Derivatives and Hedging Activities

3 Months Ended

Mar. 31, 2016

Derivatives and Hedging Activities

Derivatives and Hedging Activities

Note 5. Derivatives and Hedging Activities

We are exposed to certain risks relating to our ongoing business operations, including the effect of changes in interest rates. We use derivative instruments to manage only a part of our interest rate risk. We have an interest rate swap agreement to manage our interest rate risk exposure on a $41,000 mortgage note due 2020, with interest payable at a rate equal to a spread over LIBOR. We assumed this mortgage note and related interest rate swap agreement in connection with our acquisition of Cole Corporate Income Trust, Inc., or CCIT, in January 2015.

We record all derivatives on the balance sheet at fair value. The following table summarizes the terms of our outstanding interest rate swap agreement, which we designate as a cash flow hedge:

						Fair Value
		Notional				of Liability
		Amount as of	Interest	Effective	Maturity	as of
	Balance Sheet Location	March 31, 2016	Rate (1)	Date	Date	March 31, 2016
Interest Rate Swap	Accounts Payable and Other Liabilities	$ 41,000	4.16%	1/29/2015	8/3/2020	$ 2,094

⁽¹⁾ The interest rate consists of the underlying index swapped to a fixed rate and the applicable interest rate spread.

The table below presents the effects of our interest rate derivative in our condensed consolidated statements of comprehensive income for the three months ended March 31, 2016 and 2015:

	Three Months Ended March 31,
	2016		2015
Amount of gain (loss) recognized in cumulative
other comprehensive income (loss) (effective portion)	$	(996)	$	356
Amount of gain (loss) reclassified from cumulative
other comprehensive income (loss) into
interest expense (effective portion)	$	94	$	(138)

We may enter into additional interest rate swaps or hedge agreements to manage some of our additional interest rate risk associated with our other floating rate borrowings.