UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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Preliminary Proxy Statement |
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Definitive Proxy Statement |
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Soliciting Material Pursuant to §240.14a-12 |
LIGHTSTONE
VALUE PLUS REIT III, INC.
(Name of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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LIGHTSTONE VALUE PLUS REIT III, INC.
1985 Cedar Bridge Avenue, Suite 1
Lakewood, New Jersey 08701
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held December 14, 2023
To
the Stockholders of Lightstone Value Plus REIT III, Inc.:
I am pleased to invite our stockholders to the 2023 Annual Meeting of Stockholders of Lightstone Value Plus REIT III, Inc., a Maryland
corporation. The annual meeting will be held at 299 Park Avenue, New York, New York, 10171, at 9:15 a.m., Eastern Standard Time, on December
14, 2023.
At
the meeting, you will be asked to:
| ● | elect
three individuals to serve on the Board of Directors until our 2024 Annual Meeting of Stockholders
and until their successors are duly elected and qualify; and |
| ● | conduct
such other business as may properly come before the annual meeting or any adjournment or
postponement of the Annual Meeting. |
Our
Board of Directors has fixed the close of business on October 10, 2023 as the record date for the determination of stockholders entitled
to notice of and to vote at the meeting or any adjournment or postponement thereof. Record holders of shares of our common stock at the
close of business on the record date are entitled to notice of and to vote at the annual meeting.
For
further information regarding the matters to be acted upon at the annual meeting, I urge you to carefully read the accompanying proxy
statement. If you have questions about this proposal or would like additional copies of the proxy statement, please contact: Lightstone
Value Plus REIT III, Inc., 1985 Cedar Bridge Avenue, Suite 1, Lakewood, New Jersey 08701.
Whether
you plan to attend the annual meeting and vote or not, we urge you to have your vote recorded as early as possible. Stockholders have
the following three options for submitting their votes by proxy: (1) via the Internet; (2) by telephone; or (3) by mail, using the enclosed
proxy card.
YOUR
VOTE IS VERY IMPORTANT! Your immediate response will help avoid potential delays and may save us significant additional expenses
associated with soliciting stockholder votes.
You
are cordially invited to attend the 2023 Annual Meeting of Stockholders. Your vote is important.
By
Order of the Board of Directors,
Joseph Teichman
General Counsel and Secretary
Lakewood, New Jersey
October 16, 2023
LIGHTSTONE
VALUE PLUS REIT III, INC.
PROXY
STATEMENT
TABLE
OF CONTENTS
LIGHTSTONE
VALUE PLUS REIT III, INC.
1985 Cedar Bridge Avenue, Suite 1
Lakewood, New Jersey 08701
PROXY
STATEMENT
INTRODUCTION
The
accompanying proxy, mailed together with this proxy statement, is solicited by and on behalf of the board of directors (the “Board
of Directors”) of Lightstone Value Plus REIT III, Inc., a Maryland corporation (which we refer to in this proxy statement as the
“Company”), for use at the 2023 Annual Meeting of Stockholders and at any adjournment or postponement thereof. References
in this proxy statement to “we,” “us,” “our” or like terms also refer to the Company, and references
in this proxy statement to “you” refer to the stockholders of the Company. The mailing address of our principal executive
offices is 1985 Cedar Bridge Avenue, Suite 1, Lakewood, New Jersey 08701. This proxy statement, the accompanying proxy card and notice
of annual meeting are first being mailed to our stockholders on or about October 20, 2023. The 2022 Annual Report on Form 10-K was
previously mailed to our stockholders on or about April 15, 2023.
Our
Annual Report on Form 10-K for the year ended December 31, 2022 and the exhibits thereto may be accessed online through the Securities
and Exchange Commission (the “SEC”) website at www.sec.gov. In addition, stockholders may request a copy of our 2022 Annual
Report by writing or telephoning us at the following address: Lightstone Value Plus REIT III, Inc., 1985 Cedar Bridge Avenue, Suite 1,
Lakewood, New Jersey 08701, telephone (866) 792-8700.
INFORMATION
ABOUT THE MEETING AND VOTING
What
is the date of the annual meeting and where will it be held?
Our
2023 Annual Meeting of Stockholders will be held on December 14, 2023, at 9:15 a.m., Eastern Standard Time. The meeting will be held
at 299 Park Avenue, New York, New York, 10171.
What
will I be voting on at the meeting?
At
the meeting, you will be asked to:
| ● | elect
three individuals to serve on the Board of Directors until our 2024 Annual Meeting of Stockholders and until their successors are duly
elected and qualify; and |
| ● | conduct
such other business as may properly come before the annual meeting or any adjournment or postponement of the Annual Meeting. |
The
Board of Directors does not know of any matters that may be considered at the meeting other than the matters set forth in the items listed
above.
Who
can vote at the meeting?
Anyone
who is a stockholder of record at the close of business on October 10, 2023, the record date, or holds a valid proxy for the annual
meeting, is entitled to vote at the annual meeting.
Note
that Lightstone Value Plus REIT III LLC (the “Advisor”), which is our external
advisor, owned 20,000 shares of our common stock as of the record date and The Lightstone Group LLC (the “Sponsor”),
which is our sponsor, owned 222,222 shares of our common stock as of the record date. The Sponsor and the Advisor will abstain from
voting any shares in any vote for the election of directors. The Sponsor and the Advisor are affiliated with David Lichtenstein, one
of our directors. Any shares owned by the Sponsor, the Advisor, or any of their affiliates will be excluded in determining the requisite
percentage in interest of shares necessary to approve a matter on which they may not vote.
How
many votes do I have?
Each
share of Common Stock has one vote on each matter considered at the meeting or any adjournment or postponement thereof.
How
can I vote?
You
may vote in person at the meeting or by proxy. Stockholders have the following three options for submitting their votes by proxy:
| ● | via
the Internet at www.proxy-direct.com/; |
| ● | by
telephone, by calling toll free (800) 337-3503; or |
| ● | by
mail, using the pre-addressed, postage-paid envelope provided with this Proxy Statement. |
For
those stockholders with Internet access, we encourage you to authorize a proxy to vote your shares via the Internet, a convenient means
of authorizing a proxy that also provides cost savings to us. In addition, when you authorize a proxy to vote your shares via the Internet
or by telephone before the meeting date, your proxy authorization is recorded immediately and there is no risk that postal delays will
cause your vote by proxy to arrive late and, therefore, not be counted. For further instructions on authorizing a proxy to vote your
shares, see your proxy card enclosed with this proxy statement. You may also vote your shares at the meeting. If you attend the meeting,
you may submit your vote in person, and any proxy that you authorized by mail, Internet or telephone will be superseded by the vote that
you cast at the meeting.
How
will proxies be voted?
Shares
represented by valid proxies will be voted at the meeting in accordance with the directions given. If the enclosed proxy card is signed
and returned without any directions given, the shares will be voted FOR the nominees for director.
The
Board of Directors does not intend to present, and has no information indicating that others will present, any business at the annual
meeting other than as set forth in the attached Notice of Annual Meeting of Stockholders. However, if other matters requiring the vote
of our stockholders come before the meeting, it is the intention of the persons named in the accompanying proxy to vote the proxies held
by them in their discretion.
How
can I change my vote or revoke a proxy?
You
have the unconditional right to revoke your proxy at any time prior to the voting thereof by (i) submitting a later-dated proxy
either by telephone, via the Internet or in the mail to Computershare Fund Services (“CFS ”), whom we have
retained to aid in the solicitation of proxies, at the following address: Proxy Tabulator, 1290 Avenue of the Americas, 9th Floor, New
York, NY 10104, (ii) attending the meeting and voting in person or (iii) providing written notice to CFS. No written revocation
of your proxy shall be effective, however, unless and until it is received at or before the meeting. Your attendance at the meeting without
voting will not be sufficient to revoke a previous proxy authorization.
What
if I return my proxy but do not mark it to show how I am voting?
If
your proxy card is signed and returned without specifying your choices, your shares will be voted as recommended by the Board of Directors.
