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Derivative Instruments and Hedging Activity | 9 Months Ended
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Sep. 30, 2025
Derivative Instruments and Hedging Activity |
Derivative Instruments and Hedging Activity | Note 8 – Derivative Instruments and Hedging Activity Background The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risk, including interest rate, liquidity and credit risk primarily by managing the amount, sources and duration of its debt funding and, to a limited extent, the use of derivative instruments. For additional information regarding the leveling of the Company’s derivatives, refer to Note 9 – Fair Value Measurements. The Company’s objective in using interest rate derivatives is to manage its exposure to interest rate movements and add stability to interest expense. To accomplish this objective, the Company 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 agreement without exchanging the underlying notional amount. Hedging Activity In June 2023, the Company entered into $350.0 million of interest rate swap agreements to hedge against variability in future cash flows resulting from changes in SOFR. The swaps exchange variable rate SOFR interest on $350.0 million of SOFR indexed debt to a weighted average fixed interest rate of 3.57% beginning August 1, 2023 through the maturity date of January 1, 2029. The swaps are designated to hedge the variable rate interest payments of the 2029 Unsecured Term Loan indexed to SOFR. As of September 30, 2025, these interest rate swaps are valued as a liability of approximately $3.0 million. In December 2023, the Company entered into forward-starting interest rate swap agreements to hedge against variability in future cash flows resulting from changes in interest rates from the trade date through the forecasted issuance date of $150.0 million of long-term debt. In addition, in May 2024, the Company entered into a $150.0 million US Treasury lock at 4.51% to hedge against variability in future cash flows resulting from changes in interest rates. The Company terminated the $150.0 million forward-starting interest rate swap agreements and the $150.0 million US Treasury lock in May 2024, upon completion of the underwritten public offering of the 2034 Senior Unsecured Public Notes, receiving $4.4 million, net upon termination. This settlement was included as a component of accumulated other comprehensive income (“OCI”), to be recognized as an adjustment to income over the term of the debt. During 2024 and 2025, the Company entered into $325.0 million of forward-starting interest rate swap agreements to hedge against variability in future cash flows resulting from changes in interest rates from the trade date through the forecasted issuance date of long-term debt. The Company terminated the $325.0 million forward-starting interest rate swap agreements upon completion of the underwritten public offering of the 2035 Senior Unsecured Public Notes, receiving $13.6 million upon termination. This settlement was included as a component of accumulated OCI, to be recognized as an adjustment to income over the term of the debt. During 2025, the Company entered into $150.0 million of forward-starting interest rate swap agreements to hedge against variability in future cash flows resulting from changes in interest rates from the trade date through the forecasted issuance date of long-term debt. The swaps are designated to hedge the variability in future cash flows for a forecasted issuance of long-term debt over a maximum period ending January 2027. As of September 30, 2025, these interest rate swaps are valued as a liability of less than $0.1 million. In addition, during 2025, the Company entered into $150.0 million of interest rate swap agreements to hedge against variability in future cash flows resulting from changes in SOFR. The swaps exchange variable rate SOFR interest on $150.0 million of SOFR indexed debt to a weighted average fixed interest rate of 3.16% beginning April 1, 2026 through the maturity date of June 2, 2031. The swaps are designated to hedge the variable rate interest payments of forecasted variable rate debt indexed to SOFR. As of September 30, 2025, these interest rate swaps are valued as an asset of approximately $1.1 million. Recognition The Company recognizes all derivative instruments as either assets or liabilities at fair value on the balance sheets. The Company recognizes its derivatives within other assets, net and accounts payable, accrued expenses and other liabilities on the condensed consolidated balance sheets. Changes in fair value for hedging instruments designated and qualifying for cash flow hedge accounting treatment are recognized as a component of OCI. Accumulated OCI relates to (i) the change in fair value of interest rate derivatives and (ii) realized gains or losses on settled derivative instruments. Amounts are reclassified out of accumulated OCI as an adjustment to interest expense for (i) realized gains or losses related to effective interest rate swaps and (ii) realized gains or losses on settled derivative instruments, amortized over the term of the hedged debt transaction. During the next twelve months, the Company estimates that $4.5 million will be reclassified as a decrease to interest expense. The Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk as of the dates presented (dollars in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Number of Instruments (1) | ​ | Notional Amount (1)
​ | ​ | September 30, | ​ | December 31, | ​ | September 30, | ​ | December 31,
Interest Rate Derivatives |  | 2025 |  | 2024 |  | 2025 |  | 2024
Interest rate swaps |  | 9 |  | 11 | ​ | $ | 650,000 | ​ | $ | 550,000
​
| (1) | Number of instruments and total notional amounts disclosed includes all interest rate swap agreements outstanding at the balance sheet dates, including forward-starting interest rate swaps prior to their effective date.
