Derivative Financial Instruments

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 $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.

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.

On October 26, 2015, the Operating Partnership entered into a LIBOR interest rate cap agreement on a notional amount of $75.0 million at a strike rate of 1.25% for a premium of $0.1 million. The interest rate cap agreement expired on October 15, 2017.

On February 25, 2016, the Operating Partnership entered into a LIBOR interest rate cap agreement on a notional amount of $75.0 million at a strike rate of 1.50% for a premium of less than $0.1 million. The interest rate cap agreement expires on March 1, 2018.

On June 17, 2016, the Operating Partnership entered into a LIBOR interest rate cap agreement on a notional amount of $70.0 million at a strike rate of 1.00% for a premium of less than $0.1 million. The interest rate cap agreement expires on June 17, 2018.

On February 7, 2017, the Operating Partnership entered into a LIBOR interest rate cap agreement on a notional amount of $50.0 million at a strike rate of 1.50% for a premium of $0.2 million. The interest rate cap expires on March 1, 2019.

On June 23, 2017, the Operating Partnership entered into a LIBOR interest rate cap agreement on a notional amount of $50.0 million at a strike rate of 1.50% for a premium of less than $0.2 million. The interest rate cap agreement expires on July 1, 2019.

On September 18, 2017, the Operating Partnership entered into a LIBOR interest rate cap agreement on a notional amount of $50.0 million at a strike rate of 1.50% for a premium of less than $0.2 million. The interest rate cap agreement expires on October 1, 2019.

On November 28, 2017, the Operating Partnership entered into a LIBOR interest rate cap agreement on a notional amount of $50.0 million at a strike rate of 1.50% for a premium of less than $0.4 million. The interest rate cap agreement expires on December 1, 2019.

The Company’s derivatives comprised the following as of December 31, 2017 and 2016 (in thousands):



	December 31,
	2017							2016
	Notional		Fair Value					Notional		Fair Value
	Amount		Asset		Liability			Amount		Asset		Liability
Interest rate swaps	$	56,079	$	10	$	(69	)	$	56,901	$	—	$	(829	)
Interest rate caps	345,000		1,515		—			270,000		259		—
Total	$	401,079	$	1,525	$	(69	)	$	326,901	$	259	$	(829	)

The changes in the fair value of the Company’s derivatives during the years ended December 31, 2017, 2016, and 2015 was as follows (in thousands):



	Years Ended December 31,
	2017		2016			2015
Interest rate swaps	$	770	$	(795	)	$	(1,071	)
Interest rate caps	357		(146		)	(233		)
Total	$	1,127	$	(941	)	$	(1,304	)
Comprehensive income statement presentation:
Change in fair value of interest rate derivatives	$	1,127	$	(941	)	$	(229	)
Unrealized gain (loss) on cash flow hedge	—		—			(1,075		)
Total	$	1,127	$	(941	)	$	(1,304	)

Effective March 31, 2016, the Company determined that the short-cut method of hedge accounting was not appropriate for two of its interest-rate swaps and, for accounting purposes, the hedge relationship was terminated. The swaps were entered into in February and July 2015. Accordingly, changes in fair value of the swap should have been recorded in income rather than other comprehensive income. The Company determined that the errors were immaterial to all previously issued financial statements. The Company recognized $0.7 million of accumulated other comprehensive income and $0.4 million, which was previously allocated to noncontrolling interest as of December 31, 2015, in earnings during the first quarter of 2016. Subsequent changes in the value of the interest rate swap for the period from January 1, 2016 to December 31, 2017 were also recognized in earnings during the years ended December 31, 2017 and 2016. Net income for the year ended December 31, 2015 was overstated by $1.0 million. In reaching its conclusions, management considered the nature of the error, the effect of the error on operating results for 2015, and the effects of the error on important financial statement measures, including related trends.

The Company has not designated any of its interest rate caps as hedging instruments under GAAP.