Deferred Charges, Goodwill And Other Assets, Net |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Deferred Charges, Goodwill And Other Assets [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Deferred Charges, Goodwill And Other Assets, Net |
5. DEFERRED CHARGES, GOODWILL AND OTHER ASSETS, NET
(a)Deferred financing costs related to all other debt liabilities (other than for the unsecured revolving credit facility) are netted against those debt liabilities for all periods presented. See Note 2: Significant Accounting Policies – Deferred Financing Costs. (b)Includes as of September 30, 2019 and December 31, 2018, respectively: a mortgage receivable with a balance of zero and $45.2 million (acquired in August 2017) which bore interest at 5.85 percent and was repaid in May 2019 in connection with the acquisition of 107 Morgan; and an interest-free note receivable with a net present value of $1.8 million and $2.2 million which matures in April 2023. The Company believes this balance is fully collectible. (c)All goodwill is attributable to the Company’s Multi-family Real Estate and Services segment. (d)Balance recorded starting in 2019, pursuant to the Company’s adoption of ASU 2016-02 (Topic 842). This amount has a corresponding liability of $23.7 million, which is included in Accounts payable, accrued expense and other liabilities. See Note 12: Commitments and Contingencies – Ground Lease agreements for further details. (e)Includes as of September 30, 2019 and December 31, 2018, zero and $49.2 million, respectively, of proceeds from property sales held by a qualified intermediary. The Company utilized the proceeds as of December 31, 2018 on acquisitions completed during the nine months ended September 30, 2019.
DERIVATIVE FINANCIAL INSTRUMENTS
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 as part of its interest rate risk management strategy. As of September 30, 2019, the Company had outstanding interest rate swaps with a combined notional value of $280 million that were designated as cash flow hedges of interest rate risk. During the nine months ended September 30, 2019, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. During March 2019, in connection with a partial paydown of the Company’s outstanding term loans, the Company terminated interest rate swaps with an aggregate notional amount of $90 million. During June 2019, in connection with a subsequent partial paydown of the Company’s outstanding unsecured term loans, the Company terminated interest rate swaps with an aggregate notional amount of $160 million. During August 2019, in connection with a partial paydown of the Company’s outstanding unsecured term loans, the Company terminated rate swaps with an aggregate notional amount of $145 million. These paydowns resulted in the Company accelerating the reclassification of gains from other comprehensive income to earnings as a result of the hedged forecasted transactions no longer being probable to occur, amounting to $0.1 million and $1.9 million for the three and nine months ended September 30, 2019, respectively.
The changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The Company recorded no ineffectiveness gain or loss during the three and nine months ended September 30, 2019 and recorded ineffectiveness gain (loss) of $47,000 and $(127,000) during the three and nine months ended September 30, 2018, respectively, which is included in interest and other investment income (loss) in the consolidated statements of operations, attributable to a floor mismatch in the underlying indices of the derivatives and the hedged interest payments made on its variable-rate debt. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next 12 months, the Company estimates that an additional $0.2 million will be reclassified as a decrease to interest expense.
The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Balance Sheet as of September 30, 2019 and December 31, 2018 (dollars in thousands):
The table below presents the effect of the Company’s derivative financial instruments on the Consolidated Statement of Operations for the nine months ending September 30, 2019 and 2018 (dollars in thousands):
Credit-risk-related Contingent Features
The Company has agreements with each of its derivative counterparties that contain a provision where 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. As of September 30, 2019, the Company did not have derivatives in a net liability position including accrued interest but excluding any adjustment for nonperformance risk related to these agreements. As of September 30, 2019, the Company has not posted any collateral related to these agreements. |
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| Deferred Charges, Goodwill And Other Assets [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Deferred Charges, Goodwill And Other Assets, Net |
5. DEFERRED CHARGES, GOODWILL AND OTHER ASSETS, NET
(a)Deferred financing costs related to all other debt liabilities (other than for the unsecured revolving credit facility) are netted against those debt liabilities for all periods presented. See Note 2: Significant Accounting Policies – Deferred Financing Costs. (b)Includes as of September 30, 2019 and December 31, 2018, respectively: a mortgage receivable with a balance of zero and $45.2 million (acquired in August 2017) which bore interest at 5.85 percent and was repaid in May 2019 in connection with the acquisition of 107 Morgan; and an interest-free note receivable with a net present value of $1.8 million and $2.2 million which matures in April 2023. The Company believes this balance is fully collectible. (c)All goodwill is attributable to the Company’s Multi-family Real Estate and Services segment. (d)Balance recorded starting in 2019, pursuant to the Company’s adoption of ASU 2016-02 (Topic 842). This amount has a corresponding liability of $23.7 million, which is included in Accounts payable, accrued expense and other liabilities. See Note 12: Commitments and Contingencies – Ground Lease agreements for further details. (e)Includes as of September 30, 2019 and December 31, 2018, zero and $49.2 million, respectively, of proceeds from property sales held by a qualified intermediary. The Company utilized the proceeds as of December 31, 2018 on acquisitions completed during the nine months ended September 30, 2019.
DERIVATIVE FINANCIAL INSTRUMENTS
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 as part of its interest rate risk management strategy. As of September 30, 2019, the Company had outstanding interest rate swaps with a combined notional value of $280 million that were designated as cash flow hedges of interest rate risk. During the nine months ended September 30, 2019, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. During March 2019, in connection with a partial paydown of the Company’s outstanding term loans, the Company terminated interest rate swaps with an aggregate notional amount of $90 million. During June 2019, in connection with a subsequent partial paydown of the Company’s outstanding unsecured term loans, the Company terminated interest rate swaps with an aggregate notional amount of $160 million. During August 2019, in connection with a partial paydown of the Company’s outstanding unsecured term loans, the Company terminated rate swaps with an aggregate notional amount of $145 million. These paydowns resulted in the Company accelerating the reclassification of gains from other comprehensive income to earnings as a result of the hedged forecasted transactions no longer being probable to occur, amounting to $0.1 million and $1.9 million for the three and nine months ended September 30, 2019, respectively.
The changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The Company recorded no ineffectiveness gain or loss during the three and nine months ended September 30, 2019 and recorded ineffectiveness gain (loss) of $47,000 and $(127,000) during the three and nine months ended September 30, 2018, respectively, which is included in interest and other investment income (loss) in the consolidated statements of operations, attributable to a floor mismatch in the underlying indices of the derivatives and the hedged interest payments made on its variable-rate debt. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next 12 months, the Company estimates that an additional $0.2 million will be reclassified as a decrease to interest expense.
The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Balance Sheet as of September 30, 2019 and December 31, 2018 (dollars in thousands):
The table below presents the effect of the Company’s derivative financial instruments on the Consolidated Statement of Operations for the nine months ending September 30, 2019 and 2018 (dollars in thousands):
Credit-risk-related Contingent Features
The Company has agreements with each of its derivative counterparties that contain a provision where 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. As of September 30, 2019, the Company did not have derivatives in a net liability position including accrued interest but excluding any adjustment for nonperformance risk related to these agreements. As of September 30, 2019, the Company has not posted any collateral related to these agreements. |
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