0001296884 false Q3 2021 12/31 0001296884 2021-01-01 2021-09-30 0001296884 2021-11-10 0001296884 2021-09-30 0001296884 2020-12-31 0001296884 2021-07-01 2021-09-30 0001296884 2020-07-01 2020-09-30 0001296884 2020-01-01 2020-09-30 0001296884 us-gaap:CommonStockMember 2020-06-30 0001296884 us-gaap:AdditionalPaidInCapitalMember 2020-06-30 0001296884 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-06-30 0001296884 us-gaap:RetainedEarningsMember 2020-06-30 0001296884 us-gaap:NoncontrollingInterestMember 2020-06-30 0001296884 2020-06-30 0001296884 us-gaap:CommonStockMember 2020-07-01 2020-09-30 0001296884 us-gaap:AdditionalPaidInCapitalMember 2020-07-01 2020-09-30 0001296884 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-07-01 2020-09-30 0001296884 us-gaap:RetainedEarningsMember 2020-07-01 2020-09-30 0001296884 us-gaap:NoncontrollingInterestMember 2020-07-01 2020-09-30 0001296884 us-gaap:CommonStockMember 2020-09-30 0001296884 us-gaap:AdditionalPaidInCapitalMember 2020-09-30 0001296884 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-09-30 0001296884 us-gaap:RetainedEarningsMember 2020-09-30 0001296884 us-gaap:NoncontrollingInterestMember 2020-09-30 0001296884 2020-09-30 0001296884 us-gaap:CommonStockMember 2019-12-31 0001296884 us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0001296884 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-31 0001296884 us-gaap:RetainedEarningsMember 2019-12-31 0001296884 us-gaap:NoncontrollingInterestMember 2019-12-31 0001296884 2019-12-31 0001296884 us-gaap:CommonStockMember 2020-01-01 2020-09-30 0001296884 us-gaap:AdditionalPaidInCapitalMember 2020-01-01 2020-09-30 0001296884 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-01-01 2020-09-30 0001296884 us-gaap:RetainedEarningsMember 2020-01-01 2020-09-30 0001296884 us-gaap:NoncontrollingInterestMember 2020-01-01 2020-09-30 0001296884 us-gaap:CommonStockMember 2021-06-30 0001296884 us-gaap:AdditionalPaidInCapitalMember 2021-06-30 0001296884 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-06-30 0001296884 us-gaap:RetainedEarningsMember 2021-06-30 0001296884 us-gaap:NoncontrollingInterestMember 2021-06-30 0001296884 2021-06-30 0001296884 us-gaap:CommonStockMember 2021-07-01 2021-09-30 0001296884 us-gaap:AdditionalPaidInCapitalMember 2021-07-01 2021-09-30 0001296884 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-07-01 2021-09-30 0001296884 us-gaap:RetainedEarningsMember 2021-07-01 2021-09-30 0001296884 us-gaap:NoncontrollingInterestMember 2021-07-01 2021-09-30 0001296884 us-gaap:CommonStockMember 2021-09-30 0001296884 us-gaap:AdditionalPaidInCapitalMember 2021-09-30 0001296884 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-09-30 0001296884 us-gaap:RetainedEarningsMember 2021-09-30 0001296884 us-gaap:NoncontrollingInterestMember 2021-09-30 0001296884 us-gaap:CommonStockMember 2020-12-31 0001296884 us-gaap:AdditionalPaidInCapitalMember 2020-12-31 0001296884 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-12-31 0001296884 us-gaap:RetainedEarningsMember 2020-12-31 0001296884 us-gaap:NoncontrollingInterestMember 2020-12-31 0001296884 us-gaap:CommonStockMember 2021-01-01 2021-09-30 0001296884 us-gaap:AdditionalPaidInCapitalMember 2021-01-01 2021-09-30 0001296884 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-01-01 2021-09-30 0001296884 us-gaap:RetainedEarningsMember 2021-01-01 2021-09-30 0001296884 us-gaap:NoncontrollingInterestMember 2021-01-01 2021-09-30 0001296884 lvp:LightstoneValuePlusREITMember 2021-01-01 2021-09-30 0001296884 lvp:LightstoneValuePlusREITMember us-gaap:WhollyOwnedPropertiesMember lvp:IndustrialPropertiesMember 2021-01-01 2021-09-30 0001296884 lvp:LightstoneValuePlusREITMember us-gaap:WhollyOwnedPropertiesMember lvp:SevenHotelPropertiesMember 2021-01-01 2021-09-30 0001296884 lvp:LightstoneValuePlusREITMember us-gaap:WhollyOwnedPropertiesMember lvp:ResidentialRealEstatePropertiesMember 2021-01-01 2021-09-30 0001296884 2004-07-06 0001296884 lvp:LightstoneValuePlusREITMember 2004-07-01 2004-07-06 0001296884 lvp:LightstoneValuePlusREITMember 2004-07-06 0001296884 lvp:LightstoneSlpLlcMember 2021-09-30 0001296884 lvp:LightstoneSlpLlcMember 2021-01-01 2021-09-30 0001296884 lvp:St.AugustineOutletMember 2021-01-01 2021-09-30 0001296884 us-gaap:LandMember 2021-05-01 2021-05-25 0001296884 us-gaap:LandMember 2021-07-01 2021-09-30 0001296884 us-gaap:LandMember 2020-04-01 2020-04-06 0001296884 us-gaap:LandMember 2020-07-01 2020-09-30 0001296884 lvp:LightstoneSlpLlcMember 2021-01-01 2021-09-30 0001296884 lvp:ProDfjvholdingsLimitedLiabilityCompanyMember 2009-08-01 2009-08-25 0001296884 2008-01-01 2008-12-31 0001296884 2009-01-01 2009-12-31 0001296884 lvp:BoweryLandMember 2018-11-26 2018-12-03 0001296884 lvp:BordenRealtyCorpAnd399ExteriorStreetAssociatesLlcMember 2019-02-01 2019-02-27 0001296884 lvp:LowerEastSideMoxyHotelMember 2021-09-30 0001296884 lvp:LowerEastSideMoxyHotelMember 2020-12-31 0001296884 lvp:LowerEastSideMoxyHotelMember 2021-07-01 2021-09-30 0001296884 lvp:LowerEastSideMoxyHotelMember 2020-07-01 2020-09-30 0001296884 lvp:LowerEastSideMoxyHotelMember 2021-01-01 2021-09-30 0001296884 lvp:LowerEastSideMoxyHotelMember 2020-01-01 2020-09-30 0001296884 lvp:ExteriorStreetProjectMember 2021-09-30 0001296884 lvp:ExteriorStreetProjectMember 2020-12-31 0001296884 lvp:ExteriorStreetProjectMember 2021-07-01 2021-09-30 0001296884 lvp:ExteriorStreetProjectMember 2020-07-01 2020-09-30 0001296884 lvp:ExteriorStreetProjectMember 2021-01-01 2021-09-30 0001296884 lvp:ExteriorStreetProjectMember 2020-01-01 2020-09-30 0001296884 lvp:TheChioiniLivingTrustMember 2019-01-01 2019-01-10 0001296884 us-gaap:ConstructionInProgressMember 2021-07-01 2021-09-30 0001296884 us-gaap:ConstructionInProgressMember 2021-01-01 2021-09-30 0001296884 2021-05-28 0001296884 lvp:SantaClaraDataCenterMember 2021-09-30 0001296884 lvp:EquitySecuritiesPrimarilyREITsMember 2021-09-30 0001296884 lvp:EquitySecuritiesPrimarilyREITsMember 2021-01-01 2021-09-30 0001296884 lvp:MarcoOpUnitsAndOpTwoUnitsMember 2021-09-30 0001296884 lvp:MarcoOpUnitsAndOpTwoUnitsMember 2021-01-01 2021-09-30 0001296884 us-gaap:EquitySecuritiesMember 2021-09-30 0001296884 us-gaap:EquitySecuritiesMember 2021-01-01 2021-09-30 0001296884 us-gaap:CorporateBondSecuritiesMember 2021-09-30 0001296884 us-gaap:CorporateBondSecuritiesMember 2021-01-01 2021-09-30 0001296884 us-gaap:DebtSecuritiesMember 2021-09-30 0001296884 us-gaap:DebtSecuritiesMember 2021-01-01 2021-09-30 0001296884 lvp:EquitySecuritiesPrimarilyREITsMember 2020-12-31 0001296884 lvp:EquitySecuritiesPrimarilyREITsMember 2020-01-01 2020-12-31 0001296884 lvp:MarcoOpUnitsAndOpTwoUnitsMember 2020-12-31 0001296884 lvp:MarcoOpUnitsAndOpTwoUnitsMember 2020-01-01 2020-12-31 0001296884 us-gaap:EquitySecuritiesMember 2020-12-31 0001296884 us-gaap:EquitySecuritiesMember 2020-01-01 2020-12-31 0001296884 us-gaap:CorporateBondSecuritiesMember 2020-12-31 0001296884 us-gaap:CorporateBondSecuritiesMember 2020-01-01 2020-12-31 0001296884 us-gaap:DebtSecuritiesMember 2020-12-31 0001296884 us-gaap:DebtSecuritiesMember 2020-01-01 2020-12-31 0001296884 lvp:PROMember 2021-01-01 2021-09-30 0001296884 lvp:PROMember 2020-01-01 2020-09-30 0001296884 lvp:MarcoOpUnitsAndOpTwoUnitsMember 2021-07-01 2021-09-30 0001296884 lvp:MarcoOpUnitsAndOpTwoUnitsMember 2020-07-01 2020-09-30 0001296884 lvp:MarcoOpUnitsAndOpTwoUnitsMember 2020-01-01 2020-09-30 0001296884 us-gaap:FairValueInputsLevel1Member us-gaap:EquitySecuritiesMember 2021-09-30 0001296884 us-gaap:FairValueInputsLevel2Member us-gaap:EquitySecuritiesMember 2021-09-30 0001296884 us-gaap:FairValueInputsLevel3Member us-gaap:EquitySecuritiesMember 2021-09-30 0001296884 us-gaap:FairValueInputsLevel1Member lvp:MarcoOpUnitsAndOpTwoUnitsMember 2021-09-30 0001296884 us-gaap:FairValueInputsLevel2Member lvp:MarcoOpUnitsAndOpTwoUnitsMember 2021-09-30 0001296884 us-gaap:FairValueInputsLevel3Member lvp:MarcoOpUnitsAndOpTwoUnitsMember 2021-09-30 0001296884 us-gaap:FairValueInputsLevel1Member us-gaap:CorporateBondSecuritiesMember 2021-09-30 0001296884 us-gaap:FairValueInputsLevel2Member us-gaap:CorporateBondSecuritiesMember 2021-09-30 0001296884 us-gaap:FairValueInputsLevel3Member us-gaap:CorporateBondSecuritiesMember 2021-09-30 0001296884 us-gaap:FairValueInputsLevel1Member 2021-09-30 0001296884 us-gaap:FairValueInputsLevel2Member 2021-09-30 0001296884 us-gaap:FairValueInputsLevel3Member 2021-09-30 0001296884 us-gaap:FairValueInputsLevel1Member us-gaap:EquitySecuritiesMember 2020-12-31 0001296884 us-gaap:FairValueInputsLevel3Member us-gaap:EquitySecuritiesMember 2020-12-31 0001296884 us-gaap:FairValueInputsLevel3Member 2020-12-31 0001296884 us-gaap:FairValueInputsLevel1Member lvp:MarcoOpUnitsAndOpTwoUnitsMember 2020-12-31 0001296884 us-gaap:FairValueInputsLevel2Member lvp:MarcoOpUnitsAndOpTwoUnitsMember 2020-12-31 0001296884 us-gaap:FairValueInputsLevel3Member lvp:MarcoOpUnitsAndOpTwoUnitsMember 2020-12-31 0001296884 us-gaap:FairValueInputsLevel1Member us-gaap:CorporateBondSecuritiesMember 2020-12-31 0001296884 us-gaap:FairValueInputsLevel2Member us-gaap:CorporateBondSecuritiesMember 2020-12-31 0001296884 us-gaap:FairValueInputsLevel3Member us-gaap:CorporateBondSecuritiesMember 2020-12-31 0001296884 us-gaap:FairValueInputsLevel1Member 2020-12-31 0001296884 us-gaap:FairValueInputsLevel2Member 2020-12-31 0001296884 us-gaap:FairValueInputsLevel3Member 2020-12-31 0001296884 lvp:MarginLoanMember 2021-01-01 2021-09-30 0001296884 lvp:MarginLoanMember 2021-09-30 0001296884 lvp:NonRevolvingCreditFacilityMember 2021-01-01 2021-09-30 0001296884 lvp:NonRevolvingCreditFacilityMember 2021-09-30 0001296884 srt:MinimumMember us-gaap:NotesReceivableMember 2021-01-01 2021-09-30 0001296884 srt:MaximumMember us-gaap:NotesReceivableMember 2021-01-01 2021-09-30 0001296884 us-gaap:NotesReceivableMember lvp:NrSubsidiariesMember 2020-09-30 0001296884 us-gaap:NotesReceivableMember lvp:NrSubsidiariesMember 2021-09-30 0001296884 us-gaap:NotesReceivableMember lvp:NrAffiliatesMember 2020-09-30 0001296884 us-gaap:NotesReceivableMember lvp:NrAffiliatesMember 2021-09-30 0001296884 us-gaap:NotesReceivableMember lvp:NrSubsidiariesMember 2020-01-01 2020-09-30 0001296884 us-gaap:NotesReceivableMember lvp:NrSubsidiariesMember 2021-01-01 2021-09-30 0001296884 us-gaap:NotesReceivableMember lvp:NrAffiliatesMember 2020-01-01 2020-09-30 0001296884 us-gaap:NotesReceivableMember lvp:NrAffiliatesMember 2021-01-01 2021-09-30 0001296884 lvp:Lsc162ndCapitalILlcMember us-gaap:NotesReceivableMember 2021-09-30 0001296884 lvp:Lsc162ndCapitalILlcMember us-gaap:NotesReceivableMember 2021-01-01 2021-09-30 0001296884 lvp:Lsc162ndCapitalIiLlcMember us-gaap:NotesReceivableMember 2021-09-30 0001296884 lvp:Lsc162ndCapitalIiLlcMember us-gaap:NotesReceivableMember 2021-01-01 2021-09-30 0001296884 lvp:Lsc15437thLlcMember us-gaap:NotesReceivableMember 2021-09-30 0001296884 lvp:Lsc15437thLlcMember us-gaap:NotesReceivableMember 2021-01-01 2021-09-30 0001296884 lvp:Lsc1650LincolnLlcMember us-gaap:NotesReceivableMember 2021-09-30 0001296884 lvp:Lsc1650LincolnLlcMember us-gaap:NotesReceivableMember 2021-01-01 2021-09-30 0001296884 lvp:Lsc11640MayfieldLlcMember us-gaap:NotesReceivableMember 2021-09-30 0001296884 lvp:Lsc11640MayfieldLlcMember us-gaap:NotesReceivableMember 2021-01-01 2021-09-30 0001296884 lvp:Lsc87NewkirkLlcMember us-gaap:NotesReceivableMember 2021-09-30 0001296884 lvp:Lsc87NewkirkLlcMember us-gaap:NotesReceivableMember 2021-01-01 2021-09-30 0001296884 us-gaap:NotesReceivableMember 2021-09-30 0001296884 lvp:Lsc162ndCapitalILlcMember us-gaap:NotesReceivableMember 2020-12-31 0001296884 lvp:Lsc162ndCapitalILlcMember us-gaap:NotesReceivableMember 2020-01-01 2020-12-31 0001296884 lvp:Lsc162ndCapitalIiLlcMember us-gaap:NotesReceivableMember 2020-12-31 0001296884 lvp:Lsc162ndCapitalIiLlcMember us-gaap:NotesReceivableMember 2020-01-01 2020-12-31 0001296884 lvp:Lsc15437thLlcMember us-gaap:NotesReceivableMember 2020-12-31 0001296884 lvp:Lsc15437thLlcMember us-gaap:NotesReceivableMember 2020-01-01 2020-12-31 0001296884 lvp:Lsc1650LincolnLlcMember us-gaap:NotesReceivableMember 2020-12-31 0001296884 lvp:Lsc1650LincolnLlcMember us-gaap:NotesReceivableMember 2020-01-01 2020-12-31 0001296884 lvp:Lsc11640MayfieldLlcMember us-gaap:NotesReceivableMember 2020-12-31 0001296884 lvp:Lsc11640MayfieldLlcMember us-gaap:NotesReceivableMember 2020-01-01 2020-12-31 0001296884 lvp:Lsc87NewkirkLlcMember us-gaap:NotesReceivableMember 2020-12-31 0001296884 lvp:Lsc87NewkirkLlcMember us-gaap:NotesReceivableMember 2020-01-01 2020-12-31 0001296884 us-gaap:NotesReceivableMember 2020-12-31 0001296884 lvp:Lsc162ndCapitalILlcMember us-gaap:NotesReceivableMember 2021-07-01 2021-09-30 0001296884 lvp:Lsc162ndCapitalILlcMember us-gaap:NotesReceivableMember 2020-07-01 2020-09-30 0001296884 lvp:Lsc162ndCapitalILlcMember us-gaap:NotesReceivableMember 2020-01-01 2020-09-30 0001296884 lvp:Lsc162ndCapitalIiLlcMember us-gaap:NotesReceivableMember 2021-07-01 2021-09-30 0001296884 lvp:Lsc162ndCapitalIiLlcMember us-gaap:NotesReceivableMember 2020-07-01 2020-09-30 0001296884 lvp:Lsc162ndCapitalIiLlcMember us-gaap:NotesReceivableMember 2020-01-01 2020-09-30 0001296884 lvp:Lsc15437thLlcMember us-gaap:NotesReceivableMember 2021-07-01 2021-09-30 0001296884 lvp:Lsc15437thLlcMember us-gaap:NotesReceivableMember 2020-07-01 2020-09-30 0001296884 lvp:Lsc15437thLlcMember us-gaap:NotesReceivableMember 2020-01-01 2020-09-30 0001296884 lvp:Lsc1650LincolnLlcMember us-gaap:NotesReceivableMember 2021-07-01 2021-09-30 0001296884 lvp:Lsc1650LincolnLlcMember us-gaap:NotesReceivableMember 2020-07-01 2020-09-30 0001296884 lvp:Lsc1650LincolnLlcMember us-gaap:NotesReceivableMember 2020-01-01 2020-09-30 0001296884 lvp:Lsc11640MayfieldLlcMember us-gaap:NotesReceivableMember 2021-07-01 2021-09-30 0001296884 lvp:Lsc11640MayfieldLlcMember us-gaap:NotesReceivableMember 2020-07-01 2020-09-30 0001296884 lvp:Lsc11640MayfieldLlcMember us-gaap:NotesReceivableMember 2020-01-01 2020-09-30 0001296884 lvp:Lsc87NewkirkLlcMember us-gaap:NotesReceivableMember 2021-07-01 2021-09-30 0001296884 lvp:Lsc87NewkirkLlcMember us-gaap:NotesReceivableMember 2020-07-01 2020-09-30 0001296884 lvp:Lsc87NewkirkLlcMember us-gaap:NotesReceivableMember 2020-01-01 2020-09-30 0001296884 us-gaap:NotesReceivableMember 2021-07-01 2021-09-30 0001296884 us-gaap:NotesReceivableMember 2020-07-01 2020-09-30 0001296884 us-gaap:NotesReceivableMember 2021-01-01 2021-09-30 0001296884 us-gaap:NotesReceivableMember 2020-01-01 2020-09-30 0001296884 lvp:GantryParkLandingMember 2021-01-01 2021-09-30 0001296884 lvp:GantryParkLandingMember 2021-09-30 0001296884 lvp:GantryParkLandingMember 2020-12-31 0001296884 lvp:LowerEastSideMoxyHotel1Member 2021-01-01 2021-09-30 0001296884 lvp:LowerEastSideMoxyHotel1Member 2020-12-31 0001296884 lvp:LowerEastSideMoxyHotelMember 2021-01-01 2021-09-30 0001296884 lvp:LowerEastSideMoxyHotelMember 2021-09-30 0001296884 lvp:LowerEastSideMoxyHotelMember 2020-12-31 0001296884 lvp:LowerEastSideMoxyHotelJuniorMember 2021-01-01 2021-09-30 0001296884 lvp:LowerEastSideMoxyHotelJuniorMember 2021-09-30 0001296884 lvp:LowerEastSideMoxyHotelJuniorMember 2020-12-31 0001296884 lvp:ExteriorStreetLandMember 2021-01-01 2021-09-30 0001296884 lvp:ExteriorStreetLandMember 2021-09-30 0001296884 lvp:ExteriorStreetLandMember 2020-12-31 0001296884 lvp:SantaMonicaMember 2021-01-01 2021-09-30 0001296884 lvp:SantaMonicaMember 2021-09-30 0001296884 lvp:SantaMonicaMember 2020-12-31 0001296884 lvp:N87NewkirkMember 2021-01-01 2021-09-30 0001296884 lvp:N87NewkirkMember 2020-07-22 0001296884 lvp:N87NewkirkMember 2020-07-01 2020-07-22 0001296884 lvp:SantaMonicaMember 2019-11-12 0001296884 lvp:SantaMonicaMember 2019-11-01 2019-11-12 0001296884 lvp:ExteriorStreetLoanMember 2019-03-29 0001296884 lvp:ExteriorStreetLoanMember 2019-03-01 2019-03-29 0001296884 2018-12-03 0001296884 2018-12-01 2018-12-03 0001296884 2021-06-03 0001296884 lvp:N87NewkirkMember 2021-06-01 2021-06-03 0001296884 lvp:MoxySeniorLoanMember 2021-09-30 0001296884 lvp:LionhearMember 2021-06-03 0001296884 lvp:LionhearMember 2021-06-01 2021-06-03 0001296884 lvp:MoxyJuniorLoanMember 2021-06-03 0001296884 lvp:MoxyJuniorLoanMember 2021-09-30 0001296884 lvp:LowerEastSideMoxyMember 2021-09-30 0001296884 lvp:SantaMonicaMember 2021-09-30 0001296884 2021-03-15 0001296884 us-gaap:CommonStockMember 2021-01-01 2021-09-30 0001296884 lvp:East40EndAvenueMember 2021-01-01 2021-09-30 0001296884 lvp:East40EndAvenueMember 2020-01-01 2020-12-31 0001296884 lvp:East40EndAvenueMember 2021-07-01 2021-09-30 0001296884 lvp:East40EndAvenueMember 2020-07-01 2020-09-30 0001296884 lvp:East40EndAvenueMember 2020-01-01 2020-09-30 0001296884 lvp:East11thStreetMember 2021-01-01 2021-09-30 0001296884 lvp:East11thStreetMember 2020-01-01 2020-12-31 0001296884 lvp:East11thStreetMember 2021-07-01 2021-09-30 0001296884 lvp:East11thStreetMember 2020-07-01 2020-09-30 0001296884 lvp:East11thStreetMember 2020-01-01 2020-09-30 0001296884 lvp:MiamiMoxyMember 2021-01-01 2021-09-30 0001296884 lvp:MiamiMoxyMember 2020-01-01 2020-12-31 0001296884 lvp:MiamiMoxyMember 2021-07-01 2021-09-30 0001296884 lvp:MiamiMoxyMember 2020-07-01 2020-09-30 0001296884 lvp:MiamiMoxyMember 2020-01-01 2020-09-30 0001296884 2020-01-01 2020-12-31 0001296884 lvp:JointVentureMember 2021-09-30 0001296884 lvp:JointVentureMember 2020-12-31 0001296884 us-gaap:SubsequentEventMember 2021-10-01 2021-10-15 0001296884 us-gaap:SubsequentEventMember 2021-10-15 0001296884 us-gaap:SubsequentEventMember 2021-11-08 iso4217:USD xbrli:shares iso4217:USD xbrli:shares xbrli:pure

