v3.26.1
Derivatives and Hedging
 6 Months Ended
Jun. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives and Hedging Derivatives and Hedging
The Company uses derivatives as part of its overall strategy to manage our exposure to market risks associated with the fluctuations in variable interest rates associated with our debt. We are also required to enter into interest rate derivative instruments in compliance with certain debt agreements. We do not enter into derivative financial instruments for trading or speculative purposes.
During August 2025, the Company entered into an interest rate cap transaction for an aggregate notional amount of $122.0 million for $0.1 million to reduce exposure to interest rate fluctuations in connection with the 2025 Ally Term Loan. The interest rate cap has a 36-month term and effectively caps SOFR at 5.50%.
During March 2026, the Company entered into an interest rate cap transaction for an aggregate notional amount of $49.2 million for $0.5 million to reduce exposure to interest rate fluctuations associated with a portion of our variable mortgage notes payable to Fannie Mae. The interest rate cap has a 34-month term and effectively caps SOFR at 4.00%. The IRC is not designated as a cash flow hedge under ASC 815-20, Derivatives – Hedging, and therefore, all changes in the fair value of the instrument are included as a component of interest expense in our condensed consolidated statements of operations.
During March 2026, the Company entered into an interest rate cap transaction for an aggregate notional amount of $262.5 million for a premium of $0.6 million, to reduce exposure to interest rate fluctuations associated with the term loan tranche maturing in three years. The interest rate cap has a 36-month term and caps SOFR at 4.50%.
During May 2026, the Company entered into an interest rate cap transaction for an aggregate notional amount of $9.4 million for $0.1 million in connection with a loan related to a 2024 acquisition of a community located in Macedonia, Ohio. The interest rate cap has a 36-month term and effectively caps SOFR at 4.50%.
During June 2026, the Company entered into a SOFR-based IR Swap transaction for an aggregate notional amount of $287.5 million to reduce exposure to interest rate fluctuations associated with the term loan tranche maturing in five years at no cost to the Company. The interest rate swap is structured as floating to fixed with a fixed interest rate of 4.105% and a 57-month term. The Company has the option to early terminate the IR Swap beginning in June 2027 for up to 4.5% of the notional amount outstanding.
The following table presents the fair values of derivative assets and liabilities in the condensed consolidated balance sheets (in thousands):
June 30, 2026
Derivative AssetDerivative Liability
Notional Amount
Fair Value 1
Notional AmountFair Value
Interest rate cap (SOFR-based)
$456,690 $2,091 $— $— 
Interest rate swap (SOFR-based)
$287,500 $2,281 $— $— 
Total derivatives, net$744,190 $4,372 $— $— 

1 Of this amount, $0.3 million is presented on the condensed balance sheet as Current assets - derivative assets and $4.1 million is Other assets, net.
December 31, 2025
Derivative AssetDerivative Liability
Notional AmountFair ValueNotional AmountFair Value
Interest rate cap (SOFR-based)
$194,190 $72 $— $— 
Total derivatives, net$194,190 $72 $— $— 

The following table presents the effect of the derivative instruments on the condensed consolidated statements of operations (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2026202520262025
Derivative not designated as hedge
Gain (loss) on derivatives not designated as hedges included in interest expense$2,664 $(291)$3,057 $(781)