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Derivative Instruments | 6 Months Ended
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Jun. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments | Note 7. Derivative Instruments Interest Rate Derivatives Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish this objective, we have used interest rate swaps and caps as part of our interest rate risk management strategy. For interest rate derivatives designated and qualified as a hedge for GAAP purposes, the change in the fair value of the effective portion of the derivative is recorded in accumulated other comprehensive income (loss) (“AOCI”) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Amounts reported in AOCI related to such derivatives will be reclassified to interest expense as interest payments are made on our variable rate debt. In addition, we classify cash flows from qualifying cash flow hedging relationships in the same category as the cash flows from the hedged items in our consolidated statements of cash flows. We do not use interest rate derivatives for trading or speculative purposes. Interest rate derivatives not designated as hedges for GAAP are not speculative and are used to manage our exposure to interest rate movements and other identified risks but we have elected not to apply hedge accounting. Changes in the fair value of interest rate derivatives not designated in hedging relationships are recorded in other income (expense) within our consolidated statements of operations. Foreign Currency Hedges Our objectives in using foreign currency derivatives are to add stability to potential fluctuations in exchange rates between foreign currencies and the U.S. dollar and to manage our exposure to exchange rate movements. To accomplish this objective, we have used foreign currency forwards and foreign currency options as part of our exchange rate risk management strategy. A foreign currency forward contract is a commitment to deliver a certain amount of currency at a certain price on a specific date in the future. By entering into the forward contract and holding it to maturity, we are locked into a future currency exchange rate in an amount equal to and for the term of the forward contract. A foreign currency option contract is a commitment by the seller of the option to deliver, solely at the option of the buyer, a certain amount of currency at a certain price on a specific date. For derivatives designated as net investment hedges for GAAP purposes, the changes in the fair value of the derivatives are reported in accumulated other comprehensive income. Amounts are reclassified out of accumulated other comprehensive income (loss) into earnings when the hedged net investment is either sold or substantially liquidated. The change in the value of the designated portion of our settled and unsettled foreign currency hedges is recorded net in foreign currency hedge contract gain (loss) in our consolidated statements of comprehensive income (loss) in the related period. The change in the value of the portion of our settled and unsettled foreign currency hedges that is not designated for hedge accounting for GAAP is recorded in other income (expense) within our consolidated statements of operations and represented a loss of approximately $2.8 million and a gain of approximately $4.1 million for the three months ended June 30, 2023 and 2022, respectively, and a loss of approximately $3.2 million and a gain of approximately $2.3 million for the six months ended June 30, 2023 and 2022, respectively. On April 12, 2021, we entered into an approximately $125.9 million CAD currency forward with a settlement date of April 12, 2023. On April 12, 2023, we settled this foreign currency forward and received approximately USD $6.4 million, and simultaneously entered into a new approximately $134.4 million CAD currency forward with a maturity date of July 6, 2023. On April 12, 2022, we settled a $122 million CAD foreign currency forward, receiving a net settlement of approximately USD $3.2 million, and simultaneously entered into a new $126.2 million CAD currency forward with a settlement date of October 12, 2022. On October 12, 2022, we settled this foreign currency forward, receiving a net settlement of approximately $8.7 million, and simultaneously entered into a new $137.7 million CAD currency forward with a settlement date of October 12, 2023. The following table summarizes the terms of our derivative financial instruments as of June 30, 2023:
