ALEXANDERS INC 10-Q

Item 3. Quantitative and Qualitative Disclosures About Market Risk We have exposure to fluctuations in interest rates, which are sensitive to many factors that are beyond our control. Our exposure to a change in interest rates is summarized in the table below. 2021 2020 (Amounts in thousands, except per share amounts) September 30, Balance Weighted Average Interest Rate Effect of 1% Change in Base Rates December 31, Balance Weighted Average Interest Rate Variable Rate $ 702,544 1.11% $ 7,025 $ 702,544 1.19% Fixed Rate 462,000 2.35% — 462,000 2.35% $ 1,164,544 1.60% $ 7,025 $ 1,164,544 1.65% Total effect on diluted earnings per share $ 1.37 We have an interest rate cap relating to the mortgage loan on the office condominium of our 731 Lexington Avenue property with a notional amount of $500,000,000 that caps LIBOR at a rate of 3.0%. We have an interest rate swap relating to the mortgage loan on the retail condominium of our 731 Lexington Avenue property with a notional amount of $300,000,000 that swaps LIBOR plus 1.40% for a fixed rate of 1.72%. Fair Value of Debt The fair value of our mortgages payable is calculated by discounting the future contractual cash flows of these instruments using current risk-adjusted rates available to borrowers with similar credit ratings, which are provided by a third-party specialist. As of September 30, 2021 and December 31, 2020, the estimated fair value of our mortgages payable was $1,130,000,000. Our fair value estimates, which are made at the end of the reporting period, may be different from the amounts that may ultimately be realized upon the disposition of our financial instruments.