XML 44 R17.htm IDEA: XBRL DOCUMENT v3.24.0.1
Derivative Instruments and Hedging Activities
 12 Months Ended
Dec. 31, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities Disclosure
8. Derivative Instruments and Hedging Activities
BPLP’s agreements with the swap derivative counterparties contain provisions whereby if BPLP defaults on the underlying indebtedness, including defaults where repayment of the indebtedness has not been accelerated by the lender, then BPLP could also be declared in default of the swap derivative obligation. As of December 31, 2023, the Company had not posted any collateral related to the agreements.
Effective Hedge Instruments
On May 2, 2023, BPLP entered into four interest rate swap contracts with notional amounts aggregating $1.2 billion. BPLP entered into these interest rate swap contracts to reduce its exposure to the variability in future cash flows attributable to changes in the 2023 Unsecured Term Loan interest rate. These interest rate swaps were entered into to fix Term SOFR, the reference rate for BPLP’s 2023 Unsecured Term Loan, at a weighted-average rate of 4.6420% for the period commencing on May 4, 2023 and ending on May 16, 2024 (see Note 7). For the period from May 4, 2023 through December 31, 2023, the Company recognized approximately $(4.2) million of interest expense related to its interest rate swap contracts.
On December 7, 2023, BPLP entered into three interest rate swap contracts with notional amounts aggregating $600.0 million. BPLP entered into these interest rate swap contracts to reduce its exposure to the variability in future cash flows attributable to changes in the interest rate associated with the $600.0 million mortgage secured by its 325 Main Street, 355 Main Street, 90 Broadway and Cambridge East Garage (also known as Kendall Center Green Garage) properties (see Note 7). These interest rate swaps were entered into to fix Daily Compounded SOFR, the reference rate for the mortgage, at a weighted-average fixed interest rate of 3.7925% for the period commencing on December 15, 2023 and ending on October 26, 2028, for an all in interest rate of 6.04% per annum. For the period from December 15, 2023 through December 31, 2023, the Company recognized approximately $(0.4) million of interest expense related to these interest rate swap contracts.
On December 14, 2023, the Company completed the acquisition of it’s joint venture partner’s 45% interest in the joint venture entity that owns Santa Monica Business Park located in Santa Monica, California (See Note 3). The property is subject to $300.0 million of mortgage debt (see Note 7). Prior to the Company’s acquisition, the borrower under the loan, SMBP LLC entered into three interest rate swap contracts with notional amounts aggregating $300.0 million to fix SOFR, the reference rate for the mortgage loan, at a weighted-average fixed interest rate of approximately 2.679% per annum for a period that ends on April 1, 2025. The Company acquired and elected to continue with hedge accounting for these swaps. Upon acquisition, the Company recorded the interest rate swaps at their fair value of approximately $7.3 million. These interest rate swap contracts were entered into to reduce the exposure to the variability in future cash flows attributable to changes in the interest rate associated with the mortgage loan. For the period from December 14, 2023 through December 31, 2023, the Company recognized approximately $(0.4) million of interest expense related to these interest rate swap contracts.
BPLP assesses the effectiveness of its hedges both at inception and on an ongoing basis. If the hedges are deemed to be effective, the fair value is recorded in “Accumulated other comprehensive income (loss)” in the Company’s Consolidated Balance Sheets and is subsequently reclassified into “Interest expense” in the Company’s
Consolidated Statements of Operations in the period that the hedged forecasted transactions affect earnings. BPLP’s derivative financial instruments are cash flow hedges that are designated as effective hedges, and are carried at their estimated fair value on a recurring basis (See Note 2). The Company did not incur any ineffectiveness during the year ended December 31, 2023.
BPLP’s and SMBP LLC’s interest rate swap contracts consisted of the following at December 31, 2023 (dollars in thousands):
Derivative InstrumentAggregate Notional Amount Strike Rate RangeBalance Sheet Location
Effective Date Maturity DateLow High Fair Value
BPLP:
Interest Rate Swaps $1,200,000 May 4, 2023May 16, 20244.638 %—4.646 %Prepaid expenses and other assets$2,548 
Interest Rate Swaps600,000 December 15, 2023October 26, 20283.790 %—3.798 %Other liabilities(7,198)
1,800,000 (4,650)
SMBP LLC
Interest Rate Swaps300,000 December 14, 2023April 1, 20252.661 %—2.688 %Prepaid expenses and other assets6,626 
$2,100,000 $1,976 
The following table presents the location in the financial statements of the gains or losses recognized related to the Company’s cash flow hedges for the years ended December 31, 2023, 2022 and 2021 (in thousands):
Year ended December 31,
202320222021
Amount of gain (loss) related to the effective portion recognized in other comprehensive income (1)$(14,405)$19,396 $8,544 
Amount of gain (loss) related to the effective portion subsequently reclassified to earnings (2)$6,703 $6,707 $6,704 
Amount of gain (loss) relate do the ineffective portion and amount excluded from effectiveness testing$— $— $— 
_______________
(1)Includes the Company’s share of gain (loss) related to the effective portion of derivatives outstanding at its unconsolidated joint venture properties.
(2)Consists of amounts from previous interest rate programs.
BPLP has formally documented all of its relationships between hedge instruments and hedging items, as well as its risk-management objectives and strategy for undertaking various hedge transactions. While management believes its judgments are reasonable, a change in a derivative's effectiveness as a hedge could materially affect expenses, net income (loss) and equity.
Ineffective Hedging Instruments
During the year ended December 31, 2023, to satisfy a lender requirement, the Company entered into two agreements with the same third-party to purchase and sell a $600.0 million interest rate cap. The Company did not elect hedge accounting, and as such, any change in market value will be recognized in Losses from interest rate contracts in the Consolidated Statement of Operations. For the year ended December 31, 2023, the Company recognized approximately $79,000 of loss from entering into these agreements