|  | Notional Amount |  |  | Strike |  |  | Effective Date or Date Assumed |  | Maturity Date
Interest Rate Derivatives: |  |  |  |  |  |  |  |  |  |
SOFR Cap |  | $ | 125,000,000 |  |  |  | 2.00 | % |  | June 1, 2022 |  | June 28, 2024
SOFR Cap |  | $ | 100,000,000 |  |  |  | 4.75 | % |  | December 1, 2022 |  | December 1, 2025
SOFR Cap |  | $ | 100,000,000 |  |  |  | 4.75 | % |  | December 1, 2022 |  | December 2, 2024
SOFR Cap |  | $ | 100,000,000 |  |  |  | 4.75 | % |  | December 1, 2022 |  | December 2, 2024
Foreign Currency Forwards: |  |  |  |  |  |  |  |  |  |
Denominated in CAD (1) (2) |  | $ | 134,361,000 |  |  |  | 1.3436 |  |  | April 12, 2023 |  | July 6, 2023
Denominated in CAD (1) |  | $ | 137,680,000 |  |  |  | 1.3768 |  |  | October 12, 2022 |  | October 12, 2023
(1) No tional amounts shown are denominated in CAD. (2) On July 5, 2023, we settled this foreign currency forward and paid approximately USD $1.2 million, and simultaneously entered into a new approximately $132.4 million CAD currency forward with a settlement date of April 12, 2024. The following table summarizes the terms of our derivative financial instruments as of December 31, 2022:
|  | Notional Amount |  |  | Strike |  |  | Effective Date or Date Assumed |  | Maturity Date
Interest Rate Derivatives: |  |  |  |  |  |  |  |  |  |
SOFR Cap |  | $ | 125,000,000 |  |  |  | 1.75 | % |  | June 1, 2022 |  | June 30, 2023
SOFR Cap |  | $ | 125,000,000 |  |  |  | 2.00 | % |  | June 1, 2022 |  | June 28, 2024
SOFR Cap |  | $ | 100,000,000 |  |  |  | 4.75 | % |  | December 1, 2022 |  | December 1, 2025
SOFR Cap |  | $ | 100,000,000 |  |  |  | 4.75 | % |  | December 1, 2022 |  | December 2, 2024
SOFR Cap |  | $ | 100,000,000 |  |  |  | 4.75 | % |  | December 1, 2022 |  | December 2, 2024
Foreign Currency Forwards: |  |  |  |  |  |  |  |  |  |
Denominated in CAD (1) |  | $ | 125,925,000 |  |  | 1.2593 |  |  | April 12, 2021 |  | April 12, 2023
Denominated in CAD (1) |  | $ | 137,680,000 |  |  |  | 1.3768 |  |  | October 12, 2022 |  | October 12, 2023
(1) Notional amount shown is denominated in CAD. The following table presents a gross presentation of the fair value of our derivative financial instruments as well as their classification on our consolidated balance sheets as of June 30, 2023 and December 31, 2022:
|  | Asset/Liability Derivatives |
|  | Fair Value |
Balance Sheet Location |  | June 30, 2023 |  |  | December 31, 2022 |
Interest Rate Derivatives |  |  |  |  |  |
Other assets |  | $ | 7,570,707 |  |  | $ | 9,681,298 |
Foreign Currency Hedges |  |  |  |  |  |
Other assets |  | $ | - |  |  | $ | 6,971,265 |
Accounts payable and accrued liabilities |  | $ | (5,461,388 | ) |  | $ | (1,776,371 | )
The following tables presents the effect of our derivative financial instruments on our consolidated statements of operations for the periods presented:
| Gain (loss) recognized in OCI |  |  | Location of amounts reclassified from OCI into income |  | Gain (loss) reclassified from accumulated other comprehensive income |
| For the three months ended June 30, |
Type | 2023 |  |  | 2022 |  |  |  |  | 2023 |  |  | 2022 |
Interest Rate Swaps | $ | - |  |  | $ | - |  |  | Interest expense |  | $ | 5,041 |  |  | $ | 47,175 |
Interest Rate Caps |  | 1,896,831 |  |  |  | 1,252,638 |  |  | Interest expense |  |  | 1,341,755 |  |  |  | (204,782 | )
Foreign Currency Forwards |  | (962,245 | ) |  |  | 1,512,677 |  |  | N/A |  |  | - |  |  |  | - |
| $ | 934,586 |  |  | $ | 2,765,315 |  |  |  |  | $ | 1,346,796 |  |  | $ | (157,607 | )
| Gain (loss) recognized in OCI |  |  | Location of amounts reclassified from OCI into income |  | Gain (loss) reclassified from accumulated other comprehensive income |
| For the six months ended June 30, |
Type | 2023 |  |  | 2022 |  |  |  |  | 2023 |  |  | 2022 |
Interest Rate Swaps | $ | - |  |  | $ | (2,793 | ) |  | Interest expense |  | $ | 50,587 |  |  | $ | (398,931 | )
Interest Rate Caps |  | 1,370,513 |  |  |  | 1,252,596 |  |  | Interest expense |  |  | 2,263,231 |  |  |  | (278,579 | )
Foreign Currency Forwards |  | (1,053,861 | ) |  |  | 678,241 |  |  | N/A |  |  | - |  |  |  | - |
| $ | 316,652 |  |  | $ | 1,928,044 |  |  |  |  | $ | 2,313,818 |  |  | $ | (677,510 | )
Based on the forward rates in effect as of June 30, 2023, we estimate that approximately $3.0 million related to our qualifying cash flow hedges will be reclassified to reduce interest expense during the next 12 months.

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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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