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DERIVATIVE INSTRUMENTS
3 Months Ended
Mar. 31, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE INSTRUMENTS DERIVATIVE INSTRUMENTS
The Company enters into derivative instruments for risk management purposes to hedge its exposure to cash flow variability caused by changing interest rates. The primary goal of the Company’s risk management practices related to interest rate risk is to prevent changes in interest rates from adversely impacting the Company’s ability to achieve its investment return objectives. The Company does not enter into derivatives for speculative purposes.
The Company enters into interest rate swaps as a fixed rate payer to mitigate its exposure to rising interest rates on its variable rate notes payable. The value of interest rate swaps is primarily impacted by interest rates, market expectations about interest rates, and the remaining life of the instrument. In general, increases in interest rates, or anticipated increases in interest rates, will increase the value of the fixed rate payer position and decrease the value of the variable rate payer position. As the remaining life of the interest rate swap decreases, the value of both positions will generally move towards zero.
The Company enters into interest rate caps to mitigate its exposure to rising interest rates on its variable rate notes payable. The values of interest rate caps are primarily impacted by interest rates, market expectations about interest rates, and the remaining life of the instrument. In general, increases in interest rates, or anticipated increases in interest rates, will increase the value of interest rate caps. As the remaining life of an interest rate cap decreases, the value of the instrument will generally decrease towards zero.
As of March 31, 2024, the Company has entered into 14 interest rate swaps, which were not designated as hedging instruments. The following table summarizes the notional amount and other information related to the Company’s interest rate swaps as of March 31, 2024 and December 31, 2023. The notional amount is an indication of the extent of the Company’s involvement in each instrument at that time, but does not represent exposure to credit, interest rate or market risks (dollars in thousands):
 March 31, 2024December 31, 2023 Weighted-Average Fix Pay RateWeighted-Average Remaining Term in Years
Derivative InstrumentsNumber of InstrumentsNotional AmountNumber of InstrumentsNotional Amount
Reference Rate as of March 31, 2024
Derivative instruments not designated as hedging instruments
Interest rate swaps (1)
14$1,100,000 16$1,300,000 
Fallback SOFR (2)/
Fixed at 1.08% - 1.28%
One-month Term SOFR/
Fixed at 2.38% - 3.92%
3.1%2.1
Interest rate cap (3)
$— 1$125,000 
(3)
(3)
(3)
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(1) In February 2024, the Company terminated two interest rate swap agreements and received aggregate settlement payments of $6.6 million.
(2) Upon cessation of one-month LIBOR on June 30, 2023, eight of the Company’s interest rate swaps which bore interest at one-month LIBOR were automatically converted to a fallback rate (“Fallback SOFR”) plus a 11.448 basis point adjustment. As of March 31, 2024, the Company had two interest rate swaps which had been converted to Fallback SOFR, all with a maturity date of January 1, 2025.
(3) The interest rate cap expired in January 2024.
The following table sets forth the fair value of the Company’s derivative instruments as well as their classification on the consolidated balance sheets as of March 31, 2024 and December 31, 2023 (dollars in thousands):
March 31, 2024December 31, 2023
Derivative InstrumentsBalance Sheet LocationNumber of InstrumentsFair ValueNumber of InstrumentsFair Value
Derivative instruments not designated as hedging instruments
Interest rate swaps
Prepaid expenses and other assets, at fair value
14$26,246 15$23,891 
Interest rate swaps
Other liabilities, at fair value
$— 1$(175)
Interest rate cap
Prepaid expenses and other assets, at fair value
$— 1$— 
The following table summarizes the effects of derivative instruments on the Company’s consolidated statements of operations (in thousands):
 For the Three Months Ended
March 31,
 20242023
Derivatives not designated as hedging instruments
Realized gain recognized on interest rate swaps$(7,070)$(6,636)
Unrealized (gain) loss on interest rate swaps (1)
(8,904)13,650 
Gains related to swap terminations(178)— 
Unrealized loss on interest rate cap— 24 
Net (gain) loss on derivative instruments$(16,152)$7,038 
_____________________
(1) For the three months ended March 31, 2023, unrealized (gain) loss on interest rate swaps included a $2.5 million unrealized loss related to the change in fair value of two off-market interest rate swaps (which expired on November 2, 2023) determined to be hybrid financial instruments for which the Company elected to apply the fair value option.