Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk
The market risk associated with financial instruments and derivative financial instruments is the risk of loss from adverse changes in market prices or interest rates. Our market risk arises primarily from volatility in the digital asset market relating to LINK and interest rate risk relating to variable-rate borrowings.
Digital Asset Risk
Historically, digital asset markets have experienced significant price volatility, limited liquidity and trading volumes relative to sovereign currency markets, a developing regulatory environment, and risks related to market abuse, manipulation, and compliance or internal control failures at exchanges. These risks are heightened by the electronic and decentralized nature of digital assets. During periods of market instability, we may be unable to sell our LINK tokens at favorable prices, or at all.
In addition, LINK held with custodians or transacted through trading partners are not subject to the protections available for cash or securities held with institutions regulated by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. We may also be unable to obtain term loans or complete other capital-raising transactions using our unencumbered LINK holdings as collateral, particularly during periods of market stress or following significant declines in the price of LINK. If we are unable to transact in LINK, raise capital using LINK as collateral, or otherwise generate liquidity from our LINK holdings - and especially if we are required to sell LINK at a substantial loss to meet working capital requirements - our business and financial condition could be materially and adversely affected.
Interest Rate Risk
In addition to our LINK digital asset treasury strategy, to meet our short and long-term liquidity requirements, we borrow funds at a combination of fixed and variable rates. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to manage our overall borrowing costs. To achieve these objectives, from time-to-time, we may enter into interest rate hedge contracts such as swaps, caps, collars, treasury locks, options and forwards to mitigate our interest rate risk with respect to various debt instruments. We would not hold or issue these derivative contracts for trading or speculative purposes.
As of December 31, 2025, our debt included fixed-rate debt with a fair value and carrying value of $60.2 million and $65.6 million, respectively. Changes in market interest rates on our fixed rate debt impact the fair value of the debt, but they have no impact on interest incurred or cash flow. For instance, if interest rates rise 100 basis points, and the fixed rate debt balance remains constant, we expect the fair value of our debt to decrease, the same way the price of a bond declines as interest rates rise.
As of December 31, 2025, our debt included variable-rate debt with a fair value and carrying value of $14.8 million. The sensitivity analysis related to our variable-rate debt assumes an immediate 100 basis point move in interest rates from their December 31, 2025 levels, with all other variables held constant. A 100 basis point increase or decrease in variable interest rates on our variable-rate debt would increase or decrease our interest expense by $0.1 million annually.
Credit Risk
Substantially all the Company’s revenues are generated from the management, ownership and/or operations of real estate assets located in Alaska, Arizona, Colorado, Kansas, Texas, and Virginia. The Company mitigates the associated risk by:
• diversifying our investments in real estate assets across multiple asset types, including hospitality, commercial, single-family, multi-family, and self-storage properties.
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• diversifying our investments in real estate assets across multiple geographic locations including different markets and sub-markets in which our real estate assets are located.
• diversifying our investments in real estate assets across assets at differing points of stabilization, and in varying states of cash flow optimization; and
• maintaining financing relationships with a diversified mix of lenders (differing size and type), including large national banks, local community banks, private equity lenders, and insurance companies.
Item 8. Financial Statements and Supplementary Data
The information required by Item 8 is hereby incorporated by reference to our consolidated financial statements beginning on page F-1 of this document.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures
None.
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