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DERIVATIVE INSTRUMENTS | 9 Months Ended
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Sep. 30, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE INSTRUMENTS | DERIVATIVE INSTRUMENTS Centerspace used interest rate derivatives to stabilize interest expense and to manage its exposure to interest rate fluctuations. To accomplish this objective, the Company primarily used interest rate swap contracts to fix variable interest rate debt. Changes in the fair value of derivatives designated and that qualified as cash flow hedges were recorded in accumulated other comprehensive income (loss) (“OCI”). Amounts recorded in accumulated other comprehensive income will be reclassified to interest expense in the periods in which interest payments are incurred on variable rate debt. During the next twelve months, the Company estimates an additional $724,000 will be reclassified as an increase to interest expense. In February 2022, the Company paid $3.2 million to terminate its $75.0 million interest rate swap and its $70.0 million forward swap. As of September 30, 2022 the Company had no remaining interest rate swaps. Derivatives not designated as hedges were not speculative and were used to manage the Company’s exposure to interest rate movements and other identified risks but did not meet the strict hedge accounting requirements. Changes in fair value of derivatives not designated in hedging relationships were recorded directly to earnings within other income (loss) in the Condensed Consolidated Statement of Operations. During the nine months ended September 30, 2022 and 2021, the Company recorded a gain of $582,000 and $60,000, respectively, related to the interest rate swap not designated in a hedging relationship, prior to its termination. During the three months ended September 30, 2021, the Company paid $3.8 million to terminate its $50.0 million interest rate swap and its $70.0 million interest rate swap. The Company accelerated the reclassification of a $5.4 million loss from OCI into other income (loss) in the Condensed Consolidated Statement of Operations as a result of the hedged transactions becoming probable not to occur. As of December 31, 2021, Centerspace had one interest rate swap contract designated as a cash flow hedge of interest rate risk with a notional amount of $75.0 million to fix the interest rate on the line of credit. The Company also had one additional interest rate swap with an effective date of January 31, 2023 and a notional amount of $70.0 million which was not designated as a hedge in a qualifying hedging relationship. The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021.
|  |  |  |  |  |  | (in thousands)
|  |  |  |  |  |  |  |  | September 30, 2022 |  | December 31, 2021
|  |  |  |  |  |  | Balance Sheet Location |  | Fair Value |  | Fair Value
Total derivative instruments designated as hedging instruments - interest rate swaps |  |  |  |  |  |  | Accounts Payable and Accrued Expenses |  | $ | — |  |  | $ | 4,610 |
Total derivative instruments not designated as hedging instruments - interest rate swaps |  |  |  |  |  |  | Accounts Payable and Accrued Expenses |  | $ | — |  |  | $ | 1,097 |
The table below presents the effect of the Company’s derivative financial instruments on the Condensed Consolidated Statements of Operations as of September 30, 2022 and 2021.
| (in thousands)
| Gain (Loss) Recognized in OCI |  | Location of Gain (Loss) Reclassified from Accumulated OCI into Income |  | Gain (Loss) Reclassified from Accumulated OCI into Income
Three months ended September 30, | 2022 |  | 2021 |  |  |  | 2022 |  | 2021
Total derivatives in cash flow hedging relationships - Interest rate contracts | $ | — |  |  | $ | (70) |  |  | Interest expense |  | $ | (204) |  |  | $ | (940) |
Nine months ended September 30, |  |  |  |  |  |  |  |  |
Total derivatives in cash flow hedging relationships - Interest rate contracts | $ | 1,581 |  |  | $ | 1,555 |  |  | Interest expense |  | $ | (696) |  |  | $ | (3,156) |

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI https://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI https://asc.fasb.org/extlink&oid=126731327&loc=d3e90205-114008 + Details
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