v3.26.1
Derivatives and Hedging Activities
 9 Months Ended
Jun. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives and Hedging Activities Derivatives and Hedging Activities
For certain of our mortgage loan agreements, we have interest rate cap agreements to manage our interest rate risk exposure. The only risk currently managed by us using derivative instruments is our interest rate risk. 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 agreements are designated as cash flow hedges of interest rate risk and are measured on a recurring basis at fair value. See Note 10, Fair Value of Financial Instruments for further information regarding the fair value of our interest rate caps. The following table summarizes the terms of our outstanding interest rate cap agreements as reported in prepaid and other current assets on our condensed consolidated balance sheets:
Fair Value at
Underlying InstrumentMaturity DateStrike RateNotional AmountJune 30, 2026September 30, 2025
Raleigh, NC mortgage loan8/15/20283.00%$47,870 $1,015 $760 
Orlando, FL mortgage loan10/1/20283.00%$59,984 1,341 998 
$2,356 $1,758 
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 for an upfront premium. For derivatives designated and qualifying as cash flow hedges of interest rate risk, the gain or loss on the derivative is recognized in cumulative other comprehensive income and subsequently reclassified into interest expense in the same period during which the hedge transaction affects earnings. Gains and losses on the derivative representing the 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 income related to derivatives will be reclassified to interest expense as payments are made on our applicable debt. Over the next 12 months, we estimate that an additional $365 will be reclassified from other comprehensive income as a decrease to interest expense.
The following table summarizes the activity related to our cash flow hedges within cumulative other comprehensive income for the three and nine months ended June 30, 2026. There was no activity related to our cash flow hedges within other comprehensive income for the three and nine months ended June 30, 2025 as these mortgages were entered into in the fourth fiscal quarter of 2025:
Three Months Ended June 30, 2026Nine Months Ended June 30, 2026
Amount of gain recognized on derivatives in other comprehensive income$556 $1,232 
Amount of gain reclassified from cumulative other comprehensive income (loss) into interest expense$17 $156 
Total amount of interest expense presented in the consolidated statements of comprehensive income$(3,205)$(8,463)