Empire State Realty OP, L.P. 10-Q

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our future income, cash flows and fair values relevant to financial instruments are dependent upon prevalent market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. We are exposed to interest rate changes primarily on our unsecured revolving credit facility and debt refinancings. Our objectives with respect to interest rate risk are to limit the impact of interest rate changes on operations and cash flows, and to lower our overall borrowing costs. To achieve these objectives, we may borrow at fixed rates and may enter into derivative financial instruments such as interest rate swaps or caps in order to mitigate our interest rate risk. We do not enter into derivative or interest rate transactions for speculative purposes. As of March 31, 2026, we have interest rate SOFR swap and cap agreements with an aggregate notional value of $566.5 million and which mature between December 31, 2026 and November 1, 2033. The "variable to fixed" interest rate swaps have been designated as cash flow hedges and are deemed highly effective with fair values in an asset position of $6.4 million, which is included in prepaid expenses and other assets on the consolidated balance sheet as of March 31, 2026. As of March 31, 2026, the weighted average interest rate on the $2.3 billion of fixed-rate indebtedness outstanding was 4.53% per annum, each with maturities at various dates through April 1, 2036. As of March 31, 2026, our floating rate debt of $40.0 million represented 1.7% of our total indebtedness. As of March 31, 2026, the fair value of our outstanding debt was approximately $2.2 billion, which was approximately $0.1 billion less than the book value as of such date. Interest risk amounts were determined by considering the impact of hypothetical interest rates on our financial instruments. These analyses do not consider the effect of any change in overall economic activity that could occur in that environment. Further, in the event of a change of that magnitude, we may take actions to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, these analyses assume no changes in our financial structure.