Item 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
We have exposure to fluctuations in interest rates, which are sensitive to many factors that are beyond our control. 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. 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. As of December 31, 2024, our variable rate debt outstanding had rates indexed to SOFR.
2024 2023
(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 $ 100,905 5.36% $ 500 (3)
$ 280,969 6.53%
Fixed Rate 1,532,915 5.02% — (2)
1,462,766 4.88%
$ 1,633,820 (1)
$ 500 $ 1,743,735 (1)
(1) Excludes unamortized mortgage debt issuance costs of $14.1 million and $12.6 million as of December 31, 2024 and December 31, 2023, respectively. Debt issuance costs related to our Revolving Credit Agreement 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 $15.3 million based on outstanding balances as of December 31, 2024.
(3) Excludes the impact of a 1% increase on our $50.9 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%. 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. We do not enter into any financial instrument agreements, such as derivative agreements, for speculation or trading purposes. As of December 31, 2024, the Company was a counterparty to two interest rate derivative agreements which have been designated as cash flow hedges. These derivatives are assessed quarterly for hedge effectiveness and as of December 31, 2024, both meet the criteria of an effective hedge.
Fair Value of Debt
The estimated fair value of our consolidated debt is calculated based on current market prices and discounted cash flows at the current rate at which similar loans would be made to borrowers with similar credit ratings for the remaining term of such debt. As of December 31, 2024, the estimated fair value of our consolidated debt was $1.5 billion.
Other Market Risks
As of December 31, 2024, we had no material exposure to any other market risks (including foreign currency exchange risk or commodity price risk).
In making this determination and for purposes of the SEC’s market risk disclosure requirements, we have estimated the fair value of our financial instruments at December 31, 2024 based on pertinent information available to management as of that date. Although management is not aware of any factors that would significantly affect the estimated amounts as of December 31, 2024, future estimates of fair value and the amounts which may be paid or realized in the future may differ significantly from amounts presented.
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