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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2026-02-24 compared with 2025-02-25 · 74 added, 25 removed, 19 unchanged (84% of the section changed)

1 unchanged sentence

We are exposed to risks associated with market changes in interest rates.

We manage our exposure to this market risk by monitoring available financing alternatives.

Other than as described below, we do not currently foresee any significant changes in our exposure to fluctuations in interest rates or in how we manage this exposure in the near future.

We may in the future enter into hedge arrangements or derivative contracts from time to time to mitigate our exposure to changes in interest rates.

Fixed Rate Debt

At December 31, 2024, our outstanding fixed rate debt included the following (dollars in thousands):

We manage our exposure to this market risk by monitoring available financing alternatives, including fixed rate debt, and employing derivative instruments, including interest rate caps, to limit our exposure to increasing interest rates.

Other than as described below, we do not currently expect any significant changes in our exposure to fluctuations in interest rates or in how we manage this exposure in the near future.

Floating Rate Debt (dollars in thousands)

As of December 31, 2025, our outstanding floating rate debt consisted of the following:

Debt Principal Balance Annual Interest Rate (1)

Annual Interest Expense Maturity Date Interest Payments Due

Floating rate mortgage loan

$ 140,000 6.19% $ 8,786 March 2028 Monthly

Floating rate secured revolving credit facility — — — June 2029 Monthly

$ 140,000 $ 8,786

(1) The annual interest rate is the rate stated in the applicable contract, as adjusted by our interest rate cap, if applicable.

Our $140,000 floating rate mortgage loan is subject to two one-year extension options and requires that interest be paid at SOFR plus a premium of 2.50%.

We are vulnerable to changes in the U.S.

dollar based on short term interest rates, specifically SOFR.

In connection with this mortgage loan, to hedge our exposure to risks related to changes in SOFR and pursuant to the terms of the applicable loan agreement, we have purchased an interest rate cap with a SOFR strike rate equal to 4.50%.

At December 31, 2025, we had no amounts outstanding under our revolving credit facility.

No principal repayments are required under our revolving credit facility prior to maturity and repayments may be made and redrawn subject to conditions at any time without penalty.

Borrowings under our revolving credit facility are in U.S.

dollars and require interest to be paid at a rate of SOFR plus a premium.

Accordingly, we are vulnerable to changes in U.S.

dollar based short term interest rates, specifically SOFR.

In addition, upon renewal or refinancing of these obligations, we are vulnerable to increases in interest rate premiums, including increases in the cost of replacement interest rate caps, due to market conditions and our perceived credit risk.

The following table presents the approximate impact a one percentage point increase in interest rates would have on our annual floating rate interest expense at December 31, 2025, including the impact of our interest rate cap:

Impact of an Increase in Interest Rates

Total Interest Annual Earnings

Interest Rate (1)

Outstanding Debt Expense Per Year Per Share Impact (2)

As of December 31, 2025

6.19% $ 140,000 $ 8,786 $ (0.04)

One percentage point increase (3)

7.00% $ 140,000 $ 9,936 $ (0.04)

(1) Based on SOFR plus a premium, which was 250 basis points per annum for our $140,000 floating rate mortgage loan, as of December 31, 2025.

(2) Based on the diluted weighted average common shares outstanding for the year ended December 31, 2025.

(3) A one percentage point increase in interest rates would be capped at 7.00% for our $140,000 floating rate mortgage loan as a result of our 4.50% interest rate cap purchased for this debt.

However, a one percentage point increase in the interest rate of our floating rate debt to 7.19% at December 31, 2025 would result in total floating rate interest expense per year of $10,203 and a decrease in annual earnings per share of $0.04.

The following table presents the impact a one percentage point increase in interest rates would have on our annual floating rate interest expense at December 31, 2025 if we were fully drawn on our revolving credit facility:

Impact of an Increase in Interest Rates

Total Interest Annual Earnings

Interest Rate (1)

Outstanding Debt (2)

Expense Per Year Per Share Impact (3)

As of December 31, 2025

6.42% $ 290,000 $ 18,623 $ (0.08)

One percentage point increase (4)

6.82% $ 290,000 $ 19,776 $ (0.08)

(1) Based on SOFR plus a premium, which was 250 basis points per annum for both our revolving credit facility and our $140,000 floating rate mortgage loan, as of December 31, 2025.

Interest rate is weighted based on amounts outstanding.

(2) Represents the maximum amount available under our revolving credit facility and our $140,000 floating rate mortgage loan.

(3) Based on the diluted weighted average common shares outstanding for the year ended December 31, 2025.

(4) A one percentage point increase in interest rates would be capped at 7.00% for our $140,000 floating rate mortgage loan as a result of our 4.50% interest rate cap purchased for this debt.

However, a one percentage point increase in the interest rate of our floating rate debt to 7.44% at December 31, 2025 would result in total floating rate interest expense per year of $21,563 and a decrease in annual earnings per share of $0.09.

