Notes to Consolidated Financial Statements
(Unaudited)
Lightstone
Value Plus REIT III, Inc. (“Lightstone REIT III”), which was formerly known as Lightstone Value Plus Real Estate Investment
Trust III, Inc. before September 16, 2021, is a Maryland corporation, formed on October 5, 2012, which elected to qualify as a real estate
investment trust (“REIT”) for U.S. federal income tax purposes beginning with the taxable year ended December 31, 2015.
The
Lightstone REIT III is structured as an umbrella partnership REIT, or UPREIT, and substantially all of its current and future business
will be conducted through Lightstone Value Plus REIT III LP, a Delaware limited partnership (the “Operating Partnership”).
As of September 30, 2021, Lightstone REIT III held an approximately 99% general partnership interest in the Operating Partnership’s
common units.
Lightstone
REIT III 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 Lightstone REIT III, its Operating Partnership or
the Company as required by the context in which such pronoun is used.
The
Company has and will continue to seek to acquire a diverse portfolio of real estate assets and real estate-related investments, including
hotels, other commercial and/or residential properties, primarily located in the United States. All such properties may be acquired and
operated by the Company alone or jointly with another party. The Company may also originate or acquire mortgage loans secured by real
estate. Although the Company expects that most of its investments will be of these types, it may make other investments. In fact, it
may invest in whatever types of real estate-related investments that it believes are in its best interests.
The
Company currently has one operating segment. As of September 30, 2021, the Company (i) majority owned and consolidated the operating
results and financial condition of eight limited service hotels containing a total of 872 rooms, (ii) held an unconsolidated 50.0%
membership interest in LVP LIC Hotel JV LLC (the “Hilton Garden Inn Joint Venture”) and (iii) held an unconsolidated 25.0%
membership interest in Bedford Avenue Holdings LLC (the “Williamsburg Moxy Hotel Joint Venture”). The Company accounts for
its unconsolidated membership interests in the Hilton Garden Inn Joint Venture and the Williamsburg Moxy Hotel Joint Venture under the
equity method of accounting.
The
Company’s advisor is Lightstone Value Plus REIT III LLC (the “Advisor”), which is majority owned by David Lichtenstein.
On July 16, 2014, the Advisor contributed $2,000 to the Operating Partnership in exchange for 200 limited partner units in the Operating
Partnership. The Advisor also owns 20,000 shares of our common stock (“Common Shares”) which were issued on December 24,
2012 for $200,000, or $10.00 per share. Mr. Lichtenstein also is a majority owner of the equity interests of the Lightstone Group, LLC.
The Lightstone Group, LLC served as the Company’s sponsor (the ’’Sponsor’’) during its initial public offering
(the “Offering”) which terminated on March 31, 2017. Mr. Lichtenstein owns 222,222 Common Shares which were issued on December
11, 2014 for $2.0 million, or $9.00 per share. Pursuant to the terms of an advisory agreement and subject to the oversight of the Company’s
board of directors (the “Board of Directors”), the Advisor has primary responsibility for making investment decisions on
behalf of the Company 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 III LLC, a Delaware limited liability company (the “Special Limited Partner”),
which owns 242 subordinated participation interests (“Subordinated Participation Interests”) in the Operating Partnership
which were acquired for $12.1 million in connection with the 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 Lightstone REIT III 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 certain affiliates which may manage the properties the Company acquires. However, the Company also contracts
with other unaffiliated third-party property managers, principally for the management of its hospitality properties.
The
Company’s Common Shares are not currently listed on a national securities exchange. The Company may seek to list its Common Shares
for trading on a national securities exchange only if a majority of its independent directors believe listing would be in the best interest
of its stockholders. The Company does not intend to list its Common Shares at this time. The Company does not anticipate that there would
be any market for its Common Shares until they are listed for trading. In the event the Company does not begin the process of achieving
a liquidity event prior to March 31, 2025, which is the eighth anniversary of the termination of its Offering, its charter requires either
(a) an amendment to its charter to extend the deadline to begin the process of achieving a liquidity event, or (b) the holding of a stockholders
meeting to vote on a proposal for an orderly liquidation of its portfolio.
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Noncontrolling
Interests – Partners of the Operating Partnership
Limited
Partner
On
July 16, 2014, the Advisor contributed $2,000 to the Operating Partnership in exchange for 200 limited partner units in the Operating
Partnership. The Advisor has the right to convert limited partner units into cash or, at the Company’s option, an equal number
of its Common Shares.
Special
Limited Partner
In
connection with the Company’s Offering, which terminated on March 31, 2017, the Special Limited Partner purchased from the Operating
Partnership an aggregate of approximately 242 Subordinated Participation Interests for consideration of $12.1 million. The Subordinated
Participation Interests were each purchased for $50,000 in consideration and may be entitled to receive liquidation distributions upon
the liquidation of Lightstone REIT III.
As
the majority owner of the Special Limited Partner, Mr. Lichtenstein is the beneficial owner of a 99% interest in such Subordinated Participation
Interests and will thus receive an indirect benefit from any distributions made in respect thereof.
These
Subordinated Participation Interests entitle the Special Limited Partner to a portion of any regular and liquidation distributions that
the Company makes to its stockholders, but only after its stockholders have received a stated preferred return. From the Company’s
inception through September 30, 2021, no distributions have been declared or paid on the Subordinated Participation Interests.
The
Advisor and its affiliates and the Special Limited Partner are related parties of the Company. Certain of these entities are entitled
to compensation for services related to the investment, management and disposition of our assets during the Company’s acquisition,
operational and liquidation stages. The compensation levels during the acquisition and operational stages are 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.
|
|
2.
|
Summary
of Significant Accounting Policies
|
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 the Lightstone Value Plus REIT III, Inc. and its Subsidiaries have been prepared
in accordance with accounting principles generally accepted in the United States of America (“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 GAAP for complete financial statements.
The
consolidated financial statements have been prepared in accordance with GAAP. 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 depreciable lives. 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.
To
qualify or maintain our qualification as a REIT, we engage in certain activities through wholly-owned taxable REIT subsidiaries (“TRS”).
As such, we are subject to U.S. federal and state income and franchise taxes from these activities.
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Revenue
The
following table represents the total revenues from hotel operations on a disaggregated basis:
|
Schedule of revenues from hotel operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
September 30,
|
|
|
For the Nine Months Ended
September 30,
|
|
|
Revenues
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
Room
|
|
$
|
6,632,610
|
|
|
$
|
3,363,015
|
|
|
$
|
15,432,728
|
|
|
$
|
10,692,786
|
|
|
Food, beverage and other
|
|
|
174,446
|
|
|
|
109,770
|
|
|
|
443,571
|
|
|
|
406,913
|
|
|
Total revenues
|
|
$
|
6,807,056
|
|
|
$
|
3,472,785
|
|
|
$
|
15,876,299
|
|
|
$
|
11,099,699
|
|
Principles
of Consolidation and Basis of Presentation
The
consolidated financial statements include the accounts of Lightstone REIT III and the Operating Partnership and its subsidiaries (over
which the Company exercises financial and operating control). As of September 30, 2021, Lightstone REIT III had an approximate 99% general
partnership interest in the common units of the Operating Partnership. All inter-company accounts and transactions have been eliminated
in consolidation.
COVID-19
Pandemic Operations and Liquidity Update
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.
The
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.
As
a result of the COVID-19 pandemic, room demand and rental rates for the Company’s consolidated and unconsolidated hotels began
to significantly decline in March 2020 and while there has been sequential improvement since then; both room demand and rental rates
continue to be below historical levels. Since March 2020, the COVID-19 pandemic has had a significant negative impact on the Company's
operations, financial position and cash flow and the Company currently expects that it will continue to do so for the foreseeable future.
The Company cannot currently estimate if and when room demand and rental rates will return to pre-pandemic levels for its hotels.
In
light of the past, present and potential future impact of the COVID-19 pandemic on the operating results of its hotels, the Company has
taken various actions to preserve its liquidity, including, but not limited to, those described below:
|
|
●
|
The Company implemented
cost reduction strategies for all of its hotels, leading to reductions in certain operating expenses and capital expenditures.
|
|
|
●
|
Amendments
to Revolving Credit Facility –
On
June 2, 2020, the Company’s revolving credit facility (the “Revolving Credit Facility”) was amended to provide
for (i) the deferral of the six monthly debt service payments aggregating $0.8 million for the period from April 1, 2020 through
September 30, 2020 until July 13, 2022; (ii) a 100 bps reduction in the interest rate spread to LIBOR + 2.15%, subject to a 3.00%
floor, for the six-month period from September 1, 2020 through February 28, 2021; (iii) the Company pre-funding $0.7
million into a cash collateral reserve account to cover the six monthly debt service payments due from October 1, 2020 through
March 1, 2021; and (iv) a waiver of all financial covenants for quarter-end periods before June 30, 2021. Additionally,
a principal paydown of $0.6 million, which was previously due on April 1, 2020 was bifurcated into two separate principal paydowns,
of $0.3 million, which were made in June 2020 and September 2020.
|
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
|
|
●
|
Subsequently,
on March 31, 2021, the Revolving Credit Facility was further amended providing for (i) the Company to make another principal paydown
of $3.8 million, (ii) the Company to fund an additional $0.7 million into the cash collateral reserve account; (iii) a waiver of
all financial covenants for quarter-end periods through September 30, 2021 with a phased-in gradual return to the full financial
covenant requirements over the quarter-end periods beginning December 31, 2021 through March 31, 2023; (iv) two one-year extension
options at the lender’s sole discretion; and (v) certain limitations and restrictions on asset sales and additional borrowings
related to the pledged collateral.
See
Note 5 for additional information.
|
|
|
●
|
In April 2020 and
March 2021, the Company’s hotels received $1.5 million and $1.9 million, respectively, from loans provided under the federal
Paycheck Protection Program (“PPP Loans”). Through September 30, 2021, the Company has received notice from the U.S.
Small Business Administration (the “SBA”) that an aggregate of $0.9 million of its PPP Loans and related accrued interest
have been legally forgiven. See Note 6 for additional information.
|
|
|
●
|
On
June 19, 2019, the Board of Directors had previously determined to suspend regular monthly distributions and, as a result, has not declared
any distributions on the Company’s Common Shares since the suspension. Additionally, on March 19, 2020, the Board of Directors
approved the suspension of all redemptions under the Company’s shareholder repurchase program (the “SRP”). Subsequently
on May 10, 2021, the Board of Directors partially reopened the SRP to allow, subject to various conditions, for redemptions submitted
in connection with a stockholder’s death or hardship. See Note 7 for additional information.
|
|
|
●
|
The
Hilton Garden Inn Joint Venture has obtained various amendments to its non-recourse mortgage
loan secured by the Hilton Garden Inn – Long Island City. See Note 3 for additional
information.
|
The Company believes that these actions, along with its available
cash on hand, restricted cash and marketable securities, as well as its intention to seek to extend or refinance certain debt arrangements
as discussed in Note 5, will provide it with sufficient liquidity to meet its obligations for at least 12 months from the date of issuance
of these consolidated financial statements.
New
Accounting Pronouncements
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.
|
|
3.
|
Investments
in Unconsolidated Affiliated Real Estate Entities
|
The
entities below are partially owned by the Company. The Company accounts for these investments under the equity method of accounting as
the Company exercises significant influence, but does not exercise financial and operating control over these entities. A summary of
the Company’s investments in unconsolidated affiliated real estate entities is as follows:
|
Schedule of investments in the unconsolidated affiliated real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
Entity
|
|
Date of Ownership
|
|
Ownership %
|
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
|
LVP LIC Hotel JV LLC (the "Hilton Garden Inn Joint Venture")
|
|
March 27, 2018
|
|
|
50.00
|
%
|
|
$
|
11,222,595
|
|
|
$
|
10,663,655
|
|
|
Bedford Avenue Holdings LLC (the "Williamsburg Moxy Hotel Joint Venture")
|
|
August 5, 2021
|
|
|
25.00
|
%
|
|
|
11,022,026
|
|
|
|
-
|
|
|
Total investments in unconsolidated affiliated real estate entities
|
|
|
|
|
|
|
|
$
|
22,244,621
|
|
|
$
|
10,663,655
|
|
Williamsburg
Moxy Hotel Joint Venture
On
August 5, 2021, the Company formed a joint venture (the “Williamsburg Moxy Hotel Joint Venture”) with Lightstone Value
Plus REIT IV, Inc. (“Lightstone REIT IV”), a real estate investment trust also sponsored by the Company’s Sponsor
and a related party, pursuant to which the Company acquired 25% of Lightstone REIT IV’s membership interest in Bedford Avenue Holdings
LLC for aggregate consideration of $7.9 million.
Subsequent
to its initial acquisition, the Company made additional capital contributions to the Williamsburg Moxy Hotel Joint Venture of $2.9 million
through September 30, 2021.
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Bedford
Avenue Holdings LLC previously acquired four adjacent parcels of land located at 353-361 Bedford Avenue in Brooklyn, New York, on which
it is developing and constructing a 210-room branded hotel (the “Williamsburg Moxy Hotel”).
As
a result, the Company and Lightstone REIT IV have 25% and 75% membership interests, respectively, in the Williamsburg Moxy Hotel Joint
Venture. The Company has determined that the Williamsburg Moxy Hotel Joint Venture is a variable interest entity and the Company is not
the primary beneficiary, as it was determined that REIT IV is the primary beneficiary. The Company accounts for its membership interest in the Williamsburg Moxy Hotel Joint Venture in accordance
with the equity method because it exerts significant influence over but does not control the Williamsburg Moxy Hotel Joint Venture. All
capital contributions and distributions of earnings from the Williamsburg Moxy Hotel Joint Venture are made on a pro rata basis in proportion
to each member’s equity interest percentage. Any distributions in excess of earnings from the Williamsburg Moxy Hotel Joint Venture
are made to the members pursuant to the terms of the Williamsburg Moxy Hotel Joint Venture’s operating agreement. The Williamsburg
Moxy Hotel is currently under construction and therefore, the Williamsburg Moxy Hotel Joint Venture had no operating results from August
5, 2021 (date of acquisition) through September 30, 2021.
Moxy
Construction Loan
On
August 5, 2021, Williamsburg Moxy Hotel Joint Venture entered into a recourse construction loan facility for up to $77.0 million (the
“Moxy Construction Loan”) scheduled to mature on February 5, 2024, with two, six-month extension options, subject to
certain conditions. The Moxy Construction Loan bears interest at LIBOR plus 9.00%, subject to a 9.50% floor, with monthly interest-only
payments based on a rate of 7.50% with the accrued and unpaid interest due at maturity. The Moxy Construction Loan is collateralized
by the Williamsburg Moxy Hotel. The Williamsburg Moxy Hotel Joint Venture received initial proceeds of $16.0 million under the Moxy Construction
Loan and repaid a nonrecourse mortgage loan ($16.0 million) in full. As of September 30, 2021, the outstanding principal balance of the
Moxy Construction Loan was $16.1 million (including $0.1 million of interest capitalized to principal) and the remaining availability
under the facility was up to $61.0 million.
In
connection with the Moxy Construction Loan, the Williamsburg Moxy Hotel Joint Venture has provided certain completion and carry cost
guarantees.
Additionally,
financing fees of $144,375 payable to the Company’s Advisor have been capitalized and are reflected in the carrying value of its
investment in the Williamsburg Moxy Joint Venture which is included in investments in unconsolidated affiliated real estate entities
on the consolidated balance sheets.
Williamsburg
Moxy Hotel Joint Venture Financial Information
The
following table represents the condensed balance sheet for the Williamsburg Moxy Hotel Joint Venture:
|
Schedule of condensed balance sheet
|
|
|
|
|
|
|
|
As of
|
|
|
(amounts in thousands)
|
|
September 30,
2021
|
|
|
|
|
|
|
|
Construction in progress
|
|
$
|
61,022
|
|
|
Cash
|
|
|
132
|
|
|
Other assets
|
|
|
806
|
|
|
Total assets
|
|
$
|
61,960
|
|
|
|
|
|
|
|
|
Loans payable, net
|
|
$
|
11,890
|
|
|
Other liabilities
|
|
|
6,543
|
|
|
Members' capital
|
|
|
43,527
|
|
|
Total liabilities and members' capital
|
|
$
|
61,960
|
|
Hilton
Garden Inn Joint Venture
On
March 27, 2018, the Company and Lightstone Value Plus REIT II, Inc. (“Lightstone REIT II”), a real estate investment
trust also sponsored by the Company’s Sponsor and a related party, acquired, through the Hilton Garden Inn Joint Venture, a 183-room,
limited-service hotel located at 29-21 41st Avenue, Long Island City, New York (the “Hilton Garden Inn - Long Island
City”) from an unrelated third party, for aggregate consideration of $60.0 million, which consisted of $25.0 million of cash and
$35.0 million of proceeds from a mortgage loan from a financial institution (the “Hilton Garden Inn Mortgage”), excluding
closing and other related transaction costs. The Company and Lightstone REIT II each have a 50.0% membership interest in the Hilton Garden
Inn Joint Venture.
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The
Company paid $12.9 million for a 50.0% membership interest in the Hilton Garden Inn Joint Venture. The Company’s membership
interest in the Hilton Garden Inn Joint Venture is a co-managing interest. The Company accounts for its membership interest in the Hilton
Garden Inn Joint Venture in accordance with the equity method of accounting because it exerts significant influence over but does not
control the Hilton Garden Inn Joint Venture. All capital contributions and distributions of earnings from the Hilton Garden Inn
Joint Venture are made on a pro rata basis in proportion to each member’s equity interest percentage. Any distributions in excess
of earnings from the Hilton Garden Inn Joint Venture are made to the members pursuant to the terms of the Hilton Garden Inn Joint Venture’s
operating agreement. The Company commenced recording its allocated portion of profit/loss and cash distributions beginning as of March 27,
2018 with respect to its membership interest of 50.0% in the Hilton Garden Inn Joint Venture.
In
light of the impact of the COVID-19 pandemic on the operating results of the Hilton Garden Inn – Long Island City, the Hilton Garden
Inn Joint Venture has entered into certain amendments with respect the Hilton Garden Inn Mortgage as discussed below.
On
June 2, 2020, the Hilton Garden Inn Mortgage was amended to provide for (i) the deferral of the six monthly debt service payments aggregating
$0.9 million for the period from April 1, 2020 through September 30, 2020 until March 27, 2023; (ii) a 100 bps reduction in the interest
rate spread to LIBOR + 2.15%, subject to a 4.03% floor, for the six-month period from September 1, 2020 through February 28, 2021; (iii)
the Hilton Garden Inn Joint Venture pre-funding $1.2 million into a cash collateral reserve account to cover the six monthly debt service
payments due from October 1, 2020 through March 1, 2021; and (iv) waiver of all financial covenants for quarter-end periods before June
30, 2021.
Additionally,
on April 7, 2021, the Hilton Garden Inn Joint Venture and the lender further amended the terms of the Hilton Garden Inn Mortgage
to provide for (i) the Hilton Garden Inn Joint Venture to make a principal paydown of $1.7 million; (ii) the Hilton Garden Inn Joint
Venture to fund an additional $0.7 million into the cash collateral reserve account; (iii) a waiver of all financial covenants for quarter-end
periods through September 30, 2021 with a phased-in gradual return to the full financial covenant requirements over the quarter-end periods
beginning December 31, 2021 through December 31, 2022; (iv) a 11-month interest-only payment period from May 1, 2021 through March 31,
2022; and (v) certain restrictions on distributions to the members of the Hilton Garden Inn Joint Venture during the interest-only payment
period.
Subsequent
to the Company’s acquisition of its 50.0% membership interest in the Hilton Garden Joint Venture through September 30, 2021, it
has made an aggregate of $2.8 million of additional capital contributions, of which $1.3 million was made during the second quarter of
2021 and received aggregate distributions of $2.0 million, of which $0.5 million was received during the second quarter of 2021.
Hilton
Garden Inn Joint Venture Financial Information
The
following table represents the condensed income statement for the Hilton Garden Inn Joint Venture for the period indicated:
|
Schedule of condensed income statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(amounts in thousands)
|
|
For the Three Months Ended
September 30,
2021
|
|
|
For the Three Months Ended
September 30,
2020
|
|
|
For the Nine Months Ended
September 30,
2021
|
|
|
For the Nine Months Ended
September 30,
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
2,043
|
|
|
$
|
701
|
|
|
$
|
5,226
|
|
|
$
|
2,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating expenses
|
|
|
1,107
|
|
|
|
674
|
|
|
|
3,016
|
|
|
|
2,635
|
|
|
General and administrative costs
|
|
|
10
|
|
|
|
3
|
|
|
|
27
|
|
|
|
32
|
|
|
Depreciation and amortization
|
|
|
620
|
|
|
|
641
|
|
|
|
1,876
|
|
|
|
1,886
|
|
|
Operating income/(loss)
|
|
|
306
|
|
|
|
(617
|
)
|
|
|
307
|
|
|
|
(1,632
|
)
|
|
Gain on forgiveness of debt
|
|
|
381
|
|
|
|
-
|
|
|
|
381
|
|
|
|
-
|
|
|
Interest expense
|
|
|
(437
|
)
|
|
|
(435
|
)
|
|
|
(1,268
|
)
|
|
|
(1,352
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
$
|
250
|
|
|
$
|
(1,052
|
)
|
|
$
|
(580
|
)
|
|
$
|
(2,984
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company's share of net income/(loss) (50.00%)
|
|
$
|
125
|
|
|
$
|
(526
|
)
|
|
$
|
(290
|
)
|
|
$
|
(1,492
|
)
|
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The
following table represents the condensed balance sheet for the Hilton Garden Inn Joint Venture:
|
Schedule of condensed balance sheet
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
(amounts in thousands)
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment property, net
|
|
$
|
53,022
|
|
|
$
|
54,826
|
|
|
Cash
|
|
|
1,700
|
|
|
|
885
|
|
|
Other assets
|
|
|
1,682
|
|
|
|
1,211
|
|
|
Total assets
|
|
$
|
56,404
|
|
|
$
|
56,922
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans payable, net
|
|
$
|
33,100
|
|
|
$
|
34,988
|
|
|
Other liabilities
|
|
|
1,459
|
|
|
|
1,207
|
|
|
Members' capital
|
|
|
21,845
|
|
|
|
20,727
|
|
|
Total liabilities and members' capital
|
|
$
|
56,404
|
|
|
$
|
56,922
|
|
The
Cove Joint Venture
On
January 31, 2017, the Company, through its wholly owned subsidiary, REIT III COVE LLC along with LSG Cove LLC, an affiliate
of the Sponsor and a related party, REIT IV COVE LLC, a wholly owned subsidiary of Lightstone Real Estate Income Trust, Inc. (“Lightstone
IV”), a real estate investment trust also sponsored by the Sponsor and a related party and Maximus Cove Investor LLC (“Maximus”),
an unrelated third party, completed the acquisition of all of RP Cove, L.L.C’s membership interest in RP Maximus Cove, L.L.C. (the
“Cove Joint Venture”) for aggregate consideration of $255.0 million (the “Cove Transaction”). Excluding mortgage
financing obtained by the Cove Joint Venture in connection with the Cove Transaction, the Company paid $20.0 million for a 22.5% non-managing
membership interest in the Cove Joint Venture.
The
Cove Joint Venture owned and operated The Cove at Tiburon (“the Cove”), a 281-unit, luxury waterfront multifamily residential
property located in Tiburon, California from January 31, 2017 through February 12, 2020. As discussed below, the Company disposed of
its 22.5% membership interest in the Cove Joint Venture on February 12, 2020.
The
Company accounted for its 22.5% membership interest in the Cove Joint Venture in accordance with the equity method of accounting. For
the period from January 1, 2020 through February 12, 2020, the Company’s share of the Cove Joint Venture’s loss of $0.7 million
was $0.2 million, which is included in the loss from investments in unconsolidated affiliated real estate entities on the consolidated
statements of operations.
On
February 12, 2020, REIT IV Cove LLC, LSG Cove LLC and REIT III COVE LLC each redeemed their respective membership interests in the
Cove Joint Venture for an aggregate redemption price of $87.6 million. In connection, with the redemption of the Company’s 22.5%
membership interest in the Cove Joint Venture, it received proceeds of $21.9 million which resulted in the recognition of a gain on the
disposition of unconsolidated affiliated real estate entity of $7.9 million during the first quarter of 2020.
As
a result of the redemption of the Company’s 22.5% membership interest in the Cove Joint Venture on February 12, 2020, it no longer
has an ownership interest in the Cove Joint Venture. During August 2020, the Company received $0.1 million of additional proceeds related
to the redemption of its membership interest in the Cove Joint Venture and recognized a gain on the disposition of investment in unconsolidated
affiliated real estate entity of $0.1 million during the third quarter of 2020. As a result, the Company recognized an aggregate gain
on the disposition of investment in unconsolidated affiliated real estate entity of $8.0 million during the year ended December 31,
2020.
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
|
|
4.
|
Marketable
Securities and Fair Value Measurements
|
Marketable
Securities
The
following is a summary of the Company’s available for sale securities as of the dates indicated:
|
Schedule of available-for-sale Securities Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2021
|
|
|
|
|
Adjusted Cost
|
|
|
Gross Unrealized Gains
|
|
|
Gross Unrealized Losses
|
|
|
Fair Value
|
|
|
Marketable Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds
|
|
$
|
218,775
|
|
|
$
|
-
|
|
|
$
|
(171
|
)
|
|
$
|
218,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Bonds
|
|
|
1,707,096
|
|
|
|
3,465
|
|
|
|
(120,936
|
)
|
|
|
1,589,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,925,871
|
|
|
$
|
3,465
|
|
|
$
|
(121,107
|
)
|
|
$
|
1,808,229
|
|
|
|
|
As of December 31, 2020
|
|
|
|
|
Adjusted Cost
|
|
|
Gross Unrealized Gains
|
|
|
Gross Unrealized Losses
|
|
|
Fair Value
|
|
|
Marketable Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds
|
|
$
|
218,206
|
|
|
$
|
258
|
|
|
$
|
-
|
|
|
$
|
218,464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Bonds
|
|
|
3,229,608
|
|
|
|
10,039
|
|
|
|
(231,258
|
)
|
|
|
3,008,389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,447,814
|
|
|
$
|
10,297
|
|
|
$
|
(231,258
|
)
|
|
$
|
3,226,853
|
|
The
Company considers the declines in market value of its investments in debt securities to be temporary in nature. When evaluating its investments
in 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 debt security before recovery of its amortized cost basis. During
the nine months ended September 30, 2021 and 2020, the Company did not recognize any impairment charges on its investments in debt securities.
As of September 30, 2021, the Company does not consider any of its investments in debt securities to be other-than-temporarily impaired.
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.
|
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
|
|
●
|
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.
|
As
of September 30, 2021 and December 31, 2020, the Company’s equity securities were classified as Level 1 assets and the
Company’s debt securities were classified as Level 2 assets. There were no transfers between the level classifications during the
nine months ended September 30, 2021.
The
fair values of the Company’s investments in equity securities are measured using quoted prices in active markets for identical
assets and debt securities are measured using readily available quoted prices for similar assets.
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 estimated fair value of investments
|
|
|
|
|
|
|
|
As of September 30,
2021
|
|
|
Due in 1 year
|
|
$
|
-
|
|
|
Due in 1 year through 5 years
|
|
|
964,313
|
|
|
Due in 5 year through 10 years
|
|
|
-
|
|
|
Due after 10 years
|
|
|
625,312
|
|
|
Total
|
|
$
|
1,589,625
|
|
The
Company did not have any other significant financial assets or liabilities, which would require revised valuations that are recognized
at fair value.
|
5.
|
Mortgages
payable, net
|
Mortgages
payable, net consists of the following:
|
Schedule of mortgages Payable, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving Credit Facility
|
|
LIBOR + 3.15% (floor of 4.00%)
|
|
|
3.81
|
%
|
|
July 2022
|
|
$
|
34,573,333
|
|
|
$
|
34,573,333
|
|
|
$
|
38,414,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Promissory Note, secured by two properties
|
|
4.73%
|
|
|
4.73
|
%
|
|
October 2021
|
|
|
26,127,572
|
|
|
|
26,127,572
|
|
|
|
26,509,613
|
|
|
Total mortgages payable
|
|
|
|
|
4.21
|
%
|
|
|
|
$
|
60,700,905
|
|
|
|
60,700,905
|
|
|
|
64,924,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Deferred financing costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(157,177
|
)
|
|
|
(169,978
|
)
|
|
Total mortgage payable, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
60,543,728
|
|
|
$
|
64,754,449
|
|
Revolving
Credit Facility
The
Company, through certain subsidiaries, has a non-recourse Revolving Credit Facility with a financial institution. The Revolving Credit
Facility provides the Company with a line of credit of up to $60.0 million pursuant to which it may designate properties as collateral
that allow borrowings up to a 65.0% loan-to-value ratio subject to also meeting certain financial covenants, including a prescribed minimum
debt yield. The Revolving Credit Facility provides for monthly interest-only payments and the entire principal balance is due upon its
expiration.
The
Revolving Credit Facility, bears interest at LIBOR + 3.15%, subject to a 4.00% floor, and is currently scheduled to mature on July
13, 2022, subject to two, one-year extension options at the sole discretion of the lender.
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
On
June 2, 2020, the Company’s Revolving Credit Facility was amended to provide for (i) the deferral of the six monthly debt service
payments aggregating $0.8 million for the period from April 1, 2020 through September 30, 2020 until July 13, 2022; (ii) a 100 bps reduction
in the interest rate spread to LIBOR + 2.15%, subject to a 3.00% floor, for the six-month period from September 1, 2020 through February
28, 2021; (iii) the Company pre-funding $0.8 million into a cash collateral reserve account (of which $0.3 million was included in restricted
cash on the Company’s consolidated balance sheet as of December 31, 2020) to cover the six monthly debt service payments due from
October 1, 2020 through March 1, 2021; and (iv) a waiver of all financial covenants for quarter-end periods before June 30, 2021. Additionally,
a principal paydown of $0.6 million, which was previously due on April 1, 2020 was bifurcated into two separate principal paydowns, of
$0.3 million, which were made in June 2020 and September 2020.
Subsequently,
on March 31, 2021, the Revolving Credit Facility was further amended providing for (i) the Company to make another principal paydown
of $3.8 million, (ii) the Company to fund an additional $0.7 million into the cash collateral reserve account; (iii) a waiver of all
financial covenants for quarter-end periods through September 30, 2021 with a phased-in gradual return to the full financial covenant
requirements over the quarter-end periods beginning December 31, 2021 through March 31, 2023; (iv) two one-year extension options at
the lender’s sole discretion; and (v) certain limitations and restrictions on asset sales and additional borrowings related to
the pledged collateral.
As
of September 30, 2021, the Revolving Credit Facility had an outstanding principal balance of $34.6 million and six of the Company’s
hotel properties were pledged as collateral. Additionally, no additional borrowings were available under the Revolving Credit Facility
as of September 30, 2021. The Company currently intends to seek to extend the Revolving Credit Facility to July 13, 2023 pursuant to
the lender’s first option.
Home2
Suites Promissory Note
On
October 5, 2016, the Company entered into a non-recourse promissory note (the “Home2 Suites Promissory Note”) for $28.4 million.
The Promissory Note has a term of five years, bears interest at 4.73% and requires monthly interest and principal payments of $147,806
through its stated maturity with the then remaining unpaid balance of $26.1 million due upon maturity. The Home2 Suites Promissory Note
is cross-collateralized by two of the Company’s hotel properties (Home2 Suites – Tukwila and Home2 Suites – Salt Lake
City). The Home2 Suites Promissory Note matured on October 5, 2021 and was not repaid in full which constitutes an event of default under
the loan agreement. Prior to the maturity date, the Company had been current with respect to all scheduled debt service on the Home2
Suites Promissory Note.
The
Company is currently in the process of refinancing these two hotels with another lender which it expects will generate sufficient proceeds
to repay the Home2 Suites Promissory Note in full. Additionally, the lender of the Home2 Suites Promissory Note has provided a “reservation
of rights” letter indicating they will not take any immediate action to allow the Company time to complete the refinancing. However,
there can be no assurances as to the timing and terms of the refinancing as well as whether or not it will be successfully completed.
Principal
Maturities
The
following table, based on the initial terms of the mortgage, sets forth their aggregate estimated contractual principal maturities, including
balloon payments due at maturity, as of September 30, 2021:
|
Schedule of principal maturities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
|
2024
|
|
|
2025
|
|
|
Thereafter
|
|
|
Total
|
|
|
Principal maturities
|
|
$
|
26,127,572
|
|
|
$
|
34,573,333
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
60,700,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Deferred financing costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(157,177
|
)
|
|
Total principal maturities, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
60,543,728
|
|
Pursuant
to the Company’s debt agreements, $2.7 million and $3.0 million of funds were held in restricted escrow accounts as of September
30, 2021 and December 31, 2020, respectively. Such escrows are subject to release in accordance with the applicable debt agreement for
the payment of real estate taxes, debt service payments, insurance and capital improvements, as required. Certain of our debt agreements
also contain clauses providing for prepayment penalties.
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
During
April 2020, the Company, through various subsidiaries (each such entity, a “Borrower” and collectively, the “Borrowers”),
received aggregate funding of $1.5 million through loans (the “PPP Loans”) originated under the federal Paycheck Protection
Program, which was established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered
by the SBA. During March 2021, the Borrowers received an additional aggregate funding of $1.9 million of PPP Loans.
The
PPP Loans each have a term of five years and provide for an interest rate of 1.00%. The payment of principal and interest on the PPP
loan is deferred until the day that the forgiven amount is remitted to the lender (approximately five months after the forgiveness application
is submitted to the lender, unless the Borrower appeals a denial of forgiveness) or ten months after the end of the Borrower’s
covered period, whichever is earlier. Pursuant to the terms of the CARES Act, the proceeds of the PPP Loans may be used for payroll costs,
mortgage interest, rent or utility costs.
The
promissory note for each of the PPP Loans contains customary events of default relating to, among other things, payment defaults and
breach of representations and warranties or of provisions of the relevant promissory note. Under the terms of the CARES Act, each Borrower
can apply for and be granted forgiveness for all or a portion of the PPP Loans. Such forgiveness will be determined, subject to limitations,
based on the use of loan proceeds in accordance with the terms of the CARES Act. Although the Company intends for each Borrower to apply
for loan forgiveness, no assurance can be given that all of the Borrowers will ultimately obtain forgiveness under any relevant PPP Loan,
in whole or in part. In the event all or any portion of the PPP Loans is forgiven, the amount forgiven will be applied to outstanding
principal and recorded as income.
During
the three and nine months ended September 30, 2021, the Company received notice from the SBA that $0.5 million and $0.9 million, respectively,
of PPP Loans and related accrued interest had been legally forgiven and therefore, the Company recognized gains on forgiveness of debt
of those amounts on its consolidated statements of operations. As of September 30, 2021 and December 31, 2020, the PPP Loans had an outstanding
balance of $2.4 million and $1.5 million, respectively, and are classified as Notes Payable on the consolidated balance sheets.
|
|
7.
|
Company’s
Stockholder’s Equity
|
Distributions
on Common Shares
On
June 19, 2019, the Board of Directors determined to suspend regular monthly distributions on the Company’s Common Shares and as
a result, no distributions have been declared since the suspension.
Previously,
distributions on the Company’s Common Shares in an amount equal to a 6.0% annualized rate, based on a share price of $10.00, were
declared on a monthly basis beginning on January 14, 2015 through June 30, 2019 and were paid on or about the 15th day following each
month end.
Future
distributions declared on the Company’s Common Shares, if any, 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,
revenues and other sources of income, operating and interest expenses and 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.
Share
Repurchase Program
The
Company’s SRP may provide its stockholders with limited, interim liquidity by enabling them to sell their Common Shares back to
the Company, subject to restrictions.
On
March 19, 2020, the Board of Directors amended the SRP to remove stockholder notice requirements and also approved the suspension of
all redemptions effective immediately. On March 25, 2020, the Board of Directors determined to suspend the SRP effective immediately.
Effective
May 10, 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 or hardship and set the price for all such purchases to 100% of the NAV per
Share ($8.05 as of December 31, 2020).
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
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 1,000 shares of common stock, pursuant to its SRP at an average price
per share of $8.05 per share.
Earnings
per Share
The
Company had no potentially dilutive securities outstanding during the periods presented. Accordingly, basic and diluted earnings per
share is calculated by dividing net income/(loss) by the weighted-average number of shares of common stock outstanding during the applicable
period.
|
|
8.
|
Due
to related parties and other transactions
|
The
Company has 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, the Company’s ability to secure financing and its real estate operations
are dependent upon its Advisor and its 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
following table represents the fees incurred associated with the payments to the Company’s Advisor for the periods indicated:
|
Schedule of fees payments to Company's Advisor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
September 30,
|
|
|
For the Nine Months Ended September 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
Finance fees (1)
|
|
$
|
144,375
|
|
|
$
|
-
|
|
|
$
|
144,375
|
|
|
$
|
-
|
|
|
Disposition fees (general and administrative costs)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
39,200
|
|
|
Asset management fees (general and administrative costs)
|
|
|
301,242
|
|
|
|
300,292
|
|
|
|
903,300
|
|
|
|
955,706
|
|
|
Total
|
|
$
|
445,617
|
|
|
$
|
300,292
|
|
|
$
|
1,047,675
|
|
|
$
|
994,906
|
|
|
(1)
|
A
finance fee of $144,375 due to the Advisor in connection with arranging the Williamsburg
Moxy Hotel Joint Venture’s construction loan was capitalized and included in investment
in unconsolidated affiliated real estate entities and due to related parties 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.
The
carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, restricted cash, accounts receivable and
other assets, accounts payable and other accrued expenses, due to related parties and notes payable approximate their fair values because
of the short maturity of these instruments.
LIGHTSTONE VALUE PLUS REIT III, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The
carrying amount and estimated fair value of our mortgages payable are as follows:
|
Schedule of Mortgages payable and the related estimated fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
September 30,
2021
|
|
|
As of
December 31,
2020
|
|
|
|
|
Carrying Amount
|
|
|
Estimated Fair Value
|
|
|
Carrying Amount
|
|
|
Estimated Fair Value
|
|
|
Mortgages payable
|
|
$
|
60,700,905
|
|
|
$
|
60,707,630
|
|
|
$
|
64,924,427
|
|
|
$
|
64,823,777
|
|
The
fair value of our mortgages payable was determined by discounting the future contractual interest and principal payments by market interest
rates.
|
|
10.
|
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, we are 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.
PART
I. FINANCIAL INFORMATION, CONTINUED: