Douglas Emmett Inc 10-K

Item 7A. Quantitative and Qualitative Disclosures about Market Risk Fixed-Rate Borrowings and Hedged Borrowings As of December 31, 2023, the interest rates for 69% of our consolidated borrowings were fixed or swap-fixed with interest rate swaps, and 15% were capped with interest rate caps. Our use of interest rate swaps and caps exposes us to credit risk from the potential inability of our counterparties to perform under the terms of those agreements. We attempt to minimize this credit risk by contracting with a variety of financial counterparties with investment grade ratings. As of December 31, 2023, the maximum amount the interest expense on our capped-rate borrowings could increase is $14.3 million per year. Higher interest rates would cause an increase in our future interest expense on our capped-rate debt, which would reduce our future net income, cash flows from operations and FFO. Unhedged Floating-Rate Borrowings As of December 31, 2023, the interest rates for 16% of our consolidated borrowings were floating. As of December 31, 2023, the interest expense for our floating-rate borrowings that are not hedged would increase by $9.3 million per year for every one hundred basis point increase in the related benchmark interest rate. Higher interest rates would cause an increase in our future interest expense on our floating-rate debt, which would reduce our future net income, cash flows from operations and FFO. See Note 8 to our consolidated financial statements in Item 15 of this Report for more information regarding our debt and our future swap and cap expirations. See Note 10 to our consolidated financial statements in Item 15 of this Report for more information regarding our swaps and caps. Market Transition to SOFR from LIBOR During the third quarter of 2023, we converted all of our LIBOR loans and swaps to SOFR. The LIBOR loans converted to SOFR include a small SOFR adjustment (an increase to the SOFR rate) to calculate the interest payable to the lender. The SOFR conversion did not change the swap-fixed interest rates for our swap-fixed loans. See Notes 8 and 10 to our consolidated financial statements in Item 15 of this Report for more information regarding our debt and derivatives, respectively. Item 8. Financial Statements and Supplementary Data See the Index to our Financial Statements in Item 15 . Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.