Company: CIO
Filing Date: 2025-02-20
Form Type: 10-K
Source: 0000950170-25-023714
Chunk: 71

Company: City Office REIT, Inc.
Filing Date: 2025-02-20
Form: 10-K
Item: Item 6
Chunk 71
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1)Contracted interest on the floating rate borrowings under our Unsecured Credit Facility was calculated based on the balance and interest rate at December 31, 2024. Contracted interest on our loans which we have applied interest rate swaps was calculated based on the swap fixing the SOFR component of the borrowing rates.Inflation Substantially all of our office leases include expense reimbursement provisions that provide for property operating expense escalations. In addition, most of the leases provide for fixed rent increases. We believe that expense increases due to inflation may be at least partially offset by these contractual rent increases and expense escalations. However, a longer period of inflation could affect our cash flows or earnings, or impact our borrowings, as discussed elsewhere in this Report.As of December 31, 2024, 82.3% of our outstanding consolidated indebtedness was effectively fixed rate debt when factoring in interest rate swaps. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKOur future income, cash flows and fair values relevant to financial instruments are dependent upon prevailing market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. We use derivative financial instruments to manage or hedge interest rate risks related to borrowings. We do not use derivatives for trading or speculative purposes. We have entered, and we will only enter into, contracts with major financial institutions based on their credit rating and other factors. See Note 7 to our consolidated financial statements in Item 15 of this Annual Report on Form 10-K for more information regarding our derivatives.We currently consider our interest rate exposure to be moderate because as of December 31, 2024, approximately $534.5 million, or 82.3%, of our debt had fixed interest rates, or effectively fixed rates when factoring in interest rate swaps, and $115.0 million, or 17.7%, had variable interest rates. The $534.5 million fixed rate debt includes our loans against which we have applied interest rate swaps. The interest rate swaps effectively fix the SOFR component of the borrowing rates until maturity of the debt. A 1% increase in SOFR would result in a $1.2 million increase to our annual interest costs on debt outstanding as of December 31, 2024 and would decrease the fair value of our outstanding debt, as well as increase interest costs associated with future debt issuances or borrowings under our Unsecured Credit Facility. A 1% decrease