XML 27 R13.htm IDEA: XBRL DOCUMENT

Financial Instruments and Fair Values

12 Months Ended

Dec. 31, 2020

Derivative Financial Instruments

We use derivative financial instruments primarily to manage interest rate risk and such derivatives are not considered speculative. These derivative instruments are typically in the form of interest rate swap and forward agreements and the primary objective is to minimize interest rate risks associated with investing and financing activities. The counterparties of these arrangements are major financial institutions with which we may also have other financial relationships. We are exposed to credit risk in the event of non-performance by these counterparties; however, we currently do not anticipate that any of the counterparties will fail to meet their obligations.

We have agreements with our derivative counterparties that contain a provision where if we either default or are capable of being declared in default on any of our indebtedness, then we could also be declared in default on our derivative obligations. As of December 31, 2020, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $8.9 million. If we had breached any of these provisions at December 31, 2020, we could have been required to settle our obligations under the agreements at their termination value of $8.9 million.

As of December 31, 2020 and 2019, we had interest rate LIBOR swaps with an aggregate notional value of $265.0 million and $390.0 million, respectively. The notional value does not represent exposure to credit, interest rate or market risks. As of December 31, 2020 and 2019, the fair value of our derivative instruments amounted to ($8.8 million) and ($13.3 million), respectively, which is included in accounts payable and accrued expenses on the consolidated balance sheet. These interest rate swaps have been designated as cash flow hedges and hedge the variability in future cash flows associated with our existing variable-rate term loan facilities.

As of December 31, 2020 and 2019, our cash flow hedges are deemed highly effective and for the years ended December 31, 2020 and 2019, net unrealized losses of $10.5 million and $20.6 million, respectively, are reflected in the consolidated statements of comprehensive income (loss) relating to both active and terminated cash flow hedges of interest rate risk. Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on the debt. We estimate that $11.5 million net loss of the current balance held in accumulated other comprehensive loss will be reclassified into interest expense within the next 12 months.

The table below summarizes the terms of agreements and the fair values of our derivative financial instruments as of December 31, 2020 and 2019 (dollar amounts in thousands):


								December 31, 2020				December 31, 2019
Derivative	Notional Amount		Receive Rate	Pay Rate		Effective Date	Expiration Date	Asset		Liability		Asset		Liability
Interest rate swap	$	265,000	1 Month LIBOR	2.1485	%	August 31, 2017	August 24, 2022	$	—	$	(8,849)	$	—	$	(4,247)

Interest rate swap	125,000		3 Month LIBOR	2.9580	%	July 1, 2019	July 1, 2026	—		—		—		(9,083)





								$	—	$	(8,849)	$	—	$	(13,330)

During the year ended December 31, 2020, we terminated the $125.0 million swap and paid a settlement fee of $20.3 million.

The table below shows the effect of our derivative financial instruments designated as cash flow hedges on accumulated other comprehensive income (loss) for the years ended December 31, 2020, 2019 and 2018 (amounts in thousands):


Effects of Cash Flow Hedges	December 31, 2020		December 31, 2019		December 31, 2018
Amount of gain (loss) recognized in other comprehensive income (loss)	$	(19,322)	$	(21,813)	$	(2,721)
Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into interest expense	(8,870)		(1,231)		(1,845)

The table below shows the effect of our derivative financial instruments designated as cash flow hedges on the consolidated statements of income for the years ended December 31, 2020, 2019 and 2018(amounts in thousands):


Effects of Cash Flow Hedges	December 31, 2020		December 31, 2019		December 31, 2018
Total interest (expense) presented on the consolidated statements of income in which the effects of cash flow hedges are recorded	$	(89,907)	$	(79,246)	$	(79,623)
Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into interest expense	(8,870)		(1,231)		(1,845)

Fair Valuation

The estimated fair values at December 31, 2020 and 2019 were determined by management, using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts we could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

The following tables summarize the carrying and estimated fair values of our financial instruments as of December 31, 2020 and 2019 (amounts in thousands):


	December 31, 2020
	Carrying Value		Estimated Fair Value
			Total		Level 1		Level 2		Level 3

Interest rate swaps included in accounts payable and accrued expenses	$	8,849	$	8,849	$	—	$	8,849	$	—
Mortgage notes payable	775,929		808,294		—		—		808,294

Senior unsecured notes - Series A, B, C, D, E, F, G and H	973,159		1,039,857		—		—		1,039,857
Unsecured term loan facilities	387,561		390,000		—		—		390,000


	December 31, 2019
	Carrying Value	Estimated Fair Value
		Total	Level 1	Level 2	Level 3

Interest rate swaps included in accounts payable and accrued expenses	13,330	13,330	—	13,330	—
Mortgage notes payable	605,542	629,609	—	—	629,609

Senior unsecured notes - Series A, B, C, D, E and F	798,392	843,394	—	—	843,394
Unsecured term loan facility	264,640	265,000	—	—	265,000

Disclosure about the fair value of financial instruments is based on pertinent information available to us as of December 31, 2020 and 2019. Although we are not aware of any factors that would significantly affect the reasonable fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details