Asset Liquidation Investments and Other Investments

9 Months Ended

Sep. 30, 2013

Asset Liquidation Investments and Other Investments [Text Block]

Note 7 – Asset Liquidation Investments and Other Investments

Summarized financial information – Equity accounted asset liquidation investments

The table below details the results of operations attributable to HGI from the Joint Ventures in which it was invested.

		Nine months ended
		September 30,
		2013		2012
Gross revenues	$	5,056	$	5,976
Gross profit	$	907	$	1,445
Income from continuing operations	$	1,265	$	1,449
Net income	$	1,265	$	1,449

Other investments

The Company’s other investments as of September 30, 2013 and December 31, 2012 consisted of the following:

		September 30 ,		December 31,
		2013		2012
Knight’s Bridge Capital Partners Internet Fund No. 1 GP LLC	$	20	$	20
Polaroid		1,737		2,406
Total investments	$	1,757	$	2,426

The Company accounts for its investments under the equity method.

Knight’s Bridge Capital Partners Internet Fund No. 1 GP LLC (“Knight’s Bridge GP”)

In December 2007 the Company acquired a one-third interest in Knight’s Bridge Capital Partners Internet Fund No. 1 GP LLC (“Knight’s Bridge GP”), a private company, for a purchase price of $20. The additional two-thirds interest in Knight’s Bridge GP was acquired by parties affiliated with Counsel. Knight’s Bridge GP is the general partner of Knight’s Bridge Capital Partners Internet Fund No. 1 LP (the “Fund”). The Fund holds investments in several non-public Internet-based e-commerce businesses. Since the Company’s initial investment, the Company’s share of earnings has been almost exactly offset by cash distributions, and at September 30, 2013 the Company’s net investment was $20. Based on the Company’s analysis of Knight’s Bridge GP’s financial statements and projections as at September 30, 2013, the Company concluded that there has been no impairment in the fair value of its investment, and that its book value is the best estimate of its fair value.

Polaroid

In the second quarter of 2009, the Company indirectly acquired an approximate 5% interest in Polaroid Corporation (“Polaroid”), pursuant to a Chapter 11 reorganization in a U.S. bankruptcy court. The investment was made as part of a joint venture investor group that includes both related and non-related parties. The Company, the related parties and two of the unrelated parties formed KPL, LLC (“KPL”) to pool their individual investments in Polaroid. KPL is managed by a related party, Knight’s Bridge Capital Partners Management, L.P. (the “Management LP”), which acts as KPL’s General Partner. The Management LP is a wholly-owned subsidiary of the Company’s majority shareholder, Counsel Corporation (together with its subsidiaries, “Counsel”).

The Company’s investment in KPL has two components:

• HGI acquired Counsel’s rights and obligations as an indirect limited partner (but not Counsel’s limited partnership interest) in Knight’s Bridge Capital Partners Fund I, L.P., a related party, with respect to its investment in Class A units. HGI is also responsible for Counsel’s share of the management fees, which are approximately $40 per year. The economic interest entitles HGI to an 8% per annum preferred return. Any profits generated in addition to the preferred return, subsequent to the return of invested capital, are subject to the Management LP’s 20% carried interest.

• HGI directly acquired Class D units. These units are subject to a 2% annual management fee, payable to the General Partner, of approximately $11 per year. The units have a 10% per annum preferred return. Any profits generated in addition to the preferred return, subsequent to the return of invested capital, are subject to the Management LP’s 20% carried interest.

The components of the Company’s investment in Polaroid at September 30, 2013 and December 31, 2012 are detailed below:

September 30, 2013
		Capital		Equity in		Capital			Net
Unit type		invested		earnings		returned			investment
Class A	$	2,492	$	159	$	(1,259	)	$	1,392
Class D		617		36		(308	)		345
Total	$	3,109	$	195	$	(1,567	)	$	1,737

December 31, 2012
		Capital		Equity in		Capital			Net
Unit type		invested		earnings		returned			investment
Class A	$	2,447	$	137	$	(654	)	$	1,930
Class D		606		30		(160	)		476
Total	$	3,053	$	167	$	(814	)	$	2,406