Interest Rate Derivative Agreements

6 Months Ended

Jun. 30, 2016

Interest Rate Derivative Agreements [Abstract]

Interest Rate Derivative Agreements [Text Block]

19. Interest Rate Derivative Agreements

On June 30, 2016, the Partnership has eleven derivative agreements in order to mitigate its exposure to increases in interest rates on its variable-rate debt financing and they are as follows:

Purchase Date	Initial Notional Amount		Effective Capped Rate			Maturity Date	Purchase Price		Fair Value(1)		Variable Debt Financing Facility Hedged	Maximum Potential Cost of Borrowing			Counterparty
September-10	$	31,936,667		3.00	%	September-17	$	921,000	$	-	M24 TEBS		5.0	%	Bank of New York Mellon
September-10	$	31,936,667		3.00	%	September-17	$	845,600	$	-	M24 TEBS		5.0	%	Barclays Bank PLC
September-10	$	31,936,667		3.00	%	September-17	$	928,000	$	-	M24 TEBS		5.0	%	Royal Bank of Canada
August-13	$	93,305,000		1.50	%	September-17	$	793,000	$	669	M24 TEBS		3.5	%	Deutsche Bank
February-14	$	41,250,000		1.00	%	March-17	$	230,500	$	78	PHC TOB Trusts		3.3	%	SMBC Capital Markets, Inc
July-14	$	31,565,000		3.00	%	August-19	$	315,200	$	936	M31 TEBS		4.4	%	Barclays Bank PLC
July-14	$	31,565,000		3.00	%	August-19	$	343,000	$	936	M31 TEBS		4.4	%	Royal Bank of Canada
July-14	$	31,565,000		3.00	%	August-19	$	333,200	$	936	M31 TEBS		4.4	%	SMBC Capital Markets, Inc
July-15	$	28,095,000		3.00	%	August-20	$	210,000	$	9,603	M33 TEBS		4.3	%	Wells Fargo Bank
July-15	$	28,095,000		3.00	%	August-20	$	187,688	$	9,603	M33 TEBS		4.3	%	Royal Bank of Canada
July-15	$	28,095,000		3.00	%	August-20	$	174,900	$	9,603	M33 TEBS		4.3	%	SMBC Capital Markets, Inc

⁽¹⁾ For additional details, see Note 20 to the Partnership's consolidated financial statements.

The Partnership 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 a notational value of approximately $18.1 million, 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. On June 30, 2016 and December 31, 2015, the fair value of the Decatur Angle swap was a liability of approximately $1.5 million and $737,000, respectively. On June 30, 2016 and December 31, 2015, the fair value of the Bruton swap was a liability of approximately $1.2 million and $580,000, respectively. The fair value of these swaps is reported as a liability on the Partnership’s Condensed Consolidated Balance Sheets.

The Partnership’s 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 $531,000 and $1.6 million for the three and six months ended June 30, 2016, respectively. The change in the fair value of these derivative contracts resulted in a decrease in interest expense of approximately $198,000 for the three months ended June 30, 2015 and an increase in interest expense of approximately $701,000 for the six months ended June 30, 2015.  The valuation methodology used to estimate the fair value of the Partnership’s interest rate derivative agreements is disclosed in Note 20.