Derivative Financial Instruments

6 Months Ended

Jun. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

We utilize interest rate swap agreements for risk management purposes to reduce the impact of changes in interest rates on our variable rate debt.  On the date we enter into an interest rate swap, the derivative is designated as a hedge against the variability of cash flows that are to be paid in connection with a recognized liability.  Subsequent changes in the fair value of a derivative designated as a cash flow hedge that is determined to be highly effective are recorded in other comprehensive income (“OCI”) until earnings are affected by the variability of cash flows of the hedged transaction.  The differential between fixed and variable rates to be paid or received is accrued, as interest rates change, and recognized currently as interest expense in the condensed consolidated statements of operations.  We assess effectiveness of our cash flow hedges both at inception and on an ongoing basis.  Our cash flow hedges become ineffective if critical terms of the hedging instrument and the debt do not perfectly match such as notional amounts, settlement dates, reset dates and calculation period.

At June 30, 2014, we had seven interest rate swap agreements with an aggregate notional amount of $210.0 million that were designated as cash flow hedges.  The agreements provided for swapping one-month LIBOR interest rates ranging from 1.2% to 2.2% on $210.0 million of unsecured term loans and have expirations ranging from April 2016 to May 2020.

The following table summarizes the notional values and fair values of our derivative financial instruments as of June 30, 2014:

	Hedge	Notional		Fixed		Fair			Expiration
Underlying Debt	Type	Value		Rate		Value			Date
		(In thousands)				(In thousands)
Derivative Assets
Unsecured term loan facility	Cash Flow	$	50,000	1.4600	%	$	993		05/2020
Derivative Liabilities
Unsecured term loan facility	Cash Flow	$	75,000	1.2175	%	$	(1,094	)	04/2016
Unsecured term loan facility	Cash Flow	30,000		2.0480	%	(889		)	10/2018
Unsecured term loan facility	Cash Flow	25,000		1.8500	%	(536		)	10/2018
Unsecured term loan facility	Cash Flow	5,000		1.8400	%	(104		)	10/2018
Unsecured term loan facility	Cash Flow	15,000		2.1500	%	(299		)	05/2020
Unsecured term loan facility	Cash Flow	10,000		2.1500	%	(200		)	05/2020
		$	160,000			$	(3,122	)

The following table presents the fair values of derivative financial instruments in our condensed consolidated balance sheets as of June 30, 2014 and December 31, 2013, respectively:

	June 30, 2014				December 31, 2013
Derivatives designated as	Balance Sheet	Fair			Balance Sheet	Fair
hedging instruments	Location	Value			Location	Value
		(In thousands)				(In thousands)
Interest rate contracts - assets	Other assets	$	993		Other assets	$	2,244
Interest rate contracts - liabilities	Other liabilities	$	(3,122	)	Other liabilities	$	(2,297	)

The effect of derivative financial instruments on our condensed consolidated statements of operations for the six months ended June 30, 2014 and 2013 is summarized as follows:

	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)					Location of Loss Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Loss Reclassified from Accumulated OCI into Income (Effective Portion)
Derivatives in Cash Flow Hedging Relationship	Six Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
	(In thousands)						(In thousands)
Interest rate contracts - assets	$	(1,251	)	$	—	Interest Expense	$	(582	)	$	—
Interest rate contracts - liabilities	(825		)	4,676		Interest Expense	(946		)	(994		)
Total	$	(2,076	)	$	4,676	Total	$	(1,528	)	$	(994	)