Derivative Instruments and Hedging Activities

6 Months Ended

Jun. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily 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 agreements without exchange of the underlying notional amount.

The effective portion of changes in the fair value of derivatives designated, and that qualify, as cash flow hedges is recorded in accumulated other comprehensive loss in the accompanying condensed consolidated statement of stockholders’ equity and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the six months ended June 30, 2015, such derivatives were used to hedge the variable cash flows associated with variable rate debt. The ineffective portion of changes in fair value of the derivatives is recognized directly in earnings. During the three and six months ended June 30, 2015 and 2014, no gains or losses were recognized due to ineffectiveness of hedges of interest rate risk.

Amounts reported in accumulated other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next twelve months, the Company estimates that an additional $4,145,000 will be reclassified from accumulated other comprehensive loss as an increase to interest expense.

See Note 14—“Fair Value” for a further discussion of the fair value of the Company’s derivative instruments.

The following table summarizes the notional amount and fair value of the Company’s derivative instruments (amounts in thousands):

Derivatives Designated as Hedging Instruments	Balance Sheet Location	Effective Dates	Maturity Dates	June 30, 2015							December 31, 2014
				Outstanding Notional Amount		Fair Value of					Outstanding Notional Amount		Fair Value of
						Asset (1)		(Liability) (2)					Asset (3)		(Liability) (4)
Interest rate swaps	Other assets/Accounts payable and other liabilities	10/12/2012 to 08/03/2015	10/11/2017 to 07/11/2019	$	295,046	$	315	$	(2,778	)	$	261,162	$	273	$	(1,808	)

(1) Of this amount, $315,000 related to controlling interests.

(2) Of this amount, $(2,312,000) related to controlling interests and $(466,000) related to noncontrolling interests.

(3) Of this amount, $273,000 related to controlling interests.

(4) Of this amount, $(1,434,000) related to controlling interests and $(374,000) related to noncontrolling interests.

The notional amount under the agreements is an indication of the extent of the Company’s involvement in each instrument at the time, but does not represent exposure to credit, interest rate or market risks.

Accounting for changes in the fair value of a derivative instrument depends on the intended use and designation of the derivative instrument. The Company designated the interest rate swaps as cash flow hedges to hedge the variability of the anticipated cash flows on its variable rate notes payable. The change in fair value of the effective portion of the derivative instrument that is designated as a hedge is recorded in other comprehensive income (loss), or OCI, in the accompanying condensed consolidated statements of comprehensive income.

The table below summarizes the amount of gains or losses recognized on interest rate derivatives designated as cash flow hedges for the three and six months ended June 30, 2015 and 2014 (amounts in thousands):

Derivatives in Cash Flow Hedging Relationships	Amount of Income (Loss) Recognized in OCI on Derivatives (Effective Portion)			Location Of Income (Loss) Reclassified From Accumulated Other Comprehensive Loss to Net Income (Effective Portion)	Amount of Loss Reclassified From Accumulated Other Comprehensive Loss to Net Income (Effective Portion)
Three Months Ended June 30, 2015
Interest rate swaps	$	337		Interest Expense	$	(947	)
Total	$	337			$	(947	)
Three Months Ended June 30, 2014
Interest rate swaps	$	(1,828	)	Interest Expense	$	(558	)
Total	$	(1,828	)		$	(558	)
Six Months Ended June 30, 2015
Interest rate swaps	$	(2,753	)	Interest Expense	$	(1,825	)
Total	$	(2,753	)		$	(1,825	)
Six Months Ended June 30, 2014
Interest rate swaps	$	(2,454	)	Interest Expense	$	(946	)
Total	$	(2,454	)		$	(946	)

Credit Risk-Related Contingent Features

The Company has agreements with each of its derivative counterparties that contain cross-default provisions, whereby if the Company defaults on certain of its unsecured indebtedness, then the Company could also be declared in default on its derivative obligations, resulting in an acceleration of payment thereunder.

In addition, the Company is exposed to credit risk in the event of non-performance by its derivative counterparties. The Company believes it mitigates its credit risk by entering into agreements with creditworthy counterparties. The Company records credit risk valuation adjustments on its interest rate swaps based on the respective credit quality of the Company and the counterparty. As of June 30, 2015, the fair value of derivatives in a net liability position, including accrued interest but excluding any adjustment for nonperformance risk related to these agreements, was $3,240,000. As of June 30, 2015, there were no termination events or events of default related to the interest rate swaps.

Tabular Disclosure Offsetting Derivatives

The Company has elected not to offset derivative positions in its condensed consolidated financial statements. The following table presents the effect on the Company’s financial position had the Company made the election to offset its derivative positions as of June 30, 2015 and December 31, 2014 (amounts in thousands):

Offsetting of Derivative Assets
							Gross Amounts Not Offset in the Balance Sheet
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Balance Sheet		Net Amounts of Assets Presented in the Balance Sheet		Financial Instruments Collateral			Cash Collateral		Net Amount
June 30, 2015	$	315	$	—	$	315	$	(35	)	$	—	$	280
December 31, 2014	$	273	$	—	$	273	$	—		$	—	$	273

Offsetting of Derivative Liabilities
							Gross Amounts Not Offset in the Balance Sheet
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Balance Sheet		Net Amounts of Liabilities Presented in the Balance Sheet		Financial Instruments Collateral			Cash Collateral		Net Amount
June 30, 2015	$	2,778	$	—	$	2,778	$	(35	)	$	—	$	2,743
December 31, 2014	$	1,808	$	—	$	1,808	$	—		$	—	$	1,808

The Company reports derivatives in the accompanying condensed consolidated balance sheets as other assets and accounts payable and other liabilities.