Note 6 - Investment in Affiliate

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Equity Method Investments and Joint Ventures Disclosure [Text Block]

6. Investment in Affiliate

On March 19, 2019, the Company entered into subscription agreements with HC Realty, pursuant to which it purchased (i) 200,000 shares of HC Realty’s 10.00% Series B Cumulative Convertible Preferred Stock (the “Series B Stock”) for an aggregate purchase price of $2,000,000 and (ii) 300,000 shares of HC Realty’s common stock for an aggregate purchase price of $3,000,000. Certain investors affiliated with HPCM purchased an additional 850,000 shares of Series B Stock for an aggregate purchase price of $8,500,000. On April 3, April 9, and June 29, 2020, the Company entered into subscription agreements with HC Realty, pursuant to which we purchased 100,000, 250,000, and 475,000 shares of Series B Stock, respectively, for an aggregate purchase price of $8,250,000. While some of these investors have other investments with HPCM, each of these investors made a separate and direct investment in HC Realty and HPCM does not receive management fees, performance fees, or any other economic benefits with respect to these investors’ investment in HC Realty’s Series B Stock.

The Series B Stock is not deemed to be in-substance common stock and is accounted for using the measurement alternative for equity investments with no readily determinable fair value. The Series B Stock will be reported at cost, adjusted for impairments or any observable price changes in ordinary transactions with identical or similar investments issued by HC Realty.

The following table summarizes the Company’s investment in HC Realty as of the two years ended December 31, 2021 (in thousands):

	Ownership %						Investment in Affiliate Balance				Loss recorded in the Consolidated Statements of Operations (b)
	December 31, 2021			December 31, 2020			December 31, 2021		December 31, 2020		2021			2020
HC Realty Series B Stock (a)		26.8	%		28.7	%	$	10,250	$	10,250	$	-		$	-
HC Realty common stock		7.1	%		7.7	%		1,200		1,822		(458	)		(418	)
Total		33.9	%		36.4	%	$	11,450	$	12,072	$	(458	)	$	(418	)

(a) Represents investments in shares of HC Realty preferred stock with a basis of $10.25 million. Each share of preferred stock can be converted into one share of HC Realty common stock at a conversion price equal to the lesser of $9.10 per share or the fair market value per share of HC Realty common stock, subject to adjustment upon the occurrence of certain events.

(b) Loss from these investments is included in “Loss from affiliate” in the consolidated statements of operations. Since HC Realty is a Real Estate Investment Trust and not a taxable entity, the loss is not reported net of taxes.

The Company’s investment in HC Realty common stock is accounted for under the equity method of accounting. For portions of the year ended December 31, 2020, the Company owned less than 20% of the fully diluted shares outstanding. The Company determined that accounting for the investment in HC Realty common stock under the equity method was appropriate for the portion of time the Company owned less than 20% because the Company holds significant influence of HC Realty.