Note 5 - Common Stock Investment

3 Months Ended

Mar. 31, 2022

Common Stock [Member]

Notes to Financial Statements

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

5. Common Stock Investment

The Company owns approximately 25.8% of the total outstanding shares of NSP and thus can exercise significant influence over NSP and is accounted for under the equity method. The Company elected the fair-value option in accordance with ASC 825-10-10 for NSP.

The investment in NSP is a Level 3 asset in the fair value hierarchy and was initially measured using the entry price of the asset. The Company's valuation policy for common stock is to use readily available market prices on the relevant valuation date to the extent they are available. On a quarterly basis beginning March 31, 2021, the Company determines the value using widely accepted valuation techniques, including the discounted cash flow methodology whereby observable market terminal capitalization rates and discount rates are applied to the consolidated NSP cash flows, a top-down approach. In addition, as a secondary check for reasonableness, a bottoms-up approach was also used by valuing the wholly-owned self-storage assets in aggregate and development loans individually. In this bottoms-up approach, the discounted cash flow methodology is also applied to the self-storage assets owned by NSP. Additionally, the income approach is used to determine the fair value of the development loans owned by NSP whereby contractual cash flows are discounted at observable market discount rates. The valuation relies primarily on the top-down approach, but uses the bottoms-up approach to ensure reasonable accuracy.

The following table presents the NSP common stock investment as of March 31, 2022 and December 31, 2021, respectively (in thousands, except share amounts):

	Investment		Shares				Fair Value
Investment	Date	Property Type	March 31, 2022		December 31, 2021		March 31, 2022		December 31, 2021
Common Stock
NexPoint Storage Partners	11/6/2020	Self-storage		41,963		41,963	$	58,789	$	58,460