Mobile Infrastructure Corp Fair Value Disclosure

Note 14 — Fair Value

 

A fair value measurement is based on the assumptions that market participants would use in pricing an asset or liability in an orderly transaction. The hierarchy for inputs used in measuring fair value are as follows:

 

		Level 1 – Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
		Level 2 – Inputs include quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, and model-derived valuations whose inputs are observable.
		Level 3 – Model-derived valuations with unobservable inputs.

 

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

 

Our financial instruments include cash and cash equivalents, restricted cash, accounts receivable and accounts payable. Due to their short maturities or recent nature, the carrying amounts of these assets and liabilities approximate fair value. The estimated fair value of our notes payable were derived using Level 2 inputs and approximates $187.8 million and $186.7 million as of December 31, 2025 and 2024, respectively. The carrying amount of the Line of Credit as of December 31, 2025 approximates fair value due to its short time to maturity.

 

Recurring and Nonrecurring Fair Value Measurements

 

We have 1,900,000 shares of common stock that are subject to an earn-out structure (the "Earn-Out Shares"), as described below. The Earn-Out Shares and interest rate swap are measured and recognized at fair value on a recurring basis, while certain real estate assets and liabilities are measured and recognized at fair value as needed. Fair value measurements that occurred as of and during the years ended December 31, 2025 and 2024 were as follows (in thousands):

 

		December 31, 2025												December 31, 2024
		Level 1				Level 2				Level 3				Level 1				Level 2				Level 3
Recurring
Earn-Out Shares			—				—				—				—				—			$	935
Interest rate swap			—			$	167				—				—				—				—
Nonrecurring
Impaired real estate assets			—				—			$	30,000				—				—			$	450

 

Earn-Out Shares

 

The terms of the Earn-Out Shares allow an additional 1,900,000 shares to vest if certain milestones are achieved:

 

	•	950,000 shares vest if the aggregate volume-weighted average price for any 5-consecutive trading day period equals or exceeds $13.00 per share prior to December 31, 2026
	•	950,000 shares vest if the aggregate volume-weighted average price for any 5-consecutive trading day period equals or exceeds $16.00 per share prior to December 31, 2028

 

We estimate the fair value of each tranche of shares separately using a Monte Carlo simulation. These estimates require us to make various assumptions about the risk-free rate, expected volatility for each tranche of the Earn-Out Shares, and other items that are unobservable and are considered Level 3 inputs in the fair value hierarchy. Because we are a newly-listed company with limited share activity, we were required to exercise judgment in estimating expected volatility (currently 25.0% to 40.0%) and in selection of comparable companies.

 

The gain is recorded as the Change in Fair Value of Earn-out Liability in the Consolidated Statements of Operations. The following table reflects the change in value during the years ended December 31, 2025 and 2024 (in thousands):

 

		Level 3 Liability
Balance as of January 1, 2024		$	(1,779	)
Change in fair value recognized in earnings			844
Balance as of December 31, 2024			(935	)
Change in fair value recognized in earnings			935
Balance as of December 31, 2025		$	—

 

Interest rate swap

 

Our interest rate swap is measured at fair value on a recurring basis. The valuation is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair value of the interest rate swap is determined using the market standard methodology of valuing the expected discounted future fixed cash receipts. The variable cash or receipts are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. We evaluated the need for credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements, but believe these impacts are not material. Because we determined that the significant inputs used to value our derivatives are observable, we believe our derivative valuation is classified in Level 2 of the fair value hierarchy.

 

Impairment 

 

Our real estate assets are measured and recognized at fair value on a nonrecurring basis when we determine an impairment has occurred. To estimate fair value we  may use internally developed valuation models or independent third-parties where available. In either case, the fair value of real estate  may be based on a number of approaches including the income capitalization approach, sales comparable approach or discounted cash flow approach. We utilize market data such as sales price per stall on comparable recent real estate transactions to estimate the fair value of the real estate assets. We also utilize expected net sales proceeds to estimate the fair value of any properties that are actively being marketed for sale. Because we use estimates and assumptions regarding an assets’ future performance and cash flows as well as market conditions and discount rates, we determined the impaired assets would fall under Level 3 of the fair value hierarchy. During the years ended December 31, 2025 and 2024, we impaired approximately $3.8 million and $0.2 million of our real estate assets, respectively, as a result of property dispositions, including planned dispositions currently under contract.