Quantitative and Qualitative Disclosures About Market Risk
Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices, and
other market changes that affect market sensitive instruments. In pursuing our business plan, we expect that the primary market risk to which we will be exposed is interest rate risk. There were no material changes in our market risk exposures, or
in the methods we use to manage market risk, between the nine months ended September 30, 2023 and 2022 or the years ended December 31, 2022 and 2021.
Interest Rate Risk
We are
exposed to the effects of interest rate changes primarily as a result of long-term debt used to acquire and develop properties and other investments. Our interest rate risk is monitored using a variety of techniques. Our interest rate risk
management objectives are to limit the impact of interest rate increases on earnings, prepayment penalties and cash flows and to lower overall borrowing costs while taking into account variable interest rate risk. To achieve our objectives, we may
borrow or lend at fixed or variable rates.
We have entered into, and may continue to enter into, derivative financial instruments such as
interest rate swaps and interest rate caps in order to mitigate our interest rate risk on a related financial instrument, and for which we have not and may not elect hedge accounting treatment. We did not elect to apply hedge accounting treatment to
these derivatives; therefore, changes in the fair value of interest rate derivative financial instruments were recorded as a component of interest expense in gain or loss in fair value of derivative financial instruments in our consolidated
statements of operations and comprehensive income (loss) incorporated by reference in this prospectus. As of September 30, 2023, our interest rate swaps were recorded in other assets, net in our condensed consolidated balance sheet incorporated by
reference in this prospectus at their fair value of $8,200,000. As of December 31, 2022, we did not have any derivative financial instruments. We do not enter into derivative transactions for speculative purposes.
Debt Security Investment, Net
As of September 30, 2023 and December 31, 2022, the net carrying value of our debt security investment was $85,922,000 and
$83,000,000, respectively. As we expect to hold our debt security investment to maturity and the amounts due under such debt security investment are limited to the outstanding principal balance and any accrued and unpaid interest, we do not expect
that fluctuations in interest rates, and the resulting change in fair value of our debt security investment, would have a significant impact on our operations. The effective interest rate on our debt security investment was 4.24% per annum as
of both September 30, 2023 and December 31, 2022.
Mortgage Loans Payable, Net and Lines of Credit and Term Loan
Mortgage loans payable were $1,243,358,000 and $1,254,479,000 ($1,221,238,000 and $1,229,847,000 net of discount/premium and deferred
financing costs) as of September 30, 2023 and December 31, 2022, respectively. As of September 30, 2023 and December 31, 2022, we had 71 and 68 fixed-rate mortgage loans payable, respectively, and 13 and 11 variable-rate mortgage loans payable,
respectively, with effective interest rates ranging from 2.21% to 8.44% per annum and a weighted average effective interest rate of 4.64% and 4.29%, respectively.
In addition, as of September 30, 2023 and December 31, 2022, we had $1,277,900,000 and $1,282,634,000 ($1,277,076,000 and $1,281,794,000,
net of deferred financing fees), respectively, outstanding under our lines of credit and term loan, at a weighted-average interest rate of 7.39%, and 6.34% per annum, respectively.
As of September 30, 2023 and December 31, 2022, the weighted average effective interest rate on our outstanding debt, factoring in our
fixed-rate interest rate swaps (if any), was 5.77% and 5.82% per annum,
148