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Derivatives | 12 Months Ended
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Dec. 31, 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 August 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 December 31, 2024 and 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 December 31, 2024:
|  | December 31, 2024 |
Type of Derivatives |  | Number of Contracts |  |  | Aggregate Notional Amount (in thousands) |  |  | Notional Currency |  | Maturity |  | Weighted-Average Years to Maturity |
Fx contracts - GBP |  |  | 80 |  |  |  | 632,702 |  |  | GBP |  | January 2025 - August 2027 |  |  | 1.39 |
Fx contracts - EUR |  |  | 48 |  |  |  | 355,218 |  |  | EUR |  | January 2025 - August 2026 |  |  | 1.18 |
Fx contracts - SEK |  |  | 14 |  |  |  | 633,231 |  |  | SEK |  | February 2025 - May 2026 |  |  | 1.32 |
Interest rate cap |  |  | 2 |  |  |  | 238,535 |  |  | USD |  | July 2025 - October 2025 |  |  | 0.67 |
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 Topic 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 consolidated statements of operations related to our forward currency contracts for the years ended December 31, 2024, 2023 and 2022 ($ in thousands):
|  |  |  | Amount of gain (loss) recognized in income |
|  |  |  | Year Ended December 31, |
|  | Location of Gain (Loss) Recognized in Income |  | 2024 |  |  | 2023 |  |  | 2022 |
Forward currency contracts |  | Unrealized gain (loss) on derivative instruments |  | $ | 29,687 |  |  | $ | (91,434 | ) |  | $ | 104,159 |
Forward currency contracts |  | Realized gain (loss) on derivative instruments |  |  | 22,903 |  |  |  | 43,221 |  |  |  | 42,822 |
Total |  |  |  | $ | 52,590 |  |  | $ | (48,213 | ) |  | $ | 146,981 |
In June 2020, we entered into an interest rate cap for approximately $1.1 million, which matured in June 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 consolidated statement of operations. During 2022 and 2023 through the interest rate cap maturity, LIBOR exceeded the cap rate of 0.75%. As such, we realized gains from the interest rate cap in the amounts of $9.7 million and $5.7 million, which are included in gain (loss) on interest rate hedging instruments in our consolidated statement of operations during the years ended December 31, 2023 and December 31, 2022, respectively. The realized gains were a result of the increase in the current interest rate forward curve, partially offset by the nearing maturity of the cap. In September 2023, we entered into an interest rate cap with an original maturity of October 1, 2024 and 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 consolidated statement of operations. During the years ended December 31, 2024 and 2023, SOFR exceeded the cap rate of 4.00%. As such, during the years ended December 31, 2024 and 2023, we realized gains from the interest rate cap in the amount of $1.9 million a nd $0.6 million, respectively, which are included in gain (loss) on interest rate hedging instruments in our consolidated statement of operations. In September 2024, we extended our interest rate cap to October 1, 2025. In June 2024, we entered into an interest rate cap that matures on July 1, 2025 with a notional amount of $73.7 million. We use our interest rate cap to hedge our exposure to variable cash flows on our floating rate mortgage related to the D.C. Hotel. The interest rate cap effectively limits SOFR from exceeding 6.00% which results in the maximum all-in coupon on mortgage of 9.00%. The unrealized gain or loss related to the interest rate cap was recorded under gain (loss) on interest rate hedging instruments in our consolidated statement of operations. During the year ended December 31, 2024, SOFR did not exceed the cap rate of 6.00%, and accordingly, no realized gain was r ecorded. The following table summarizes the amounts recognized on our consolidated statements of operations related to our interest rate caps for the years ended December 31, 2024, 2023 and 2022 ($ in thousands):
|  |  |  | Amount of gain (loss) recognized in income |
|  |  |  | Year Ended December 31, |
|  | Location of Gain (Loss) recognized in Income |  | 2024 |  |  | 2023 |  |  | 2022 |
Interest rate caps |  | Unrealized gain (loss) on interest rate hedging instruments |  | $ | (1,373 | ) |  | $ | (10,098 | ) |  | $ | 7,692 |
Interest rate caps |  | Realized gain on interest rate hedging instruments |  |  | 1,943 |  |  |  | 9,684 |  |  |  | 5,671 |
Total |  |  |  | $ | 570 |  |  | $ | (414 | ) |  | $ | 13,363 |
The following table summarizes the gross asset and liability amounts related to our derivatives at December 31, 2024 and December 31, 2023 ($ in thousands):
|  | December 31, 2024 |  |  | December 31, 2023 |
|  | Gross Amount of Recognized Assets |  |  | Gross Amounts Offset in our Consolidated Balance Sheet |  |  | Net Amounts of Assets Presented in our 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 |  | $ | 59,261 |  |  | $ | (1,508 | ) |  | $ | 57,753 |  |  | $ | 55,102 |  |  | $ | (27,037 | ) |  | $ | 28,065 |
Interest rate caps |  |  | 416 |  |  |  | — |  |  |  | 416 |  |  |  | 1,360 |  |  |  | — |  |  |  | 1,360 |
Total derivative assets |  | $ | 59,677 |  |  | $ | (1,508 | ) |  | $ | 58,169 |  |  | $ | 56,462 |  |  | $ | (27,037 | ) |  | $ | 29,425 |

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