4 unchanged sentences
As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.
−Removed: As of June 30, 2023, we had two investments with an aggregate principal balance of $16.6 million, net of obligations under participation agreements, that provide for interest income at an annual rate of LIBOR plus a spread, one of which is subject to a LIBOR floor.
−Removed: A decrease of 100 basis points in LIBOR would decrease our annual interest income, net of interest expense on participation agreements, by approximately $0.2 million, and an increase of 100 basis points in LIBOR would increase our annual interest income, net of interest expense on participation agreements, by approximately $0.2 million.
−Removed: Additionally, we had 16 investments with an aggregate principal balance of $458.6 million that provide for interest income at an annual rate of SOFR or Term SOFR, plus a spread, 15 of which were subject to a SOFR or Term SOFR floor.
+Added: As of September 30, 2023.
+Added: we had 15 investments with an aggregate principal balance of $456.8 million that provide for interest income at an annual rate of SOFR or Term SOFR, plus a spread, 14 of which were subject to a SOFR or Term SOFR floor.
A decrease of 100 basis points in SOFR or Term SOFR would decrease our annual interest income by $4.5 million, and an increase of 100 basis points in SOFR or Term SOFR would increase our annual interest income by $4.6 million.
−Removed: Additionally, as of June 30, 2023, we had $27.6 million of borrowings outstanding under a mortgage loan payable that bear interest at an annual rate of Term SOFR plus a spread that is collateralized by an office building;
+Added: Additionally, as of September 30, 2023, we had $27.6 million of borrowings outstanding under a mortgage loan payable that bear interest at an annual rate of Term SOFR plus a spread that is collateralized by an office building;
$33.0 million of borrowings outstanding under another mortgage loan payable that bear interest an annual rate of Term SOFR plus a spread that is collateralized by three industrial buildings;
2 unchanged sentences
another repurchase agreement with an outstanding balance of $75.5 million that bears interest at an annual rate of Term SOFR plus a spread that is collateralized by $141.7 million of first mortgages;
−Removed: and a $15.0 million of term loan that bears interest at an annual rate of SOFR plus a spread of 7.375% with a SOFR floor of 5.0%.
+Added: a $37.0 million promissory note payable that bears interest at an annual rate of Term SOFR plus a spread with a combined floor;
+Added: and a $15.0 million of term loan that bears interest at an annual rate of SOFR plus a spread with a SOFR floor.
A decrease of 100 basis points in Term SOFR would decrease our annual interest expense by approximately $2.3 million, and an increase of 100 basis points in Term SOFR would increase our annual interest expense by approximately $2.8 million.
−Removed: In July 2017, the U.K.
−Removed: Financial Conduct Authority, which regulates the LIBOR administrator, IBA, announced that it would cease to compel banks to participate in setting LIBOR as a benchmark by the end of 2021, which has subsequently been delayed to June 30, 2023.
−Removed: The Alternative Reference Rates Committee, a steering committee comprised of large U.S.
−Removed: financial institutions convened by the U.S.
−Removed: Federal Reserve, has recommended SOFR as a more robust reference rate alternative to U.S.
−Removed: dollar LIBOR.
−Removed: SOFR is calculated based on overnight transactions under repurchase agreements, backed by Treasury securities.
−Removed: SOFR is observed and backward looking, which stands in contrast with LIBOR under the current methodology, which is an estimated forward-looking rate and relies, to some degree, on the expert judgment of submitting panel members.
−Removed: Given that SOFR is a secured rate backed by government securities, it will be a rate that does not take into account bank credit risk (as is the case with LIBOR).
−Removed: SOFR is therefore likely to be lower than LIBOR and is less likely to correlate with the funding costs of financial institutions.
−Removed: Whether or not SOFR attains market traction as a LIBOR replacement tool remains in question.
−Removed: As such, the future of LIBOR at this time is uncertain.
−Removed: Potential changes, or uncertainty related to such potential changes, may adversely affect the market for LIBOR-based loans, including our portfolio of LIBOR-indexed, floating-rate loans, or the cost of our borrowings.
−Removed: In addition, changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market for LIBOR-based loans, including the value of the LIBOR-indexed, floating-rate loans in our portfolio, or the cost of our borrowings.
−Removed: In the event LIBOR is unavailable, our investment documents
−Removed: provide for a substitute index, on a basis generally consistent with market practice, intended to put us in substantially the same economic position as LIBOR.
We may hedge against interest rate fluctuations by using standard hedging instruments, such as futures, options and forward contracts, subject to the requirements of the 1940 Act.
While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates.
−Removed: For the three and six months ended June 30, 2023 and 2022, we did not engage in interest rate hedging activities.
+Added: For the three and nine months ended September 30, 2023 and 2022, we did not engage in interest rate hedging activities.
Prepayment Risks
6 unchanged sentences
Extension risk is the risk that our assets will be repaid at a slower rate than anticipated and generally increases when interest rates rise.
−Removed: In which case, to the extent we have financed the acquisition of an asset, we may have to finance our asset at potentially higher costs without the ability to reinvest principal into higher yielding securities because borrowers prepay their mortgages at a slower pace than originally expected, adversely impacting our net interest spread, and thus our net interest income.
+Added: In which case, to the extent we have financed the acquisition of an asset, we may have to finance our asset at potentially higher costs without the ability to reinvest principal into higher yielding securities because borrowers prepay their
+Added: mortgages at a slower pace than originally expected, adversely impacting our net interest spread, and thus our net interest income.
Real Estate Risk
13 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.