Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
The Company is subject to market risk associated with changes in interest rates both in terms of variable-rate debt and the price of new fixed-rate debt upon maturity of existing debt. The Company's interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows. As of December 31, 2025, the Company's debt included outstanding variable-rate debt of $400.0 million, all of which has been swapped to a fixed rate through the maturity dates.
We maintain risk management control systems to monitor interest rate cash flow risk attributable to both outstanding or forecasted debt obligations as well as our potential offsetting hedge positions. The risk management control systems involve the use of analytical techniques, including cash flow sensitivity analysis, to estimate the expected impact of changes in interest rates on our future cash flows. We continue to assess retaining cash flows that may assist us in maintaining a flexible low leverage balance sheet and managing the impact of debt maturities.
We monitor interest rate risk using a variety of techniques, including periodically evaluating fixed interest rate quotes on all variable rate debt and the costs associated with converting the debt to fixed rate debt. In addition, existing fixed and variable rate loans that are scheduled to mature within the next two years are evaluated for possible early refinancing and/or extension due to consideration given to current interest rates. Refer to our Borrowings table in Item 7 of this Annual Report for debt principal amounts and expected maturities by year to evaluate the expected cash flows and sensitivity to interest rate changes.
We may use financial instruments to hedge exposures to changes in interest rates on loans. To the extent we do, we are exposed to credit risk and market risk. Credit risk is the risk of failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us.
When the fair value of a derivative contract is negative, we owe the counterparty and, therefore, it does not pose credit risk. We seek to minimize the credit risk in derivative instruments by entering into transactions with what we believe are high-quality counterparties. Market risk is the adverse effect on the value of a financial instrument resulting from a change in interest rates.
As of December 31, 2025, the Company's interest rate risk was limited to $55.0 million on its revolving credit facility. If market rates of interest on all variable-rate debt as of December 31, 2025 permanently increased or decreased by 1%, the annual increase or decrease in interest expense, future earnings, and future cash flows would be approximately $0.6 million.
As of December 31, 2025 and 2024, the Company was party to five effective interest rate swap agreements which, together with the four forward-starting interest rate swaps described below, achieved fixed interest rates through the maturity dates of the Amended Term Loan Agreement. The following table summarizes the Company's effective interest rate swaps as of December 31, 2025 and 2024:
Effective
Interest Rate Swaps Effective
Date Termination
Date InvenTrust
Receives InvenTrust Pays
Fixed Rate of Fixed Rate
Achieved (a) Notional
Amount Fair Value as of
Dec. 31, 2025 Dec. 31, 2024
5.5 year Term Loan
4/3/23 3/22/27 1-Month SOFR 3.69% 4.84% $ 100,000 $ (435) $ 656
5 year Term Loan
12/21/23 9/22/26 1-Month SOFR 1.51% 2.66% 100,000 1,413 4,212
5 year Term Loan
12/21/23 9/22/26 1-Month SOFR 1.51% 2.66% 100,000 1,418 4,226
5.5 year Term Loan
6/21/24 3/22/27 1-Month SOFR 1.54% 2.69% 50,000 1,082 2,634
5.5 year Term Loan
6/21/24 3/22/27 1-Month SOFR 1.48% 2.63% 50,000 1,118 2,698
$ 400,000 $ 4,596 $ 14,426
(a) Interest rates reflect the Company's current credit spread of 1.15% as of December 31, 2025.
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The following table summarizes the Company's four forward-starting interest rate swaps as of December 31, 2025, which address the periods between the termination dates of the effective swaps and the maturity dates of the Amended Term Loan Agreement:
Forward-Starting
Interest Rate Swaps Effective
Date Termination
Date InvenTrust
Receives InvenTrust Pays
Fixed Rate of Fixed Rate
Achieved (a) Notional
Amount Fair Value as of
Dec. 31, 2025
5 year Term Loan
9/22/26 8/26/30 Daily SOFR 3.35% 4.50% $ 100,000 $ 28
5 year Term Loan
9/22/26 8/26/30 Daily SOFR 3.35% 4.50% 100,000 36
5.5 year Term Loan
3/22/27 2/24/31 Daily SOFR 3.42% 4.57% 100,000 56
5.5 year Term Loan
3/22/27 2/24/31 Daily SOFR 3.43% 4.58% 100,000 45
$ 400,000 $ 165
(a) Interest rates reflect the Company's current credit spread of 1.15% as of December 31, 2025.
Gains or losses resulting from marking-to-market derivatives each reporting period are recognized as an increase or decrease in comprehensive income (loss) on the consolidated statements of operations and comprehensive income (loss).
The information presented above does not consider all exposures or positions that could arise in the future. Therefore, the information represented herein has limited predictive value. As a result, the ultimate realized gain or loss with respect to interest rate fluctuations will depend on the exposures that arise during the period, the hedging strategies at the time, and the related interest rates.
Item 8. Consolidated Financial Statements and Supplementary Data
See the Index to Consolidated Financial Statements and Financial Statement Schedule commencing on page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.