Note 6. Derivative Instruments

Interest Rate Derivatives

Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish this objective, we use interest rate swaps and caps as part of our interest rate risk management strategy. The effective portion of the change in the fair value of the derivative that qualifies as a cash flow hedge is recorded in accumulated other comprehensive income (“AOCI”) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate debt.

We do not use derivatives for trading or speculative purposes. Derivatives not designated as hedges are not speculative and are used to manage our exposure to interest rate movements and other identified risks but we have elected not to apply hedge accounting. Changes in the fair value of derivatives not designated in hedging relationships are recorded in other income (expense) as income within our consolidated statements of operations and were approximately $20,000 for the three months ended March 31, 2018.

Foreign Currency Forward

Our objectives in using foreign currency derivatives are to add stability to potential fluctuations in exchange rates between foreign currencies and the U.S. dollar and to manage our exposure to exchange rate movements. To accomplish this objective, we use foreign currency forwards as part of our exchange rate risk management strategy. A foreign currency forward contract is a commitment to deliver a certain amount of currency at a certain price on a specific date in the future. By entering into the forward contract and holding it to maturity, we are locked into a future currency exchange rate in an amount equal to and for the term of the forward contract. For derivatives designated as net investment hedges, the changes in the fair value of the derivatives are reported in accumulated other comprehensive income. Amounts are reclassified out of accumulated other comprehensive income into earnings when the hedged net investment is either sold or substantially liquidated.

The following table summarizes the terms of our derivative financial instruments as of March 31, 2018:

	Notional Amount			Strike			Effective Date or Date Assumed	Maturity Date
Interest Rate Swaps:
Oakland and Concord loan	$	19,840,007			3.95	%	May 18, 2016	April 10, 2023
Dufferin loan		13,886,000	⁽¹⁾		3.21	%	February 1, 2017	May 31, 2019
Mavis loan		11,705,000	⁽¹⁾		3.21	%	February 1, 2017	May 31, 2019
Brewster loan		7,650,000	⁽¹⁾		3.21	%	February 1, 2017	May 31, 2019
Interest Rate Cap:
LIBOR	$	90,000,000			1.25	%	July 1, 2017	December 22, 2018
Foreign Currency Forward:
Denominated in CAD	$	90,000,000	⁽¹⁾		1.2846		March 28, 2018	January 28, 2019

⁽¹⁾	Notional amounts shown are denominated in CAD.

On February 1, 2017, to hedge our net investment related to the Toronto Merger, we entered into a foreign currency forward contract with a notional amount of $58.5 million CAD, and a forward rate of approximately 1.3058. During the quarter ended March 31, 2017, we settled our two foreign currency forward contracts which resulted in us receiving a net settlement of approximately $1.4 million, and simultaneously entered into a third foreign currency forward contract with a notional amount of $101 million CAD, and a forward rate of approximately 1.3439. During the quarter ended September 30, 2017, we settled our third foreign currency forward contract, which resulted in us paying a net settlement of approximately $5.5 million, and simultaneously entered into a fourth foreign currency forward contract with a notional amount of $101 million CAD, and a forward rate of approximately 1.2526. The fourth foreign currency forward was settled on March 28, 2018 and resulted in us receiving a net settlement of approximately $2.2 million. We simultaneously entered into our fifth foreign currency forward as noted in the table above. A portion of our gain (loss) from our settled hedges is recorded net in foreign currency forward contract gain (loss) in our consolidated statements of comprehensive loss, and a gain of approximately $65,000 related to the ineffective portion is recorded in other income (expense) within our consolidated statements of operations for the three months ended March 31, 2018.

The following table summarizes the terms of our derivative financial instruments as of December 31, 2017:

	Notional Amount			Strike			Effective Date or Date Assumed	Maturity Date
Interest Rate Swaps:
Oakland and Concord loan	$	19,960,190			3.95	%	May 18, 2016	April 10, 2023
Dufferin loan		14,025,000	⁽¹⁾		3.21	%	February 1, 2017	May 31, 2019
Mavis loan		11,821,000	⁽¹⁾		3.21	%	February 1, 2017	May 31, 2019
Brewster loan		7,726,000	⁽¹⁾		3.21	%	February 1, 2017	May 31, 2019
Interest Rate Cap:
LIBOR	$	90,000,000			1.25	%	July 1, 2017	December 22, 2018
Foreign Currency Forward:
Denominated in CAD	$	101,000,000	⁽¹⁾		1.2526		August 31, 2017	March 29, 2018

⁽¹⁾	Notional amount shown is denominated in CAD.

The following table presents a gross presentation of the fair value of our derivative financial instruments as well as their classification on our consolidated balance sheets as of March 31, 2018 and December 31, 2017

	Asset/Liability Derivatives
	Fair Value
Balance Sheet Location	March 31, 2018		December 31, 2017
Interest Rate Swaps
Other assets	$	766,080	$	455,526
Accounts payable and accrued liabilities		2,551		6,320
Interest Rate Cap
Other assets	$	535,340	$	472,501
Foreign Currency Forward
Accounts payable and accrued liabilities	$	126,392	$	67,092