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Derivative Instruments | 9 Months Ended
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Sep. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments | Note 7—Derivative Instruments From time to time, we enter into derivative instruments to manage the economic risk of changes in interest rates. We do not enter into derivative transactions for speculative or trading purposes. Designated hedges are derivatives that meet the criteria for hedge accounting and that we have elected to designate as hedges. Non-designated hedges are derivatives that do not meet the criteria for hedge accounting or that we did not elect to designate as hedges. Designated Hedges We have entered into various interest rate swap agreements, which are used to hedge the variable cash flows associated with variable-rate interest payments. Currently, each of our swap agreements is indexed to LIBOR and is designated for hedge accounting purposes. LIBOR is set to expire at the end of 2021, and we will work with the counterparties to our swap agreements to adjust each floating rate to a comparable or successor rate. Changes in the fair value of these swaps are recorded in other comprehensive income and are subsequently reclassified into earnings in the period in which the hedged forecasted transactions affect earnings. The table below summarizes our interest rate swap instruments as of September 30, 2020:
Agreement Date |  | Forward Effective Date |  | Maturity Date |  | Strike Rate |  | Index |  | Notional Amount
December 21, 2016 |  | February 28, 2017 |  | January 31, 2022 |  | 1.97% |  | One month LIBOR |  | $ | 750,000 |
December 11, 2019 |  | February 28, 2017 |  | December 31, 2024 |  | 1.74% |  | One month LIBOR |  | 750,000 |
April 19, 2018 |  | January 31, 2019 |  | January 31, 2025 |  | 2.86% |  | One month LIBOR |  | 400,000 |
February 15, 2019 |  | March 15, 2019 |  | March 15, 2022 |  | 2.23% |  | One month LIBOR |  | 800,000 |
April 19, 2018 |  | March 15, 2019 |  | November 30, 2024 |  | 2.85% |  | One month LIBOR |  | 400,000 |
April 19, 2018 |  | March 15, 2019 |  | February 28, 2025 |  | 2.86% |  | One month LIBOR |  | 400,000 |
January 10, 2017 |  | January 15, 2020 |  | January 15, 2021 |  | 2.13% |  | One month LIBOR |  | 550,000 |
May 8, 2018 |  | March 9, 2020 |  | June 9, 2025 |  | 2.99% |  | One month LIBOR |  | 325,000 |
May 8, 2018 |  | June 9, 2020 |  | June 9, 2025 |  | 2.99% |  | One month LIBOR |  | 595,000 |
June 3, 2016 |  | July 15, 2020 |  | July 15, 2021 |  | 1.47% |  | One month LIBOR |  | 450,000 |
June 28, 2018 |  | August 7, 2020 |  | July 9, 2025 |  | 2.90% |  | One month LIBOR |  | 1,100,000 |
January 10, 2017 |  | January 15, 2021 |  | July 15, 2021 |  | 2.23% |  | One month LIBOR |  | 550,000 |
December 9, 2019 |  | July 15, 2021 |  | November 30, 2024 |  | 2.90% |  | One month LIBOR |  | 400,000 |
November 7, 2018 |  | March 15, 2022 |  | July 31, 2025 |  | 3.14% |  | One month LIBOR |  | 400,000 |
November 7, 2018 |  | March 15, 2022 |  | July 31, 2025 |  | 3.16% |  | One month LIBOR |  | 400,000 |
During the three and nine months ended September 30, 2020 and 2019, such derivatives were used to hedge the variable cash flows associated with existing variable-rate interest payments. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate debt. During the next 12 months, we estimate that $152,334 will be reclassified to earnings as an increase in interest expense. Non-Designated Hedges Concurrent with entering into certain of the mortgage loan agreements and in connection with previous mergers, we entered into or acquired and maintain interest rate cap agreements with terms and notional amounts equivalent to the terms and amounts of the mortgage loans made by the third party lenders. Currently, each of our cap agreements is indexed to LIBOR, which is set to expire at the end of 2021. We will work with the counterparties to our cap agreements to adjust each floating rate to a comparable or successor rate. To the extent that the maturity date of one or more of the mortgage loans is extended through an exercise of one or more extension options, replacement or extension interest rate cap agreements must be executed with terms similar to those associated with the initial interest rate cap agreements and strike prices equal to the greater of the interest rate cap strike price and the interest rate at which the debt service coverage ratio (as defined) is not less than 1.2 to 1.0. The interest rate cap agreements, including all of our rights to payments owed by the counterparties and all other rights, have been pledged as additional collateral for the mortgage loans. Additionally, in certain instances, in order to minimize the cash impact of purchasing required interest rate caps, we simultaneously sell interest rate caps (which have identical terms and notional amounts) such that the purchase price and sales proceeds of the related interest rate caps are intended to offset each other. The purchased and sold interest rate caps have strike prices ranging from approximately 3.75% to 5.31%. Fair Values of Derivative Instruments on the Condensed Consolidated Balance Sheets The table below presents the fair value of our derivative financial instruments as well as their classification on the condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019:
|  | Asset Derivatives |  | Liability Derivatives
|  |  |  | Fair Value as of |  |  |  | Fair Value as of
|  | Balance Sheet Location |  | September 30, 2020 |  | December 31, 2019 |  | Balance Sheet Location |  | September 30, 2020 |  | December 31, 2019
