Market risk is the adverse effect on the value of assets and liabilities that results from a change in market conditions. Our primary market risk exposure is interest rate risk with respect to our indebtedness and counterparty credit risk with respect to our interest rate derivatives. In order to minimize counterparty credit risk, we enter into and expect to enter into hedging arrangements only with major financial institutions that have high credit ratings. As of June 30, 2026, we had total indebtedness of $1.6 billion at a weighted average interest rate of 4.77%, of which $1.6 billion was debt with a floating interest rate. As of June 30, 2026, the interest rate swap agreements we have entered into effectively fix the interest rate on 54% of our $1.5 billion of floating rate mortgage debt outstanding. As of June 30, 2026, the adjusted weighted average interest rate of the Company's mortgage indebtedness was 3.49%, which excludes the effect of interest rate caps. For purposes of calculating the adjusted weighted average interest rate of the total indebtedness, we have included the weighted average fixed rate of 1.43% for the floating interest rate on the combined $0.8 billion notional amount of interest rate swap agreements that we have entered into as of June 30, 2026, which effectively fix the interest rate on $0.8 billion of our floating rate mortgage debt outstanding. An increase in interest rates could make the financing of any acquisition by us more costly. Rising or high interest rates could also limit our ability to refinance our debt when it matures or cause us to pay higher interest rates upon refinancing and increase interest expense on refinanced indebtedness. We may manage, or hedge, interest rate risks related to our borrowings by means of interest rate cap and interest rate swap agreements. As of June 30, 2026, the interest rate cap agreements we have entered into effectively cap SOFR on $1.5 billion of our floating rate mortgage debt at a weighted average rate of 8.01% for the term of the agreements, which is generally three to four years. In order to fix a portion of, and mitigate the risk associated with, our floating rate indebtedness (without incurring substantial prepayment penalties or defeasance costs typically associated with fixed rate indebtedness when repaid early or refinanced), we, through the OP, have entered into six interest rate swap transactions with the Counterparties with a combined notional amount of $0.8 billion, and one forward swap agreement with a notional amount of approximately $0.1 billion. The interest rate swaps we have entered into effectively replace the floating interest rate (Adjusted SOFR or SOFR) with respect to that amount with a weighted average fixed rate of 1.43%. During the term of these interest rate swap agreements, we are required to make monthly fixed rate payments of 1.43%, on a weighted average basis, on the notional amounts, while the Counterparties are obligated to make monthly floating rate payments based on Adjusted SOFR or SOFR to us referencing the same notional amounts. We have designated these interest rate swaps as cash flow hedges of interest rate risk. Until our interest rates reach the caps provided by our interest rate cap agreements, each quarter point change in SOFR would result in an approximate increase to annual interest expense costs on our floating rate indebtedness, reduced by any payments due from the Counterparties under the terms of the interest rate swap agreements we had entered into as of June 30, 2026, of the amounts illustrated in the table below for our indebtedness as of June 30, 2026 (dollars in thousands): Change in Interest Rates Annual Increase to Interest Expense 0.25% $ 1,930 0.50% 3,860 0.75% 5,790 1.00% 7,720 There is no assurance that we would realize such expense as such changes in interest rates could alter our liability positions or strategies in response to such changes. We may also be exposed to credit risk in the derivative financial instruments we use. Credit risk is the failure of the Counterparties to perform under the terms of the derivative financial instruments. If the fair value of a derivative financial instrument is positive, the Counterparties will owe us, which creates credit risk for us. If the fair value of a derivative financial instrument is negative, we will owe the Counterparties and, therefore, do not have credit risk. We seek to minimize the credit risk in derivative financial instruments by entering into transactions with major financial institutions that have high credit ratings. 42