Derivative Instruments

6 Months Ended

Jun. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Note 6. Derivative Instruments

Interest Rate Derivatives

Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish this objective, we use interest rate swaps and caps as part of our interest rate risk management strategy. The effective portion of the change in the fair value of the derivative that qualifies as a cash flow hedge is recorded in accumulated other comprehensive income (loss) (“AOCI”) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate debt.

Interest rate derivatives not designated as hedges for GAAP are not speculative and are used to manage our exposure to interest rate movements and other identified risks but we have elected not to apply hedge accounting. Changes in the fair value of interest rate derivatives not designated in hedging relationships are recorded in derivative fair value adjustment within our consolidated statements of operations.

The following table summarizes the terms of our derivative financial instruments as of June 30, 2023:


	Notional Amount	Strike	Effective Date	Maturity Date
Interest Rate Derivative:
CDOR Swap - Burlington Loan (1)	$16,005,000	4.02%	September 27, 2022	September 20, 2025
CDOR Swap - Cambridge Loan (1)	$15,095,000	3.83%	December 20, 2022	December 22, 2025
CDOR Swap - North York Loan (1)	$25,000,000	3.79%	January 31, 2023	February 2, 2026
SOFR Swap - Huntington Credit Facility I (2)	$38,000,000	4.01%	April 12, 2023	November 28, 2025
SOFR Swap - Huntington Credit Facility II (2)	$22,000,000	4.01%	April 12, 2023	November 28, 2025
SOFR Cap - Huntington Credit Facility (2)	$47,574,000	2.60%	April 13, 2023	November 28, 2025
CDOR Swap - Bank of Montreal Loan (1)	$21,625,000	4.47%	May 4, 2023	May 4, 2026
CDOR Swap - Ontario Loan (3)	$127,200,000	4.73%	June 15, 2023	June 15, 2026

(1)

Notional amount is denominated in CAD and has been designated as a cash flow hedge.

(2)

Notional amount is denominated in USD and has been designated as a cash flow hedge.

(3)

Notional amount is denominated in CAD and we have elected not to apply hedge accounting.

The following table presents a gross presentation of the fair value of our derivative financial instruments as well as their classification on our consolidated balance sheets:


	Asset/Liability Derivatives Fair Value
	June 30, 2023		December 31, 2022
Interest Rate Derivatives
Other assets	$	4,002,624	$	126,864
Accounts payable and accrued liabilities		104,453		—

The following table presents the effects of our derivative financial instruments on our consolidated statements of operations for the periods presented:


	Location of amounts reclassified from OCI into income
	Gain (loss) recognized in OCI					Gain (loss) reclassified from OCI
	Three Months Ended June 30,
Type	2023		2022			2023		2022
Interest Rate Swaps	$	2,012,970	$	—	Interest Expense	$	266,325	$	—
Interest Rate Caps	$	663,616	$	—	Interest Expense	$	98,841	$	—
	$	2,676,586	$	—		$	365,166	$	—


	Location of amounts reclassified from OCI into income
	Gain (loss) recognized in OCI					Gain (loss) reclassified from OCI
	For the Six Months Ended June 30,
Type	2023		2022			2023		2022
Interest Rate Swaps	$	1,938,251	$	—	Interest Expense	$	353,498	$	—
Interest Rate Caps	$	663,616	$	—	Interest Expense	$	98,841	$	—
	$	2,601,867	$	—		$	452,339	$	—

Based upon the forward rates in effect as of June 30, 2023, we estimate that approximately $2.0 million related to our qualifying cash flow hedges will be reclassified to reduce interest expense during the next 12 months.