Notes to Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, except per share/unit
data and where indicated in millions)
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 (“Lightstone REIT I”), 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 I 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 I
is structured as an umbrella partnership REIT, 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 March 31, 2022, the Company held a 98%
general partnership interest in the Company’s Operating Partnership’s common units (“Common Units”).
The Lightstone REIT I 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 I, 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 evaluates
all of its real estate investments as one operating segment. As of March 31, 2022, 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 0.3 million
square feet of gross leasable area, and has a majority ownership interest of 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 REIT 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 I
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.
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.
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 March 31, 2022.
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 5). PRO’s holdings principally consist of Marco OP Units and Marco II OP Units (see Note
6). The 2nd Street Joint Venture owns Gantry Park Landing, a multi-family apartment building located in Queens, New York.
| 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.
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 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, 2021.
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, 2021 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.
Derivative Financial Instruments
The Company utilizes derivative financial instruments to reduce interest
rate risk. The Company does not hold or issue derivative financial instruments for trading purposes. The Company recognizes all derivatives
as either assets or liabilities in the consolidated balance sheets and measures those instruments at fair value. Changes in fair value
of those instruments are reported in the consolidated statements of operations.
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.
During the COVID-19 pandemic, the occupancy
of the Company’s St. Augustine Outlet Center, which is located in St. Augustine, Florida, significantly declined and because of
limited leasing success, the Company began exploring various strategic alternatives for the 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. Because of the aforementioned lease
terminations and scheduled expirations, substantially all of the tenants vacated during the first quarter of 2022.
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 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.
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 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.
Reclassifications
Certain prior period amounts may have been reclassified
to conform to the current year presentation.
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 adoption of this standard will not have a material effect on the Company’s consolidated financial
position, results of operations or cash flows.
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:
| Summary of supplemental cash flow information | |
| | | |
| | |
| | |
For the Three Months Ended March 31, | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| Cash paid for interest | |
$ | 2,806 | | |
$ | 2,259 | |
| Distributions declared but not paid | |
$ | 3,873 | | |
$ | 3,906 | |
| Investment property acquired but not paid | |
$ | 3,289 | | |
$ | 1,790 | |
| Amortization of deferred financing costs included in development projects | |
$ | 669 | | |
$ | 75 | |
| Holding loss on marketable securities | |
$ | 47 | | |
$ | 27 | |
| Value of shares issued from distribution reinvestment program | |
$ | 84 | | |
$ | 82 | |
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 from unaffiliated third parties for aggregate consideration of $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 from an unaffiliated third party for $2.4 million, excluding closing and other
acquisition related costs. The Company is using the land and air rights for the development and construction of a 296-room Marriott Moxy
hotel (the “Lower East Side Moxy Hotel”). On June 3, 2021, the Company entered into a development agreement (the “Development
Agreement”) with an affiliate of the Advisor (the “Moxy Lower East Side Developer”) pursuant to which the Lower East
Side Moxy Developer is being paid a development fee equal to 3% of hard and soft costs incurred in connection with the development and
construction of the Lower East Side Moxy Hotel. Additionally on June 3, 2021, the Company obtained construction financing for the Lower
East Side Moxy Hotel. The Lower East Side Moxy Hotel is currently under construction and expected to open during the fourth quarter of
2022.
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)
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 from unaffiliated third parties for an aggregate purchase price of $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 land parcels for the
development of a multi-family residential property (the “Exterior Street Project”).
