Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUE MEASUREMENTS

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FAIR VALUE MEASUREMENTS
6 Months Ended
Jun. 30, 2022
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS FAIR VALUE MEASUREMENTS
Recurring Fair Value Measurements
The Company sometimes limits its exposure to interest rate fluctuations by entering into interest rate swap agreements. The interest rate swap agreements moderate the Company's exposure to interest rate risk by effectively converting the interest on variable rate debt to a fixed rate. The Company measures its interest rate swap derivatives at fair value on a recurring basis. The changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive income (loss) and are subsequently reclassified into earnings in the period that the hedged transaction affects earnings.
Information regarding the Company's interest rate swaps measured at fair value, which are classified within Level 2 of the GAAP fair value hierarchy, is presented below (dollars in thousands):
Fair Value
Number of Contracts Notional Amount Other Assets, net Interest Rate Swap Liabilities
As of June 30, 2022
Interest Rate Swaps 15 $ 1,125,000  $ 27,674  $ — 
As of December 31, 2021
Interest Rate Swaps 19 $ 1,125,000  $ —  $ 33,757 

The following table presents the effect of our derivative instruments on our consolidated financial statements (dollars in thousands):
Fair value at December 31, 2020 $ (77,918)
Swap ineffectiveness
24 
Losses on interest rate swaps reclassified into interest expense from accumulated other comprehensive loss
10,081 
Unrealized losses on interest rate swaps included in accumulated other comprehensive (loss) income
14,175 
Fair value at June 30, 2021 $ (53,638)
Fair value at December 31, 2021 $ (33,757)
Swap ineffectiveness
Losses on interest rate swaps reclassified into interest expense from accumulated other comprehensive income
8,260 
Unrealized gains on interest rate swaps included in accumulated other comprehensive (loss) income
53,169 
Fair value at June 30, 2022 $ 27,674 
As of June 30, 2022 and December 31, 2021, the Company had outstanding interest rate swaps with aggregate notional amounts of $1,125.0 million and $1,125.0 million, respectively, designated as cash flow hedges. As of June 30, 2022, the Company's swaps had a weighted average remaining term of approximately 2.7 years. The fair value of these swaps are presented as interest rate swap assets and liabilities in the Company's balance sheets, and the Company recognizes any changes in the fair value as an adjustment of accumulated other comprehensive income (loss) within equity. If the forward rates at June 30, 2022 remain constant, the Company estimates that during the next 12 months, the Company would reclassify into earnings approximately $12.9 million of the unrealized gains included in accumulated other comprehensive income (loss).
There were no transfers between levels of the three-tier fair value measurement hierarchy during the six months ended June 30, 2022 and 2021. For financial assets and liabilities that utilize Level 2 inputs, the Company utilizes both direct and indirect observable price quotes, including LIBOR yield curves. The Company uses valuation techniques for Level 2 financial assets and liabilities which include LIBOR yield curves at the reporting date as well as assessing counterparty credit risk. Counterparties to these contracts are highly rated financial institutions. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with the Company's derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and the counterparties. As of June 30, 2022, the Company determined that the effect of credit valuation adjustments on the overall valuation of its derivative positions are not significant to the overall valuation of its derivatives. Therefore, the Company has determined that its derivative valuations are appropriately classified in Level 2 of the fair value hierarchy.
Fair Value Disclosures
The carrying values of cash and cash equivalents, restricted cash, trade receivables, and accounts payable and accrued liabilities reflected in the balance sheets at June 30, 2022 and December 31, 2021, approximate fair value due to the short term nature of these financial assets and liabilities. The carrying value of variable rate debt financing reflected in the balance sheets at June 30, 2022 and December 31, 2021 approximates fair value as the changes in their associated interest rates reflect the current market and credit risk is similar to when the loans were originally obtained.
The fair values of fixed rate private placement notes and mortgages were estimated using the discounted estimated future cash payments to be made on such debt; the discount rates used approximated current market rates for loans, or groups of loans, with similar maturities and credit quality (categorized within Level 2 of the fair value hierarchy). The combined principal balance of the Company’s fixed rate private placement notes was approximately $1.03 billion as of June 30, 2022, with a fair value of approximately $871.3 million. In determining the fair value, the Company estimated a weighted average market interest rate of approximately 5.22%, compared to the weighted average contractual interest rate of 3.08%. The combined principal balance of the Company’s fixed rate private placement notes was approximately $905.0 million as of December 31, 2021, with a fair value of approximately $931.1 million. In determining the fair value, the Company estimated a weighted average market interest rate of approximately 2.81%, compared to the weighted average contractual interest rate of 3.09%. The combined principal balance of the Company's fixed rate mortgages payable was approximately $301.8 million as of June 30, 2022 with a fair value of approximately $295.7 million. In determining the fair value, the Company estimated a weighted average market interest rate of approximately 4.66%, compared to the weighted average contractual interest rate of 4.11%. The combined principal balance of the Company's fixed rate mortgages was approximately $303.9 million as of December 31, 2021 with a fair value of approximately $319.9 million. In determining the fair value as of December 31, 2021, the Company estimated a weighted average market interest rate of approximately 2.55%, compared to the weighted average contractual interest rate of 4.12%.