Derivative Financial Instruments

6 Months Ended

Jun. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]


6.	Derivative Financial Instruments

The Company may use derivative financial instruments, including interest rate swaps, caps, options, floors, and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with its borrowings. The principal objective of such arrangements is to minimize the risks and/or costs associated with the Company's operating and financial structure as well as to hedge specific anticipated transactions. The Company does not intend to utilize derivatives for speculative transactions or purposes other than mitigation of interest rate risk. 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 quality credit ratings. The Company does not anticipate that any of the counterparties will fail to meet their obligations.

The Company's objectives in using interest rate derivatives are to attempt to stabilize interest expense where possible and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily 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.

The following table summarizes the terms and fair values of the Company's derivative financial instruments, as well as their classification on the Consolidated Balance Sheets:


						Fair Value
(in thousands)						Assets (Liabilities) (1)
Effective Date	Maturity Date	Notional Amount		Bank Pays Variable Rate of	Regency Pays Fixed Rate of	June 30, 2023			December 31, 2022
12/1/16	11/1/23		30,806	SOFR	1.490%		407			883
9/17/19	3/17/25		24,000	SOFR	1.443%		1,357			1,443
12/20/19	12/19/26		24,365	SOFR	1.684%		1,938			1,939
2/24/23	12/31/26		15,435	SOFR	4.229%		(25	)		152
6/2/17	6/2/27		35,160	SOFR	2.261%		2,213			2,158
						$	5,890			6,575

(1)

Derivatives in an asset position are included within Other assets in the accompanying Consolidated Balance Sheets, while those in a liability position are included within Accounts payable and other liabilities.

These derivative financial instruments are all interest rate swaps, which are designated and qualify as cash flow hedges. The Company does not use derivatives for trading or speculative purposes and, as of June 30, 2023, does not have any derivatives that are not designated as hedges.

The changes in the fair value of derivatives designated and qualifying as cash flow hedges are recorded in Accumulated other comprehensive income ("AOCI") and subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

The following table represents the effect of the derivative financial instruments on the accompanying Consolidated Financial Statements:


Location and Amount of Gain (Loss) Recognized in OCI on Derivative					Location and Amount of Gain (Loss) Reclassified from AOCI into Income						Total amounts presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded
	Three months ended June 30,					Three months ended June 30,						Three months ended June 30,
(in thousands)	2023		2022			2023			2022			2023		2022
Interest rate swaps	$	5,457		4,436	Interest expense	$	(1,649	)		481	Interest expense, net	$	36,956		36,699

	Six months ended June 30,					Six months ended June 30,						Six months ended June 30,
(in thousands)	2023		2022			2023			2022			2023		2022
Interest rate swaps	$	2,721		13,404	Interest expense	$	(3,141	)		1,491	Interest expense, net	$	73,349		73,437

As of June 30, 2023, the Company expects approximately $5.8 million of accumulated comprehensive income on derivative instruments in AOCI, including the Company's share from its Investments in real estate partnerships, to be reclassified into earnings during the next 12 months.