Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurement

v3.21.2
Fair Value Measurement
6 Months Ended
Jun. 30, 2021
Fair Value Disclosures [Abstract]  
Fair Value Measurement Fair Value Measurement
At June 30, 2021 and December 31, 2020, the carrying value of receivables, accounts payable, accrued expenses and distributions payable to noncontrolling interests approximates fair value due to their short-term nature and falls under the Level 2 hierarchy. The carrying values and fair values of debt instruments are as follows (in thousands):
June 30, 2021 December 31, 2020
Carrying Value Fair Value Carrying Value Fair Value
Recourse debt $ 606,766  $ 562,832  $ 230,660  $ 230,660 
Senior debt 1,930,662  1,931,429  1,722,730  1,733,767 
Subordinated debt 999,825  1,027,504  934,386  958,880 
Securitization debt 2,072,305  2,143,734  1,908,369  2,012,283 
Total $ 5,609,558  $ 5,665,499  $ 4,796,145  $ 4,935,590 
At June 30, 2021 and December 31, 2020, the fair value of certain recourse debt and certain senior, subordinated and securitization loans approximate their carrying values because their interest rates are variable rates that approximate rates currently available to the Company. At June 30, 2021 and December 31, 2020, the fair value of the Company’s other debt instruments are based on rates currently offered for debt with similar maturities and terms. The Company’s fair value of the debt instruments fell under the Level 2 hierarchy. These valuation approaches involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market.
At June 30, 2021 and December 31, 2020, financial instruments measured at fair value on a recurring basis, based upon the fair value hierarchy, are as follows (in thousands):
June 30, 2021
Level 1 Level 2 Level 3 Total
Derivative assets:
Interest rate swaps $ —  $ 17,084  $ —  $ 17,084 
Total $ —  $ 17,084  $ —  $ 17,084 
Derivative liabilities:
Interest rate swaps $ —  $ 132,312  $ —  $ 132,312 
Total $ —  $ 132,312  $ —  $ 132,312 
Contingent consideration:        
Contingent consideration $ —  $ —  $ 2,253  $ 2,253 
Total $ —  $ —  $ 2,253  $ 2,253 
December 31, 2020
Level 1 Level 2 Level 3 Total
Derivative assets:
Interest rate swaps $ —  $ 5,218  $ —  $ 5,218 
Total $ —  $ 5,218  $ —  $ 5,218 
Derivative liabilities:
Interest rate swaps $ —  $ 175,444  $ —  $ 175,444 
Total $ —  $ 175,444  $ —  $ 175,444 
Contingent consideration:
Contingent consideration: $ —  $ —  $ 4,653  $ 4,653 
Total $ —  $ —  $ 4,653  $ 4,653 
    
The above balances are recorded in other assets and other liabilities, respectively, in the consolidated balance sheets, except for $0.1 million as of December 31, 2020 which was recorded in prepaid and other assets and except for $25.8 million and $23.9 million as of June 30, 2021 and December 31, 2020, respectively, which is recorded in accrued expenses and other liabilities.
The Company determines the fair value of its interest rate swaps using a discounted cash flow model that incorporates an assessment of the risk of non-performance by the interest rate swap counterparty and an evaluation of the Company’s credit risk in valuing derivative instruments. The valuation model uses various inputs including contractual terms, interest rate curves, credit spreads and measures of volatility.
    The Company recorded contingent consideration in connection with the July 2019 acquisition of a specific customer pipeline and assembled workforce from Omni Energy, LLC, which is dependent on the achievement of specified deployment milestones associated with the number of solar energy systems installed through 2022. The Company determined the fair value of the contingent consideration using a probability-weighted expected return methodology that considers the timing and probabilities of achieving these milestones and uses discount rates that reflect the appropriate cost of capital. Contingent consideration was valued with Level 3 inputs. The Company reassesses the valuation assumptions each reporting period, with any changes in the fair value accounted for in the consolidated statements of operations.
The following table summarizes the activity of Level 3 contingent consideration balance in the six months ended June 30, 2021 (in thousands):
Balance at December 31, 2020
$ 4,653 
Change in fair value recognized in earnings within sales and marketing expense (2,400)
Balance at June 30, 2021
$ 2,253