Derivative Instruments and Hedging Activities

6 Months Ended

Jun. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We utilize interest rate swaps, from time to time, to add stability to interest risk and to manage our exposure to interest rate movements.

As of June 30, 2015, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges:

Interest Rate Derivative	Number of Instruments	Notional Amount
Interest Rate Swaps	4	$150.0 million

On January 30, 2015, we entered into a forward starting interest rate swap on $25.0 million of our $150 million unsecured term loan, fixing the rate beginning January 2016 at a rate of 1.42% per annum plus the credit spread, which was 1.40% per annum as of June 30, 2015, or an all-in rate of 2.82% per annum until the loan matures in January 2020. Additionally, on January 30, 2015, we entered into a forward starting interest rate swap on $125.0 million of our $150 million unsecured term loan, fixing the rate beginning January 2018 at a rate of 1.75% per annum plus the credit spread, which was 1.40% per annum as of June 30, 2015, or an all-in rate of 3.15% per annum, through the maturity date of January 2020. The credit spread is subject to change, from time to time, from a minimum of 0.90% per annum to a maximum of 1.90% per annum over LIBOR based upon our qualified ratings as defined in the agreement.

On April 2, 2013, we entered into a forward starting interest rate swap on $125.0 million of our $150 million unsecured term loan, fixing the rate beginning June 2, 2016 at a rate of 1.55% per annum plus the credit spread, which was 1.40% per annum as of June 30, 2015, or an all-in rate of 2.95% per annum until January 2018. The credit spread is subject to change, from time to time, from a minimum of 0.90% per annum to a maximum of 1.90% per annum over LIBOR based upon our qualified ratings as defined in the agreement.

On December 19, 2011, we entered into a forward starting interest rate swap effective June 7, 2013. This swap hedges the future cash flows of interest payments on $125.0 million of our $150 million unsecured term loan by fixing the rate until June 2016 at a rate of 1.26% per annum plus the credit spread, which was 1.40% per annum at June 30, 2015, or an all-in rate of 2.66% per annum. The credit spread is subject to change, from time to time, from a minimum of 0.90% per annum to a maximum of 1.90% per annum over LIBOR based upon our qualified ratings as defined in the agreement.

The following table presents the fair value of our derivative financial instruments as well as the classification on the Consolidated Balance Sheets (see Note 12 for additional information regarding the fair value of these derivative instruments):

Fair Value of Derivative Instruments
	Asset Derivatives
	As of June 30, 2015			As of December 31, 2014
(In thousands)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated
as hedging instruments:
Interest rate swap	Other assets, net	$	1,354	Other assets, net	$	256

Fair Value of Derivative Instruments
	Liability Derivatives
	As of June 30, 2015			As of December 31, 2014
(In thousands)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated
as hedging instruments:
	Accounts payable and			Accounts payable and
Interest rate swap	other liabilities	$	1,572	other liabilities	$	1,349

The following table presents the effect of our derivative financial instruments on the Consolidated Statements of Operations and Comprehensive Income:

The Effect of Derivative Instruments on the Consolidated Statements of Operations and Comprehensive Income
	Location of Gain or
(In thousands)	(Loss) Recognized	Three Months Ended						Six Months Ended
Derivatives in Cash Flow Hedging	in Income	June 30,						June 30,
Relationships (Interest Rate Swaps)	on Derivative	2015			2014			2015			2014
Amount of gain/(loss) recognized in OCI on derivative		$	670		$	(1,032	)	$	194		$	(1,439	)
Amount of loss reclassified from accumulated
OCI into interest expense	Interest expense	$	(341	)	$	(349	)	$	(681	)	$	(693	)
Amount of gain/(loss) recognized in
income on derivative (ineffective portion and
amount excluded from effectiveness testing)	Other expense	$	—		$	—		$	—		$	—

The following table presents the effect of offsetting financial assets and liabilities on the Consolidated Balance Sheets:

Offsetting of Derivative Assets and Liabilities
							Gross Amounts Not Offset in
					Net Amounts of		the Balance Sheets
	Gross Amounts		Gross Amounts		Assets/Liabilities				Cash
	of Recognized		Offset in the		Presented in the		Financial		Collateral		Net
(In thousands)	Assets/Liabilities		Balance Sheets		Balance Sheets		Instruments		Received		Amount
June 30, 2015
Offsetting Derivative
Assets	$	1,354	$	—	$	1,354	$	—	$	—	$	1,354
Liabilities	$	1,572	$	—	$	1,572	$	—	$	—	$	1,572
December 31, 2014
Offsetting Derivative
Assets	$	256	$	—	$	256	$	—	$	—	$	256
Liabilities	$	1,349	$	—	$	1,349	$	—	$	—	$	1,349

As of June 30, 2015, the fair value of the derivative in a liability position, excluding any adjustment for nonperformance risk, was $1.7 million. As of June 30, 2015, we have not posted any collateral related to this agreement. If we had breached any of the provisions in the agreement with our derivative counterparty at June 30, 2015, we could have been required to settle our obligations under the agreement at its termination value of $1.7 million, which includes accrued interest of $86,000. The expected amount of other comprehensive income to be reclassified as earnings within the next twelve months is $1.2 million.