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DERIVATIVE INSTRUMENTS, HEDGING ACTIVITIES AND OTHER COMPREHENSIVE INCOME | 3 Months Ended
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Mar. 31, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE INSTRUMENTS, HEDGING ACTIVITIES AND OTHER COMPREHENSIVE INCOME | DERIVATIVE INSTRUMENTS, HEDGING ACTIVITIES AND OTHER COMPREHENSIVE INCOMEIn order to manage potential future variable interest rate risk, we enter into interest rate derivative agreements from time to time. We do not use interest rate derivative agreements for trading or speculative purposes. The agreements with each of our derivative counterparties provide that in the event of default on any of our indebtedness, we could also be declared in default on our derivative obligations. The following table summarizes the terms and fair values of the Company’s derivative financial instruments that were designated and qualified as part of a hedging relationship as of March 31, 2023 and December 31, 2022 (dollars in thousands):
|  |  |  |  |  |  |  |  |  |  |  |  |  | Fair Value Assets (Liabilities)(1)
Type of Hedge |  | Number of Instruments |  | Aggregate Notional |  | Reference Rate |  | Interest Rate |  | Effective Date |  | Maturity Date |  | March 31, 2023 |  | December 31, 2022
Cash Flow |  | Four |  | $ | 250,000 |  |  | SOFR |  | 2.99 | % |  | 12/1/2022 |  | 10/24/2025 |  | $ | 4,831 |  |  | $ | 7,134 |
Cash Flow |  | Two |  | 100,000 |  |  | SOFR |  | 2.66 | % |  | 8/1/2022 |  | 8/1/2025 |  | 2,655 |  |  | 3,616 |
Cash Flow |  | Two |  | 200,000 |  |  | SOFR |  | 2.72 | % |  | 8/3/2022 |  | 11/22/2023 |  | 2,625 |  |  | 3,663 |
Cash Flow |  | Three |  | 120,000 |  |  | SOFR |  | 1.58 | % |  | 8/15/2022 |  | 7/17/2024 |  | 4,315 |  |  | 5,461 |
Cash Flow |  | Three |  | 150,000 |  |  | SOFR |  | 1.68 | % |  | 8/15/2022 |  | 7/17/2026 |  | 8,743 |  |  | 10,896 |
|  |  |  | $ | 820,000 |  |  |  |  |  |  |  |  |  |  | $ | 23,169 |  |  | $ | 30,770 |
Fair Value(2) |  | Two |  | $ | 155,000 |  |  | LIBOR |  | LIBOR + 3.70% |  | 4/23/2021 |  | 9/10/2025 |  | $ | (12,045) |  |  | $ | (14,177) |
Forward-Starting Cash Flow |  | Two |  | $ | 200,000 |  |  | SOFR |  | 2.37 | % |  | 11/22/2023 |  | 8/1/2025 |  | $ | 3,528 |  |  | $ | 4,370 |
(1)Derivatives in an asset position are included within “Prepaid and other assets” and derivatives in a liability position are included within “Accounts payable and accrued expenses” in the accompanying consolidated balance sheets. (2)The derivative agreements swap a blended fixed rate of 4.52% for a blended floating rate of LIBOR plus 3.70%. In October 2022, we terminated two forward-starting interest rate swaps with notional amounts totaling $150.0 million and a maturity date of June 1, 2032 and received $30.9 million upon termination. This settlement is included as a component of “Accumulated other comprehensive income” in the accompanying consolidated balance sheets and is being reclassified to earnings over time as the hedged items are recognized in earnings. During the three months ended March 31, 2023, we accelerated the reclassification of $1.5 million in accumulated other comprehensive income as a reduction to interest expense as a result of a portion of the hedged forecasted transaction becoming probable not to occur. We currently expect that the debt issuance will occur during 2023. These interest rate derivative agreements are the only assets or liabilities that we record at fair value on a recurring basis. The valuation of these assets and liabilities is determined using widely accepted techniques including discounted cash flow analysis. These techniques consider the contractual terms of the derivatives (including the period to maturity) and use observable market-based inputs such as interest rate curves and implied volatilities. We also incorporate credit valuation adjustments into the fair value measurements to reflect nonperformance risk on both our part and that of the respective counterparties. We determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, although the credit valuation adjustments associated with our derivatives use Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. As of March 31, 2023 and December 31, 2022, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and determined the credit valuation adjustments were not significant to the overall valuation of our derivatives. As a result, we determined our derivative valuations were classified within Level 2 of the fair value hierarchy. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to earnings over time as the hedged items are recognized in earnings. Approximately $4.2 million was reclassified as an increase to earnings during the three months ended March 31, 2023 and approximately $4.1 million was reclassified as a decrease to earnings during the three months ended March 31, 2022. As interest payments on our derivatives are made over the next 12 months, we estimate the decrease to interest expense to be approximately $25.1 million, assuming the current SOFR and LIBOR curves. Unrealized gains and losses on our interest rate derivative agreements are the only components of the change in accumulated other comprehensive income.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI https://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI https://asc.fasb.org/extlink&oid=126731327&loc=d3e90205-114008 + Details
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