Derivative Financial Instruments

12 Months Ended

Dec. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

10. DERIVATIVE FINANCIAL INSTRUMENTS

The sole objective of our use of derivative financial instruments is to minimize the risks and/or costs associated with our investments and/or financing transactions. These derivatives may or may not qualify as net investment, cash flow, or fair value hedges under the hedge accounting requirements of ASC 815 – “Derivatives and Hedging.” Derivatives not designated as hedges are not speculative and are used to manage our exposure to interest rate movements and other identified risks. Refer to Note 2 for additional discussion of the accounting for designated and non-designated hedges.

The use of derivative financial instruments involves certain risks, including the risk that the counterparties to these contractual arrangements do not perform as agreed. To mitigate this risk, we only enter into derivative financial instruments with counterparties that have appropriate credit ratings and are major financial institutions with which we and our affiliates may also have other financial relationships.

Net Investment Hedges of Foreign Currency Risk

Certain of our international investments expose us to fluctuations in foreign interest rates and currency exchange rates. These fluctuations may impact the value of our cash receipts and payments in terms of our functional currency, the U.S. dollar. We use foreign currency forward contracts to protect the value or fix the amount of certain investments or cash flows in terms of the U.S. dollar.

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, 2019				December 31, 2018
Foreign Currency Derivatives	Number of Instruments	Notional Amount		Foreign Currency Derivatives		Number of     Instruments		Notional Amount
Sell GBP Forward	4	£	527,100		Sell GBP Forward		3	£	192,300
Sell EUR Forward	5	€	525,600		Sell AUD Forward		2	A$	187,600
Sell AUD Forward	3	A$	135,600		Sell EUR Forward		1	€	185,000
Sell CAD Forward	1	C$	23,200		Sell CAD Forward		1	C$	70,600

Cash Flow Hedges of Interest Rate Risk

Certain of our transactions expose us to interest rate risks, which include a fixed versus floating rate mismatch between our assets and liabilities. We use derivative financial instruments, which include interest rate caps and swaps, and may also include interest rate options, floors, and other interest rate derivative contracts, to hedge interest rate risk.

The following tables detail our outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (notional amount in thousands):

December 31, 2019
Interest Rate Derivatives	Number of Instruments		Notional Amount		Strike			Index		Wtd.-Avg. Maturity         (Years)
Interest Rate Swaps		2	C$	17,273		1.0	%		CDOR		0.7
Interest Rate Caps		1	C$	21,387		3.0	%		CDOR		1.0
December 31, 2018
Interest Rate Derivatives	Number of     Instruments		Notional Amount		Strike			Index		Wtd.-Avg. Maturity         (Years)
Interest Rate Swap		3	C$	90,472		1.0	%		CDOR		0.5
Interest Rate Caps		9	$	204,248		2.4	%		USD LIBOR		0.5
Interest Rate Caps		2	C$	39,998		2.5	%		CDOR		0.6

Amounts reported in accumulated other comprehensive income (loss) 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, 2019, we estimate that an additional $91,000 will be reclassified from accumulated other comprehensive income (loss) as an increase to interest income.

Non-designated Hedges

During the years ended December 31, 2019 and 2018, we recorded gains of $1.1 million and $23,000, respectively, related to non-designated hedges that were reported as a component of interest expense in our consolidated financial statements. During the year ended December 31, 2017, we recorded losses of $449,000 related to such non-designated hedges.

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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 (Loss) Gain Recognized in OCI on Derivatives									Location of Gain (Loss) Reclassified from			Amount of Loss Reclassified from Accumulated OCI into Income
	Year Ended December 31,									Accumulated			Year Ended December 31,
	2019			2018			2017			OCI into Income			2019		2018		2017
Net Investment Hedges
Foreign exchange contracts(1)	$	(5,592	)	$	40,372		$	(22,216	)		Interest Expense		$	—	$	—	$	—
Cash Flow Hedges
Interest rate derivatives		(144	)		(8	)		757			Interest Expense	(2)		195		563		(831	)
Total	$	(5,736	)	$	40,364		$	(21,459	)				$	195	$	563	$	(831	)

(1) During the years ended December 31, 2019 and December 31, 2018, we received net cash settlements of $43.1 million and $29.1 million, respectively, on our foreign currency forward contracts. During the year ended December 31, 2017, we paid net cash settlements of $14.2 million on our foreign currency forward contracts. Those amounts are included as a component of accumulated other comprehensive loss on our consolidated balance sheets.

(2) During the years ended December 31, 2019 and December 31, 2018, we recorded total interest and related expenses of $458.5 million and $359.6 million, respectively, which were reduced by $195,000 and $563,000, respectively, related to income generated by our cash flow hedges. During the year ended December 31, 2017, we recorded total interest and related expenses of $234.9 million, which included interest expenses of $831,000 related to our cash flow hedges.

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, 2019, we were in a net liability position with each such derivative counterparty and posted collateral of $30.8 million under these derivative contracts. As of December 31, 2018, we were in a net asset position with each such derivative counterparty and did not have any collateral posted under these derivative contracts.