​ The table below presents the estimated fair value of the Company’s derivative financial instruments, as well as their classification in the condensed consolidated balance sheets as of the dates presented (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Asset Derivatives
​ | ​ | September 30, 2025 | ​ | December 31, 2024
Derivatives designated as cash flow hedges: |  | ​ |  |  | ​ |
Other assets, net | ​ | $ | 1,369 | ​ | $ | 17,526
​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Liability Derivatives
​ | ​ | September 30, 2025 | ​ | December 31, 2024
Derivatives designated as cash flow hedges: |  | ​ |  |  | ​ |
Accounts payable, accrued expenses, and other liabilities | ​ | $ | 3,278 | ​ | $ | —
​ ​ The tables below present the effect of the Company’s derivative financial instruments in the condensed consolidated statements of operations and other comprehensive income for the periods presented (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Amount of Income/(Loss) | ​ | Location of Accumulated OCI | ​ | Amount Reclassified from
​ | ​ | Recognized in | ​ | Reclassified from Accumulated | ​ | Accumulated OCI as a
​ | ​ | OCI on Derivative | ​ | OCI into Income | ​ | (Reduction)/Increase in Interest Expense
Three Months Ended September 30, | ​ | 2025 |  | 2024 |  | ​ |  | 2025 |  | 2024
Interest rate swaps | ​ | $ | 1,408 | ​ | $ | (10,202) |  | Interest expense | ​ | $ | (1,772) | ​ | $ | (2,297)
​ ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Amount of Income/(Loss) | ​ | Location of Accumulated OCI | ​ | Amount Reclassified from
​ | ​ | Recognized in | ​ | Reclassified from Accumulated | ​ | Accumulated OCI as a
​ | ​ | OCI on Derivative | ​ | OCI into Income | ​ | (Reduction)/Increase in Interest Expense
Nine Months Ended September 30, |  | 2025 |  | 2024 |  | ​ | ​ | 2025 |  | 2024
Interest rate swaps | ​ | $ | (3,849) | ​ | $ | 8,612 | ​ | Interest expense | ​ | $ | (4,728) | ​ | $ | (6,709)
​ The Company does not use derivative instruments for trading or other speculative purposes and did not have any other derivative instruments or hedging activities as of September 30, 2025. ​ Credit-Risk-Related Contingent Features The Company has agreements with its derivative counterparties that contain a provision where the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on the indebtedness. The fair value of derivative contracts, which includes interest but excludes any adjustments for nonperformance risk, was in a net liability position of $1.7 million as of September 30, 2025 and an asset position of $17.9 million as of December 31, 2024, respectively. ​ Although the derivative contracts are subject to master netting arrangements, which serve as credit mitigants to both the Company and its counterparties under certain situations, the Company does not net its derivative fair values or any existing rights or obligations to cash collateral on the condensed consolidated balance sheets. ​ There was no offsetting of derivative assets or liabilities as of December 31, 2024. The tables below present a gross presentation of the effects of offsetting and a net presentation of the Company’s derivatives as of September 30, 2025 (in thousands): ​ Offsetting of Derivative Assets as of September 30, 2025 ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Gross Amounts |  | Net Amounts of | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Offset in the | ​ | Assets presented | ​ | Gross Amounts Not Offset in the
​ | ​ | Gross Amounts |  | Statement of | ​ | in the Statement | ​ | Statement of Financial Position
​ | ​ | of Recognized | ​ | Financial | ​ | of Financial |  | Financial |  | Cash Collateral | ​ | ​ | ​
​ |  | Assets |  | Position |  | Position |  | Instruments |  | Received |  | Net Amount
Derivatives | ​ | $ | 1,369 | ​ | $ | — | ​ | $ | 1,369 | ​ | $ | (200) | ​ | $ | — | ​ | $ | 1,169
​ Offsetting of Derivative Liabilities as of September 30, 2025 ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ |  | Gross Amounts |  | Net Amounts of | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ |  | Offset in the |  | Liabilities presented |  | Gross Amounts Not Offset in the
​ | ​ | Gross Amounts |  | Statement of |  | in the Statement |  | Statement of Financial Position
​ | ​ | of Recognized |  | Financial |  | of Financial |  | Financial |  | Cash Collateral | ​ | ​ | ​
​ | ​ | Liabilities | ​ | Position | ​ | Position | ​ | Instruments | ​ | Posted | ​ | Net Amount
Derivatives | ​ | $ | 3,278 | ​ | $ | — | ​ | $ | 3,278 | ​ | $ | (200) | ​ | $ | — | ​ | $ | 3,078
​

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