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Derivative Instruments | 3 Months Ended
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Mar. 31, 2024
Summary of Derivative Instruments [Abstract] |
Derivative Instruments | Derivative Instruments All derivatives are recognized at fair value in the consolidated balance sheets within the line items "Other assets" and "Accounts payable and accrued liabilities" as applicable. The Company has elected not to offset its derivative position for purposes of balance sheet presentation and disclosure. The Compa ny had derivative assets of $1.6 million and $1.3 million at March 31, 2024 and December 31, 2023, respectively. The Company had derivative liabilities of $0.4 million and $4.9 million at March 31, 2024 and December 31, 2023, respectively. The Company has not posted or received collateral with its derivative counterparties as of March 31, 2024 or December 31, 2023. See Note 10 for disclosures relating to the fair value of the derivative instruments. Risk Management Objective of Using Derivatives The Company is exposed to certain risk arising from both its business operations and economic conditions, including the effect of changes in foreign currency exchange rates on foreign currency transactions and interest rates on its SOFR-based borrowings. The Company manages this risk by following established risk management policies and procedures including the use of derivatives. The Company’s objective in using derivatives is to add stability to reported earnings and to manage its exposure to foreign exchange and interest rate movements or other identified risks. To accomplish this objective, the Company primarily uses interest rate swaps, cross-currency swaps and foreign currency forwards. Cash Flow Hedges of Interest Rate Risk The Company uses interest rate swaps as its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt or payment of variable-rate amounts from a counterparty, which results in the Company recording net interest expense that is fixed over the life of the agreements without exchange of the underlying notional amount. At March 31, 2024, the Company had one interest rate swap agreement designated as a cash flow hedge of interest rate risk. The interest rate swap agreement outstanding as of March 31, 2024 is summarized below:
Fixed rate |  | Notional Amount (in millions) |  | Index |  | Maturity
2.5325% |  | $ | 25.0 |  |  | USD SOFR |  | September 30, 2026
The change in the fair value of interest rate derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (AOCI) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings within the same income statement line item as the earnings effect of the hedged transaction. Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. As of March 31, 2024, the Company estimates t hat during the twelve months end ing March 31, 2025, $0.6 million of gains will be reclassified from AOCI to interest expense. Cash Flow Hedges of Foreign Exchange Risk The Company is exposed to foreign currency exchange risk against its functional currency, USD, on CAD denominated cash flow from its six Canadian properties. The Company uses cross-currency swaps to mitigate its exposure to fluctuations in the USD-CAD exchange rate on cash inflows associated with these properties, which should hedge a significant portion of the Company's expected CAD denominated cash flows. As of March 31, 2024, the Company had the following cross-currency swaps:
Fixed rate |  | Notional Amount (in millions, CAD) |  | Annual Cash Flow (in millions, CAD) |  | Maturity
$1.26 CAD per USD |  | $ | 150.0 |  |  | $ | 10.8 |  |  | October 1, 2024
$1.28 CAD per USD |  | 200.0 |  |  | 4.5 |  |  | October 1, 2024
$1.30 CAD per USD |  | 90.0 |  |  | 8.1 |  |  | December 1, 2024
|  | $ | 440.0 |  |  | $ | 23.4 |  |  |
The change in the fair value of foreign currency derivatives designated and that qualify as cash flow hedges of foreign exchange risk is recorded in AOCI and reclassified into earnings in the period that the hedged forecasted transaction affects earnings within the same income statement line item as the earnings effect of the hedged transaction. As of March 31, 2024, the Company estimates t hat during the twelve months ending March 31, 2025, $0.5 million of gains will be reclassified from AOCI to other income. Net Investment Hedges The Company is exposed to fluctuations in the USD-CAD exchange rate on its net investments in Canada. As such, the Company uses currency forward agreements to manage its exposure to changes in foreign exchange rates on certain of its foreign net investments. As of March 31, 2024, the Company had the following foreign currency forwards designated as net investment hedges:
Fixed rate |  | Notional Amount (in millions, CAD) |  | Maturity
$1.35 CAD per USD |  | $ | 200.0 |  |  | October 1, 2025
$1.35 CAD per USD |  | 90.0 |  |  | December 1, 2025
Total |  | $ | 290.0 |  |  |
For qualifying foreign currency derivatives designated as net investment hedges, the change in the fair value of the derivatives is reported in AOCI as part of the cumulative translation adjustment. Amounts are reclassified out of AOCI into earnings when the hedged net investment is either sold or substantially liquidated. Gains and losses on the derivative representing hedge components excluded from the assessment of effectiveness are recognized over the life of the hedge on a systematic and rational basis, as documented at hedge inception in accordance with the Company's accounting policy election. The earnings recognition of excluded components are presented in other income. Below is a summary of the effect of derivative instruments on the consolidated statements of changes in equity and income for the three months ended March 31, 2024 and 2023. Effect of Derivative Instruments on the Consolidated Statements of Changes in Equity and Comprehensive Income for the Three Months Ended March 31, 2024 and 2023 (Dollars in thousands)
| Three Months Ended March 31, |  |
Description | 2024 | 2023 |  |  |
Cash Flow Hedges |  |  |  |  |
Interest Rate Swaps |  |  |  |  |
Amount of Gain (Loss) Recognized in AOCI on Derivative | $ | 334 |  | $ | (298) |  |  |  |
Amount of Income Reclassified from AOCI into Earnings (1) | 183 |  | 126 |  |  |  |
Cross-Currency Swaps |  |  |  |  |
Amount of Gain Recognized in AOCI on Derivative | 342 |  | 4 |  |  |  |
Amount of Income Reclassified from AOCI into Earnings (2) | 227 |  | 225 |  |  |  |
Net Investment Hedges |  |  |  |  |
Currency Forward Agreements |  |  |  |  |
Amount of Gain Recognized in AOCI on Derivative | 4,466 |  | 341 |  |  |  |
Total |  |  |  |  |
Amount of Gain Recognized in AOCI on Derivatives | $ | 5,142 |  | $ | 47 |  |  |  |
Amount of Income Reclassified from AOCI into Earnings | 410 |  | 351 |  |  |  |
Interest expense, net in accompanying consolidated statements of income and comprehensive income | $ | 31,651 |  | $ | 31,722 |  |  |  |
Other income in accompanying consolidated statements of income and comprehensive income | $ | 12,037 |  | $ | 9,333 |  |  |  |
(1) Included in "Interest expense, net" in the accompanying consolidated statements of income and comprehensive income for the three months ended March 31, 2024 and 2023. (2) Included in "Other income" in the accompanying consolidated statements of income and comprehensive income for the three months ended March 31, 2024 and 2023. Credit-risk-related Contingent Features The Company has an agreement with its interest rate derivative counterparty that contains a provision where if the Company defaults on any of its obligations for borrowed money or credit in an amount exceeding $50.0 million and such default is not waived or cured within a specified period of time, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its interest rate derivative agreements. As of March 31, 2024, the fair value of the Company's derivatives in a liability position related to these agreements was $0.4 million. If the Company breached any of the contractual provisions of these derivative contracts, it would be required to settle its obligations under the agreements at their termination value of $0.3 million, after considering the right of offset. As o f March 31, 2024, the Company had not posted any collateral related to these agreements and was not in breach of any provisions in these agreements.

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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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