Derivative Financial Instruments

12 Months Ended

Dec. 31, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

9. DERIVATIVE FINANCIAL INSTRUMENTS

Risk Management Objective of Using Derivatives

Certain of our foreign operations expose us to fluctuations of foreign interest rates and exchange rates. These fluctuations may impact the value of our cash receipts and payments in terms of our functional currency, the U.S. Dollar. In addition, we enter into derivative financial instruments to protect the value or fix the amount of certain obligations in terms of the U.S. Dollar. In addition, we use derivative financial instruments, which include interest rate caps and may also include interest rate swaps, options, floors and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with our borrowings.

The principal objective of such arrangements is to minimize the risks and/or costs associated with our operating and financing structure as well as to hedge specific transactions. We do not intend to utilize derivatives for speculative or other purposes. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, we only enter into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which we and our affiliates may also have other financial relationships. We do not anticipate that any of the counterparties will fail to meet their obligations.

Net Investment Hedges of Foreign Currency Risk

We have made investments in foreign entities that expose us to fluctuations between the U.S. Dollar and the foreign currency of each such investment. Currently, we use derivative financial instruments to manage, or hedge, the variability in the carrying value of certain of our net investments in consolidated, foreign currency-denominated subsidiaries caused by the fluctuations in foreign currency exchange rates. For derivatives that are designated and qualify as a hedge of our net investment in a foreign currency, the gain or loss on such derivatives is reported in other comprehensive income as part of the cumulative translation adjustment to the extent it is effective. Any ineffective portion of a net investment hedge is recognized in our consolidated statements of operations. For derivatives that are not designated as hedging instruments, gains or losses are recognized in our consolidated statements of operations as incurred.

The following table details our outstanding foreign exchange derivatives that were designated as net investment hedges of foreign currency risk (notional amount in thousands):

December 31, 2015			December 31, 2014
Foreign Currency Derivatives	Number of Instruments	Notional Amount	Foreign Currency Derivatives	Number of Instruments	Notional Amount
Sell CAD Forward	2	C$        154,900	Sell CAD Forward	1	C$          42,525
Sell GBP Forward	2	£            90,400
Sell EUR Forward	1	€            49,000

Cash Flow Hedges of Interest Rate Risk

Our objective in using interest rate derivatives is to add stability to interest expense and to manage our exposure to interest rate movements. In addition, we may be required by our lenders to enter into certain derivative contracts related to our credit facilities. To accomplish this objective, we primarily use interest rate caps. Interest rate caps designated as cash flow hedges involve the receipt of variable-rate amounts if interest rates rise above a certain level in exchange for an up-front premium.

The effective portion of changes in the fair value of derivatives designated and qualifying as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged transaction affects net income. These derivatives were used to hedge the variable cash flows associated with floating rate debt. The ineffective portion of the change in fair value of such derivatives is recognized directly in net income. During the years ended December 31, 2015, 2014, and 2013, we recorded no hedge ineffectiveness in our consolidated statements of operations.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on our floating rate debt. During the twelve months following December 31, 2015, we estimate that an additional $780,000 will be reclassified from other accumulated comprehensive income as an increase to interest expense.

As of December 31, 2015, we had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (notional amount in thousands):

Interest Rate Derivatives	Number of     Instruments	Notional Amount		Strike			Index	Wtd.-Avg. Maturity         (Years)
Interest Rate Caps	26	$	1,097,632		2	%	USD LIBOR	1.3
Interest Rate Caps	7	C	483,286		2	%	CDOR	1.2
Interest Rate Caps	1	€	152,710		2	%	EURIBOR	1.0
Interest Rate Caps	1	£	15,142		2	%	GBP LIBOR	1.3

We did not have any interest rate derivatives that were designated as cash flow hedges of interest rate risk as of December 31, 2014.

Non-designated Hedges

Derivatives not designated as hedges are not speculative and are used to manage our exposure to interest rate movements and other identified risks, but do not meet the strict hedge accounting requirements of ASC 815 – “Derivatives and Hedging.” Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in our consolidated statements of operations. During the year ended December 31, 2015, we recorded losses of $698,000 related to non-designated hedges.

As of December 31, 2015, we had the following outstanding non-designated hedges (notional amount in thousands):

Non-designated Hedges	Number of Instruments	Notional Amount
Interest Rate Caps	4	C$	67,303
Interest Rate Caps	1	$	13,387
Buy GBP / Sell EUR Forward	1	€	12,857
Buy GBP / Sell USD Forward	1	£	10,400
Buy USD / Sell GBP Forward	1	£	10,400
Buy CAD / Sell USD Forward	1	C$	1,000
Buy USD / Sell CAD Forward	1	C$	1,000

We did not have any non-designated hedges outstanding as of December 31, 2014.

Valuation of Derivative Instruments

The following table summarizes the fair value of our derivative financial instruments ($ in thousands):

	Fair Value of Derivatives in an Asset Position(1) as of				Fair Value of Derivatives in a Liability Position(2) as of
	December 31, 2015		December 31, 2014		December 31, 2015		December 31, 2014
Derivatives designated as hedging instruments:
Foreign exchange contracts		$                7,999	$	1,138	$	511	$	—
Interest rate caps		238		—		—		—
Total derivatives designated as hedging instruments	$	8,237	$	1,138	$	511	$	—
Derivatives not designated as hedging instruments:
Foreign exchange contracts	$	419	$	—	$	937	$	—
Interest rate caps		1		—		—		—
Total derivatives not designated as hedging instruments	$	420	$	—	$	937	$	—
Total Derivatives	$	8,657	$	1,138	$	1,448	$	—

(1) Included in other assets in our consolidated balance sheets.

(2) Included in accounts payable, accrued expenses, and other liabilities in our consolidated balance sheets.

The following table presents the effect of our derivative financial instruments on our consolidated statements of operations ($ in thousands):

Derivatives in Hedging Relationships	Amount of Gain (Loss) Recognized in OCI on Derivatives (Effective Portion)							Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)		Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
	Year Ended December 31,									Year Ended December 31,
	2015			2014		2013				2015			2014		2013
Net Investment
Foreign exchange contracts(1)	$	25,356		$	1,138	$	—		Interest Expense	$	—		$	—	$	—
Cash Flow Hedges
Interest rate caps contracts(2)		(1,474	)		—		—		Interest Expense		(4	)		—		—
Total	$	23,882		$	1,138	$	—			$	(4	)	$	—	$	—

(1) During the year ended December 31, 2015, we received net cash settlements of $18.8 million on our foreign currency forward contracts. Those amounts are included as a component of accumulated other comprehensive loss on our consolidated balance sheets. We did not receive net cash settlements on our foreign currency contracts during 2014 and 2013.

(2) During 2013, our consolidated subsidiary, CT Legacy Partners, was party to five interest rate swaps. In June 2013, CT Legacy Partners terminated these interest rate swaps and recorded a gain of $136,000 which was included as a component of interest expense on our consolidated statements of operations for the year ended December 31, 2013. CT Legacy Partners was no longer party to any derivative financial instruments subsequent to December 31, 2013.

Credit-Risk Related Contingent Features

We have entered into agreements with certain of our derivative counterparties that contain provisions where if we were to default on any of our indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, we may also be declared in default on our derivative obligations. In addition, certain of our agreements with our derivative counterparties require that we post collateral to secure net liability positions. As of December 31, 2015, we were in a net asset position with both of our derivative counterparties.