Derivatives

3 Months Ended

Mar. 31, 2025

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Note 10 – 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 March 2028. 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 March 31, 2025 and December 31, 2024, 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 caps as of March 31, 2025:

          
         March 31, 2025

         Type of Derivatives

         Number of
Contracts

         Aggregate
Notional Amount
(in thousands)

         Notional
Currency

         Maturity

         Weighted-Average
Years to Maturity

Fx contracts - GBP

88

626,454

GBP

April 2025 - March 2028

1.44

Fx contracts - EUR

44

341,860

EUR

April 2025 - August 2026

0.98

Fx contracts - SEK

13

617,606

SEK

May 2025 - May 2026

1.10

Interest rate caps

2

238,535

USD

July 2025 - October 2025

0.43

The following table summarizes our non-designated Fx forwards and interest rate caps 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 caps

2

238,535

USD

July 2025 - October 2025

0.67

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 months ended March 31, 2025 and 2024 ($ in thousands):


		Amount of gain (loss) recognized in income
		Three Months Ended March 31,
	Location of Gain (Loss) Recognized in Income	2025			2024
Forward currency contracts	Unrealized gain (loss) on derivative instruments	$	(41,829	)	$	18,053
Forward currency contracts	Realized gain (loss) on derivative instruments		2,857			5,345
Total		$	(38,972	)	$	23,398

The following table summarizes the amounts recognized on our condensed consolidated statements of operations related to our interest rate caps for the three months ended March 31, 2025 and 2024 ($ in thousands):


		Amount of gain (loss) recognized in income
		Three Months Ended March 31,
	Location of Gain (Loss) recognized in Income	2025			2024
Interest rate caps	Unrealized gain (loss) on interest rate hedging instruments	$	(174	)	$	(194	)
Interest rate caps	Realized gain on interest rate hedging instruments		132			550
Total		$	(42	)	$	356

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. During September 2024, we extended our interest rate cap to October 1, 2025. 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%. During both the three months ended March 31, 2025 and 2024, SOFR exceeded the cap rate of 4.00%. As such, during the three months ended March 31, 2025 and 2024, we realized a gain from the interest rate cap in the amount of $0.1 million and $0.6 million,

respectively, which is included in gain (loss) on interest rate hedging instruments in our condensed consolidated statement of operations.

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%. During the three months ended March 31, 2025, SOFR did not exceed the cap rate of 6.00%, and accordingly, no realized gain was recorded.

The following tables summarize the gross asset and liability amounts related to our derivatives at March 31, 2025 and December 31, 2024 ($ in thousands):


	March 31, 2025							December 31, 2024
	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	$	27,481	$	(11,557	)	$	15,924	$	59,261	$	(1,508	)	$	57,753
Interest rate caps		243		—			243		416		—			416
Total derivative assets	$	27,724	$	(11,557	)	$	16,167	$	59,677	$	(1,508	)	$	58,169