The primary goal of the Company’s risk management practices related to interest rate risk is to prevent changes in interest rates from adversely impacting the Company’s ability to achieve its investment return objectives. The Company does not enter into derivatives for speculative purposes.

The Company enters into interest rate swaps as a fixed rate payer to mitigate its exposure to rising interest rates on its variable rate mortgage notes payable. The value of interest rate swaps is primarily impacted by interest rates, market expectations about interest rates, and the remaining life of the applicable instrument. In general, increases in interest rates, or anticipated increases in interest rates, will increase the value of the fixed rate payer position and decrease the value of the variable rate payer position. As the remaining life of the interest rate swap decreases, the value of both positions will generally move towards zero.

The Company (or wholly-owned limited liability company subsidiaries) has entered into interest rate swap agreements with amortizing notational amounts relating to four of its mortgage notes payable. The notional amount is an indication of the extent of the Company’s involvement in each instrument at that time, but does not represent exposure to credit, interest rate or market risks.

The following table summarizes the notional amount and other information related to the Company’s interest rate swaps as of June 30, 2018 and December 31, 2017.

June 30, 2018

December 31, 2017

Derivative

‎

Instruments

Number

‎

Instru-

‎

ments

Notional

‎

Amount (i)

Reference

‎

Rate (ii)

Weighted

‎

Average

‎

Fixed

‎

pay rate

Weighted

‎

Average

‎

Remaining

‎

Term

Number

‎

Instru-

‎

ments

Notional

‎

Amount (i)

Reference

‎

Rate (iii)

Weighted

‎

Average

‎

Fixed

‎

pay rate

Weighted

‎

Average

‎

Remaining

‎

Term

Interest Rate Swap Derivatives

27,420,000

One-month LIBOR + applicable spread/Fixed at 4.05%-5.16%

4.74

5.6 years

10,620,000

One-month LIBOR + applicable spread/Fixed at 4.05%-4.34%

4.21

7.2 years

	(i)	The notional amount of the Company’s swaps decreases each month to correspond to the outstanding principal balance on the related mortgage. The maximum notional amount is shown above. As of June 30, 2018, the minimum notional amount (outstanding principal balance at the maturity date) was $24,936,800.
	(ii)	The reference rate was June 30, 2018.
	(iii)	The reference rate was December 31, 2017.

The following table sets forth the fair value of the Company’s derivative instruments (Level 2 measurement), as well as their classification in the condensed consolidated balance sheets:

		June 30, 2018				December 31, 2017
Derivative Instrument	Balance Sheet Location	Number of ‎ Instruments	Fair Value			Number of ‎ Instruments	Fair Value
Interest Rate Swaps	Asset - Interest rate swap derivatives, at fair value	2	$	326,710		2	$	7,899
Interest Rate Swaps	Liability - Interest rate swap derivatives, at fair value	2	$	(98,240	)	—	$	—

The change in fair value of a derivative instrument that is not designated as a cash flow hedge for financial accounting purposes is recorded as interest expense in the condensed consolidated statements of operations. None of the Company’s derivatives at June 30, 2018 or December 31, 2017 were designated as hedging instruments; therefore, the net unrealized loss (gain) recognized on interest rate swaps of $6,236 and $104,633 was recorded as an increase in interest expense for the three months ended June 30, 2018 and 2017, respectively, and $(220,570) and $104,633 was recorded as a (decrease) increase in interest expense for the six months ended June 30, 2018 and 2017, respectively (see Note 6).