In the normal course of business, we are exposed to financial market risks, including interest rate risk on our interest bearing liabilities. We attempt to limit these risks by following established risk management policies, procedures and strategies, including the use of financial instruments such as derivatives. We do not use financial instruments for trading or speculative purposes.

For derivatives that have been designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in “Accumulated other comprehensive (loss) income” and subsequently reclassified into “Interest expense, net” in the same periods during which the hedged transaction affects earnings. Through December 10, 2020, all of our derivatives were designated and qualified as cash flow hedges of interest rate risk.

On August 24, 2022, we entered into two interest rate swap agreements with a weighted average interest swap rate of 3.59% on a notional amount of $100.0 million maturing on May 24, 2024. We entered into these interest rate swap agreements to hedge the interest payments associated with our variable interest rate mortgage loans. We have assessed the effectiveness of these interest rate swap agreements as hedges at inception and will do so on a quarterly basis.

As of September 30, 2022, we had nine total derivatives which were designated as cash flow hedges.

We recognize all derivatives at fair value as either assets or liabilities in the accompanying consolidated balance sheets. Our derivative assets are recorded in “Deferred costs and other assets” and our derivative liabilities are recorded in “Fair value of derivative instruments.”

Over the next twelve months, we estimate that $3.5 million will be reclassified as a decrease to interest expense. The recognition of these amounts could be accelerated in the event that we repay amounts outstanding on the debt instruments and do not replace them with new borrowings.

Derivatives not designated as hedges are not speculative; they are also used to manage the Company’s exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements. For swaps that were not re-designated subsequent to December 10, 2020, changes in the fair value of derivatives were recorded directly in earnings as interest expense in the consolidated statement of operations. During the nine months ended September 30, 2022, we had no non-designated swaps mature. As of September 30, 2022, we had no derivatives which were not designated in hedging relationships.

As of September 30, 2022, we had interest rate swap agreements designated in qualifying hedging relationships outstanding with a weighted average base interest rate of 2.92% on a notional amount of $400.0 million, maturing in either May 2023 or May 2024. We originally entered into these interest rate swap agreements in order to hedge the interest payments associated with our issuances of variable interest rate long term debt. The interest rate swap agreements are net settled monthly.

The following table summarizes the terms and estimated fair values of our interest rate swap derivative instruments as of September 30, 2022 and December 31, 2021 based on the year they mature. The notional values provide an indication of the extent of our involvement in these instruments, but do not represent exposure to credit, interest rate or market risks.


Maturity Date	Aggregate Notional Value at September 30, 2022 (in millions of dollars)		Aggregate Fair Value at September 30, 2022 (1) (in millions of dollars)		Aggregate Fair Value at December 31, 2021 (1) (in millions of dollars)			Weighted Average Interest Rate
Derivatives in Cash Flow Hedging Relationships
Interest Rate Swaps
2023	$	300.0	$	2.9	$	(8.1	)		2.70	%
2024		100.0		1.0		-			3.59	%
Total	$	400.0	$	3.9	$	(8.1	)		2.92	%

The tables below present the effect of derivative financial instruments on accumulated other comprehensive income (loss) and on our consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021:


	Three Months Ended September 30,									Nine Months Ended September 30,
	Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivative Instruments					Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Interest Expense				Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivative Instruments					Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Interest Expense
(in millions of dollars)	2022		2021			2022		2021		2022		2021			2022		2021
Derivatives in Cash Flow Hedging Relationships
Interest rate products	$	2.4	$	(0.4	)	$	0.5	$	3.0	$	8.5	$	(0.4	)	$	3.8	$	8.6


	Three Months Ended September 30,						Nine Months Ended September 30,
(in millions of dollars)	2022			2021			2022			2021
Total interest expense presented in the consolidated statements of operations in which the effects of cash flow hedges are recorded	$	(36.5	)	$	(32.4	)		(100.5	)	$	(95.1	)
Amount of gain reclassified from accumulated other comprehensive income into interest expense	$	0.5		$	3.0			3.8		$	8.6

As we did not have any derivatives which were not designated in hedging relationships, our non-designated swaps had no impact on the financial statements for the three and nine months ended September 30, 2022. The impact of our non-designated swaps resulted in a loss of approximately $35 thousand and $129 thousand for the three and nine months ended September 30, 2021, respectively, which is recognized in interest expense, net in the consolidated statement of operations.

We have agreements with some of our derivative counterparties that contain a provision pursuant to which, if our entity that originated such derivative instruments defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then we could also be declared to be in default on our derivative obligations. As of September 30, 2022, we were not in default on any of our derivative obligations.

We have an agreement with a derivative counterparty that incorporates the loan covenant provisions of our loan agreement with a lender affiliated with the derivative counterparty. Failure to comply with the loan covenant provisions would result in our being in default on any derivative instrument obligations covered by the agreement.

As of September 30, 2022, the Company did not have any derivatives in a net liability position.