6. Interest Rate Swaps

The Company’s objectives in using interest rate swaps are to reduce variability in interest expense and to manage exposure to adverse interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

On April 5, 2017, the Company entered into forward interest rate swap agreements with an aggregate notional amount of $400 million. The forward swap agreements effectively fix the interest rate on $400 million of term loan borrowings, $200 million of swaps allocated to each term loan, from January 2, 2018 through December 17, 2021 and April 27, 2022, respectively.

The Company reflects its forward interest rate swap agreements, which are designated as cash flow hedges, at fair value as either assets or liabilities on the consolidated balance sheets within the “Other assets, net” or “Advance rents, security deposits and other liabilities” line items, as applicable. As of June 30, 2018, the fair value of interest rate swaps was $10.0 million, which was recorded within the “Other assets, net” line item of the consolidated balance sheet.

The forward interest rate swap agreements are derivatives that currently qualify for hedge accounting whereby the Company records the effective portion of changes in fair value of the interest rate swaps in accumulated other comprehensive income or loss on the consolidated balance sheets and statement of comprehensive income which is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Any ineffective portion of a derivative's change in fair value is immediately recognized within net income. The amount reclassified from other comprehensive income to interest expense on the consolidated statements of operations was $0.1 million and $0.5 million for the three and six months ended June 30, 2018. There was no ineffectiveness recognized for the three and six months ended June 30, 2018. No amounts were recorded in other comprehensive income or loss on the consolidated financial statements as of and for the three and six months ended June 30, 2017. During the subsequent twelve months, beginning July 1, 2018, we estimate that $1.5 million will be reclassified from other comprehensive income as a reduction to interest expense.

Interest rate derivatives and their fair values as of June 30, 2018 and December 31, 2017 were as follows (unaudited and in thousands):


				Fixed One Month
Notional Amount				LIBOR rate per			Fair Value
June 30, 2018		December 31, 2017		annum	Effective Date	Expiration Date	June 30, 2018		December 31, 2017
$	25,000	$	25,000	1.989%	January 2, 2018	December 17, 2021	$	606	$	100
	100,000		100,000	1.989%	January 2, 2018	December 17, 2021		2,436		401
	75,000		75,000	1.989%	January 2, 2018	December 17, 2021		1,826		298
	50,000		50,000	2.033%	January 2, 2018	April 27, 2022		1,272		158
	100,000		100,000	2.029%	January 2, 2018	April 27, 2022		2,575		337
	50,000		50,000	2.033%	January 2, 2018	April 27, 2022		1,279		155
$	400,000	$	400,000				$	9,994	$	1,449