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

FORM 10-Q

 

(Mark One)

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2021

 

OR

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                      to                    

 

Commission file number 000-52610

 

LIGHTSTONE VALUE PLUS REIT I, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Maryland   20-1237795

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

1985 Cedar Bridge Avenue, Suite 1    
Lakewood, New Jersey   08701
(Address of Principal Executive Offices)   (Zip Code)

 

(732) 367-0129

(Registrant’s Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Act: None.

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒      No ☐

 

 Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒      No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   ☐   Accelerated filer   ☐
Non-accelerated filer   ☒       Smaller reporting company  ☒
    Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐      No ☒

 

As of November 10, 2021, there were approximately 22.2 million outstanding shares of common stock of Lightstone Value Plus REIT I, Inc., including shares issued pursuant to the dividend reinvestment plan.  

 

 

 

 

LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES

 

INDEX

 

    Page
PART I FINANCIAL INFORMATION  
     
Item 1. Financial Statements (unaudited)  
     
  Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020 1
     
  Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020 2
     
  Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2021 and 2020 3
     
  Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2021 and 2020 4
     
  Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020 5
     
  Notes to Consolidated Financial Statements 6
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 21
     
Item 4. Controls and Procedures 37
     
PART II OTHER INFORMATION  
     
Item 1. Legal Proceedings 38
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 38
     
Item 3. Defaults Upon Senior Securities 38
     
Item 4. Mine Safety Disclosures 38
     
Item 5. Other Information 38
     
Item 6. Exhibits 38

 

i

 

PART I. FINANCIAL INFORMATION, CONTINUED:

 

ITEM 1. FINANCIAL STATEMENTS, CONTINUED:

 

LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except per share data)

 

                 
   

As of

September 30,
2021

   

As of

December 31,
2020

 
  (unaudited)    
Assets                
                 
Investment property:                
Land and improvements   $ 27,301     $ 30,143  
Building and improvements     88,782       101,492  
Furniture and fixtures     2,457       2,453  
Construction in progress     216,957       186,196  
Gross investment property     335,497       320,284  
Less accumulated depreciation     (35,367 )     (33,038 )
Net investment property     300,130       287,246  
Investments in related parties     15,464       15,590  
Cash and cash equivalents     33,378       44,446  
Marketable securities and other investments     53,653       46,071  
Restricted cash     1,710       2,395  
Notes receivable, net     65,500       104,624  
Prepaid expenses and other assets     2,394       1,869  
                 
Total Assets   $ 472,229     $ 502,241  
                 
Liabilities and Stockholders’ Equity                
Mortgages payable, net   $ 163,945     $ 192,385  
Accounts payable, accrued expenses and other liabilities     15,940       8,641  
Due to related parties     110       241  
Tenant allowances and deposits payable     513       487  
Distributions payable     3,889       3,905  
Deferred rental income     250       399  
                 
Total Liabilities     184,647       206,058  
                 
Commitments and contingencies                
                 
Stockholders’ equity:                
Company’s Stockholders Equity:                
Preferred shares, $0.01 par value, 10.0 million shares authorized,  none issued and outstanding     -       -  
Common stock, $0.01 par value; 60.0 million shares authorized, 22.2 million and 22.3 million shares issued and outstanding, respectively     222       223  
Additional paid-in-capital     168,646       169,649  
Accumulated other comprehensive income     420       378  
Accumulated surplus     89,004       89,639  
Total Company’s stockholders’ equity     258,292       259,889  
      -       -  
Noncontrolling interests     29,290       36,294  
                 
Total Stockholders’ Equity     287,582       296,183  
                 
Total Liabilities and Stockholders’ Equity   $ 472,229     $ 502,241  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

1

 

LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share data)

(Unaudited)

 

                                 
    For the Three Months Ended September 30,     For the Nine Months Ended September 30,  
    2021     2020     2021     2020  
                         
Revenues:                                
Rental income   $ 2,300     $ 2,460     $ 7,486     $ 8,502  
Tenant recovery income     32       86       109       271  
                                 
Total revenues     2,332       2,546       7,595       8,773  
                                 
Expenses:                                
Property operating expenses     1,368       996       3,240       2,956  
Real estate taxes     71       95       291       324  
General and administrative costs     616       608       1,787       2,342  
Impairment charge     11,341       -       11,341       -  
Depreciation and amortization     1,545       939       3,826       2,907  
                                 
Total operating expenses     14,941       2,638       20,485       8,529  
                                 
Operating (loss)/income     (12,609 )     (92 )     (12,890 )     244  
Other income/(expense), net     297       31       (96 )     83  
Interest and dividend income     3,193       3,650       10,352       9,431  
Interest expense     (580 )     (798 )     (1,977 )     (2,097 )
Gain on disposition of real estate     213       -       3,802       1,562  
Unrealized (loss)/gain on marketable equity securities     (3,521 )     (1,472 )     10,556       (20,083 )
Gain/(loss) on sale and redemption of marketable securities     4,669       -       4,653       (230 )
Net (loss)/income     (8,338 )     1,319       14,400       (11,090 )
                                 
Less: net income attributable to noncontrolling interests     (582 )     (1,094 )     (3,332 )     (1,835 )
                                 
Net (loss)/income attributable to Company’s common shares   $ (8,920 )   $ 225     $ 11,068     $ (12,925 )
                                 
Net (loss)/income per Company’s common share, basic and diluted   $ (0.40 )   $ 0.01     $ 0.50     $ (0.58 )
                                 
Weighted average number of common shares outstanding, basic and diluted     22,221       22,304       22,276       22,351  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

2

 

PART I. FINANCIAL INFORMATION, CONTINUED:  

 

ITEM 1. FINANCIAL STATEMENTS, CONTINUED:

 

LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(Unaudited)

 

                                 
    For the Three Months Ended September 30,     For the Nine Months Ended September 30,  
    2021     2020     2021     2020  
                         
Net (loss)/income   $ (8,338 )   $ 1,319     $ 14,400     $ (11,090 )
                                 
Other comprehensive (loss)/income                                
Holding gain/(loss) on available for sale debt securities     4,605       627       4,696       (853 )
Reclassification adjustment for gain included in net (loss)/income     (4,669 )     -       (4,653 )     -  
                                 
Other comprehensive (loss)/income     (64 )     627       43       (853 )
                                 
Comprehensive (loss)/income     (8,402 )     1,946       14,443       (11,943 )
                                 
Less: Comprehensive income attributable to noncontrolling interests     (581 )     (1,105 )     (3,333 )     (1,816 )
                                 
Comprehensive (loss)/income attributable to Company’s common shares   $ (8,983 )   $ 841     $ 11,110     $ (13,759 )

 

The accompanying notes are an integral part of these consolidated financial statements.

 

3

 

PART I. FINANCIAL INFORMATION, CONTINUED:  

 

ITEM 1. FINANCIAL STATEMENTS, CONTINUED:

 

LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts in thousands)

(Unaudited)

 

                                                         
               

Additional

   

Accumulated

Other

                Total  
    Common     Paid-In     Comprehensive    

Accumulated

   

Noncontrolling

    Stockholders’  
    Shares     Amount     Capital     Loss     Surplus     Interests     Equity  
BALANCE, June 30, 2020     22,335     $ 223     $ 169,784     $ (1,042 )   $ 88,586     $ 30,644     $ 288,195  
Net income     -       -       -       -       225       1,094       1,319  
Other comprehensive income     -       -       -       616       -       11       627  
Distributions declared (a)     -       -       -       -       (3,903 )     -       (3,903 )
Distributions paid to noncontrolling interests     -       -       -       -       -       (13,664 )     (13,664 )
Contributions received from noncontrolling interests     -       -       -       -       -       18,436       18,436  
Tender of common shares     (55 )     -       (301 )                     -       (301 )
Shares issued from distribution reinvestment program     7       -       84       -       -       -       84  
BALANCE, September 30, 2020     22,287     $ 223     $ 169,567     $ (426 )   $ 84,908     $ 36,521     $ 290,793  

 

 

 

(a) Distributions per share were $0.175.

 

    Common    

Additional

Paid-In 

   

Accumulated

Other

Comprehensive

   

Accumulated

   

Noncontrolling

    Total Stockholders’  
    Shares     Amount     Capital     Income/(Loss)     Surplus     Interests     Equity  
BALANCE, December 31, 2019     22,608     $ 226     $ 172,749     $ 408     $ 109,559     $ 28,831       311,773  
Net loss     -       -       -       -       (12,925 )     1,835       (11,090 )
Other comprehensive loss     -       -       -       (834 )     -       (19 )     (853 )
Distributions declared (a)     -       -       -       -       (11,726 )     -       (11,726 )
Distributions paid to noncontrolling interests     -       -       -       -       -       (16,052 )     (16,052 )
Contributions received from noncontrolling interests     -       -       -       -       -       21,926       21,926  
Redemption, cancellation and tender of common shares     (343 )     (3 )     (3,429 )     -       -       -       (3,432 )
Shares issued from distribution reinvestment program     22       -       247       -       -       -       247  
BALANCE, September 30, 2020     22,287     $ 223     $ 169,567     $ (426 )   $ 84,908     $ 36,521     $ 290,793  

 

 

 

 

(a)

Distributions per share were $0.525.

 

    Common    

Additional

Paid-In

   

Accumulated

Other

Comprehensive

   

Accumulated

   

Noncontrolling

    Total Stockholders’  
    Shares     Amount     Capital   Income   Surplus    

Interests

    Equity  
BALANCE, June 30, 2021     22,309     $ 223     $ 169,810     $ 483     $ 101,813     $ 29,903       302,232  
Net loss     -       -       -       -       (8,920 )     582       (8,338 )
Other comprehensive loss     -       -       -       (63 )     -       (1 )     (64 )
Distributions declared (a)     -       -       -       -       (3,889 )     -       (3,889 )
Distributions paid to noncontrolling interests     -       -       -       -       -       (1,340 )     (1,340 )
Contributions received from noncontrolling interests     -       -       -       -       -       146       146  
Redemption and cancellation of common shares     (111 )     (1 )     (1,245 )     -       -       -       (1,246 )
Shares issued from distribution reinvestment program     8       -       81       -       -       -       81  
BALANCE, September 30, 2021     22,206     $ 222     $ 168,646     $ 420     $ 89,004     $ 29,290     $ 287,582  

 

 

 

 

(a) Distributions per share were $0.175.

 

    Common    

Additional

Paid-In

   

Accumulated

Other

Comprehensive

   

Accumulated

   

Noncontrolling

    Total Stockholders’  
    Shares     Amount   Capital     Income     Surplus    

Interests

    Equity  
BALANCE, December 31, 2020     22,294     $ 223     $ 169,649     $ 378     $ 89,639     $ 36,294       296,183  
Net income     -       -       -       -       11,068       3,332       14,400  
Other comprehensive income     -       -       -       42       -       1       43  
Distributions declared (a)     -       -       -       -       (11,703 )     -       (11,703 )
Distributions paid to noncontrolling interests     -       -       -       -       -       (10,523 )     (10,523 )
Contributions received from noncontrolling interests     -       -       -       -       -       186       186  
Redemption and cancellation of common shares     (111 )     (1 )     (1,245 )     -       -       -       (1,246 )
Shares issued from distribution reinvestment program     23       -       242       -       -       -       242  
BALANCE, September 30, 2021     22,206     $ 222     $ 168,646     $ 420     $ 89,004     $ 29,290     $ 287,582  

 

 

 

(a) Distributions per share were $0.525.

 

The accompanying notes are an integral part of these consolidated financial statements.

 

4

 

PART I. FINANCIAL INFORMATION, CONTINUED:

 

ITEM 1. FINANCIAL STATEMENTS, CONTINUED:

 

LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

 

                 
    For the Nine Months Ended
September 30, 		 
    2021     2020  
             
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net income/(loss)   $ 14,400     $ (11,090 )
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:                
Depreciation and amortization     3,826       2,907  
Unrealized (gain)/loss on marketable equity securities     (10,556 )     20,083  
(Gain)/loss on sale and redemption of marketable securities     (4,653 )     230  
Amortization of deferred financing costs     334       453  
Noncash interest income     (4,203 )     (3,701 )
Gain on disposition of real estate     (3,802 )     (1,562 )
Other non-cash adjustments     148       411  
Impairment charge     11,341       -  
Changes in assets and liabilities:                
Increase in prepaid expenses and other assets     (522 )     (528 )
Increase/(decrease) in tenant allowances and deposits payable     26       (78 )
Increase in accounts payable,  accrued expenses and other liabilities     5,711       2,758  
Decrease in due to related parties     (131 )     (4 )
Decrease in deferred rental income     (149 )     (157 )
                 
Net cash provided by operating activities     11,770       9,722  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Purchase of investment property     (42,797 )     (21,654 )
Purchase of marketable securities     (4,188 )     (7,460 )
Proceeds from sale of marketable securities     11,859       4,260  
Proceeds from disposition of real estate     20,052       2,082  
Investment in joint venture     (12 )     (123 )
Proceeds from joint venture     138       211  
Funding of notes receivable     -       (43,068 )
Proceeds from notes receivable     43,326       500  
Proceeds from investments in related parties     -       20,000  
                 
Net cash provided by/(used in) investing activities     28,378       (45,252 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Proceeds from mortgage financing     40,596       26,390  
Mortgage principal payments     (63,745 )     (935 )
Payment of loan fees and expenses     (5,692 )     (526 )
Redemption, cancellation and tender of common shares     (1,246 )     (3,432 )
Contributions received from noncontrolling interests     186       21,926  
Distributions paid to noncontrolling interests     (10,523 )     (16,052 )
Distributions paid to Company’s common stockholders     (11,477 )     (11,536 )
                 
Net cash (used in)/provided by financing activities     (51,901 )     15,835  
                 
Net change in cash, cash equivalents and restricted cash     (11,753 )     (19,695 )
Cash, cash equivalents and restricted cash, beginning of year     46,841       79,800  
Cash, cash equivalents and restricted cash, end of period   $ 35,088     $ 60,105  
                 
See Note 2 for supplemental cash flow information.                
                 
