Derivatives and Hedging Activities

12 Months Ended

Dec. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Hedging Activities

Derivatives and Hedging Activities

Cash Flow Hedges of Interest Rate Risk

During the year ended December 31, 2019, the Company entered into interest rate swap agreements with an aggregate $900.0 million notional amount, effective on February 6, 2019 and maturing on January 31, 2023, which were designated as cash flow hedges. Due to an improvement in the Company's credit rating during the fourth quarter of 2019, the interest rate spread on the $900.0 million Credit Facility Term Loan was reduced by 25 bps to LIBOR + 1.10%, and beginning on November 1, 2019, the swap agreements effectively fixed the Credit Facility Term Loan interest rate at 3.59%.

During the year ended December 31, 2019, the Company also entered into forward starting interest rate swaps with a total notional amount of $400.0 million, which were designated as cash flow hedges to hedge the risk of changes in the interest-related cash outflows associated with the anticipated issuance of long-term debt. The Company is hedging its exposure to the variability in future cash flows for forecasted transactions over a maximum period of 120 months (excluding forecasted transactions related to the payment of variable interest on existing financial instruments), with anticipated issuance of 10-year public debt between May 1, 2020 and December 31, 2021.

The table below presents the fair value of the Company’s derivative financial instruments designated as cash flow hedges as well as their classification in the consolidated balance sheets as of December 31, 2019 (in thousands). There were no financial instruments designated as cash flow hedges as of December 31, 2018.

Derivatives Designated as Hedging Instruments	Balance Sheet Location	December 31, 2019
Interest rate swaps	Rent and tenant receivables and other assets, net	$	250
Interest rate swaps	Deferred rent, derivative and other liabilities	$	(28,081	)

During the years ended December 31, 2019 and 2017, the Company recorded unrealized losses of $29.9 million and less than $0.1 million, respectively, for changes in the fair value of the cash flow hedges in accumulated other comprehensive income. There were no similar amounts recorded during the year ended December 31, 2018.

The Company reclassified previous losses of $2.5 million, $0.3 million and $0.2 million for the years ended December 31, 2019, 2018 and 2017, respectively, from accumulated other comprehensive income into interest expense as a result of the hedged transactions impacting earnings. During the year ended December 31, 2017, the Company also reclassified losses of $0.8 million from accumulated other comprehensive income into interest expense associated with settled interest rate derivatives and reclassified a gain of $1.1 million from accumulated other comprehensive income into interest expense in connection with the early termination of its interest rate swaps related to early repayment of mortgage loans and borrowings under the Credit Facility Term Loan.

During the next twelve months, the Company estimates that an additional $8.3 million will be reclassified from other comprehensive income as an increase to interest expense.

Derivatives Not Designated as Hedging Instruments

As of December 31, 2019, the Company had no interest rate swaps that were not designated as qualifying hedging relationships. As of December 31, 2018, the Company had one interest rate swap that was not designated as a qualifying hedging relationship, with a notional amount of $50.7 million.

The table below presents the fair value of the Company’s derivative financial instruments not designated as a hedge as well as their classification in the consolidated balance sheets as of December 31, 2018 (in thousands):

Derivatives Not Designated as Hedging Instruments	Balance Sheet Location	December 31, 2018
Interest rate swaps	Rent and tenant receivables and other assets, net	$	544

A loss of $0.1 million for the year ended December 31, 2019 and gains of $0.4 million and $3.0 million for the years ended December 31, 2018 and 2017, respectively, related to the change in the fair value of derivatives not designated as hedging instruments were recorded in other income, net in the accompanying consolidated statements of operations.

Tabular Disclosure of Offsetting Derivatives

The table below details a gross presentation, the effects of offsetting and a net presentation of the Company’s derivatives as of December 31, 2019 and December 31, 2018 (in thousands). The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value.

	Offsetting of Derivative Assets and Liabilities
	Gross Amounts of Recognized Assets		Gross Amounts of Recognized Liabilities			Gross Amounts Offset in the Consolidated Balance Sheets		Net Amounts of Assets Presented in the Consolidated Balance Sheets		Net Amounts of Liabilities Presented in the Consolidated Balance Sheets			Financial Instruments		Cash Collateral Received		Net Amount
December 31, 2019	$	250	$	(28,081	)	$	—	$	250	$	(28,081	)	$	—	$	—	$	(27,831	)
December 31, 2018	$	544	$	—		$	—	$	544	$	—		$	—	$	—	$	544

Credit Risk Related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a provision specifying that if the Company either defaults or is capable of being declared in default on any of its indebtedness, the Company could also be declared in default on its derivative obligations.

As of December 31, 2019, the Company has not posted any collateral related to these agreements and was not in breach of any provisions in these agreements. If the Company had breached any of these agreements, it could have been required to settle its obligations under the agreements at their aggregate termination value of $28.2 million at December 31, 2019.