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Derivative Instruments | 9 Months Ended
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Sep. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments | Derivative Instruments From time to time, we enter into derivative instruments to manage the economic risk of changes in interest rates. We do not enter into derivative transactions for speculative or trading purposes. Designated hedges are derivatives that meet the criteria for hedge accounting and that we have elected to designate as hedges. Non-designated hedges are derivatives that do not meet the criteria for hedge accounting or that we did not elect to designate as hedges. Designated Hedges We have entered into various interest rate swap agreements, which are used to hedge the variable cash flows associated with variable-rate interest payments. Each of our swap agreements is designated for hedge accounting purposes and is currently indexed to one month Term SOFR. On April 18, 2023, we completed a series of transactions related to certain of our variable rate debt and derivative agreements that were originally indexed to LIBOR to effectuate a transition to Term SOFR. While the original agreements provided for a prescribed transition to an alternate rate, this series of transactions amended or modified our Credit Facility and all of our LIBOR-indexed interest rate swap agreements such that each agreement is now indexed to Term SOFR. See Note 2 for additional information about reference rate reform and our transition from LIBOR. Changes in the fair value of these swaps are recorded in other comprehensive income and are subsequently reclassified into earnings in the period in which the hedged forecasted transactions affect earnings. The table below summarizes our interest rate swap instruments as of September 30, 2023:
Agreement Date |  | Forward Effective Date |  | Maturity Date |  | Strike Rate |  | Index |  | Notional Amount
April 18, 2023 |  | March 31, 2023 |  | January 31, 2025 |  | 2.80% |  | One month Term SOFR |  | $ | 400,000 |
April 18, 2023 |  | March 31, 2023 |  | November 30, 2024 |  | 2.83% |  | One month Term SOFR |  | 400,000 |
April 18, 2023 |  | April 15, 2023 |  | November 30, 2024 |  | 2.78% |  | One month Term SOFR |  | 400,000 |
April 18, 2023 |  | April 15, 2023 |  | February 28, 2025 |  | 2.79% |  | One month Term SOFR |  | 400,000 |
April 18, 2023 |  | April 15, 2023 |  | June 9, 2025 |  | 2.94% |  | One month Term SOFR |  | 325,000 |
April 18, 2023 |  | April 15, 2023 |  | June 9, 2025 |  | 2.95% |  | One month Term SOFR |  | 595,000 |
April 18, 2023 |  | April 15, 2023 |  | July 9, 2025 |  | 2.83% |  | One month Term SOFR |  | 1,100,000 |
April 18, 2023 |  | April 15, 2023 |  | July 31, 2025 |  | 3.08% |  | One month Term SOFR |  | 200,000 |
March 22, 2023 |  | July 9, 2025 |  | May 31, 2029 |  | 2.99% |  | One month Term SOFR |  | 300,000 |
During the nine months ended September 30, 2022, we terminated interest rate swaps or portions thereof and paid the counterparties $13,292 in connection with these terminations. There were no such terminations during the nine months ended September 30, 2023. During the nine months ended September 30, 2023 and 2022, interest rate swap instruments were used to hedge the variable cash flows associated with existing variable-rate interest payments. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate debt. During the next 12 months, we estimate that $82,542 will be reclassified to earnings as a decrease in interest expense. Non-Designated Hedges Concurrent with entering into certain of the mortgage loan agreements and in connection with previous mergers, we entered into or acquired and maintain interest rate cap agreements with terms and notional amounts equivalent to the terms and amounts of the mortgage loans made by the third party lenders. To the extent that the maturity date of a mortgage loan is extended through an exercise of one or more extension options, a replacement or extension interest rate cap agreement must be executed with terms similar to those associated with the initial interest rate cap agreement and strike prices equal to the greater of the interest rate cap strike price and the interest rate at which the debt service coverage ratio (as defined) is not less than 1.2 to 1.0. The interest rate cap agreement, including all of our rights to payments owed by the counterparties and all other rights, has been pledged as additional collateral for the mortgage loan. Additionally, in certain instances, in order to minimize the cash impact of purchasing required interest rate caps, we simultaneously sell interest rate caps (which have identical terms and notional amounts) such that the purchase price and sales proceeds of the related interest rate caps are intended to offset each other. As of September 30, 2023, the remaining interest rate cap has a strike price of 8.46%. Fair Values of Derivative Instruments on the Condensed Consolidated Balance Sheets The table below presents the fair value of our derivative financial instruments as well as their classification on the condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022:
|  | Asset Derivatives |  | Liability Derivatives
|  |  |  | Fair Value as of |  |  |  | Fair Value as of
|  | Balance Sheet Location |  | September 30, 2023 |  | December 31, 2022 |  | Balance Sheet Location |  | September 30, 2023 |  | December 31, 2022
