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Nodal Logistics

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Case Study: Nodal Logistics and Custo Brasil
Analysis of International Capital Investment Case Study: Nodal Logistics and Custo Brasil
Analysis of International Capital Investment

Table of Contents I. Introduction 2 II. Analysis of Different Hedging Methods 2 a. Forward Contracts 2 b. Currency Options 3 c. Currency Adjustment Clause 3 d. Local Currency Debt Financing 3 e. Cross-currency Swaps 3 f. No-hedging (“self insure”) 3 g. Extra: Cross-hedging 3 III. Decision 3 IV. References 4 V. Appendix 4

I. Introduction

Nodal Logistics Corporation is an American-based Real Estate Investment Trust (REIT), working with warehouses and property acquisition for logistics purposes. Therefore, as a REIT, most of its revenues come from rents and leases. REITS also have a unique tax structure of their own: given that more than 75% of their profits arise from rents from real estate property, and they distribute at least 90% of their current period profits as dividends to their shareholders, they don’t pay corporate income taxes. Hence, as no tax benefits would arise using debt, they typically financed investments with all equity. All these characteristics of a REIT point to a very high profit rate of the business (large up-front capital investments with little actual ongoing operating expenses). However, it is important to bare in mind that a REIT might present some risks to the stakeholders, like investors, if it has vacant properties, if it enters in a risky investment project, or if it faces value depreciation of the properties (as they are company’s only assets).

Nodal had properties in North America, Europe and Asia. Latin America was an unexplored market that caught their attention for its high density market (which is a key characteristic for a REIT to function at that market), making storage space expensive

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