COPT Defense Properties Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Interest Rate Derivatives

Interest Rate Derivatives

9 Months Ended

Sep. 30, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The following table sets forth the key terms and fair values of our interest rate swap derivatives, each of which was designated as a cash flow hedge of interest rate risk (dollars in thousands):



							Fair Value at
Notional Amount			Fixed Rate	Floating Rate Index	Effective Date	Expiration Date	September 30, 2018		December 31, 2017
$	100,000		1.7300%	One-Month LIBOR	9/1/2015	8/1/2019	$	695	$	252
12,931		(1)	1.3900%	One-Month LIBOR	10/13/2015	10/1/2020	349		213
100,000			1.9013%	One-Month LIBOR	9/1/2016	12/1/2022	3,937		1,046
100,000			1.9050%	One-Month LIBOR	9/1/2016	12/1/2022	3,943		1,051
50,000			1.9079%	One-Month LIBOR	9/1/2016	12/1/2022	1,951		511
							$	10,875	$	3,073

(1) The notional amount of this instrument is scheduled to amortize to $12.1 million.

The table below sets forth the fair value of our interest rate derivatives as well as their classification on our consolidated balance sheets (in thousands):



		Fair Value at
Derivatives	Balance Sheet Location	September 30, 2018		December 31, 2017
Interest rate swaps designated as cash flow hedges	Interest rate derivatives	$	10,875	$	3,073

The table below presents the effect of our interest rate derivatives on our consolidated statements of operations and comprehensive income (in thousands):



	Amount of Gain (Loss) Recognized in AOCI on Derivatives										Amount of Gain (Loss) Reclassified from AOCI into Interest Expense on Statement of Operations
	For the Three Months Ended September 30,					For the Nine Months Ended September 30,					For the Three Months Ended September 30,					For the Nine Months Ended September 30,
Derivatives in Hedging Relationships	2018		2017			2018		2017			2018		2017			2018		2017
Interest rate derivatives	$	1,325	$	(301	)	$	7,913	$	(1,877	)	$	207	$	(615	)	$	9	$	(2,740	)

Over the next 12 months, we estimate that approximately $2.5 million of gains will be reclassified from AOCI as a decrease 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 defined levels of our indebtedness, we could also be declared in default on our derivative obligations. 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. We are not in default with any of these provisions. As of September 30, 2018, we did not have any derivatives in liability positions. As of September 30, 2018, we had not posted any collateral related to these agreements.