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Item 3 — Quantitative and Qualitative Disclosures About Market Risk
Cto Realty Growth, Inc. · 10-Q · Q2 FY2026 · Period ended Jun 30, 2026
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The principal market risk (i.e. the risk of loss arising from adverse changes in market rates and prices), to which we are exposed is interest rate risk relating to our debt. We may utilize overnight sweep accounts and short-term investments as a means to minimize the interest rate risk. We do not believe that interest rate risk related to cash equivalents and short-term investments, if any, is material due to the nature of the investments.
We are primarily exposed to interest rate risk relating to our own debt in connection with our Revolving Credit Facility, as this facility carries a variable rate of interest. Our borrowings on our $300.0 million Revolving Credit Facility bear interest at a rate ranging from SOFR plus 0.10% plus 125 basis points to SOFR plus 0.10% plus 220 basis points based on our level of borrowing as a percentage of our total asset value. As of June 30, 2026, the outstanding balance on our Revolving Credit Facility totaled $193.0 million of which $143.0 million was not fixed by virtue of an interest rate swap agreement. As of June 30, 2025, the outstanding balance on our Revolving Credit Facility totaled $224.0 million of which $74.0 million was not fixed by virtue of an interest rate swap agreement. A hypothetical change in the interest rate of 100 basis points (i.e., 1%) would affect our financial position, results of operations, and cash flows by $1.4 million and $0.7 million as of June 30, 2026 and 2025, respectively. The Company entered into interest rate swap agreements to hedge against changes in future cash flows resulting from fluctuating interest rates related to certain of its debt borrowings, see Note 15, “Interest Rate Swaps” in the Notes to Financial Statements. By virtue of fixing the variable rate on certain debt borrowings, our exposure to changes in interest rates is minimal but for the impact on other comprehensive income and loss. Management’s objective is to limit the impact of interest rate changes on earnings and cash flows and to manage our overall borrowing costs.
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