Company: LANDO
Filing Date: 2025-02-19
Form Type: 10-K
Source: 0001495240-25-000005
Chunk: 127

Company: GLADSTONE LAND Corp
Filing Date: 2025-02-19
Form: 10-K
Item: Item 7A
Chunk 127
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ITEM 7A.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.  The primary market risk that we believe we are and will be exposed to is interest rate risk.  Certain of our existing leases contain escalations based on market indices, such as the consumer price index (“CPI”), and while very little of our existing borrowings are subject to variable interest rates, the interest rates on the majority of our fixed-rate borrowings are fixed for a finite period before converting to variable rate.  Although we seek to mitigate this risk by including certain provisions in many of our leases, such as escalation clauses or adjusting the rent to prevailing market rents at various intervals, these features do not eliminate this risk.

Currently, over 99.9% of our borrowings are at fixed rates, and on a weighted-average basis, these rates are fixed at an effective interest rate (after interest patronage) of 3.35% for another 3.6 years.  As such, with respect to our current borrowings, we believe fluctuations in interest rates would have a minimal impact on our net income.  However, interest rate fluctuations may affect the fair value of our fixed-rate borrowings.  As of December 31, 2024, the fair value of our fixed-rate borrowings outstanding (excluding our Series D Term Preferred Stock) was approximately $486.3 million.

The following table summarizes the hypothetical change in fair value of our fixed-rate borrowings at December 31, 2024, if market interest rates had been one or two percentage points lower or higher than those in place as of December 31, 2024 (dollars in thousands):

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Change in Market Interest RatesCarrying Value(1)Fair ValueDifference2% decrease$526,309 $511,544 $(14,765)1% decrease526,309 498,658 (27,651)No change526,309 486,314 (39,995)1% increase526,309 474,586 (51,723)2% increase526,309 463,336 (62,973)

(1)Includes the principal balances outstanding of all long-term borrowings (consisting of notes and bonds payable), excluding unamortized debt issuance costs.

In the