in the exchange rates between the functional currencies of the foreign operations and the U.S. dollar. The translation adjustments are accumulated in the Accumulated Other Comprehensive Income in the Consolidated Balance Sheets.

As indicated previously, our overall operating strategy is to conduct business mostly on a self-funding basis (except for funds used to pay an appropriate share of our U.S. corporate overhead). As such, we do not use derivative financial instruments to hedge against the risk of foreign currency exposure. However, in certain circumstances, we may decide to move funds between jurisdictions where circumstances encouraged us to do so from an overall economic standpoint. As of December 31, 2016, we reassessed our assertion in regards to intercompany advances from the U.S. Parent Company to our Australian subsidiary that we previously deemed to be of long-term investment in nature. Given the interest savings that will be generated from using funds through the repayments of intercompany loans by our Australian subsidiary to finance a portion of our Union Square redevelopment project rather than paying up for high interest mezzanine loans (which will yield overall notional all-in interest savings of approximately 10.0%), we changed our assertion for a portion of these intercompany loans to short-term. As a result, we recognized foreign exchange gain on these intercompany advances based on the relative strengthening of the Australian dollar to the U.S. dollar in the amounts of $820,000 for the six months ended June 30, 2017 in our Consolidated Statements of Income.

Presented in the table below are the currency exchange rates for Australia and New Zealand:


	Foreign Currency / USD
	June 30, 2017		December 31, 2016	June 30, 2016
	As of and for the quarter ended	As of and for the six months ended	As of and for the twelve months ended	As of and for the quarter ended	As of and for the six months ended
Spot Rate
Australian Dollar	0.7676		0.7230	0.7432
New Zealand Dollar	0.7322		0.6958	0.7120
Average Rate
Australian Dollar	0.7511	0.7547	0.7440	0.7461	0.7339
New Zealand Dollar	0.7049	0.7086	0.6973	0.6913	0.6775