What
are the Board’s recommendations?
The
Board of Directors recommends that you vote FOR each of the three nominees for director named in this proxy statement for election as
director.
What
votes are required to elect directors?
Proposal
1: To be elected, each nominee for director must receive a majority of the votes present in person or by proxy at the Annual Meeting,
assuming a quorum is present. Withheld votes and broker non-votes will have the effect of a vote against each nominee for director.
What
is a “broker non-vote”?
A
“broker non-vote” occurs when a broker who holds shares for the beneficial owner is deemed present for purposes of establishing
a quorum for the meeting but does not vote on a proposal because the broker does not have discretionary voting authority for that proposal
and has not received instructions from the beneficial owner of the shares.
How
many shares of common stock are outstanding?
As
of the record date, 12.7 million shares of our common stock were issued and outstanding and entitled to vote at the meeting. However,
as noted above, The Lightstone Group, LLC, our external advisor and their affiliates will abstain from voting their shares in any vote
for the election of directors.
What
constitutes a “quorum”?
A
quorum consists of the presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast
at the annual meeting. There must be a quorum present in order for the annual meeting to be a duly held meeting at which business can
be conducted. No business may be conducted at the annual meeting if a quorum is not present. If you submit your proxy, even if you abstain
from voting, then you will still be considered part of the quorum.
If
a quorum is not present at the annual meeting, the chairman of the meeting may adjourn the annual meeting to another date, time or place,
not later than 120 days after the original record date of October 10, 2023. Notice need not be given of the new date, time
or place if announced at the annual meeting before an adjournment is taken.
Will
you incur expenses in soliciting proxies?
We
will bear all costs associated with soliciting proxies for the meeting. Solicitations may be made on behalf of the Board of Directors
by mail, personal interview, telephone or other electronic means by our officers and other employees of the Advisor, who will receive
no additional compensation. We will request banks, brokers, custodians, nominees, fiduciaries and other record holders to forward copies
of this proxy statement to people on whose behalf they hold shares of Common Stock and to request authority for the exercise of proxies
by the record holders on behalf of those people. In compliance with the regulations of the SEC, we will reimburse such persons for reasonable
expenses incurred by them in forwarding proxy materials to the beneficial owners of shares of our Common Stock.
We
have also retained CFS to aid in the solicitation of proxies. We will pay CFS a fee of approximately $11,000 in addition to reimbursement
of its reasonable out-of-pocket expenses. As the date of the meeting approaches, certain stockholders may receive a telephone call
from a representative of CFS if their votes have not yet been received.
What
should I do if I receive more than one set of meeting materials for the annual meeting?
You
may receive more than one set of voting materials for the annual meeting, including multiple copies of this proxy statement and multiple
proxy cards or voting instruction forms. For example, if you hold your shares in more than one brokerage account, you will receive a
separate voting instruction form for each brokerage account in which you hold shares. If you are a holder of record and your shares are
registered in more than one name, you will receive more than one proxy card and voting instruction form. For each and every proxy card
and voting instruction form that you receive, please authorize a proxy as soon as possible using one of the following methods:
| ● | via
the Internet at www.proxy-direct.com/; |
| ● | by
telephone, by calling toll free (800) 337-3503; or |
| ● | by
mail, using the pre-addressed, postage-paid envelope provided with this Proxy Statement. |
If
you hold your shares in registered form and wish to combine your stockholder accounts in the future, you should contact Lightstone Value
Plus REIT III, Inc., 1985 Cedar Bridge Avenue, Suite 1, Lakewood, New Jersey 08701, or call us at (866) 792-8700. Combining
accounts reduces excess printing and mailing costs, resulting in cost savings to us that benefit you as a stockholder.
What
if I receive only one set of proxy materials although there are multiple stockholders at my address?
The
SEC has adopted a rule concerning the delivery of documents filed by us with the SEC, including proxy statements and annual reports.
The rule allows us to, with the consent of affected stockholders, send a single set of any annual report, proxy statement, proxy statement
combined with a prospectus, or information statement to any household at which two or more stockholders reside if they share the same
last name or we reasonably believe they are members of the same family. This procedure is referred to as “Householding.”
This rule benefits both you and us. It reduces the volume of duplicate information received at your household and helps us reduce expenses.
Each stockholder subject to Householding will continue to receive a separate proxy card or voting instruction card.
We
will promptly deliver, upon written or oral request, a separate copy of our annual report or proxy statement, as applicable, to a stockholder
at a shared address to which a single copy was previously delivered. If you received a single set of disclosure documents for this year,
but you would prefer to receive your own copy, you may direct requests for separate copies to Lightstone Value Plus REIT III, Inc., 1985
Cedar Bridge Avenue, Suite 1, New Jersey 08701, or call us at (866) 792-8700. Likewise, if your household currently receives
multiple copies of disclosure documents and you would like to receive one set, please contact us.
Who
can help answer my questions?
If
you have any questions about the annual meeting, the election of directors, how to submit your proxy, or if you need additional copies
of this proxy statement or the paper proxy card or voting instructions, you should contact us or CFS:
| Lightstone
Value Plus REIT III, Inc. |
|
Proxy Tabulator |
| 1985 Cedar Bridge Ave.,
Suite 1 |
|
P.O.
Box 43130 |
| Lakewood, New Jersey
08701 |
|
Providence,
RI 02940-9430 |
| (866) 792-8700 |
|
|
| Attn: Investor Services |
|
|
When
are the director nominations and stockholder proposals for the next annual meeting of stockholders due?
Any
proposals by stockholders for inclusion in proxy solicitation material for the 2024 annual meeting of stockholders must be received by
our secretary, Joseph E. Teichman, at our executive offices during the period beginning on May 23, 2024, and ending at 5:00 p.m.,
Eastern Daylight Time, on June 22, 2024. If you wish to present a proposal for inclusion in the proxy material for next year’s
annual meeting, we must receive written notice of your proposal at our executive offices no later than June 22, 2024. However, if
we hold the annual meeting before November 14, 2024 or after January 13, 2025, stockholders must submit proposals for inclusion in our
2024 proxy statement within a reasonable time before we begin to print our proxy materials. All proposals must contain the information
specified in, and otherwise comply with, our bylaws. Proposals should be sent via registered, certified or express mail to: Lightstone
Value Plus REIT III, Inc., 1985 Cedar Bridge Avenue, Suite 1, Lakewood, New Jersey 08701, Attention: Joseph Teichman.
For additional information, see the section in this proxy statement captioned “Stockholder Proposals for the 2024 Annual Meeting.”
PROPOSAL
ONE:
ELECTION
OF DIRECTORS
General
The
Board of Directors ultimately is responsible for directing the management of our business and affairs. We have no employees and have
retained the Advisor to manage our day-to-day operations, including the acquisition of our properties. The Advisor is an affiliate of
our Sponsor. The Board of Directors, including our independent directors, is responsible for monitoring and supervising the Advisor’s
conduct of our day-to-day operations.
Our
bylaws provide for a Board of Directors with no fewer than three and no more than ten directors, a majority of whom must be independent.
An “independent director” is defined under our charter (the “Charter”) and means a person who is not, and within
the last two years has not been, directly or indirectly associated with the Company, the Sponsor, the Advisor or any of their affiliates
by virtue of:
| ● | ownership
of an interest in the Sponsor, the Advisor or any of their affiliates, other than the Company; |
| ● | employment
by the Company, the Sponsor, the Advisors or any of their affiliates; |
| ● | service
as an officer or director of the Sponsor, the Advisor or any of their affiliates, other than as a director of the Company; |
| ● | performance
of services, other than as a director of the Company; |
| ● | service
as a director of the Company or as a director of more than three real estate investment trusts organized by the Sponsor or advised by
the Advisor; or |
| ● | maintenance
of a material business or professional relationship with the Sponsor, the Advisor or any of their affiliates. |
An
independent director cannot be associated with us, the Sponsor or the Advisor as set forth above either directly or indirectly. An indirect
association with the Sponsor or the Advisor includes circumstances in which a director’s spouse, parent, child, sibling, mother-
or father-in-law, son- or daughter-in-law or brother- or sister-in-law, is or has been associated with us, the Sponsor, the Advisor,
or any of their affiliates.
