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The following table discusses our exposure to hypothetical changes in market rates of interest on interest expense for our variable rate debt and fixed-rate debt.
−Removed: Interest rate risk amounts were determined by considering the impact of hypothetical interest rates on our debt.
This analysis does not take into account all of the factors that may affect our debt, such as the effect that a changing interest rate environment could have on the overall level of economic activity or the action that our management might take to reduce our exposure to the change.
This analysis assumes no change in our financial structure.
−Removed: Our exposure to a change in interest rates is summarized in the table below.
−Removed: As of December 31, 2022, our variable rate debt outstanding had rates indexed to LIBOR, SOFR, and the Prime Rate.
+Added: As of December 31, 2023, our variable rate debt outstanding had rates indexed to SOFR.
(Amounts in thousands) December 31, Balance Weighted Average Interest Rate Effect of 1% Change in Base Rates December 31, Balance Weighted Average Interest Rate
Variable Rate $ 280,969 6.53% $ 2,287 (3)
+Added: $ 159,198 6.11%
Fixed Rate 1,462,766 4.88% — (2)
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$ 2,287 $ 1,699,491 (1)
−Removed: (1) Excludes unamortized debt issuance costs of $7.8 million and $8.2 million as of December 31, 2022 and December 31, 2021, respectively.
+Added: (1) Excludes unamortized mortgage debt issuance costs of $12.6 million and $7.8 million as of December 31, 2023 and December 31, 2022, respectively.
+Added: Debt issuance costs related to our unsecured credit facility are included within prepaid expenses and other assets on the consolidated balance sheets.
(2) If the weighted average interest rate of our fixed rate debt increased by 1% (i.e.
due to refinancing at higher rates), annualized interest expense would increase by approximately $14.6 million based on outstanding balances as of December 31, 2023.
+Added: (3) Excludes the impact of a 1% increase on our $52.3 million variable rate mortgage on Plaza at Woodbridge as the loan is hedged with an interest rate cap to limit the maximum SOFR to 3.0%.
+Added: See Note 9 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information on the Plaza at Woodbridge interest rate cap.
We may utilize various financial instruments to mitigate the impact of interest rate fluctuations on our cash flows and earnings, including hedging strategies, depending on our analysis of the interest rate environment and the costs and risks of such strategies.
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As of December 31, 2023, the Company was a counterparty to two interest rate derivative agreements which have been designated as cash flow hedges.
−Removed: On June 23, 2022, in connection with the refinancing of one of our variable rate loans, we entered into a one-year interest rate cap agreement for a purchase price of approximately $0.3 million.
−Removed: The cap agreement has an expiration date of July 1, 2023 and limits the maximum SOFR of the variable loan it is hedged with to 3%.
−Removed: This derivative instrument is assessed quarterly and as of December 31, 2022 meets the criteria of an effective hedge.
+Added: These derivatives are assessed quarterly for hedge effectiveness and as of December 31, 2023, both meet the criteria of an effective hedge.
+Added: On June 23, 2022, in connection with the refinancing of one of our variable rate loans, we entered into a one-year interest rate cap agreement for a purchase price of approximately $0.3 million, to limit the maximum SOFR of our Plaza at Woodbridge floating rate debt to 3%.
+Added: In May 2023, the Company entered into a new two-year interest rate cap agreement for a purchase price of $1.1 million, to replace the previous interest rate cap agreement which expired on July 1, 2023.
+Added: The new cap went into effect July 3, 2023 and expires on July 1, 2025, and is included in the prepaid expenses and other assets line item of the consolidated balance sheets.
+Added: Discontinuation of LIBOR
+Added: The LIBOR benchmark has been the subject of national, international and other regulatory guidance and proposals for reform and replacement, with LIBOR “settings” relevant to the Company no longer being published after June 30, 2023.
+Added: As a result, we have entered into loan amendments with our lenders to transition all of our LIBOR-indexed debt to SOFR effective July 2023.
+Added: The transitions did not have a material impact on the loans affected and the Company was able to maintain rates comparable to the rates in place prior to the SOFR transition.
Fair Value of Debt
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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.