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Derivative and Hedging Activities
 3 Months Ended
Mar. 31, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative and Hedging Activities Derivative and Hedging Activities
The Company does not enter into derivative financial instruments for speculative or trading purposes. The Company's objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company 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.
These derivatives are considered cash flow hedges and are recorded on a gross basis at fair value. Subsequent to the adoption of ASU 2017-12, assessments of hedge effectiveness are performed quarterly using either a qualitative or quantitative approach. The Company recognizes the entire change in the fair value in accumulated other comprehensive income (loss) and the change is reflected as derivative changes in fair value in the supplemental disclosures of non-cash financing activities in the consolidated statements of cash flows. The amounts recorded in accumulated other comprehensive income (loss) will subsequently be reclassified to interest expense as interest payments are made on the Company's borrowings under its variable-rate term loan facilities. During the next twelve months, the Company estimates that $24.4 million will be reclassified from accumulated other comprehensive income as a decrease to interest expense. The Company does not have netting arrangements related to its derivatives.
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 high credit ratings and with major financial institutions with which the Company and its affiliates may also have other financial relationships. The Company does not anticipate that any of the counterparties will fail to meet their obligations. As of March 31, 2024, there were no events of default related to the Company's derivative financial instruments.
The following table summarizes the notional amount at inception and fair value of these instruments on the Company's balance sheet as of March 31, 2024 and December 31, 2023 (dollar amounts in thousands):
Derivatives Designated as Hedging InstrumentsFixed Rate Paid by CompanyEffective DateMaturity Date
Notional Value(1)
Fair value of Asset/(Liability)(2)
March 31, 2024December 31, 2023
Interest Rate Swap1.96%5/14/20194/12/2024$100,000 $403 $981 
Interest Rate Swap1.95%5/14/20194/12/202450,000 66 492 
Interest Rate Swap1.94%5/14/20194/12/202450,000 66 492 
Interest Rate Swap1.52%12/9/201911/26/2026175,000 12,183 10,654 
Interest Rate Swap1.51%12/9/201911/26/202650,000 3,501 3,077 
Interest Rate Swap1.49%12/9/201911/26/202625,000 1,754 1,542 
Interest Rate Swap1.26%7/9/202011/26/2026100,000 7,604 6,810 
Interest Rate Swap1.28%7/9/202011/26/202680,000 6,061 5,406 
Interest Rate Swap3.19%9/26/20221/25/202850,000 1,522 688 
Interest Rate Swap3.35%9/26/20221/25/202850,000 1,236 383 
Interest Rate Swap3.36%9/26/20221/25/202825,000 607 180 
Interest Rate Swap3.43%9/26/20221/25/202850,000 1,089 226 
Interest Rate Swap3.71%9/26/20221/25/202850,000 605 (290)
Interest Rate Swap3.70%9/26/20221/25/202825,000 306 (144)
Interest Rate Swap4.00%10/26/20221/25/202850,000 81 (851)
Interest Rate Swap3.95%11/28/20221/25/202825,000 86 (378)
Interest Rate Swap4.03%11/28/20221/25/202825,000 11 (459)
Interest Rate Swap4.06%11/28/20221/25/202825,000 (13)(485)
Interest Rate Swap4.07%11/28/20221/25/202825,000 (23)(492)
Interest Rate Swap4.15%8/24/20232/28/202950,000 (470)(1,550)
Interest Rate Swap4.38%9/29/20232/28/202975,000 (1,515)(3,193)
Interest Rate Swap4.39%9/29/20232/28/202950,000 (1,005)(2,114)
Interest Rate Swap4.32%10/11/20232/28/202925,000 (431)(981)
Interest Rate Swap4.32%10/11/20232/28/202925,000 (429)(980)
Interest Rate Swap4.51%10/31/20232/28/202925,000 (645)(1,207)
Interest Rate Swap(3)
4.48%4/12/20242/28/2029100,000 (2,459)(4,919)
Interest Rate Swap(3)
4.48%4/12/20242/28/2029100,000 (2,473)(4,913)
$1,480,000 $27,718 $7,975 
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(1)Notional value indicates the extent of the Company’s involvement in these instruments, but does not represent exposure to credit, interest rate or market risks.
(2)Derivatives in an asset position are included within derivative assets and derivatives in a liability position are included within derivative liabilities in the Company's consolidated balance sheets.
(3)The Company entered into two forward swap contracts in October 2023.
The Company has agreements with each of its derivative counterparties that contain a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.
The following table presents amounts recorded to accumulated other comprehensive income (loss) related to derivative and hedging activities for the periods presented:
Three months ended March 31,
(in thousands) 20242023
Other comprehensive income (loss)$19,631 $(14,828)
As of March 31, 2024, the fair value of derivatives in a net asset position, including accrued interest but excluding any adjustment for nonperformance risk related to these agreements, was $37.3 million and the fair value of derivatives in a net liability position, including accrued interest but excluding any adjustment for nonperformance risk related to these agreements, was $9.7 million.
As of December 31, 2023, the fair value of derivatives in a net asset position, including accrued interest but excluding any adjustment for nonperformance risk related to these agreements, was $31.1 million and the fair value of derivatives in a net liability position, including accrued interest but excluding any adjustment for nonperformance risk related to these agreements, was $23.4 million.
During the three months ended March 31, 2024, the Company realized a gain on the change in fair value of its interest rate swaps of $8.2 million, which was included as a reduction of interest expense in the Company's consolidated statements of operations. During the three months ended March 31, 2023, the Company realized a gain on the change in fair value of its interest rate swaps of $5.3 million, which was included in interest expense in the Company's consolidated statements of operations.
As of March 31, 2024 and December 31, 2023, the Company had not posted any collateral related to these agreements and was not in breach of any provisions of such agreements. If the Company had breached any of these provisions, it could have been required to settle its obligations under the agreements at their aggregate termination value, which were a $27.6 million net asset and a $7.7 million net asset as of March 31, 2024 and December 31, 2023, respectively.