PS Business Parks, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Derivative Financial Instruments

Derivative Financial Instruments

9 Months Ended

Sep. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The Company uses derivative financial instruments to manage interest rate risk on its floating rate debt.

In connection with the mortgages obtained on the date of the Merger, as further described in Note 4 — Debt, the Company entered into interest rate derivative contracts to limit its exposure of interest rate risk. The following is a summary of the Company’s derivative financial instruments:


		Successor
	Number of Instruments	Balance at September 30, 2022				Notional Amounts
		Asset1		Liability2					Strike		Maturity Date
Undesignated derivatives:
Interest rate caps - purchased	2	$	47,804	$	—		$	3,592,215	3.85	%	August 2024
Interest rate cap - sold	1	—		47,804			$	3,592,215	3.85	%	August 2024
Interest rate swap - purchased	1	68,993		—			$	3,592,215	3.10	%	August 2024
Total fair value of derivatives		$	116,797	$	47,804

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¹ Included in Prepaid expenses and other assets in the Consolidated Balance Sheets.

2 Included in Accounts payable, accrued expenses and other liabilities in the Consolidated Balance Sheets.

During the period from July 20, 2022 through September 30, 2022, the Company recognized a net gain on interest rate derivatives of $61,661. Gains and losses on interest rate derivatives are recorded in the line item Interest income (expense) in the Consolidated Statements of Operations.

There were no derivative instruments as of December 31, 2021 or for the period from January 1, 2022 through July 19, 2022.