Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Our future income, cash flows and fair values relevant to financial instruments are dependent upon prevailing market interest rates. In the normal course of business, we are exposed to the effect of interest rate changes. We have entered into derivative agreements to mitigate exposure to unexpected changes in interest. Market risk refers to the risk of loss from adverse changes in market interest rates. We periodically use derivative financial instruments to seek to manage, or hedge, interest rate risks related to our borrowings. We do not use derivatives for trading or speculative purposes and only enter into contracts with major financial institutions based on their credit rating and other factors. We intend to enter into derivative agreements only with counterparties that we believe have a strong credit rating to mitigate the risk of counterparty default or insolvency.

As of December 31, 2018, we had $4,148.5 million of debt outstanding of which $2,048.5 million was fixed rate debt and $1,500.0 million was hedged variable rate debt, the remaining $600.0 million of our indebtedness was unhedged. Subsequent to December 31, 2018 we entered into two interest swap transactions which are effective January 22, 2019, for a notional amount of $500 million, effectively bringing our unhedged variable rate debt to $100.0 million. As of December 31, 2018, a one percent increase or decrease in the annual interest rate on our unhedged variable rate borrowings of $600.0 million would increase or decrease our annual cash interest expense by approximately $6.0 million. Subsequent to January 22, 2019, a one percent increase or decrease

in the annual interest rate on our unhedged variable rate borrowings of $100.0 million would increase or decrease our annual cash interest expense by approximately $1.0 million.

We may manage, or hedge, interest rate risks related to our borrowings by means of interest rate swap agreements. We also expect to manage our exposure to interest rate risk by maintaining a mix of fixed and variable rates for our indebtedness. However, the REIT provisions of the Code substantially limit our ability to hedge our assets and liabilities.