XML 27 R16.htm IDEA: XBRL DOCUMENT v3.24.3
Derivative Instruments
9 Months Ended
Sep. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments Derivative Instruments
From time to time, we enter into derivative instruments to manage the economic risk of changes in interest rates. We do not enter into derivative transactions for speculative or trading purposes. Designated hedges are derivatives that meet the criteria for hedge accounting and that we have elected to designate as hedges. Non-designated hedges are derivatives that do not meet the criteria for hedge accounting or that we did not elect to designate as hedges.
Designated Hedges
We have entered into various interest rate swap agreements, which are used to hedge the variable cash flows associated with variable-rate interest payments. Each of our swap agreements is designated for hedge accounting purposes and is currently indexed to one month Term SOFR. On April 18, 2023, we completed a series of transactions related to certain of our variable rate debt and derivative agreements that were originally indexed to LIBOR to effectuate a transition to Term SOFR. All of our LIBOR-indexed interest rate swap agreements have been amended or modified such that each agreement is now indexed to Term SOFR. Changes in the fair value of these swaps are recorded in other comprehensive income and are subsequently reclassified into earnings in the period in which the hedged forecasted transactions affect earnings.
The table below summarizes our interest rate swap instruments as of September 30, 2024:
Agreement Date
Forward
Effective Date
Maturity
Date
Strike
Rate
IndexNotional
Amount
April 18, 2023March 31, 2023January 31, 20252.80%One month Term SOFR$400,000 
April 18, 2023March 31, 2023November 30, 20242.83%One month Term SOFR400,000 
April 18, 2023April 15, 2023November 30, 20242.78%One month Term SOFR400,000 
September 25, 2024(1)
April 15, 2023December 31, 20242.79%One month Term SOFR400,000 
April 18, 2023April 15, 2023June 9, 20252.94%One month Term SOFR325,000 
September 25, 2024(1)
April 15, 2023December 31, 20242.95%One month Term SOFR595,000 
September 25, 2024(1)
April 15, 2023December 31, 20242.83%One month Term SOFR1,100,000 
April 18, 2023April 15, 2023July 31, 20253.08%One month Term SOFR200,000 
September 25, 2024December 31, 2024May 31, 20281.93%One month Term SOFR200,000 
September 25, 2024December 31, 2024May 31, 20293.12%One month Term SOFR200,000 
September 24, 2024December 31, 2024May 31, 20283.08%One month Term SOFR200,000 
September 24, 2024December 31, 2024May 31, 20283.08%One month Term SOFR200,000 
September 23, 2024December 31, 2024May 31, 20283.13%One month Term SOFR200,000 
September 20, 2024December 31, 2024May 31, 20283.13%One month Term SOFR200,000 
September 20, 2024December 31, 2024May 31, 20283.14%One month Term SOFR200,000 
March 22, 2023July 9, 2025May 31, 20292.99%One month Term SOFR300,000 
(1)Represents the date the interest rate swap agreement was amended to modify the maturity date.

During the nine months ended September 30, 2024, we entered into certain new interest rate swap agreements and terminated others resulting in a net payment to the counterparties of $1,140. There were no such terminations during the nine months ended September 30, 2023.
During the nine months ended September 30, 2024 and 2023, interest rate swap instruments were used to hedge the variable cash flows associated with existing variable-rate interest payments. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate debt. During the next 12 months, we estimate that $24,129 will be reclassified to earnings as a decrease in interest expense.
Non-Designated Hedges
Concurrent with entering into certain of the mortgage loan agreements, we entered into or acquired and maintain interest rate cap agreements with terms and notional amounts equivalent to the terms and amounts of the mortgage loans made by the third-party lenders. To the extent that the maturity date of a mortgage loan is extended through an exercise of one or more extension options, a replacement or extension interest rate cap agreement must be executed with terms similar to those associated with the initial interest rate cap agreement and strike prices equal to the greater of the interest rate cap strike price and the interest rate at which the debt service coverage ratio (as defined) is not less than 1.2 to 1.0. The interest rate cap agreement, including all of our rights to payments owed by the counterparties and all other rights, has been pledged as additional collateral for the mortgage loan. Additionally, in certain instances, in order to minimize the cash impact of purchasing required interest rate caps, we simultaneously sell interest rate caps (which have identical terms and notional amounts) such that the purchase price and sales proceeds of the related interest rate caps are intended to offset each other. As of September 30, 2024, the remaining interest rate cap has a strike price of 8.95%.
Fair Values of Derivative Instruments on the Condensed Consolidated Balance Sheets
The table below presents the fair value of our derivative financial instruments as well as their classification on the condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023:
Asset DerivativesLiability Derivatives
Fair Value as ofFair Value as of
Balance
Sheet Location
September 30,
2024
December 31, 2023Balance
Sheet Location
September 30,
2024
December 31, 2023
Derivatives designated as hedging instruments:
Interest rate swapsOther assets$27,063 $75,487 Other liabilities$118 $— 
Derivatives not designated as hedging instruments:
Interest rate capsOther assets— Other liabilities— — 
Total$27,063 $75,488 $118 $— 
Offsetting Derivatives
We enter into master netting arrangements, which reduce risk by permitting net settlement of transactions with the same counterparty. The tables below present a gross presentation, the effects of offsetting, and a net presentation of our derivatives as of September 30, 2024 and December 31, 2023:
September 30, 2024
Gross Amounts Not Offset in the Statement of Financial Position
Gross Amounts of Recognized Assets/ LiabilitiesGross Amounts Offset in the Statement of Financial PositionNet Amounts of Assets/ Liabilities Presented in the Statement of Financial PositionFinancial InstrumentsCash Collateral ReceivedNet
Amount
Offsetting assets:
Derivatives$27,063 $— $27,063 $(44)$— $27,019 
Offsetting liabilities:
Derivatives$(118)$— $(118)$44 $— $(74)

