v3.25.2
Derivatives and Hedging Activities
 6 Months Ended
Jun. 30, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives and Hedging Activities Derivatives and Hedging Activities
We are exposed to certain risks relating to our ongoing business operations, including the impact of changes in interest rates. The only risk currently managed by us using derivative instruments is our interest rate risk. As required under the loan agreement, we have an interest rate cap agreement to manage our interest rate risk exposure on the Mountain Floating Rate Loan, with interest payable at a rate equal to SOFR plus a premium. Additionally, we maintain another interest rate cap that has been designated as a standalone derivative instrument. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, we only enter into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which we or our related parties may also have other financial relationships. We do not anticipate that any of the counterparties will fail to meet their obligations.
Our interest rate cap agreement for the Mountain Floating Rate Loan is designated as a cash flow hedge of interest rate risk and is measured on a recurring basis at fair value.
Interest rate caps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium. For derivatives designated and qualifying as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in cumulative other comprehensive loss and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings. Gains and losses on the derivative representing hedge components excluded from the assessment of effectiveness are recognized over the life of the hedge on a systematic and rational basis, as documented at hedge inception in accordance with our accounting policy election. The earnings recognition of excluded components is presented in interest expense. Amounts reported in cumulative other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are made on our applicable debt.
On June 26, 2025, we obtained a $1,160,000 mortgage loan and used the net proceeds from such loan and cash on hand to repay in full the ILPT Floating Rate Loan. As of June 26, 2025, we discontinued hedge accounting for the derivative associated with this underlying instrument, which was previously designated as a cash flow hedge of variable interest payments on our ILPT Floating Rate Loan. As a result of the discontinuation of hedge accounting, the derivative is now accounted for as a standalone instrument, and all subsequent changes in the fair value and proceeds from settlements of the interest rate cap will be recognized in interest and other income in our condensed consolidated statements of comprehensive income (loss).
The following table summarizes the terms of our outstanding interest rate cap agreements as of June 30, 2025 and December 31, 2024:
Balance
SheetUnderlyingMaturityStrikeNotionalFair Value at
Line Item InstrumentDateRateAmountJune 30, 2025December 31, 2024
Other assets, net
ILPT Floating Rate Loan
10/15/20252.78%$1,235,000 $5,365 $13,302 
Other assets, net
Mountain Floating Rate Loan
03/15/2025
3.04%$1,400,000 — 3,614 
Other assets, net
Mountain Floating Rate Loan03/15/20263.10%$1,400,000 9,085 — 
Total$14,450 $16,916 
The following table summarizes the activity related to our cash flow hedges within cumulative other comprehensive loss for the periods shown:
Three Months Ended June 30,
Six Months Ended June 30,
2025202420252024
Amount of gain recognized on derivatives in other comprehensive loss
$2,673 $3,926 $914 $8,600 
Amount of gain (loss) reclassified from cumulative other comprehensive loss into interest expense$1,615 $(5,436)$658 $(14,956)
Total amount of interest expense presented in the condensed consolidated statements of comprehensive income (loss)
$(67,914)$(73,631)$(137,727)$(146,861)
See Notes 5 and 6 for further information regarding the debt our interest rate caps are related to and the fair value of our interest rate caps.