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Fair Value | 3 Months Ended
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Mar. 31, 2019
Fair Value Disclosures [Abstract] |
Fair Value | Fair Value Financial Instruments Carried at Fair Value Derivative Financial Instruments The Company uses interest rate swap and interest rate cap agreements to manage its interest rate risk. These instruments are carried at fair value in the Company's financial statements. In adjusting the fair value of its derivative contracts for the effect of counterparty nonperformance risk, the Company has considered the impact of its net position with a given counterparty, as well as any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees. The Company minimizes its credit risk on these transactions by dealing with major, creditworthy financial institutions which have an A or better credit rating by the Standard & Poor's Ratings Group. As part of its on-going control procedures, the Company monitors the credit ratings of counterparties and the exposure of the Company to any single entity, thus reducing credit risk concentration. The Company believes the likelihood of realizing losses from counterparty nonperformance is remote. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, such as interest rate, term to maturity and volatility, the credit valuation adjustments associated with its derivatives use Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by itself and its counterparties. As of March 31, 2019, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined it is not significant. As a result, the Company has determined that its derivative valuations are classified in Level 2 of the fair value hierarchy. The following table summarizes the consolidated derivative positions at March 31, 2019 (dollars in thousands):
| Non-designated Hedges |  | Cash Flow Hedges |  | Cash Flow Hedges Interest Rate Swaps
Notional balance | $ | 587,272 |  |  | $ | 33,929 |  |  | $ | 250,000 |
Weighted average interest rate (1) | 3.1 | % |  | 4.8 | % |  | N/A |
Weighted average swapped/capped interest rate | 6.6 | % |  | 5.9 | % |  | 3.0 | %
Earliest maturity date | Apr 2020 |  |  | Apr 2019 |  |  | Sep 2019 |
Latest maturity date | Sep 2022 |  |  | Apr 2019 |  |  | Sep 2019 |
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(1) | Represents the weighted average interest rate on the hedged debt.
As of March 31, 2019, the Company had $250,000,000 in aggregate outstanding forward interest rate swap agreements. At maturity of the swap agreements, the Company expects to cash settle the contracts and either pay or receive cash for the then current fair value. Assuming that the Company issues the hedged forecasted debt as expected, the hedging impact from these positions will then be recognized over the life of the issued debt as a yield adjustment. The Company had four derivatives designated as cash flow hedges and 10 derivatives not designated as hedges at March 31, 2019. Fair value changes for derivatives not in qualifying hedge relationships for the three months ended March 31, 2019 and 2018 were not material. During the three months ended March 31, 2019, the Company deferred $7,231,000 of losses for cash flow hedges reported as a component of accumulated other comprehensive loss. The following table summarizes the deferred losses reclassified from accumulated other comprehensive loss as a component of interest expense, net (dollars in thousands):
| For the three months ended
| 3/31/2019 |  | 3/31/2018
Cash flow hedge losses reclassified to earnings | $ | 1,468 |  |  | $ | 1,756 |
The Company anticipates reclassifying approximately $5,752,000 of net hedging losses from accumulated other comprehensive loss into earnings within the next 12 months as an offset to the hedged item during this period. The Company did not have any derivatives designated as fair value hedges as of March 31, 2019 and 2018. Redeemable Noncontrolling Interests The Company is party to investments in two consolidated ventures, which contain redemption options (the "Puts") that allow joint venture partners of the Company to require the Company to purchase their interests in the investment at a guaranteed minimum amount. The Puts are payable in cash. The Company determines the fair value of the Puts based on unobservable inputs considering the assumptions that market participants would make in pricing the obligations, applying a guaranteed rate of return to the joint venture partners' net capital contribution balances as of period end. Given the significance of the unobservable