A
business or professional relationship is considered material if the aggregate gross revenue derived by the director from the Advisor
or the Sponsor and their affiliates exceeds five percent of either the director’s annual gross income during either of the last
two years or the director’s net worth on a fair market value basis.
We
currently have three directors, two of whom are independent. Directors are elected annually by our stockholders, and there is no limit
on the number of times a director may be elected to office. Each director serves until the next annual meeting of stockholders or (if
longer) until his or her successor is duly elected and qualifies.
During
2022, the Board of Directors held four meetings. The entire Board of Directors was present at all of the meetings. The Board of Directors
expects each director to attend annual meetings of stockholders when possible. We anticipate that all directors and nominees will attend
our 2023 Annual Meeting of Stockholders.
Nominees
for the Board of Directors
The
Board of Directors has proposed the following nominees for election as directors, each to serve until our 2024 Annual Meeting of stockholders
and until his successor is duly elected and qualifies: Messrs. David W. Lichtenstein, George R. Whittemore and Yehuda “Judah”
L. Angster. Each nominee currently serves as a director.
The
proxy holder named on the enclosed proxy card intends to vote FOR the election of each of the three nominees for director. If you do
not wish your shares to be voted for particular nominees, please identify the exceptions in the designated space provided on the proxy
card or, if you are authorizing a proxy to vote your shares by telephone or the Internet, follow the instructions provided when you authorize
a proxy.
We
know of no reason why any nominee will be unable to serve if elected. If, at the time of the meeting, one or more of the nominees should
become unable to serve, shares represented by proxies will be voted for the remaining nominees and for any substitute nominee or nominees
designated by the Board of Directors. No proxy will be voted for a greater number of persons than the number of nominees described in
this proxy statement.
The
principal occupation and certain other information about the nominees are set forth below.
| Name |
|
Age |
|
Year
First
Elected |
|
Business
Experience and Principal Occupation; Directorships in Public Corporations and Investment Companies |
| David Lichtenstein |
|
62 |
|
2014 |
|
Mr.
David Lichtenstein is our Chief Executive Officer and Chairman of our board of directors. Mr.
Lichtenstein founded both American Shelter Corporation and The Lightstone Group. From 1988 to the present, Mr. Lichtenstein has served
as Chairman of the Board of Directors and Chief Executive Officer of The Lightstone Group, directing all aspects of the acquisition,
financing and management of a diverse portfolio of multifamily, lodging, retail and industrial properties located in 20 states and
Puerto Rico. From June 2004 to the present, Mr. Lichtenstein has served as the Chairman of the Board of Directors and Chief Executive
Officer of Lightstone Value Plus REIT I, Inc. (“Lightstone REIT I”) and Chief Executive Officer of Lightstone Value Plus
REIT LLC, its advisor. From April 2008 to the present, Mr. Lichtenstein has served as the Chairman of the Board of Directors and
Chief Executive Offer of Lightstone Value Plus REIT II, Inc. (“Lightstone REIT II”) and Lightstone Value Plus REIT II
LLC, its advisor. From September 2014 to the present, Mr. Lichtenstein has served as Chairman of the Board of Directors and Chief
Executive Officer of Lightstone REIT IV Inc., (“Lightstone REIT IV”), and as Chief Executive Officer of Lightstone Real
Estate Income LLC, its advisor. From October 2014 to the present, Mr. Lichtenstein has served as Chairman of the Board of Directors
and Chief Executive Officer of Lightstone Enterprises Limited (“Lightstone Enterprises”). Mr. Lichtenstein was appointed
Chairman Emeritus of the Board of Directors of Lightstone Value Plus REIT V, Inc. (“Lightstone REIT V”) on August 31,
2021 and is Chairman and Chief Executive Officer of its advisor. From July 2015 to the present, Mr. Lichtenstein has served as a
member of the Board of Directors of the New York City Economic Development Corporation. Mr. Lichtenstein is also a member of the
International Council of Shopping Centers and the National Association of Real Estate Investment Trusts, Inc., an industry trade
group, as well as a member of the Board of Directors of Touro College and New York Medical College.
Mr.
Lichtenstein has been selected to serve as a director due to his experience and networking relationships in the real estate industry,
along with his experience in acquiring and financing real estate properties. |
| Name |
|
Age |
|
Year
First
Elected |
|
Business
Experience and Principal Occupation; Directorships in Public Corporations and Investment Companies |
| George R. Whittemore |
|
73 |
|
2014 |
|
Mr.
Whittemore is one of our independent directors and the Chairman of our Audit Committee.
From July 2006 to the present, Mr. Whittemore has served as a member of the board of directors of Lightstone REIT I and the
Chairman of its Audit Committee. From April 2008 to the present has served as a member of the
board of directors of Lightstone REIT II and the Chairman of its Audit Committee. Previously,
Mr. Whittemore served as a Director and member of the Audit Committee of Village Bank Financial Corporation in Richmond, Virginia,
a publicly traded company, through May 2023. Mr. Whittemore previously served as a director
of Condor Hospitality, Inc. in Norfolk, Nebraska, a publicly traded company, from November 1994 to March 2016. Mr. Whittemore previously
served as a director and chairman of the audit committee of Prime Group Realty Trust from July 2005 until December 2012. Mr. Whittemore
previously served as President and Chief Executive Officer of Condor Hospitality Trust, Inc. from November 2001 until August 2004
and as Senior Vice President and Director of both Anderson & Strudwick, Incorporated, a brokerage firm based in Richmond, Virginia,
and Anderson & Strudwick Investment Corporation, from October 1996 until October 2001. Mr. Whittemore has also served as Director,
President and Managing Officer of Pioneer Federal Savings Bank and its parent, Pioneer Financial Corporation, from September 1982
until August 1994, and as President of Mills Value Adviser, Inc., a registered investment advisor. Mr. Whittemore is a graduate of
the University of Richmond.
Mr.
Whittemore has been selected to serve as an independent director due to his experience in accounting, banking, finance and real estate. |
| |
|
|
|
|
|
|
| Yehuda “Judah”
L. Angster |
|
40 |
|
2021 |
|
Mr.
Angster is one of our independent directors. From August 2021 to the present, Mr. Angster has served as a member of the board of
directors of Lightstone REIT II and from November 2015 through August 2021, Mr. Angster served as a member of the board of directors
of Lightstone REIT I. Mr. Angster is currently the Chief Executive Officer of CastleRock Equity Group in Florham Park, NJ. Before
joining CastleRock Equity Group in June of 2015, Mr. Angster was the Vice President of Global Development for PCS Wireless, LLC in
Florham Park NJ beginning in September 2012. Mr. Angster was the Internal Counsel for Empire Bank from June 2009 to September 2012.
Mr. Angster earned his J.D. from the Pace University School of Law in May 2009. Mr. Angster earned a Bachelor of Talmudic Law from
Tanenbaum Educational Center, Rockland, NY. Mr. Angster is licensed to practice law in New Jersey and New York.
Mr.
Angster has been selected to serve as an independent director due to his extensive experience in global business development and real
estate transactions. |
THE
BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” EACH OF
THE NOMINEES TO BE ELECTED AS DIRECTORS
CORPORATE
GOVERNANCE
The
only standing committee of the Board of Directors is the audit committee (the “Audit Committee”). The Audit Committee consists
of two members composed entirely of our independent directors. The Board of Directors has determined that each of our independent directors
is independent within the meaning of the applicable (i) provisions set forth in the Charter and (ii) requirements set forth
in the Securities Exchange Act of 1934, as amended (the “Exchange Act “), and the applicable SEC rules.
Interested
parties may communicate matters they wish to raise with the directors by writing to our Secretary at: Lightstone Value Plus REIT III,
Inc., 1985 Cedar Bridge Avenue, Suite 1, Lakewood, New Jersey 08701, Attention: Joseph Teichman. Mr. Teichman will deliver
all appropriate communications to the Board of Directors no later than the next regularly scheduled meeting of the Board of Directors.
