Derivative Instruments

9 Months Ended

Sep. 30, 2018

DERIVATIVE INSTRUMENTS

In September 2016, ESH REIT entered into a floating-to-fixed interest rate swap, as amended and supplemented from time to time, at a fixed rate of 1.175% and a floating rate of one-month LIBOR to manage its exposure to interest rate risk on a portion of the 2016 Term Facility. The notional amount of the interest rate swap as of September 30, 2018 was $300.0 million. The notional amount decreases by an additional $50.0 million every six months until the swap's maturity in September 2021.

On January 1, 2018, the Company adopted ASU 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities, which changes the designation and measurement guidance for qualifying hedging relationships as well as the presentation of hedging results, and as a result recorded a cumulative-effect adjustment to reclassify a previously recorded loss of approximately $0.7 million from retained earnings to accumulated other comprehensive income and noncontrolling interests. For the three and nine months ended September 30, 2018, the Company received proceeds of approximately $0.8 million and $1.9 million that offset interest expense, respectively, and recorded interest (income) expense of approximately $(0.1) million and $0.8 million for the three and nine months ended September 30, 2017, respectively. As of September 30, 2018, approximately $3.9 million is expected to be recognized through earnings over the following twelve months.

The table below presents the amounts and classification on the Company's financial statements related to the interest rate swap (in thousands):



	Other assets		Accumulated other comprehensive income, net of tax			Other non-operating income		Interest (income) expense, net
As of September 30, 2018	$	8,328	$	7,078	⁽¹⁾
As of December 31, 2017	$	6,387	$	5,992	⁽²⁾
For the three months ended September 30, 2018						$	—	$	(803	)
For the three months ended September 30, 2017						$	104	$	(66	)
For the nine months ended September 30, 2018						$	—	$	(1,888	)
For the nine months ended September 30, 2017						$	356	$	807

_______________________________


(1)	Changes during the nine months ended September 30, 2018, consisted of changes in fair value of $1.9 million and cumulative-effect adjustment of $(0.7) million.


(2)	Changes during the year ended December 31, 2017, consisted of changes in fair value of $1.4 million (effective portion) and amortization of accumulated other comprehensive income prior to hedge de-designation of $0.7 million and removal of a previous LIBOR floor of approximately $(0.3) million.

ESH REIT

Entity Information [Line Items]

Derivative Instruments

DERIVATIVE INSTRUMENTS

In September 2016, ESH REIT entered into a floating-to-fixed interest rate swap, as amended and supplemented from time to time, at a fixed rate of 1.175% and a floating rate of one-month LIBOR to manage its exposure to interest rate risk on a portion of its 2016 Term Facility. The notional amount of the interest rate swap as of September 30, 2018 was $300.0 million. The notional amount decreases by an additional $50.0 million every six months until the swap's maturity in September 2021.

On January 1, 2018, ESH REIT adopted ASU 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities, which changes the designation and measurement guidance for qualifying hedging relationships as well as the presentation of hedging results, and as a result recorded a cumulative-effect adjustment to reclassify a previously recorded loss of approximately $0.7 million from retained earnings to accumulated other comprehensive income. For the three and nine months ended September 30, 2018, ESH REIT received proceeds of approximately $0.8 million and $1.9 million that offset interest expense, respectively, and recorded interest (income) expense of approximately $(0.1) million and $0.8 million for the three and nine months ended September 30, 2017, respectively. As of September 30, 2018, approximately $3.9 million is expected to be recognized through earnings over the following twelve months.

The table below presents the amounts and classification on ESH REIT's financial statements related to the interest rate swap (in thousands):



	Other assets		Accumulated other comprehensive income, net of tax			Other non-operating income		Interest expense, net
As of September 30, 2018	$	8,328	$	8,327	⁽¹⁾
As of December 31, 2017	$	6,387	$	7,038	⁽²⁾
For the three months ended September 30, 2018						$	—	$	(803	)
For the three months ended September 30, 2017						$	104	$	(66	)
For the nine months ended September 30, 2018						$	—	$	(1,888	)
For the nine months ended September 30, 2017						$	356	$	807

_______________________________


(1)	Changes during the nine months ended September 30, 2018, consisted of changes in fair value of $1.9 million and cumulative-effect adjustment of $(0.7) million.


(2)	Changes during the year ended December 31, 2017, consisted of changes in amortization of accumulated other comprehensive income prior to hedge de-designation of $0.7 million and removal of a previous LIBOR floor of approximately $(0.3) million.