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 the change in fair value of interest rate derivatives in the condensed consolidated statements of 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 loss and reclassified into earnings in the periods during which the hedged forecasted transaction affects earnings.

On March 7, 2018, the Operating Partnership entered into a LIBOR interest rate cap agreement on a notional amount of $50.0 million at a strike rate of 2.25% for a premium of $0.3 million. The interest rate cap expires on April 1, 2020.

The Company’s derivatives were comprised of the following as of March 31, 2018 and December 31, 2017 (in thousands):



	March 31, 2018						December 31, 2017
	(Unaudited)
	Notional Amount		Fair Value				Notional Amount		Fair Value
			Asset		Liability				Asset		Liability
Interest rate swaps	$	56,033	$	289	$	—	$	56,079	$	10	$	(69	)
Interest rate caps	320,000		2,446		—		345,000		1,515		—
Total	$	376,033	$	2,735	$	—	$	401,079	$	1,525	$	(69	)

The changes in the fair value of the Company’s derivatives during the three months ended March 31, 2018 and 2017 were comprised of the following (in thousands):



	Three Months Ended March 31,
	2018		2017
Interest rate swaps	$	348	$	261
Interest rate caps	621		33
Total change in fair value of interest rate derivatives	$	969	$	294

The Company has not designated any of its current derivatives as hedging instruments under GAAP.

Subsequent to March 31, 2018

On April 23, 2018, the Operating Partnership entered into a floating-to-fixed interest rate swap attributable to one-month LIBOR indexed interest payments with a notional amount of $50.0 million. The interest rate swap has a fixed rate of 2.783%, an effective date of May 1, 2018, and a maturity date of May 1, 2023.