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SEC Filings

10-Q
FOREST CITY REALTY TRUST, INC. filed this Form 10-Q on 10/30/2018
Entire Document
 
Forest City Realty Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

Fair Value Hedges of Interest Rate Risk
The Company enters into total rate of return swaps (“TROR”) on various tax-exempt fixed-rate borrowings. The TROR convert borrowings from a fixed rate to a variable rate. The TROR requires the payment of a variable interest rate, generally equivalent to the Securities Industry and Financial Markets Association (“SIFMA”) rate (1.56% at September 30, 2018) plus a spread. Additionally, the Company has guaranteed the fair value of the underlying borrowings. Fluctuation in the value of the TROR is offset by the fluctuation in the value of the underlying borrowings, resulting in minimal financial impact. At September 30, 2018, the aggregate notional amount of TROR designated as fair value hedging instruments is $676,466,000. The underlying TROR borrowings are subject to a fair value adjustment.
The following amounts were recorded on the Consolidated Balance Sheets in nonrecourse mortgage debt and notes payable, net related to the hedged borrowings in fair value hedges:
 
September 30, 2018
December 31, 2017
 
(in thousands)
Carrying amount of underlying borrowings
$
676,466

$
605,036

Cumulative fair value adjustments to underlying borrowings
(2,722
)
3,210

Fair value of underlying borrowings
$
673,744

$
608,246

Nondesignated Hedges of Interest Rate Risk
The Company uses derivative contracts to hedge certain interest rate risk, even though the contracts do not qualify for, or the Company has elected not to apply, hedge accounting. In these situations, the derivative is recorded at its fair value with changes reflected in earnings.
The Company has certain undesignated TROR where the associated debt is held by an unconsolidated affiliate or unrelated third parties. The change in fair value of these TROR is recognized in earnings. At September 30, 2018, the aggregate notional amount of these TROR is $180,321,000.
The following table summarizes the fair values and location in the Consolidated Balance Sheets of all derivative instruments:
 
Fair Value of Derivative Instruments
 
Asset Derivatives
(included in Other Assets)
 
Liability Derivatives
(included in Accounts Payable,
Accrued Expenses and Other Liabilities)
 
Current
Notional
Fair Value
 
Current
Notional
Fair Value
 
(in thousands)
 
September 30, 2018
Derivatives Designated as Hedging Instruments
 
 
 
 
 
Interest rate swaps
$
96,271

$
2,046

 
$

$

TROR
409,151

679

 
267,315

3,401

Total
$
505,422

$
2,725

 
$
267,315

$
3,401

Derivatives Not Designated as Hedging Instruments
 
 
 
 
 
Interest rate caps
$
69,518

$

 
$

$

TROR
89,124

2,509

 
91,197

8,619

Total
$
158,642

$
2,509

 
$
91,197

$
8,619

 
 
 
 
 
 
 
December 31, 2017
Derivatives Designated as Hedging Instruments
 
 
 
 
 
Interest rate swaps
$
63,372

$
1,129

 
$
34,078

$
863

TROR
369,021

3,862

 
236,015

652

Total
$
432,393

$
4,991

 
$
270,093

$
1,515

Derivatives Not Designated as Hedging Instruments
 
 
 
 
 
Interest rate caps
$
69,518

$

 
$

$

TROR
100,466

4,107

 
36,280

11,330

Total
$
169,984

$
4,107

 
$
36,280

$
11,330


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