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Fair Value of Financial Instruments
6 Months Ended
Jun. 30, 2024
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments
6. Fair Value of Financial Instruments
Fair value measurements are based on assumptions that market participants would use in pricing an asset or a liability. The hierarchy for inputs used in measuring fair value is as follows:
Level 1 Inputs – quoted prices in active markets for identical assets or liabilities
Level 2 Inputs – observable inputs other than quoted prices in active markets for identical assets and liabilities
Level 3 Inputs – unobservable inputs
In September 2019
, the Company entered into a London Interbank Offered Rate (“LIBOR”) interest rate swap for a notional amount of $
50.0
 million. In January 2023, the Company amended the $
50.0
 million interest rate swap to transition from LIBOR to daily-simple SOFR. The Company applied the practical expedients available for hedging relationships under the reference rate reform guidance, which preserves the presentation of the derivative consistent with past presentation and does not result in dedesignation of the hedging relationship. The interest rate swap effectively fixes the SOFR component of the corresponding loan at approximately
1.17
% for the remainder of the five-year term.
In January 2023
, the Company entered into an interest rate swap for a notional amount of $25.0 million. The interest rate swap effectively fixes the SOFR component of the corresponding loan at approximately 3.90% for the three-year term.
In February 2023
, the Company entered into an interest rate swap for a notional amount of $140.0 million. The interest rate swap effectively fixes the SOFR component of the corresponding loan at approximately 4.19%
for the three-year term.
In August 2023
, the Company entered into an interest rate swap at FRP Collection for an initial notional amount of $26.3 million. The interest rate swap effectively fixes the SOFR component of the corresponding loan at approximately 4.30% for the five-year term. The notional amount of the interest rate swap amortizes over the term consistent with the balance of the corresponding loan.
 
In August 2023
, the Company entered into an interest rate swap at Carillon Point for an initial notional amount of $14.5 million. The interest rate swap effectively fixes the SOFR component of the corresponding loan at approximately 4.30% for the five-year term. The notional amount of the interest rate swap amortizes over the term consistent with the balance of the corresponding loan.
In May 2024, the Company entered into an interest rate swap at Central Fairwinds for an initial notional amount of $
15.6
 million. The interest rate swap effectively fixes the SOFR component of the corresponding loan at approximately
4.43
% for the five-year term. The notional amount of the interest rate swap amortizes over the term consistent with the balance of the corresponding loan.
The fair value of the interest rate swaps have been classified as Level 2 fair value measurements.
The interest rate swaps have been designated and qualify as cash flow hedges and have been recognized on the condensed consolidated balance sheets at fair value, presented within other assets and other liabilities. Gains and losses resulting from changes in the fair value of derivatives that have been designated and qualify as cash flow hedges are reported as a component of other comprehensive income/(loss) and reclassified into earnings in the periods during which the hedged forecasted transaction affects earnings.
The following table summarizes the Company’s derivative financial instruments as of June 30, 2024 and December 31, 2023 (in thousands):
 
 
  
Notional Value
 
  
 
 
  
 
 
  
Fair Value

Assets/(Liabilities)
 
 
  
June 30, 2024
 
  
Effective Date
 
  
Maturity Date
 
  
June 30, 2024
 
 
December 31, 2023
 
Interest Rate Swap
   $ 50,000        September 2019        September 2024      $ 366     $ 1,268  
Interest Rate Swap
     25,000        January 2023        January 2026        283       49  
Interest Rate Swap
     140,000        March 2023        November 2025        993       (295
Interest Rate Swap
     25,943        August 2023        August 2028        (215     (846
Interest Rate Swap
     14,310        August 2023        August 2028        (118     (466
Interest Rate Swap
     15,614        May 2024        June 2029        (291     —   
  
 
 
          
 
 
   
 
 
 
   $ 270,867            $ 1,018     $ (290
  
 
 
          
 
 
   
 
 
 
For the six months ended June 30, 2024, approximately $2.2 million of realized gains were reclassified to interest expense due to payments made to or received from the swap counterparty. For the six months ended June 30, 2023, approximately $1.3 million of realized gains were reclassified to interest expense due to payments made to or received from the swap counterparty.
Cash, Cash Equivalents, Restricted Cash, Rents Receivable, Accounts Payable and Accrued Liabilities
The Company estimates that the fair value approximates carrying value due to the relatively short-term nature of these instruments.
Fair Value of Financial Instruments Not Carried at Fair Value
With the exception
 of fixed rate mortgage loans payable, the carrying amounts of the Company’s financial instruments approximate their fair value. The Company determines the fair value of its fixed rate mortgage loan payable based on a discounted cash flow analysis using a discount rate that approximates the current borrowing rates for instruments of similar maturities. Based on this, the Company has determined that the fair value of these instruments was $300.3 million and $343.1 million (compared to a carrying value of $316.6 million and $357.2 million) as of June 30, 2024, and December 31, 2023, respectively. Accordingly, the fair value of mortgage loans payable have been classified as Level 3 fair value measurements.