Ventas (VTR) 10-Q2023 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Ventas, Inc.

(Address of Principal Executive Offices)    

(Registrant’s Telephone Number, Including Area Code)

    

VENTAS, INC.

FORM 10-Q

PART I—FINANCIAL INFORMATION

VENTAS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts, unaudited)

VENTAS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts, unaudited)

VENTAS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, unaudited)

   

VENTAS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

For the Three Months Ended June 30, 2023 and 2022

(In thousands, except per share amounts, unaudited)

VENTAS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

For the Six Months Ended June 30, 2023 and 2022

(In thousands, except per share amounts, unaudited)

VENTAS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

VENTAS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In thousands, unaudited)

Ventas, Inc. (together with its consolidated subsidiaries, unless otherwise indicated or except where the context otherwise requires, “we,” “us,” “our,” “Company” and other similar terms), an S&P 500 company, is a real estate investment trust (“REIT”) operating at the intersection of healthcare and real estate. We hold a highly diversified portfolio of senior housing communities, outpatient medical buildings, research centers, hospitals and other healthcare facilities, which we generally refer to collectively as “healthcare real estate,” located throughout the United States, Canada and the United Kingdom. As of June 30, 2023, we owned or had investments in approximately 1,400 properties (including properties classified as held for sale). Our company was originally founded in 1983 and is headquartered in Chicago, Illinois with additional corporate offices in Louisville, Kentucky and New York, New York.

We primarily invest in a diversified portfolio of healthcare real estate assets through wholly owned subsidiaries and other co-investment entities. We operate through three reportable business segments: triple-net leased properties, senior housing operating portfolio, which we also refer to as “SHOP” and which was formerly known as senior living operations, and outpatient medical and research portfolio, which was formerly known as office operations. See “Note 2 – Accounting Policies” and “Note 15 – Segment Information.” Our senior housing communities are either subject to triple-net leases, in which case they are included in our triple-net leased properties reportable business segment, or operated by independent third-party managers, in which case they are included in our SHOP reportable business segment.

As of June 30, 2023, we leased a total of 355 properties (excluding properties within our outpatient medical and research portfolio reportable business segment) to various healthcare operating companies under triple-net or absolute-net leases that obligate the tenants to pay all property-related expenses, including maintenance, utilities, repairs, taxes, insurance and capital expenditures. Our three largest tenants, Brookdale Senior Living Inc. (together with its subsidiaries, “Brookdale Senior Living”), Ardent Health Partners, LLC (together with its subsidiaries, “Ardent”) and Kindred Healthcare, LLC (together with its subsidiaries, “Kindred”) leased from us 121 properties, 30 properties (including 19 outpatient medical buildings) and 29 properties, respectively, as of June 30, 2023.

As of June 30, 2023, pursuant to long-term management agreements, we engaged independent operators, such as Atria Senior Living, Inc. (together with its subsidiaries, including Holiday Retirement (“Holiday”), “Atria”) and Sunrise Senior Living, LLC (together with its subsidiaries, “Sunrise”), to manage 579 senior housing communities.

As of June 30, 2023, we owned or had investments in a total of 460 properties in our outpatient medical and research portfolio reportable business segment. These properties generally consist of outpatient medical buildings that are predominantly located on or contiguous to a health system campus and research properties that are affiliated with and often located on or contiguous to a university or academic medical campus. Through our Lillibridge Healthcare Services, Inc. subsidiary and our ownership interest in PMB Real Estate Services LLC, we also provide outpatient medical building management, leasing, marketing, facility development and advisory services to highly rated hospitals and health systems throughout the United States.

In addition, from time to time, we make secured and unsecured loans and other investments relating to healthcare real estate or operators.

We have a third-party institutional capital management business, Ventas Investment Management (“VIM”), which includes our open-ended investment vehicle, the Ventas Life Science & Healthcare Real Estate Fund (the “Ventas Fund”). Through VIM, we partner with third-party institutional investors to invest in healthcare real estate through various joint ventures and other co-investment vehicles where we are the sponsor or general partner.

The accompanying Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information set forth in the Accounting Standards Codification (“ASC”), as published by the Financial Accounting Standards Board (“FASB”), and with the Securities and Exchange Commission (“SEC”) instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of results for the interim period have been included. Operating results for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. The accompanying Consolidated Financial Statements and related notes should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Annual Report”). Certain prior period amounts have been reclassified to conform to the current period presentation.

