COPT Defense Properties Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Interest Rate Derivatives

Interest Rate Derivatives

12 Months Ended

Dec. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The following table sets forth the key terms and fair values of our interest rate swap derivatives (dollars in thousands):


Notional Amount						Effective Date	Expiration Date	Fair Value at December 31,
			Fixed Rate		Floating Rate Index			2023		2022
$	10,640	(1)	1.678	%	SOFR + 0.10%	8/1/2019	8/1/2026	$	571	$	806
$	22,475	(2)	0.573	%	SOFR + 0.10%	4/1/2020	3/26/2025	1,084		1,825
$	150,000		3.742	%	One-Month SOFR	2/1/2023	2/2/2026	681		—
$	50,000		3.747	%	One-Month SOFR	2/1/2023	2/2/2026	222		—
								$	2,558	$	2,631

(1)The notional amount of this instrument is scheduled to amortize to $10.0 million.

(2)The notional amount of this instrument is scheduled to amortize to $22.1 million.

Each of these swaps was designated as a cash flow hedge of interest rate risk.

The table below sets forth the fair value of our interest rate derivatives as well as their classification on our consolidated balance sheets (in thousands):


		Fair Value at December 31,
Derivatives	Balance Sheet Location	2023		2022
Interest rate swaps designated as cash flow hedges	Prepaid expenses and other assets, net	$	2,558	$	2,631

The table below presents the effect of our interest rate derivatives on our consolidated statements of operations and comprehensive income (in thousands):


	Amount of Income Recognized in AOCI on Derivatives						Amount of Income (Loss) Reclassified from AOCI into Interest Expense on Statement of Operations
	For the Years Ended December 31,						For the Years Ended December 31,
Derivatives in Hedging Relationships	2023		2022		2021		2023		2022		2021
Interest rate derivatives	$	3,827	$	4,730	$	1,379	$	3,900	$	(996)	$	(5,048)

Based on the fair value of our derivatives as of December 31, 2023, we estimate that approximately $3.0 million of gains will be reclassified from AOCI as a decrease to interest expense over the next 12 months.

We have agreements with each of our interest rate derivative counterparties that contain provisions under which, if we default or are capable of being declared in default on defined levels of our indebtedness, we could also be declared in default on our derivative obligations. Failure to comply with the loan covenant provisions could result in our being declared in default on any derivative instrument obligations covered by the agreements. As of December 31, 2023, we were not in default with any of these provisions. As of December 31, 2023, we did not have any derivatives in liability positions.