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The principal market risks we face due to the risk of loss arising from adverse changes in market rates and prices are:
In the normal course of business, we manage these risks through a variety of strategies, including hedging transactions using various derivative financial instruments such as foreign currency forward contracts. We enter into derivative instruments with high credit-quality counterparties and diversify our positions across such counterparties in order to reduce our exposure to credit losses. We do not enter into derivative transactions for trading or speculative purposes.
We centrally manage our debt, considering investment opportunities and risks, tax consequences and overall financing strategies. We are primarily exposed to interest rate risk on the Facility, which as of December 31, 2014 had a borrowing capacity of $1.2 billion and consisted of revolving credit that is available for working capital, investments, capital expenditures and acquisitions. Our average outstanding borrowings under the Facility were $357.0 million during 2014, with an effective interest rate of 1.2%. We had outstanding letters of credit of $22.0 million under the Facility and no outstanding borrowings at December 31, 2014. The Facility bears a variable rate of interest based on market rates. Subsequent to December 31, 2014, we amended and expanded the Facility; refer to Note 15, Subsequent Events, within the Notes to Consolidated Financial Statements for additional discussion in our 2014 Annual Report.
In November 2012, in an underwritten public offering, we issued $275.0 million of Long-term senior notes due in November 2022. The Notes bear interest at an annual rate of 4.4%, subject to adjustment if a credit rating assigned to the Notes is downgraded below an investment grade rating (or subsequently upgraded). The issuance of these Notes at a fixed interest rate has helped to limit the Company’s exposure to future movements in interest rates.
Our overall interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. To achieve this objective, in the past we have entered into derivative financial instruments such as interest rate swap agreements when appropriate and we may do so in the future. We did not enter into any such agreements in the prior three years and we had no such agreements outstanding at December 31, 2014.
Foreign exchange risk is the risk that we will incur economic losses due to adverse changes in foreign currency exchange rates. Our revenue from outside of the United States totaled 59% and 56% of our total revenue for 2014 and 2013, respectively. Operating in international markets means that we are exposed to movements in foreign exchange rates, most significantly by the British pound (15% of revenue for 2014) and the euro (13% of revenue for 2014).
We mitigate our foreign currency exchange risk principally by (1) establishing local operations in the markets we serve and (2) invoicing customers in the same currency as the source of the costs. The impact of translating expenses incurred in foreign currencies into U.S. dollars offsets the impact of translating revenue earned in foreign currencies into U.S. dollars. In addition, British pound and Singapore dollar expenses incurred as a result of our regional headquarters being located in London and Singapore, respectively, act as a partial operational hedge against our translation exposures to British pounds and Singapore dollars.
We enter into forward foreign currency exchange contracts to manage currency risks associated with intercompany loan balances. At December 31, 2014, we had forward exchange contracts in effect with a gross notional value of $2.03 billion ($1.19 billion on a net basis) and a net fair value loss of $7.7 million. This net carrying loss is generally offset by a carrying gain in associated intercompany loans.
Although we operate globally, we report our results in U.S. dollars. As a result, the strengthening or weakening of the U.S. dollar may positively or negatively impact our reported results. The following table sets forth the revenue derived from our most significant currencies ($ in millions):
|2014||% of Total
||2013||% of Total
|United States dollar
|Hong Kong dollar
We estimate that had euro-to-U.S. dollar exchange rates been 10% higher throughout the course of 2014, our reported operating income would have increased by $10.4 million. Had the British pound-to-U.S. dollar exchange rates been 10% higher throughout the course of 2014, our reported operating income would have increased by $1.9 million. These hypothetical calculations estimate the impact of translating results into U.S. dollars and do not include an estimate of the impact a 10% increase in the U.S. dollar against other currencies would have on our foreign operations.
Our quarterly revenue and profits tend to grow progressively by quarter throughout the year. This is a result of a general focus in the real estate industry on completing or documenting transactions by fiscal-year-end and the fact that certain expenses are constant through the year. Historically, we have reported a relatively smaller profit in the first quarter and then increasingly larger profits during each of the following three quarters, excluding the recognition of investment-generated performance fees and co-investment equity gains or losses (each of which can be unpredictable). We generally recognize such performance fees and realized co-investment equity gains or losses when assets are sold, the timing of which is geared toward the benefit of our clients. Non-variable operating expenses, which we treat as expenses when incurred during the year, are relatively constant on a quarterly basis.
Our operating expenses fluctuate with our revenue and general economic conditions including inflation. However, we do not believe that inflation has had a material impact on our results of operations during the three year period ended December 31, 2014.