Interest rate swap agreements

6 Months Ended

Jun. 30, 2012

Interest rate swap agreements

Interest rate swap agreements

6.      Interest rate swap agreements

During the three and six months ended June 30, 2012 and 2011, our interest rate swap agreements were used primarily to hedge the variable cash flows associated with certain of our existing LIBOR-based variable rate debt, including our unsecured senior line of credit and unsecured senior bank term loans.  The ineffective portion of the change in fair value of our interest rate swap agreements is required to be recognized directly in earnings.  During the three and six months ended June 30, 2012 and 2011, our interest rate swap agreements were 100% effective; because of this, no hedge ineffectiveness was recognized in earnings.  The effective portion of changes in the fair value of our interest rate swap agreements that are designated and that qualify as cash flow hedges is classified in accumulated other comprehensive loss.

The following table reflects the effective portion of the unrealized loss recognized in other comprehensive loss for our interest rate swaps related to the change in fair value for the three and six months ended June 30, 2012 and 2011 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Unrealized loss recognized in other comprehensive loss related to the effective portion of changes in the fair value of our interest rate swap agreements	$	3,091	$	5,555	$	7,164	$	5,255

Losses are subsequently reclassified into earnings in the period during which the hedged forecasted transactions affect earnings.  During the next 12 months, we expect to reclassify approximately $17.7 million from accumulated other comprehensive loss to interest expense as an increase to interest expense.  The following table indicates the classification in the condensed consolidated statements of income and the effective portion of the loss reclassified from accumulated other comprehensive income into earnings for our cash flow hedge contracts for the three and six months ended June 30, 2012 and 2011 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Loss reclassified from accumulated other comprehensive income to earnings as an increase to interest expense (effective portion)	$	5,895	$	5,302	$	11,670	$	10,741

As of June 30, 2012, and December 31, 2011, our interest rate swap agreements were classified in accounts payable, accrued expenses, and tenant security deposits based upon their respective fair values, aggregating a liability balance of approximately $28.5 million and $33.0 million, respectively, which included accrued interest and adjustments for non-performance risk, with the offsetting adjustment reflected as unrealized loss in accumulated other comprehensive loss in total equity.  Under our interest rate swap agreements we have no collateral posting requirements.  We had the following outstanding interest rate swap agreements that were designated as cash flow hedges of interest rate risk as of June 30, 2012 (dollars in thousands):

								Notional Amount in Effect as of
Transaction Date	Effective Date	Termination Date	Interest Pay Rate (1)		Fair Value as of June 30, 2012			June 30, 2012		December 31, 2013		December 31, 2014
December 2006	December 29, 2006	March 31, 2014	4.990	%	$	(4,098	)	$	50,000	$	50,000	$	–
October 2007	October 31, 2007	September 30, 2012	4.546		(543		)	50,000		–		–
October 2007	October 31, 2007	September 30, 2013	4.642		(2,738		)	50,000		–		–
October 2007	July 1, 2008	March 31, 2013	4.622		(817		)	25,000		–		–
October 2007	July 1, 2008	March 31, 2013	4.625		(818		)	25,000		–		–
December 2006	November 30, 2009	March 31, 2014	5.015		(6,180		)	75,000		75,000		–
December 2006	November 30, 2009	March 31, 2014	5.023		(6,191		)	75,000		75,000		–
December 2006	December 31, 2010	October 31, 2012	5.015		(1,639		)	100,000		–		–
December 2011	December 30, 2011	December 31, 2012	0.480		(275		)	250,000		–		–
December 2011	December 30, 2011	December 31, 2012	0.480		(275		)	250,000		–		–
December 2011	December 30, 2011	December 31, 2012	0.480		(137		)	125,000		–		–
December 2011	December 30, 2011	December 31, 2012	0.480		(137		)	125,000		–		–
December 2011	December 30, 2011	December 31, 2012	0.495		(147		)	125,000		–		–
December 2011	December 30, 2011	December 31, 2012	0.508		(155		)	125,000		–		–
December 2011	December 31, 2012	December 31, 2013	0.640		(672		)	–		250,000		–
December 2011	December 31, 2012	December 31, 2013	0.640		(672		)	–		250,000		–
December 2011	December 31, 2012	December 31, 2013	0.644		(341		)	–		125,000		–
December 2011	December 31, 2012	December 31, 2013	0.644		(341		)	–		125,000		–
December 2011	December 31, 2013	December 31, 2014	0.977		(1,150		)	–		–		250,000
December 2011	December 31, 2013	December 31, 2014	0.976		(1,148		)	–		–		250,000
Total					$	(28,474	)	$	1,450,000	$	950,000	$	500,000

(1) In addition to the interest pay rate, borrowings outstanding under our unsecured senior line of credit and unsecured senior bank term loans include an applicable margin currently ranging from 1.20% to 1.65%.