DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

9 Months Ended

Sep. 30, 2015

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

12. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

Hedges of Interest Rate Risk

        In order to minimize financing costs and to manage interest rate exposure related to our $385,000,000 unsecured term loan facility (see Note 8), on August 13, 2015, we entered into forward-starting interest rate swap agreements with multiple counterparties. Each of our forward-starting interest rate swap agreements meets the criteria for cash flow hedge accounting treatment and we have designated the interest rate swap agreements as cash flow hedges of the risk of variability attributable to changes in the one-month LIBOR on the term loan facility. Accordingly, the forward-starting interest rate swaps are recorded on the consolidated balance sheets at fair value and the changes in the fair value of the swaps are recorded in OCI and reclassified to earnings as an adjustment to interest expense as interest becomes receivable or payable (see Note 3). We do not expect any significant losses from counterparty defaults related to our swap agreements.

Summary of Derivatives

        The following table sets forth the key terms of our forward-starting interest rate swap contracts:

Number of Interest Rate Swaps(1)(2)	Total Notional Amount		Fixed Rates	Floating Rate Index	Effective Date	Expiration Date
	(in thousands)
10	$	385,000	1.559% - 1.569%	One-Month LIBOR	11/2/2015	5/8/2020

(1)	See Note 13 for our fair value disclosures.
(2)	Our interest rate swaps are not subject to master netting arrangements.

        These swaps hedge the future cash flows of interest payments on our $385,000,000 unsecured term loan facility by fixing the rate until May 8, 2020 at a weighted average rate of 1.563% plus the credit spread, which was 1.60% at September 30, 2015, or an all-in rate of 3.163%.

Credit-Risk-Related Contingent Features

        Each of our forward-starting interest rate swap agreements contains a provision under which we could also be declared in default under such agreements if we default on the term loan facility. As of September 30, 2015, there have been no events of default under our interest rate swap agreements.

Impact of Hedges on AOCI and Consolidated Statements of Operations

        The amounts of OCI before reclassifications associated with derivatives designated as cash flow hedges are as follows:

	Amount of Derivative Gain (Loss) Recognized in OCI
	Three Months Ended September 30,					Nine Months Ended September 30,
	2015			2014		2015			2014
				(in thousands)
Forward-starting interest rate swaps	$	(6,312	)	$	—	$	(6,312	)	$	—

        There have been no amounts reclassified out of AOCI associated with derivatives designated as cash flow hedges for the three and nine months ended September 30, 2015 and 2014. However, to the extent such amounts exist, the amounts from AOCI will be reclassified as an increase or a decrease to interest expense in the statements of operations.

Future Reclassifications from AOCI

        We estimate that $4,835,000 of our AOCI related to our derivatives designated as cash flow hedges will be reclassified as an increase to interest expense during the next twelve months.