Derivatives

6 Months Ended

Jun. 30, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

16. Derivatives

The Company uses derivative financial instruments to minimize the risks and costs associated with the Company's investments and financing transactions. The Company has not designated any of its derivative financial instruments as hedges as defined under GAAP. Derivatives not designated as hedges are not speculative and are used to manage the Company's exposure to interest rate movements and other identified risks.

The use of derivative financial instruments involves certain risks, including the risk that counterparties do not perform as agreed. To mitigate this risk, the Company enters into derivative financial instruments with counterparties it believes to have appropriate credit ratings and that are major financial institutions with which the Company and its affiliates may also have other financial relationships.

Interest Rate Contracts

Certain of the Company's transactions expose the Company to interest rate risk on loans secured by the Company's real estate. The Company uses derivative financial instruments, which includes Treasury note futures contracts and interest rate swaps, to limit the Company's exposure to interest rate fluctuations.

The following table details the Company's outstanding Treasury note futures contracts that were non-designated hedges of interest rate risk (notional amount in thousands):

	June 30, 2024
Treasury note futures contracts	Number of Contracts		Notional Amount		Commencement Date	Maturity Date
5-year Treasury note futures		217	$	22,951	May 23, 2024	September 30, 2024
2-year Treasury note futures		33		6,719	May 23, 2024	September 30, 2024

The following table details the Company’s outstanding interest rate swap that was a non-designated hedge of interest rate risk (notional amount in thousands):

	June 30, 2024
Interest rate swap	Number of Instruments		Notional Amount		Strike Rate	Index	Maturity (Years)		Commencement Date	Maturity Date
Interest rate swap – mortgage notes		1	$	10,000	4.21%	SOFR		4.3	April 2, 2024	October 2, 2028

The following table details the fair value of the Company's derivative financial instruments ($ in thousands):

	Fair Value of Derivatives(1)
	June 30, 2024			December 31, 2023
5-year Treasury note futures	$	(24	)	$	20
2-year Treasury note futures		(1	)		2
Interest rate swap		(101	)		—

(1) The derivative asset balance as of December 31, 2023 is included in other assets, net on the Company's Consolidated Balance Sheets. The derivative liability balance as of June 30, 2024 is included in accounts payable, accrued expenses and other liabilities.

For the three and six months ended June 30, 2024, the Company recorded an unrealized gain related to changes in the fair value of its derivative financial instruments of $0.03 million and an unrealized loss of $0.5 million, respectively. Changes in fair value of the Company's derivative financial instruments are recorded within other income (expense), net on the Consolidated Statements of Operations. During the three and six months ended June 30, 2024, the Company recorded a realized loss of $0.4 million and $0.4 million related to sales of its derivative financial instruments. Realized gain (loss) from the sale of the Company’s derivative financial instruments is recorded within other income, net on the Consolidated Statements of Operations. For the three and six months ended June 30, 2023, the Company did not have any derivative financial instruments.