Interest Rate Derivative Agreements

3 Months Ended

Mar. 31, 2015

Interest Rate Derivative Agreements [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Interest Rate Derivative Agreements

As of March 31, 2015, the Company has nine derivative agreements in order to mitigate its exposure to increases in interest rates on its variable-rate debt financing.

At March 31, 2015, the terms of the nine derivative agreements are as follows:

Date Purchased	Notional Amount		Effective Capped Rate		Maturity Date	Purchase Price		Counterparty
September 2, 2010	$	31,936,667	3.00	%	September 1, 2017	$	921,000	Bank of New York Mellon
September 2, 2010	$	31,936,667	3.00	%	September 1, 2017	$	845,600	Barclays Bank PLC
September 2, 2010	$	31,936,667	3.00	%	September 1, 2017	$	928,000	Royal Bank of Canada
August 15, 2013	$	93,305,000	1.50	%	September 1, 2017	$	793,000	Deutsche Bank
February 18, 2014	$	41,250,000	1.00	%	March 1, 2017	$	230,500	SMBC Capital Markets, Inc
February 18, 2014	$	11,000,000	1.00	%	March 1, 2017	$	150,500	SMBC Capital Markets, Inc
July 10, 2014	$	31,565,000	3.00	%	August 15, 2019	$	315,200	Barclays Bank PLC
July 10, 2014	$	31,565,000	3.00	%	August 15, 2019	$	343,000	Royal Bank of Canada
July 10, 2014	$	31,565,000	3.00	%	August 15, 2019	$	333,200	SMBC Capital Markets, Inc

In February 2014, the Company entered into two interest rate cap agreements with SMBC Capital Markets, Inc. for a notional amount of $70.0 million with an effective start date of March 1, 2014. On March 30, 2015, SMBC Capital Markets, Inc revised and replaced this agreement with the notional amount for the outstanding borrowings on the MBS TOB financing facilities to $11.0 million. These agreements effectively limit the interest component of the TOB financing correlated with the SIFMA index to a maximum of 1.0% on $52.3 million of the outstanding borrowings on the MBS TOB financing facilities and the PHC Certificates TOB financing facilities through a three year term ending March 1, 2017. The Company received $10,500 of cash collateral upon the execution of this revised agreement. These interest rate cap contract revised cost approximately $369,500 and does not qualify for hedge accounting. Therefore, changes in the estimated fair value of the interest rate derivatives are included in earnings.

The Company contracted for two no-cost interest rate swaps with DB related to the Decatur Angle and Bruton TOB financing facilities collateralized by mortgage revenue bonds that are used to provide financing for the construction of these properties. The swap related to the Decatur Angle TOB financing facility has a $23.0 million notional value, an October 15, 2016 effective date, and an October 15, 2021 termination date. The swap related to the Bruton TOB financing facility has an approximate $18.1 million notional value, an April 15, 2017 effective date, and an April 15, 2022 termination date. Both swaps are in place to mitigate the possible interest rate increases and swaps a variable rate based on LIBOR for an approximate 2% fixed rate. As of March 31, 2015 the fair value of the Decatur Angle swap is a liability of approximately $646,000 and the fair value of the Bruton swap is a liability of approximately $520,000. The fair value of these swaps have been recorded as a liability on the Balance Sheet.

These interest rate derivatives do not qualify for hedge accounting and, accordingly, they are carried at fair value, with changes in fair value included in current period earnings within interest expense. The change in the fair value of these derivative contracts resulted in an increase in interest expense of approximately $900,000 and $176,000 for the quarters ended March 31, 2015 and 2014, respectively. The valuation methodology used to estimate the fair value of the Company’s interest rate derivative agreements is disclosed in footnote 13.