XML 30 R19.htm IDEA: XBRL DOCUMENT v3.22.2.2
Derivative Instruments and Hedging Activities
 9 Months Ended
Sep. 30, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities Derivative Instruments and Hedging Activities
Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable rate amounts from a counterparty in exchange for the Company making fixed rate payments over the life of the agreements without exchange of the underlying notional amount.
Accounting for changes in the fair value of a derivative instrument depends on the intended use and designation of the derivative instrument. The Company designated the interest rate swaps as cash flow hedges to hedge the variability of the anticipated cash flows on its variable rate credit facility. Changes in the fair value of derivatives designated, and that qualify, as cash flow hedges are recorded in accumulated other comprehensive income (loss) in the accompanying condensed consolidated statements of stockholders' equity and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.
In connection with the Data Center Sale on July 22, 2021, the Company terminated eight interest rate swap agreements related to mortgage notes fixed through interest rate swaps. Prior to the termination of the eight interest rate swaps, the Company de-designated and then formally re-designated these hedged transactions. During the three and nine months ended September 30, 2022, as the hedged forecasted transactions affected earnings, the Company reclassified approximately $291,000 and $1,274,000, respectively, from accumulated other comprehensive income (loss) to interest and other expense, net, related to the swap terminations, in the accompanying condensed consolidated statements of comprehensive income.
Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest and other expense, net, as interest is incurred on the Company’s variable rate debt. During the next twelve months, the Company estimates that an additional $15,406,000 will be reclassified from accumulated other comprehensive income (loss) as an increase to earnings.
The following table summarizes the notional amount and fair value of the Company’s derivative instruments (amounts in thousands):
Derivatives
Designated as
Hedging
Instruments		Balance
Sheet
Location
Effective
Dates (2), (3)
Maturity
Dates (2)
September 30, 2022December 31, 2021
Outstanding
Notional
Amount (2)
Fair Value ofOutstanding
Notional
Amount		Fair Value of
Assets(Liabilities)Assets(Liabilities)
Interest rate swaps(1)05/01/2022 to
05/01/2023		04/27/2023 to
01/31/2028		$485,000 $29,724 $— $400,000 $2,171 $(5,618)
(1)     Derivative assets and liabilities are reported in the condensed consolidated balance sheets as other assets, net, and accounts payable and other liabilities, respectively.
(2)    During the three months ended June 30, 2022, the Company entered into three interest rate swap agreements with an aggregate notional amount of $150,000,000, that have an effective date of May 1, 2023, to replace two interest rate swaps with an aggregate notional amount of $150,000,000 that have a maturity date of April 27, 2023.
(3)    In May 2022, the Company entered into bilateral agreements with its swap counterparties to transition all of its interest rate swap agreements to SOFR. As of June 30, 2022, all of the Company's interest rate swap agreements were indexed to SOFR.
The notional amount under the agreements is an indication of the extent of the Company’s involvement in each instrument at the time, but does not represent exposure to credit, interest rate or market risks.
The table below summarizes the amount of income and losses recognized on the interest rate derivatives designated as cash flow hedges for the three and nine months ended September 30, 2022 and 2021 (amounts in thousands):
Derivatives in Cash Flow
Hedging Relationships		Amount of Income (Loss) Recognized
in Other Comprehensive Income on Derivatives		Location of Income (Loss)
Reclassified From
Accumulated Other
Comprehensive Income (Loss) to
Net Income		Amount of Income (Loss)
Reclassified From
Accumulated Other
Comprehensive Income (Loss) to
Net Income		Total Amount of Line Item in Condensed Consolidated Statements of Comprehensive Income
Three Months Ended September 30, 2022
Interest rate swaps - continuing operations$16,724 Interest and other expense, net$379 $5,498 
Three Months Ended September 30, 2021
Interest rate swaps - continuing operations$(253)Interest and other expense, net$(1,952)$11,737 
Interest rate swaps - discontinued operations— Income from discontinued operations(542)377,191 
Total$(253)$(2,494)
Nine Months Ended September 30, 2022
Interest rate swaps - continuing operations$31,545 Interest and other expense, net$(2,912)$17,942 
Nine Months Ended September 30, 2021
Interest rate swaps - continuing operations$2,555 Interest and other expense, net$(5,643)$30,035 
Interest rate swaps - discontinued operations(37)Income from discontinued operations(1,647)401,444 
Total$2,518 $(7,290)
Credit Risk-Related Contingent Features
The Company has agreements with each of its derivative counterparties that contain a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations. The Company records credit risk valuation adjustments on its interest rate swaps based on the respective credit quality of the Company and the counterparty. The Company believes it mitigates its credit risk by entering into agreements with creditworthy counterparties. As of September 30, 2022, the Company had no derivatives with fair value in a net liability position, inclusive of accrued interest but excluding any adjustment for nonperformance risk related to the agreement. As of September 30, 2022, there were no termination events or events of default related to the interest rate swaps.
Tabular Disclosure Offsetting Derivatives
The Company has elected not to offset derivative positions in its condensed consolidated financial statements. The following tables present the effect on the Company’s financial position had the Company made the election to offset its derivative positions as of September 30, 2022 and December 31, 2021 (amounts in thousands):
Offsetting of Derivative Assets    
    Gross Amounts Not Offset in the Balance Sheet 
 Gross
Amounts of
Recognized
Assets		Gross Amounts
Offset in the
Balance Sheet		Net Amounts of
Assets Presented in
the Balance Sheet		Financial Instruments
Collateral		Cash CollateralNet
Amount
September 30, 2022$29,724 $— $29,724 $— $— $29,724 
December 31, 2021$2,171 $— $2,171 $(1,023)$— $1,148 
Offsetting of Derivative Liabilities    
    Gross Amounts Not Offset in the Balance Sheet 
 Gross
Amounts of
Recognized
Liabilities		Gross Amounts
Offset in the
Balance Sheet		Net Amounts of
Liabilities
Presented in the
Balance Sheet		Financial Instruments
Collateral		Cash CollateralNet
Amount
September 30, 2022$— $— $— $— $— $— 
December 31, 2021$5,618 $— $5,618 $(1,023)$— $4,595