v3.26.1
Fair Value Measurements
 3 Months Ended
Mar. 31, 2026
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
Fair Value Hierarchy—For disclosure purposes, financial instruments, whether measured at fair value on a recurring or nonrecurring basis or not measured at fair value, are classified in a hierarchy consisting of three levels based on the observability of valuation inputs in the marketplace as discussed below:
•Level 1: Fair value measurements that are quoted prices (unadjusted) in active markets that we have the ability to access for identical assets or liabilities. Market price data generally are obtained from exchange or dealer markets.
•Level 2: Fair value measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.
•Level 3: Fair value measurements based on valuation techniques that use significant inputs that are unobservable. The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability.
The fair value of interest rate caps and floors is determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates fall below the strike rates of the floors or rise above the strike rates of the caps. Variable interest rates used in the calculation of projected receipts and payments on the caps are based on an expectation of future interest rates derived from observable market interest rate curves (SOFR forward curves) and volatilities (Level 2 inputs). We also incorporate credit valuation adjustments (Level 3 inputs) to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk.
When a majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. However, when valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties, which we consider significant (10% or more) to the overall valuation of our derivatives, the derivative valuations in their entirety are classified in Level 3 of the fair value hierarchy. Transfers of inputs between levels are determined at the end of each reporting period. In determining the fair values of our derivatives at March 31, 2026, the SOFR interest rate forward curve (Level 2 inputs) assumed a downtrend from 3.66% to 3.493% for the remaining term of our derivatives. Credit spreads (Level 3 inputs) used in determining the fair values of derivatives assumed an uptrend in nonperformance risk for us and all of our counterparties through the maturity dates.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table presents our assets and liabilities measured at fair value on a recurring basis aggregated by the level within which measurements fall in the fair value hierarchy (in thousands):
Quoted Market Prices (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)Total
March 31, 2026:
Assets
Derivative assets:
Interest rate derivatives – floors$— $210 $— $210 
Interest rate derivatives – caps
— 1,002 — 1,002 
Total$— $1,212 $— $1,212 
(1)
December 31, 2025:
Assets
Derivative assets:
Interest rate derivatives – floors
$— $177 $— $177 
Interest rate derivatives – caps
— 233 — 233 
Total$— $410 $— $410 
(1)
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(1)    Reported as “derivative assets” in our consolidated balance sheets.
Effect of Fair Value Measured Assets and Liabilities on Consolidated Statements of Operations
The following table summarizes the effect of fair value measured assets and liabilities on our consolidated statements of operations (in thousands):
Gain (Loss) Recognized in Income
Three Months Ended March 31,
20262025
Assets
Derivative assets:
Interest rate derivatives – floors
$33 $184 
Interest rate derivatives – caps
724 (2,023)
Total$757 $(1,839)
Liabilities
Derivative liabilities:
Embedded debt derivative
$— $(901)
(1)
Net$757 $(2,740)
Total combined
Interest rate derivatives – floors
$33 $184 
Interest rate derivatives – caps
724 (2,345)
Embedded debt derivative— (901)
Unrealized gain (loss) on derivatives757 
(2)
(3,062)
(2)
Realized gain (loss) on interest rate caps— 
(2) (3)
322 
(2) (3)
Net$757 $(2,740)
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(1)    Relates to the change in the fair value of an exit fee on a term loan which was repaid on February 12, 2025. Prior to the repayment date, the exit fee was considered under the applicable accounting guidance as an embedded derivative liability that met the criteria for bifurcation from the debt host and was measured at estimated fair value at each reporting period.
(2)    Reported as “realized and unrealized gain (loss) on derivatives” in our consolidated statements of operations.
(3)    Represents settled and unsettled payments from counterparties on interest rate caps.