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Derivative Financial Instruments
 12 Months Ended
Dec. 31, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments
10.
Derivative 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 at December 31,

 

(in thousands)

 

 

 

 

 

 

 

 

Assets (Liabilities) (1)

 

Effective
Date

 

Maturity
Date

 

Notional
Amount

 

 

Bank Pays Variable
Rate of

 

Regency Pays
Fixed Rate of

 

2023

 

 

2022

 

12/1/22

 

3/17/25

 

 

24,000

 

 

SOFR

 

1.443%

 

 

873

 

 

 

1,443

 

12/16/22

 

6/2/27

 

 

34,873

 

 

SOFR

 

2.261%

 

 

1,540

 

 

 

2,158

 

1/17/23(2)

 

8/15/24

 

 

13,033

 

 

SOFR

 

3.995%

 

 

196

 

 

 

-

 

7/17/17(2)

 

7/1/27

 

 

43,150

 

 

SOFR

 

1.498%

 

 

3,041

 

 

 

-

 

9/21/16(2)

 

10/1/26

 

 

8,768

 

 

SOFR

 

1.475%

 

 

526

 

 

 

-

 

8/16/18(2)

 

8/15/28

 

 

8,764

 

 

SOFR

 

4.830%

 

 

214

 

 

 

-

 

3/18/19(2)

 

4/1/29

 

 

23,078

 

 

SOFR

 

3.165%

 

 

473

 

 

 

-

 

2/1/22(2)

 

2/1/32

 

 

33,667

 

 

SOFR

 

3.053%

 

 

4,879

 

 

 

-

 

1/3/23(2)

 

7/1/29

 

 

10,944

 

 

SOFR

 

3.633%

 

 

861

 

 

 

-

 

1/3/23(2)

 

11/1/24

 

 

5,000

 

 

SOFR

 

3.705%

 

 

106

 

 

 

-

 

2/24/23

 

12/31/26

 

 

15,342

 

 

SOFR

 

4.229%

 

 

(212

)

 

 

152

 

2/21/23

 

12/21/26

 

 

24,365

 

 

SOFR

 

1.684%

 

 

1,386

 

 

 

1,939

 

9/19/23

 

9/19/28

 

 

30,919

 

 

SOFR

 

4.314%

 

 

(1,008

)

 

 

883

 

10/31/17(2)

 

10/1/24

 

 

6,025

 

 

SOFR

 

2.334%

 

 

118

 

 

 

-

 

12/1/23

 

12/1/26

 

 

13,000

 

 

SOFR

 

4.060%

 

 

(115

)

 

 

-

 

Total derivative financial instruments

 

 

 

 

 

 

$

12,878

 

 

 

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.
(2)
Derivative instruments assumed as part of the UBP acquisitions.

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 December 31, 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 Loss (Gain)
Reclassified from AOCI into Income

 

 

Total amounts presented in the Consolidated
Statements of Operations in which the effects
of cash flow hedges are recorded

 

 

 

Year ended December 31,

 

 

 

 

Year ended December 31,

 

 

 

 

Year ended December 31,

 

(in thousands)

 

2023

 

 

2022

 

 

2021

 

 

 

 

2023

 

 

2022

 

 

2021

 

 

 

 

2023

 

 

2022

 

 

2021

 

Interest
rate swaps

 

$

(2,448

)

 

 

20,061

 

 

 

5,391

 

 

Interest
expense, net

 

$

(7,536

)

 

 

833

 

 

 

4,141

 

 

Interest
expense, net

 

$

154,249

 

 

 

146,186

 

 

 

145,170

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Early extinguishment of debt

 

$

(99

)

 

 

—

 

 

 

—

 

 

As of December 31, 2023, the Company expects approximately $10.6 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.