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  | Other assets |  | $ | — |  |  | $ | 1,643 |  |  | Other liabilities |  | $ | 602,507 |  |  | $ | 275,679 |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |
Interest rate caps |  | Other assets |  | 1 |  |  | — |  |  | Other liabilities |  | — |  |  | — |
Total |  |  |  | $ | 1 |  |  | $ | 1,643 |  |  |  |  | $ | 602,507 |  |  | $ | 275,679 |
Offsetting Derivatives We enter into master netting arrangements, which reduce risk by permitting net settlement of transactions with the same counterparty. The tables below present a gross presentation, the effects of offsetting, and a net presentation of our derivatives as of September 30, 2020 and December 31, 2019:
|  | September 30, 2020
|  |  |  |  |  |  |  | Gross Amounts Not Offset in the Statement of Financial Position |  |
|  | Gross Amounts of Recognized Assets/ Liabilities |  | Gross Amounts Offset in the Statement of Financial Position |  | Net Amounts of Assets/ Liabilities Presented in the Statement of Financial Position |  | Financial Instruments |  | Cash Collateral Received |  | Net Amount
Offsetting assets: |  |  |  |  |  |  |  |  |  |  |  |
Derivatives |  | $ | 1 |  |  | $ | — |  |  | $ | 1 |  |  | $ | — |  |  | $ | — |  |  | $ | 1 |
Offsetting liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Derivatives |  | $ | 602,507 |  |  | $ | — |  |  | $ | 602,507 |  |  | $ | — |  |  | $ | — |  |  | $ | 602,507 |
|  | December 31, 2019
|  |  |  |  |  |  |  | Gross Amounts Not Offset in the Statement of Financial Position |  |
|  | Gross Amounts of Recognized Assets/ Liabilities |  | Gross Amounts Offset in the Statement of Financial Position |  | Net Amounts of Assets/ Liabilities Presented in the Statement of Financial Position |  | Financial Instruments |  | Cash Collateral Received |  | Net Amount
Offsetting assets: |  |  |  |  |  |  |  |  |  |  |  |
Derivatives |  | $ | 1,643 |  |  | $ | — |  |  | $ | 1,643 |  |  | $ | (1,054) |  |  | $ | — |  |  | $ | 589 |
Offsetting liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Derivatives |  | $ | 275,679 |  |  | $ | — |  |  | $ | 275,679 |  |  | $ | (1,054) |  |  | $ | — |  |  | $ | 274,625 |
Effect of Derivative Instruments on the Condensed Consolidated Statements of Comprehensive Income (Loss) and the Condensed Consolidated Statements of Operations The tables below present the effect of our derivative financial instruments in the condensed consolidated statements of comprehensive income (loss) and the condensed consolidated statements of operations for the three months ended September 30, 2020 and 2019:
|  | Amount of Loss Recognized in OCI on Derivative |  | Location of Gain (Loss) Reclassified from Accumulated OCI into Net Income |  | Amount of Gain (Loss) Reclassified from Accumulated OCI into Net Income |  | Total Amount of Interest Expense Presented in the Condensed Consolidated Statements of Operations
|  | For the Three Months Ended September 30, |  |  | For the Three Months Ended September 30, |  | For the Three Months Ended September 30,
|  | 2020 |  | 2019 |  |  | 2020 |  | 2019 |  | 2020 |  | 2019
Derivatives in cash flow hedging relationships: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  | $ | (4,171) |  |  | $ | (71,729) |  |  | Interest expense |  | $ | (37,557) |  |  | $ | 4,272 |  |  | $ | 87,713 |  |  | $ | 89,067 |
|  | Location of Loss Recognized in Net Income on Derivative |  | Amount of Loss Recognized in Net Income on Derivative
|  |  | For the Three Months Ended September 30,
|  |  | 2020 |  | 2019
Derivatives not designated as hedging instruments: |  |  |  |  |  |
Interest rate caps |  | Interest expense |  | $ | 146 |  |  | $ | 64 |
The tables below present the effect of our derivative financial instruments in the condensed consolidated statements of comprehensive income (loss) and the condensed consolidated statements of operations for the nine months ended September 30, 2020 and 2019:
|  | Amount of Loss Recognized in OCI on Derivative |  | Location of Gain (Loss) Reclassified from Accumulated OCI into Net Income |  | Amount of Gain (Loss) Reclassified from Accumulated OCI into Net Income |  | Total Amount of Interest Expense Presented in the Condensed Consolidated Statements of Operations
|  | For the Nine Months Ended September 30, |  |  | For the Nine Months Ended September 30, |  | For the Nine Months Ended September 30,
|  | 2020 |  | 2019 |  |  | 2020 |  | 2019 |  | 2020 |  | 2019
Derivatives in cash flow hedging relationships: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  | $ | (398,426) |  |  | $ | (308,196) |  |  | Interest expense |  | $ | (74,166) |  |  | $ | 23,026 |  |  | $ | 258,541 |  |  | $ | 278,756 |
|  | Location of Loss Recognized in Net Income on Derivative |  | Amount of Loss Recognized in Net Income on Derivative
|  |  | For the Nine Months Ended September 30,
|  |  | 2020 |  | 2019 |  |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |
Interest rate caps |  | Interest expense |  | $ | 198 |  |  | $ | 98 |  |  |
Credit-Risk-Related Contingent Features The agreements with our derivative counterparties which govern our interest rate swap agreements contain a provision where we could be declared in default on our derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to our default on the indebtedness. As of September 30, 2020, the fair value of certain derivatives in a net liability position was $602,507. If we had breached any of these provisions at September 30, 2020, we could have been required to settle the obligations under the agreements at their termination value, which includes accrued interest and excludes the nonperformance risk related to these agreements, of $631,397.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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