Derivative and Hedging Activities
 3 Months Ended
Mar. 31, 2015
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative and Hedging Activities
Derivative and Hedging Activities
The Company uses interest rate derivative contracts to manage its exposure to changes in interest rates on its variable rate debt. These derivatives are considered cash flow hedges and are recorded on a gross basis at fair value and included in accounts payable, accrued expenses and other liabilities on the accompanying consolidated balance sheets. Assessments of hedge effectiveness are performed quarterly using regression analysis and the measurement of hedge ineffectiveness is based on the hypothetical derivative method. The effective portion of changes in fair value are recorded in AOCL and subsequently reclassified to earnings when the hedged transactions affect earnings. The ineffective portion is recorded immediately in earnings in general and administrative expenses.
The following table summarizes the notional amount and fair value of the Company’s derivative instruments (dollars in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value of Liability
Derivatives Designated as Hedging Instruments
 
Balance Sheet Location
 
Notional
Amount
 
Fixed
Interest
Rate
 
Effective
Date
 
Maturity
Date
 
March 31,
2015
 
December 31,
2014
Interest Rate Swap
 
Accounts payable, accrued expenses and other liabilities
 
$
10,787

 
4.62
%
 
06/28/12
 
07/06/17
 
$
(85
)
 
$
(46
)
Interest Rate Swap
 
Accounts payable, accrued expenses and other liabilities
 
$
6,627

 
5.75
%
 
07/17/13
 
03/01/16
 
(147
)
 
(180
)
Interest Rate Swap
 
Accounts payable, accrued expenses and other liabilities
 
$
32,400

 
3.15
%
 
07/17/13
 
09/05/15
 
(63
)
 
(93
)
Interest Rate Swaps(1)
 
Accounts payable, accrued expenses and other liabilities
 
$
61,758

 
5.14
%
 
01/02/14
 
12/13/18
 
(1,335
)
 
(803
)
 
 
 
 
 
 
 
 
 
 
 
 
$
(1,630
)
 
$
(1,122
)
(1) Represents a tranche of eight individual interest rate swap agreements with notional amounts ranging from $7.6 million to $7.9 million. The swap agreements contain the same payment terms, stated interest rate, effective date, and maturity date.

The following tables provide information about the amounts recorded in AOCL, as well as the loss recorded in operations, when reclassified out of AOCL or recognized in earnings immediately, for the three months ended March 31, 2015 and 2014, respectively (in thousands):
 
 
Amount of Loss Recognized
in AOCL on Derivative
(Effective Portion)
 
 
Three Months 
 Ended March 31,
Derivatives in Cash Flow Hedging Relationships
 
2015
 
2014
Interest rate swaps
 
$
(852
)
 
$
(402
)
 
 
 
 
 
 
 
Amount of Loss Reclassified from
AOCL into Operations
(Effective Portion)
 
 
Three Months 
 Ended March 31,
Location of Loss Reclassified from AOCL into Operations
 
2015
 
2014
Interest expense
 
$
(317
)
 
$
(323
)
 
 
 
 
 
 
 
Amount of Loss Recognized in
Operations on Derivative
(Ineffective Portion)
 
 
Three Months 
 Ended March 31,
Location of Loss Recognized in Operations on Derivatives
 
2015
 
2014
General and administrative expense
 
$
(4
)
 
$
—


Approximately $1.1 million of the remaining balance in AOCL is estimated to be reclassified as an increase to interest expense during the next twelve months. The Company does not enter into derivative contracts for speculative or trading purposes.
The Company is exposed to credit risk in the event of non-performance by its derivative counterparties. The Company believes it mitigates its credit risk by entering into agreements with counterparties it considers credit-worthy. As of March 31, 2015 and December 31, 2014, there were no termination events or events of default related to the interest rate swaps.