December 31, 2023
Gross Amounts Not Offset in the Statement of Financial Position
Gross Amounts of Recognized Assets/ LiabilitiesGross Amounts Offset in the Statement of Financial PositionNet Amounts of Assets/ Liabilities Presented in the Statement of Financial PositionFinancial InstrumentsCash Collateral ReceivedNet
Amount
Offsetting assets:
Derivatives$75,488 $— $75,488 $— $— $75,488 
Offsetting liabilities:
Derivatives$— $— $— $— $— $— 
Effect of Derivative Instruments on the Condensed Consolidated Statements of Comprehensive Income (Loss) and the Condensed Consolidated Statements of Operations
The tables below present the effect of our derivative financial instruments in the condensed consolidated statements of comprehensive income (loss) and the condensed consolidated statements of operations for the three months ended September 30, 2024 and 2023:

Amount of Gain (Loss) Recognized in OCI on Derivative
Location of Gain (Loss) Reclassified from Accumulated OCI into Net Income
Amount of Gain Reclassified from Accumulated OCI into Net Income
Total Amount of Interest Expense Presented in the Condensed Consolidated Statements of Operations
For the Three Months
Ended September 30,
For the Three Months Ended September 30,
For the Three Months
Ended September 30,
202420232024202320242023
    Derivatives in cash flow hedging relationships:
Interest rate swaps$(21,587)$27,845 Interest expense$21,222 $21,081 $91,060 $86,736 

Location of
Loss Recognized in
Net Income on Derivative
Amount of Loss Recognized in Net Income on Derivative
For the Three Months
Ended September 30,
20242023
Derivatives not designated as hedging instruments:
Interest rate capsInterest expense$— $
The tables below present the effect of our derivative financial instruments in the condensed consolidated statements of comprehensive income (loss) and the condensed consolidated statements of operations for the nine months ended September 30, 2024 and 2023:

Amount of Gain Recognized in OCI on Derivative
Location of Gain (Loss) Reclassified from Accumulated OCI into Net Income
Amount of Gain Reclassified from Accumulated OCI into Net Income
Total Amount of Interest Expense Presented in the Condensed Consolidated Statements of Operations
For the Nine Months
Ended September 30,
For the Nine Months
Ended September 30,
For the Nine Months
Ended September 30,
202420232024202320242023
    Derivatives in cash flow hedging relationships:
Interest rate swaps$21,734 $73,853 Interest expense$64,251 $52,023 $270,912 $243,408 
Location of Loss Recognized in
Net Income on Derivative
Amount of Loss Recognized in Net Income on Derivative
For the Nine Months
Ended September 30,
20242023
Derivatives not designated as hedging instruments:
Interest rate capsInterest expense$$41 
Credit-Risk-Related Contingent Features
The agreements with our derivative counterparties which govern our interest rate swap agreements contain a provision where we could be declared in default on our derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to our default on the indebtedness.
As of September 30, 2024, the fair value of certain derivatives in a net liability position was $118. If we had breached any of these provisions at September 30, 2024, we could have been required to settle the obligations under the agreements at their termination value, which includes accrued interest and excludes the nonperformance risk related to these agreements, of $193.