Accounting Estimates

The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions regarding future events that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Principles of Consolidation

The accompanying Consolidated Financial Statements include our accounts and the accounts of our wholly owned subsidiaries and the joint venture entities over which we exercise control. All intercompany transactions and balances have been eliminated in consolidation, and our net earnings are reduced by the portion of net earnings attributable to noncontrolling interests.

GAAP requires us to identify entities for which control is achieved through means other than voting rights and to determine which business enterprise is the primary beneficiary of variable interest entities (“VIEs”). Substantially all of the assets of the VIEs are real estate investments, and substantially all of the liabilities of the VIEs are mortgage loans. Assets of the consolidated VIEs can only be used to settle obligations of such VIEs. Liabilities of the consolidated VIEs represent claims against the specific assets of the VIEs. The table below summarizes the total assets and liabilities of our consolidated VIEs as reported on our Consolidated Balance Sheets (dollars in thousands):

We applied for grants under the Provider Relief Fund administered by the U.S. Department of Health & Human Services (“HHS”) on behalf of the assisted living communities in our SHOP reportable business segment to partially mitigate losses attributable to COVID-19. These grants are intended to reimburse eligible providers for expenses incurred to prevent, prepare for and respond to COVID-19 and lost revenues attributable to COVID-19. Recipients are not required to repay distributions from the Provider Relief Fund, provided that they attest to and comply with certain terms and conditions, including not using grants received from the Provider Relief Fund to reimburse expenses or losses that other sources are obligated to reimburse, complying with reporting and record keeping requirements and cooperating with any government audits.

During the three and six months ended June 30, 2023, we did not receive any HHS grants. During the three and six months ended June 30, 2022, we received $0 and $34.0 million, respectively, in HHS grants in connection with our applications and recognized these grants within property-level operating expenses in our Consolidated Statements of Income in the period in which they were received.

As of June 30, 2023, Atria, Sunrise, Brookdale Senior Living, Ardent and Kindred managed or operated approximately 25.1%, 9.5%, 7.6%, 5.1% and 0.8%, respectively, of our consolidated real estate investments based on gross book value (excluding properties classified as held for sale as of June 30, 2023). Because Atria and Sunrise manage our properties in exchange for a management fee from us, we are not directly exposed to their credit risk in the same manner or to the same extent as triple-net tenants like Brookdale Senior Living, Ardent and Kindred.

Based on gross book value, approximately 11.1% and 54.5% of our consolidated real estate investments were senior housing communities included in the triple-net leased properties and SHOP reportable business segments, respectively (excluding properties classified as held for sale as of June 30, 2023). Outpatient medical buildings, research centers, inpatient rehabilitation facilities (“IRFs”) and long-term acute care facilities (“LTACs”), health systems, skilled nursing facilities (“SNFs”) and secured loans receivable and investments collectively comprised the remaining 34.4%. Our consolidated properties were located in 47 states, the District of Columbia, seven Canadian provinces and the United Kingdom as of June 30, 2023, with properties in one state (California) accounting for more than 10% of our total consolidated revenues and net operating income (“NOI,” which is defined as total revenues, less interest and other income, property-level operating expenses and third party capital management expenses) for each of the three months ended June 30, 2023 and 2022. See “Non-GAAP Financial Measures” included elsewhere in this Quarterly Report on Form 10-Q for additional disclosure and a reconciliation of net income attributable to common stockholders, as computed in accordance with GAAP, to NOI.

The properties we triple-net leased to Brookdale Senior Living, Ardent and Kindred accounted for a significant portion of total revenues and total NOI for the three months ended June 30, 2023 and 2022. The following table reflects the concentration risk related to our triple-net leased properties including assets held for sale for the periods presented:

Each of our leases with Brookdale Senior Living, Ardent and Kindred is a triple-net lease that obligates the tenant to pay all property-related expenses, including maintenance, utilities, repairs, taxes, insurance and capital expenditures, and to comply with the terms of the mortgage financing documents, if any, affecting the properties. In addition, each of our Brookdale Senior Living, Ardent and Kindred leases is guaranteed by a corporate parent.

