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Interest Rate Derivatives | 12 Months Ended
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Dec. 31, 2011
Interest Rate Derivatives |
Interest Rate Derivatives |
11. Interest Rate Derivatives The following table sets forth the key terms and fair values of our interest rate swap derivatives at December 31, 2011 and 2010 (dollars in thousands):
|  |  |  |  |  |  |  |  |  | Fair Value at December 31, |
--- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ---
Notional Amount |  | Fixed Rate |  |  |  | Effective Date |  | Expiration Date |
| Floating Rate Index |  | 2011 |  | 2010 |
$ | 50,000 |  |  | 0.5025 | % | One-Month LIBOR |  | 1/3/2011 |  | 1/3/2012 |  | $ | (1 | ) | $ | (64 | )
| 50,000 |  |  | 0.5025 | % | One-Month LIBOR |  | 1/3/2011 |  | 1/3/2012 |  |  | (1 | ) |  | (64 | )
| 50,000 |  |  | 0.4400 | % | One-Month LIBOR |  | 1/4/2011 |  | 1/3/2012 |  |  | — |  |  | (34 | )
| 120,000 |  |  | 1.7600 | % | One-Month LIBOR |  | 1/2/2009 |  | 5/1/2012 |  |  | (552 | ) |  | (2,062 | )
| 100,000 |  |  | 1.9750 | % | One-Month LIBOR |  | 1/1/2010 |  | 5/1/2012 |  |  | (532 | ) |  | (2,002 | )
| 100,000 |  |  | 0.6123 | % | One-Month LIBOR |  | 1/3/2012 |  | 9/1/2014 |  |  | 55 |  |  | N/A |
| 100,000 |  |  | 0.6100 | % | One-Month LIBOR |  | 1/3/2012 |  | 9/1/2014 |  |  | 56 |  |  | N/A |
| 100,000 |  |  | 0.8320 | % | One-Month LIBOR |  | 1/3/2012 |  | 9/1/2015 |  |  | (66 | ) |  | N/A |
| 100,000 |  |  | 0.8320 | % | One-Month LIBOR |  | 1/3/2012 |  | 9/1/2015 |  |  | (49 | ) |  | N/A |
| 39,213 | (1) |  | 3.8300 | % | One-Month LIBOR |  | 11/2/2010 |  | 11/2/2015 |  |  | (1,054 | ) |  | 644 |
| 100,000 | (2) |  | 3.8415 | % | Three-Month LIBOR |  | 9/30/2011 |  | 9/30/2021 |  |  | (16,333 | ) |  | N/A |
| 75,000 | (2) |  | 3.8450 | % | Three-Month LIBOR |  | 9/30/2011 |  | 9/30/2021 |  |  | (12,275 | ) |  | N/A |
| 100,000 | (2) |  | 2.0525 | % | Three-Month LIBOR-Reverse |  | 12/30/2011 |  | 9/30/2021 |  |  | 345 |  |  | N/A |
| 75,000 | (2) |  | 2.0525 | % | Three-Month LIBOR-Reverse |  | 12/30/2011 |  | 9/30/2021 |  |  | 260 |  |  | N/A |
|  |  |  |  |  |  |  |  |  |  |  | $ | (30,147 | ) | $ | (3,582 | )
(1) The notional amount of this instrument is scheduled to amortize to $36.2 million. (2) As discussed below, these instruments were cash settled on January 5, 2012. Each of the one-month LIBOR interest rate swaps set forth in the table above was designated as a cash flow hedge of interest rate risk. On April 5, 2011, we entered into the two forward starting three-month LIBOR swaps set forth above with an effective date of September 30, 2011 for an aggregate notional amount of $175 million. We designated these swaps as cash flow hedges of interest payments on ten-year, fixed-rate borrowings forecasted to occur between August 2011 and April 2012. After meeting with our Board of Trustees on December 21, 2011, we determined that we would pursue other financing options and concluded that the originally forecasted borrowings were expected not to occur. Accordingly, the swaps no longer qualified for hedge accounting. On December 22, 2011, we entered into the two reverse three-month LIBOR swaps set forth above with an effective date of December 30, 2011 for an aggregate notional amount of $175 million in order to remove the majority of the variability in the termination value of the forward starting swaps entered into on April 5, 2011. We recognized aggregate net losses of $29.8 million on these interest rate swaps in December 2011. On January 5, 2012, we cash settled all of the forward starting swaps entered into on April 5, 2011 and December 22, 2011 and interest accrued thereon for an aggregate of $29.7 million. The table below sets forth the fair value of our interest rate derivatives as well as their classification on our consolidated balance sheet as of December 31, 2011 and 2010 (in thousands):
|  | December 31, 2011 |  | December 31, 2010 |
--- | --- | --- | --- | --- | ---
Derivatives |  | Balance Sheet Location |  | Fair Value |  | Balance Sheet Location |  | Fair Value |
Interest rate swaps designated as cash flow hedges |  | Prepaid expenses and other assets |  | $ | 111 |  | Prepaid expenses and other assets |  | $ | 644 |
Interest rate swaps not designated as hedges |  | Prepaid expenses and other assets |  |  | 605 |  | N/A |  |  | N/A |
Interest rate swaps designated as cash flow hedges |  | Interest rate derivatives |  |  | (2,255 | ) | Interest rate derivatives |  |  | (4,226 | )
Interest rate swaps not designated as hedges |  | Interest rate derivatives |  |  | (28,608 | ) | N/A |  |  | N/A |
The table below presents the effect of our interest rate derivatives on our consolidated statements of operations and comprehensive income for 2011and 2010 (in thousands):
|  | For the Years Ended December 31, |
--- | --- | --- | ---
|  | 2011 |  | 2010 |  | 2009 |
Amount of loss recognized in AOCL (effective portion) |  | $ | (31,531 | ) | $ | (5,473 | ) | $ | (3,253 | )
Amount of loss reclassified from AOCL into interest expense (effective portion) |  |  | (4,601 | ) |  | (3,689 | ) |  | (6,680 | )
Amount of loss reclassified from AOCL to loss on interest rate derivatives upon discontinuing hedge accounting |  |  | 28,430 |  |  | — |  |  | — |
Amount of loss on interest rate derivatives recognized subsequent to such derivatives no longer being designated as hedges |  |  | 1,375 |  |  | — |  |  | — |
Amount of loss recognized in interest expense (ineffective portion and amount excluded from effectiveness testing |  |  | — |  |  | — |  |  | (261 | )
Over the next 12 months, we estimate that approximately $2.4 million will be reclassified from AOCL as an increase to interest expense. We have agreements with each of our interest rate derivative counterparties that contain provisions under which if we default or are capable of being declared in default on any of our indebtedness, we could also be declared in default on our derivative obligations. These agreements also incorporate the loan covenant provisions of our indebtedness with a lender affiliate of the derivative counterparties. Failure to comply with the loan covenant provisions could result in our being declared in default on any derivative instrument obligations covered by the agreements. As of December 31, 2011, the fair value of interest rate derivatives in a liability position related to these agreements was $30.9 million, excluding the effects of accrued interest. As of December 31, 2011, we had not posted any collateral related to these agreements. We are not in default with any of these provisions. If we breached any of these provisions, we could be required to settle our obligations under the agreements at their termination value of $33.3 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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