XML 32 R17.htm IDEA: XBRL DOCUMENT v3.19.2
Derivative Contracts
 6 Months Ended
Jun. 30, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Contracts Derivative Contracts

We make use of interest rate swap and cap contracts to manage the risk associated with changes in interest rates on our floating-rate debt. When we enter into a floating-rate term loan, we generally enter into an interest rate swap agreement for the equivalent principal amount, for a period covering the majority of the loan term, which effectively converts our floating-rate debt to a fixed-rate basis during that time. In limited instances, we also make use of interest rate caps to limit our exposure to interest rate increases on our floating-rate debt. We do not speculate in derivatives and we do not make use of any other derivative instruments. See Note 8 regarding our debt, and our consolidated JVs debt, that is hedged. See Note 16 regarding our unconsolidated Funds debt that is hedged.

Derivative Summary

As of June 30, 2019, our interest rate swaps, which include the interest rate swaps of our consolidated JVs and our unconsolidated Funds, were designated as cash flow hedges:

 
Number of Interest Rate Swaps
 
Notional
  (In thousands)
 
 
 
 
Consolidated derivatives(1)(2)(4)
36
 
$
4,484,800

Unconsolidated Funds' derivatives(3)(4)
4
 
$
510,000


___________________________________________________
(1)
The notional amount reflects 100%, not our pro-rata share, of our consolidated JVs' derivatives.
(2)
Includes forward swaps with a total notional of $177.4 million.
(3)
The notional amount reflects 100%, not our pro-rata share, of our unconsolidated Funds' derivatives.
(4)
See Note 13 for our derivative fair value disclosures.

Credit-risk-related Contingent Features

Our swaps include credit-risk related contingent features, for example, we have agreements with certain of our interest rate swap counterparties that contain a provision under which we could be declared in default on our derivative obligations if repayment of the underlying indebtedness that we are hedging is accelerated by the lender due to our default on the indebtedness. As of June 30, 2019, there have been no events of default with respect to our interest rate swaps or our consolidated JVs' or unconsolidated Funds' interest rate swaps. We do not post collateral for our interest rate swap contract liabilities. The fair value of our interest rate swap contract liabilities, including accrued interest and excluding credit risk adjustments, were as follows:
(In thousands)
 
June 30, 2019
 
December 31, 2018
 
 
 
 
 
Consolidated derivatives(1)
 
$
52,887

 
$
1,681

Unconsolidated Funds' derivatives
 
$
1,949

 
$
—


___________________________________________________
(1)
Includes 100%, not our pro-rata share, of our consolidated JVs' derivatives.
 
Counterparty Credit Risk

We are subject to credit risk from the counterparties on our interest rate swap contract assets because we do not receive collateral. We seek to minimize that risk by entering into agreements with a variety of high quality counterparties with investment grade ratings. The fair value of our interest rate swap contract assets, including accrued interest and excluding credit risk adjustments, were as follows:
(In thousands)
June 30, 2019
 
December 31, 2018
 
 
 
 
Consolidated derivatives(1)
$
18,749

 
$
76,021

Unconsolidated Funds' derivatives(2)
$
1,598

 
$
12,576

___________________________________________________
(1)
The amounts reflect 100%, not our pro-rata share, of our consolidated JVs' derivatives.
(2)
The amounts reflect 100%, not our pro-rata share, of our unconsolidated Funds' derivatives.

Impact of Hedges on AOCI and the Consolidated Statements of Operations

The table below presents the effect of our derivatives on our AOCI and the consolidated statements of operations:

(In thousands)
Six Months Ended June 30,
 
2019
 
2018
Derivatives Designated as Cash Flow Hedges:
 
 
 
 
 
 
 
Consolidated derivatives:
 
 
 
Gain recorded in AOCI - adoption of ASU 2017-12(1)
$
—

 
$
211

(Loss) gain recorded in AOCI before reclassifications(1)
$
(89,483
)
 
$
58,890

Gains reclassified from AOCI to Interest Expense(1)
$
(17,284
)
 
$
(2,063
)
Interest Expense presented in the consolidated statements of operations
$
(67,356
)
 
$
(66,168
)
Unconsolidated Funds' derivatives (our share)(2):
 
 
 
(Loss) gain recorded in AOCI before reclassifications(1)
$
(6,928
)
 
$
6,404

Gains reclassified from AOCI to Income, including depreciation, from unconsolidated real estate funds(1)
$
(1,226
)
 
$
(79
)
Income, including depreciation, from unconsolidated real estate funds presented in the consolidated statements of operations
$
3,758

 
$
3,174

___________________________________________________
(1)
See Note 11 for our AOCI reconciliation.
(2)
We calculate our share by multiplying the total amount for each Fund by our direct and indirect equity interest in the respective Fund.

Future Reclassifications from AOCI

At June 30, 2019, our estimate of the AOCI related to derivatives designated as cash flow hedges that will be reclassified to earnings during the next twelve months as interest rate swap payments are made is as follows:

 
(In thousands)
 
 
Consolidated derivatives:
 
Gains to be reclassified from AOCI to Interest Expense
$
7,417

Unconsolidated Funds' derivatives (our share):
 
Gains to be reclassified from AOCI to Income, including depreciation, from unconsolidated real estate funds
$
436