Audit
Committee
The
Board of Directors established an Audit Committee in December 2014. A copy of the charter of the Audit Committee is available on our
website at www.lightstonecapitalmarkets.com or in print to any stockholder who requests it c/o Lightstone Value Plus REIT
III, Inc., 1985 Cedar Bridge Avenue, Suite 1, Lakewood, NJ 08701. Our Audit Committee consists of Messrs. George R. Whittemore and Yehuda
“Judah” L. Angster. Mr. Whittemore is the chairman of our audit committee.
The
Audit Committee, in performing its duties, monitors:
| ● | our
financial reporting process; |
| ● | the
integrity of our financial statements; |
| ● | compliance
with legal and regulatory requirements; |
| ● | the
independence and qualifications of our independent and internal auditors, as applicable; and |
| ● | the
performance of our independent and internal auditors, as applicable. |
Each
member of our Audit Committee is independent within the meaning of the applicable requirements set forth in or promulgated under the
Exchange Act and within the meaning of the New York Stock Exchange (“NYSE”) listing standards. In addition, the Board of
Directors has determined that Mr. Whittemore and Mr. Angster are qualified as “audit committee financial experts” within
the meaning of the applicable rules promulgated by the SEC. Unless otherwise determined by the Board of Directors, no member of the Audit
Committee may serve as a member of the audit committee of more than two other public companies.
During
2022, the Audit Committee held six meetings. Each of the Audit Committee members attended all of the meetings held by the Audit Committee,
while he was a member of the Audit Committee, either in person or by telephone. The Audit Committee’s report on our financial statements
for the fiscal year ended December 31, 2022 is discussed below under the heading “Audit Committee Report.”
Nominating
the Board of Directors
The
Board of Directors does not have a standing nominating committee for the purpose of nominating individuals to serve as directors. All
members of our Board of Directors participate in the consideration of director nominees. The primary functions of the members of the
Board of Directors relating to the consideration of director nominees is to identify individuals qualified to serve on the Board of Directors.
We have not adopted a specific policy regarding the consideration of director nominees recommended to us by stockholders.
In
determining the composition of the Board of Directors, our goals are to assemble a board that, as a whole, possesses the appropriate
balance of professional and real estate industry knowledge, financial expertise and high-level management experience to bring a diverse
set of skills and experiences to the board as a whole to oversee our business. The Board of Directors believes that diversity is an important
attribute of the members of our Board of Directors and that the members should represent an array of backgrounds. To that end, our Board
of Directors includes directors who complement and strengthen the skills of other members and who also exhibit integrity, collegiality,
sound business judgment and other qualities that we view as critical to effective functioning of the board. The brief biographies in
“Proposal One” include information, as of the date of this proxy, regarding the specific and particular experience, qualifications,
attributes or skills of each director or nominee that led the board to believe that the director should serve on the board.
The
Board of Directors annually reviews the appropriate experience, skills and characteristics required of directors in the context of our
business. This review includes, in the context of the perceived needs of the board at that time, issues of knowledge, experience, judgment
and skills relating to the understanding of the real estate industry, accounting or financial expertise. The Board of Directors gives
consideration to the members of the Board of Directors having a diverse mix of background and skills. This review also includes the candidate’s
ability to attend regular board meetings and to devote a sufficient amount of time and effort in preparation for such meetings.
Code
of Business Conduct and Ethics
The
Board of Directors has adopted a Code of Business Conduct and Ethics (the “Code of Ethics”), which is applicable to the directors,
officers and employees of the Company and its subsidiaries and affiliates. The Code of Ethics covers topics including, but not limited
to, conflicts of interest, confidentiality of information, full and fair disclosure, reporting of violations and compliance with laws
and regulations. The Code of Ethics is available, free of charge, on our website at www.lightstonecapitalmarkets.com. You
may also obtain a copy of the Code of Ethics by writing to: Lightstone Value Plus REIT III, Inc., 1985 Cedar Bridge Avenue, Suite 1,
Lakewood, New Jersey 08701, Attention: Joseph Teichman. A waiver of the Code of Ethics for our Chief Executive Officer may be made only
by the Board of Directors and will be promptly disclosed to the extent required by law. A waiver of the Code of Ethics for all other
directors, officers and employees may be made only by our Chief Executive Officer or General Counsel, and shall be discussed with the
Board of Directors as appropriate.
Board
Leadership Structure
As
noted above, our Board of Directors currently is comprised of two independent and one affiliated directors. Mr. Lichtenstein has served
as Chairman of the Board of Directors since 2014 and serves as our Chief Executive Officer. Mr. Whittemore serves as the “presiding
director” at any executive sessions of the independent directors, as defined under the rules of the NYSE. The Board of Directors
believes that this provides an effective leadership model for the Company.
We
recognize that different board leadership structures may be appropriate for companies in different situations, and that no one structure
is suitable for all companies. We believe our current board leadership structure is optimal for us because it demonstrates to our investors
and other stakeholders that the Company is under strong leadership, coordinated closely between Mr. Lichtenstein, who has over 20 years
of real estate industry experience, and Mr. Whittemore, who has served various public and private entities as a key executive and officer
over the past 20 years. In our judgment, the Company, like many U.S. companies, has been well-served by this leadership structure.
Board
Role in Risk Oversight
Our
Board of Directors is actively involved in overseeing our risk management through our Audit Committee. Under its charter, our Audit Committee
is responsible for discussing guidelines and policies governing the process by which our senior management and our relevant departments
assess and manage our exposure to risk, as well as our major financial risk exposures and the steps management has taken to monitor and
control such exposures.
Director
Independence
Our
Charter and bylaws provide for a Board of Directors with no fewer than three and no more than ten directors, a majority of whom must
be independent. An “independent director” is defined under our Charter and means a person who is not, and within the last
two years has not been, directly or indirectly associated with the Company, our Sponsor or our Advisor or any of their affiliates by
virtue of:
| ● | ownership
of an interest in our Sponsor, our Advisor or any of their affiliates, other than the Company; |
| ● | employment
by the Company, our Sponsor, our Advisor or any of their affiliates; |
| ● | service
as an officer of our Sponsor, our Advisor or any of their affiliates, other than as a director of the Company; |
| ● | performance
of services, other than as a director of the Company; |
| ● | service
as a director of more than three real estate investment trusts organized or controlled by our Sponsor or advised by our Advisor; or |
| ● | maintenance
of a material business or professional relationship with our Sponsor, our Advisor or any of their affiliates. |
An
independent director cannot be associated with us, our Sponsor or our Advisor as set forth above either directly or indirectly. An indirect
association with our Sponsor or our Advisor includes circumstances in which a director’s spouse, parent, child, sibling, mother-
or father-in-law, son- or daughter-in-law or brother- or sister-in-law, is or has been associated with us, our Sponsor, our Advisor,
or any of their affiliates.
A
business or professional relationship is considered material if the aggregate gross revenue derived by the director from our Advisor
or our Sponsor and their affiliates exceeds five percent of either the director’s annual gross income during either of the last
two years or the director’s net worth on a fair market value basis.
The
Board of Directors has considered the independence of each director and nominee for election as a director in accordance with the elements
of independence set forth in the listing standards of the NYSE. Based upon information solicited from each nominee, the Board of Directors
has affirmatively determined that George R. Whittemore and Yehuda “Judah” L. Angster have no material relationship with the
Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company) and are
“independent” within the meaning of the NYSE’s director independence standards and Audit Committee independence standards,
as currently in effect.
DIRECTOR
AND EXECUTIVE COMPENSATION
Compensation
of Our Directors
We
have no standing compensation committee. Our entire Board of Directors determines matters relating to director and officer compensation.
Our Board of Directors designs our director compensation with the goals of attracting and retaining highly qualified individuals to serve
as independent directors and to fairly compensate them for their time and efforts. Because of our unique attributes as a REIT, service
as an independent director on our Board of Directors requires broad expertise in the fields of real estate and real estate investment.
