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Derivatives | 6 Months Ended
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Jun. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives | Note 11 – Derivatives We use forward currency contracts to economically hedge interest and principal payments due under our loans denominated in currencies other than USD. We have entered into a series of forward contracts to sell an amount of foreign currency (GBP, EUR and SEK) for an agreed upon amount of USD at various dates through February 2027. These forward contracts were executed to economically fix the USD amounts of foreign denominated cash flows expected to be received by us related to foreign denominated loan investments. The agreements with our derivative counterparties require that we post collateral to secure net liability positions. As of both June 30, 2024 and December 31, 2023, we were in a net asset position with all of our derivative counterparties and did not have any collateral posted under these derivative contracts. The following table summarizes our non-designated Fx forwards and interest rate cap as of June 30, 2024:
|  | June 30, 2024 |
Type of Derivatives |  | Number of Contracts |  |  | Aggregate Notional Amount (in thousands) |  |  | Notional Currency |  | Maturity |  | Weighted-Average Years to Maturity |
Fx contracts - GBP |  |  | 85 |  |  |  | 963,399 |  |  | GBP |  | July 2024 - February 2027 |  |  | 1.00 |
Fx contracts - EUR |  |  | 114 |  |  |  | 481,209 |  |  | EUR |  | July 2024 - August 2026 |  |  | 0.69 |
Fx contracts - SEK |  |  | 16 |  |  |  | 663,828 |  |  | SEK |  | August 2024 - May 2026 |  |  | 1.75 |
Interest rate cap |  |  | 2 |  |  |  | 238,535 |  |  | USD |  | October 2024 - July 2025 |  |  | 0.49 |
The following table summarizes our non-designated Fx forwards and interest rate cap as of December 31, 2023:
|  | December 31, 2023 |
Type of Derivatives |  | Number of Contracts |  |  | Aggregate Notional Amount (in thousands) |  |  | Notional Currency |  | Maturity |  | Weighted-Average Years to Maturity |
Fx contracts - GBP |  |  | 97 |  |  |  | 938,903 |  |  | GBP |  | January 2024 - February 2027 |  |  | 1.13 |
Fx contracts - EUR |  |  | 135 |  |  |  | 561,441 |  |  | EUR |  | January 2024 - August 2026 |  |  | 1.08 |
Fx contracts - SEK |  |  | 17 |  |  |  | 690,740 |  |  | SEK |  | February 2024 - May 2026 |  |  | 2.16 |
Interest rate cap |  |  | 1 |  |  |  | 164,835 |  |  | USD |  | October 2024 |  |  | 0.75 |
We have not designated any of our derivative instruments as hedges as defined in ASC 815, "Derivatives and Hedging" and, therefore, changes in the fair value of our derivative instruments are recorded directly in earnings. The following table summarizes the amounts recognized on our condensed consolidated statements of operations related to our forward currency contracts for the three and six months ended June 30, 2024 and 2023 ($ in thousands):
|  |  |  | Amount of gain (loss) recognized in income |  |  | Amount of gain (loss) recognized in income |
|  |  |  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | Location of Gain (Loss) Recognized in Income |  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
Forward currency contracts |  | Unrealized gain (loss) on derivative instruments |  | $ | 911 |  |  | $ | (20,102 | ) |  | $ | 18,964 |  |  | $ | (55,953 | )
Forward currency contracts |  | Realized gain (loss) on derivative instruments |  |  | 5,466 |  |  |  | 2,986 |  |  |  | 10,811 |  |  |  | 24,702 |
Total |  |  |  | $ | 6,377 |  |  | $ | (17,116 | ) |  | $ | 29,775 |  |  | $ | (31,251 | )