As of June 30, 2023, we leased 29 properties to Kindred pursuant to a single, triple-net master lease agreement (together with certain other agreements related to such master lease, collectively, the “Kindred Lease”). Pursuant to the Kindred Lease, the 29 properties are divided into two groups. The first group is composed of 6 properties (“Group 1”) and the second group is composed of 23 properties (“Group 2”). The existing term of the Kindred Lease expires on April 30, 2028 for Group 1 and April 30, 2025 for Group 2. Kindred has the option to renew the Group 1 properties for two, 5-year extension at the greater of escalated rent and fair market rental. Kindred has the option to renew the Group 2 properties for one, 5-year extension at escalated rent, and following that, two additional 5-year extensions at the greater of escalated rent and fair market rent. The Kindred Lease is guaranteed by a parent company.

As of June 30, 2023, Atria and Sunrise, collectively, provided comprehensive property management and accounting services with respect to 334 of our 570 consolidated senior housing communities, for which we pay annual management fees pursuant to long-term management agreements.

As of June 30, 2023, Atria and its subsidiaries, including Holiday, managed a pool of 242 senior housing communities for Ventas. Ventas has the right to terminate the management contract for 91 of the communities on short notice.

As of June 30, 2023, Sunrise managed 92 communities for Ventas pursuant to multiple management agreements (collectively, the “Sunrise Management Agreements”). Our Sunrise Management Agreements have initial terms expiring between 2035 and 2040. Ventas has the ability to terminate some or all of the Sunrise Management Agreements under certain circumstances.

We rely on our managers’ personnel, expertise, technical resources and information systems, proprietary information, good faith and judgment to manage our senior housing operating portfolio efficiently and effectively. We also rely on our managers to set appropriate resident fees, provide accurate property-level financial results in a timely manner and otherwise operate our senior housing communities in compliance with the terms of our management agreements and all applicable laws and regulations.

During the six months ended June 30, 2023, we sold six senior housing communities (three of which were vacant), five outpatient medical buildings, one research center and three triple-net leased properties (two of which were vacant) for aggregate consideration of $64.4 million and recognized a gain on the sale of these assets of $11.6 million in our Consolidated Statements of Income.

The table below summarizes our real estate assets classified as held for sale including the amounts reported on our Consolidated Balance Sheets, which may include anticipated post-closing settlements of working capital for disposed properties (dollars in thousands):

We recognized impairments of $10.7 million and $12.6 million for the three months ended June 30, 2023 and 2022, respectively, and $19.2 million and $26.9 million for the six months ended June 30, 2023 and 2022, respectively, which are recorded primarily as a component of depreciation and amortization in our Consolidated Statements of Income. The impairments recorded were primarily a result of a change in our intent to hold or a change in the future cash flows of the impaired assets.

As of June 30, 2023 and December 31, 2022, we had $52.2 million and $561.4 million, respectively, of loans receivable and investments, net of allowance, relating to senior housing and healthcare operators or properties. The following is a summary of our loans receivable and investments, net, including amortized cost, fair value and unrealized gains or losses on available for sale investments (dollars in thousands):    

On May 1, 2023, we took ownership of the properties that secured the Santerre Mezzanine Loan by converting the outstanding principal amount of the Santerre Mezzanine Loan to equity, with no additional consideration being paid. As a result, the Santerre Mezzanine Loan is no longer outstanding. The properties consisted of a diverse pool of outpatient medical buildings, senior housing operating portfolio communities, triple-net leased skilled nursing facilities and hospital assets in the United States, which, at the time, also secured a $1 billion non-recourse senior mortgage loan issued under the CHC Commercial Mortgage Trust 2019-CHC (the “CHC Mortgage Loan”). For additional information regarding the CHC Mortgage Loan, see “Note 9 – Senior Notes Payable And Other Debt.”

As of December 31, 2022, we recognized a $20.0 million allowance on the Santerre Mezzanine Loan in our Consolidated Statements of Income. The allowance for the Santerre Mezzanine Loan was calculated using the “current expected credit loss”, or “CECL”, model, which considers relevant information about past events, current conditions and reasonable and supportable forecasts to estimate expected losses as of the most recent balance sheet date. During the three months ended March 31, 2023, we recorded an $8.0 million partial reversal of the allowance in our Consolidated Statements of Income resulting in a $12.0 million allowance as of March 31, 2023. In connection with our equitization of the Santerre Mezzanine Loan on May 1, 2023, we recognized $41.1 million in valuation-related items in our Consolidated Statements of Income consisting of: (a) the reversal of the $12.0 million and $20.0 million of allowances on the Santerre Mezzanine Loan for the three and six months ended June 30, 2023, respectively, and (b) a gain on foreclosure of real estate of $29.1 million for the three and six months ended June 30, 2023. The gain is the fair value of the properties that secured the Santerre Mezzanine Loan, less the fair value of the CHC Mortgage Loan, less the principal amount of the Santerre Mezzanine Loan on May 1, 2023 (after the reversal of previously recorded allowances), and net of non-real estate assets and liabilities and transaction costs. For additional information, see “Note 10 – Fair Value Measurements”.