The following is a summary of the Company’s cash, cash equivalents, and restricted cash total as presented in our statements of cash flows for the periods presented:                
Cash and cash equivalents   $ 33,378     $ 57,506  
Restricted cash     1,710       2,599  
Total cash, cash equivalents and restricted cash   $ 35,088     $ 60,105  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

5

LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollar amounts in thousands, except per share/unit data and where indicated in millions)

 

 

1. Structure

 

Lightstone Value Plus REIT I, Inc. (“Lightstone REIT”), which was formerly known as Lightstone Value Plus Real Estate Investment Trust, Inc. before September 16, 2021, a Maryland corporation formed on June 8, 2004, which has elected to be taxed and qualify as a real estate investment trust for U.S. federal income tax purposes (“REIT”). The Lightstone REIT was formed primarily for the purpose of engaging in the business of investing in and owning commercial and residential real estate properties located throughout the United States.

 

The Lightstone REIT is structured as an umbrella partnership real estate investment trust, or UPREIT, and substantially all of the Company’s current and future business is and will be conducted through Lightstone Value Plus REIT, L.P. (the “Operating Partnership”), a Delaware limited partnership formed on July 12, 2004. As of September 30, 2021, the Company held a 98% general partnership interest in the Company’s Operating Partnership’s common units (“Common Units”).

 

The Lightstone REIT and the Operating Partnership and its subsidiaries are collectively referred to as the “Company” and the use of “we,” “our,” “us” or similar pronouns refers to the Lightstone REIT, its Operating Partnership or the Company as required by the context in which such pronoun is used.

 

Through its Operating Partnership, the Company owns, operates and develops commercial, residential, and hospitality properties and makes real estate-related investments, principally in the United States. The Company’s real estate investments are held alone or jointly with other parties. The Company also originates or acquires mortgage loans secured by real estate. Although most of its investments are of these types, the Company may invest in whatever types of real estate or real estate-related investments that it believes is in its best interests. Since its inception, the Company has owned and managed various commercial and residential properties located throughout the United States. The Company currently has one operating segment.

 

As of September 30, 2021, the Company has ownership interests in (i) two consolidated operating properties, (ii) two consolidated development properties and (iii) seven unconsolidated operating properties. With respect to its consolidated operating properties, the Company wholly owns the St. Augustine Outlet Center, a retail property containing approximately 0.3 million square feet of gross leasable area, and has a majority ownership interest of approximately 59.2% in Gantry Park Landing, a multi-family residential property containing 199 apartment units. With respect to its consolidated development properties, the Company wholly owns two projects consisting of the Lower East Side Moxy Hotel and the Exterior Street Project. The Company also holds a 2.5% ownership interest in seven hotel properties through a joint venture (the “Joint Venture”) which the Company accounts for using a measurement alternative under which the Joint Venture is measured at cost, adjusted for observable price changes and impairments, if any. The Joint Venture is between the Company and the operating partnership of Lightstone Value Plus REIT II, Inc., a real estate investment trust also sponsored by the Company’s Sponsor, which has a 97.5% ownership interest in the Joint Venture. Furthermore, the Company has other real estate-related investments, including preferred investments in related parties and nonrecourse loans made to unaffiliated third-party borrowers.

 

The Company’s advisor is Lightstone Value Plus REIT, LLC (the “Advisor”), which is majority owned by David Lichtenstein. On July 6, 2004, the Advisor contributed $2 to the Operating Partnership in exchange for 200 Common Units. The Company’s Advisor also owns 20,000 shares of the Company’s common stock (“Common Shares”) which were issued on July 6, 2004 for $200, or $10.00 per share. Mr. Lichtenstein also is the majority owner of the equity interests of The Lightstone Group, LLC. The Lightstone Group, LLC served as the sponsor (the “Sponsor”) during the Company’s initial public offering (the “Offering”), which terminated on October 10, 2008. The Company’s Advisor, together with its board of directors (the “Board of Directors”), is primarily responsible for making investment decisions on the Company’s behalf and managing its day-to-day operations. Through his ownership and control of The Lightstone Group, LLC, Mr. Lichtenstein is the indirect owner and manager of Lightstone SLP, LLC, a Delaware limited liability company, which owns an aggregate of $30.0 million of special general partner interests (“SLP Units”) in the Operating Partnership which were purchased, at a cost of $100,000 per unit, in connection with the Company’s Offering. Mr. Lichtenstein also acts as the Company’s Chairman and Chief Executive Officer. As a result, he exerts influence over but does not control the Lightstone REIT or the Operating Partnership.

 

The Company does not have any employees. The Advisor receives compensation and fees for services related to the investment and management of the Company’s assets.

 

The Company’s Advisor has affiliates which may manage and develop certain of its properties. However, the Company also contracts with other unaffiliated third-party property managers.

 

6

LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollar amounts in thousands, except per share/unit data and where indicated in millions)

 

The Company’s Common Shares are not currently listed on a national securities exchange. The Company may seek to list its stock for trading on a national securities exchange only if a majority of independent directors believe listing would be in the best interest of its stockholders. The Company does not intend to list its shares at this time. The Company does not anticipate that there would be any market for its shares of common stock until they are listed for trading. 

 

Related Parties

 

The Advisor and its affiliates, and Lightstone SLP, LLC are related parties of the Company. Certain of these entities are entitled to compensation for services related to the investment, management and disposition of the Company’s assets. The compensation is based on the cost of acquired properties/investments and the annual revenue earned from such properties/investments, and other such fees and expense reimbursements as outlined in each of the respective agreements.

 

Investment Impairment - St. Augustine Outlet Center

 

Because of limited leasing success, the Company has been exploring various strategic alternatives for its St. Augustine Outlet Center and as a result determined during the third quarter of 2021 that it would no longer pursue leasing of space to tenants and therefore, entered into lease termination agreements with certain tenants and also provided notice to its other tenants that it would not renew their leases at scheduled expiration.

 

As a result of this change in its leasing strategy, the Company recorded a non-cash impairment charge of $11.3 million during the third quarter of 2021 to reduce the carrying value of the St. Augustine Outlet Center to its estimated fair value of $23.3 million.  In estimating the fair value of the St. Augustine Outlet Center, the Company used management’s internal analysis prepared with consideration of local market conditions. 

 

The Company believes the reduced carrying value of the St. Augustine Outlet Center is currently recoverable.  However, if market conditions worsen unexpectedly or if changes in its strategy significantly affect any key assumptions used in determining the property’s estimated fair value, the Company may need to take additional impairment charges in future periods. 

 

Gain on Disposition of Real Estate

 

On May 25, 2021, the Company completed the disposition of a parcel of land adjacent to the St. Augustine Outlet Center for a contractual sales price of $6.8 million and recognized a gain on the disposition of real estate of approximately $3.6 million during the second quarter of 2021.

 

On April 6, 2020, the Company completed the disposition of a parcel of land adjacent to the St. Augustine Outlet Center for a contractual sales price of $2.1 million and recognized a gain on the disposition of real estate of approximately $1.6 million during the second quarter of 2020.

Noncontrolling Interests

 

Partners of Operating Partnership

 

On July 6, 2004, the Advisor contributed $2 to the Operating Partnership in exchange for 200 Common Units in the Operating Partnership. The Advisor has the right to convert the Common Units into cash or, at the option of the Company, an equal number of shares of Common Shares.

 

In connection with the Offering, Lightstone SLP, LLC, an affiliate of the Advisor, purchased an aggregate of $30.0 million of SLP Units. As the majority owner of the SLP Units, Mr. Lichtenstein is the beneficial owner of a 99% interest in such SLP Units and thus receives an indirect benefit from any distributions made in respect thereof. These SLP Units may be entitled to a portion of any regular and liquidation distributions that the Company makes to its stockholders, but only after the Company’s stockholders have received a stated preferred return.

 

In addition, an aggregate 497,209 Common Units were issued to other unrelated parties during the years ended December 31, 2008 and 2009 and remain outstanding as of September 30, 2021.

 

Other Noncontrolling Interests in Consolidated Subsidiaries

 

Other noncontrolling interests in consolidated subsidiaries include ownership interests in (i) Pro-DFJV Holdings LLC (“PRO”) held by the Company’s Sponsor, (ii) 50-01 2nd St. Associates LLC (the “2nd Street Joint Venture”), held by the Company’s Sponsor and other affiliates and (iii) various joint ventures held by affiliates of the Sponsor that have originated promissory notes to unaffiliated third parties (see Note 6). PRO’s holdings principally consist of Marco OP Units and Marco II OP Units (see Note 5). The 2nd Street Joint Venture owns Gantry Park Landing, a multi-family apartment building located in Queens, New York.

  

7

LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollar amounts in thousands, except per share/unit data and where indicated in millions)

 

 

2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The consolidated financial statements include the accounts of the Lightstone REIT and its Operating Partnership and its subsidiaries (over which the Company exercises financial and operating control). All inter-company balances and transactions have been eliminated in consolidation. In addition, interests in entities acquired are evaluated based on applicable accounting principles generally accepted in the United States of America (“GAAP”), and if deemed to be variable interest entities (“VIE”) in which the Company is the primary beneficiary are also consolidated. If the interest in the entity is determined not to be a VIE, then the entity is evaluated for consolidation based on legal form, economic substance, and the extent to which the Company has control, substantive participating rights or both under the respective ownership agreement. For entities in which the Company has less than a controlling interest but have significant influence, the Company accounts for the investment using the equity method of accounting.

 

There are judgments and estimates involved in determining if an entity in which the Company has made an investment is a VIE and, if so, whether the Company is the primary beneficiary.  The entity is evaluated to determine if it is a VIE by, among other things, calculating the percentage of equity being risked compared to the total equity of the entity.  Determining expected future losses involves assumptions of various possibilities of the results of future operations of the entity, assigning a probability to each possibility and using a discount rate to determine the net present value of those future losses.  A change in the judgments, assumptions, and estimates outlined above could result in consolidating an entity that should not be consolidated or accounting for an investment using the equity method that should in fact be consolidated, the effects of which could be material to our financial statements.

 

The accompanying unaudited interim consolidated financial statements and related notes should be read in conjunction with the audited Consolidated Financial Statements of the Company and related notes as contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. The unaudited interim consolidated financial statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair presentation of the results for the periods presented. The accompanying unaudited consolidated financial statements of Lightstone Value Plus REIT I, Inc. and its Subsidiaries have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

 

GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during a reporting period. The most significant assumptions and estimates relate to the valuation of real estate and real-estate related investments, marketable securities, notes receivable, depreciable lives, and revenue recognition. Application of these assumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates.

 

The consolidated balance sheet as of December 31, 2020 included herein has been derived from the consolidated balance sheet included in the Company’s Annual Report on Form 10-K.

 

The unaudited consolidated statements of operations for interim periods are not necessarily indicative of results for the full year or any other period.

 

COVID-19 Pandemic

 

The World Health Organization declared COVID-19 a global pandemic on March 11, 2020 and since that time many of the previously imposed restrictions and other measures which were instituted in response have been subsequently reduced or lifted. However, the COVID-19 pandemic remains highly unpredictable and dynamic and its duration and extent continue to be dependent on various developments, such as the emergence of variants to the virus that may cause additional strains of COVID-19, the administration and ultimate effectiveness of vaccines, and the eventual timeline to achieve a sufficient level of herd immunity among the general population. Accordingly, the COVID-19 pandemic may continue to have negative effects on the health of the U.S. economy for the foreseeable future.

 

8

LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollar amounts in thousands, except per share/unit data and where indicated in millions)

 

As a result of previously imposed restrictions, the Company temporarily closed its St. Augustine Outlet Center from March 20, 2020 through May 7, 2020. Primarily because of the impact of the COVID-19 pandemic, the property’s occupancy declined and also during 2020 the Company provided forbearance of certain rent payments to various tenants. Because of limited leasing success, the Company has been exploring various strategic alternatives for its St. Augustine Outlet Center and as a result determined during the third quarter of 2021 that it would no longer pursue leasing of space to tenants and therefore, entered into lease termination agreements with certain tenants and also provided notice to its other tenants that it would not renew their leases at scheduled expiration. As a result of this change in leasing strategy and resulting decrease in the fair value of the St. Augustine Outlet Center, the Company recorded a non-cash impairment charge of $11.3 million during the third quarter of 2021. See Note 1 for additional information.

 

Additionally, as a result of the COVID-19 pandemic, during 2020 the Company saw deterioration in both the occupancy and rental rates for Gantry Park Landing, which is located on Long Island, New York, as the luxury rental market in the greater New York City metropolitan area was negatively impacted. However, both occupancy and rental rates have improved considerably throughout 2021 and have returned to pre-COVID-19 levels.

 

To-date, the COVID-19 pandemic has not had any significant impact on the Company’s development projects. Furthermore, the Company’s other real estate-related investments (both its preferred investments in related parties and nonrecourse loans made to unaffiliated third-party borrowers) also relate to various development projects which are at different stages in their respective development process. These investments, which are subject to similar restrictions and other measures, have also not yet been significantly impacted by the COVID-19 pandemic.

 

The overall extent to which the Company’s business may be affected by the ongoing COVID-19 pandemic will largely depend on both current and future developments, all of which are highly uncertain and cannot be reasonably predicted.

 

If the Company’s operating properties, development projects and real estate-related investments are negatively impacted for an extended period because (i) occupancy levels and rental rates decline, (ii) tenants are unable to pay their rent, (iii) borrowers are unable to pay scheduled debt service on notes receivable, (iv) development activities are delayed and/or (v) various related party entities are unable to pay monthly preferred distributions on the Company’s preferred investments in related parties, the Company’s business and financial results could be materially and adversely impacted.

 

New Accounting Pronouncements

 

In June 2016, the FASB issued an accounting standards update which replaces the Company incurred loss impairment methodology currently in use with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.  The new guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.  The Company is currently in the process of evaluating the impact the adoption of this standard will have on the Company’s consolidated financial statements.

 

The Company has reviewed and determined that other recently issued accounting pronouncements will not have a material impact on its financial position, results of operations and cash flows, or do not apply to its current operations.

 

Supplemental Cash Flow Information

 

Supplemental cash flow information for the periods indicated is as follows:

 

           
    For the Nine Months Ended
September 30, 		 
    2021     2020  
             
Cash paid for interest   $ 6,424     $ 6,524  
Distributions declared but not paid   $ 3,889     $ 3,904  
Investment property acquired but not paid   $ 4,483     $ 2,532  
Amortization of deferred financing costs included in construction in progress   $ 848     $ 997  
Holding loss/gain on marketable securities   $ 43     $ 853  
Value of shares issued from distribution reinvestment program   $ 242     $ 247  
Accrued loan exit fee included in deferred financing costs   $ 1,100     $ -  

 

9

LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollar amounts in thousands, except per share/unit data and where indicated in millions)

 

 

3. Development Projects

 

Lower East Side Moxy Hotel

 

On December 3, 2018, the Company, through a subsidiary of the Operating Partnership, acquired three adjacent parcels of land located at 147-151 Bowery, New York, New York (collectively, the “Bowery Land”) from 151 Emmut Properties LLC and 145-149 Bowery LLC, both unaffiliated third parties, for aggregate consideration of approximately $56.5 million, excluding closing and other acquisition related costs. Additionally, on December 6, 2018, the Company, though a subsidiary of the Operating Partnership, acquired certain air rights located at 329 Broome Street, New York, New York (the “Air Rights”) from B.R.P. Realty Corp., an unaffiliated third party, for approximately $2.4 million, excluding closing and other acquisition related costs. The Company is using the Bowery Land and Air Rights for the development and construction of a 296-room Marriott Moxy hotel (the “Lower East Side Moxy Hotel”). 

 

Exterior Street Project

 

On February 27, 2019, the Company, through subsidiaries of the Operating Partnership, acquired two adjacent parcels of land located at 355 and 399 Exterior Street, New York, New York (collectively, the “Exterior Street Land”), from Borden Realty Corp and 399 Exterior Street Associates LLC, unaffiliated third parties, for an aggregate purchase price of approximately $59.0 million, excluding closing and other acquisition related costs. In September 2021, the Company subsequently acquired an additional adjacent parcel of land at cost from an affiliate of its Advisor for $1.0 million in order to achieve certain zoning compliance. The Company is using the various land parcels for the development and construction of a multi-family residential property (the “Exterior Street Project”).

 

 The following is a summary of the amounts incurred and capitalized to construction in progress for the Lower East Side Moxy Hotel and the Exterior Street Project as of the dates indicated and the amounts of interest capitalized to construction in progress for the periods indicated:

 

                                               
    Amounts Capitalized to Construction in Progress     Capitalized Interest     Capitalized Interest  
    As of
September 30, 		    As of
December 31, 		    Three Months Ended September 30,     Nine Months Ended
September 30, 		 
Development Project   2021     2020     2021     2020     2021     2020  
Lower East Side Moxy Hotel   $ 130,416     $ 98,608     $ 1,662     $ 1,146     $ 4,007     $ 3,253  
Exterior Street Project     86,532       74,230       477       722       1,516       2,510  
Total   $ 216,948     $ 172,838     $ 2,139     $ 1,868     $ 5,523     $ 5,763  

 

 

4. Disposition of the Santa Clara Data Center

 

On January 10, 2019, the Company acquired a parcel of land located at 2175 Martin Avenue, Santa Clara, California (the “Martin Avenue Land”) from an unaffiliated third party, for approximately $10.6 million. Subsequently, the Company completed certain activities associated with the potential development and construction of the Santa Clara Data Center on the Martin Avenue Land. 

 

As of December 31, 2020, the Company had incurred and capitalized to construction in progress aggregate costs of $13.4 million related to the Santa Clara Data Center, which were included in construction in progress on its consolidated balance sheet as of that date. Additionally, during the three and nine months ended September 30, 2020, $0.1 million and $0.3 million, respectively, of interest was capitalized to construction in progress for the Santa Clara Data Center. No interest was capitalized for the Santa Clara Data Center during the 2021 periods.

 

On July 7, 2021, the Company completed the disposition of the Santa Clara Data Center to Prime Data Centers, Corp. (the “Santa Clara Data Center Buyer”), an unrelated third party, for aggregate consideration of $13.9 million. In connection with the disposition of the Santa Clara Data Center, the Company recognized a gain on sale of investment property of $0.2 million during the third quarter of 2021.

 

The disposition of the Santa Clara Data Center did not qualify to be reported as discontinued operations since it did not represent a strategic shift that had a major effect on the Company’s operations and financial results. Accordingly, the operating results of the Santa Clara Data Center are reflected in the Company’s results from continuing operations for all periods presented through its date of disposition.

