Interest Rate Derivatives

9 Months Ended

Sep. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The following table sets forth the key terms and fair values of our interest rate swap derivatives, each of which was designated as a cash flow hedge of interest rate risk (dollars in thousands):


							Fair Value at
Notional Amount			Fixed Rate	Floating Rate Index	Effective Date	Expiration Date	September 30, 2020		December 31, 2019
$	12,132	(1)	1.390%	One-Month LIBOR	10/13/2015	10/1/2020	$	—	$	23
100,000			1.901%	One-Month LIBOR	9/1/2016	12/1/2022	(3,857)		(1,028)
100,000			1.905%	One-Month LIBOR	9/1/2016	12/1/2022	(3,865)		(1,037)
50,000			1.908%	One-Month LIBOR	9/1/2016	12/1/2022	(1,935)		(524)
11,200		(2)	1.678%	One-Month LIBOR	8/1/2019	8/1/2026	(827)		(20)
150,000			0.498%	One-Month LIBOR	4/1/2020	12/31/2020	(127)		—
23,000		(3)	0.573%	One-Month LIBOR	4/1/2020	3/26/2025	(366)		—
75,000		(4)	3.176%	Three-Month LIBOR	6/30/2020	N/A	—		(8,640)
75,000		(4)	3.192%	Three-Month LIBOR	6/30/2020	N/A	—		(8,749)
75,000		(4)	2.744%	Three-Month LIBOR	6/30/2020	N/A	—		(5,684)
							$	(10,977)	$	(25,659)

(1)The notional amount of this instrument is scheduled to amortize to $12.1 million.

(2)The notional amount of this instrument is scheduled to amortize to $10.0 million.

(3)The notional amount of this instrument is scheduled to amortize to $22.1 million.

(4)As discussed below, these instruments were cash settled in September 2020.

The table below sets forth the fair value of our interest rate derivatives as well as their classification on our consolidated balance sheets (in thousands):


		Fair Value at
Derivatives	Balance Sheet Location	September 30, 2020		December 31, 2019
Interest rate swaps designated as cash flow hedges	Prepaid expenses and other assets, net	$	—	$	23
Interest rate swaps designated as cash flow hedges	Interest rate derivatives (liabilities)	$	(10,977)	$	(25,682)

The table below presents the effect of our interest rate derivatives on our consolidated statements of operations and comprehensive income (in thousands):


	Amount of Income (Loss) Recognized in AOCL on Derivatives								Amount of (Loss) Gain Reclassified from AOCL into Interest Expense on Statement of Operations
	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Derivatives in Hedging Relationships	2020		2019		2020		2019		2020		2019		2020		2019
Interest rate derivatives	$	1,428	$	(11,047)	$	(39,592)	$	(33,437)	$	(1,342)	$	307	$	(2,408)	$	1,434


	Amount of Loss Reclassified from AOCL into Loss on Interest Rate Derivatives on Statement of Operations								Amount of Loss Recognized on Undesignated Swaps in Loss on Interest Rate Derivatives on Statement of Operations
	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Derivatives in Hedging Relationships	2020		2019		2020		2019		2020		2019		2020		2019
Interest rate derivatives	$	(51,865)	$	—	$	(51,865)	$	—	$	(1,265)	$	—	$	(1,265)	$	—

As described further in Note 9, in September 2020, we completed our issuance of the 2.25% Notes. In August 2020, in anticipation of pursuing such an issuance, we determined that the forecasted transactions hedged by our three interest rate swaps with an effective date of June 30, 2020 and an aggregate notional amount of $225.0 million were no longer probable of occurring, resulting in our discontinuance of hedge accounting on these swaps. When we consummated the note issuance in September 2020, we determined that it was probable that the forecasted transactions would not occur, resulting in our reclassification of $51.9 million in losses from accumulated other comprehensive loss (“AOCL”) to loss on interest rate derivatives on our statements of operations. On September 22, 2020, we cash settled these swaps and accrued interest thereon for an aggregate amount of $53.1 million.

Based on the fair value of our derivatives as of September 30, 2020, we estimate that approximately $4.8 million of losses will be reclassified from AOCL as an increase to interest expense over the next 12 months.

We have agreements with each of our interest rate derivative counterparties that contain provisions under which, if we default or are capable of being declared in default on defined levels of our indebtedness, we could also be declared in default on our derivative obligations. Failure to comply with the loan covenant provisions could result in our being declared in default on any derivative instrument obligations covered by the agreements. As of September 30, 2020, we were not in default with any of these provisions. As of September 30, 2020, the fair value of interest rate derivatives in a liability position related to these agreements was $11.1 million, excluding the effects of accrued interest and credit valuation adjustments. As of September 30, 2020, we had not posted any collateral related to these agreements. If we breach any of these provisions, we could be required to settle our obligations under the agreements at their termination value, which was $11.5 million as of September 30, 2020.