DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

3 Months Ended

Mar. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

8. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

In the normal course of business, the Company may use certain types of derivative instruments for the purpose of managing or hedging its interest rate risk. During the three months ended March 31, 2023, the Company entered into two interest rate cap agreements in connection with the assumption of two mortgage loans.

The following table summarizes the terms of the Company’s interest rate cap agreements as of March 31, 2023 (dollar amounts in thousands):

		Outstanding Notional					Fair Value of Assets as of
	Balance Sheet	Amount as of		Strike	Effective	Maturity	March 31,
	Location	March 31, 2023		Rates (1)	Dates	Dates	2023
Interest Rate Caps	Other assets	$	165,318	2.5% to 3.5%	6/15/2021 to 8/07/2022	7/07/2023 to 6/07/2024	$	2,590

____________________________________

(1)The index used for the Company’s interest rate cap agreements is 1-Month Term SOFR.

Additional disclosures related to the fair value of the Company’s derivative instruments are included in Note 13. The notional amount under the derivative instruments is an indication of the extent of the Company’s involvement in each instrument, but does not represent exposure to credit, interest rate or market risks.

Accounting for changes in the fair value of a derivative instrument depends on the intended use and designation of the derivative instrument. The Company has interest rate caps that are used to manage exposure to interest rate movements, but do not meet the requirements to be designated as hedging instruments. The change in fair value of the derivative instruments that are not designated as hedges is recorded directly to earnings as interest expense on the accompanying consolidated statements of operations.