Derivatives

9 Months Ended

Sep. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

DERIVATIVES

The Company’s objective in using interest rate derivatives is to manage its exposure to interest rate movements and add stability to interest expense. To accomplish this objective, the Company uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable rate amounts from a counterparty in exchange for the Company making fixed rate payments over the life of the agreement without exchange of the underlying notional amount.

As of September 30, 2020, the Company has eight interest rate swaps to hedge the variable cash flows associated with variable rate debt. Changes in fair value of the derivatives that are designated and that qualify as cash flow hedges are recorded in “Accumulated other comprehensive loss” and are reclassified into interest expense as interest payments are made on the Company’s variable rate debt. Over the next 12 months, the Company estimates that an additional $10,927 will be reclassified as an increase to interest expense.

The following table summarizes the Company’s interest rate swaps as of September 30, 2020, which effectively convert one-month floating rate LIBOR to a fixed rate:

Number of Instruments	Effective Date	Aggregate Notional		Fixed Interest Rate		Maturity Date
Two	November 23, 2018	$	200,000	2.85	%	November 22, 2023
Three	August 15, 2019	$	120,000	1.68	%	July 17, 2024
Three	August 15, 2019	$	150,000	1.77	%	July 17, 2026

The Company previously had three interest rate swaps with notional amounts totaling $250,000 and a maturity date of January 5, 2021 that were terminated in conjunction with the repayment of the Company’s $250,000 unsecured term loan due 2021 during the three months ended September 30, 2020. At termination, these three interest rate swaps were in a liability position and had a fair value of $1,699. The associated other comprehensive income will be amortized into expense through the original maturity date. As a result, the Company recognized $451 of interest expense, which is included within “Interest expense” in the

accompanying condensed consolidated statements of operations and other comprehensive income (loss), in connection with the termination of these swaps during the three months ended September 30, 2020.

The following table summarizes the Company’s interest rate swaps that were designated as cash flow hedges of interest rate risk:

	Number of Instruments		Notional
Interest Rate Derivatives	September 30, 2020	December 31, 2019	September 30, 2020		December 31, 2019
Interest rate swaps	8	11	$	470,000	$	720,000

The table below presents the estimated fair value of the Company’s derivative financial instruments, which are presented within “Other liabilities” in the accompanying condensed consolidated balance sheets. The valuation techniques used are described in Note 12 to the condensed consolidated financial statements.

	Fair Value
	September 30, 2020		December 31, 2019
Derivatives designated as cash flow hedges:
Interest rate swaps	$	34,804	$	12,288

The following table presents the effect of the Company’s derivative financial instruments on the accompanying condensed consolidated statements of operations and other comprehensive income (loss) for the three and nine months ended September 30, 2020 and 2019:

Derivatives in Cash Flow Hedging Relationships	Amount of Loss Recognized in Other Comprehensive Income on Derivative				Location of Loss (Gain) Reclassified from Accumulated Other Comprehensive Income (AOCI) into Income	Amount of Loss (Gain) Reclassified from AOCI into Income				Total Interest Expense Presented in the Statements of Operations in which the Effects of Cash Flow Hedges are Recorded
	Three Months Ended September 30,		Nine Months Ended September 30,			Three Months Ended September 30,		Nine Months Ended September 30,		Three Months Ended September 30,		Nine Months Ended September 30,
2020	$	492	$	31,446	Interest expense	$	3,616	$	7,682	$	21,941	$	58,347
2019	$	7,159	$	16,760	Interest expense	$	7	$	(213)	$	25,084	$	59,877