Derivative Instruments and Hedging Activities

3 Months Ended

Mar. 31, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

7. Derivative Instruments and Hedging Activities

We use variable rate debt to finance our construction of student housing properties. These debt obligations expose us to variability in cash flows due to fluctuations in interest rates. We use derivative instruments to limit variability for a portion of our interest payments and to manage exposure to interest rate risk.

As of March 31, 2013 and December 31, 2012, the fair value of derivative contracts is recorded within other assets and other liabilities in the accompanying consolidated balance sheets. The effective portion of changes in fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (loss) and is subsequently reclassified to earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of changes in fair value of derivatives designated and that qualify as cash flow hedges is recorded in earnings. If a derivative is either not designated as a hedge or if hedge accounting is discontinued, all changes in fair value of the derivative are recorded in earnings.

The fair value of interest rate swaps is determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. We incorporate credit valuation adjustments to appropriately reflect our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of derivative contracts for the effect of nonperformance risk, we consider the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds and guarantees.

The following is a summary of the derivative instruments we entered into for the periods presented (in thousands):

	As of March 31, 2013							March 31, 2013				December 31, 2012
Derivative	Notional		Receive	Pay or			Maturity
Agreement	Amount		Rate	Strike Rate			Date	Asset		Liability		Asset		Liability
Interest rate cap	$	100,000	1 Month LIBOR		2.50	%	January 2014	$	-	$	-	$	-	$	-
Interest rate cap		18,762	1 Month LIBOR		1.25	%	April 2013		-		-		-		-
Interest rate swap		18,762	1 Month LIBOR		1.39	%	April 2013		-		-		-		(73	)
								$	-	$	-	$	-	$	(73	)

	Amount of Income (Loss) Recognized on
	OCI Derivatives (Effective Portion)
Derivatives Designated as Cash Flow Hedges	Three Months Ended March 31, 2013		Three Months Ended March 31, 2012
Caps	$	-	$	(4	)
Swaps (receive float/pay fixed)		73		11
Total effect of derivative instruments on    other comprehensive income	$	73	$	7

The table below reflects the amount reclassified from accumulated other comprehensive income (loss) to income related to an interest rate swap for the periods presented (in thousands):

	Amount of Income (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) to Income (Loss)
	Three Months Ended March 31, 2013			Three Months Ended March 31, 2012
Swap	$	(14	)	$	(14	)

The table below reflects the amount reclassified from accumulated other comprehensive income (loss) to income related to an interest rate swap for the periods presented (in thousands):

Interest rate swaps (receive float/pay fixed):	Location of Gain (Loss) Recognized on Statements of Operations	Three Months Ended March 31, 2013			Three Months Ended March 31, 2012
Monthly net settlements - cash settled	Change in fair value of interest rate derivatives	$	(54	)	$	(49	)
Mark to market adjustments - non cash	Change in fair value of interest rate derivatives		-			-
Total effect of derivative instruments on the condensed consolidated statements of operations		$	(54	)	$	(49	)

Interest rate caps and interest rate swaps measured at fair value for the periods presented are as follows (in thousands):

	Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Balance at end of Period
March 31, 2013
Other assets - Interest rate caps	$	-	$	-		$	-	$	-
Other liabilities - Interest rate swaps		-		-			-		-
December 31, 2012
Other assets - Interest rate caps		-		-			-		-
Other liabilities - Interest rate swaps		-		(73	)		-		(73	)