XML 27 R17.htm IDEA: XBRL DOCUMENT v3.23.1
Derivative Financial Instruments
 3 Months Ended
Mar. 31, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments Derivative Financial Instruments
 
The Company enters into interest rate derivative contracts to manage exposure to interest rate risks. The Company does not use derivative financial instruments for trading or speculative purposes. Derivative financial instruments are recognized at fair value and presented within other assets and other liabilities in the condensed consolidated balance sheets. Gains and losses resulting from changes in the fair value of derivatives that are neither designated nor qualify as hedging instruments are recognized within the change in fair value of interest rate derivatives in the condensed consolidated statements of comprehensive income. For derivatives that qualify as cash flow hedges, the gain or loss is reported as a component of other comprehensive income (loss) and reclassified into earnings in the periods during which the hedged forecasted transaction affects earnings.

As of March 31, 2023, the Company had the following London Inter-Bank Offered Rate ("LIBOR"), SOFR, and Bloomberg Short-Term Bank Yield Index ("BSBY") interest rate caps ($ in thousands):
Effective DateMaturity DateNotional AmountStrike RatePremium Paid
3/4/20214/1/2023$14,479 
2.50% (LIBOR)
$4 
11/1/202011/1/202384,375 
(a)
1.84% (SOFR)
91 
7/1/20221/1/202450,000 
(a)
1.00%-3.00% (SOFR)
(b)
143 
(c)
7/5/20221/1/202435,100 
(a)
1.00%-3.00% (SOFR)
(b)
120 
(c)
1/11/20222/1/2024175,000 
4.00% (BSBY)
(e)
154 
4/7/20222/1/2024175,000 
(a)
1.00%-3.00% (BSBY)
(b) (e)
3,595 
7/6/20223/1/2024200,000 
(a)
1.00%-3.00% (SOFR)
(b)
352 
(c)
9/1/20229/1/202432,822 
(a)(d)
1.00%-3.00% (SOFR)
(b)
1,370 
Total$766,776 $5,829 
________________________________________
(a) Designated as a cash flow hedge.
(b) The Company purchased interest rate caps at 1.00% and sold interest rate caps at 3.00%, resulting in interest rate cap corridors of 1.00% and 3.00%. The intended goal of these corridors is to provide a level of protection from the effect of rising interest rates and reduce the all-in cost of the derivative instrument.
(c) This amount represents the sum of the premiums paid on the original instruments. The caps were blended and extended for a net zero premium during the year ended December 31, 2022.
(d) Represents the notional amount as of March 31, 2023. The notional amount is scheduled to increase over the term of the corridor in accordance with projected borrowings on the associated loan. The maximum notional amount that will eventually be in effect is $73.6 million.
(e) Effective April 4, 2023, these interest rate caps were terminated and replaced with a floating-to-fixed interest rate swap, effective April 3, 2023, with a notional amount of $175.0 million and SOFR rate of 1.84%. The interest rate swap will expire on February 1, 2024. The Company did not pay a premium for this transaction.

As of March 31, 2023, the Company held the following floating-to-fixed interest rate swaps ($ in thousands):
Related DebtNotional AmountIndexSwap Fixed RateDebt effective rateEffective DateExpiration Date
Senior unsecured term loan$50,000 1-month LIBOR2.78 %4.08 %5/1/20185/1/2023
Senior unsecured term loan32,706 
(a)
1-month SOFR
(b)
2.17 %3.47 %4/1/20198/10/2023
Senior unsecured term loan10,500 
(a)
1-month LIBOR3.02 %4.32 %10/12/201810/12/2023
Senior unsecured term loan25,000 
(a)
1-month LIBOR0.50 %1.80 %4/1/20204/1/2024
Senior unsecured term loan25,000 
(a)
1-month LIBOR0.50 %1.80 %4/1/20204/1/2024
Senior unsecured term loan25,000 
(a)
Daily SOFR
(c)
0.44 %1.74 %4/1/20204/1/2024
Thames Street Wharf68,969 
(a)
1-month BSBY
(d)
1.05 %2.35 %9/30/20219/30/2026
M&T unsecured term loan100,000 1-month SOFR3.50 %4.80 %12/6/202212/6/2027
Senior unsecured term loan100,000 1-month SOFR3.43 %4.73 %12/13/20221/21/2028
Total$437,175 
________________________________________
(a) Designated as a cash flow hedge.
(b) Effective February 1, 2023, this swap was amended to reference the 1-month SOFR index. Prior to the amendment, the swap referenced the 1-month LIBOR index.
(c) Effective February 1, 2023, this swap was amended to reference the Daily SOFR index. Prior to the amendment, the swap referenced the 1-month LIBOR index.
(d) Effective April 3, 2023, this swap was amended to reference the Daily SOFR index with a fixed rate of 0.93%.

For the interest rate swaps and caps designated as cash flow hedges, realized gains and losses are reclassified out of accumulated other comprehensive gain (loss) to interest expense in the condensed consolidated statements of comprehensive income due to payments received from and paid to the counterparty. During the next 12 months, the Company anticipates recognizing approximately $10.4 million of net hedging gains as reductions to interest expense. These amounts will be reclassified from accumulated other comprehensive gain into earnings to offset the variability of the hedged items during this period.

The Company’s derivatives were comprised of the following as of March 31, 2023 and December 31, 2022 (in thousands): 
 March 31, 2023December 31, 2022
 Notional
Amount		Fair ValueNotional
Amount		Fair Value
 AssetLiability AssetLiability
Derivatives not designated as accounting hedges
Interest rate swaps$250,000 $91 $(990)$250,000 $2,201 $— 
Interest rate caps189,479 1,398 — 289,479 2,102 — 
Total derivatives not designated as accounting hedges439,479 1,489 (990)539,479 4,303 — 
Derivatives designated as accounting hedges
Interest rate swaps187,175 9,267 — 187,670 11,247 — 
Interest rate caps577,297 10,582 — 561,200 13,565 — 
Total derivatives$1,203,951 $21,338 $(990)$1,288,349 $29,115 $— 

The changes in the fair value of the Company’s derivatives during the three months ended March 31, 2023 and 2022 were comprised of the following (in thousands): 
 Three Months Ended March 31,
 20232022
Interest rate swaps$(3,502)$6,757 
Interest rate caps(728)5,182 
Total change in fair value of interest rate derivatives$(4,230)$11,939 
Comprehensive income statement presentation:
Change in fair value of derivatives and other$(3,804)$4,217 
Unrealized cash flow hedge gains (losses)(426)7,722 
Total change in fair value of interest rate derivatives$(4,230)$11,939