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Financial Instruments: Derivatives and Hedging
9 Months Ended
Sep. 30, 2013
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Financial Instruments: Derivatives and Hedging
Financial Instruments: Derivatives and Hedging
 
In the normal course of business, we use a variety of commonly used derivative instruments, such as interest rate swaps, caps, collar and floors, to manage, or hedge interest rate risk. We hedge our exposure to variability in future cash flows for forecasted transactions in addition to anticipated future interest payments on existing debt. We recognize all derivatives on the balance sheet at fair value.  Derivatives that are not hedges are adjusted to fair value through earnings.  If a derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the hedged asset, liability, or firm commitment through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings.  The ineffective portion of a derivative’s change in fair value will be immediately recognized in earnings.  Reported net income and equity may increase or decrease prospectively, depending on future levels of interest rates and other variables affecting the fair values of derivative instruments and hedged items, but will have no effect on cash flows. Currently, all of our designated derivative instruments are effective hedging instruments.
 
The following table summarizes the notional and fair value of our derivative financial instruments at September 30, 2013 based on Level 2 inputs.  The notional value is an indication of the extent of our involvement in these instruments at that time, but does not represent exposure to credit, interest rate or market risks (amounts in thousands):

 
Notional
Value
 
Strike
Rate
 
Effective
Date
 
Expiration
Date
 
Balance Sheet Location
Fair
Value
Interest Rate Cap
$
271,912

 
6.000
%
 
November 2012
 
November 2013
 
Other Liabilities
$

Interest Rate Swap
$
30,000

 
2.295
%
 
July 2010
 
June 2016
 
Other Liabilities
(1,412
)
Interest Rate Swap
$
8,500

 
0.740
%
 
February 2012
 
February 2015
 
Other Liabilities
(53
)
 
 
 
 
 
 
 
 
 
 
$
(1,465
)


Gains and losses on terminated hedges are included in the accumulated other comprehensive loss, and are recognized into earnings over the term of the related mortgage obligation. Over time, the realized and unrealized gains and losses held in accumulated other comprehensive loss will be reclassified into earnings as an adjustment to interest expense in the same periods in which the hedged interest payments affect earnings.  We estimate that approximately $2.7 million of the current balance held in accumulated other comprehensive loss will be reclassified into interest expense and $5.0 million of the portion related to our share of joint venture accumulated other comprehensive loss will be reclassified into equity in net income (loss) from unconsolidated joint ventures within the next 12 months.
 
The following table presents the effect of our derivative financial instruments and our share of our joint ventures' derivative financial instruments that are designated and qualify as hedging instruments on the consolidated statements of income for the three months ended September 30, 2013 and 2012, respectively (in thousands):

 
 
Amount of Gain or (Loss)
Recognized in
Other Comprehensive
Loss
(Effective Portion)
 
Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
 
Amount of Loss
 Reclassified from
Accumulated Other
Comprehensive Loss  into Income
(Effective Portion)
 
Location of Gain (Loss) Recognized in Income on Derivative
 
Amount of Gain or  (Loss) or
Recognized
into Income
(Ineffective Portion)
 
 
Three Months Ended 
 September 30,
 
 
Three Months Ended 
 September 30,
 
 
Three Months Ended 
 September 30,
Derivative
 
2013
 
2012
 
 
 
2013
 
2012
 
 
 
2013
 
2012
Interest Rate Swaps/Caps
 
$
(160
)
 
$
(278
)
 
Interest expense
 
$
320

 
$
468

 
Interest expense
 
$
2

 
$
(1
)
Share of unconsolidated joint ventures' derivative instruments
 
(2,606
)
 
(3,074
)
 
Equity in net income (loss) from unconsolidated joint ventures
 
1,281

 
2,782

 
Equity in net income (loss) from unconsolidated joint ventures
 
5

 

 
 
$
(2,766
)
 
$
(3,352
)
 
 
 
$
1,601

 
$
3,250

 
 
 
$
7

 
$
(1
)
 
The following table presents the effect of our derivative financial instruments and our share of our joint ventures' derivative financial instruments that are designated and qualify as hedging instruments on the consolidated statements of income for the nine months ended September 30, 2013 and 2012, respectively (in thousands):

 
 
Amount of Gain or (Loss)
Recognized in
Other Comprehensive
Loss
(Effective Portion)
 
Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
 
Amount of Loss
Reclassified from
Accumulated Other
Comprehensive Loss  into Income
(Effective Portion)
 
Location of Gain (Loss) Recognized in Income on Derivative
 
Amount of Gain or  (Loss)
Recognized
in Income
(Ineffective Portion)
 
 
Nine Months Ended September 30,
 
 
Nine Months Ended September 30,
 
 
Nine Months Ended September 30,
Derivative
 
2013
 
2012
 
 
 
2013
 
2012
 
 
 
2013
 
2012
Interest Rate Swaps/Caps
 
$
(20
)
 
$
(901
)
 
Interest expense
 
$
1,258

 
$
1,394

 
Interest expense
 
$
2

 
$

Share of unconsolidated joint ventures' derivative instruments
 
5,503

 
(9,404
)
 
Equity in net income (loss) from unconsolidated joint ventures
 
3,781

 
8,276

 
Equity in net income (loss) from unconsolidated joint ventures
 

 

 
 
$
5,483

 
$
(10,305
)
 
 
 
$
5,039

 
$
9,670

 
 
 
$
2

 
$