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Financial Instruments: Derivatives and Hedging
 9 Months Ended
Sep. 30, 2024
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, including, but not limited to, interest rate swaps, caps, collars and floors, to manage 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 September 30, 2024 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 Cap$205,000 4.000 %February 2024February 2025Other Assets$395 
Interest Rate Cap370,000 3.250 %June 2024June 2025Other Assets2,287 
Interest Rate Cap370,000 3.250 %June 2024June 2025Other Liabilities(2,275)
Interest Rate Cap68,678 4.000 %August 2024July 2025Other Liabilities(161)
Interest Rate Swap150,000 2.621 %December 2021January 2026Other Assets1,870 
Interest Rate Swap200,000 2.662 %December 2021January 2026Other Assets2,393 
Interest Rate Swap125,000 3.667 %August 2024December 2026Other Liabilities(826)
Interest Rate Swap125,000 3.670 %August 2024December 2026Other Liabilities(841)
Interest Rate Swap100,000 2.903 %February 2023February 2027Other Assets991 
Interest Rate Swap100,000 2.733 %February 2023February 2027Other Assets1,374 
Interest Rate Swap50,000 2.463 %February 2023February 2027Other Assets992 
Interest Rate Swap200,000 2.591 %February 2023February 2027Other Assets3,391 
Interest Rate Swap300,000 2.866 %July 2023May 2027Other Assets3,333 
Interest Rate Swap150,000 3.524 %January 2024May 2027Other Liabilities(792)
Interest Rate Swap370,000 3.888 %November 2022June 2027Other Liabilities(5,513)
Interest Rate Swap68,678 4.466 %August 2024June 2027Other Liabilities(2,076)
Interest Rate Swap300,000 4.487 %November 2024November 2027Other Liabilities(10,723)
Interest Rate Swap100,000 3.756 %January 2023January 2028Other Liabilities(1,482)
Interest Rate Swap204,963 3.915 %February 2025May 2028Other Liabilities(4,683)
$(12,346)
During the three and nine months ended September 30, 2024, we recorded a loss of $9.2 million and $2.8 million, respectively, based on the changes in the fair value of forward-starting interest rate swaps, which is included in Purchase price and other fair value adjustments in the consolidated statements of operations. During the three and nine months ended September 30, 2023, we recorded a loss of $0.0 million and $0.2 million, respectively, 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. During the three and nine months ended September 30, 2024, we recorded a gain of $0.2 million and $0.1 million, respectively, on the changes in fair value, which is included in interest expense in the consolidated statements of operations. During the three and nine months ended September 30, 2023, we recorded a loss of $0.0 million and $0.2 million, respectively, on the changes in fair value, which is included in interest expense in the consolidated statements of operations.
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 September 30, 2024, 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 ($29.7 million). As of September 30, 2024, 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 $31.0 million as of September 30, 2024.
Gains and losses on terminated hedges are included in accumulated other comprehensive income, and are recognized into earnings over the term of the related 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 ($11.2 million) of the current balance held in accumulated other comprehensive income will be reclassified into interest expense and $1.3 million of the portion related to our share of joint venture accumulated other comprehensive income will be reclassified into equity in net loss from unconsolidated joint ventures within the next 12 months.
The following table presents the effect of our derivative financial instruments and our share of our joint ventures' derivative financial instruments that are designated and qualify as hedging instruments on the consolidated statements of operations for the three months ended September 30, 2024 and 2023, respectively (in thousands):
 Amount of Gain Recognized in
Other Comprehensive (Loss) Income		Location of Gain Reclassified from Accumulated Other Comprehensive (Loss) Income into IncomeAmount of Gain Reclassified from
Accumulated Other
Comprehensive (Loss) Income into Income
Three Months Ended September 30,Three Months Ended September 30,
Derivative2024202320242023
Interest Rate Swaps/Caps$(38,205)$24,910 Interest expense$10,248 $11,422 
Share of unconsolidated joint ventures' derivative instruments(19,493)3,927 Equity in net (loss) income from unconsolidated joint ventures4,222 4,616 
$(57,698)$28,837 $14,470 $16,038 
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 nine months ended September 30, 2024 and 2023, respectively (in thousands):
 Amount of Gain Recognized in
Other Comprehensive (Loss) Income		Location of Gain Reclassified from Accumulated Other Comprehensive (Loss) Income into IncomeAmount of Gain Reclassified from
Accumulated Other
Comprehensive (Loss) Income into Income
Nine Months Ended September 30,Nine Months Ended September 30,
Derivative2024202320242023
Interest Rate Swaps/Caps$4,143 $52,624 Interest expense$29,746 $31,043 
Share of unconsolidated joint ventures' derivative instruments(11,951)13,467 Equity in net (loss) income from unconsolidated joint ventures11,498 11,986 
$(7,808)$66,091 $41,244 $43,029 
The following table summarizes the notional value at inception and fair value of our joint ventures' derivative financial instruments as of September 30, 2024 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$312,783 4.000 %May 2024November 2024Asset$294 
Interest Rate Cap312,783 4.000 %May 2024November 2024Asset294 
Interest Rate Cap285,000 4.000 %August 2024July 2025Asset671 
Interest Rate Swap250,000 3.608 %April 2023February 2026Liability(67)
Interest Rate Swap250,000 3.608 %April 2023February 2026Liability(67)
Interest Rate Swap177,000 1.555 %December 2022February 2026Asset4,836 
Interest Rate Swap268,750 4.039 %July 2024September 2028Liability(7,984)
Interest Rate Swap268,750 4.058 %July 2024September 2028Liability(8,176)
Interest Rate Swap537,500 4.065 %July 2024September 2028Liability(16,710)
$(26,909)