 

10

LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollar amounts in thousands, except per share/unit data and where indicated in millions)

 

 

5. Marketable Securities, Fair Value Measurements and Notes Payable

 

Marketable Securities:

 

The following is a summary of the Company’s available for sale securities:

 

                               
    As of September 30, 2021  
    Adjusted Cost     Gross Unrealized Gains     Gross Unrealized Losses     Fair Value  
Marketable Securities:                                
Equity securities:                                
Equity Securities, primarily REITs   $ 5,186     $ 2,855     $ (170 )   $ 7,871  
Marco OP Units and Marco II OP Units     19,227       7,968       -       27,195  
      24,413       10,823       (170 )     35,066  
Debt securities:                                
Corporate Bonds     18,145       532       (90 )     18,587  
                                 
Total   $ 42,558     $ 11,355     $ (260 )   $ 53,653  

 

    As of December 31, 2020  
    Adjusted Cost     Gross Unrealized Gains     Gross Unrealized Losses     Fair Value  
Marketable Securities:                                
Equity securities:                                
Equity Securities, primarily REITs   $ 9,386     $ 2,054     $ (575 )   $ 10,865  
Marco OP Units and Marco II OP Units     19,227       -       (1,383 )     17,844  
      28,613       2,054       (1,958 )     28,709  
Debt securities:                                
Corporate Bonds     16,964       546       (148 )     17,362  
                                 
Total   $ 45,577     $ 2,600     $ (2,106 )   $ 46,071  

 

As of both September 30, 2021 and December 31, 2020, the Company held an aggregate of 209,243 Marco OP Units and Marco II OP Units, of which 89,695 were owned by PRO. The Marco OP Units and the Marco II OP Units are exchangeable for a similar number of common operating partnership units (“Simon OP Units”) of Simon Property Group, L.P., (“Simon OP”), the operating partnership of Simon Property Group, Inc. (“Simon”), a public REIT that is an owner and operator of shopping malls and outlet centers. Subject to the various conditions, the Company may elect to exchange the Marco OP Units and/or the Marco II OP Units to Simon OP Units which must be immediately delivered to Simon in exchange for cash or similar number of shares of Simon’s common stock (“Simon Stock”). Accordingly, the Marco OP Units and Marco II OP Units are valued based on the closing price of Simon Stock, which was $129.97 per share and $85.28 per share as of September 30, 2021 and December 31, 2020, respectively.

 

Since 2020, financial markets experienced significant volatility in response to the current COVID-19 pandemic, including significant changes in market interest rates and market prices of certain equity securities. Primarily because of this volatility, the Company incurred unrealized losses of $3.5 million and $1.5 million, for the three months ended September 30, 2021 and 2020, respectively, and an unrealized gain of $10.6 million for the nine months ended September 30, 2021 and an unrealized loss of $20.1 million for the nine months ended September 30, 2020. These unrealized gains and losses incurred on the Company’s marketable equity securities are included in its consolidated statements of operations.

 

The Company considers the declines in market value of its investments in marketable debt securities to be temporary in nature. When evaluating its investments in marketable debt securities for other-than-temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer and any changes thereto, and the Company’s intent to sell, or whether it is more likely than not it will be required to sell, the marketable debt security before recovery of its amortized cost basis. During the three and nine months ended September 30, 2021 and 2020, the Company did not recognize any impairment charges on its investments in marketable debt securities. As of September 30, 2021, the Company does not consider any of its investments in marketable debt securities to be other-than-temporarily impaired.

 

11

LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollar amounts in thousands, except per share/unit data and where indicated in millions)

 

The Company may sell certain of its investments in marketable debt securities prior to their stated maturities for strategic purposes, in anticipation of credit deterioration, or for duration management.

 

Fair Value Measurements

 

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

 

The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:

 

  ● Level 1 – Quoted prices in active markets for identical assets or liabilities.
     
  ● Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
     
  ● Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

Marketable securities measured at fair value on a recurring basis as of the dates indicated are as follows:

 

                               
    Fair Value Measurement Using        
As of September 30, 2021   Level 1     Level 2     Level 3     Total  
                         
Marketable Securities:                                
Equity Securities, primarily REITs   $ 7,871     $ -     $         -     $ 7,871  
Marco OP and OP II Units     -       27,195       -       27,195  
Corporate Bonds     -       18,587       -       18,587  
Total   $ 7,871     $ 45,782     $ -     $ 53,653  

 

    Fair Value Measurement Using        
As of December 31, 2020   Level 1     Level 2     Level 3     Total  
                         
Marketable Securities:                                
Equity Securities, primarily REITs   $ 10,865     $ -     $         -     $ 10,865  
Marco OP and OP II Units     -       17,844       -       17,844  

Corporate Bonds

    -       17,362       -       17,362  
Total   $ 10,865     $ 35,206     $ -     $ 46,071  

 

The fair values of the Company’s investments in Corporate Bonds are measured using readily available quoted prices for similar assets. Additionally, as noted above, the Company’s Marco OP and Marco OP II Units are ultimately exchangeable for cash or similar number of shares of Simon Stock, therefore the Company uses the quoted market price of Simon Stock to measure the fair value of the Company’s Marco OP and Marco OP II Units.

 

12

LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollar amounts in thousands, except per share/unit data and where indicated in millions)

 

The following table summarizes the estimated fair value of our investments in marketable debt securities with stated contractual maturity dates, accounted for as available-for-sale securities and classified by the contractual maturity date of the securities:

 

       
    September 30,
2021 		 
Due in 1 year   $ 2,018  
Due in 1 year through 5 years     4,413  
Due in 5 years through 10 years     531  
Due after 10 years     11,625  
Total   $ 18,587  

 

Nonrecurring Fair Value Measurements

 

During the nine months ended September, 30, 2021, the Company recorded a non-cash impairment charge of $11.3 million to reduce the carrying value of the St. Augustine Outlet Center to its estimated fair value. In estimating the fair value of the St. Augustine Outlet Center, the Company used management’s internal comparable sales analysis prepared with consideration of local market conditions, which is considered Level 3 under the fair value hierarchy described above.

 

The following fair value hierarchy table presents information about our assets measured at fair value on a nonrecurring basis during the nine months ended September 30, 2021:

 

                                       
    Fair Value Measurement Using              
    Level 1     Level 2     Level 3     Fair Value     Loss  
Assets:                                        
Investment Property, net   $       -     $       -     $ 23,300     $ 23,300     $ 11,341  

 

The Company did not have any other significant financial assets or liabilities, which would require revised valuations that are recognized at fair value.

 

Notes Payable

  

Margin Loan

 

The Company has access to a margin loan (the “Margin Loan”) from a financial institution that holds custody of certain of the Company’s marketable securities. The Margin Loan, which is du]e on demand, bears interest at LIBOR + 0.85% (0.93% as of September 30, 2021) and is collateralized by the marketable securities in the Company’s account. The amounts available to the Company under the Margin Loan are at the discretion of the financial institution and not limited to the amount of collateral in its account. There were no amounts outstanding under this Margin Loan as of September 30, 2021 and December 31, 2020.

 

Line of Credit

 

The Company had a non-revolving credit facility (the “Line of Credit”) with a financial institution that provided for borrowings up to a maximum of $20.0 million, subject to a 55% loan-to-value ratio based on the fair value of the underlying collateral, and bore interest at LIBOR + 1.35% (1.43% as of September 30, 2021). The Line of Credit was collateralized by an aggregate of 209,243 of Marco OP Units and Marco II OP Units and was guaranteed by PRO. As of September 30, 2021, the amount of borrowings available to be drawn under the Line of Credit was approximately $15.0 million. No amounts were outstanding under the Line of Credit as of both September 30, 2021 and December 31, 2020. The Line of Credit matured on October 9, 2021 and the Company is currently finalizing the terms of a renewal of the Line of Credit with the lender.

 

6. Notes Receivable

 

Beginning in 2019, the Company has formed certain joint ventures (collectively, the “NR Joint Ventures”) between wholly-owned subsidiaries of the Operating Partnership (collectively, the “NR Subsidiaries”) and affiliates of the Sponsor (the “NR Affiliates”) which have originated nonrecourse loans (collectively, the “Joint Venture Promissory Notes”) to unaffiliated third-party borrowers (collectively, the “Joint Venture Borrowers”).

 

13

LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollar amounts in thousands, except per share/unit data and where indicated in millions)

 

The NR Subsidiaries and NR Affiliates have varying ownership interests in the NR Joint Ventures and certain other wholly-owned subsidiaries of the Operating Partnership serve as the manager and are the sole decision-maker for each of the NR Joint Ventures.

 

The Company has determined that the NR Joint Ventures are VIEs and the NR Subsidiaries are the primary beneficiaries.  Since the NR Subsidiaries are the primary beneficiaries, beginning on the applicable date of formation, the Company has consolidated the operating results and financial condition of the NR Joint Ventures and accounted for the respective ownership interests of the NR Affiliates as noncontrolling interests.

 

The Joint Venture Promissory Notes provide for monthly interest at a prescribed variable rate, subject to a floor. In connection with funding of the Joint Venture Promissory Notes, the NR Joint Ventures have received origination fees (1.00% - 1.50%) based on the principal amount of the loan and retained a portion of the loan proceeds to establish a reserve for interest and other items (the “Loan Reserves”). The Joint Venture Promissory Notes are recorded in notes receivable, net on the consolidated balance sheets.

 

The Joint Venture Promissory Notes generally have an initial term of one or two years and may provide for additional extension options subject to satisfaction of certain prescribed conditions, including the funding of an additional Loan Reserves and payment of an extension fee. The Joint Venture Promissory Notes are collateralized by either the membership interests of the Joint Venture Borrowers in the borrowing entity or the underlying real property being developed by the Joint Venture Borrower.

 

The origination fees received are presented in the consolidated balance sheets as a direct deduction from the carrying value of the Joint Venture Promissory Notes and are amortized into interest income, using a straight-line method that approximates the effective interest method, over the initial term of the Joint Venture Promissory Notes. The Loan Reserves are presented in the consolidated balance sheets as a direct deduction from the carrying value of the Joint Venture Promissory Notes and are applied against the monthly interest due over the term.

 

During the nine months ended September 30, 2021 and 2020, both the NR Subsidiaries and the NR Affiliates made aggregate contributions to the NR Joint Ventures of $0.2 million and $21.9 million, respectively. Additionally, during the nine months ended September 30, 2021 and 2020, the NR Joint Ventures made aggregate distributions to both the NR Subsidiaries and NR Affiliates of $8.6 million and $14.2 million, respectively, based on their respective membership interests.

 

The following tables summarize the Notes Receivable as of the dates indicated:

 

                                                                                     
                                      As of September 30, 2021  
Joint   Company’s
Ownership 		    Loan
Commitment 		    Origination     Origination     Maturity     Contractual
Interest 		  Outstanding           Unamortized Origination     Carrying     Unfunded  
Venture/Lender   Percentage     Amount     Fee     Date     Date     Rate   Principal     Reserves     Fee     Value     Commitment  
                                                                 
LSC 162nd Capital I LLC     45.45 %   $ 4,234       1.50 %     February 5, 2019       December 10, 2021     Libor plus 7.50% (Floor of 11%)   $ 4,076     $ (113 )   $ -     $ 3,963     $ -  
                                                                                     
LSC 162nd Capital II LLC     45.45 %     9,166       1.50 %     February 5, 2019       December 10, 2021     Libor plus 7.50% (Floor of 11%)     8,824       (242 )     -       8,582       -  
                                                                                     
LSC 1543 7th LLC     50 %     20,000       1.00 %     August 27, 2019       February 28, 2022     Libor plus 5.40% (Floor of 7.90%)     20,000       -       (83 )     19,917       -  
                                                                                     
LSC 1650 Lincoln LLC     50 %     24,000       1.00 %     August 27, 2019       February 28, 2022     Libor plus 5.40% (Floor of 7.90%)     24,000       -       (100 )     23,900       -  
                                                                                     
LSC 11640 Mayfield LLC     50 %     18,000       1.50 %     March 4, 2020       March 1, 2022     Libor plus 11.00% (Floor of 13.00%)     10,540       (1,345 )     (57 )     9,138       6,960  
                                                                                     
LSC 87 Newkirk LLC (1)     50 %     42,700       1.25 %     July 2, 2020       December 1, 2021     Libor plus 6.00% (Floor of 7.00%)     -       -       -       -       -  
                                                                                     
Total                                               $ 67,440     $ (1,700 )   $ (240 )   $ 65,500     $ 6,960  

 

(1) Repaid in full during April 2021

 

14

LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollar amounts in thousands, except per share/unit data and where indicated in millions)

 

                                      As of December 31, 2020  
Joint   Company’s
Ownership 		    Loan
Commitment 		    Origination     Origination     Maturity     Contractual
Interest 		  Outstanding           Unamortized Origination     Carrying     Unfunded  
Venture/Lender   Percentage     Amount     Fee     Date     Date     Rate   Principal     Reserves     Fee     Value     Commitment  
LSC 162nd Capital I LLC     45.45 %   $ 4,234       1.50 %     February 5, 2019       September 11, 2021     Libor plus 7.50% (Floor of 11%)   $ 4,076     $ (338 )   $ (33 )   $ 3,705     $ -  
                                                                                     
LSC 162nd Capital II LLC     45.45 %     9,166       1.50 %     February 5, 2019       September 11, 2021     Libor plus 7.50% (Floor of 11%)     8,824       (732 )     (71 )     8,021       -  
                                                                                     
LSC 1543 7th LLC     50 %     20,000       1.00 %     August 27, 2019       August 26, 2021     Libor plus 5.40% (Floor of 7.90%)     20,000       -       (33 )     19,967       -  
                                                                                     
LSC 1650 Lincoln LLC     50 %     24,000       1.00 %     August 27, 2019       August 26, 2021     Libor plus 5.40% (Floor of 7.90%)     24,000       -       (40 )     23,960       -  
                                                                                     
LSC 11640 Mayfield LLC     50 %     18,000       1.50 %     March 4, 2020       March 1, 2022     Libor plus 10.50% (Floor of 12.50%)     10,750       (2,369 )     (158 )     8,223       7,250  
                                                                                     
LSC 87 Newkirk LLC     50 %     42,700       1.25 %     July 2, 2020       December 1, 2021     Libor plus 6.00% (Floor of 7.00%)     42,700       (1,597 )     (355 )     40,748       -  
                                                                                     
Total                                               $ 110,350     $ (5,036 )   $ (690 )   $ 104,624     $ 7,250  

  

The following summarizes the interest earned (included in interest and dividend income on the consolidated statements of operations) for each of the Joint Venture Promissory Notes during the periods indicated:

 

                               
    For the Three Months Ended September 30,     For the Nine Months Ended September 30,  
Joint Venture/Lender   2021     2020     2021     2020  
                         
LSC 162nd Capital I LLC   $ 123     $ 145     $ 373     $ 508  
                                 
LSC 162nd Capital II LLC     266       314       807       1,099  
                                 
LSC 1543 7th LLC     454       444       1,348       1,317  
                                 
LSC 1650 Lincoln LLC     545       532       1,618       1,580  
                                 
LSC 11640 Mayfield LLC     383       377       1,125       866  
                                 
LSC 87 Newkirk LLC     -       812       1,585       812  
                                 
Total   $ 1,771     $ 2,624     $ 6,856     $ 6,182  

 

 

15

LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollar amounts in thousands, except per share/unit data and where indicated in millions)

 

 

7. Mortgages Payable, Net

 

Mortgages payable, net consists of the following:

 

                                       
Property/Investment   Interest Rate   Weighted Average Interest Rate as of September 30, 2021     Maturity Date   Amount Due at Maturity     As of
September 30, 2021 		    As of
December 31, 2020 		 
                                 
Gantry Park Landing   4.48%     4.48 %   November 2024   $ 65,317     $ 69,880     $ 70,868  
                                         
Lower East Side Moxy Hotel   Repaid in full on June 3, 2021           -       -       35,168  
                                         
Lower East Side Moxy Hotel Senior   LIBOR + 7.50% (floor of 8.00%)     8.00 %   June 2024     35,610       35,610       -  
                                         
Lower East Side Moxy Hotel Junior   LIBOR + 13.50% (floor of 14.00%)     14.00 %   June 2024     4,898       4,898       -  
                                         
Exterior Street Project   LIBOR + 2.25%     2.36 %   April 2022     35,000       35,000       35,000  
                                         
Santa Monica Notes Receivable   LIBOR + 3.75% (floor of 5.50%)     5.50 %   February 2022     25,000       25,000       25,000  
                                         
87 Newkirk Note Receivable   Repaid in full on April 5, 2021           -       -       27,500  
                                         
Total mortgages payable         5.15 %       $ 165,825       170,388       193,536  
                                         
Less: Deferred financing costs                             (6,443 )     (1,151 )
                                         
Total mortgages payable, net                           $ 163,945     $ 192,385  

 

 

LIBOR as of September 30, 2021 and December 31, 2020 was 0.08% and 0.14%, respectively. The Company’s loans are secured by the indicated real estate and are non-recourse to the Company, unless otherwise indicated.

 

On July 22, 2020, the Company, through the 87 Newkirk Joint Venture, entered into a $27.5 million loan (the “87 Newkirk Loan”) which bore interest at LIBOR + 3.80%, subject to a 4.80% floor, and was scheduled to initially mature on January 1, 2022. The 87 Newkirk Loan required monthly interest-only payments with the outstanding principal balance due in full at its maturity date and was collateralized by the 87 Newkirk Note Receivable. On April 5, 2021, the 87 Newkirk Joint Venture repaid the 87 Newkirk Loan in full using a portion of the proceeds it received from the repayment in full of the 87 Newkirk Note Receivable.

 

On November 12, 2019, the Company, through LSC 1543 7th LLC and LSC 1650 Lincoln LLC (collectively, the “Santa Monica Joint Ventures”), entered into a $25.0 million loan (the “Santa Monica Loan”) which bears interest at LIBOR + 3.75%, subject to a 5.50% floor, and matures on February 28, 2022. The Santa Monica Loan requires monthly interest-only payments with the outstanding principal balance due at its maturity date and is cross-collateralized by two nonrecourse loans originated by the Santa Monica Joint Ventures (see Note 6).  

  

On March 29, 2019, the Company entered into the $35.0 million Exterior Street Loan which initially bore interest at 4.50% and was scheduled to mature on April 9, 2020, but had two six-month extension options. However, because the Company exercised both extension options, the maturity date was extended to April 9, 2021 and upon the exercise of the second extension option on October 9, 2020, the interest rate became LIBOR plus 2.25%. The Exterior Street Loan requires monthly interest-only payments through its maturity date and is collateralized by the Exterior Street Project. During April 2021, the maturity date of the Exterior Street Loan was further extended to April 9, 2022.

