XML 22 R11.htm IDEA: XBRL DOCUMENT

Fair Value

9 Months Ended

Sep. 30, 2021

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 included the Warrant liability and Contingent Value Rights (“CVR”) liability related to the private placement on August 24, 2020 (see Note 2). 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.

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


		Sep. 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		$	—		$	156		$	—
Interest rate swap liabilities		$	—		$	5,335		$	—


		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 and construction loan, 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 September 30, 2021 and December 31, 2020, the carrying values of the mortgage loans and construction loan were $171,273 and $160,655, respectively, and the fair values of the mortgage loans and construction loan were $174,254 and $163,906, respectively.

The Warrant was included on the Company’s consolidated balance sheet as a liability carried at its fair value from the date it was issued, August 24, 2020, through the first anniversary of its issuance date when the Warrant’s cash settlement provision expired (see Notes 2 and 7). The Warrant’s fair value 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 as of August 24, 2021, is as follows:


			Warrant Liability
Expected volatility			46.24	%
Risk free interest rate			0.23	%
Expected term (in years)			2.00
Annual dividend yield			0.89	%

			Fair Value of Derivative Warrant Liability
Fair value at December 31, 2020		$	8,790
Change in fair value December 31, 2020 through August 24, 2021			3,402
Reclassification to equity at August 24, 2021		$	12,192

The fair value of the CVR liability, prior to its expiration on August 24, 2021 (see Note 2), was estimated using a Monte Carlo simulation valuation methodology. This weighted-average was comprised of unobservable inputs including expected volatility, risk free interest rate, expected term and annual dividend yield (Level 3 inputs). The change in the fair value of the CVR liability in the 2021 nine month period reflected the expiration of the CVRA on

August 24, 2021, and elimination of the CVR liability, which was $656 as of December 31, 2020. The loss on the fair value of financial instruments of $2,746 in the 2021 nine month period reflected the loss of $3,402 for the change in the fair value of the Warrant liability from December 31, 2020, through August 24, 2021, the date it was reclassified into stockholders’ equity, partially offset by the elimination of the CVR liability.

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details