Derivative Instruments and Hedging Activities

9 Months Ended

Sep. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

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.

For derivatives designated and qualifying as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated other comprehensive income and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest and other expenses, net, as interest is incurred on the Company’s variable rate debt. During the next twelve months, the Company estimates that an additional $17,453,000 will be reclassified from accumulated other comprehensive income as a reduction to interest expense.

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

Maturity
Dates

September 30, 2023

December 31, 2022

Outstanding
Notional
Amount

Fair Value of

Outstanding
Notional
Amount

Fair Value of

Assets

Interest rate swaps

(1)

05/01/2022 to
05/01/2023

12/31/2024 to
01/31/2028

525,000

29,423

485,000

27,990

(1) Derivative assets are reported in the condensed consolidated balance sheets as other assets.

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 recognized on the interest rate derivatives designated as cash flow hedges for the three and nine months ended September 30, 2023 and 2022 (amounts in thousands):


Derivatives in Cash Flow Hedging Relationships	Amount of Income Recognized in Other Comprehensive Income on Derivatives		Location of Income Reclassified From Accumulated Other Comprehensive Income to Net Income	Amount of Income (Loss) Reclassified From Accumulated Other Comprehensive Income to Net Income		Total Amount of Line Item in Condensed Consolidated Statements of Comprehensive Income
Three Months Ended September 30, 2023
Interest rate swaps	$	6,780	Interest and other expenses, net	$	4,465	$	5,630

Three Months Ended September 30, 2022
Interest rate swaps	$	16,724	Interest and other expenses, net	$	379	$	5,498


Nine Months Ended September 30, 2023
Interest rate swaps	$	13,550	Interest and other expenses, net	$	12,117	$	16,769


Nine Months Ended September 30, 2022
Interest rate swaps	$	31,545	Interest and other expenses, net	$	(2,912)	$	17,942

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, 2023, 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, 2023, 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, 2023 and December 31, 2022 (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 Collateral		Net Amount
September 30, 2023	$	29,423	$	—	$	29,423	$	—	$	—	$	29,423
December 31, 2022	$	27,990	$	—	$	27,990	$	—	$	—	$	27,990