Derivative Instruments and Hedging Activities

3 Months Ended

Mar. 31, 2017

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

9. Derivative Instruments and Hedging Activities

We manage our market risk on variable rate debt by entering into interest rate swaps to fix the rate on all or a portion of the debt for varying periods through maturity. These interest rate swaps are accounted for as derivative instruments and, pursuant to ASC Topic 815, are recorded on our consolidated balance sheets at fair value. Changes in the fair value of interest rate swaps are accounted for based on the hedging relationship and their designation and qualification. We have agreements with various derivative counterparties that contain provisions wherein a default on our indebtedness could be deemed a default on our derivative obligations, which would require us to either post collateral up to the fair value of our derivative obligations or settle the obligations for cash.  As of March 31, 2017, we did not have any obligations relating to our swaps that contained such provisions.

Interest Rate Swaps – Designated as Cash Flow Hedges

As of March 31, 2017, we have interest rate swaps with an aggregate notional amount of $1.0 billion that are designated as cash flow hedges. We also have entered into a forward starting interest rate swaps with an aggregate notional amount of $400,000,000 to extend the maturity of certain swaps for an additional year. Changes in the fair value of interest rate swaps that are designated as cash flow hedges are recognized in “other comprehensive income (loss)” (outside of earnings). We recognized other comprehensive income of $4,032,000 for the three months ended March 31, 2017 and losses of $29,867,000 for the three months ended March 31, 2016, from the changes in the fair value of these interest rate swaps. During the next twelve months, we estimate that $5,558,000 of the amounts recognized in accumulated other comprehensive income (loss) will be reclassified as an increase to interest expense. The table below provides additional details on our interest rate swaps that are designated as cash flow hedges.  

	Notional				Strike			Fair Value as of
Property	Amount		Effective Date	Maturity Date	Rate			March 31, 2017		December 31, 2016
(Amounts in thousands)
1633 Broadway	$	1,000,000	Dec-2015	Dec-2020 to Dec-2022		1.79	%	$	2,890	$	-
1633 Broadway		400,000	Dec-2020	Dec-2021		2.35	%		62		139
Total interest rate swap assets designated as cash flow hedges (included    in "other assets")								$	2,952	$	139
1633 Broadway	$	1,000,000	Dec-2015	Dec-2020 to Dec-2022		1.79	%	$	-	$	1,219
Total interest rate swap liabilities designated as cash flow hedges								$	-	$	1,219

Interest Rate Swaps – Non-designated Hedges

As of March 31, 2017, we did not have any interest rate swaps that were not designated as hedges.  At December 31, 2016, we had interest rate swap liabilities that had a fair value of $21,227,000, which were terminated on January 19, 2017 in connection with the refinancing of One Market Plaza (see Note 8, Debt for additional details). Changes in the fair value of interest rate swaps that are not designated as hedges are recognized in earnings. We recognized unrealized gains of $1,802,000 and $6,860,000 for the three months ended March 31, 2017 and 2016, respectively, from the changes in the fair value of these interest rate swaps.