DERIVATIVE AND HEDGING INSTRUMENTS

6 Months Ended

Jun. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE AND HEDGING INSTRUMENTS

DERIVATIVE AND HEDGING INSTRUMENTS

The Company is exposed to various market risks, including the potential loss arising from adverse changes in interest rates and foreign exchange rates. The Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates and foreign exchange rates. The Company’s derivative financial instruments are used to manage differences in the amount of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investments and borrowings.

Certain of the Company’s foreign operations expose the Company to fluctuations of foreign interest rates and exchange rates. These fluctuations may impact the value of the Company’s cash receipts and payments in terms of the Company’s functional currency. The Company enters into derivative financial instruments to protect the value or fix the amount of certain obligations in terms of its functional currency, the U.S. dollar. The Company does not enter into derivatives for speculative purposes.

Cash Flow Hedges

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 and caps as part of its interest rate risk management strategy. The notional value of the Company's interest rate cap was $200.0 million as of each of June 30, 2015 and December 31, 2014, respectively. The notional value of the Company's interest rate swap was CAD $90.0 million as of June 30, 2015. Approximately $0.9 million of losses, which are included in accumulated other comprehensive loss, are expected to be reclassified into earnings in the next 12 months.

Net Investment Hedges

The Company is exposed to fluctuations in foreign exchange rates on investments it holds in Canadian entities. The Company uses cross currency interest rate swaps to hedge its exposure to changes in foreign exchange rates on these foreign investments. The notional value of these contracts was CAD $56.3 million as of June 30, 2015. The Company also holds a CAD $90.0 million term loan which was designated as a net investment hedge. The Company did not hold any net investment hedges as of December 31, 2014.

The following is a summary of the derivative and financial instruments designated as hedging instruments held by the Company at June 30, 2015 and December 31, 2014 (in thousands):    

			June 30, 2015		December 31, 2014		Maturity Dates
Type	Designation	Count	Fair Value					Balance Sheet Location
Assets:
Interest rate cap	Cash Flow	1	$	3,066	$	4,618	2019	Prepaid expenses, deferred financing costs and other assets, net
Liabilities:
Interest rate swap	Cash Flow	1	$	1,137	$	—	2020	Accounts payable and accrued liabilities
Cross currency interest rate swaps	Net Investment	2	164		—		2025	Accounts payable and accrued liabilities
CAD Term Loan	Net Investment	1	72,846		—		2020	Term loans
			$	74,147	$	—

The following presents the effect of the Company’s derivative financial instruments on the condensed consolidated statements of income and the condensed consolidated statements of equity for the three and six months ended June 30, 2015:

	Gain (Loss) Recognized in Other Comprehensive Income (Effective Portion)						Gain (Loss) Reclassified from Accumulated Other Comprehensive Income Into Income (Effective Portion)						Income Statement Location
	Three Months Ended June 30, 2015			Six Months Ended June 30, 2015			Three Months Ended June 30, 2015			Six Months Ended June 30, 2015
Cash Flow Hedges:
Interest Rate Products	$	(1,169	)	$	(2,714	)	$	(25	)	$	(25	)	Interest Expense
Net Investment Hedges:
Foreign Currency Products	(164		)	(164		)	—			—			N/A
CAD Term Loan	(396		)	(396		)	—			—			N/A
	$	(1,729	)	$	(3,274	)	$	(25	)	$	(25	)

During the three and six months ended June 30, 2015, the Company recorded no hedge ineffectiveness in earnings.

Offsetting Derivatives

We enter into master netting arrangements, which reduce credit risk by permitting net settlement of transactions with the same counterparty. The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of June 30, 2015:

							Gross Amounts Not Offset in the Balance Sheet
	Gross Amounts of Recognized Assets / Liabilities		Gross Amounts Offset in the Balance Sheet		Net Amounts of Assets / Liabilities presented in the Balance Sheet		Financial Instruments			Cash Collateral Received		Net Amount
Offsetting Assets:
Derivatives	$	3,066	$	—	$	3,066	$	(32	)	$	—	$	3,034
Offsetting Liabilities:
Derivatives	$	1,301	$	—	$	1,301	$	(32	)	$	—	$	1,269

Credit-risk-related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations.

As of June 30, 2015, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $1.6 million. As of June 30, 2015, the Company has not posted any collateral related to these agreements. If the Company had breached any of these provisions at June 30, 2015, it could have been required to settle its obligations under the agreements at their termination value of $1.6 million.