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Financial Instruments: Derivatives and Hedging
 6 Months Ended
Jun. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Financial Instruments: Derivatives and Hedging Financial Instruments: Derivatives and Hedging
In the normal course of business, we use a variety of commonly used derivative instruments, such as interest rate swaps, caps, collars and floors, to manage, or hedge interest rate risk. We hedge our exposure to variability in future cash flows for forecasted transactions in addition to anticipated future interest payments on existing debt. We recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges are adjusted to fair value through earnings. If a derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the hedge asset, liability, or firm commitment through earnings, or recognized in other comprehensive income (loss) until the hedged item is recognized in earnings. Reported net income and equity may increase or decrease prospectively, depending on future levels of interest rates and other variables affecting the fair values of derivative instruments and hedged items, but will have no effect on cash flows. Currently, all of our designated derivative instruments are effective hedging instruments.
The following table summarizes the notional value at inception and fair value of our consolidated derivative financial instruments as of June 30, 2023 based on Level 2 information. The notional value is an indication of the extent of our involvement in these instruments at that time, but does not represent exposure to credit, interest rate or market risks (dollars in thousands).
Notional
Value		Strike
Rate		Effective
Date		Expiration
Date		Balance Sheet LocationFair
Value
Interest Rate Swap$100,000 1.063 %November 2021July 2023Other Assets$336 
Interest Rate Swap200,000 1.033 %November 2021July 2023Other Assets677 
Interest Rate Cap600,000 4.080 %September 2022September 2023Other Liabilities(1,413)
Interest Rate Cap50,000 3.386 %April 2023September 2023Other Assets219 
Interest Rate Swap200,000 4.739 %November 2022November 2023Other Assets402 
Interest Rate Cap196,717 3.500 %November 2022November 2023Other Assets1,315 
Interest Rate Cap196,717 3.500 %November 2022November 2023Other Liabilities(1,313)
Interest Rate Swap150,000 2.600 %December 2021January 2024Other Assets2,043 
Interest Rate Swap200,000 4.490 %November 2022January 2024Other Assets813 
Interest Rate Swap200,000 4.411 %November 2022January 2024Other Assets893 
Interest Rate Cap370,000 3.250 %June 2023June 2024Other Assets7,125 
Interest Rate Cap370,000 3.250 %June 2023June 2024Other Liabilities(7,100)
Interest Rate Swap150,000 2.621 %December 2021January 2026Other Assets6,549 
Interest Rate Swap200,000 2.662 %December 2021January 2026Other Assets8,587 
Interest Rate Swap100,000 2.903 %February 2023February 2027Other Assets4,055 
Interest Rate Swap100,000 2.733 %February 2023February 2027Other Assets4,619 
Interest Rate Swap50,000 2.463 %February 2023February 2027Other Assets2,758 
Interest Rate Swap200,000 2.591 %February 2023February 2027Other Assets10,184 
Interest Rate Swap300,000 2.866 %July 2023May 2027Other Assets12,153 
Interest Rate Swap150,000 3.524 %January 2024May 2027Other Assets1,497 
Interest Rate Swap370,000 3.888 %November 2022June 2027Other Assets2,051 
Interest Rate Swap100,000 3.756 %January 2023January 2028Other Assets784 
$57,234 
During the three and six months ended June 30, 2023, we recorded a loss of $0.4 million and $0.2 million based on the changes in the fair value of an interest rate cap we sold, which is included in Purchase price and other fair value adjustments in the consolidated statements of operations. No interest rate caps were sold during the three and six months ended June 30, 2022. During the three and six months ended June 30, 2023, we recorded a loss of $0.1 million and $0.1 million on the changes in fair value, which is included in interest expense in the consolidated statements of operations. No gains or losses on the changes in fair value were included in interest expense in the consolidated statements of operations during the three and six months ended June 30, 2022.
Certain agreements the Company has with each of its derivative counterparties contain a provision where if the Company defaults on any of its indebtedness, then the Company could also be declared in default on its derivative obligations. As of June 30, 2023, the fair value of derivatives in a net liability position, including accrued interest but excluding any adjustment for nonperformance risk related to these agreements, was $10.8 million. As of June 30, 2023, the Company was not required to post any collateral related to these agreements and was not in breach of any agreement provisions. If the Company had breached any of these provisions, it could have been required to settle its obligations under the agreements at their aggregate termination value of $10.8 million as of June 30, 2023.
Gains and losses on terminated hedges are included in accumulated other comprehensive income, and are recognized into earnings over the term of the related mortgage obligation. Over time, the realized and unrealized gains and losses held in accumulated other comprehensive income will be reclassified into earnings as an adjustment to interest expense in the same periods in which the hedged interest payments affect earnings. We estimate that ($49.2 million) of the current balance held in accumulated other comprehensive income will be reclassified into interest expense and ($15.1 million) of the portion related to our share of joint venture accumulated other comprehensive income will be reclassified into equity in net loss from unconsolidated joint ventures within the next 12 months.
The following table presents the effect of our derivative financial instruments and our share of our joint ventures' derivative financial instruments that are designated and qualify as hedging instruments on the consolidated statements of operations for the three months ended June 30, 2023 and 2022, respectively (in thousands):
 Amount of Gain Recognized in
Other Comprehensive (Loss) Income		Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into IncomeAmount of Gain Reclassified from
Accumulated Other
Comprehensive Income into Income
Three Months Ended June 30,Three Months Ended June 30,
Derivative2023202220232022
Interest Rate Swaps/Caps$45,626 $11,333 Interest expense$10,598 $(1,868)
Share of unconsolidated joint ventures' derivative instruments11,036 3,289 Equity in net loss from unconsolidated joint ventures4,742 (833)
$56,662 $14,622 $15,340 $(2,701)
The following table presents the effect of our derivative financial instruments and our share of our joint ventures' derivative financial instruments that are designated and qualify as hedging instruments on the consolidated statements of operations for the six months ended June 30, 2023 and 2022, respectively (in thousands):
 Amount of Gain Recognized in
Other Comprehensive (Loss) Income		Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into IncomeAmount of Gain Reclassified from
Accumulated Other
Comprehensive Income into Income
Six Months Ended June 30,Six Months Ended June 30,
Derivative2023202220232022
Interest Rate Swaps/Caps$27,713 $39,711 Interest expense$19,621 $(5,734)
Share of unconsolidated joint ventures' derivative instruments9,541 13,596 Equity in net loss from unconsolidated joint ventures7,370 (1,849)
$37,254 $53,307 $26,991 $(7,583)
The following table summarizes the notional value at inception and fair value of our joint ventures' derivative financial instruments as of June 30, 2023 based on Level 2 information. The notional value is an indication of the extent of our involvement in these instruments at that time, but does not represent exposure to credit, interest rate or market risks (dollars in thousands).
Notional
Value		Strike
Rate		Effective
Date		Expiration
Date		ClassificationFair
Value
Interest Rate Cap$272,000 4.000 %July 2022August 2023Asset$338 
Interest Rate Cap444,711 3.500 %September 2022September 2023Asset1,588 
Interest Rate Cap1,075,000 4.080 %September 2022September 2023Asset2,461 
Interest Rate Cap125,000 4.080 %September 2022September 2023Asset286 
Interest Rate Cap220,000 4.000 %February 2023February 2024Asset1,784 
Interest Rate Cap378,467 0.490 %February 2022May 2024Asset18,340 
Interest Rate Cap378,467 0.490 %February 2022May 2024Asset18,339 
Interest Rate Cap505,412 3.000 %June 2023June 2024Asset10,966 
Interest Rate Swap250,000 3.608 %April 2023February 2026Asset5,095 
Interest Rate Swap250,000 3.608 %April 2023February 2026Asset5,095 
Interest Rate Swap177,000 1.555 %December 2022February 2026Asset12,603 
$76,895