Non-controlling Interests

3 Months Ended

Mar. 31, 2022

Non-controlling interests on the Company’s consolidated balance sheet is comprised of the following:


	Balance as of
(In thousands)	March 31, 2022		December 31, 2021
Series A Preferred Units held by third parties	$	2,578	$	2,578
Common OP Units held by third parties	3,963		3,758
Total Non-controlling Interests in the Operating Partnership	6,541		6,336
Non-controlling Interests in property owning subsidiaries	373		368
Total Non-controlling interests	$	6,914	$	6,704

Non-Controlling Interests in the Operating Partnership

For preferred and common shares issued by the Company, the Company typically issues mirror securities with substantially equivalent economic rights between the Company and the Operating Partnership. The securities held by the Company are eliminated in consolidation.

Series A Preferred Units

The Company is the sole general partner and holds substantially all of the Series A Preferred Units.

In September 2021, the Company partially funded the purchase of an MOB from an unaffiliated third party by causing the OP to issue 100,000 Series A Preferred Units, with a face value of $25.00 per unit, which were recorded at issuance at a then fair value of $2.6 million, or $25.78 per unit, to the unaffiliated third party.

A holder of Series A Preferred Units has the right to receive cash distributions equivalent to the cash distributions, if any, on the Company’s Series A Preferred Stock. After holding the Series A Preferred Units for a period of one year, a holder of Series A Preferred Units has the right to redeem Series A Preferred Units for, at the option of the OP, the corresponding number of shares of the Company’s Series A Preferred Stock, or the cash equivalent. The remaining rights of the limited partners in the OP are limited, however, and do not include the ability to replace the general partner or to approve the sale, purchase or refinancing of the OP’s assets. During the three months ended March 31, 2022, Series A Preferred Unit holders were paid $46,000.

Common OP Units

The Company is the sole general partner and holds substantially all of the Common OP Units. As of March 31, 2022 and December 31, 2021, the Advisor held 90 Common OP Units, which represents a nominal percentage of the aggregate ownership in the OP.

In November 2014, the Company partially funded the purchase of a MOB from an unaffiliated third party by causing the OP to issue 405,908 Common OP Units, with a value of $10.1 million, or $25.00 per unit, to the unaffiliated third party.

A holder of Common OP Units has the right to receive cash distributions equivalent to the cash distributions, if any, on the Company’s common stock in an amount retroactively adjusted to reflect the Stock Dividends, other stock dividends and other similar events. After holding the Common OP Units for a period of one year, a holder of Common OP Units has the right to redeem Common OP Units for, at the option of the OP, the corresponding number of shares of the Company’s common stock, as retroactively adjusted for the Stock Dividends, other stock dividends and other similar events, or the cash equivalent. The remaining rights of the limited partners in the OP are limited, however, and do not include the ability to replace the general partner or to approve the sale, purchase or refinancing of the OP’s assets. During the three months ended March 31, 2021, Common OP Unit non-controlling interest holders were not paid any cash distributions. No cash distributions were paid to non-controlling interest holders during the three months ended March 31, 2022.

Stock Dividends do not cause the OP to issue additional Common OP Units, rather, the redemption ratio to common stock is adjusted. The 405,998 Common OP Units outstanding as of March 31, 2022 would be redeemable for 448,287 shares of common stock, giving effect to adjustments for the impact of the Stock Dividends through April 2022.

Non-Controlling Interests in Property Owning Subsidiaries

The Company also has investment arrangements with other unaffiliated third parties whereby such investors receive an ownership interest in certain of the Company’s property-owning subsidiaries and are entitled to receive a proportionate share of the net operating cash flow derived from the subsidiaries’ property. Upon disposition of a property subject to non-controlling interest, the investor will receive a proportionate share of the net proceeds from the sale of the property. The investor has no recourse to any other assets of the Company. Due to the nature of the Company’s involvement with these arrangements and the significance of its investment in relation to the investment of the third party, the Company has determined that it controls each entity in these arrangements and therefore the entities related to these arrangements are consolidated within the Company’s financial statements. A non-controlling interest is recorded for the investor’s ownership interest in the properties.

The following table summarizes the activity related to investment arrangements with the unaffiliated third parties:


										Distributions
		Third Party Net Investment Amount		Non-Controlling Ownership Percentage		Net Real Estate Assets Subject to Investment Arrangement				Three Months Ended March 31,
Property Name (Dollar amounts in thousands)	Investment Date	March 31, 2022		March 31, 2022		March 31, 2022		As of December 31, 2021		2022	2021
Plaza Del Rio Medical Office Campus Portfolio (1)	May 2015	$	373	2.4	%	$	12,751	$	12,925	—	—

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(1) One property within the Plaza Del Rio Medical Office Campus Portfolio was pledged to secure the Multi-Property CMBS Loan. See Note 4 - Mortgage Notes Payable for additional information.