The foregoing table shows the impact of an immediate one percentage point change in floating interest rates, including the impact of our interest rate cap.

Our exposure to fluctuations in floating interest rates will increase or decrease in the future with increases or decreases in the outstanding amounts of any floating rate debt we may incur and the impact, if any, of interest rate caps we may purchase.

Generally, if interest rates were to change gradually over time, the impact would be spread over time.

Fixed Rate Debt (dollars in thousands)

At December 31, 2025, our outstanding fixed rate debt consisted of the following:

Annual Annual

2 unchanged sentences

Expense Maturity Payments Due

Senior unsecured notes 380,000 9.750 % 37,050 2025 Semi-Annually

Senior secured notes (2)

940,534 0.000 % — 2026 At Maturity

Senior unsecured notes 500,000 4.750 % 23,750 2028 Semi-Annually

Senior unsecured notes 500,000 4.375 % 21,875 2031 Semi-Annually

Senior unsecured notes 350,000 5.625 % 19,688 2042 Quarterly

Senior unsecured notes 250,000 6.250 % 15,625 2046 Quarterly

Mortgage note 120,000 6.864 % 8,237 2034 Monthly

Mortgage note 7,464 6.444 % 481 2043 Monthly

Senior secured notes $ 375,000 7.250 % $ 27,188 October 2030 Semi-Annually

Senior unsecured notes 500,000 4.750 % 23,750 February 2028 Semi-Annually

Senior unsecured notes 500,000 4.375 % 21,875 March 2031 Semi-Annually

Senior unsecured notes 350,000 5.625 % 19,688 August 2042 Quarterly

Senior unsecured notes 250,000 6.250 % 15,625 February 2046 Quarterly

Mortgage note 63,499 6.572 % 4,231 June 2030 Monthly

Mortgage note 120,000 6.864 % 8,351 June 2034 Monthly

Mortgage note 108,873 6.220 % 6,866 May 2035 Monthly

Mortgage note 30,284 6.360 % 1,953 June 2035 Monthly

Mortgage note 5,847 6.444 % 382 July 2043 Monthly

$ 2,303,503 $ 129,909

(1) The principal balances and interest rates are the amounts stated in the applicable contracts.

(1) The principal balances and annual interest rates are the amounts stated in the applicable contracts.

In accordance with GAAP, our carrying values and recorded interest expense may differ from these amounts because of market conditions at the time we assumed certain of these debts.

This table does not include obligations under finance leases.

(2) These notes require no cash interest to accrue prior to maturity and will accrete at a rate of 11.25% per annum compounded semiannually on January 15 and July 15 of each year, such that the accreted value will equal the principal amount at maturity.

We have a one-time option to extend the maturity date of these notes by one year, to January 15, 2027, subject to satisfaction of certain conditions and payment of an extension fee.

No principal repayments are due under our senior notes until maturity.

Our $120.0 million mortgage note due 2034 is a fixed rate, interest only loan and our mortgage note due 2043 requires principal and interest payments through maturity pursuant to an amortization schedule.

Our mortgage loan maturing in June 2034 requires monthly interest payments and no principal payment is due until maturity, while our mortgage loans maturing in March 2028, May 2035 and June 2035 require monthly interest payments and no principal payment is due for a specified amount of time.

Our mortgage loans maturing in June 2030 and July 2043 require monthly principal and interest payments.

Because these debts require interest to be paid at a fixed rate, changes in market interest rates during the term of these debts will not affect our interest obligations.

If these debts were refinanced at interest rates which are one percentage point higher or lower than shown above, our annual interest cost would increase or decrease by approximately $21.1 million, which amount excludes our $940.5 million of our senior secured notes due 2026 as no interest is due until maturity.

Changes in market interest rates also would affect the fair value of our fixed rate debt obligations;

If these debts were refinanced at interest rates which are one percentage point higher or lower than shown above, our annual interest cost would increase or decrease by approximately $19,285.

Changes in market interest rates would also affect the fair value of our fixed rate debt obligations.

Increases in market interest rates decrease the fair value of our fixed rate debt, while decreases in market interest rates increase the fair value of our fixed rate debt.

In response to significant increases in inflation, the U.S.

Federal Reserve raised interest rates multiple times during 2022 and 2023.

Federal Reserve cut interest rates three times in late 2024, and it may further reduce interest rates, increase interest rates or maintain current interest rates.

Interest rates continue to remain elevated despite reductions in 2025 by the U.S.

Federal Reserve.

There are uncertainties surrounding interest rates and they may remain at current levels, decrease or increase.

Our debt agreements contain provisions that allow us to make repayments earlier than the stated maturity date.

2 unchanged sentences

These prepayment rights and our ability to repurchase and retire outstanding debt may afford us opportunities to mitigate the risk of refinancing our debts at maturity at higher rates by refinancing prior to maturity.

Floating Rate Debt

At December 31, 2024 and February 21, 2025, we did not have any floating rate debt obligations.

Financial Statements and Supplementary Data.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk