Derivative and Hedging Activities

12 Months Ended

Dec. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The Company does not enter into derivative financial instruments for speculative or trading purposes. The Company's objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

These derivatives are considered cash flow hedges and are recorded on a gross basis at fair value. Subsequent to the adoption of ASU 2017-12, assessments of hedge effectiveness are performed quarterly using either a qualitative or quantitative approach. The Company recognizes the entire change in the fair value in accumulated other comprehensive income (loss) and the change is reflected as derivative changes in fair value in the supplemental disclosures of non-cash financing activities in the consolidated statements of cash flows. The amounts recorded in accumulated other comprehensive income (loss) will subsequently be reclassified to interest expense as interest payments are made on the Company's borrowings under its variable-rate term loan facilities. During the next twelve months, the Company estimates that $26.6 million will be reclassified from accumulated other comprehensive income as a decrease to interest expense. The Company does not have netting arrangements related to its derivatives.

The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, the Company only enters into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which the Company and its affiliates may also have other financial relationships. The Company does not anticipate that any of the counterparties will fail to meet their obligations. As of December 31, 2022 and 2021, there were no events of default related to the Company's derivative financial instruments.

The following table summarizes the notional amount at inception and fair value of these instruments on the Company's balance sheets as of December 31, 2022 and 2021 (dollar amounts in thousands):


						Fair Value of Asset/(Liability)(3)(4)
Derivatives Designated as Hedging Instruments	Fixed Rate Paid by Company	Effective Date	Maturity Date	Notional Value (2)		December 31, 2022		December 31, 2021
Interest Rate Swap (1)	1.96%	5/14/2019	4/12/2024	$	100,000	$	3,545	$	(2,747)
Interest Rate Swap (1)	1.95%	5/14/2019	4/12/2024	50,000		1,781		(1,374)
Interest Rate Swap (1)	1.94%	5/14/2019	4/12/2024	50,000		1,777		(1,377)
Interest Rate Swap (1)	1.52%	12/9/2019	11/26/2026	175,000		14,685		(3,444)
Interest Rate Swap (1)	1.51%	12/9/2019	11/26/2026	50,000		4,248		(996)
Interest Rate Swap (1)	1.49%	12/9/2019	11/26/2026	25,000		2,120		(481)
Interest Rate Swap (1)	1.26%	7/9/2020	11/26/2026	100,000		9,324		(790)
Interest Rate Swap (1)	1.28%	7/9/2020	11/26/2026	80,000		7,418		(629)
Interest Rate Swap	3.19%	9/26/2022	1/25/2028	50,000		1,166		—
Interest Rate Swap	3.35%	9/26/2022	1/25/2028	50,000		804		—
Interest Rate Swap	3.36%	9/26/2022	1/25/2028	25,000		387		—
Interest Rate Swap	3.43%	9/26/2022	1/25/2028	50,000		612		—
Interest Rate Swap	3.71%	9/26/2022	1/25/2028	50,000		(12)		—
Interest Rate Swap	3.70%	9/26/2022	1/25/2028	25,000		(15)		—
Interest Rate Swap	4.00%	10/26/2022	1/25/2028	50,000		(693)		—
Interest Rate Swap	3.95%	11/28/2022	1/25/2028	25,000		(293)		—
Interest Rate Swap	4.03%	11/28/2022	1/25/2028	25,000		(396)		—
Interest Rate Swap	4.06%	11/28/2022	1/25/2028	25,000		(427)		—
Interest Rate Swap	4.07%	11/28/2022	1/25/2028	25,000		(428)		—
				$	1,030,000	$	45,603	$	(11,838)

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(1)In June 2022, the Company converted the reference rate used in these interest rate swaps from 1-month LIBOR to 1-month Adjusted Term SOFR.

(2)Notional value indicates the extent of the Company’s involvement in these instruments, but does not represent exposure to credit, interest rate or market risks.

(3)Derivatives in a liability position totaling $2.3 million as of December 31, 2022 are included within derivative liabilities in the Company’s consolidated balance sheets.

(4)Derivatives in an asset position totaling to $47.9 million as of December 31, 2022 are included within derivative assets in the Company’s consolidated balance sheets.

The Company has agreements with each of its derivative counterparties that contain a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.

In May 2021, in anticipation of the issuance of the 2031 Notes (which was completed in June 2021), the Company entered into a treasury rate lock agreement which was designated as a cash flow hedge associated with $330.0 million of principal. In June 2021, the agreement was settled in accordance with its terms. The Company recorded a deferred loss of $4.8 million from the settlement of this treasury rate lock agreement, which was recognized as a component of other comprehensive income (loss) in the Company's consolidated statements of comprehensive income/(loss) for the year ended December 31, 2021.

The following table presents amounts recorded to accumulated other comprehensive income/loss related to derivative and hedging activities for the periods presented:


	Year ended December 31,
(in thousands)	2022		2021		2020
Accumulated other comprehensive income (loss)	$	56,762	$	22,508	$	(35,445)

As of December 31, 2022, the fair value of derivatives in a net asset position including accrued interest but excluding any adjustment for nonperformance risk related to these agreements was $48.2 million. As of

December 31, 2022, 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 $2.4 million.

As of December 31, 2021, 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 $11.9 million. As of December 31, 2021, there were no derivatives in a net asset position.

During the year ended December 31, 2022, the Company recorded a gain on the change in fair value of its interest rate swaps of approximately $26,000 and during the years ended December 31, 2021 and 2020, the Company recorded a loss on the change in fair value of its interest rate swaps of $10.1 million and $6.7 million, respectively. These gains and losses are included in interest expense in the Company's consolidated statements of operations for the respective periods.

As of December 31, 2022 and December 31, 2021, the Company had not posted any collateral related to these agreements and was not in breach of any provisions of such agreements. 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, which were a $45.9 million asset and $11.9 million liability as of December 31, 2022 and 2021, respectively.