Financial Instruments and Fair Value Measurements |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Financial Instruments and Fair Value Measurements | 6. Financial Instruments and Fair Value Measurements The following methods and assumptions were used by the Company in estimating fair value disclosures of financial instruments. Cash and Cash Equivalents, Restricted Cash, Accounts Receivable, Accounts Payable and Other Liabilities The carrying amounts reported in the Company’s consolidated balance sheets for these financial instruments approximated fair value because of their short-term maturities. Debt The following methods and assumptions were used by the Company in estimating fair value disclosures of debt. The fair market value for debt is estimated using a discounted cash flow technique that incorporates future contractual interest and principal payments and a market interest yield curve with adjustments for duration, optionality and risk profile, including the Company’s nonperformance risk and loan to value. The Company’s debt is classified as Level 3 in the fair value hierarchy. Considerable judgment is necessary to develop estimated fair values of financial instruments. Accordingly, the estimates presented are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments. Carrying values that are different from estimated fair values are summarized as follows (in thousands):
Cash Flow Hedges of Interest Rate Risk The Company may use swaps and caps as part of its interest rate risk management strategy. The swaps designated as cash flow hedges involved 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. Prior to the termination and repayment of amounts outstanding under a term loan agreement on August 15, 2024, the Company had one effective swap with a notional amount of $200.0 million, expiring in June 2027, which converted the variable-rate SOFR component of the interest rate applicable to its term loan to a fixed rate of 2.75%. In 2024, in conjunction with the repayment of the term loan agreement, the swap was terminated and re-designated to convert the variable-rate SOFR component of the interest rate applicable to $200.0 million of the loan outstanding under the Mortgage Facility to a fixed rate of 2.75%. At the time of termination, the Company received a cash payment of $6.8 million and the fair value of the derivative remaining in Accumulated Other Comprehensive Income was $6.4 million. This amount is reclassified into interest expense in the period that the hedged forecasted transaction is probable of affecting earnings. All components of the swap were included in the assessment of hedge effectiveness. The Company expects to reflect a decrease to interest expense (and a corresponding increase to earnings) of approximately $2.2 million within the next 12 months. |
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