DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

3 Months Ended

Mar. 31, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

8. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

In the ordinary 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 year ended December 31, 2023, the Company entered into two interest rate cap agreements in connection with the assumption of two mortgage loans. In December 2023, the Company terminated one of its interest rate cap agreements.

The following table summarizes the terms of the Company’s interest rate cap agreement as of March 31, 2024 (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, 2024		Rates (1)	Dates	Dates	2024
Interest Rate Caps	Other assets	$	87,000	4.5%	5/03/2023	7/07/2025	$	544

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(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 instrument is included in Note 13. The notional amount under the derivative instrument is an indication of the extent of the Company’s involvement in the 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 an interest rate cap that is used to manage exposure to interest rate movements but does not meet the requirements to be designated as a hedging instrument. The change in fair value of the derivative instrument that is not designated as a hedge is recorded directly to earnings as interest expense on the accompanying consolidated statements of operations. During the three months ended March 31, 2024, the Company recorded an unrealized gain of $55,000, which was included in interest expense on the accompanying consolidated statements of operations related to its interest rate cap.