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Derivatives and Hedging Activity | 6 Months Ended
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Jun. 30, 2012
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVES AND HEDGING ACTIVITY | DERIVATIVES AND HEDGING ACTIVITY Risk Management Objective of Using Derivatives The Company is exposed to certain risk 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 amount, sources, and duration of its debt funding and through the use of derivative financial instruments. Specifically, the Company may enter 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 and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps and caps as part of its interest rate risk management strategy. 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. Interest rate caps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up front premium. 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. During the three and six months ended June 30, 2012 and 2011, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the three and six months ended June 30, 2012 and 2011, the Company recorded less than a $1,000 loss from ineffectiveness in earnings attributable to reset date and index mismatches between the derivative and the hedged item, and the fair value of interest rate swaps that were not zero at inception of the hedging relationship. Amounts reported in “Accumulated Other Comprehensive Income/(Loss)” related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. Through June 30, 2013, the Company estimates that an additional $7.0 million will be reclassified as an increase to interest expense. As of June 30, 2012, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (dollar amounts in thousands):
Interest Rate Derivative |  | Number of Instruments |  | Notional
Interest rate swaps |  | 13 |  |  | $ | 509,787 |
Interest rate caps |  | 5 |  |  | 274,291 |
Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements of FASB ASC 815, Derivatives and Hedging. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings and resulted in a gain/(loss) of $(7,000) and $291,000 and $86,000 and $36,000 for the three and six months ended June 30, 2012 and 2011, respectively. As of June 30, 2012, the Company had the following outstanding derivatives that were not designated as hedges in qualifying hedging relationships (dollar amounts in thousands):
Product |  | Number of Instruments |  | Notional
Interest rate caps |  | 3 |  |  | $ | 172,697 |
Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet 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 June 30, 2012 and December 31, 2011 (amounts in thousands):
| Asset Derivatives |  | Liability Derivatives
|  |  | Fair Value at: |  |  |  | Fair Value at:
| Balance Sheet Location |  | June 30, 2012 |  | December 31, 2011 |  | Balance Sheet Location |  | June 30, 2012 |  | December 31, 2011
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |
Interest rate products | Other assets |  | $ | 15 |  |  | $ | 71 |  |  | Other liabilities |  | $ | 13,404 |  |  | $ | 13,660 |
Total |  |  | $ | 15 |  |  | $ | 71 |  |  |  |  | $ | 13,404 |  |  | $ | 13,660 |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |
Interest rate products | Other assets |  | $ | 2 |  |  | $ | 18 |  |  | Other liabilities |  | $ | — |  |  | $ | — |
Total |  |  | $ | 2 |  |  | $ | 18 |  |  |  |  | $ | — |  |  | $ | — |
Tabular Disclosure of the Effect of Derivative Instruments on the Consolidated Statements of Operations The tables below present the effect of the Company’s derivative financial instruments on the Consolidated Statements of Operations for the three and six months ended June 30, 2012 and 2011 (dollar amounts in thousands):
|  | Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion) |  | Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) |  | Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) |  | Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) |  | Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Derivatives in Cash Flow Hedging Relationships |  | 2012 |  | 2011 |  |  | 2012 |  | 2011 |  | 2012 |  | 2011
For the Three Months Ended June 30, |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate products |  | $ | (1,533 | ) |  | $ | (9,276 | ) |  |  |  | $ | (1,897 | ) |  | $ | (2,441 | ) |  |  |  | $ | — |  |  | $ | — |
Total |  | $ | (1,533 | ) |  | $ | (9,276 | ) |  | Interest expense |  | $ | (1,897 | ) |  | $ | (2,441 | ) |  | Interest expense |  | $ | — |  |  | $ | — |
For the Six Months Ended June 30, |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate products |  | $ | (3,492 | ) |  | $ | (7,903 | ) |  | Interest expense |  | $ | (3,752 | ) |  | $ | (4,350 | ) |  | Interest expense |  | $ | — |  |  | $ | — |
Total |  | $ | (3,492 | ) |  | $ | (7,903 | ) |  |  |  | $ | (3,752 | ) |  | $ | (4,350 | ) |  |  |  | $ | — |  |  | $ | — |
Derivatives Not Designated as Hedging Instruments |  | Location of Gain or (Loss) Recognized in Income on Derivative |  | Amount of Gain or (Loss) Recognized in Income on Derivative
2012 |  | 2011
For the Three Months Ended June 30, |  |  |  |  |  |
Interest rate products |  | Other income/(expense) |  | $ | (7 | ) |  | $ | 86 |
Total |  |  |  | $ | (7 | ) |  | $ | 86 |
For the Six Months Ended June 30, |  |  |  |  |  |
Interest rate products |  | Other income/(expense) |  | $ | 291 |  |  | $ | 36 |
Total |  |  |  | $ | 291 |  |  | $ | 36 |
Credit-risk-related Contingent Features The Company has agreements with some of its derivative counterparties that contain a provision where (1) if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations; or (2) the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on the indebtedness. Certain of the Company’s agreements with its derivative counterparties contain provisions where if there is a change in the Company’s financial condition that materially changes the Company’s creditworthiness in an adverse manner, the Company may be required to fully collateralize its obligations under the derivative instrument. The Company also has an agreement with a derivative counterparty that incorporates the loan and financial covenant provisions of the Company’s indebtedness with a lender affiliate of the derivative counterparty. Failure to comply with these covenant provisions would result in the Company being in default on any derivative instrument obligations covered by the agreement. As of June 30, 2012, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $14.1 million. As of June 30, 2012, the Company has not posted any collateral related to these agreements. If the Company had breached any of these provisions at June 30, 2012, it would have been required to settle its obligations under the agreements at their termination value of $14.1 million.

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- Definition The entire disclosure for the entity's entire derivative instruments and hedging activities. Describes an entity's risk management strategies, derivatives in hedging activities and non-hedging derivative instruments, the assets, obligations, liabilities, revenues and expenses arising therefrom, and the amounts of and methodologies and assumptions used in determining the amounts of such items. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 133 -Paragraph 44 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. 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