 

16

LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollar amounts in thousands, except per share/unit data and where indicated in millions)

 

On December 3, 2018, the Company entered into a mortgage loan which was collateralized by the Lower East Side Moxy Hotel (the “Lower East Side Moxy Mortgage”) for up to $35.6 million. The Lower East Side Moxy Mortgage had an initial term of two years, bore interest at LIBOR+4.25%, subject to a 6.63% floor, and required monthly interest-only payments through its stated maturity with the entire unpaid balance due upon maturity. In November 2020 the maturity date of Lower East Side Moxy Mortgage was extended to March 3, 2021 and in March 2021 it was further extended until June 3, 2021, on which date it was then repaid in full as discussed below.

 

On June 3, 2021, the Company, through a wholly owned subsidiary, closed on a recourse construction loan facility (the “Moxy Senior Loan”) with MSD Partners, L.P. (“MSD”) providing for up to $90 million of funds for the development and construction of the Lower East Side Moxy Hotel. At closing, $35.6 million of proceeds were advanced under the Moxy Senior Loan and used to repay in full the Lower East Side Moxy Mortgage. The Moxy Senior Loan bears interest at LIBOR plus 7.50%, subject to an 8.00% floor, and initially matures on June 3, 2024, with two one-year extension options subject to the satisfaction of certain conditions. The Moxy Senior Loan is collateralized by the Lower East Side Moxy Hotel. As of September 30, 2021, the outstanding principal balance of the Moxy Senior Loan was $35.6 million and the remaining availability under the facility was up to $54.4 million.

 

Simultaneously on June 3, 2021, the Company, through the same wholly owned subsidiary, also entered into a mezzanine construction loan facility (the “Moxy Junior Loan” and together with the Moxy Senior Loan, the “Moxy Construction Loans”) with Lionheart Strategic Management LLC (“Lionheart”) providing for up to $40 million of additional funds for the development and construction of the Lower East Side Moxy Hotel. The Moxy Junior Loan bears interest at LIBOR plus 13.50%, subject to a 14.00% floor, and initially matures on June 3, 2024, with two one-year extension options subject to the satisfaction of certain conditions. The Moxy Junior Loan is subordinate to the Moxy Senior loan but also collateralized by the Lower East Side Moxy Hotel. The Company has provided a principal guarantee of up to $7.0 million with respect to the Moxy Junior Loan. As of September 30, 2021, the outstanding principal balance of the Moxy Junior Loan was $4.9 million and the remaining availability under the facility was up to $35.1 million.

 

Future draws to cover the costs associated with the development and construction of the Lower East Side Moxy Hotel will first be advanced under the Moxy Junior Loan until it has been fully funded and thereafter, funds will be advanced under the remaining availability of the Moxy Senior Loan.

 

In connection with the Moxy Construction Loans, the Company has provided certain completion and carry cost guarantees. The Company has also entered into an interest rate cap agreement pursuant to which the LIBOR rate will be capped at 3.00% on the Moxy Senior Loan through June 3, 2024 at a cost of $0.2 million. Furthermore, in connection with the Moxy Construction Loans, the Company paid $5.3 million of loan fees and expenses and accrued $1.1 million of loan exit fees which are due at the initial maturity date and are included in accounts payable, accrued expenses and other liabilities on the consolidated balance sheets as of September 30, 2021.    

 

The following table shows the contractually scheduled principal maturities of the Company’s mortgage debt during the next five years and thereafter as of September 30, 2021:

 

                                                       
    2021     2022     2023     2024     2025     Thereafter     Total  
Principal maturities   $ 340     $ 61,389     $ 1,454     $ 107,205     $      -     $      -     $ 170,388  
                                                         
Less: Deferred financing costs                                                     (6,443 )
                                                         
Total principal maturities, net                                                   $ 163,945  

 

Certain of the Company’s debt agreements require the maintenance of certain ratios, including debt service coverage. As of September 30, 2021, the Company was in compliance with all of its financial debt covenants. Additionally, certain of our mortgages payable also contain clauses providing for prepayment penalties.

 

Debt Maturities

 

The Exterior Street Loan (outstanding principal balance of $35.0 million as of September 30, 2021) is scheduled to mature on April 9, 2022. The Company intends to refinance the Exterior Street Loan on or before the its maturity date.

 

The Santa Monica Loan (outstanding principal balance of $25.0 million as of September 30, 2021) is scheduled to mature on February 28, 2022. The Company currently intends to repay the Santa Monica Loan with the proceeds from the two nonrecourse loans originated by the Santa Monica Joint Ventures (see Note 6). 

 

However, if the Company is unable to extend or refinance any of its maturing indebtedness at favorable terms, it will look to repay the then outstanding balance with available cash and/or proceeds from selective asset sales. The Company has no additional significant maturities of mortgage debt over the next 12 months.

 

17

LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollar amounts in thousands, except per share/unit data and where indicated in millions)

 

 

8. Leases

 

The Company’s retail property (St. Augustine Outlet Center) and multi-family residential property (Gantry Park Landing) are both leased to tenants under operating leases. Substantially all of our multi-family residential property leases have initial terms of 12 months or less. Our retail space leases expire between the remainder of 2021 and 2024.

 

As of September 30, 2021, the approximate fixed future minimum rent payments, excluding variable lease consideration, from the Company’s retail property, due to us under non-cancelable leases are as follows:

 

                                     
2021     2022     2023     2024     2025     Thereafter     Total  
$ 336     $ 341     $ 225     $ 40     $ -     $       -     $ 942  

 

The Company has excluded its multi-family residential property’s leases from this table as substantially all of its multi-family residential property’s leases have initial terms of 12 months of less.

 

9. Equity

 

Share Repurchase Program

 

The Company’s share repurchase program (the “SRP”) may provide its stockholders with limited, interim liquidity by enabling them to sell their shares of common stock back to the Company, subject to restrictions.

 

On March 25, 2020, the Board of Directors amended the SRP to remove stockholder notice requirements and also approved the suspension of all redemptions effective immediately.

 

Effective March 15, 2021 and May 14, 2021, the Board of Directors partially reopened the SRP to allow, subject to various conditions as set forth below, for redemptions submitted in connection with a stockholder’s death and hardship, respectively, and set the price for all such purchases to $11.18, which is 100% of the NAV per Share. Deaths that occurred subsequent to January 1, 2020 are eligible for consideration. Beginning January 1, 2022, requests for redemptions in connection with a stockholder’s death must be submitted and received by the Company within one year of the stockholder’s date of death for consideration.

 

On an annual basis, the Company will not redeem in excess of 0.5% of the number of shares outstanding as of the end of the preceding year for either death or hardship redemptions, respectively. Redemption requests are expected to be processed on a quarterly basis and may be subject to pro ration if either type of redemption requests exceed the annual limitation.

 

For the nine months ended September 30, 2021 the Company repurchased 111,470 shares of common stock, pursuant to its share repurchase program at an average price per share of $11.18 per share.

 

Net Earnings Per Share

 

Basic net earnings per share is calculated by dividing net income attributable to common shareholders by the weighted-average number of shares of common stock outstanding during the applicable period. Dilutive income per share includes the potentially dilutive effect, if any, which would occur if our outstanding options to purchase our common stock were exercised. For all periods presented dilutive net income per share is equivalent to basic net income per share.

 

10. Related Party Transactions

 

The Company has various agreements, including an advisory agreement, with the Advisor and Lightstone Value Plus REIT Management LLC (the “Property Manager”) to pay certain fees in exchange for services performed by these entities and other affiliated entities. The Company’s ability to secure financing and subsequent real estate operations are dependent upon its Advisor, Property Manager and their affiliates to perform such services as provided in these agreements.  Amounts the Company owes to the Advisor and its affiliated entities are principally for asset management fees, and are classified as due to related parties on the consolidated balance sheets.

 

18

LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollar amounts in thousands, except per share/unit data and where indicated in millions)

 

The Company, pursuant to the related party arrangements, has recorded the following amounts for the periods indicated:

 

                               
    Three Months Ended
September 30, 		    Nine Months Ended
September 30, 		 
    2021     2020     2021     2020  
Asset management fees (general and administrative costs)   $ 206     $ 245     $ 661     $ 675  
Property management fees (property operating expenses)     99       93       267       306  
Development fees and cost reimbursement(1)     877       333       2,789       1,028  
Total   $ 1,182     $ 671     $ 3,717     $ 2,009  

 

(1) Development fees and development costs that the Company reimburses its Advisor for are capitalized and are included in the carrying value of the associated development project and classified as construction in progress on the consolidated balance sheets.

 

The advisory agreement has a one-year term and is renewable for an unlimited number of successive one-year periods upon the mutual consent of the Advisor and the Company’s independent directors. Payments to the Advisor or its affiliates may include asset acquisition fees and the reimbursement of acquisition-related expenses, development fees and the reimbursement of development-related costs, financing coordination fees, asset management fees or asset management participation, and construction management fees. The Company may also reimburse the Advisor and its affiliates for actual expenses it incurs for administrative and other services provided for it. Upon the liquidation of the Company’s assets, it may pay the Advisor or its affiliates a disposition commission.

 

In connection with the Company’s Offering, Lightstone SLP, LLC purchased an aggregate of $30.0 million of SLP Units which are included in noncontrolling interests in the consolidated balance sheets. These SLP Units, the purchase price of which will be repaid only after stockholders receive a stated preferred return and their net investment, entitle Lightstone SLP, LLC to a portion of any regular distributions made by the Operating Partnership.

 

During both the three and nine months ended September 30, 2021 and 2020, distributions of $0.5 million and $1.5 million, respectively, were declared and paid on the SLP units.

 

Preferred Investments

 

The Company has entered into agreements with various related party entities that provide for it to make preferred contributions pursuant to certain instruments (the “Preferred Investments”) that entitle it to certain prescribed monthly preferred distributions (see below for additional information). The fair value of these investments approximated their carrying values based on market rates for similar instruments.

 

The Preferred Investments are summarized as follows:

 

                                                       
          Preferred Investment Balance     Investment Income (1)  
Preferred    Dividend     As of September 30,     As of December 31,     Three Months Ended September 30,     Nine Months Ended
September 30, 		 
Investments Rate     2021     2020     2021     2020     2021     2020  
40 East End Avenue     12 %   $ 6,000     $ 6,000     $ 184     $ 184     $ 546     $ 702  
East 11th Street     12 %     8,500       8,500       261       261       774       779  
Miami Moxy     12 %     -       -       -       -       -       45  
Total           $ 14,500     $ 14,500     $ 445     $ 445     $ 1,320     $ 1,526  

 

Note:

(1) Included in interest and dividend income on the consolidated statements of operations.

 

The Joint Venture

 

The Company has a 2.5% membership interest in the Joint Venture, which holds ownership interests in seven hotels. The carrying value of its investment was $1.0 million and $1.1 million, as of September 30, 2021 and December 31, 2020, respectively, which is included in investment in related parties on the consolidated balance sheets.

 

11. Financial Instruments

 

The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, restricted escrows, tenants’ accounts receivable and accounts payable and accrued expenses approximate their fair values because of the short maturity of these instruments. The carrying amounts of the notes receivable approximate their fair values because the interest rates are variable and reflective of market rates.

 

19

LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollar amounts in thousands, except per share/unit data and where indicated in millions)

 

The carrying amount and estimated fair value (in millions) of the Company’s mortgage debt is summarized as follows:

 

                       
    As of September 30, 2021     As of December 31, 2020  
    Carrying Amount     Estimated Fair Value     Carrying Amount     Estimated Fair Value  
Mortgages payable   $ 170.4     $ 174.0     $ 193.5     $ 198.0  

 

The fair value of the mortgages payable was determined by discounting the future contractual interest and principal payments by estimated current market interest rates.

 

12. Commitments and Contingencies

 

Legal Proceedings

 

From time to time in the ordinary course of business, the Company may become subject to legal proceedings, claims or disputes.

 

As of the date hereof, the Company is not a party to any material pending legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on its results of operations or financial condition, which would require accrual or disclosure of the contingency and possible range of loss.

 

13. Subsequent Events

 

Distribution Payment

 

On October 15, 2021, the distribution for the three-month period ending September 30, 2021 of $3.9 million was paid in full using a combination of cash and approximately 7,000 shares of the Company’s common stock issued pursuant to the Company’s DRIP, at a discounted price of $10.62 per share, equal to 95% of the Company’s most recently published estimated net asset value per share of $11.18 as of September 30, 2020.

 

Distribution Declaration

 

On November 8, 2021, the Company’s Board of Directors authorized and the Company declared a distribution of $0.175 per share for the quarterly period ending December 31, 2021. The quarterly distribution is the pro rata equivalent of an annual distribution of $0.70 per share, or an annualized rate of 7.0% assuming a purchase price of $10.00 per share. The distribution will be paid on or about the 15th day of the month following the quarter-end to stockholders of record at the close of business on the last day of the quarter-end. The stockholders have an option to elect the receipt of shares under the Company’s DRIP.

 

Additionally, on November 8, 2021, the Board of Directors declared a quarterly distribution for the quarterly period ending September 30, 2021 on the SLP Units at an annualized rate of 7.0%. Any future distributions on the SLP Units will always be subordinated until stockholders receive a stated preferred return.

 

Future distributions declared will be at the discretion of the Board of Directors based on their analysis of our performance over the previous periods and expectations of performance for future periods and may differ from the amount of the distribution determined for this period. The Board of Directors will consider various factors in its determination, including but not limited to, the sources and availability of capital, current rental revenues, operating and interest expenses and our ability to refinance near-term debt. In addition, the Company currently intends to continue to comply with REIT distribution requirements. The Company cannot assure that regular distributions will continue to be made or that it will maintain any particular level of distributions that it has established or may establish.

 

20

 

 

PART I. FINANCIAL INFORMATION, CONTINUED:  

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements of Lightstone Value Plus REIT I, Inc. and Subsidiaries and the notes thereto. As used herein, the terms “we,” “our” and “us” refer to Lightstone Value Plus REIT I, Inc., which was formerly known as Lightstone Value Plus Real Estate Investment Trust, Inc. before September 16, 2021, a Maryland corporation, and, as required by context, Lightstone Value Plus REIT, L.P. and its wholly owned subsidiaries, which we collectively refer to as “the Operating Partnership.” Dollar amounts are presented in thousands, except per share data and where indicated in millions.

 

Forward-Looking Statements

 

Certain information included in this Quarterly Report on Form 10-Q contains, and other materials filed or to be filed by us with the Securities and Exchange Commission, or the SEC, contain or will contain, forward-looking statements. All statements, other than statements of historical facts, including, among others, statements regarding our possible or assumed future results of our business, financial condition, liquidity, results of operations, plans and objectives, are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of Lightstone Value Plus REIT I, Inc. and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should” or similar expressions. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that actual results may differ materially from those contemplated by such forward-looking statements.

 

Such statements are based on assumptions and expectations which may not be realized and are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results, financial and otherwise, may differ from the results discussed in the forward-looking statements.

 

Risks and other factors that might cause differences, some of which could be material, include, but are not limited to, economic and market conditions, competition, tenant or joint venture partner(s) bankruptcies, changes in governmental, tax, real estate and zoning laws and regulations, failure to increase tenant occupancy and operating income, rejection of leases by tenants in bankruptcy, financing and development risks, construction and lease-up delays, cost overruns, the level and volatility of interest rates, the rate of revenue increases versus expense increases, the financial stability of various tenants and industries, the failure of the Company (defined herein) to make additional investments in real estate properties, the failure to upgrade our tenant mix, restrictions in current financing arrangements, the failure to fully recover tenant obligations for common area maintenance (“CAM”), insurance, taxes and other property expenses, the failure of the Company to continue to qualify as a real estate investment trust (“REIT”), the failure to refinance debt at favorable terms and conditions, an increase in impairment charges, loss of key personnel, failure to achieve earnings/funds from operations targets or estimates, conflicts of interest with the Advisor, Sponsor and their affiliates, failure of joint venture relationships, significant costs related to environmental issues and uncertainties regarding the impact of the current COVID-19 pandemic, and restrictions intended to prevent its spread on our business and the economy generally, as well as other risks listed from time to time in this Form 10-Q, our Form 10-K and in the Company’s other reports filed with the SEC.

 

We believe these forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are qualified in their entirety by these cautionary statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time unless required by law.

  

Overview

 

Lightstone Value Plus REIT I, Inc. (the “Lightstone REIT”), (together with the Operating Partnership (as defined below), the “Company”, also referred to as “we”, “our” or “us” herein) has and expects to continue to acquire and operate or develop in the future, commercial, residential and hospitality properties and/or make real estate-related investments, principally in the United States. Our acquisitions and investments are, principally conducted through the Operating Partnership, and may include both portfolios and individual properties.

 

21

 

 

As of September 30, 2021, we have ownership interests in (i) two consolidated operating properties, (ii) two consolidated development properties and (iii) seven unconsolidated operating properties. With respect to our consolidated operating properties, we wholly own the St. Augustine Outlet Center, a retail property containing approximately 0.3 million square feet of gross leasable area, and have a majority ownership interest of approximately 59.2% in Gantry Park Landing, a multi-family residential property containing 199 apartment units. With respect to our consolidated development properties, we wholly own two projects consisting of the Lower East Side Moxy Hotel and the Exterior Street Project. We also hold a 2.5% ownership interest in seven hotel properties through a joint venture (the “Joint Venture”) which we account for using a measurement alternative under which the Joint Venture is measured at cost, adjusted for observable price changes and impairments, if any. The Joint Venture is between us and the operating partnership of Lightstone Value Plus REIT II, Inc., a real estate investment trust also sponsored by our Sponsor, which has a 97.5% ownership interest in the Joint Venture. Furthermore, we have other real estate-related investments, including preferred contributions that were made pursuant to agreements with various related party entities (the “Preferred Investments”) and nonrecourse promissory notes made to unaffiliated third-parties. Our real estate investments have been and are expected to continue to be held by the Company alone or jointly with other parties.

 

We do not have employees. We entered into an advisory agreement pursuant to which the Advisor supervises and manages our day-to-day operations and selects our real estate and real estate related investments, subject to oversight by our Board of Directors. We pay the Advisor fees for services related to the investment and management of our assets, and we will reimburse the Advisor for certain expenses incurred on our behalf.

 

To maintain our qualification as a REIT, we engage in certain activities through taxable REIT subsidiaries (“TRSs”). As such, we may still be subject to U.S. federal and state income and franchise taxes from these activities.

 

Acquisitions and Investment Strategy

 

We have, to date, acquired and/or developed residential, commercial and hospitality properties principally, all of which are located in the United States and also made other real estate-related investments. Our acquisitions have included both portfolios and individual properties. Our current operating properties consist of one retail property (the St. Augustine Outlet Center) and one multi-family residential property (Gantry Park Landing). We have also acquired various parcels of land and air rights related to the development and construction of real estate properties. Additionally, we have made preferred investments in related parties and originated nonrecourse loans to unaffiliated third-party borrowers.

 

Investments in real estate are generally made through the purchase of all or part of a fee simple ownership, or all or part of a leasehold interest. We may also purchase limited partnership interests, limited liability company interests and other equity securities. We may also enter into joint ventures with related parties for the acquisition, development or improvement of properties as well as general partnerships, co-tenancies and other participations with real estate developers, owners and others for the purpose of developing, owning and operating real properties. We will not enter into a joint venture to make an investment that we would not be permitted to make on our own. Not more than 10% of our total assets will be invested in unimproved real property. For purposes of this paragraph, “unimproved real properties” does not include properties acquired for the purpose of producing rental or other operating income, properties under construction and properties for which development or construction is planned within one year.

 

Current Environment

 

Our operating results are substantially impacted by the overall health of local, U.S. national and global economies and may be influenced by market and other challenges. Additionally, our business and financial performance may be adversely affected by current and future economic and other conditions; including, but not limited to, availability or terms of financings, financial markets volatility, political upheaval or uncertainty, natural and man-made disasters, terrorism and acts of war, unfavorable changes in laws and regulations, outbreaks of contagious diseases, cybercrime, loss of key relationships, and recession.

 

 COVID-19 Pandemic

 

The World Health Organization declared COVID-19 a global pandemic on March 11, 2020 and since that time many of the previously imposed restrictions and other measures which were instituted in response have been subsequently reduced or lifted. However, the COVID-19 pandemic remains highly unpredictable and dynamic and its duration and extent continue to be dependent on various developments, such as the emergence of variants to the virus that may cause additional strains of COVID-19, the administration and ultimate effectiveness of vaccines, and the eventual timeline to achieve a sufficient level of herd immunity among the general population. Accordingly, the COVID-19 pandemic may continue to have negative effects on the health of the U.S. economy for the foreseeable future.

 

22

 

 

As a result of previously imposed restrictions, we temporarily closed our St. Augustine Outlet Center from March 20, 2020 through May 7, 2020. Primarily because of the impact of the COVID-19 pandemic, the property’s occupancy declined and also during 2020 we provided forbearance of certain rent payments to various tenants. Because of limited leasing success, we have been exploring various strategic alternatives for our St. Augustine Outlet Center and as a result determined during the third quarter of 2021 that we would no longer pursue leasing of space to tenants and therefore, entered into lease termination agreements with certain tenants and also provided notice to our other tenants that we would not renew their leases at scheduled expiration. As a result of this change in leasing strategy and resulting decrease in the fair value of the St. Augustine Outlet Center, we recorded a non-cash impairment charge of $11.3 million during the third quarter of 2021. See Note 1 of the Notes to Consolidated Financial Statements for additional information.

 

Additionally, as a result of the COVID-19 pandemic, during 2020 we saw deterioration in both the occupancy and rental rates for Gantry Park Landing, which is located on Long Island, New York, as the luxury rental market in the greater New York City metropolitan area was negatively impacted. However, both occupancy and rental rates have improved considerably throughout 2021 and have returned to pre-COVID-19 levels.  

 

To-date, the COVID-19 pandemic has not had any significant impact on our development projects. Furthermore, our other real estate-related investments (both our preferred investments in related parties and nonrecourse loans made to unaffiliated third-party borrowers) also relate to various development projects which are at different stages in their respective development process. These investments, which are subject to similar restrictions and other measures, have also not yet been significantly impacted by the COVID-19 pandemic.

 

The overall extent to which our business may be affected by the ongoing COVID-19 pandemic will largely depend on both current and future developments, all of which are highly uncertain and cannot be reasonably predicted.

 

If our operating properties, development projects and real estate-related investments are negatively impacted for an extended period because (i) occupancy levels and rental rates further decline, (ii) tenants are unable to pay their rent, (iii) borrowers are unable to pay scheduled debt service on notes receivable, (iv) development activities are delayed and/or (v) various related party entities are unable to pay monthly preferred distributions on our preferred investments in related parties, our business and financial results could be materially and adversely impacted.

 

We are not currently aware of any other material trends or uncertainties, favorable or unfavorable, that may be reasonably anticipated to have a material impact on either capital resources or the revenues or income to be derived from our operations, other than those referred to above or throughout this Form 10-Q. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during a reporting period.

 

Wholly Owned and Consolidated Real Estate Properties:

 

    Location   Year Built (Range of years built)   Date Acquired   Gross Leasable Area (“GLA”) in Square Feet/Leaseable Units     Percentage Occupied as of September 30,
2021 		   

Annualized Revenues based on rents at

September 30,
2021

  Annualized Revenues per square foot/unit at September 30,
2021 		 
                                   
St. Augustine Outlet Center (Retail Outlet Shopping Center (1)   St. Augustine, Florida   1998   March 2006     328,125  GLA     71.4 %    $1.6 million   $ 6.96  sqft
Gantry Park Landing (Multi-Family Apartment Building)   Long Island City, New York   2013   August 2013     199  units     98.5 %    $9.2 million   $ 47,075 unit

 

Annualized revenue is defined as the minimum monthly payments due as of September 30, 2021 annualized, excluding periodic contractual fixed increases and rents calculated based on a percentage of tenants’ sales. The annualized base rent disclosed in the table above includes all concessions, abatements and reimbursements of rent to tenants as September 30, 2021.

 

Development Projects

 

Lower East Side Moxy Hotel

 

On December 3, 2018, we initially acquired three adjacent parcels of land located at 147-151 Bowery, New York, New York and subsequently acquired an additional adjacent parcel in September 2021 on which we are developing and constructing a 296-room Marriott Moxy hotel (the “Lower East Side Moxy Hotel”).

 

23

 

 

Exterior Street Project

 

On February 27, 2019, we, acquired two adjacent parcels of land located at 355 and 399 Exterior Street, New York, New York, on which we are developing and constructing a multi-family residential property (the “Exterior Street Project”).

 

The following is a summary of the amounts incurred and capitalized to construction in progress for the Lower East Side Moxy Hotel and the Exterior Street Project as of September 30, 2021:

 

Development Project      
Lower East Side Moxy Hotel   $ 130,416  
Exterior Street Project     86,532  
Total   $ 216,948  

 

Disposition of the Santa Clara Data Center

 

On January 10, 2019, we acquired a parcel of land located at 2175 Martin Avenue, Santa Clara, California (the “Martin Avenue Land”). Subsequently, we completed certain activities associated with the potential development and construction of a data center (the “Santa Clara Data Center”) on the Martin Avenue Land.

 

As of December 31, 2020, we incurred and capitalized to construction in progress aggregate costs of $13.4 million related to the Santa Clara Data Center, which were included in construction in progress on our consolidated balance sheet as of that date. Additionally, during the three and nine months ended September 30, 2020, $0.1 million and $0.3 million, respectively, of interest was capitalized to construction in progress for the Santa Clara Data Center. No interest was capitalized for the Santa Clara Data Center during the 2021 periods.

 

On July 7, 2021, we completed the disposition of the Santa Clara Data Center to Prime Data Centers, Corp. (the “Santa Clara Data Center Buyer”) an unrelated third party, for aggregate consideration of $13.9 million. In connection with the disposition of the Santa Clara Data Center, we recognized a gain on sale of investment property of $0.2 million during the third quarter of 2021.

 

The disposition of the Santa Clara Data Center did not qualify to be reported as discontinued operations since it did not represent a strategic shift that had a major effect on our operations and financial results. Accordingly, the operating results of the Santa Clara Data Center are reflected in our results from continuing operations for all periods presented through its date of disposition.

 

Investment Impairment - St. Augustine Outlet Center

 

Because of limited leasing success, we have been exploring various strategic alternatives for our St. Augustine Outlet Center and as a result determined during the third quarter of 2021 that we would no longer pursue leasing of space to tenants and therefore, entered into lease termination agreements with certain tenants and also provided notice to our other tenants that we would not renew their leases at scheduled expiration.

 

As a result of this change in our leasing strategy, we recorded a non-cash impairment charge of $11.3 million during the third quarter of 2021 to reduce the carrying value of the St. Augustine Outlet Center to its estimated fair value of $23.3 million.  In estimating the fair value of the St. Augustine Outlet Center, we used management’s internal analysis prepared with consideration of local market conditions. 

 

We believe the reduced carrying value of the St. Augustine Outlet Center is currently recoverable.  However, if market conditions worsen unexpectedly or if changes in our strategy significantly affect any key assumptions used in determining the property’s estimated fair value, we may need to take additional impairment charges in future periods. 

 

24

 

 

Results of Operations

 

For the Three Months Ended September 30, 2021 vs. September 30, 2020

 

Consolidated

 

Revenues

 

Our revenues are comprised of rental income and tenant recovery income. Total revenues decreased by $0.2 million to $2.3 million for the three months ended September 30, 2021 compared to $2.5 million for the same period in 2020.

 

Property operating expenses

 

Property operating expenses increased by $0.4 million to $1.4 million for the three months ended September 30, 2021 compared to $1.0 million for the same period in 2020. The increase in property operating expenses is primarily a result of lease termination fees incurred for the St. Augustine Outlet Center. (See “Investment Impairment - St. Augustine Outlet Center” above)

 

Real estate taxes

 

Real estate taxes were $0.1 million for both the three months ended September 30, 2021 and 2020.

 

General and administrative expenses

 

General and administrative expenses were $0.6 million for both the three months ended September 30, 2021 and 2020.

 

Depreciation and amortization

 

Depreciation and amortization increased by $0.6 million to $1.5 million for the three months ended September 30, 2021 compared to $0.9 million for the same period in 2020. The increase in depreciation and amortization reflects changes to the estimated remaining useful life of certain tenant-related building improvements resulting from the lease terminations for the St. Augustine Outlet Center. See “Investment Impairment - St. Augustine Outlet Center” above.

 

Interest and dividend income

 

Interest and dividend income decreased by $0.5 million to $3.2 million for the three months ended September 30, 2021 compared to $3.7 million for the same period in 2020. The decrease primarily reflects lower interest income earned on our notes receivable of $0.9 million offset by higher interest and dividend income earned on our available cash and investments in marketable securities of $0.4 million.

 

Interest expense

 

Interest expense, including amortization of deferred financing costs, decreased by $0.2 million to $0.6 million for the three months ended September 30, 2021 compared to $0.8 million for the same period in 2020. During the three months ended September 30, 2021 and 2020, $2.1 million and $1.9 million, respectively, of interest was capitalized to construction in progress for our development projects.

 

Gain on disposition of real estate

 

On July 7, 2021, we completed the disposition of the Santa Clara Data Center for a contractual sales price of $13.9 million and recognized a gain on the disposition of real estate of approximately $0.2 million during the third quarter of 2021.

 

Unrealized (loss)/gain on marketable equity securities

 

During the three months ended September 30, 2021 and 2020, we recorded unrealized losses on marketable equity securities of $3.5 million and $1.5 million, respectively. These unrealized losses represented the change in the fair value of our marketable equity securities during those periods.

 

Gain/(loss) on sale and redemption of marketable securities

 

During the three months ended September 30, 2021, we recorded a gain on the sale of marketable securities of $4.7 million. This gain represented the difference between the sales price and carrying value of our marketable securities sold during this period.

 

25

 

 

Impairment charge

 

During the three months ended September 30, 2021, we recorded a non-cash impairment charge of $11.3 million to reduce the carrying value of our St. Augustine Outlet Center to its estimated fair value. See “Investment Impairment - St. Augustine Outlet Center” above.

 

Noncontrolling interests

 

The net earnings allocated to noncontrolling interests relates to (i) parties of the Company that hold units in the Operating Partnership, (ii) the interest in PRO-DFJV Holdings LLC (“PRO”) held by our Sponsor, (iii) the ownership interests in 50-01 2nd St. Associates LLC (the “2nd Street Joint Venture”) held by our Sponsor and other affiliates and (iv) the ownership interest in various joint ventures held by affiliates of our Sponsor that have originated nonrecourse loans to unaffiliated third-party borrowers.

 

For the Nine Months Ended September 30, 2021 vs. September 30, 2020

 

Consolidated – Continuing Operations

 

Revenues

 

Our revenues are comprised of rental income and tenant recovery income. Total revenues decreased by approximately $1.2 million to $7.6 million for the nine months ended September 30, 2021 compared to $8.8 million for the same period in 2020. This decrease was primarily attributable to reduced occupancy and rental rates for Gantry Park Landing during the 2021 period resulting from the COVID-19 pandemic.

 

Property operating expenses

 

Property operating expenses increased by $0.2 million to $3.2 million for the nine months ended September 30, 2021 compared to $3.0 million for the same period in 2020. The increase in property operating expenses is primarily a result of lease termination fees incurred for the St. Augustine Outlet Center. (See “Investment Impairment - St. Augustine Outlet Center” above)

 

Real estate taxes

 

Real estate taxes were $0.3 million for both the nine months ended September 30, 2021 and 2020.

 

General and administrative expenses

 

General and administrative expenses decreased by $0.5 million to $1.8 million for the nine months ended September 30, 2021 compared to $2.3 million for the same period in 2020 principally due to a decrease in bad debt expense.

 

Depreciation and amortization

 

Depreciation and amortization increased by $0.9 million to $3.8 million for the nine months ended September 30, 2021 compared to $2.9 million for the same period in 2020. The increase in depreciation and amortization reflects changes to the estimated remaining useful life of certain tenant-related building improvements resulting from the lease terminations for the St. Augustine Outlet Center. (See “Investment Impairment - St. Augustine Outlet Center” above)

 

Interest and dividend income

 

Interest and dividend income increased by approximately $1.0 million to $10.4 million for the nine months ended September 30, 2021 compared to $9.4 million for the same period in 2020. The increase primarily reflects higher interest income earned on our notes receivable of $0.7 million and higher interest and dividend income earned on our available cash and investments in marketable securities of $0.5 million, partially offset by lower investment income of $0.2 million from our Preferred Investments.

 

Interest expense

 

Interest expense, including amortization of deferred financing costs, decreased slightly by $0.1 million to $2.0 million for the nine months ended September 30, 2021 compared to $2.1 million for the same period in 2020. During the nine months ended September 30, 2021 and 2020, $5.5 million and $5.8 million, respectively, of interest was capitalized to construction in progress for our development projects.

 

26

 

 

Gain on disposition of real estate

 

On July 7, 2021, we completed the disposition of the Santa Clara Data Center for a contractual sales price of $13.9 million and recognized a gain on the disposition of real estate of approximately $0.2 million during the nine months ended September 30, 2021.

 

On May 25, 2021, we completed the disposition of a parcel of land adjacent to the St. Augustine Outlet Center for a contractual sales price of $6.8 million and recognized a gain on the disposition of real estate of approximately $3.6 million during the nine months ended September 30, 2021.

 

On April 6, 2020, we completed the disposition of a parcel of land adjacent to the St. Augustine Outlet Center for a contractual sales price of $2.1 million and recognized a gain on the disposition of real estate of approximately $1.6 million during the nine months ended September 30, 2020.

 

Unrealized (loss)/gain on marketable equity securities

 

During the nine months ended September 30, 2021, we recorded unrealized gains on marketable equity securities of $10.6 million and during the nine months ended September 30, 2020, we recorded unrealized losses on marketable equity securities of $20.1 million. These unrealized gains and losses represented the change in the fair value of our marketable equity securities during those periods.

 

Gain/(loss) on sale and redemption of marketable securities

 

During the nine months ended September 30, 2021, we recorded a gain on the sale of marketable securities of $4.7 million and during the nine months ended September 30, 2020, we recorded a loss on the sale of marketable securities of $0.2 million. These gains and losses represented the difference between the sales price and carrying value of our marketable securities sold during those periods.

 

Impairment charge

 

During the nine months ended September 30, 2021, we recorded a non-cash impairment charge of $11.3 million to reduce the carrying value of our St. Augustine Outlet Center to its estimated fair value. See “Investment Impairment - St. Augustine Outlet Center” above.

 

Noncontrolling interests

 

The net earnings allocated to noncontrolling interests relates to (i) parties of the Company that hold units in the Operating Partnership, (ii) the interest in PRO-DFJV Holdings LLC (“PRO”) held by our Sponsor, (iii) the ownership interests in 50-01 2nd St. Associates LLC (the “2nd Street Joint Venture”) held by our Sponsor and other affiliates and (iv) the ownership interest in various joint ventures held by affiliates of our Sponsor that have originated nonrecourse loans to unaffiliated third-party borrowers.

 

Financial Condition, Liquidity and Capital Resources   

 

Overview:

  

Rental income, interest and dividend income and borrowings are our principal source of funds to pay operating expenses, scheduled debt service, routine capital expenditures and distributions.

 

We expect to meet our short-term liquidity requirements, including the costs of our expected non-recurring capital expenditures, including development activities, and scheduled debt service generally through working capital, redemptions of our Preferred Investments, repayments of our outstanding notes receivable, selective asset dispositions and/or new borrowings and refinancing of existing debt. On June 3, 2021, we closed on construction financings related to our Lower East Side Moxy Hotel development project and we ultimately expect to obtain construction financing to also fund a substantial portion of Exterior Street development project’s future development costs. See “Development Activities” for additional information. However, there can be no assurance we will be successful in obtaining additional construction financing at favorable terms, if at all.  As of September 30, 2021, we had $33.4 million of cash on hand, $1.7 million of restricted cash and $53.7 million of marketable securities. We believe that these cash resources along with construction financings will be sufficient to satisfy our cash requirements for the foreseeable future, and we do not anticipate a need to raise funds from other than these sources within the next 12 months.

 

Our borrowings consist of single-property mortgages as well as mortgages cross-collateralized by a pool of properties. We typically have obtained level payment financing, meaning that the amount of debt service payable would be substantially the same each year. As such, most of the mortgages on our properties provide for a so-called “balloon” payment and are at a fixed interest rate.

 

27

 

 

Additionally, in order to leverage our investments in marketable securities and seek a higher rate of return, we have access to borrowings under a margin loan and line of credit collateralized by the securities held with the financial institution that provided the margin loan and line of credit as well as a portion of our Marco OP Units. These loans are due on demand and any outstanding balance must be paid upon the liquidation of securities.

 

Our charter provides that the aggregate amount of borrowing, both secured and unsecured, may not exceed 300% of net assets in the absence of a satisfactory showing that a higher level is appropriate, the approval of our Board of Directors and disclosure to stockholders. Net assets means our total assets, other than intangibles, at cost before deducting depreciation or other non-cash reserves less our total liabilities, calculated at least quarterly on a basis consistently applied. Any excess in borrowing over such 300% of net assets level must be approved by a majority of our independent directors and disclosed to our stockholders in our next quarterly report to stockholders, along with justification for such excess. As of September 30, 2021, our total borrowings of $170.4 million represented 53% of net assets.

 

Any future properties that we may acquire or investments we may make may be funded through a combination of borrowings, proceeds generated from the sale and redemption of our marketable securities, available for sale, proceeds received from the selective disposition of our properties and proceeds received from the redemption of our preferred investments in related parties. These borrowings may consist of single-property mortgages as well as mortgages cross-collateralized by a pool of properties. Such mortgages may be put in place either at the time we acquire a property or subsequent to our purchasing a property for cash. In addition, we may acquire properties that are subject to existing indebtedness where we choose to assume the existing mortgages. Generally, though not exclusively, we intend to seek to encumber our properties with debt, which will be on a non-recourse basis. This means that a lender’s rights on default will generally be limited to foreclosing on the property. However, we may, at our discretion, secure recourse financing or provide a guarantee to lenders if we believe this may result in more favorable terms. When we give a guaranty for a property owning entity, we will be responsible to the lender for the satisfaction of the indebtedness if it is not paid by the property owning entity.

 

We may also obtain lines of credit to be used to acquire properties or real estate-related assets. These lines of credit will be at prevailing market terms and will be repaid from proceeds from the sale or refinancing of properties, working capital or permanent financing. Our Sponsor or its affiliates may guarantee the lines of credit although they will not be obligated to do so. We expect that such properties may be purchased by our Sponsor’s affiliates on our behalf, in our name, in order to minimize the imposition of a transfer tax upon a transfer of such properties to us.

 

We have various agreements, including an advisory agreement, with the Advisor to pay certain fees in exchange for services performed by the Advisor and/or its affiliated entities. Additionally, our ability to secure financing and our real estate operations are dependent upon our Advisor and its affiliates to perform such services as provided in these agreements.

 

In addition to meeting working capital needs and distributions, if any, to our stockholders, our capital resources are used to make certain payments to our Advisor and our Property Manager, including payments related to asset acquisition fees, development fees and leasing commissions, asset management fees, the reimbursement of acquisition related expenses to our Advisor and property management fees. We also reimburse our Advisor and its affiliates for actual expenses it incurs for administrative and other services provided to us. Additionally, the Operating Partnership may be required to make distributions to Lightstone SLP, LLC, an affiliate of the Advisor.

 

The advisory agreement has a one-year term and is renewable for an unlimited number of successive one-year periods upon the mutual consent of the Advisor and our independent directors.

 

The following table represents the fees incurred associated with the payments to be made to our Advisor and its affiliates for the periods indicated:

 

    Three Months Ended
September 30, 		    Nine Months Ended
September 30, 		 
    2021     2020     2021     2020  
Asset management fees (general and administrative costs)   $ 206     $ 245     $ 661     $ 675  
Property management fees (property operating expenses)     99       93       267       306  
Development fees and cost reimbursement(1)     877       333       2,789       1,028  
Total   $ 1,182     $ 671     $ 3,717     $ 2,009  

 

(1) Development fees and development costs that we reimburse our Advisor for are capitalized and are included in the carrying value of the associated development project and classified as construction in progress on the consolidated balance sheets.

 

28

 

 

Additionally, we may be required to make distributions on the special general partner interests (“SLP Units”) in the Operating Partnership held by Lightstone SLP, LLC, an affiliate of the Advisor. In connection with the Company’s initial public offering, Lightstone SLP, LLC purchased an aggregate of $30.0 million of SLP Units. These SLP Units, the purchase price of which will be repaid only after stockholders receive a stated preferred return and their net investment, entitle Lightstone SLP, LLC to a portion of any regular distributions made by the Operating Partnership.

 

During both the three and nine months ended September 30, 2021 and 2020, distributions of $0.5 million and $1.5 million, respectively, were declared and paid on the SLP units.

 

Summary of Cash Flows

 

The following summary discussion of our cash flows is based on the consolidated statements of cash flows and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below:

 

    For the Nine Months Ended September 30,  
    2021     2020  
             
Net cash flows provided by operating activities   $ 11,770     $ 9,722  
Net cash flows provided by/(used in) investing activities     28,378       (45,252 )
Net cash flows (used in)/provided by financing activities     (51,901 )     15,835  
Net change in cash, cash equivalents and restricted cash     (11,753 )     (19,695 )
                 
Cash, cash equivalents and restricted cash, beginning of year     46,841       79,800  
Cash, cash equivalents and restricted cash, end of the period   $ 35,088     $ 60,105  

 

Our principal sources of cash flow are derived from the operation of our rental properties, interest and dividend income on our marketable securities and real estate-related investments, as well as loan proceeds, proceeds from redemptions of Preferred Investments, proceeds from selective asset dispositions and proceeds from the repayment of our outstanding notes receivable. We intend that our properties and real estate-related investments will provide a relatively consistent stream of cash flow that provides us with resources to fund operating expenses, debt service and quarterly distributions if authorized by our board of directors.

 

Our principal demands for liquidity are (i) our property operating expenses, (ii) real estate taxes, (iii) insurance costs, (iv) leasing costs and related tenant improvements, (v) capital expenditures, (vi) acquisition and development activities (vii) funding of notes receivable, (viii) scheduled debt service and (viii) distributions to our stockholders and noncontrolling interests. The principal sources of funding for our operations are operating cash flows and proceeds from (i) the sale and redemption of marketable securities, (ii) repayments of our outstanding notes receivable, (iii) redemptions of our Preferred Investments, (iv) the issuance of equity and debt securities and (v) the placement of mortgage loans or other indebtedness.

 

Operating activities

 

The net cash provided by operating activities of $11.8 million for the nine months ended September 30, 2021 consists of the following:

 

● cash inflows of approximately $6.8 million from our net income after adjustment for non-cash items; and

 

● cash inflows of approximately $4.9 million associated with the net changes in operating assets and liabilities.

 

 

Investing activities

 

The net cash provided by investing activities of $28.4 million for the nine months ended September 30, 2021 consists primarily of the following:

 

● purchases of investment property of approximately $42.8 million;

 

● net proceeds from the sale of marketable securities of $7.7 million

 

● proceeds from notes receivable of $43.3 million; and

 

● proceeds from the sale of investment property of $20.1 million.

 

29

 

 

Financing activities

 

The net cash used in financing activities of approximately $51.9 million for the nine months ended September 30, 2021 is primarily related to the following:

 

● debt principal payments of $63.7 million;

 

● proceeds from mortgage financing of $40.6 million;

 

● payment of loan fees and expenses of $5.7 million;

 

● redemption and cancellation of common shares of $1.2 million;

 

● distributions to our noncontrolling interests of $10.5 million; and

 

● distributions to our common shareholders of $11.5 million.

 

Development Activities

 

Lower East Side Moxy Hotel

 

On December 3, 2018, we, through a subsidiary of the Operating Partnership, acquired three adjacent parcels of land located at 147-151 Bowery, New York, New York (collectively, the “Bowery Land”) from 151 Emmet Properties LLC and 145-149 Bowery LLC, both unaffiliated third parties, for aggregate consideration of approximately $56.5 million, excluding closing and other acquisition related costs. Additionally, on December 6, 2018, we, though a subsidiary of the Operating Partnership, acquired certain air rights located at 329 Broome Street, New York, New York (the “Air Rights”) from B.R.P. Realty Corp., an unaffiliated third party, for approximately $2.4 million, excluding closing and other acquisition related costs. We are using the Bowery Land and Air Rights in connection with the development and construction of a 296-room Marriott Moxy hotel (the “Lower East Side Moxy Hotel”).

 

On December 3, 2018, we entered into a mortgage loan which was collateralized by the Lower East Side Moxy Hotel (the “Lower East Side Moxy Mortgage”) for approximately $35.6 million. The Lower East Side Moxy Mortgage had an initial term of two years, bore interest at LIBOR + 4.25%, subject to a 6.63% floor, and required monthly interest-only payments through its stated maturity with the entire unpaid balance due upon maturity. In November 2020 the maturity date of Lower East Side Moxy Mortgage was extended to March 3, 2021 and in March 2021 it was further extended until June 3, 2021, on which date it was then repaid in full as discussed below.

 

On June 3, 2021, we, through a wholly owned subsidiary, closed on a recourse construction loan facility (the “Moxy Senior Loan”) with MSD Partners, L.P. (“MSD”) providing for up to $90 million of funds for the development and construction of the Lower East Side Moxy Hotel. At closing, $35.6 million of proceeds were advanced under the Moxy Senior Loan and used to repay in full the Lower East Side Moxy Mortgage. The Moxy Senior Loan bears interest at LIBOR plus 7.50%, subject to an 8.00% floor, and initially matures on June 3, 2024, with two one-year extension options subject to the satisfaction of certain conditions. The Moxy Senior Loan is collateralized by the Lower East Side Moxy Hotel. As of September 30, 2021, the outstanding principal balance of the Moxy Senior Loan was $35.6 million and the remaining availability under the facility was up to $54.4 million.

 

Simultaneously on June 3, 2021, we, through the same wholly owned subsidiary, also entered into a mezzanine construction loan facility (the “Moxy Junior Loan” and together with the Moxy Senior Loan, the “Moxy Construction Loans”) with Lionheart Strategic Management LLC (“Lionheart”) providing for up to $40 million of additional funds for the development and construction of the Lower East Side Moxy Hotel. The Moxy Junior Loan bears interest at LIBOR plus 13.50%, subject to a 14.00% floor, and initially matures on June 3, 2024, with two one-year extension options subject to the satisfaction of certain conditions. The Moxy Junior Loan is subordinate to the Moxy Senior loan but also collateralized by the Lower East Side Moxy Hotel. We provided a principal guarantee of up to $7.0 million with respect to the Moxy Junior Loan. As of September 30, 2021, the outstanding principal balance of the Moxy Junior Loan was $4.9 million and the remaining availability under the facility was up to $35.1 million.

 

Future draws to cover the costs associated with the development and construction of the Lower East Side Moxy Hotel will first be advanced under the Moxy Junior Loan until it has been fully funded and thereafter, funds will be advanced under the remaining availability of the Moxy Senior Loan.

 

30

 

 

In connection with the Moxy Construction Loans, we provided certain completion and carry cost guarantees. We also entered into an interest rate cap agreement pursuant to which the LIBOR rate will be capped at 3.00% on the Moxy Senior Loan through June 3, 2024 at a cost of $0.2 million. Furthermore, in connection with the Moxy Construction Loans, we paid $5.3 million of loan fees and expenses and accrued $1.1 million of loan exit fees which are due at the initial maturity date and are included in accounts payable, accrued expenses and other liabilities on the consolidated balance sheets as of September 30, 2021.

 

Exterior Street Project

 

On February 27, 2019, we, through subsidiaries of the Operating Partnership, acquired two adjacent parcels of land located at 355 and 399 Exterior Street, New York, New York (collectively, the “Exterior Street Land”), from Borden Realty Corp and 399 Exterior Street Associates LLC, unaffiliated third parties, for an aggregate purchase price of approximately $59.0 million, excluding closing and other acquisition related costs. In September 2021, we subsequently acquired an additional adjacent parcel of land at cost from an affiliate of our Advisor for $1.0 million in order to achieve certain zoning compliance. We are using the various land parcels for the development and construction of a multi-family residential property (the “Exterior Street Project”).

 

On March 29, 2019, we entered into a $35.0 million loan (the “Exterior Street Loan”) which initially bore interest at 4.50% and was scheduled to mature on April 9, 2020, but had two six-month extensions. However, because we exercised both extension options, the maturity date was extended to April 9, 2021 and upon the exercise of the second extension option on October 9, 2020, the interest rate became LIBOR + 2.25%. The Exterior Street Loan requires monthly interest-only payments through its maturity date and is collateralized by the Exterior Street Project. During April 2021, the maturity date of the Exterior Street Loan was further extended to April 9, 2022.

  

The following is a summary of the amounts incurred and capitalized to construction in progress for the Lower East Side Moxy Hotel and the Exterior Street Project as of September 30, 2021:

 

Development Project      
Lower East Side Moxy Hotel   $ 130,416  
Exterior Street Project     86,532  
Total   $ 216,948  

 

To-date the COVID-19 pandemic has not had any significant impact on the Lower East Side Moxy Hotel or the Exterior Street Project. As discussed above, we have obtained construction financing for the Lower East Side Moxy Hotel and also intend to obtain construction financing for the Exterior Street Project to fund a substantial portion of their development and construction costs. However, the COVID-19 pandemic may (i) affect our ability to obtain additional construction financing, and/or (ii) cause delays or increase costs associated with building materials or construction services necessary for construction, which could adversely impact our ability to either ultimately commence and/or complete construction as planned, on budget or at all for our development projects.

 

We currently believe our capital resources are sufficient to fund our expected development activities for the next 12 months. However, we ultimately expect to finance a substantial portion of our development and construction costs related to the Exterior Street Project through construction financing. Due to the uncertainty in capital and financial markets in the United States because of the current COVID-19 pandemic, there can be no assurance we will be successful in obtaining construction financing at favorable terms, if at all.

 

Preferred Investments

 

We have Preferred Investments that entitle us to monthly preferred distributions. The Preferred Investments are classified as held-to-maturity securities, recorded at cost and included in investments in related parties on the consolidated balance sheets. The fair value of these investments approximated their carrying values based on market rates for similar instruments.

 

The Preferred Investments are summarized as follows:

 

Preferred   Dividend     As of September 30,     As of December 31,     Three Months Ended
September 30, 		    Nine Months Ended
September 30, 		 
Investments   Rate   2021   2020     2021     2020     2021     2020  
40 East End Avenue     12 %   $ 6,000     $ 6,000     $ 184     $ 184     $ 546     $ 702  
East 11th Street     12 %     8,500       8,500       261       261       774       779  
Miami Moxy     12 %     -       -       -       -       -       45  
Total           $ 14,500     $ 14,500     $ 445     $ 445     $ 1,320     $ 1,526  

 

Note:

(1) – Included in interest and dividend income on the statements of operations.

 

31

 

 

Notes Receivable

 

Beginning in 2019, we formed certain joint ventures (collectively, the “NR Joint Ventures”) between wholly-owned subsidiaries of the Operating Partnership (collectively, the “NR Subsidiaries”) and affiliates of the Sponsor (the “NR Affiliates”) which have originated nonrecourse loans (collectively, the “Joint Venture Promissory Notes”) to unaffiliated third-party borrowers (collectively, the “Joint Venture Borrowers”).

 

We determined that the NR Joint Ventures are VIEs and the NR Subsidiaries are the primary beneficiaries.  Since the NR Subsidiaries are the primary beneficiaries, beginning on the applicable date of formation, we consolidated the operating results and financial condition of the NR Joint Ventures and accounted for the respective ownership interests of the NR Affiliates as noncontrolling interests.

 

The Joint Venture Promissory Notes provide for monthly interest at a prescribed variable rate, subject to a floor. In connection with funding of the Joint Venture Promissory Notes, the NR Joint Ventures have received origination fees (1.00% - 1.50%) based on the principal amount of the loan and retained a portion of the loan proceeds to establish a reserve for interest and other items (the “Loan Reserves”). The Joint Venture Promissory Notes are recorded in notes receivable, net on the consolidated balance sheets.

 

The Joint Venture Promissory Notes generally have an initial term of one or two years and may provide for additional one-year extension options subject to satisfaction of certain prescribed conditions, including the funding of an additional reserve for interest and payment of an extension fee. The Joint Venture Promissory Notes are collateralized by either the membership interests of the Joint Venture Borrowers in the borrowing entity or the underlying real property being developed by the Joint Venture Borrower.

 

The Joint Venture Promissory Notes are recorded in notes receivable, net on the consolidated balance sheets. The origination fees received are presented in the consolidated balance sheets as a direct deduction from the carrying value of the Joint Venture Promissory Notes and are amortized into interest income, using a straight-line method that approximates the effective interest method, over the initial term of the Joint Venture Promissory Notes. The Loan Reserves are presented in the consolidated balance sheets as a direct deduction from the carrying value of the Joint Venture Promissory Notes and are applied against the monthly interest due over the initial term.

 

The Notes Receivable are summarized as follows:

 

                                As of September 30, 2021  
Joint   Company’s
Ownership 		    Loan
Commitment 		    Origination     Origination     Maturity     Contractual
Interest 		  Outstanding           Unamortized Origination     Carrying     Unfunded  
Venture/Lender   Percentage     Amount     Fee     Date     Date     Rate   Principal     Reserves     Fee     Value     Commitment  
                                                                 
LSC 162nd Capital I LLC     45.45 %   $ 4,234       1.50 %     February 5, 2019       December 10, 2021     Libor plus 7.50% (Floor of 11%)   $ 4,076     $ (113 )   $ -     $ 3,963     $ -  
                                                                                     
LSC 162nd Capital II LLC     45.45 %     9,166       1.50 %     February 5, 2019       December 10, 2021     Libor plus 7.50% (Floor of 11%)     8,824       (242 )     -       8,582       -  
                                                                                     
LSC 1543 7th LLC     50 %     20,000       1.00 %     August 27, 2019       February 28, 2022     Libor plus 5.40% (Floor of 7.90%)     20,000       -       (83 )     19,917       -  
                                                                                     
LSC 1650 Lincoln LLC     50 %     24,000       1.00 %     August 27, 2019       February 28, 2022     Libor plus 5.40% (Floor of 7.90%)     24,000       -       (100 )     23,900       -  
                                                                                     
LSC 11640 Mayfield LLC     50 %     18,000       1.50 %     March 4, 2020       March 1, 2022     Libor plus 11.00% (Floor of 13.00%)     10,540       (1,345 )     (57 )     9,138       6,960  
                                                                                     
LSC 87 Newkirk LLC (1)     50 %     42,700       1.25 %     July 2, 2020       December 1, 2021     Libor plus 6.00% (Floor of 7.00%)     -       -       -       -       -  
                                                                                     
  Total                                               $ 67,440     $ (1,700 )   $ (240 )   $ 65,500     $ 6,960  

  

(1) Repaid in full during April 2021

 

32

 

 

The following summarizes the interest earned (included in interest and dividend income on the consolidated statements of operations) for each of the Joint Venture Promissory Notes during the periods indicated:

 

    For the Three Months Ended September 30,     For the Nine Months Ended September 30,  
Joint Venture/Lender   2021     2020     2021     2020  
                         
LSC 162nd Capital I LLC   $ 123     $ 145     $ 373     $ 508  
                                 
LSC 162nd Capital II LLC     266       314       807       1,099  
                                 
LSC 1543 7th LLC     454       444       1,348       1,317  
                                 
LSC 1650 Lincoln LLC     545       532       1,618       1,580  
                                 
LSC 11640 Mayfield LLC     383       377       1,125       866  
                                 
LSC 87 Newkirk LLC     -       812       1,585       812  
                                 
Total   $ 1,771     $ 2,624     $ 6,856     $ 6,182  

 

Distribution Reinvestment Program (“DRIP”)

 

Our DRIP provides our shareholders with an opportunity to purchase additional shares of our common stock at a discount by reinvesting distributions. Under our distribution reinvestment program, a shareholder may acquire, from time to time, additional shares of our common stock by reinvesting cash distributions payable by us to such shareholder, without incurring any brokerage commission, fees or service charges.

 

Our Registration Statement on Form S-3D was filed and became effective as amended and restated, under the Securities Act of 1933 on October 25, 2018.

 

Pursuant to the DRIP, our stockholders who elect to participate may invest all or a portion of the cash distributions that we pay them on shares of our common stock in additional shares of our common stock without paying any fees or commissions. The purchase price for shares under the DRIP will be equal to 95% of the Company’s current estimated per-share net asset value (the “Estimated Per-Share NAV”), as determined by the Company’s board of directors and reported by the Company from time to time.  On December 3, 2020, our Board of Directors determined our Estimated Per-Share NAV of $11.18 as of September 30, 2020, which resulted in a purchase price for shares under the DRIP of $10.62 per share. As of September 30, 2021, we had approximately 9.9 million shares available for issuance under our DRIP. 

 

Our Board of Directors reserves the right to terminate the DRIP for any reason without cause by providing written notice of termination of the DRIP to all participants.

 

Share Repurchase Program

 

Our share repurchase program (the “SRP”) may provide our stockholders with limited, interim liquidity by enabling them to sell their shares of common stock back to us, subject to restrictions.

 

On March 25, 2020, the Board of Directors amended the share repurchase program to remove stockholder notice requirements and also approved the suspension of all redemptions effective immediately.

 

Effective March 15, 2021 and May 14, 2021, the Board of Directors partially reopened the SRP to allow, subject to various conditions as set forth below, for redemptions submitted in connection with a stockholder’s death and hardship, respectively, and set the price for all such purchases to $11.18, which is 100% of the NAV per Share. Deaths that occurred subsequent to January 1, 2020 are eligible for consideration. Beginning January 1, 2022, requests for redemptions in connection with a stockholder’s death must be submitted and received by us within one year of the stockholder’s date of death for consideration.

 

On an annual basis, we will not redeem in excess of 0.5% of the number of shares outstanding as of the end of the preceding year for either death or hardship redemptions, respectively. Redemption requests are expected to be processed on a quarterly basis and may be subject to pro ration if either type of redemption requests exceed the annual limitation.

 

For the nine months ended September 30, 2021 we repurchased 111,470 shares of common stock, pursuant to our share repurchase program at an average price per share of $11.18 per share.

 

33

 

 

Contractual Obligations

 

The following is a summary of our contractual obligations outstanding over the next five years and thereafter as of September 30, 2021.

 

Contractual Obligations   2021     2022     2023     2024     2025     Thereafter     Total  
Mortgage Payable   $ 340     $ 61,389     $ 1,454     $ 107,205     $     -     $           -     $ 170,388  
Interest Payments 1     2,237       7,330       6,649       4,743       -       -       20,959  
                                                         
Total Contractual Obligations   $ 2,577     $ 68,719     $ 8,103     $ 111,948     $ -     $     -     $ 191,347  

  

1) These amounts represent future interest payments related to mortgage payable obligations based on the fixed and variable interest rates specified in the associated debt agreement. All variable rate debt agreements are based on the one month LIBOR rate. For purposes of calculating future interest amounts on variable interest rate debt the one month LIBOR rate as of September 30, 2021 was used.

 

Notes Payable

  

Margin Loan

 

We have access to a margin loan (the “Margin Loan”) from a financial institution that holds custody of certain of our marketable securities. The Margin Loan, which is due on demand, bears interest at LIBOR + 0.85% (0.93% as of September 30, 2021) and is collateralized by the marketable securities in our account. The amounts available to us under the Margin Loan are at the discretion of the financial institution and not limited to the amount of collateral in our account.  There were no amounts outstanding under the Margin Loan as of September 30, 2021 and December 31, 2020.

 

Line of Credit

 

We had a non-revolving credit facility (the “Line of Credit”) with a financial institution that provided for borrowings up to a maximum of $20.0 million, subject to a 55% loan-to-value ratio based on the fair value of the underlying collateral, and bore interest at LIBOR + 1.35% (1.43% as of September 30, 2021). The Line of Credit was collateralized by an aggregate of 209,243 of Marco OP Units and Marco II OP Units and was guaranteed by PRO. As of September 30, 2021, the amount of borrowings available to be drawn under the Line of Credit was approximately $15.0 million. No amounts were outstanding under the Line of Credit as of both September 30, 2021 and December 31, 2020. The Line of Credit matured on October 9, 2021 and we are currently finalizing the terms of a renewal of the Line of Credit with the lender.

 

Debt Maturities

 

The Exterior Street Loan (outstanding principal balance of $35.0 million as of September 30, 2021) is scheduled to mature on April 9, 2022. We currently intend to refinance the Exterior Street Loan on or before its maturity date. 

 

On November 12, 2019, we, through LSC 1543 7th LLC and LSC 1650 Lincoln LLC (collectively, the “Santa Monica Joint Ventures”), entered into a $25.0 million loan (the “Santa Monica Loan”) (outstanding principal balance of $25.0 million as of September 30, 2021) which bears interest at LIBOR + 3.75%, subject to a 5.50% floor, and is currently scheduled to mature on February 28, 2022. The Santa Monica Loan requires monthly interest-only payments with the outstanding principal balance due at its maturity date and is cross-collateralized by two nonrecourse loans originated by the Santa Monica Joint Ventures. We currently intend to repay the Santa Monica Loan with the proceeds from the two nonrecourse loans originated by the Santa Monica Joint Ventures.

 

However, if we are unable to extend or refinance any of our maturing indebtedness at favorable terms, we will look to repay the then outstanding balance with available cash and/or proceeds from selective asset sales. We have no additional significant maturities of mortgage debt over the next 12 months.

 

Funds from Operations and Modified Funds from Operations

 

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings, improvements, and straight-line amortization of intangibles, which implies that the value of a real estate asset diminishes predictably over time. We believe that, because real estate values historically rise and fall with market conditions, including, but not limited to, inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using the historical accounting convention for depreciation and certain other items may be less informative.

 

34

 

 

Because of these factors, the National Association of Real Estate Investment Trusts (“NAREIT”), an industry trade group, has published a standardized measure of performance known as funds from operations (“FFO”), which is used in the REIT industry as a supplemental performance measure. We believe FFO, which excludes certain items such as real estate-related depreciation and amortization, is an appropriate supplemental measure of a REIT’s operating performance. FFO is not equivalent to our net income or loss as determined under GAAP.

 

We calculate FFO, a non-GAAP measure, consistent with the standards established over time by the Board of Governors of NAREIT, as restated in a White Paper approved by the Board of Governors of NAREIT effective in December 2018 (the “White Paper”). The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. Our FFO calculation complies with NAREIT’s definition.

 

We believe that the use of FFO provides a more complete understanding of our performance to investors and to management and reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income.

 

Changes in the accounting and reporting promulgations under GAAP that were put into effect in 2009 subsequent to the establishment of NAREIT’s definition of FFO, such as the change to expense as incurred rather than capitalize and depreciate acquisition fees and expenses incurred for business combinations, have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses, as items that are expensed under GAAP across all industries. These changes had a particularly significant impact on publicly registered, non-listed REITs, which typically have a significant amount of acquisition activity in the early part of their existence, particularly during the period when they are raising capital through ongoing initial public offerings.

 

Because of these factors, the Investment Program Association (the “IPA”), an industry trade group, published a standardized measure of performance known as modified funds from operations (“MFFO”), which the IPA has recommended as a supplemental measure for publicly registered, non-listed REITs. MFFO is designed to be reflective of the ongoing operating performance of publicly registered, non-listed REITs by adjusting for those costs that are more reflective of acquisitions and investment activity, along with other items the IPA believes are not indicative of the ongoing operating performance of a publicly registered, non-listed REIT, such as straight-lining of rents as required by GAAP. We believe it is appropriate to use MFFO as a supplemental measure of operating performance because we believe that both before and after we have deployed all of our offering proceeds and are no longer incurring a significant amount of acquisition fees or other related costs, it reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. MFFO is not equivalent to our net income or loss as determined under GAAP.

 

We define MFFO, a non-GAAP measure, consistent with the IPA’s Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations (the “Practice Guideline”) issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for acquisition and transaction-related fees and expenses and other items. In calculating MFFO, we follow the Practice Guideline and exclude acquisition and transaction-related fees and expenses (which includes costs incurred in connection with strategic alternatives), amounts relating to straight line rent receivables and amortization of market lease and other intangibles, net (which are adjusted in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments), accretion of discounts and amortization of premiums on debt investments and borrowings, mark-to-market adjustments included in net income (including gains or losses incurred on assets held for sale), gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis.

 

We believe that, because MFFO excludes costs that we consider more reflective of acquisition activities and other non-operating items, MFFO can provide, on a going-forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of our operating performance after the period in which we are acquiring properties and once our portfolio is stabilized. We also believe that MFFO is a recognized measure of sustainable operating performance by the non-listed REIT industry and allows for an evaluation of our performance against other publicly registered, non-listed REITs.

 

35

 

 

Not all REITs, including publicly registered, non-listed REITs, calculate FFO and MFFO the same way. Accordingly, comparisons with other REITs, including publicly registered, non-listed REITs, may not be meaningful. Furthermore, FFO and MFFO are not indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as determined under GAAP as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs including our ability to make distributions to our stockholders. FFO and MFFO should be reviewed in conjunction with other GAAP measurements as an indication of our performance. FFO and MFFO should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The methods utilized to evaluate the performance of a publicly registered, non-listed REIT under GAAP should be construed as more relevant measures of operational performance and considered more prominently than the non-GAAP measures, FFO and MFFO, and the adjustments to GAAP in calculating FFO and MFFO.

 

Neither the SEC, NAREIT, the IPA nor any other regulatory body or industry trade group has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, NAREIT, the IPA or another industry trade group may publish updates to the White Paper or the Practice Guidelines or the SEC or another regulatory body could standardize the allowable adjustments across the publicly registered, non-listed REIT industry, and we would have to adjust our calculation and characterization of FFO or MFFO accordingly.

 

The below table illustrates the items deducted in the calculation of FFO and MFFO. Items are presented net of non-controlling interest portions where applicable.

 

    For the Three Months Ended September 30,     For the Nine Months Ended September 30,  
    2021     2020     2021     2020  
Net (loss)/income   $ (8,338 )   $ 1,319     $ 14,400     $ (11,090 )
FFO adjustments:                                
Depreciation and amortization of real estate assets     1,545       939       3,826       2,907  
Gain on disposal of investment property     (213 )     -       (3,802 )     (1,562 )
Impairment loss     11,341       -       11,341       -  
                                 
FFO     4,335       2,258       25,765       (9,745 )
MFFO adjustments:                                
Acquisition and other transaction related costs expensed(1)     -       -       -       -  
Amortization of above or below market leases and liabilities(2)     -       -       -       -  
Gain on debt extinguishment(4)     (175 )     -       143       -  
Accretion of discounts and amortization of premiums on debt investments     -       -       -       -  
Mark-to-market adjustments(3)     3,407       1,472       (10,670 )     20,083  
(Gain)/loss on sale of marketable securities(4)     (4,669 )     -       (4,653 )     230  
MFFO     2,898       3,730       10,585       10,568  
Straight-line rent(5)     22       89       (16 )     102  
MFFO - IPA recommended format(6)   $ 2,920     $ 3,819     $ 10,569     $ 10,670  
                                 
Net (loss)/income   $ (8,338 )   $ 1,319     $ 14,400     $ (11,090 )
Less: income attributable to noncontrolling interests     (582 )     (1,094 )     (3,332 )     (1,835 )
Net (loss)/income applicable to Company’s common shares   $ (8,920 )   $ 225     $ 11,068     $ (12,925 )
Net (loss)/income per common share, basic and diluted   $ (0.40 )   $ 0.01     $ 0.50     $ (0.58 )
                                 
FFO   $ 4,335     $ 2,258     $ 25,765     $ (9,745 )
Less: FFO attributable to noncontrolling                                
interests     (1,018 )     (544 )     (4,058 )     (857 )
FFO attributable to Company’s common shares   $ 3,317     $ 1,714     $ 21,707     $ (10,602 )
FFO per common share, basic and diluted   $ 0.15     $ 0.08     $ 0.97     $ (0.47 )
                                 
MFFO - IPA recommended format   $ 2,920     $ 3,819     $ 10,569     $ 10,670  
Less: MFFO attributable to noncontrolling interests     (923 )     (887 )     (3,421 )     (2,842 )
MFFO attributable to Company’s common shares   $ 1,997     $ 2,932     $ 7,148     $ 7,828  
                                 
Weighted average number of common shares outstanding, basic and diluted     22,221       22,304       22,276       22,351  

 

 

36

 

 

Notes:

(1) The purchase of properties, and the corresponding expenses associated with that process, is a key operational feature of our business plan to generate operational income and cash flows in order to make distributions to investors. In evaluating investments in real estate, management differentiates the costs to acquire the investment from the operations derived from the investment. Such information would be comparable only for non-listed REITs that have completed their acquisition activity and have other similar operating characteristics. By excluding expensed acquisition costs, management believes MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties. Acquisition fees and expenses include payments to our advisor or third parties. Acquisition fees and expenses under GAAP are considered operating expenses and as expenses included in the determination of net income and income from continuing operations, both of which are performance measures under GAAP. Such fees and expenses are paid in cash, and therefore such funds will not be available to distribute to investors. Such fees and expenses negatively impact our operating performance during the period in which properties are being acquired. Therefore, MFFO may not be an accurate indicator of our operating performance, especially during periods in which properties are being acquired. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to the property. Acquisition fees and expenses will not be paid or reimbursed, as applicable, to our advisor even if there are no further proceeds from the sale of shares in our offering, and therefore such fees and expenses would need to be paid from either additional debt, operational earnings or cash flows, net proceeds from the sale of properties or from ancillary cash flows.
(2) Under GAAP, certain intangibles are accounted for at cost and reviewed at least annually for impairment, and certain intangibles are assumed to diminish predictably in value over time and amortized, similar to depreciation and amortization of other real estate related assets that are excluded from FFO. However, because real estate values and market lease rates historically rise or fall with market conditions, management believes that by excluding charges relating to amortization of these intangibles, MFFO provides useful supplemental information on the performance of the real estate.
(3) Management believes that adjusting for mark-to-market adjustments is appropriate because they are nonrecurring items that may not be reflective of ongoing operations and reflects unrealized impacts on value based only on then current market conditions, although they may be based upon current operational issues related to an individual property or industry or general market conditions. Mark-to-market adjustments are made for items such as ineffective derivative instruments, certain marketable equity securities and any other items that GAAP requires we make a mark-to-market adjustment for. The need to reflect mark-to-market adjustments is a continuous process and is analyzed on a quarterly and/or annual basis in accordance with GAAP.
(4) Management believes that adjusting for gains or losses related to extinguishment/sale of debt, derivatives or securities holdings is appropriate because they are items that may not be reflective of ongoing operations. By excluding these items, management believes that MFFO provides supplemental information related to sustainable operations that will be more comparable between other reporting periods.
(5) Under GAAP, rental receipts are allocated to periods using various methodologies. This may result in income recognition that is significantly different than underlying contract terms. By adjusting for these items (to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments), MFFO provides useful supplemental information on the realized economic impact of lease terms and debt investments, providing insight on the contractual cash flows of such lease terms and debt investments, and aligns results with management’s analysis of operating performance.

 

The table below presents our cumulative distributions paid and cumulative FFO attributable to the Company’s common shares:

 

    From inception through  
    September 30,
2021 		 
       
FFO attributable to  Company’s common shares   $ 257,358  
Distributions paid   $ 259,419  

 

On or about October 15, 2021, the distribution for the three-month period ending September 30, 2021 of $3.9 million was paid in full using a combination of cash and approximately 7,000 shares of the Company’s common stock issued pursuant to the Company’s DRIP, at a discounted price of $10.62 per share, equal to 95% of the Company’s most recently published estimated net asset value per share of $11.18 as of September 30, 2020.

 

The amount of distributions paid to our stockholders in the future will be determined by our Board and is dependent on a number of factors, including funds available for payment of dividends, our financial condition, capital expenditure requirements and annual distribution requirements needed to maintain our status as a REIT under the Internal Revenue Code.

 

New Accounting Pronouncements

 

See Note 2 to the Notes to Consolidated Financial Statements for further information of certain accounting standards that have been adopted during 2021, if any, and certain accounting standards that we have not yet been required to implement and may be applicable to our future operations.

 

ITEM 4. CONTROLS AND PROCEDURES.

 

As of the end of the period covered by this report, management, including our chief executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based upon, and as of the date of the evaluation, our chief executive officer and principal financial officer concluded that the disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required.

 

There have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. There were no material weaknesses identified in the evaluation, and therefore, no corrective actions were taken.

 

37

 

 

PART II. OTHER INFORMATION:

 

ITEM 1. LEGAL PROCEEDINGS

 

From time to time in the ordinary course of business, we may become subject to legal proceedings, claims or disputes.

 

As of the date hereof, the Company is not a party to any material pending legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on its results of operations or financial condition, which would require accrual or disclosure of the contingency and possible range of loss. Additionally, the Company has not recorded any loss contingencies related to legal proceedings in which the potential loss is deemed to be remote.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

During the period covered by this Form 10-Q, we did not sell any equity securities that were not registered under the Securities Act of 1933.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION.

 

None.

 

ITEM 6. EXHIBITS

 

Exhibit

Number

 

 

Description

     
31.1*   Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
31.2*   Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15 d-14(a) of the Securities Exchange Act, as amended.
32.1*   Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Pursuant to SEC Release 34-47551 this Exhibit is furnished to the SEC and shall not be deemed to be “filed.”
32.2*   Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Pursuant to SEC Release 34-47551 this Exhibit is furnished to the SEC and shall not be deemed to be “filed.”
101*   XBRL (eXtensible Business Reporting Language). The following financial information from Lightstone Value Plus REIT I, Inc. on Form 10-Q for the quarter ended September 30, 2021, filed with the SEC on November 12, 2021, formatted in XBRL includes: (1) Consolidated Balance Sheets, (2) Consolidated Statements of Operations, (3) Consolidated Statements of Comprehensive Income, (4) Consolidated Statements of Stockholders’ Equity, (5) Consolidated Statements of Cash Flows and (6) the Notes to the Consolidated Financial Statement.

 

*Filed herewith

 

38

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  LIGHTSTONE VALUE PLUS REIT I, INC.
   
Date:     November 12, 2021 By:   /s/ David Lichtenstein
    David Lichtenstein
    Chairman and Chief Executive Officer
(Principal Executive Officer)

 

Date:     November 12, 2021 By:   /s/ Seth Molod
    Seth Molod
   

Chief Financial Officer and Treasurer

(Duly Authorized Officer and Principal Financial and Accounting Officer)

 

39

Lightstone Value Plus RE... (GM) (USOTC:LHTV)
Historical Stock Chart
Von Mai 2024 bis Jun 2024 Click Here for more Lightstone Value Plus RE... (GM) Charts.
Lightstone Value Plus RE... (GM) (USOTC:LHTV)
Historical Stock Chart
Von Jun 2023 bis Jun 2024 Click Here for more Lightstone Value Plus RE... (GM) Charts.