We report investments in unconsolidated entities over whose operating and financial policies we have the ability to exercise significant influence under the equity method of accounting. We are not required to consolidate these entities because our joint venture partners have significant participating rights, nor are these entities considered VIEs, as they are controlled by equity holders with sufficient capital. We invest in both real estate entities and operating entities which are described further below.

Through our Ventas Investment Management Platform, which combines our extensive third-party capital ventures under a single platform, we partner with third-party institutional investors to invest in healthcare real estate through various joint ventures and other co-investment vehicles where we are the sponsor or general partner.

Below is a summary of our investments in unconsolidated real estate entities as of June 30, 2023 and December 31, 2022, respectively (dollars in thousands):

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We provide various services to our unconsolidated real estate entities in exchange for fees and reimbursements. Total management fees earned in connection with these services were $3.6 million and $3.8 million for the three months ended June 30, 2023 and 2022, respectively, and $7.2 million and $7.3 million for the six months ended June 30, 2023 and 2022, respectively. Such amounts are included in third party capital management revenues in our Consolidated Statements of Income.

We own investments in unconsolidated operating entities such as Ardent and Atria, which are included within other assets on our Consolidated Balance Sheets. Our 34% ownership interest in Atria entitles us to customary minority rights and protections, including the right to appoint two members to the Atria Board of Directors.

As of June 30, 2023, we held a 7.5% ownership interest in Ardent, which entitles us to customary minority rights and protections, including the right to appoint one member to the Ardent Board of Directors. In May 2023, we sold approximately 24% of our ownership interest in Ardent to a third-party investor for $50.1 million in total proceeds. As a result of the sale, we recognized $33.5 million of gain for both the three and six months ended June 30, 2023 in income from unconsolidated entities in our Consolidated Statements of Income and our ownership interest in Ardent was reduced from 9.8% to 7.5%.

The following is a summary of our intangibles (dollars in thousands):

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Above-market lease intangibles and in-place and other lease intangibles are included in acquired lease intangibles within real estate investments on our Consolidated Balance Sheets. Other intangibles (including non-compete agreements, trade names and trademarks) are included in other assets on our Consolidated Balance Sheets. Below-market lease intangibles, other lease intangibles and purchase option intangibles are included in accounts payable and other liabilities on our Consolidated Balance Sheets.

The following is a summary of our other assets (dollars in thousands):

Stock warrants represent warrants exercisable at any time prior to December 31, 2025, in whole or in part, for 16.3 million shares of Brookdale Senior Living common stock at an exercise price of $3.00 per share. These warrants are measured at fair value with changes in fair value being recognized within other expense in our Consolidated Statements of Income.

The following is a summary of our senior notes payable and other debt (dollars in thousands):

We have a $2.75 billion unsecured revolving credit facility priced at SOFR plus 0.925%, which is subject to adjustment based on the Company’s debt rating. The unsecured revolving credit facility matures in January 2025, but may be extended at our option, subject to the satisfaction of certain conditions, for two additional periods of six months each. The unsecured revolving credit facility also includes an accordion feature that permits us to increase our aggregate borrowing capacity thereunder to up to $3.75 billion, subject to the satisfaction of certain conditions, including the receipt of additional commitments for such increase.

Our unsecured credit facility imposed certain customary restrictions on us, including restrictions pertaining to: (i) liens; (ii) investments; (iii) the incurrence of additional indebtedness; (iv) mergers and dissolutions; (v) certain dividend, distribution and other payments; (vi) permitted businesses; (vii) transactions with affiliates; (viii) agreements limiting certain liens; and (ix) the maintenance of certain consolidated total leverage, secured debt leverage, unsecured debt leverage and fixed charge coverage ratios and minimum consolidated adjusted net worth, and contains customary events of default.

