Derivative Instruments

12 Months Ended

Dec. 31, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

DERIVATIVE INSTRUMENTS

In connection with the Cabot acquisition, the Company assumed the seller’s interest in three interest rate swap contracts (“Swaps”) that eliminate the impact of changes in interest rates on the payments required under variable rate mortgages that were also assumed. The Swaps had an aggregate notional amounts of $101.4 million and $103.6 million at December 31, 2015 and 2014, respectively, and expire at various dates between 2018 and 2020.

The Company designated the Swaps as cash flow hedges on November 22, 2013. The change in the fair value of the Swaps from October 8, 2013 through November 22, 2013 in the amount of $813,000 is included as an increase in interest expense in the accompanying consolidated statements of comprehensive income.

The Company accounts for the effective portion of changes in the fair value of a derivative in accumulated other comprehensive loss and subsequently reclassifies the effective portion to earnings over the term that the hedged transaction affects earnings. The Company accounts for the ineffective portion of changes in the fair value of a derivative directly in earnings.

The following table presents the location in the financial statements of the gains or losses recognized related to the Company’s cash flow hedges for the year ended December 31, 2015 and 2014 and from November 22, 2013 to December 31, 2013 (in thousands):

	Year Ended						November 22, 2013 - December 31, 2013
	December 31, 2015			December 31, 2014
Amount of (loss) gain related to the effective portion recognized in other comprehensive (loss) income	$	(1,884	)	$	(3,400	)	$	1,600
Amount of loss related to the effective portion reclassified to interest expense	$	(1,396	)	$	(1,500	)	$	—
Amount of (loss) gain related to the ineffective portion recognized in interest expense	$	(91	)	$	(82	)	$	266

The fair value of the interest rate swaps in the amount of $7.1 million and $8.5 million as of December 31, 2015 and 2014, respectively, is included in other liabilities in the accompanying consolidated balance sheets. The Company estimates that $0.9 million will be reclassified from accumulated other comprehensive income as an increase to interest expense over the next twelve months.

The Company has agreements with its derivative counterparties that contain a provision whereby if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations. If the Company were to breach any of the contractual provisions of the derivative contracts, it would be required to settle its obligations under the agreements at their termination value including accrued interest for approximately $7.2 million.