The Company’s use of derivative instruments is limited to the utilization of interest rate swaps to manage interest rate risk exposure on existing and future liabilities and not for speculative purposes. The principal objective of such arrangements is to minimize the risks and related costs associated with the Company’s operating and financial structure.

As of March 31, 2025, the Company had 17 interest rate swaps, all of which are used to hedge the variable cash flows associated with unsecured loans. All of the Company’s interest rate swaps convert the related loans’ Term SOFR or Daily SOFR components, as applicable, to effectively fixed interest rates, and the Company has concluded that each of the hedging relationships are highly effective. The following table summarizes the fair value of the interest rate swaps as of March 31, 2025 and December 31, 2024.


Balance Sheet Line Item (in thousands)	Effective Notional Amount March 31, 2025		Fair Value March 31, 2025		Effective Notional Amount December 31, 2024		Fair Value December 31, 2024
Interest rate swaps-gross asset	$	825,000	$	26,261	$	1,025,000	$	36,466
Interest rate swaps-gross liability	$	200,000	$	(783)	$	—	$	—

For derivatives designated and that qualify 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 to interest expense in the same periods during which the hedged transaction affects earnings.

Amounts reported in accumulated other comprehensive income related to derivatives designated as qualifying cash flow hedges will be reclassified to interest expense as interest payments are made on the Company’s variable rate debt. The Company estimates that approximately $17.3 million will be reclassified from accumulated other comprehensive income as a decrease to interest expense over the next 12 months.

The following table summarizes the effect of cash flow hedge accounting and the location of amounts related to the Company’s derivatives in the consolidated financial statements for the three months ended March 31, 2025 and 2024.


	Three months ended March 31,
Effect of Cash Flow Hedge Accounting (in thousands)	2025		2024
Income (loss) recognized in accumulated other comprehensive income on interest rate swaps	$	(5,104)	$	16,405
Income reclassified from accumulated other comprehensive income into income as interest expense	$	5,877	$	9,329
Total interest expense presented in the Consolidated Statements of Operations in which the effect of cash flow hedges are recorded	$	32,529	$	25,421

The Company has agreements with each of its derivative counterparties that contain a provision where the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on the indebtedness.

As of March 31, 2025, the Company had not breached the provisions of these agreements and had not posted any collateral related to these agreements. If the Company had breached any of these provisions, it would be required to settle its obligations under the agreements at their termination value.

The Company’s valuation of the interest rate swaps is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs including interest rate curves. The fair values of interest rate swaps are determined by using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.

The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company or its counterparties. However, as of March 31, 2025 and December 31, 2024, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

The following table summarizes the Company’s financial instruments that were recorded at fair value on a recurring basis as of March 31, 2025 and December 31, 2024.


			Fair Value Measurements as of March 31, 2025 Using
Balance Sheet Line Item (in thousands)	Fair Value March 31, 2025		Level 1		Level 2		Level 3
Interest rate swaps-gross asset	$	26,261	$	—	$	26,261	$	—
Interest rate swaps-gross liability	$	(783)	$	—	$	(783)	$	—


			Fair Value Measurements as of December 31, 2024 Using
Balance Sheet Line Item (in thousands)	Fair Value December 31, 2024		Level 1		Level 2		Level 3
Interest rate swaps-gross asset	$	36,466	$	—	$	36,466	$	—