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Derivatives and Hedging Activities
12 Months Ended
Dec. 31, 2015
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives and Hedging Activities
Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives. The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the type, amount, sources, and duration of its debt funding and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company's derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company's known or expected cash receipts and its known or expected cash payments principally related to the Company's investments and borrowings.

Cash Flow Hedges of Interest Rate Risk. The Company's objectives in using interest rate derivatives are to add stability to interest expense, to manage its exposure to interest rate movements and therefore manage its cash outflows as it relates to the underlying debt instruments. To accomplish these objectives the Company primarily uses interest rate swaps as part of its interest rate risk management strategy relating to certain of its variable rate debt instruments. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate 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.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (loss) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings.

The Company has designated the interest rate swap agreements with its counterparties as cash flow hedges of the risk of variability attributable to changes in the LIBOR swap rates on $505,000 of LIBOR-indexed variable-rate unsecured term loans. Accordingly, changes in the fair value of the swaps are recorded in other comprehensive income (loss) and reclassified to earnings as interest becomes receivable or payable. During 2015, the Company extended the maturity date of the $505,000 of LIBOR-indexed variable-rate unsecured term loans to August 2020 ($250,000) and January 2021 ($255,000). The extension of these term loans had no impact on the effectiveness of the corresponding cash flow hedges. In 2012, the Company settled the 2008 interest rate swap agreement with KeyBank for $3,539. The Company had a credit balance of $1,837 in accumulated other comprehensive income at the settlement date which was amortized into earnings on a straight-line basis through February 2013.

Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on the aggregate $505,000 term loans. During the next 12 months, the Company estimates that an additional $2,928 will be reclassified as an increase to interest expense if the swaps remain outstanding.

As of December 31, 2015, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:

Interest Rate Derivative
Number of Instruments
Notional
Interest Rate Swaps
10
$505,000

The table below presents the fair value of the Company's derivative financial instruments as well as their classification on the Consolidated Balance Sheets as of December 31, 2015 and 2014.
 
As of December 31, 2015
 
As of December 31, 2014
 
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 

Interest Rate Swap Asset
Other Assets
 
$
4

 
Other Assets
 
$
1,153

Interest Rate Swap Liability
Accounts Payable and Other Liabilities
 
$
(1,943
)
 
Accounts Payable and Other Liabilities
 
$
(749
)

The tables below present the effect of the Company's derivative financial instruments on the Consolidated Statements of Operations for 2015 and 2014:

Derivatives in Cash Flow
 
 
Amount of Loss Recognized
in OCI on Derivative
(Effective Portion)
December 31,
 
Location of Loss
Reclassified from
Accumulated OCI into Income (Effective Portion)
 
Amount of Loss Reclassified
from Accumulated OCI into
Income (Effective Portion)
December 31,
Hedging Relationships
 
 
2015
 
2014
 
 
2015
 
2014
Interest Rate Swap
 
 
$
(7,809
)
 
$
(9,560
)
 
Interest expense
 
$
5,466

 
$
5,525



The Company's agreements with the swap derivative counterparties contain provisions whereby if the Company defaults on the underlying indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default of the swap derivative obligation. As of December 31, 2015, the Company had not posted any collateral related to the agreements.