v3.25.2
DERIVATIVE INSTRUMENTS, HEDGING ACTIVITIES AND OTHER COMPREHENSIVE INCOME
 6 Months Ended
Jun. 30, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE INSTRUMENTS, HEDGING ACTIVITIES AND OTHER COMPREHENSIVE INCOME DERIVATIVE INSTRUMENTS, HEDGING ACTIVITIES AND OTHER COMPREHENSIVE INCOME
In order to manage potential future variable interest rate risk, we enter into interest rate derivative agreements from time to time. We do not use interest rate derivative agreements for trading or speculative purposes. The agreements with each of our derivative counterparties provide that in the event of default on any of our indebtedness, we could also be declared in default on our derivative obligations.
The following table summarizes the terms and fair values of the Company’s derivative financial instruments that were designated and qualified as part of a hedging relationship as of June 30, 2025 and December 31, 2024 (dollars in thousands):
Fair Value Assets (Liabilities)(1)
Type of HedgeNumber of InstrumentsAggregate NotionalReference RateInterest RateEffective DateMaturity DateJune 30, 2025December 31, 2024
Cash FlowFour$250,000 SOFR2.99%12/1/202210/24/2025$1,006 $2,307 
Cash FlowTwo100,000 SOFR2.66%8/1/20228/1/2025143 884 
Cash FlowTwo200,000 SOFR2.37%11/22/20238/1/2025336 2,101 
Cash Flow(2)
Three150,000 SOFR1.68%8/15/20227/17/20263,234 5,316 
$700,000 $4,719 $10,608 
Fair Value(3)
Two$155,000 SOFR
SOFR + 3.70%
4/23/20219/10/2025$(1,191)$(3,937)
(1)Derivatives in an asset position are included within “Prepaid and other assets” and derivatives in a liability position are included within “Accounts payable and accrued expenses” in the accompanying consolidated balance sheets.
(2)These interest rate swaps are expected to be assigned to the Company’s $300M Term Loan effective August 1, 2025.
(3)The derivative agreements swap a blended fixed rate of 4.52% for a blended floating rate of three-month SOFR plus 3.70%.
In June 2025, we entered into three intraday interest rate lock agreements with notional amounts totaling $150.0 million that fixed the interest rate on a portion of the Notes Due 2032, which were issued in June 2025, at 4.21%. We paid $0.2 million upon termination, which is included as a component of “Accumulated other comprehensive income” in the accompanying consolidated balance sheets and is being reclassified as an increase to interest expense over the term of the debt.
These interest rate derivative agreements are the only assets or liabilities that we record at fair value on a recurring basis. The valuation of these assets and liabilities is determined using widely accepted techniques, including discounted cash flow analysis. These techniques consider the contractual terms of the derivatives (including the period to maturity) and use observable market-based inputs such as interest rate curves and implied volatilities. We also incorporate credit valuation adjustments into the fair value measurements to reflect non-performance risk on both our part and that of the respective counterparties.
We have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, although the credit valuation adjustments associated with our derivatives use Level 3 inputs such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. As of June 30, 2025 and December 31, 2024, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and determined that the credit valuation adjustments were not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations are classified within Level 2 of the fair value hierarchy.
Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to earnings over time as the hedged items are recognized in earnings. Approximately $2.6 million and $5.2 million was reclassified as a reduction to interest expense during the three and six months ended June 30, 2025, respectively. Approximately $4.9 million and $9.8 million was reclassified as a reduction to interest expense during the three and six months ended June 30, 2024, respectively. As interest payments on our derivatives are made over the next 12 months, we estimate the decrease to interest expense to be approximately $8.7 million, assuming the current SOFR curve.
Unrealized gains and losses on our interest rate derivative agreements are the only components of the change in accumulated other comprehensive income.