Item 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposure is interest rate risk. The Company has managed and will continue to manage interest rate risk by (1) maintaining a ratio of fixed rate, long-term debt to total debt such that floating rate exposure is kept at an acceptable level, (2) reducing interest rate exposure on certain long-term floating rate debt through the use of interest rate caps and/or swaps with matching maturities where appropriate, (3) using treasury rate locks where appropriate to fix rates on anticipated debt transactions, and (4) taking advantage of favorable market conditions for long-term debt and/or equity.
The following table sets forth information as of December 31, 2024 concerning the Company's long term debt obligations, including principal cash flows by scheduled maturity, weighted average interest rates and estimated fair value (dollars in thousands):
Expected Maturity Date
For the years ending December 31,
2025 2026 2027 2028 2029 Thereafter Total Fair Value
CONSOLIDATED CENTERS:
Long term debt:
Fixed rate $ 241,392 $ 949,264 $ 484,098 $ 733,318 $ 1,138,441 $ 1,145,982 $ 4,692,495 $ 4,426,227
Average interest rate 4.18 % 3.71 % 4.00 % 4.98 % 4.66 % 4.57 % 4.40 %
Floating rate 300,000 — — 110,000 — — 410,000 410,963
Average interest rate 5.92 % — % — % 7.01 % — % — % 6.21 %
Total debt—Consolidated Centers
$ 541,392 $ 949,264 $ 484,098 $ 843,318 $ 1,138,441 $ 1,145,982 $ 5,102,495 $ 4,837,190
UNCONSOLIDATED JOINT VENTURE CENTERS:
Long term debt (at the Company's pro rata share):
Fixed rate $ 12,766 $ 155,970 $ 97,138 $ 810,883 $ 239,570 $ 245,607 $ 1,561,934 $ 1,522,992
Average interest rate 3.92 % 3.95 % 3.95 % 6.03 % 5.50 % 4.04 % 5.28 %
Floating rate(1) 86,467 33,719 736 12,000 — — 132,922 133,770
Average interest rate 8.30 % 8.73 % 7.53 % 6.98 % — % — % 8.29 %
Total debt—Unconsolidated Joint Venture Centers
$ 99,233 $ 189,689 $ 97,874 $ 822,883 $ 239,570 $ 245,607 $ 1,694,856 $ 1,656,762
_______________________________________________________________________________
(1) On February 7, 2025, the Company’s joint venture in FlatIron Crossing repaid $29.1 million ($14.8 million at the Company's pro rata share) on the mortgage loan and obtained a 90-day extension on the remaining $140.5 million ($71.6 million at the Company's pro rata share) loan (See “Financing Activity” in Management’s Overview and Summary).
The Consolidated Centers' total fixed rate debt at December 31, 2024 and 2023 was $4.7 billion and $3.8 billion, respectively. The average interest rate on such fixed rate debt at December 31, 2024 and 2023 was 4.40% and 4.29%, respectively. The Consolidated Centers' total floating rate debt at December 31, 2024 and 2023 was $0.4 billion and $0.5 billion, respectively. The average interest rate on such floating rate debt at December 31, 2024 and 2023 was 6.21% and 7.43%, respectively.
The Company's pro rata share of the Unconsolidated Joint Venture Centers' fixed rate debt at December 31, 2024 and 2023 was $1.6 billion and $2.8 billion, respectively. The average interest rate on such fixed rate debt at December 31, 2024 and 2023 was 5.28% and 5.06%, respectively. The Company's pro rata share of the Unconsolidated Joint Venture Centers' floating rate debt at December 31, 2024 and 2023 was $132.9 million and $45.2 million, respectively. The average interest rate on such floating rate debt at December 31, 2024 and 2023 was 8.29% and 9.00%, respectively.
The Company uses derivative financial instruments in the normal course of business to manage or hedge interest rate risk and records all derivatives on the balance sheet at fair value. Interest rate cap agreements offer protection against floating rates on the notional amount from exceeding the rates noted in the above schedule, and interest rate swap agreements effectively
58
replace a floating rate on the notional amount with a fixed rate as noted above. As of December 31, 2024, the Company has interest rate cap agreements in place (See Note 4—Investments in Unconsolidated Joint Ventures and Note 5—Derivative Instruments and Hedging Activities in the Company's Notes to the Consolidated Financial Statements). The respective loans each require an interest rate cap agreement to be in place at all times, which limits how high the prevailing floating loan rate index (i.e., SOFR) for the loans can rise. As of the date of this Annual Report on Form 10-K, SOFR for each of these loans exceeded the strike interest rate (the "Strike Rate") within the required interest rate cap agreement. If SOFR does exceed the Strike Rate, each of these loans would then be considered fixed rate debt. If SOFR for these respective loans thereafter no longer exceeds the Strike Rate, then these loans would once again be considered floating rate debt.
In addition, the Company has assessed the market risk for its floating rate debt and believes that a 1% increase in interest rates would decrease future earnings and cash flows by approximately $5.4 million per year based on $542.9 million of floating rate debt outstanding at December 31, 2024.
The fair value of the Company's long-term debt is estimated based on a present value model utilizing interest rates that reflect the risks associated with long-term debt of similar risk and duration. In addition, the method of computing fair value for mortgage notes payable included a credit value adjustment based on the estimated value of the property that serves as collateral for the underlying debt (See Note 10—Mortgage Notes Payable and Note 11—Bank and Other Notes Payable in the Company's Notes to the Consolidated Financial Statements).
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Refer to the Financial Statements and Financial Statement Schedules for the required information appearing in Item 15.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.