As of June 30, 2023, we had $2.7 billion of undrawn capacity on our unsecured revolving credit facility with $35.0 million outstanding and an additional $1.2 million restricted to support outstanding letters of credit. We limit our use of the unsecured revolving credit facility, to the extent necessary, to support our commercial paper program when commercial paper notes are outstanding.

As of June 30, 2023, our $100.0 million uncommitted line for standby letters of credit had an outstanding balance of $14.7 million. The agreement governing the line contains certain customary covenants and, under its terms, we are required to pay a commission on each outstanding letter of credit at a fixed rate.

Our wholly owned subsidiary, Ventas Realty, Limited Partnership (“Ventas Realty”), may issue from time to time unsecured commercial paper notes up to a maximum aggregate amount outstanding at any time of $1.0 billion. The notes are sold under customary terms in the U.S. commercial paper note market and are ranked pari passu with all of Ventas Realty’s other unsecured senior indebtedness. The notes are fully and unconditionally guaranteed by Ventas, Inc. As of June 30, 2023, we had $135.0 million in borrowings outstanding under our commercial paper program.

As of June 30, 2023, we had a C$500.0 million unsecured term loan facility priced at Canadian Dollar Offered Rate (“CDOR”) plus 0.90% that matures in 2025.

In June 2023, Ventas Realty issued $862.5 million aggregate principal amount of its 3.75% Exchangeable Senior Notes due 2026 (the “Exchangeable Notes”) in a private placement. The Exchangeable Notes are senior, unsecured obligations of Ventas Realty and are fully and unconditionally guaranteed on an unsecured and unsubordinated basis by Ventas. The Exchangeable Notes bear interest at a rate of 3.75% per year, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2023. The Exchangeable Notes mature on June 1, 2026, unless earlier exchanged, redeemed or repurchased. The net proceeds from the Exchangeable Notes were primarily used to repay the CHC Mortgage Loan. As of June 30, 2023, we had $862.5 million aggregate principal amount of the Exchangeable Notes outstanding.

The Exchangeable Notes are exchangeable at an initial exchange rate of 18.2460 shares of our common stock per $1,000 principal amount of Exchangeable Notes (equivalent to an initial exchange price of approximately $54.81 per share of common stock). The initial exchange rate is subject to adjustment, including in the event of the payment of a quarterly dividend in excess of $0.45 per share, but will not be adjusted for any accrued and unpaid interest. Upon exchange of the Exchangeable Notes, Ventas Realty will pay cash up to the aggregate principal amount of the Exchangeable Notes to be exchanged and pay or deliver (or cause to be delivered), as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at Ventas Realty’s election, in respect of the remainder, if any, of its exchange obligation in excess of the aggregate principal amount of the Exchangeable Notes being exchanged. Prior to the close of business on the business day immediately preceding March 1, 2026, the Exchangeable Notes will be exchangeable at the option of the noteholders only upon the satisfaction of specified conditions and during certain periods described in the indenture governing the Exchangeable Notes. On or after March 1, 2026, until the close of business on the business day immediately preceding the maturity date, the Exchangeable Notes will be exchangeable at the option of the noteholders at any time regardless of these conditions or periods.

We have evaluated and concluded that the exchange options embedded in our exchangeable senior notes are eligible for the entity’s own equity scope exception from ASC 815 and therefore, do not need to be bifurcated. Accordingly, we record our exchangeable senior notes as liabilities (included in senior notes payable and other debt on our Consolidated Balance Sheets).

In April 2023, our 100% owned subsidiary, Ventas Canada Finance Limited (“Ventas Canada”), issued and sold C$600.0 million aggregate principal amount of 5.398% Senior Notes due 2028 in a private placement at par. Pursuant to cash tender offers, we used the proceeds to repurchase C$613.7 million in aggregate principal amount of outstanding senior notes due in 2024 for an aggregate purchase price of C$600.0 million plus accrued and unpaid interest as disclosed below:

As a result of the tender offers, we recognized a gain on extinguishment of debt of $8.3 million in our Consolidated Statements of Income for both the three and six months ended June 30, 2023.

In March 2023, we entered into a C$271.8 million floating rate mortgage loan maturing in 2028 with an interest rate of CDOR + 0.88%. The mortgage is secured by 14 SHOP communities in Canada.

