Derivative Instruments and Hedging Activities

9 Months Ended

Sep. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

As of September 30, 2023, the Company had an interest rate swap contract with an aggregate notional amount of $300.0 million that effectively fixed the interest rate on the $300.0 million unsecured term loan at 4.2%. This derivative qualifies for hedge accounting.

As of September 30, 2023 and December 31, 2022, the swap contracts were presented in the consolidated balance sheets as an asset of $11.2 million and $5.6 million, respectively, and were included in prepaid expenses and other assets on the consolidated balance sheets.

As of September 30, 2023 and December 31, 2022, the Company had no interest rate caps.

The Company has four total return swap contracts, with an aggregate notional amount of $223.0 million, that effectively convert $223.0 million of mortgage notes payable to a floating interest rate based on the Securities Industry and Financial Markets Association Municipal Swap Index ("SIFMA") plus a spread. The total return swaps provide fair market value protection on the mortgage notes payable to the counterparties during the initial period of the total return swap until the Company's option to call the mortgage notes at par can be exercised. The Company can currently call all four of its total return swaps, with $223.0 million of the outstanding debt at par. These derivatives do not qualify for hedge accounting and had a carrying and fair value of zero at both September 30, 2023 and December 31, 2022. These total return swaps are scheduled to mature between December 2024 and November 2033. The realized gains of $0.7 million and $1.9 million for the three months ended September 30, 2023 and 2022, respectively, and $2.5 million and $6.7 million for the nine months ended September 30, 2023 and 2022, respectively, were reported in the condensed consolidated statements of income and comprehensive income as total return swap income.