Interest Rate Derivative Instruments (QualityTech, LP [Member])

9 Months Ended

Sep. 30, 2013

QualityTech, LP [Member]

Interest Rate Derivative Instruments

6. Interest Rate Derivative Instruments

As discussed in Note 5, the Company entered into interest rate cap and swap agreements with a notional amount of $150 million on February 8, 2012. Derivatives that were entered into in September 2006 did not qualify for hedge accounting treatment, and therefore were not accounted for as hedges. Those derivative instruments were settled in February 2012 and were replaced by derivative instruments designated as cash flow hedges for hedge accounting. In addition, an interest rate cap of an additional $50 million was in place as of September 30, 2013 with a capped LIBOR rate of 3% through December 18, 2015.

For derivative instruments that are accounted for as hedges, or for the effective portions of qualifying hedges, the change in fair value is recorded through other comprehensive income (loss). The total amount of unrealized gains recorded in other comprehensive income (loss) were $0 for the three months ended September 30, 2013, compared to the total amount of unrealized losses of $0.4 million for the three months ended September 30, 2012. The total amount of unrealized gains recorded in other comprehensive income (loss) for the nine months ended September 30, 2013 were $0.2 million, compared to the total amount of unrealized losses of $0.8 million for the nine months ended September 30, 2012.

Interest expense related to payments on interest rate swaps for the three and nine months ended September 30, 2013 were $0.1 and $0.4 million, respectively, and $0.5 million for the nine months ended September 30, 2012. There were no such interest payments for the three months ended September 30, 2012.

As of September 30, 2013 and December 31, 2012, the value of the interest rate swaps was a liability of $0.5 million and $0.8 million, respectively. These values were determined using Level 2 inputs within the valuation hierarchy.