On May 1, 2023, we took ownership of the properties that supported the Santerre Mezzanine Loan by converting the outstanding principal amount of the Santerre Mezzanine Loan to equity, with no additional consideration being paid. The properties consisted of a diverse pool of 153 assets, which, at the time, also secured the CHC Mortgage Loan. At the time of the equitization of the Santerre Mezzanine Loan, there was $1 billion outstanding under the CHC Mortgage Loan and it accrued interest at a weighted average rate of LIBOR + 1.84% and had matured on June 9, 2023. The CHC Mortgage Loan was recorded at fair value, which approximates par, on May 1, 2023.

On June 8, 2023, we voluntary prepaid, without penalty, $656.6 million of the CHC Mortgage Loan. In connection with the prepayment, 83 properties were released from the collateral securing the CHC Mortgage Loan. As of June 30, 2023, $360.2 million remained outstanding under the CHC Mortgage Loan, which was secured by 70 outpatient medical buildings, triple-net leased skilled nursing facilities and hospital assets in the United States.

On June 9, 2023, we extended the maturity date of the CHC Mortgage Loan to June 9, 2024 and amended the CHC Mortgage Loan to replace its LIBOR-based rates with SOFR-based rates. As of June 30, 2023, the CHC Mortgage Loan had a weighted average rate of SOFR + 2.69%.

In July 2023, we provided notice that we intend to repay the full balance of the CHC Mortgage Loan in August 2023.

In July 2023, we entered into a $426.8 million fixed rate mortgage loan, which accrues interest at 5.91%, matures in 2033 and is secured by 19 SHOP communities in the United States.

As of June 30, 2023, our indebtedness had the following maturities (dollars in thousands):

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In the normal course of our business, interest rate fluctuations affect future cash flows under our variable rate debt obligations, loans receivable and marketable debt securities, and foreign currency exchange rate fluctuations affect our operating results. We follow established risk management policies and procedures, including the use of derivative instruments, to mitigate the impact of these risks.

We do not use derivative instruments for trading or speculative purposes, and we have a policy of entering into contracts only with major financial institutions based upon their credit ratings and other factors. When considered together with the underlying exposure that the derivative is designed to hedge, we do not expect that the use of derivatives in this manner would have any material adverse effect on our future financial condition or results of operations.

As of June 30, 2023, our variable rate debt obligations of $1.4 billion reflect, in part, the effect of $143.8 million notional amount of interest rate swaps with maturities in March 2027, that effectively convert fixed rate debt to variable rate debt.

As of June 30, 2023, our fixed rate debt obligations of $12.0 billion reflect, in part, the effect of $537.5 million and C$564.6 million notional amount of interest rate swaps with maturities ranging from October 2023 to April 2031, in each case, that effectively convert variable rate debt to fixed rate debt.

In the first quarter of 2023, we hedged an incremental $200.0 million of variable rate debt to fixed rate debt through the execution in March 2023 of two-year $400.0 million notional swaps on our unsecured term loan due in 2027, replacing a $200.0 million notional swap that matured in January 2023. The swap instruments are designated as cash flow hedges.

In March 2023, in connection with our new C$271.8 million mortgage loan, we entered into an interest rate swap totaling a notional amount of C$271.8 million with a maturity of March 14, 2028 that effectively converts CDOR-based floating rate debt to fixed rate debt.

In March and April 2023, we entered into a total of $250.0 million aggregate forward starting swaps with a ten-year weighted average rate of 3.37%:

On May 1, 2023, in connection with taking ownership of the properties securing the Santerre Mezzanine Loan, which was collateral for the CHC Mortgage Loan, we also took ownership of existing interest rate caps based on LIBOR with an aggregate notional amount of $1.5 billion that expired in June 2023. On June 5, 2023, in connection with the extension of the maturity date of the CHC Mortgage Loan, we purchased interest rate caps with a total notional value of $360.2 million that expire in June 2024. The objective of the interest rate caps is to offset the variability of cash flows in the CHC Mortgage Loan interest payments attributable to fluctuations in SOFR beyond 9.42%.

Accounting guidance on fair value measurements for certain financial assets and liabilities requires that financial assets and liabilities carried at fair value be classified and disclosed in one of the following categories:

The use of different market assumptions and estimation methodologies may have a material effect on the reported estimated fair value amounts. Accordingly, the estimates presented are not necessarily indicative of the amounts we would realize in a current market exchange or transaction.

The table below summarizes the carrying amounts and fair values of our financial instruments either recorded or disclosed on a recurring basis (dollars in thousands):