In June 2020, we entered into an interest rate cap for approximately $1.1 million, which matured on June 15, 2023. Our interest rate cap managed our exposure to variable cash flows on our borrowings under the senior secured term loan by effectively limiting LIBOR from exceeding 0.75%. This limited the maximum all-in coupon on our senior secured term loan to 3.50%. The unrealized gain or loss related to the interest rate cap was recorded net under unrealized gain on interest rate hedging instruments in our condensed consolidated statement of operations. During the three and six months ended June 30, 2023, LIBOR exceeded the cap rate of 0.75%. As such, during the three and six months ended June 30, 2023, we realized a gain from the interest rate cap in the amount of $4.4 million and $9.1 million, respectively, which is included in gain (loss) on interest rate hedging instruments in our condensed consolidated statement of operations. The realized gain was a result of the increase in the current interest rate forward curve, partially offset by the nearing maturity of the cap. On September 26, 2023, we entered into an interest rate cap that matures on October 1, 2024 with a notional amount of $164.8 million. We use our interest rate cap to hedge our exposure to variable cash flows on our construction financing. The interest rate cap effectively limits SOFR from exceeding 4.00% which results in the maximum all-in coupon on our construction financing of 6.55%. The unrealized gain or loss related to the interest rate cap was recorded under gain (loss) on interest rate hedging instruments in our condensed consolidated statement of operations. During the three and six months ended June 30, 2024, SOFR exceeded the cap rate of 4.00%. As such, during the three and six months ended June 30, 2024, we realized a gain from the interest rate cap in the amount of $0.6 million and $1.1 million, respectively, which is included in gain (loss) on interest rate hedging instruments in our condensed consolidated statement of operations. On June 13, 2024, we entered into an interest rate cap that matures on July 1, 2025 with a notional amount of $73.7 million. We use our interest rate cap to hedge our exposure to variable cash flows on our floating rate mortgage related to the D.C. Hotel. The interest rate cap effectively limits SOFR from exceeding 6.00% which results in the maximum all-in coupon on mortgage of 9.00%. The unrealized gain or loss related to the interest rate cap was recorded under gain (loss) on interest rate hedging instruments in our condensed consolidated statement of operations. During the three months ended June 30, 2024, SOFR did not exceed the cap rate of 6.00%, and accordingly, no realized gain was recorded. The following table summarizes the amounts recognized on our condensed consolidated statements of operations related to our interest rate caps for the three and six months ended June 30, 2024 and 2023 ($ in thousands):
|  |  |  | Amount of gain (loss) recognized in income |  |  | Amount of gain (loss) recognized in income |
|  |  |  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | Location of Gain (Loss) recognized in Income |  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
Interest rate caps |  | Unrealized gain (loss) on interest rate hedging instruments |  | $ | (457 | ) |  | $ | (4,328 | ) |  | $ | (651 | ) |  | $ | (9,141 | )
Interest rate caps |  | Realized gain on interest rate hedging instruments |  |  | 551 |  |  |  | 4,383 |  |  |  | 1,101 |  |  |  | 9,089 |
Total |  |  |  | $ | 94 |  |  | $ | 55 |  |  | $ | 450 |  |  | $ | (52 | )
The following tables summarize the gross asset and liability amounts related to our derivatives at June 30, 2024 and December 31, 2023 ($ in thousands):
|  | June 30, 2024 |  |  | December 31, 2023 |
|  | Gross Amount of Recognized Assets |  |  | Gross Amounts Offset in our Condensed Consolidated Balance Sheet |  |  | Net Amounts of Assets Presented in our Condensed Consolidated Balance Sheet |  |  | Gross Amount of Recognized Assets |  |  | Gross Amounts Offset in our Consolidated Balance Sheet |  |  | Net Amounts of Assets Presented in our Consolidated Balance Sheet |
Forward currency contracts |  | $ | 67,325 |  |  | $ | (20,296 | ) |  | $ | 47,029 |  |  | $ | 55,102 |  |  | $ | (27,037 | ) |  | $ | 28,065 |
Interest rate caps |  |  | 720 |  |  |  | — |  |  |  | 720 |  |  |  | 1,360 |  |  |  | — |  |  |  | 1,360 |
Total derivative assets (liabilities) |  | $ | 68,045 |  |  | $ | (20,296 | ) |  | $ | 47,749 |  |  | $ | 56,462 |  |  | $ | (27,037 | ) |  | $ | 29,425 |

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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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