Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Our primary market risk exposure is interest rate changes at the time we need to obtain new or refinance existing long-term debt that is used to maintain liquidity and fund our operations. Our interest rate risk management objectives are to limit the impact of increasing interest rates on earnings and cash flows. To achieve our objectives, we borrow primarily at fixed rates and in some cases variable rates. With regard to variable rate financing, we assess interest rate cash flow risk by identifying and monitoring changes in interest rate exposure that may adversely impact future cash flows and by evaluating hedging opportunities.
The fair value of our long-term debt obligations is affected by changes in market interest rates, however our scheduled maturities are well laddered from 2025 to 2041, which minimizes the market risk until the debt matures. As of December 31, 2024, we had $87.6 million of secured debt maturing in 2025. In addition, 19.1% of our outstanding debt is fully amortizing, further reducing the risk related to increased interest rates.
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For each increase in interest rates of 1.0% (or 100 basis points), the fair value of the total outstanding debt would decrease by approximately $264.0 million. For each decrease in interest rates of 1.0% (or 100 basis points), the fair value of the total outstanding debt would increase by approximately $287.9 million. Our secured debt has fixed interest rates so interest expense and cash flows would not be affected by fluctuations in interest rates. The variable rate on our unsecured $200.0 million term loan is fixed through the utilization of an interest rate swap through maturity of the term loan, so interest expense and cash flows would not be affected by fluctuations in interest rates. Our line of credit bears interest at a rate of SOFR plus 0.10% plus 1.25% to 1.65%.
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FORWARD-LOOKING STATEMENTS
In addition to historical information, this report includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. When used, words such as “anticipate,” “expect,” “believe,” “project,” “estimate,” “intend,” “may be” and “will be” and similar words or phrases, or the negative thereof, unless the context requires otherwise, are intended to identify forward-looking statements and may include without limitation, information regarding our expectations, goals or intentions regarding the future and the expected effect of our acquisitions. These forward-looking statements are subject to numerous assumptions, risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in a forward-looking statement due to a number of factors, including, but not limited to:
• our ability to control costs and real estate market conditions, our ability to retain customers, the actual use of Sites by customers and our success in acquiring new customers at our Properties (including those that we may acquire);
• our ability to maintain historical or increase future rental rates and occupancy with respect to properties currently owned or that we may acquire;
• our ability to attract and retain customers entering, renewing and upgrading membership subscriptions;
• our assumptions about rental and home sales markets;
• our ability to manage counterparty risk;
• our ability to renew our insurance policies at existing rates and on consistent terms;
• home sales results could be impacted by the ability of potential homebuyers to sell their existing residences as well as by financial, credit and capital markets volatility;
• results from home sales and occupancy will continue to be impacted by local economic conditions, including an adequate supply of homes at reasonable costs, lack of affordable manufactured home financing and competition from alternative housing options including site-built single-family housing;
• impact of government intervention to stabilize site-built single-family housing and not manufactured housing;
• impact of public health crises, such as, highly infectious or contagious diseases, on our business operations, our residents, our customers, our employees and the economy generally;
• effective integration of recent acquisitions and our estimates regarding the future performance of recent acquisitions;
• our ability to execute expansion/development opportunities in the face of changes impacting the supply chain or labor markets;
• the completion of future transactions in their entirety, if any, and timing and effective integration with respect thereto;
• unanticipated costs or unforeseen liabilities associated with recent acquisitions;
• the effect of potential damage from natural disasters, including hurricanes and other weather-related events, which could result in substantial costs to our business;
• our ability to obtain financing or refinance existing debt on favorable terms or at all;
• the effect of inflation and interest rates;
• the effect from any breach of our, or any of our vendors’ data management systems;
• the dilutive effects of issuing additional securities;
• the potential impact of material weaknesses, if any, in our internal control over financial reporting;
• the outcome of pending or future lawsuits or actions brought by or against us, including those disclosed in our filings with the Securities and Exchange Commission; and
• other risks indicated from time to time in our filings with the Securities and Exchange Commission.
For further information on these and other factors that could impact us and the statements contained herein, refer to Part I. Item 1A. Risk Factors herein.
These forward-looking statements are based on management's present expectations and beliefs about future events. As with any projection or forecast, these statements are inherently susceptible to uncertainty and changes in circumstances. We are under no obligation to, and expressly disclaim any obligation to, update or alter our forward-looking statements whether as a result of such changes, new information, subsequent events or otherwise.
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Item 8. Financial Statements and Supplementary Data
See Index to Consolidated Financial Statements and Schedule on page F-1 of this Form 10-K.
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
None.