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  | Other assets |  | $ | 134,017 |  |  | $ | 119,157 |  |  | Other liabilities |  | $ | — |  |  | $ | — |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |
Interest rate caps |  | Other assets |  | — |  |  | 36 |  |  | Other liabilities |  | — |  |  | — |
Total |  |  |  | $ | 134,017 |  |  | $ | 119,193 |  |  |  |  | $ | — |  |  | $ | — |
Offsetting Derivatives We enter into master netting arrangements, which reduce risk by permitting net settlement of transactions with the same counterparty. The tables below present a gross presentation, the effects of offsetting, and a net presentation of our derivatives as of September 30, 2023 and December 31, 2022:
|  | September 30, 2023
|  |  |  |  |  |  |  | Gross Amounts Not Offset in the Statement of Financial Position |  |
|  | Gross Amounts of Recognized Assets/ Liabilities |  | Gross Amounts Offset in the Statement of Financial Position |  | Net Amounts of Assets/ Liabilities Presented in the Statement of Financial Position |  | Financial Instruments |  | Cash Collateral Received |  | Net Amount
Offsetting assets: |  |  |  |  |  |  |  |  |  |  |  |
Derivatives |  | $ | 134,017 |  |  | $ | — |  |  | $ | 134,017 |  |  | $ | — |  |  | $ | — |  |  | $ | 134,017 |
Offsetting liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Derivatives |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
|  | December 31, 2022
|  |  |  |  |  |  |  | Gross Amounts Not Offset in the Statement of Financial Position |  |
|  | Gross Amounts of Recognized Assets/ Liabilities |  | Gross Amounts Offset in the Statement of Financial Position |  | Net Amounts of Assets/ Liabilities Presented in the Statement of Financial Position |  | Financial Instruments |  | Cash Collateral Received |  | Net Amount
Offsetting assets: |  |  |  |  |  |  |  |  |  |  |  |
Derivatives |  | $ | 119,193 |  |  | $ | — |  |  | $ | 119,193 |  |  | $ | — |  |  | $ | — |  |  | $ | 119,193 |
Offsetting liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Derivatives |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Effect of Derivative Instruments on the Condensed Consolidated Statements of Comprehensive Income (Loss) and the Condensed Consolidated Statements of Operations The tables below present the effect of our derivative financial instruments in the condensed consolidated statements of comprehensive income (loss) and the condensed consolidated statements of operations for the three months ended September 30, 2023 and 2022:
|  | Amount of Gain Recognized in OCI on Derivative |  | Location of Gain (Loss) Reclassified from Accumulated OCI into Net Income |  | Amount of Gain (Loss) Reclassified from Accumulated OCI into Net Income |  | Total Amount of Interest Expense Presented in the Condensed Consolidated Statements of Operations |  |
|  | For the Three Months Ended September 30, |  |  | For the Three Months Ended September 30, |  | For the Three Months Ended September 30, |  |
|  | 2023 |  | 2022 |  |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |
Derivatives in cash flow hedging relationships: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  | $ | 27,845 |  |  | $ | 102,940 |  |  | Interest expense |  | $ | 21,081 |  |  | $ | (9,591) |  |  | $ | 86,736 |  |  | $ | 76,454 |  |  |
|  | Location of Loss Recognized in Net Income on Derivative |  | Amount of Loss Recognized in Net Income on Derivative
|  |  | For the Three Months Ended September 30,
|  |  | 2023 |  | 2022
Derivatives not designated as hedging instruments: |  |  |  |  |  |
Interest rate caps |  | Interest expense |  | $ | 1 |  |  | $ | 28 |
The tables below present the effect of our derivative financial instruments in the condensed consolidated statements of comprehensive income (loss) and the condensed consolidated statements of operations for the nine months ended September 30, 2023 and 2022:
|  | Amount of Gain Recognized in OCI on Derivative |  | Location of Gain (Loss) Reclassified from Accumulated OCI into Net Income |  | Amount of Gain (Loss) Reclassified from Accumulated OCI into Net Income |  | Total Amount of Interest Expense Presented in the Condensed Consolidated Statements of Operations |  |
|  | For the Nine Months Ended September 30, |  |  | For the Nine Months Ended September 30, |  | For the Nine Months Ended September 30, |  |
|  | 2023 |  | 2022 |  |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |
Derivatives in cash flow hedging relationships: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  | $ | 73,853 |  |  | $ | 316,479 |  |  | Interest expense |  | $ | 52,023 |  |  | $ | (63,837) |  |  | $ | 243,408 |  |  | $ | 225,683 |  |  |
|  | Location of Loss Recognized in Net Income on Derivative |  | Amount of Loss Recognized in Net Income on Derivative
|  |  | For the Nine Months Ended September 30,
|  |  | 2023 |  | 2022
Derivatives not designated as hedging instruments: |  |  |  |  |  |
Interest rate caps |  | Interest expense |  | $ | 41 |  |  | $ | 63 |
Credit-Risk-Related Contingent Features The agreements with our derivative counterparties which govern our interest rate swap agreements contain a provision where we could be declared in default on our derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to our default on the indebtedness. As of September 30, 2023, we were not in a net liability position with any of our derivative counterparties.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//815/tableOfContent + Details
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