Item 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
Our future income and cash flows relevant to financial instruments are dependent upon prevalent market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates.
As of December 31, 2025, we had $645.0 million of outstanding USD-denominated variable-rate debt and C$250.0 million of outstanding CAD-denominated variable-rate debt under the Senior Unsecured Term Loan Facility (excluding the 2025 Term Loan). This consisted of our Senior Unsecured Term Loan A Facility bearing interest at adjusted one-month SOFR (which includes an adjustment of 0.10%) for the USD tranches and adjusted daily CORRA (which includes an adjustment of 0.30%) for the CAD tranche. These rates are also subject to contractual margins of 0.94%. Additionally, we have entered into interest rate swaps to effectively lock in the floating rates on the above USD-denominated term loans at a weighted average rate of 4.20% and our CAD-denominated term loan at a rate of 4.53%.
As of December 31, 2025, we had $250.0 million of outstanding USD-denominated variable-rate debt for the 2025 Term Loan. The 2025 Term Loan is unhedged and bears interest at daily SOFR, which was approximately 3.68% at December 31, 2025, and is subject to a contractual margin of 0.95%.
Additionally, as of December 31, 2025, we had C$98.0 million, €70.5 million, A$207.5 million, and NZ$68.5 million outstanding of Senior Unsecured Revolving Credit Facility draws. At December 31, 2025, adjusted daily CORRA (which includes an adjustment of 0.30%) (CAD) was approximately 2.60%, one-month BBSW (AUD) was approximately 3.60%, one-month EURIBOR (Euro) was approximately 1.90%, and one-month BKBM (NZD) was approximately 2.46%. These rates are also subject to contractual margins of 0.84%. The interest rate paid on borrowings can never drop below 0.0%. A 100 basis point increase in market interest rates would result in an increase in annual interest expense to service our variable-rate debt of approximately $5.8 million, and a 100 basis point decrease in market interest rates would result in a $5.8 million decrease in annual interest expense.
Foreign Currency Risk
Our international revenues and expenses are generated in the currencies of the countries in which we operate, including Australia, New Zealand, Argentina, Canada and several European countries. We are exposed to foreign currency exchange variability related to investments in and earnings from our foreign investments. Foreign currency market risk is the possibility that our results of operations or financial position could be better or worse than planned because of changes in foreign currency exchange rates. When the local currencies in these countries decline relative to our reporting currency, the U.S. dollar, our consolidated revenues, contribution (NOI) margins and net investment in properties and operations outside the United States decrease. The impact of currency fluctuations on our earnings is partially mitigated by the fact that most operating and other expenses are also incurred and paid in the local currency. The impact of devaluation or depreciating currency on an entity depends on the residual effect on the local economy and the ability of an entity to raise prices and/or reduce expenses. Due to our constantly changing currency exposure and the potential substantial volatility of currency exchange rates, we cannot predict the effect of exchange rate fluctuations on our business. As a result, changes in the relation of the currency of our international operations to U.S. dollars may also affect the book value of our assets and the amount of total equity. A 10% depreciation in the year-end functional currencies of our international operations, relative to the U.S. dollar, would have resulted in a reduction in our total equity of approximately $36.9 million as of December 31, 2025. However, to manage this risk, as of December 31, 2025, the Company designated A$207.5 million and €820.5 million of debt and accrued interest as a hedge of its net investments in certain international
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subsidiaries. Additionally, the Company periodically enters into cross-currency swap agreements, which effectively mitigate the Company’s exposure to fluctuations in cash flows due to changes in foreign exchange rates. Refer to Note 10 - Derivative Financial Instruments for further details.
Our operations in Argentina are reported using highly inflationary accounting. The Argentina subsidiary’s functional currency is the Australian dollar, which is the reporting and functional currency of their immediate parent company. The entity’s statements of operations and balance sheets have been measured in Australian dollars using both current and historical exchange rates prior to translation into U.S. dollars in consolidation. As of December 31, 2025, the net monetary assets of the Argentina subsidiary were immaterial and, therefore, a 10% unfavorable change in the exchange rate would not be material. Additionally, the revenues of the Argentina subsidiary was 0.6% of our consolidated revenues for both of the years ended December 31, 2025 and 2024.
For the years ended December 31, 2025 and 2024, revenues from our international operations were $608.4 million and $591.4 million, respectively, which represented 23.4% and 22.2% of our consolidated revenues, respectively.
Net assets in international operations were approximately $368.9 million and $352.8 million as of December 31, 2025 and 2024, respectively.
The effect of a change in foreign exchange rates on our net investment in foreign subsidiaries is reflected in the Accumulated other comprehensive loss component of equity of our Consolidated Financial Statements included in this Annual Report on Form 10-K.
We attempt to mitigate a portion of the risk of currency fluctuation by financing certain of our foreign investments in local currency denominations, effectively providing a natural hedge. However, given the volatility of currency exchange rates, there can be no assurance that this strategy will be effective. The Company has entered into cross-currency swaps on its foreign denominated intercompany loans to hedge the cash flow variability from the impact of changes in foreign currency on the interest payments on the intercompany loan as well as the final principal payment. Since the critical terms of the derivatives match the critical terms of the intercompany loans, the hedge is considered perfectly effective. All changes in fair value will be recorded to Accumulated other comprehensive loss.
During the years ended December 31, 2025, 2024 and 2023, we funded various international capital requirements, including acquisitions, and various expansion and development projects with borrowings from our Senior Unsecured Revolving Credit Facility. Certain foreign-denominated borrowings under our Senior Unsecured Revolving Credit Facility were designated as a net investment hedge. A portion of this Revolver liability may be undesignated if the equity is insufficient to hedge the outstanding debt. The remeasurement on these borrowings is recorded to Accumulated other comprehensive loss.