Derivative Financial Instruments

6 Months Ended

Jun. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

6. Derivative Financial Instruments

The Company may enter into interest rate derivative contracts to manage exposure to interest rate risks. The Company does not use derivative financial instruments for trading or speculative purposes. Derivative financial instruments are recognized at fair value and presented within other assets and liabilities in the condensed consolidated balance sheets. Gains and losses resulting from changes in the fair value of derivatives that are neither designated nor qualify as hedging instruments are recognized within other income (expense) in the condensed consolidated statements of comprehensive income. For derivatives that qualify as cash flow hedges, the effective portion of the gain or loss is reported as a component of other comprehensive income and reclassified into earnings in the periods during which the hedged forecasted transaction affects earnings.

On February 20, 2015, the Operating Partnership entered into a $50.0 million floating-to-fixed interest rate swap attributable to one-month LIBOR indexed interest payments. The $50.0 million interest rate swap has a fixed rate of 2.00%, an effective date of March 1, 2016 and a maturity date of February 20, 2020. The Operating Partnership entered into this interest rate swap agreement in connection with the new $50.0 million senior unsecured term loan facility that bears interest at LIBOR plus 1.35% to 1.95%, depending on the Operating Partnership’s total leverage. The Company designated this interest rate swap as a cash flow hedge of variable interest payments based on one-month LIBOR.

The Company’s derivatives were comprised of the following as of June 30, 2015 and December 31, 2014 (in thousands):

	June 30, 2015							December 31, 2014
	(Unaudited)
	Notional Amount		Fair Value					Notional Amount		Fair Value
			Asset		Liability					Asset		Liability
Interest rate swaps	$	50,675	$	—	$	(559	)	$	685	$	—	$	(11	)
Interest rate caps		171,546		73		—			180,434		260		—
Total	$	222,221	$	73	$	(559	)	$	181,119	$	260	$	(11	)

The changes in the fair value of the Company’s derivatives during the three and six months ended June 30, 2015 and 2014 were comprised of the following (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
	(Unaudited)
Interest rate swaps	$	239		$	(1	)	$	(548	)	$	1
Interest rate caps		(41	)		(261	)		(187	)		(170	)
Total	$	198		$	(262	)	$	(735	)	$	(169	)
Comprehensive income statement presentation:
Other income (loss)	$	(40	)	$	(262	)	$	(187	)	$	(169	)
Unrealized gain (loss) on cash flow hedge		238			—			(548	)		—
Total	$	198		$	(262	)	$	(735	)	$	(169	)

Subsequent to June 30, 2015

On July 13, 2015, the Operating Partnership entered into a $6.5 million floating-to-fixed interest rate swap attributable to one-month LIBOR indexed interest payments. The $6.5 million interest rate swap has a fixed rate of 3.05%, an effective date of July 13, 2015 and a maturity date of April 5, 2018. The Company designated this interest rate swap as a cash flow hedge of variable interest payments based on one-month LIBOR.