The following is a summary of
the total amounts incurred and capitalized to each of the Company’s development projects as of the dates indicated and the amounts
of interest capitalized to the Company’s development projects for the periods indicated:
| Schedule of development projects | |
| | | |
| | | |
| | | |
| | |
| | |
| | |
| | |
Capitalized Interest | |
| | |
As of | | |
As of | | |
Three Months Ended | |
| Development Projects | |
March 31,
2022 | | |
December 31,
2021 | | |
March 31,
2022 | | |
March 31,
2021 | |
| Lower East Side Moxy Hotel | |
$ | 163,553 | | |
$ | 146,747 | | |
$ | 2,616 | | |
$ | 1,114 | |
| Exterior Street Project | |
| 88,674 | | |
| 87,467 | | |
| 571 | | |
| 558 | |
| Total Development Projects | |
$ | 252,227 | | |
$ | 234,214 | | |
$ | 3,187 | | |
$ | 1,672 | |
| 4. | Investments in Related Parties |
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:
| Schedule of Preferred Investments | |
| | | |
| | | |
| | | |
| | | |
| | |
| | |
| | |
Preferred Investment Balance | | |
Investment Income (1) | |
| | |
| | |
As of
March 31, | | |
As of
December 31, | | |
Three Months Ended
March 31, | |
| Preferred Investments | |
Dividend Rate | | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| 40 East End Avenue | |
| 12 | % | |
$ | 6,000 | | |
$ | 6,000 | | |
$ | 180 | | |
$ | 180 | |
| East 11th Street | |
| 12 | % | |
| 8,500 | | |
| 8,500 | | |
| 255 | | |
| 255 | |
| Total Preferred Investments | |
| | | |
$ | 14,500 | | |
$ | 14,500 | | |
$ | 435 | | |
$ | 435 | |
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, as of both March 31, 2022 and December 31, 2021, which is included in investment in related parties on the consolidated
balance sheets.
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”).
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.
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 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 generally provide for monthly interest at a prescribed variable rate, subject to a floor. In connection with the initial
funding of the Joint Venture Promissory Notes, the NR Joint Ventures receive origination fees (ranging from 1.00% to 1.50%) based on the
principal commitment under the loan and retain 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 conditions, including the funding of additional Loan Reserves and payment of extension fees. 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.
Origination fees
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 three months
ended March 31, 2022, both the NR Subsidiaries and the NR Affiliates made aggregate contributions to the NR Joint Ventures of $21.9 million,
principally to fund their respective shares of the Joint Venture Promissory Note that was originated. During three months ended March
31, 2021, both the NR Subsidiaries and the NR Affiliates made aggregate contributions to the NR Joint Ventures of $40, principally to
fund their respective shares of the NR Joint Ventures’ operating expenses. Additionally, during the three months ended March 31,
2022, the NR Joint Ventures made aggregate distributions of $15.4 million to both the NR Subsidiaries and NR Affiliates, based on their
respective membership interests and during the three months ended March 31, 2021, the NR Joint Ventures made aggregate distributions of
$0.2 million to both the NR Subsidiaries and NR Affiliates, based on their respective membership interests.
The following
tables summarize the Notes Receivable as of the dates indicated:
| Summary of Notes Receivable | |
| | | |
| | | |
| | | |
| |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
| | |
| | |
| | |
| | |
| |
| |
| |
As of
March 31, 2022 | |
| | |
Company’s
Ownership | | |
Loan
Commitment | | |
Origination | | |
Origination | |
Maturity | |
Contractual
Interest | |
Outstanding | | |
| | |
Unamortized Origination | | |
Carrying | | |
Unfunded | |
| Joint
Venture/Lender | |
Percentage | | |
Amount | | |
Fee | | |
Date | |
Date | |
Rate | |
Principal | | |
Reserves | | |
Fee | | |
Value | | |
Commitment | |
| LSC 1543 7th LLC | |
| 50 | % | |
| 49,000 | | |
| 1.50 | % | |
March 2, 2022 | |
August
31, 2023 | |
SOFR plus 7.00% (Floor of 7.15%) | |
$ | 49,000 | | |
$ | (4,320 | ) | |
$ | (694 | ) | |
$ | 43,986 | | |
$ | - | |
| | |
| | |
| | |
| | |
| |
| |
| |
As of
December 31, 2021 | |
| | |
Company’s
Ownership | | |
Loan
Commitment | | |
Origination | | |
Origination | |
Maturity | |
Contractual
Interest | |
Outstanding | | |
| | |
Unamortized Origination | | |
Carrying | | |
Unfunded | |
| Joint
Venture/Lender | |
Percentage | | |
Amount | | |
Fee | | |
Date | |
Date | |
Rate | |
Principal | | |
Reserves | | |
Fee | | |
Value | | |
Commitment | |
| LSC 1543 7th LLC (1) | |
| 50 | % | |
| 20,000 | | |
| 1.00 | % | |
August 27, 2019 | |
February 28, 2022 | |
Libor plus 5.40% (Floor of 7.90%) | |
$ | 17,500 | | |
$ | - | | |
$ | (33 | ) | |
$ | 17,467 | | |
$ | - | |
| LSC 11640 Mayfield LLC (2) | |
| 50 | % | |
| 18,000 | | |
| 1.50 | % | |
March 4, 2020 | |
March 1, 2022 | |
Libor plus 11.00% (Floor of 13.00%) | |
| 10,040 | | |
| (629 | ) | |
| (24 | ) | |
| 9,387 | | |
| 6,960 | |
| | |
| | | |
| | | |
| | | |
| |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
| Total | |
| | | |
| | | |
| | | |
| |
| |
| |
$ | 27,540 | | |
$ | (629 | ) | |
$ | (57 | ) | |
$ | 26,854 | | |
$ | 6,960 | |
| (1) | Repaid in full during March 2022. |
| (2) | Repaid in full during February 2022. |
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
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:
| Summarizes the interest earned for each of the Joint Venture Promissory Notes | |
| | | |
| | |
| | |
For the Three Months | | |
For the Three Months | |
| | |
Ended | | |
Ended | |
| | |
March 31, | | |
March 31, | |
| Joint Venture/Lender | |
2022 | | |
2021 | |
| | |
| | |
| |
| LSC 1543 7th LLC | |
$ | 321 | | |
$ | - | |
| | |
| | | |
| | |
| LSC 1543 7th LLC | |
| 368 | | |
| 445 | |
| | |
| | | |
| | |
| LSC 162nd Capital I LLC | |
| - | | |
| 124 | |
| | |
| | | |
| | |
| LSC 162nd Capital II LLC | |
| - | | |
| 269 | |
| | |
| | | |
| | |
| LSC 1650 Lincoln LLC | |
| - | | |
| 534 | |
| | |
| | | |
| | |
| LSC 11640 Mayfield LLC | |
| 455 | | |
| 369 | |
| | |
| | | |
| | |
| LSC 87 Newkirk LLC | |
| - | | |
| 796 | |
| | |
| | | |
| | |
| Total | |
$ | 1,144 | | |
$ | 2,537 | |
| 6. | Marketable Securities, Derivative Financial Instruments,
Fair Value Measurements and Notes Payable |
Marketable Securities:
The following is a summary of the Company’s
available for sale securities:
| Summary of available for sale securities and other investments | |
| | | |
| | | |
| | | |
| | |
| | |
As of March 31, 2022 | |
| | |
Adjusted Cost | | |
Gross Unrealized Gains | | |
Gross Unrealized Losses | | |
Fair Value | |
| Marketable Securities: | |
| | | |
| | | |
| | | |
| | |
| Equity securities: | |
| | | |
| | | |
| | | |
| | |
| Common and Preferred Equity Securities | |
$ | 22,055 | | |
$ | 124 | | |
$ | (822 | ) | |
$ | 21,357 | |
| Marco OP Units and Marco II OP Units | |
| 19,227 | | |
| 8,301 | | |
| - | | |
| 27,528 | |
| | |
| 41,282 | | |
| 8,425 | | |
| (822 | ) | |
| 48,885 | |
| Debt securities: | |
| | | |
| | | |
| | | |
| | |
| Corporate Bonds | |
| 1,290 | | |
| - | | |
| (75 | ) | |
| 1,215 | |
| Total | |
$ | 42,572 | | |
$ | 8,425 | | |
$ | (897 | ) | |
$ | 50,100 | |
| | |
As of December 31, 2021 | |
| | |
Adjusted Cost | | |
Gross Unrealized Gains | | |
Gross Unrealized Losses | | |
Fair Value | |
| Marketable Securities: | |
| | | |
| | | |
| | | |
| | |
| Equity securities: | |
| | | |
| | | |
| | | |
| | |
| Common and Preferred Equity Securities | |
$ | 24,932 | | |
$ | 2,541 | | |
$ | (135 | ) | |
$ | 27,338 | |
| Marco OP Units and Marco II OP Units | |
| 19,227 | | |
| 14,204 | | |
| - | | |
| 33,431 | |
| | |
| 44,159 | | |
| 16,745 | | |
| (135 | ) | |
| 60,769 | |
| Debt securities: | |
| | | |
| | | |
| | | |
| | |
| Corporate Bonds | |
| 2,073 | | |
| - | | |
| (28 | ) | |
| 2,045 | |
| Total | |
$ | 46,232 | | |
$ | 16,745 | | |
$ | (163 | ) | |
$ | 62,814 | |
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 both March
31, 2022 and December 31, 2021, 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 both 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 Inc.”), 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 Inc. in exchange for cash or similar number of shares of Simon Inc.’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 $131.56 per share
and $113.77 per share as of March 31, 2022 and 2021, respectively. Additionally, the closing price of Simon Stock was $159.77 per share
as of December 31, 2021.
Financial
markets have been experiencing significant volatility resulting in swings in market interest rates and market prices of certain equity
securities. Primarily because of this volatility, particularly due to the above noted changes in the closing prices of Simon Stock, the
Company incurred an unrealized losses of $9.0 million for the three months ended March 31, 2022 and unrealized gains of $9.0 million
for the three months ended March 31, 2021. These unrealized gains and losses incurred on the Company’s marketable equity securities
are included in its consolidated statements of operations.
Additionally, as
of March 31, 2022 and December 31, 2021, certain of the Company’s marketable debt securities had gross unrealized losses of $75
and $28. However, the Company does not consider these declines in market value to be other than temporary in nature. When evaluating the
debt investments 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 investment before recovery of the investment’s amortized
cost basis. During the three months ended March 31, 2022 and 2021, the Company did not recognize any other-than-temporary impairment charges.
As of both March 31, 2022 and December 31, 2021, the Company did not consider any of its investments to be other-than-temporarily impaired.
The Company may
sell certain of its investments prior to their stated maturities for strategic purposes, in anticipation of credit deterioration, or for
duration management.
Derivative Financial Instruments
The Company has entered into two interest
rate cap contracts with unrelated financial institutions in order to reduce the effect of interest rate fluctuations or risk of certain
real estate investment’s interest expense on its variable rate debt. The Company is exposed to credit risk in the event of non-performance
by the counterparty to these financial instruments. Management believes the risk of loss due to non-performance to be minimal.
The Company is accounting for the interest rate cap contracts as economic
hedges, marking these contracts to market, taking into account present interest rates compared to the contracted fixed rate over the life
of the contract and recording the unrealized gain or loss on the interest rate cap contracts in the consolidated statements of operations.
For the three months ended March 31,
2022, the Company recorded an unrealized gain of $0.9 million in the consolidated statement of operations representing the change in the fair value of these economic hedges during such period.
The two interest rate cap contracts
have an aggregate notional amount of $90.0 million and $40.0 million, respectively, and effectively cap LIBOR at 3.00% and 2.50%, respectively.
Both interest rate cap contracts mature on June 3, 2024. The aggregate fair value of the interest rate cap contracts was $1.2 million
as of March 31, 2022 and is included in prepaid and other assets. See Note 7 for additional information.
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. |
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)
Marketable securities
and derivative financial instruments measured at fair value on a recurring basis as of the dates indicated are as follows:
| Schedule of Marketable securities measured at fair value on a recurring basis | |
| | | |
| | | |
| | | |
| | |
| | |
Fair Value Measurement Using |
|
| |
| As of March 31, 2022 | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
| | |
| | |
| | |
| | |
| |
| Marketable Securities: | |
| | | |
| | | |
| | | |
| | |
| Common and Preferred Equity Securities | |
$ | 3,925 | | |
$ | 17,432 | | |
$ | - | | |
$ | 21,357 | |
| Marco OP and OP II Units | |
| - | | |
| 27,528 | | |
| - | | |
| 27,528 | |
| Corporate Bonds | |
| - | | |
| 1,215 | | |
| - | | |
| 1,215 | |
| Total | |
$ | 3,925 | | |
$ | 46,175 | | |
$ | - | | |
$ | 50,100 | |
| | |
| | | |
| | | |
| | | |
| | |
| Derivative Financial Instruments: | |
| | | |
| | | |
| | | |
| | |
| Interest Rate Cap Contracts | |
$ | - | | |
$ | 1,154 | | |
$ | - | | |
$ | 1,154 | |
| | |
Fair Value Measurement Using |
|
| |
| As of December 31, 2021 | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
| | |
| | |
| | |
| | |
| |
| Marketable Securities: | |
| | | |
| | | |
| | | |
| | |
| Common and Preferred Equity Securities | |
$ | 6,825 | | |
$ | 20,513 | | |
$ | - | | |
$ | 27,338 | |
| Marco OP and OP II Units | |
| - | | |
| 33,431 | | |
| - | | |
| 33,431 | |
| Corporate Bonds | |
| - | | |
| 2,045 | | |
| - | | |
| 2,045 | |
| Total | |
$ | 6,825 | | |
$ | 55,989 | | |
$ | - | | |
$ | 62,814 | |
The fair values
of the Company’s common equity securities are measured using readily quoted prices for these investments which are listed for trade
on active markets. The fair values of the Company’s preferred equity securities and corporate bonds are measured using readily available
quoted prices for these securities; however, the markets for these securities are not active. The fair values of the Company’s interest
rate cap contracts are measured using other inputs that are observable or can be corroborated by observable market data for substantially
the full term of the assets or liabilities. Additionally, as noted and disclosed above, the Company’s Marco OP and OP II units are
both 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 OP II units.
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:
| Schedule of contractual maturity | |
| | |
| | |
March 31,
2022 | |
| Due in 1 year | |
$ | - | |
| Due in 1 year through 5 years | |
| - | |
| Due in 5 years through 10 years | |
| - | |
| Due after 10 years | |
| 1,215 | |
| Total | |
$ | 1,215 | |
The Company did
not have any other significant financial assets or liabilities, which would require revised valuations that are recognized at fair value.
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)
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 due on demand, bears interest at LIBOR + 0.85% (1.30% as of March 31, 2022) 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 March 31, 2022 and December 31, 2021.
Line of Credit
The Company has
a non-revolving credit facility (the “Line of Credit”) that provides 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, matures on November 30, 2022 and bears interest at
LIBOR + 1.35% (1.80% as of March 31, 2022). The Line of Credit is collateralized by an aggregate of 209,243 of Marco OP Units and Marco
II OP Units and is guaranteed by PRO. As of March 31, 2022, the amount of borrowings available to be drawn under the Line of Credit was
$15.1 million. No amounts were outstanding under the Line of Credit as of both March 31, 2022 and December 31, 2021.
Mortgages payable, net consists of the
following:
| Schedule of Mortgages Payable | |
| |
| | | |
| |
| | | |
| | | |
| | |
| Property/Investment | |
Interest Rate | |
Weighted Average Interest Rate as of March 31, 2022 | | |
Maturity Date | |
Amount Due at Maturity | | |
As of
March 31, 2022 | | |
As of
December 31, 2021 | |
| | |
| |
| | |
| |
| | |
| | |
| |
| Gantry Park Landing | |
4.48% | |
| 4.48 | % | |
November 2024 | |
$ | 65,317 | | |
$ | 69,188 | | |
$ | 69,540 | |
| Lower East Side Moxy Hotel Senior | |
LIBOR + 7.25% (floor of 7.75%) | |
| 7.75 | % | |
June 2024 | |
| 35,610 | | |
| 35,610 | | |
| 35,610 | |
| Lower East Side Moxy Hotel Junior | |
LIBOR + 13.50% (floor of 14.00%) | |
| 14.03 | % | |
June 2024 | |
| 36,912 | | |
| 36,912 | | |
| 24,603 | |
| Exterior Street Project | |
LIBOR + 2.25% | |
| 2.42 | % | |
October 2022 | |
| 35,000 | | |
| 35,000 | | |
| 35,000 | |
| Exterior Street Project Supplemental | |
LIBOR + 2.50% | |
| 2.67 | % | |
October 2022 | |
| 7,000 | | |
| 7,000 | | |
| 7,000 | |
| | |
| |
| | | |
| |
| | | |
| | | |
| | |
| Total mortgages payable | |
| |
| 6.57 | % | |
| |
$ | 179,839 | | |
| 183,710 | | |
| 171,753 | |
| | |
| |
| | | |
| |
| | | |
| | | |
| | |
| Less: Deferred financing costs | |
| |
| | | |
| |
| | | |
| (5,309 | ) | |
| (6,047 | ) |
| | |
| |
| | | |
| |
| | | |
| | | |
| | |
| Total mortgages payable, net | |
| |
| | | |
| |
| | | |
$ | 178,401 | | |
$ | 165,706 | |
LIBOR as of March
31, 2022 and December 31, 2021 was 0.45% and 0.10%, respectively. The Company’s loans are secured by the indicated real estate and
are non-recourse to the Company, unless otherwise indicated.
On June 3, 2021, the Company, through a wholly owned subsidiary, closed on a recourse construction loan facility (the “Moxy
Senior Loan”) providing for up to $90.0 million of funds for the development and construction of the Lower East Side Moxy Hotel.
At closing, $35.6 million of proceeds were initially advanced under the Moxy Senior Loan, which were used to repay in full the Lower
East Side Moxy Mortgage. The Moxy Senior Loan bears interest at LIBOR + 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 March 31, 2022, 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”) providing for up to
$40.0 million of additional funds for the development and construction of the Lower East Side Moxy Hotel. The Moxy Junior Loan bears
interest at LIBOR + 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 March 31, 2022, the outstanding principal balance of the Moxy Junior Loan was $36.9 million and the remaining
availability under the facility was up to $3.1 million.
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)
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 two interest rate cap agreements pursuant to which the LIBOR rate will be capped at 3.00% on the Moxy Senior Loan (up to $90.0 million)
through June 3, 2024 and 2.50% on the Moxy Junior Loan (up to $40.0 million) through June 3, 2024. 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 March 31, 2022 and December 31, 2021.
On March 29, 2019, the Company entered into a $35.0 million loan (the “Exterior Street
Loan”) which, commencing on October 10, 2020, bears interest at LIBOR + 2.25% through its scheduled maturity date. The
Exterior Street Loan requires monthly interest-only payments with the outstanding principal balance due in full at its maturity date.
The Exterior Street Loan was initially scheduled to mature on April 9, 2021 but during April 2021, its maturity date was further extended
to April 9, 2022. Additionally, on December 21, 2021, the loan agreement was amended to provide an additional six-month extension and
an additional $7.0 million loan (the “Exterior Street Supplemental Loan” and collectively with the Exterior Street Loan,
the “Exterior Street Loans”) which bears interest at LIBOR + 2.50% and requires monthly interest-only payments through
its maturity date. During April of 2022, the Company exercised the additional six-month extension and the Exterior Street Loans
are currently scheduled to mature on October 9, 2022 and are collateralized by the Exterior Street Project.
The following
table shows the contractually scheduled principal maturities of the Company’s mortgage debt during the next five years and thereafter
as of March 31, 2022:
| Scheduled of Contractually Principal Maturities During Next Five Years | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| | |
2022 | | |
2023 | | |
2024 | | |
2025 | | |
2026 | | |
Thereafter | | |
Total | |
| Principal maturities | |
$ | 43,037 | | |
$ | 1,454 | | |
$ | 139,219 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 183,710 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Less: Deferred financing costs | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (5,309 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total principal maturities, net | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
$ | 178,401 | |
Certain of the Company’s
debt agreements require the maintenance of certain ratios, including debt service coverage. As of March 31, 2022, 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
Loans (outstanding aggregate principal balance of $42.0 million as of March 31, 2022) mature on October 9, 2022. The Company currently
intends to seek to extend or refinance the Exterior Street Loans on or before their maturity date.
However, if the
Company is unable to extend or refinance 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.
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.
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)
Effective
March 18, 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 our current net asset value per share (“NAV per Share”), as determined by the Board of Directors and reported
by the Company from time to time. Deaths that occurred subsequent to January 1, 2020 were eligible for consideration, subject to certain
conditions. 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.
At
the above noted dates, the Board of Directors established that on an annual basis, the Company would 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. Additionally,
redemption requests generally would be processed on a quarterly basis and would be subject to pro ration if either type of redemption
requests exceeded the annual limitation.
On
March 18, 2022, the Board of Directors approved an increase to the annual threshold for death redemptions from up to 0.5% to 1.0%.
For the three months
ended March 31, 2022 the Company repurchased 79,021 shares of common stock, pursuant to its SRP at an average price per share of $11.75
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.
| 9. | 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.
The Company, pursuant
to the related party arrangements, has recorded the following amounts for the periods indicated:
| Summary of Amount recorded in pursuant to related party arrangement | |
| | | |
| | |
| | |
For the Three Months Ended | |
| | |
March 31,
2022 | | |
March 31,
2021 | |
| | |
| | |
| |
| Asset management fees (general and administrative costs) | |
$ | 154 | | |
$ | 244 | |
| Property management fees (property operating expenses) | |
| 80 | | |
| 96 | |
| Development fees and cost reimbursement(1) | |
| 884 | | |
| 310 | |
| Total | |
$ | 1,118 | | |
$ | 650 | |
| (1) | Development fees and the
reimbursement of development-related costs that the Company pays to the Advisor and its affiliates are capitalized and are included
in the carrying value of the associated development project which are classified as development projects on the consolidated balance
sheets. As of March 31, 2022 and December 31, 2021, the Company owed the Advisor and its affiliated entities $0.5 million and $0.7
million, respectively, for development fees, which is included in accounts payable, accrued expenses and other liabilities on the
consolidated balance sheets. |
See Notes 3, 4 and 5 for other related party transactions.
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.
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)
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 months ended March 31, 2022 and 2021, distributions of $0.5 million were declared and paid on the SLP units.
The carrying amounts
reported in the consolidated balance sheets for cash and cash equivalents, restricted cash, prepaid expenses and other assets, accounts
payable, accrued expenses and other liabilities, due to related parties, tenant allowances and deposits payable and deferred rental income
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.
The carrying amount
and estimated fair value (in millions) of the Company’s mortgage debt is summarized as follows:
| Schedule of mortgage debt | |
| | | |
| | | |
| | | |
| | |
| | |
As of March 31, 2022 | | |
As of December 31, 2021 | |
| | |
Carrying Amount | | |
Estimated Fair Value | | |
Carrying Amount | | |
Estimated Fair Value | |
| Mortgages payable | |
$ | 183.7 | | |
$ | 185.2 | | |
$ | 171.8 | | |
$ | 174.4 | |
The fair value of
the mortgages payable was determined by discounting the future contractual interest and principal payments by estimated current market
interest rates.
| 11. | 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.
Distribution Payment
On April 15, 2022,
the distribution for the three-month period ending March 31, 2022 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 $11.16 per share,
equal to 95% of the Company’s most recently published estimated net asset value per share of $11.75 as of September 30, 2021.
Distribution Declaration
On May 5, 2022,
the Company’s Board of Directors authorized and the Company declared a distribution of $0.175 per share for the quarterly period
ending June 30, 2022. 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 May 5, 2022, the Board
of Directors declared a quarterly distribution for the quarterly period ending June 30, 2022 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, if any, declared
will be at the discretion of the Board of Directors based on their analysis of the Company’s performance over the previous periods
and expectations of performance for future periods. The Board of Directors will consider various factors in its determination, including
but not limited to, the sources and availability of capital, operating and interest expenses, the Company’s ability to refinance
near-term debt, as well as the IRS’s annual distribution requirement that REITs distribute no less than 90% of their taxable income.
The Company cannot assure that any future distributions will be made or that it will maintain any particular level of distributions that
it has previously established or may establish.
PART
I. FINANCIAL INFORMATION, CONTINUED: