Fair Value

6 Months Ended

Jun. 30, 2021

Fair Value

Fair Value

3.    Fair Value

INDUS applies the provisions of ASC 820, which establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs, when measuring fair value. The categorization of an asset or liability within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value, as follows:

Level 1 applies to assets or liabilities for which there are quoted market prices in active markets for identical assets or liabilities.

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, such as quoted prices for similar assets or liabilities in active markets; quoted prices for assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Level 2 assets and liabilities include INDUS’s interest rate swap agreements (see Note 5). These inputs are readily available in public markets or can be derived from information available in publicly quoted

markets, therefore, INDUS has categorized these derivative instruments as Level 2 within the fair value hierarchy.

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. INDUS’s consolidated balance sheet includes the Warrant liability and Contingent Value Rights (“CVR”) liability related to the private placement on August 24, 2020 (see Note 9). INDUS derived these values based on the Cox-Ross-Rubenstein option-pricing model and a Monte Carlo simulation valuation methodology, respectively. Therefore, INDUS recognized these liabilities as Level 3 within the fair value hierarchy and they will be measured on a recurring basis.

The following are INDUS’s financial assets and liabilities carried at fair value and measured at fair value on a recurring basis:

	June 30, 2021
	Quoted Prices in		Significant		Significant
	Active Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)
Interest rate swap asset	$	—	$	134	$	—
Interest rate swap liabilities	$	—	$	5,937	$	—
Common stock warrant liability	$	—	$	—	$	10,165
Contingent value rights liability	$	—	$	—	$	—

	Dec. 31, 2020
	Quoted Prices in		Significant		Significant
	Active Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)
Interest rate swap liabilities	$	—	$	8,766	$	—
Common stock warrant liability	$	—	$	—	$	8,790
Contingent value rights liability	$	—	$	—	$	656

The amounts included in the consolidated financial statements for cash and cash equivalents, leasing receivables from tenants, accounts payable and accrued liabilities and interest rate swap assets and liabilities approximate their fair values because of the short-term maturities of these instruments. The fair values of the interest rate swaps (used for purposes other than trading) are determined based on discounted cash flow models that incorporate the cash flows of the derivatives as well as the current Overnight Index Swap Rate and swap curve along with other market data, taking into account current interest rates and the credit worthiness of the counterparty for assets and the credit worthiness of INDUS for liabilities.

The fair values of the mortgage loans, net of debt issuance costs, are estimated based on current rates offered to INDUS for similar debt of the same remaining maturities and, additionally, INDUS considers its credit worthiness in determining the fair value of its mortgage loans. At June 30, 2021 and December 31, 2020, the carrying values of the mortgage loans were $157,724 and $160,655, respectively, and the fair values of the mortgage loans were $161,335 and $163,906, respectively.

The fair value of the Warrant liability was estimated using the Cox-Ross-Rubenstein option-pricing model. A summary of the weighted-average significant unobservable inputs (Level 3 inputs) used in determining fair value of the Warrant liability is as follows:

		Warrant Liability
Expected volatility		46.63	%
Risk free interest rate		0.28	%
Expected term (in years)		2.15
Annual dividend yield		0.93	%
		Fair Value of Derivative Warrant Liability
Fair value at December 31, 2020	$	8,790
Change in fair value		1,375
Fair value at June 30, 2021	$	10,165

Although the fair value of the Warrant was $10,165 as of June 30, 2021, the maximum amount that INDUS would be required to pay if the Warrant were to be settled in cash is $2,018. On August 24, 2021, the cash settlement feature of the Warrant liability terminates and the fair value of the Warrant liability on that date will be reclassified to equity on INDUS’s consolidated balance sheet.

The fair value of the CVR liability (see Note 9) was estimated using a Monte Carlo simulation valuation methodology. A summary of the weighted-average significant unobservable inputs (Level 3 inputs) used in determining fair value of the CVR liability is as follows:

		Contingent Value Rights Liability
Expected volatility		24.15	%
Risk free interest rate		0.05	%
Expected term (in years)		0.15
Annual dividend yield		—	%
		Fair Value of Contingent Value Rights Liability
Fair value at December 31, 2020	$	656
Change in fair value		(656)
Fair value at June 30, 2021	$	—