We
pay our independent directors an annual fee of $40,000 (payable in quarterly installments) and are responsible for reimbursement
of their out-of-pocket expenses, as incurred. We also pay our audit committee chair an additional aggregate annual fee of $10,000 (payable
in quarterly installments).
Compensation
of Our Executive Officers
We
currently have no employees. Our Advisor performs our day-to-day management functions. Our executive officers are all employees of the
Advisor. Our executive officers do not receive compensation from us for services rendered to us. Our executive officers are all employees
of our Advisor and are compensated by our Advisor. As a result, our Board of Directors has determined that it is not necessary to establish
a compensation committee. In addition, we do not have, and the Board of Directors has not considered, a compensation policy or program
for our executive officers, and we have not included a “Compensation Discussion and Analysis” in this proxy statement. See
“Certain Relationships and Related Party Transactions” below for a discussion of the fees paid to and services provided by
our Advisor and Property Managers.
Compensation
Committee Interlocks and Insider Participation
The
Board of Directors in its entirety performs the duties typically delegated to a compensation committee. There are no interlocks or insider
participation as to compensation decisions required to be disclosed pursuant to SEC regulations.
DIRECTORS
AND EXECUTIVE OFFICERS
The
following table presents certain information as of September 15, 2023 concerning each of our directors and officers serving in such capacity:
| Name |
|
Age |
|
Principal
Occupation and Positions Held |
|
Served
as a
Director Since |
| David Lichtenstein |
|
62 |
|
Chief Executive Officer
and Chairman of the Board of Directors |
|
2014 |
| George R. Whittemore |
|
73 |
|
Director |
|
2014 |
| Yehuda “Judah”
L. Angster |
|
40 |
|
Director |
|
2021 |
| Mitchell Hochberg |
|
71 |
|
President and Chief Operating
Officer |
|
N/A |
| Joseph Teichman |
|
50 |
|
General Counsel |
|
N/A |
| Seth Molod |
|
59 |
|
Chief Financial Officer
and Treasurer |
|
N/A |
David
Lichtenstein — for biographical information about Mr. Lichtenstein, see “Nominees for the Board of Directors.”
Yehuda
“Judah” L. Angster — for biographical information about Mr. Angster, see “Nominees for the Board of Directors.”
George
R. Whittemore — for biographical information about Mr. Whittemore, see “Nominees for the Board of Directors.”
Mitchell
Hochberg is our President and Chief Operating Officer and also serves as President and
Chief Operating Officer of Lightstone REIT I, Lightstone REIT II and Lightstone REIT IV and their advisors. Mr. Hochberg also serves
as the President of our sponsor and as the President and Chief Operating Officer of our advisor. From October 2014 to the present, Mr.
Hochberg has served as President of Lightstone. Mr. Hochberg was appointed Chief Executive Officer of Behringer Harvard Opportunity
REIT I, Inc. (“OP 1”) and Lightstone REIT V effective as of September 28, 2017. Additionally, on August 31, 2021,
Mr. Hochberg was appointed as a director and Chairman of the Board of Directors of Lightstone REIT V and will continue to serve
as the Lightstone V’s Chief Executive Officer. Prior to joining The Lightstone Group in August 2012, Mr. Hochberg served as principal
of Madden Real Estate Ventures from 2007 to August 2012 when it combined with our sponsor. Mr. Hochberg held the position of President
and Chief Operating Officer of Ian Schrager Company, a developer and manager of innovative luxury hotels and residential projects in
the United States from early 2006 to early 2007 and prior to that Mr. Hochberg founded Spectrum Communities, a developer of luxury neighborhoods
in the northeast of the United States, in 1985 where for 20 years he served as its President and Chief Executive Officer. Mr. Hochberg
served on the board of directors of Belmond Ltd from 2009 to April 2019. Additionally, through October 2014 Mr. Hochberg served on the
board of directors and as Chairman of the board of directors of Orleans Homebuilders, Inc. Mr. Hochberg received his law degree as a
Harlan Fiske Stone Scholar from Columbia University School of Law and graduated magna cum laude from New York University College of Business
and Public Administration with a Bachelor of Science degree in accounting and finance.
Joseph
E. Teichman is our General Counsel and Secretary and also serves as General Counsel of Lightstone REIT I, Lightstone REIT II
and Lightstone REIT IV and their respective advisors. Mr. Teichman also serves as Executive Vice President and General Counsel of our
sponsor and as General Counsel of our advisor. From October 2014 to the present, Mr. Teichman has served as Secretary and a Director
of Lightstone. Prior to joining The Lightstone Group in January 2007, Mr. Teichman practiced law at the law firm of Paul, Weiss, Rifkind,
Wharton & Garrison LLP in New York, NY from September 2001 to January 2007. Mr. Teichman earned a J.D. from the University of Pennsylvania
Law School and a B.A. from Beth Medrash Govoha, Lakewood, New Jersey. Mr. Teichman is licensed to practice law in New York and New Jersey.
Mr. Teichman is also a member of the Board of Directors of Yeshiva Orchos Chaim, Lakewood, New Jersey and was appointed to the Ocean
County College Board of Trustees in February 2016.
Seth
Molod is our Chief Financial Officer and Treasurer and also serves as the Chief Financial
Officer and Treasurer of Lightstone REIT I, Lightstone REIT II, Lightstone REIT IV and Lightstone V. Mr. Molod also serves as the
Executive Vice President and Chief Financial Officer of our Sponsor and as the Chief Financial Officer of our Advisor and the advisors
of Lightstone REIT I, Lightstone REIT II, Lightstone REIT IV and Lightstone V. Prior to joining The Lightstone Group in August of 2018,
Mr. Molod, 54, served as an Audit Partner, Chair of Real Estate Services and on the Executive Committee of Berdon LLP, a full service
accounting, tax, financial and management advisory firm (“Berdon”). Mr. Molod joined Berdon in 1989. He has extensive
experience advising some of the nation’s most prominent real estate owners, developers, managers, and investors in both commercial
and residential projects. Mr. Molod has worked with many privately held real estate companies as well as institutional investors,
REITs, and other public companies. Mr. Molod is a licensed certified public accountant in New Jersey and New York and a member of
the American Institute of Certified Public Accountants. Mr. Molod holds a Bachelor of Business Administration degree in Accounting
from Muhlenberg College.
STOCK
OWNERSHIP BY DIRECTORS, OFFICERS AND CERTAIN STOCKHOLDERS
The
following table presents certain information as of September 15, 2023 concerning:
| ● | each
person known by us to be the beneficial owner of more than 5% of our outstanding shares of Common Stock based solely upon the amounts
and percentages contained in the public filings of such persons; |
| ● | each
of our directors and executive officers serving in such capacity; and |
| ● | all
of our directors and executive officers as a group: |
| Name and Address of Beneficial Owner(1) | |
Number of
Shares of
Common Stock
of the Company | | |
Percent of
All Common Shares
of the Company | |
| David Lichtenstein(2) | |
| 242,222 | | |
| 1.9 | % |
| George R. Whittemore | |
| - | | |
| - | |
| Yehuda “Judah” L. Angster | |
| - | | |
| - | |
| Mitchell Hochberg | |
| - | | |
| - | |
| Seth Molod | |
| - | | |
| - | |
| Joseph Teichman | |
| - | | |
| - | |
| Our directors and officers as a group (6 persons) | |
| 242,222 | | |
| 1.9 | % |
| (1) |
The business address of each individual listed in the table
is 1985 Cedar Bridge Avenue, Suite 1, Lakewood, New Jersey 08701. |
| (2) |
Includes 20,000 shares owned by our Advisor
and 222,222 shares owned by an entity 100% owned by David Lichtenstein. Our Advisor is majority owned by David Lichtenstein. |
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires each director, officer and individual beneficially owning more than
10% of our Common Stock to file initial statements of beneficial ownership (Form 3) and statements of changes in beneficial ownership
(Forms 4 and 5) of our Common Stock with the SEC. Officers, directors and greater than 10% beneficial owners are required by SEC rules
to furnish us with copies of all such forms they file. Based solely on a review of the copies of such forms furnished to us during and
with respect to the fiscal year ended December 31, 2022, or written representations that no additional forms were required, we believe
that all of our officers and directors and persons that beneficially own more than 10% of the outstanding shares of our Common Stock
complied with these filing requirements in 2022.
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
David
Lichtenstein serves as the Chairman of our Board of Directors and our Chief Executive Officer. Our Advisor and its affiliates and the
Special Limited Partner are majority owned and controlled by Mr. Lichtenstein. We have or may entered into agreements with our Advisor
and its affiliates to pay certain fees, as described below, in exchange for services performed or consideration given by these and other
affiliated entities. As a majority owner of those entities, Mr. Lichtenstein benefits from fees and other compensation that they receive
pursuant to these agreements.
Property
Managers
Our
Advisor has certain affiliates which may manage the properties we acquire. We also use other unaffiliated third-party property managers,
principally for the management of our hospitality properties.
We
have agreed to pay our property managers a monthly management fee in an amount not to exceed the fee customarily charged in arm’s-length
transactions by others rendering similar services in the same geographic area for similar properties as determined by a survey of property
managers in such area. We will reimburse our property managers for certain costs and expenses. We may also pay our property managers
a separate fee for the one-time initial rent-up or leasing-up of newly constructed property in an amount not to exceed the fee customarily
charged in arm’s length transactions by others rendering similar services in the same geographic area for similar properties as
determined by a survey of brokers and agents in such area.
We
may also engage our property managers to provide construction management services for some of our properties. We will pay a construction
management fee in an amount of up to 5% of the cost of any improvements that our property managers undertake.
Advisor
We
pay our Advisor an acquisition fee equal to 1.0% of the gross contractual purchase price (including any mortgage assumed) of each property
purchased and reimburse our Advisor for expenses that it incurs in connection with the purchase of a property. Acquisition fees and expenses
are capped at 5% of the gross contractual purchase price of a property.
The
Advisor is paid an advisor asset management fee of one-twelfth (1/12) of 0.75% of our average invested assets and we will reimburse some
expenses of the Advisor relating to asset management.
If
our Advisor provides services in connection with the financing of an asset, assumption of a loan in connection with the acquisition of
an asset or origination or refinancing of any loan on an asset, we may pay our Advisor a financing coordination fee equal to 0.75% of
the amount available or outstanding under such financing.
For
substantial services in connection with the sale of a property, we will pay to our Advisor a commission in an amount equal to the lesser
of (a) one-half of a real estate commission that is reasonable, customary and competitive in light of the size, type and location of
the property and (b) 2.0% of the contractual sales price of the property. The commission will not exceed the lesser of 6.0% of the contractual
sales price or commission that is reasonable, customary and competitive in light of the size, type and location of the property
We
may pay our Advisor an annual subordinated performance fee calculated on the basis of our annual return to holders of our Common Shares,
payable annually in arrears, such that for any year in which holders of our Common Shares receive payment of a 6.0% annual cumulative,
pre-tax, non-compounded return on their respective net investments, our Advisor will be entitled to 15.0% of the amount in excess of
such 6.0% per annum return, provided, that the amount paid to the Advisor will not exceed 10.0% of the aggregate return for such
year, and provided, further, that the annual subordinated performance fee will not be paid unless holders of our Common Shares
receive a return of their respective net investments. From our inception through December 31, 2022, no annual subordinated performance
fees were incurred.
We
have various agreements with the Sponsor, Advisor and their affiliates to pay certain fees and reimburse certain costs incurred for services
performed by these entities. Additionally, our ability to secure financing and our real estate operations are dependent upon these entities
to perform such services as provided in these agreements. As of both December 31, 2022 and 2021, we owed these entities an aggregate
of $0.3 million, respectively, which was principally for asset management fees, non-interest bearing, due on demand 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 Advisor for the period indicated:
| | |
For the
Year
Ended
December 31, | |
| (amounts in thousands) | |
2022 | | |
2021 | |
| Finance
fees(1)(2) | |
$ | - | | |
$ | 345 | |
| Asset management fees (general
and administrative costs) | |
| 1,207 | | |
| 1,205 | |
| Total | |
$ | 1,207 | | |
$ | 1,550 | |
| (1) | A
finance fee of $144 paid 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 on the consolidated balance sheets. |
| (2) | An
aggregate finance fee of $201 paid to the Advisor in connection with arranging the Home2 Suites
– Tukwila Loan and the Home2 Suites – Salt Lake City was capitalized
and included in mortgages payable, net on the consolidated balance sheets as a direct deduction from the
carrying value of the corresponding loan. |
Special
Limited Partner
In
connection with our Offering, which terminated on March 31, 2017, Lightstone SLP III LLC, a Delaware limited liability company (the “Special
Limited Partner”), purchased from the Operating Partnership an aggregate of 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
we make to stockholders, but only after stockholders have received a stated preferred return. From our inception through December 31,
2022, no distributions have been declared or paid on the Subordinated Participation Interests.
Hilton
Garden Inn Joint Venture
On
March 27, 2018, we and Lightstone Value Plus REIT II, Inc. (“Lightstone REIT II”), a REIT also sponsored by our Sponsor
and a related party, acquired, through the newly formed Hilton Garden Inn Joint Venture 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 five-year term, non-recourse mortgage loan from a financial institution (the “Hilton
Garden Inn Mortgage”), excluding closing and other related transaction costs. We paid $12.9 million for a 50.0% membership interest
in the Hilton Garden Inn Joint Venture.
The
Hilton Garden Inn Mortgage bore interest at LIBOR plus 3.15%, subject to a 5.03% floor, initially provided for monthly interest-only
payments for the first 30 months of its term with principal and interest payments pursuant to a 25-year amortization schedule thereafter,
and the remaining unpaid balance due in full at its maturity on March 27, 2023. The Hilton Garden Inn Mortgage is collateralized by the
Hilton Garden Inn – Long Island City.
We
and Lightstone II each have a 50.0% co-managing membership interest in the Hilton Garden Inn Joint Venture. We account for our membership
interest in the Hilton Garden Inn Joint Venture in accordance with the equity method of accounting because we exert significant influence
over but do 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. We commenced recording our allocated portion of profit/loss and cash distributions
beginning as of March 27, 2018 with respect to our 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 previously entered into certain amendments with respect to 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 plus 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) an 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.
On
March 27, 2023, the Hilton Garden Inn Joint Venture and the lender amended the Hilton Garden Inn Mortgage to extend the maturity
date for 90 days, through June 25, 2023, to provide additional time to finalize the terms of a long-term extension. Subsequently,
on May 31, 2023, the Hilton Garden Inn Mortgage was further amended to provide for (i) an extension of the maturity date for an
additional five years, (ii) the interest rate to be adjusted to SOFR plus 3.25%, subject to a 6.41% floor, interest-only payment for
the first two years of its extended term with principal and interest payments pursuant to a 300-month amortization schedule thereafter
and the remaining unpaid balance due in full at its maturity date of May 31, 2028, (iii) the ability to draw up to an additional
$3.0 million of principal, subject to the satisfaction of certain conditions, and (iv) certain changes to its financial covenants. Additionally,
the Hilton Garden Inn Joint Venture will fund $1.3 million, through monthly payments of $37 from May 31, 2023 through June 1, 2026,
into a cash collateral reserve account which may be drawn upon for specified capital expenditures.
As
of December 31, 2022, the Hilton Garden Inn Joint Venture was in compliance with respect to all of its financial debt covenants.
Subsequent
to the acquisition of our 50.0% membership interest in the Hilton Garden Joint Venture through December 31, 2022, we made an aggregate
of $2.8 million of additional capital contributions (all of which was made prior to 2022) and received aggregate distributions of
$4.0 million (of which $2.0 million was received in 2022).
Williamsburg
Moxy Hotel Joint Venture
On
August 5, 2021, we formed a joint venture with Lightstone Value Plus REIT IV, Inc. (“Lightstone REIT IV”), a
REIT also sponsored by the Sponsor and a related party, pursuant to which we acquired 25% of Lightstone REIT IV’s membership interest
in the Bedford Avenue Holdings LLC, which effective on that date became the Williamsburg Moxy Hotel Joint Venture, for aggregate consideration
of $7.9 million. Subsequent to our acquisition, we have made aggregate net capital contributions to the Williamsburg Moxy Hotel Joint
Venture of $4.3 million through December 31, 2022 (of which $0.2 million was made during the year ended December 31, 2022).
In
July 2019, Lightstone REIT IV, through its then wholly owned subsidiary, Bedford Avenue Holdings LLC, previously acquired four adjacent
parcels of land located at 353-361 Bedford Avenue in the Williamsburg neighborhood in the Brooklyn borough of New York City, from unrelated
third parties, for the development of the Williamsburg Moxy Hotel.
As
a result, we and Lightstone REIT IV have 25% and 75% membership interests, respectively, in the Williamsburg Moxy Hotel Joint Venture.
We have determined that the Williamsburg Moxy Hotel Joint Venture is a variable interest entity and we are not the primary beneficiary,
as it was determined that REIT IV is the primary beneficiary. Therefore, we account for our membership interest in the Williamsburg Moxy
Hotel Joint Venture in accordance with the equity method because we exert significant influence over but do 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.
On
August 5, 2021, the Williamsburg Moxy Hotel Joint Venture entered into a development agreement (the “Development Agreement”)
with an affiliate of the Advisor (the “Williamsburg Moxy Developer”) pursuant to which the Williamsburg Moxy Developer is
being paid a development fee equal to 3% of hard and soft costs, as defined in the Development Agreement, incurred in connection with
the development and construction of the Williamsburg Moxy Hotel. Additionally on August 5, 2021, the Williamsburg Moxy Hotel Joint Venture
obtained construction financing for the Williamsburg Moxy Hotel as discussed below. Additionally, the Advisor and its affiliates are
reimbursed for certain development and development-related costs attributable to the Williamsburg Moxy Hotel.
As
of December 31, 2022, the Williamsburg Moxy Hotel Joint Venture incurred and capitalized to construction in progress an aggregate of
$114.6 million (including cumulative capitalized interest of $9.8 million) consisting of acquisition and other costs attributable to
the development and construction of the Williamsburg Moxy Hotel. During the years ended December 31, 2022 and 2021, $6.6 million and
$1.7 million, respectively, of interest was capitalized to construction in progress.
In
preparation for the opening of the Williamsburg Moxy Hotel, which opened on March 7, 2023, the Williamsburg Moxy Hotel Joint Venture
incurred pre-opening costs of $1.5 million during the year ended December 31, 2022. No pre-opening costs were incurred during 2021 period.
Pre-opening costs generally consist of non-recurring personnel, marketing and other costs.
An
adjacent land owner has filed a claim questioning the Williamsburg Moxy Hotel Joint Venture’s right to develop and construct the
Williamsburg Moxy Hotel without his consent. The Williamsburg Moxy Hotel Joint Venture is currently responding to this claim and management
believes it will, in due course, be recognized that the adjacent owner waived his right to object in 2017 when he signed a waiver, consent
and subordination allowing the future development of the property as it exists today. While this matter is currently pending in the court
system, continued use of the property will ultimately be determined by the government of New York City and management has a number of
avenues that it believes are viable paths to unfettered certificates of occupancy. While any dispute has an element of uncertainty, management
currently believes that the likelihood of an unfavorable outcome with respect to any of the aforementioned proceedings is remote. No
provision for loss has been recorded in connection therewith.
Moxy
Construction Loan
On
August 5, 2021, the Williamsburg Moxy Hotel Joint Venture entered into a recourse construction loan facility for up to $77.0 million
(the “Moxy Construction Loan”) to fund the development, construction and certain pre-opening costs associated with the Williamsburg
Moxy Hotel. The Moxy Construction Loan is scheduled to initially mature on February 5, 2024, with two, six-month extension options, subject
to the satisfaction of 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% and the excess added to the outstanding loan balance due at maturity.
LIBOR as of December 31, 2022 and 2021 was 4.39% and 0.10%, respectively. Additionally, the Moxy Construction Loan provides for a replacement
benchmark rate based on SOFR in connection with the phase-out of LIBOR after June 30, 2023. The Moxy Construction Loan is collateralized
by the Williamsburg Moxy Hotel.
As
of December 31, 2022 and 2021, the outstanding principal balance of the Moxy Construction Loan was $65.6 million (including $1.7 million
of interest capitalized to principal) which is presented, net of deferred financing fees of $2.0 million and $18.6 million
(including $0.1 million of interest capitalized to principal) which is presented, net of deferred financing fees of $3.7 million,
respectively, on the condensed balance sheets and is classified as loans payable, net. As of December 31, 2022, the remaining
availability under the facility was up to $11.4 million and its interest rate was 13.39%. Additionally,
the Williamsburg Moxy Hotel Joint Venture was required by the lender to deposit $3.0 million of key money (the “Key Money”)
received from Marriott International, Inc. (“Marriott”) during the first quarter of 2023 into an escrow account all of which
was subsequently used to fund remaining construction costs for the project during the second quarter of 2023. The remaining availability
under the Moxy Construction Loan may be used to fund the remaining construction costs for the project.
In
connection with the Moxy Construction Loan, the Williamsburg Moxy Hotel Joint Venture has provided certain completion and carry cost
guarantees. Furthermore, in connection with the Moxy Construction Loan, the Williamsburg Moxy Hotel Joint Venture paid $3.7 million of
loan fees and expenses and accrued $0.8 million of loan exit fees which are due at the initial maturity date and are included in other
liabilities on the condensed balance sheets as of both and December 31, 2022 and 2021.
Review,
Approval, or Ratification of Transactions with Related Persons
Our
Charter generally requires that any transactions between us and our Sponsor, our Advisor, our directors, or their affiliates must be
approved by a majority of our directors (including a majority of Independent Directors) not otherwise interested in the transaction.
In addition, our Board of Directors has adopted a policy relating to the review, approval and ratification of transactions with related
persons. This policy applies to any transaction, the amount of which exceeds $120,000, between us and any person who is a director, executive
officer or the beneficial owner of more than 5% of any class of our voting securities. Any such related person transaction is subject
to approval by the Board of Directors. The Board of Directors will decide whether or not to approve a related party transaction and will
generally approve only those transactions that do not create a conflict of interest. The Board of Directors (including a majority of
the Independent Directors) has approved the transactions disclosed in this section titled “Certain Relationships and Related Party
Transactions.”
RELATIONSHIP
WITH INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
EisnerAmper
LLP audited our financial statements for the years ended December 31, 2022 and 2021. EisnerAmper LLP reports directly to our Audit Committee.
The Audit Committee reviewed the audit and nonaudit services performed by EisnerAmper LLP, as well as the fees charged by EisnerAmper
LLP for such services. In its review of the nonaudit service fees, the Audit Committee considered whether the provision of such services
is compatible with maintaining the independence of EisnerAmper LLP.
One
or more representatives of EisnerAmper LLP have been invited and are expected to be present at the 2023 Annual Meeting of Stockholders.
They will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.
The
following table presents the aggregate fees billed to the Company for the years ended December 31, 2022 and 2021 by the Company’s
principal accounting firm:
| (amounts in thousands) | |
2022 | | |
2021 | |
| Audit Fees(a) | |
$ | 242 | | |
$ | 213 | |
| Tax Fees(b) | |
| 87 | | |
| 83 | |
| Total Fees | |
$ | 329 | | |
$ | 296 | |
| (a) |
Fees for audit
services consisted of the audit of the Company’s annual consolidated financial statements and interim reviews, including services
normally provided in connection with statutory and regulatory filings including registration statement consents. |
| (b) |
Fees for tax
services. |
Our
Audit Committee considers the provision of these services to be compatible with maintaining the independence of our independent registered
accounting firms.