inputs, the valuations are classified in Level 3 of the fair value hierarchy. The Company issued units of limited partnership interest in DownREITs which provide the DownREIT limited partners the ability to present all or some of their units for redemption for cash as determined by the partnership agreement. Under the DownREIT agreements, for each limited partnership unit, the limited partner is entitled to receive cash in the amount equal to the fair value of the Company's common stock on or about the date of redemption. In lieu of cash redemption, the Company may elect to exchange such units for an equal number of shares of the Company's common stock. The limited partnership units in the DownREITs are valued using the market price of the Company's common stock, a Level 1 price under the fair value hierarchy. Financial Instruments Not Carried at Fair Value Cash and Cash Equivalents Cash and cash equivalent balances are held with various financial institutions within accounts designed to preserve principal. The Company monitors credit ratings of these financial institutions and the concentration of cash and cash equivalent balances with any one financial institution and believes the likelihood of realizing material losses related to cash and cash equivalent balances is remote. Cash and cash equivalents are carried at their face amounts, which reasonably approximate their fair values and are Level 1 within the fair value hierarchy. Other Financial Instruments Rents and other receivables and prepaid expenses, accounts and construction payable and accrued expenses and other liabilities are carried at their face amounts, which reasonably approximate their fair values. The Company values its unsecured notes using quoted market prices, a Level 1 price within the fair value hierarchy. The Company values its notes payable and outstanding amounts under the Credit Facility and Term Loans using a discounted cash flow analysis on the expected cash flows of each instrument. This analysis reflects the contractual terms of the instrument, including the period to maturity, and uses observable market-based inputs, including interest rate curves. The process also considers credit valuation adjustments to appropriately reflect the Company's nonperformance risk. The Company has concluded that the value of its notes payable and amounts outstanding under its Credit Facility and Term Loans are Level 2 prices as the majority of the inputs used to value its positions fall within Level 2 of the fair value hierarchy. Financial Instruments Measured/Disclosed at Fair Value on a Recurring Basis The following tables summarize the classification between the three levels of the fair value hierarchy of the Company's financial instruments measured/disclosed at fair value on a recurring basis (dollars in thousands):
|  | 3/31/2019
Description |  | Total Fair Value |  | Quoted Prices in Active Markets for Identical Asset (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Cash Flow Hedges |  |  |  |  |  |  |  |
Interest Rate Swaps - Liabilities |  | $ | (13,600 | ) |  | $ | — |  |  | $ | (13,600 | ) |  | $ | — |
Puts |  | (417 | ) |  | — |  |  | — |  |  | (417 | )
DownREIT units |  | (1,506 | ) |  | (1,506 | ) |  | — |  |  | — |
Indebtedness |  |  |  |  |  |  |  |
Fixed rate unsecured notes |  | (5,466,171 | ) |  | (5,466,171 | ) |  | — |  |  | — |
Secured notes and variable rate unsecured indebtedness |  | (1,519,569 | ) |  | — |  |  | (1,519,569 | ) |  | — |
Total |  | $ | (7,001,263 | ) |  | $ | (5,467,677 | ) |  | $ | (1,533,169 | ) |  | $ | (417 | )
|  | 12/31/2018
Description |  | Total Fair Value |  | Quoted Prices in Active Markets for Identical Asset (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Non-Designated Hedges |  |  |  |  |  |  |  |
Interest Rate Caps |  | $ | 2 |  |  | $ | — |  |  | $ | 2 |  |  | $ | — |
Cash Flow Hedges |  |  |  |  |  |  |  |
Interest Rate Swaps - Liabilities |  | (6,366 | ) |  | — |  |  | (6,366 | ) |  | — |
Puts |  | (465 | ) |  | — |  |  | — |  |  | (465 | )
DownREIT units |  | (1,305 | ) |  | (1,305 | ) |  | — |  |  | — |
Indebtedness |  |  |  |  |  |  |  |
Fixed rate unsecured notes |  | (5,268,277 | ) |  | (5,268,277 | ) |  | — |  |  | — |
Secured notes and variable rate unsecured indebtedness |  | (1,505,876 | ) |  | — |  |  | (1,505,876 | ) |  | — |
Total |  | $ | (6,782,287 | ) |  | $ | (5,269,582 | ) |  | $ | (1,512,240 | ) |  | $ | (465 | )

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -URI http://asc.fasb.org/topic&trid=2155941 + Details
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