Company: OLP
Filing Date: 2025-05-06
Form Type: 10-Q
Source: 0001558370-25-006509
Chunk: 9

Company: ONE LIBERTY PROPERTIES INC
Filing Date: 2025-05-06
Form: 10-Q
Item: Part I, Item 3Q
Chunk 9
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Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Our primary market risk exposure is the effect of changes in interest rates on the interest cost of draws on our revolving variable rate credit facility and the effect of changes in the fair value of our interest rate swap agreements. Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond our control.

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We use interest rate swaps to limit interest rate risk on substantially all variable rate mortgages. These swaps are used for hedging purposes - not for speculation. We do not enter into interest rate swaps for trading purposes. At March 31, 2025, we had no liability in the event of the early termination of our swaps.

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At March 31, 2025, we had eight interest rate swap agreements outstanding. The fair market value of the interest rate swaps is dependent upon existing market interest rates and swap spreads, which change over time. As of March 31, 2025, if there had been an increase of 100 basis points in forward interest rates, the fair market value of the interest rate swaps and the net unrealized gain on derivative instruments would have increased by $53,000. If there were a decrease of 100 basis points in forward interest rates, the fair market value of the interest rate swaps and the net unrealized gain on derivative instruments would have decreased by $54,000. These changes would not have any impact on our net income or cash.

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Our variable mortgage debt, after giving effect to the interest rate swap agreements, primarily bears interest at fixed rates and accordingly, the effect of changes in interest rates would not impact the interest expense we incur under these mortgages. 

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Our variable rate credit facility is sensitive to interest rate changes.  Based on the $5.0 million outstanding balance under this facility at March 31, 2025, a 100 basis point increase of the interest rate would increase our related interest costs over the next twelve months by approximately $50,000 and a 100 basis point decrease of the interest rate would decrease our related interest costs over the next twelve months by approximately $50,000.

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The fair market value of our long-term debt is estimated based on discounting future cash flows at interest rates that our management believes reflect the risks associated with long-term debt of similar risk and duration.