Quarterly report pursuant to Section 13 or 15(d)

Orion Office REIT, Derivative and Hedging Activities

v3.22.2.2
Orion Office REIT, Derivative and Hedging Activities
 9 Months Ended
Sep. 30, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative and Hedging Activities
Note 7 – Derivatives and Hedging Activities
Cash Flow Hedges of Interest Rate Risk
As of each of September 30, 2022 and December 31, 2021, the Company had interest rate swap agreements with an aggregate notional amount of $175.0 million, which were designated as cash flow hedges under U.S. GAAP. The interest rate swap agreements were effective on December 1, 2021 and mature on November 12, 2023. The interest rate swap agreements were entered into in order to hedge interest rate volatility with respect to the Company’s borrowings under the Term Loan Facility.
The table below presents the fair value of the Company’s derivative financial instrument designated as a cash flow hedge as well as its classification in the Company’s consolidated balance sheets as of September 30, 2022 and December 31, 2021 (in thousands):
Derivatives Designated as Hedging Instruments Balance Sheet Location September 30, 2022 December 31, 2021
Interest rate swaps Other assets, net $ 7,057  $ 299 
During the three and nine months ended September 30, 2022, the Company recorded unrealized gains of $1.9 million and $7.2 million, respectively, for changes in the fair value of its cash flow hedge in accumulated other comprehensive income. There were no similar amounts recorded during the three and nine months ended September 30, 2021, as the interest rate swap agreement did not exist during such periods.
During the three and nine months ended September 30, 2022, the Company reclassified previous gains of $0.7 million and $0.5 million, respectively, from accumulated other comprehensive income into interest expense as a result of the hedged transactions impacting earnings. There were no similar amounts recorded during the three and nine months ended September 30, 2021.
During the next twelve months, the Company estimates that an additional $6.3 million will be reclassified from other comprehensive income as a decrease to interest expense.
Derivatives Not Designated as Hedging Instruments
As of each of September 30, 2022 and December 31, 2021, the Company had no interest rate swaps that were not designated as qualifying hedging relationships.
Tabular Disclosure of Offsetting Derivatives
The table below details a gross presentation, the effects of offsetting and a net presentation of the Company’s derivatives as of September 30, 2022 and December 31, 2021 (in thousands). The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value.
Offsetting of Derivative Assets and Liabilities
Gross Amounts of Recognized Assets Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Consolidated Balance Sheets Net Amounts of Assets Presented in the Consolidated Balance Sheets Net Amounts of Liabilities Presented in the Consolidated Balance Sheets Financial Instruments Cash Collateral Received Net Amount
September 30, 2022 $ 7,057  $ —  $ —  $ 7,057  $ —  $ —  $ —  $ 7,057 
December 31, 2021 $ 299  $ —  $ —  $ 299  $ —  $ —  $ —  $ 299