In the normal course of business, our operations are exposed to market risks, including the effect of changes in interest rates. We have entered into, and from time to time in the future may enter into derivative financial instruments to hedge or offset this underlying market risk. There have been no significant changes in our policy and strategy from what was disclosed in our Annual Report.

As of June 30, 2026, the Company had no interest rate swaps outstanding. For a description of the Company's interest rate swap activity during the year ended December 31, 2025, see Note 6 to the consolidated financial statements included in our Annual Report.

Interest rate caps involve the receipt of variable-rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium. On June 27, 2025, the Company, through the OP, paid a premium of approximately $0.1 million and entered into an interest rate cap transaction with Royal Bank of Canada with a notional amount of $31.9 million (the “RBC Cap”). Subsequent to the initial RBC Cap transaction, the Company has paid premiums and modified the RBC Cap, wherein the total notional was increased to $134.9 million. On February 11, 2026, the Company, through the OP, paid a premium of approximately $6.8 million and entered into an interest rate cap transaction with JPMorgan Chase Bank, N.A. with a notional amount of $450.0 million (the “JPM Cap”). The $6.8 million premium paid on the JPM Cap is included in the net cash received (paid) on derivative settlements and premiums on the consolidated statements of cash flows. The interest rate caps effectively cap one-month term SOFR at 4.25% on $134.9 million and 2.00% on $450.0 million on floating rate debts. The interest rate caps expire on July 9, 2027 and March 1, 2027, respectively.

As of June 30, 2026, the Company had the following outstanding interest rate caps that were not designated as a hedge in qualifying hedging relationships (dollars in thousands):


Derivative	Notional		Expiration Date	Index	Index as of June 30, 2026			Strike Rate
RBC Interest Rate Cap	$	134,860	7/9/2027	One-Month Term SOFR		3.6520	%		4.2500	%
JPM Interest Rate Cap	$	450,000	3/1/2027	One-Month Term SOFR		3.6520	%		2.0000	%

The table below presents the fair value of the Company’s derivative financial instruments, which are presented on the consolidated balance sheets as of June 30, 2026 and December 31, 2025 (in thousands):


		Asset Derivatives
	Balance Sheet Location	June 30, 2026		December 31, 2025
Derivatives not designated as hedging instruments:
Interest rate caps	Interest rate derivatives, at fair value	$	5,800	$	21
Total		$	5,800	$	21

Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements but either do not meet the strict requirements to apply hedge accounting in accordance with FASB ASC 815, Derivatives and Hedging, or the Company has elected not to designate such derivatives as hedges. Changes in the fair value of derivatives not designated in hedging relationships are recognized as either increases or decreases to interest expense. The table below presents the effect of the Company’s derivative financial instruments on the consolidated statements of operations and comprehensive income (loss) as of June 30, 2026 and 2025 (in thousands):


	Amount of gain (loss) recognized in OCI							Amount of gain (loss) reclassified from OCI into income
	June 30, 2026		June 30, 2025			Location of gain (loss) reclassified from OCI into income		June 30, 2026		June 30, 2025
Derivatives designated as hedging instruments:
Interest rate swaps	$	—	$	(2,545	)	Interest expense		$	—	$	5,652
							Amount of gain (loss) recognized in income
						Location of gain (loss) recognized in income		June 30, 2026		June 30, 2025
Derivatives not designated as hedging instruments:
Interest rate swaps						Interest expense		$	—	$	4,267
Interest rate cap						Interest expense		$	1,731	$	497

The Class F Certificates that the Company purchased and retained as part of the ABS I and ABS II transactions, are classified as held to maturity and are valued at amortized cost. As of June 30, 2026 and December 31, 2025, the carrying value of the ABS I and ABS II Class F Certificates was $79.0 million and $79.0 million, respectively.

The table below presents the outstanding principal balance and estimated fair value of our debt as of June 30, 2026 and December 31, 2025 (in thousands):

          
         June 30, 2026

         December 31, 2025

          
         Outstanding Principal Balance

         Estimated Fair Value

         Outstanding Principal Balance

         Estimated Fair Value

Debt

2,664,537

2,620,629

2,726,197

2,500,760

The following table sets forth a summary of the Company’s held for sale assets, held and used real estate assets that underwent impairment and real estate assets that underwent a casualty related impairment that were accounted for at fair value on a nonrecurring basis as of their respective measurement date (in thousands):


			Fair Value Hierarchy Level
Description	Fair Value		Level 1		Level 2		Level 3
Assets held at June 30, 2026
Fair value of real estate assets - impaired at March 31, 2026	$	23,602	$	—	$	—	$	23,602
Fair value of real estate assets - impaired at June 30, 2026	$	82,694	$	—	$	—	$	82,694