Derivative Financial Instruments

3 Months Ended

Mar. 31, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]


6.	Derivative Financial Instruments

The Company may use derivative financial instruments, including interest rate swaps, caps, options, floors, and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with its borrowings. The principal objective of such arrangements is to minimize the risks and/or costs associated with the Company's operating and financial structure as well as to hedge specific anticipated transactions. The Company does not intend to utilize derivatives for speculative transactions or purposes other than mitigation of interest rate risk. 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 quality credit ratings. The Company does not anticipate that any of the counterparties will fail to meet their obligations.

The Company's objectives in using interest rate derivatives are to attempt to stabilize interest expense where possible and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily 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.

Detail on the Company's interest rate derivatives outstanding as of March 31, 2024 and December 31, 2023 is as follows:


	Number of Instruments
Interest Rate Swaps	March 31, 2024		December 31, 2023
Notional amount		323,678		294,928
Number of instruments		16		15

Detail on the fair value of the Company's interest rate derivatives as of March 31, 2024 and December 31, 2023 is as follows:


(in thousands)	Fair Value
Interest rate swaps classified as:	March 31, 2024			December 31, 2023
Derivative assets	$	16,711			14,213
Derivative liabilities		(393	)		(1,335	)

These derivative financial instruments are all interest rate swaps, which are designated and qualify as cash flow hedges. The Company does not use derivatives for trading or speculative purposes and, as of March 31, 2024, does not have any derivatives that are not designated as hedges.

The changes in the fair value of derivatives designated and qualifying as cash flow hedges are recorded in Accumulated other comprehensive income ("AOCI") and subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

The following table represents the effect of the derivative financial instruments on the accompanying Consolidated Financial Statements:


Location and Amount of Gain (Loss) Recognized in OCI on Derivative						Location and Amount of Gain (Loss) Reclassified from AOCI into Income							Total amounts presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded
	Three months ended March 31,						Three months ended March 31,							Three months ended March 31,
(in thousands)	2024		2023				2024			2023				2024		2023
Interest rate swaps	$	8,593		(2,736	)	Interest income	$	(2,367	)		(1,492	)	Interest expense, net	$	42,868		36,393

As of March 31, 2024, the Company expects approximately $6.4 million of accumulated comprehensive income on derivative instruments in AOCI, including the Company's share from its Investments in real estate partnerships, to be reclassified into earnings during the next 12 months.