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Derivative Instruments and Hedging Activities
 9 Months Ended
Sep. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities Disclosure
7. Derivative Instruments and Hedging Activities
BPLP’s agreements with derivative counterparties contain provisions whereby if BPLP defaults on the underlying indebtedness, including defaults where repayment of the indebtedness has not been accelerated by the lender, then BPLP could also be declared in default of the swap derivative obligation. As of September 30, 2024, the Company had not posted any collateral related to the agreements.
Effective Hedge Instruments
BPLP assesses the effectiveness of its derivatives both at inception and on an ongoing basis. If the hedges are deemed to be effective, the fair value is recorded in “Accumulated other comprehensive loss” in the Company’s Consolidated Balance Sheets and is subsequently reclassified into “Interest expense” in the Company’s Consolidated Statements of Operations in the period that the hedged forecasted transactions affect earnings. BPLP’s derivative financial instruments are cash flow hedges that are designated as effective hedges, and they are carried at their estimated fair value on a recurring basis (See Note 2). The Company did not incur ineffectiveness during the three and nine months ended September 30, 2024.
BPLP’s and SMBP LLC’s derivative contracts consisted of the following at September 30, 2024 (dollars in thousands):
Derivative InstrumentAggregate Notional Amount Strike Rate RangeBalance Sheet Location
Effective Date Maturity DateLow High Fair Value
BPLP:
Interest Rate Swaps$600,000 December 15, 2023October 26, 20283.790 %—3.798 %Other liabilities$(12,600)
Interest Rate Swaps100,000 September 27, 2024April 1, 20252.688 %—2.688 %Prepaid expenses and other assets799 
700,000 (11,801)
SMBP LLC (1)
Interest Rate Swaps200,000 December 14, 2023April 1, 20252.661 %—2.688 %Prepaid expenses and other assets1,610 
$900,000 $(10,191)
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(1)A consolidated subsidiary of the Company that is the borrower under the mortgage loan collateralized by its Santa Monica Business Park property.
The following table presents the location in the financial statements of the gains or (losses) recognized as a result of the Company’s cash flow hedges for the three and nine months ended September 30, 2024 and 2023 (in thousands):
Three months ended September 30,Nine months ended September 30,
2024202320242023
Amount of gain (loss) related to the effective portion recognized in other comprehensive income (1)$(32,263)$5,459 $(14,976)$13,886 
Amount of gain (loss) related to the effective portion subsequently reclassified to earnings (2)$3,077 $1,677 $9,518 $5,026 
Amount of gain (loss) related do the ineffective portion and amount excluded from effectiveness testing$— $— $— $— 
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(1)Includes the Company’s share of gain (loss) related to the effective portion of derivatives outstanding at its unconsolidated joint venture properties.
(2)Includes amounts from previous interest rate programs.
BPLP has formally documented all of its relationships between hedge instruments and hedging items, as well as its risk-management objectives and strategy for undertaking various hedge transactions. While management believes its judgments are reasonable, a change in a derivative's effectiveness as a hedge could materially affect expenses, net income (loss) and equity.
Ineffective Hedging Instruments
During the year ended December 31, 2023, to satisfy a lender requirement, the Company entered into two agreements with the same third-party to purchase and sell a $600.0 million interest rate cap. The Company did not elect hedge accounting, and as such, any change in market value will be recognized in Gain (losses) from interest rate contracts in the Consolidated Statement of Operations. For the three and nine months ended September 30, 2024 and 2023, the Company recognized no impact to its Consolidated Statement of Operations from entering into these agreements.