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INTEREST RATE SWAP DERIVATIVES
 9 Months Ended
Sep. 30, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
INTEREST RATE SWAP DERIVATIVES INTEREST RATE SWAP DERIVATIVES
The Company, through its Operating Partnership, entered into a five-year swap agreement to fix SOFR at 2.258% related to its variable interest rate Term Loan effective May 31, 2022. The Company designated the pay-fixed, receive-floating interest rate swap with the terms described in the table below as of July 1, 2022. The swap agreement matures on January 15, 2027 and the financial institution counterparty has a one-time option to cancel the swap on December 31, 2024.
In prior years, the Company, through its limited liability company subsidiaries, entered into interest rate swap agreements with amortizing notional amounts relating to four of its mortgage notes payable. These swap agreements, which were in place as of December 31, 2021, were terminated during the three months ended March 31, 2022 in connection with refinancings discussed in Note 7. 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. During the three months ended March 31, 2022, the Company terminated the swap agreements related to mortgages on the 3M, Cummins, Wyndham and Williams Sonoma properties at aggregate costs of $733,000 and during the three months ended March 31, 2021, the Company terminated the swap agreements related to mortgages on the GSA and Eco-Thrift properties at aggregate costs of $23,900.
The following table summarizes the notional amount and other information related to the Company’s interest rate swaps as of September 30, 2022 and December 31, 2021:
September 30, 2022December 31, 2021
Derivative
Instruments		Number of InstrumentsNotional
Amount (i)		Reference
Rate (ii)		Fixed Pay Rate (iii)Remaining Non-Cancellable TermNumber of InstrumentsNotional
Amount (i)		Reference
Rate (iv)		Weighted Average Fixed Pay RateWeighted
Average
Remaining Term
Interest Rate Swap Derivatives1$150,000,000 Indexed to USD - SOFR - COMPOUND3.858 %2.3 years4$26,051,000 
One-month LIBOR + applicable spread/Fixed at 4.05%-5.16%
4.51 %2.0 years
(i)The notional amount of the Company’s swaps decreased each month to correspond to the outstanding principal balance on the related debt. The minimum notional amounts (outstanding principal balance at the maturity date) as of September 30, 2022 and December 31, 2021 were $150,000,000 and $24,935,999, respectively.
(ii)The reference rate was as of September 30, 2022.
(iii)Based on the terms of the Credit Facility, the fixed pay rate increases if the Company's leverage ratio increases above 40%.
(iv)The reference rate was as of December 31, 2021.
The following table sets forth the fair value of the Company’s derivative instruments (Level 2 measurement), as well as their classification in the unaudited condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021:
September 30, 2022December 31, 2021
Derivative InstrumentBalance Sheet LocationNumber of
Instruments		Fair Value (1)Number of
Instruments		Fair Value
Interest Rate SwapsAsset - Interest rate swap derivatives, at fair value1$4,845,903 —$— 
Interest Rate SwapsLiability - Interest rate swap derivatives, at fair value—$— 4$(788,016)
(1)    The unaudited condensed consolidated balance sheet reflects the fair value of the derivative, net of accumulated amortization of the unrealized gain on interest rate swap valuation as of June 30, 2022 discussed below.
The interest rate swap derivative was designated as a cash flow hedge for financial accounting purposes beginning July 1, 2022 and therefore the change in fair value of $4,255,906 for the three months ended September 30, 2022 was recorded as unrealized holding gain on interest rate swap designated as a cash flow hedge in the Company's unaudited condensed consolidated statements of comprehensive income for the three and nine months ended September 30, 2022.
The change in fair value of the derivative instrument of $589,997 for the period from May 31, 2022 to June 30, 2022 that was not designated as a cash flow hedge for financial accounting purposes was recorded as an unrealized gain on interest rate swap valuation as of June 30, 2022 and a reduction to interest expense in the unaudited condensed consolidated statement of operations. Beginning July 1, 2022 through December 31, 2024, the related interest rate swap derivative asset will be amortized to interest expense. The amortization of interest rate swap derivative asset for the three months ended September 30, 2022 was $59,000.
The changes in fair value of the derivative instruments as of December 31, 2021 that were not designated as cash flow hedges for financial accounting purposes were recorded as interest expense in the unaudited condensed consolidated statement of operations. None of the Company’s derivatives as of December 31, 2021 were designated as hedging instruments; therefore, the net gains recognized were recorded as reductions in the loss on early extinguishment of debt for the three months ended March 31, 2022 and the net unrealized gain recognized on interest rate swaps of $166,338 and $684,057 were recorded as decreases in interest expense for the three and nine months ended September 30, 2021, respectively. The loss on early extinguishment of debt for the three months ended March 31, 2022 includes the actual cost of terminating the interest rate swap derivatives in January 2022 of $733,000, which was offset by a corresponding reversal of the liability of $788,016 for interest rate swap derivatives as of December 31, 2021.