v3.26.1
Derivative Instruments
 6 Months Ended
Jun. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments Derivative Instruments
We are exposed to, among other risks, the impact of changes in foreign currency exchange rates as a result of our non-U.S. investments and interest rate risk related to our capital structure. Our risk management program is designed to manage the exposure and volatility arising from these risks, and utilizes foreign currency forward contracts, cross currency swap contracts, interest rate swaps, interest rate locks and debt issued in foreign currencies to offset a portion of these risks.
Cash Flow Hedges and Fair Value Hedges of Interest Rate Risk
We enter into interest rate swaps in order to maintain a capital structure containing targeted amounts of fixed and floating-rate debt and manage interest rate risk. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for our fixed-rate payments. These interest rate swap agreements are used to hedge the variable cash flows associated with variable-rate debt.
Interest rate swaps designated as fair value hedges involve the receipt of fixed amounts from a counterparty in exchange for our variable-rate payments. These interest rate swap agreements hedge the exposure to changes in the fair value of fixed-rate debt attributable to changes in the designated benchmark interest rate. For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative instrument, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk, are recognized in earnings. We record the gain or loss on the hedged items in interest expense, the same line item as the offsetting loss or gain on the related interest rate swaps. In March 2022, we entered into a $550,000,000 fixed to floating swap in connection with our March 2022 senior note issuance. This swap was terminated in January 2024 resulting in a loss of $59,555,000. As of June 30, 2026, the unamortized loss amount was $42,337,000. In January 2024, we entered into a $550,000,000 forward-starting fixed to floating swap which converts a portion of cash flows on our $750,000,000 2.8% senior unsecured notes to floating rate. The swap became effective in June 2025 and matures in December 2030. As of June 30, 2026, the carrying amount of the notes, exclusive of the hedge, was $745,150,000. The fair value of the
swap as of June 30, 2026 was $9,124,000 and was recorded as a derivative liability with an offset to senior unsecured notes on our Consolidated Balance Sheets.
Periodically, we enter into and designate interest rate locks to partially hedge the risk of changes in interest payments attributable to increases in the benchmark interest rate during the period leading up to the probable issuance of fixed-rate debt. We designate our interest rate locks as cash flow hedges. Gains and losses when we settle our interest rate locks are amortized into earnings over the life of the related debt, except where a material amount is deemed to be ineffective, which would be immediately recognized in the Consolidated Statements of Comprehensive Income. Approximately $2,562,000 of losses, which are included in other comprehensive income (“OCI”), are expected to be reclassified into earnings in the next 12 months.
Cash flows from derivatives accounted for as a fair value or cash flow hedge are classified in the same category as the cash flows from the items being hedged in the Consolidated Statements of Cash Flows.
Foreign Currency Forwards Contracts and Cross Currency Swap Contracts Designated as Net Investment Hedges
We use foreign currency forward and cross currency swap contracts to hedge a portion of the net investment in foreign subsidiaries against fluctuations in foreign exchange rates. For instruments that are designated and qualify as net investment hedges, the variability in the foreign currency to U.S. Dollar of the instrument is recorded as a cumulative translation adjustment component of OCI.
During the six months ended June 30, 2026 and 2025, we settled certain net investment hedges necessitating cash payments of $3,625,000 and $3,359,000, respectively. The balance of the cumulative translation adjustment will be reclassified to earnings if the hedged investment is sold or substantially liquidated.
Cross Currency Swap Contracts Designated as Fair Value Hedges
We have entered into cross currency swaps to economically convert our British Pounds Sterling-denominated debt exposure into U.S. dollars and to mitigate the impact of foreign currency translation gains or losses. These swaps are designated as fair value hedges of changes in the fair value of the hedged debt attributable to changes in spot foreign exchange rates. We record the cross currency swaps at fair value in our Consolidated Balance Sheets as assets and liabilities. Changes in the fair value of the cross currency swaps attributable to changes in spot foreign exchange rates, along with the changes in the carrying value of the hedged debt due to changes in spot foreign exchange rates, are recorded in interest expense in the Consolidated Statements of Comprehensive Income and substantially offset each other.
Derivative Contracts Undesignated
We use foreign currency exchange contracts to manage existing exposures to foreign currency exchange risk. Gains and losses resulting from the changes in fair value of these instruments are recorded in interest expense on the Consolidated Statements of Comprehensive Income and are substantially offset by net revaluation impacts on foreign currency denominated balance sheet exposures.
Equity Warrants
We received equity warrants through our lending activities, which were accounted for as loan origination fees. The warrants provided us the right to participate in the capital appreciation of the underlying HC-One Group real estate portfolio above a designated price upon liquidation and contain net settlement terms qualifying as derivatives. The warrants were classified within receivables and other assets on our Consolidated Balance Sheets and were measured at fair value with changes in fair value being recognized within loss (gain) on derivatives and financial instruments, net in our Consolidated Statements of Comprehensive Income. Please refer to Note 3 for information related to consideration for the HC-One acquisition, which included the settlement of the outstanding warrants.
The following presents the notional amount of derivatives and other financial instruments as of the dates indicated (in thousands):
 June 30, 2026December 31, 2025
Derivatives designated as net investment hedges:
Denominated in Canadian DollarsC$7,051,059 C$5,702,699 
Denominated in Pounds Sterling£8,850,708 £8,830,708 
Financial instruments designated as net investment hedges:
Denominated in Canadian DollarsC$— C$250,000 
Denominated in Pounds Sterling£— £1,050,000 
Derivatives designated as fair value hedges:
     Denominated in Pounds Sterling£1,050,000 £— 
Interest rate swaps and caps designated as cash flow hedges:
Denominated in Canadian Dollars (1)
C$74,188 C$32,000 
Interest rate swaps designated as fair value hedges:
Denominated in U.S. Dollars$550,000 $550,000 
Derivative instruments not designated:
Foreign currency exchange contracts denominated in Canadian DollarsC$2,827,565 C$2,827,565 
(1) At June 30, 2026, the maximum maturity date was July 25, 2033.
In July 2026, we completed the issuance of C$1,150,000,000 aggregate principal amount of senior unsecured notes, as further described in Note 11. The notes were designated as financial instruments serving as net investment hedges.
The following presents the impact of derivative instruments on the Consolidated Statements of Comprehensive Income for the periods presented (in thousands):
Three Months Ended June 30,
Six Months Ended
June 30,
DescriptionLocation2026202520262025
Gain (loss) on derivative instruments designated as hedges recognized in incomeInterest expense$30,263 $15,669 $28,140 $26,560 
Gain (loss) on derivative instruments not designated as hedges recognized in incomeInterest expense(69,642)(3,158)(98,294)(3,683)
Gain (loss) on equity warrants recognized in incomeGain (loss) on derivatives and financial instruments, net— 409 — 3,619 
Gain (loss) on derivative and financial instruments designated as hedges recognized in OCIOCI(69,956)(413,839)252,075 (532,130)