DERIVATIVE FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2023

DERIVATIVE FINANCIAL INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTS

NOTE 13. DERIVATIVE FINANCIAL INSTRUMENTS

Cash Flow Hedges of Interest Rate Risk

The Partnership’s objectives in using rate derivatives are to manage its exposure to interest rate movements. To accomplish this objective, the Partnership 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 amounts from a counterparty in exchange for the Partnership making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

The changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Partnership’s variable rate debt. During the next 12 months, the Partnership estimates $143,000 will be reclassified as a decrease to interest expense.

As of September 30, 2023, the Partnership had one interest rate swap outstanding with a notional amount of approximately $560,000 designated as cash flow hedges of interest rate risk. As of September 30, 2023, the Partnership did not have any interest rate derivatives in a net liability position.

The table below presents the fair value of the Partnership’s derivative financial instruments as well as their classification on the consolidated balance sheets as of September 30, 2023 and 2022.

	Fair Value
Asset Derivatives designated	September 30,		December 31,
as hedging instruments	2023		2022		Balance sheet location
Interest rate swaps	$	560,278	$	294,931	Prepaid Expenses and Other Assets

The table below presents the effect the Partnership’s derivative financial instruments on the consolidated statements of income for the quarters ended September 30, 2023 and 2022.

					Location of Gain
					or (Loss)	Amount of Gain					Total Amount of
					Reclassified	or (Loss)				Location of Gain	Interest Expense
	Amount of Gain				from	Reclassified				or (Loss) Recognized	presented in the
Derivatives in Cash Flow	or (Loss) Recognized				Accumulated	from Accumulated				in Income on	consolidated statements
Hedging Relationships	in OCI on Derivative				OCI Into Income	OCI into Income				Derivative	of operations
Three Months Ended September 30,	2023		2022			2023		2022			2023		2022
Interest rate swaps	$	263,232	$	—	Interest expense	$	—	$	—	Interest and other investment income (loss)	$	(3,956,182)	$	(3,982,445)
Nine Months Ended September 30,
Interest rate swaps	$	265,347	$	—	Interest expense	$	—	$	—	Interest and other investment income (loss)	$	(11,781,285)	$	(11,060,795)