Audit
Committee’s Pre-Approval Policies and Procedures
The
Audit Committee must approve any fee for services to be performed by the independent registered public accounting firm in advance of
the services being performed. In considering the nature of the services provided by the independent auditor, the Audit Committee determined
that such services are compatible with the provision of independent audit services. The Audit Committee discussed these services with
the independent auditor and the Company’s management to determine that they are permitted under the rules and regulations concerning
auditor independence promulgated by the SEC to implement the related requirements of the Sarbanes-Oxley Act of 2002, as well as the American
Institute of Certified Public Accountants.
All
services rendered by EisnerAmper LLP for the years ended December 31, 2022 and 2021 were approved by the Audit Committee.
AUDIT
COMMITTEE REPORT
To
the Directors of Lightstone Value Plus REIT III, Inc.:
We
have reviewed and discussed with management Lightstone Value Plus REIT III, Inc.’s audited financial statements as of and for the
year ended December 31, 2022.
We
have discussed with the independent auditors the matters required to be discussed by Auditing Standard No. 16, “Communication
with Audit Committees,” as amended, as adopted by the Public Company Accounting Oversight Board.
We
have received and reviewed the written disclosures and the letter from the independent auditors required by Public Company Accounting
Oversight Board Rule 3526, Communication with Audit Committees Concerning Independence and have discussed with the auditors the auditors’
independence.
Based
on the reviews and discussions referred to above, we recommend to the board of directors that the financial statements referred to above
be included in Lightstone Value Plus REIT III, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2022.
Audit
Committee
George
R. Whittemore
Yehuda “Judah” L. Angster
INDEPENDENT
DIRECTORS’ REPORT
To
the Stockholders of Lightstone Value Plus REIT III, Inc.:
We
have reviewed the Company’s policies and determined that they are in the best interest of the Company’s stockholders. Set
forth below is a discussion of the basis for that determination.
General
The
Company has and expects to continue to primarily invest in full-service or limited-service hotels, including extended-stay hotels. Even
though the Company has and expects to continue primarily to invest in hotels, it has and may continue to invest in other types of real
estate.
Assets
other than hotels may include, without limitation, office buildings, shopping centers, business and industrial parks, manufacturing facilities,
single-tenant properties, multifamily properties, student housing properties, warehouses and distribution facilities and medical office
properties. The Company has and expects to continue to invest mainly in direct real estate investments and other equity interests; however,
it may also invest in debt interests, which may include bridge or mezzanine loans, including in furtherance of a loan-to-own strategy.
The Company has not established any limits on the percentage of its portfolio that may be comprised of various categories of assets which
present differing levels of risk.
Financing
Policies
The
Company has and expects to continue to utilize leverage for its properties. The number of different properties the Company may acquire
will be affected by numerous factors, including, the amount of funds available to it. When interest rates on mortgage loans are high
or financing is otherwise unavailable on terms that are satisfactory to the Company, the Company may purchase certain properties for
cash with the intention of obtaining a mortgage loan for a portion of the purchase price at a later time. There is no limitation on the
amount the Company may invest in any single property or on the amount the Company can borrow for the purchase of any property.
The
Company has and expects to continue to limit its aggregate long-term permanent borrowings to 75% of the aggregate fair market value of
all properties unless any excess borrowing is approved by a majority of the independent directors and is disclosed to the Company’s
stockholders. The Company may also incur short-term indebtedness, having a maturity of two years or less. By operating on a leveraged
basis, the Company may have more funds available for investment in properties. This may allow the Company to make more investments than
would otherwise be possible, resulting in a more diversified portfolio. Although the Company’s liability for the repayment of indebtedness
is expected to be limited to the value of the property securing the liability and the rents or profits derived therefrom, the Company’s
use of leveraging increases the risk of default on the mortgage payments and a resulting foreclosure of a particular property. To the
extent that the Company does not obtain mortgage loans on the Company’s properties, the Company’s ability to acquire additional
properties will be restricted. The Company will endeavor to obtain financing on the most favorable terms available.
Policy
on Sale or Disposition of Properties
The
Company’s Board will determine whether a particular property should be sold or otherwise disposed of after considering the relevant
factors, including performance or projected performance of the property and market conditions, with a view toward achieving its principal
investment objectives.
The Company currently intends to hold its properties until its investment objectives are met or it is likely they will not be met. At
a future date, the Company’s Board may decide to liquidate the Company, list its shares on a national stock exchange, sell its
properties individually or merge or otherwise consolidate the Company with a publicly-traded REIT. Alternatively, the Company may merge
with, or otherwise be acquired by, the Sponsor or its affiliates. The Company may, however, sell properties prior to such time and if
so, may invest the proceeds from any sale, financing, refinancing or other disposition of its properties into additional properties.
Alternatively, the Company may use these proceeds to fund maintenance or repair of existing properties or to increase reserves for such
purposes. The Company may choose to reinvest the proceeds from the sale, financing and refinancing of its properties to increase its
real estate assets and its net income. Notwithstanding this policy, the Board, in its discretion, may distribute all or part of the proceeds
from the sale, financing, refinancing or other disposition of all or any of the Company’s properties to the Company’s stockholders.
In determining whether to distribute these proceeds to stockholders, the Board will consider, among other factors, the desirability of
properties available for purchase, real estate market conditions, the likelihood of the listing of the Company’s shares on a national
securities exchange and compliance with the applicable requirements under federal income tax laws.
When
the Company sells a property, it intends to obtain an all-cash sale price. However, the Company may take a purchase money obligation
secured by a mortgage on the property as partial payment, and there are no limitations or restrictions on the Company’s ability
to take such purchase money obligations. The terms of payment to the Company will be affected by customs in the area in which the property
being sold is located and the then prevailing economic conditions. If the Company receives notes and other property instead of cash from
sales, these proceeds, other than any interest payable on these proceeds, will not be available for distributions until and to the extent
the notes or other property are actually paid, sold, refinanced or otherwise disposed. Therefore, the distribution of the proceeds of
a sale to the stockholders may be delayed until that time. In these cases, the Company will receive payments in cash and other property
in the year of sale in an amount less than the selling price and subsequent payments will be spread over a number of years.
Independent
Directors
George
R. Whittemore
Yehuda “Judah” L. Angster
OTHER
MATTERS PRESENTED FOR ACTION
AT THE 2023 ANNUAL MEETING OF STOCKHOLDERS
Our
Board of Directors does not intend to present for consideration at the 2023 Annual Meeting of stockholders any matter other than those
specifically set forth in the Notice of Annual Meeting of Stockholders. If any other matter is properly presented for consideration at
the meeting, the persons named in the proxy will vote thereon pursuant to the discretionary authority conferred by the proxy.
STOCKHOLDER
PROPOSALS FOR THE 2024 ANNUAL MEETING
Stockholder
Proposals in the Proxy Statement
Rule
14a-8 under the Exchange Act addresses when a company must include a stockholder’s proposal in its proxy statement and identify
the proposal in its form of proxy when the company holds an annual or special meeting of stockholders. Under Rule 14a-8, in order for
a stockholder proposal to be considered for inclusion in the proxy statement and proxy card relating to our 2024 Annual Meeting of stockholders,
the proposal must be received at our principal executive offices no later than June 22, 2024.
Stockholder
Proposals and Nominations for Directors to Be Presented at Meeting
Any
proposals by stockholders for inclusion in proxy solicitation material for the 2024 annual meeting of stockholders must be received by
our secretary, Joseph Teichman, at our principal executive offices located at 1985 Cedar Bridge Avenue, Suite 1, Lakewood, New Jersey
08701 Attention: Secretary, no later than June 22, 2024 in order for the proposal to be considered for inclusion in our proxy statement
for that meeting. However, if we hold the 2024 annual meeting before November 14, 2024 or after January 13, 2025, stockholders must submit
proposals for inclusion in our 2024 proxy statement within a reasonable time before we begin to print our proxy materials. Stockholders
also must follow the procedures prescribed in Rule 14a-8 promulgated under the Exchange Act.
If
a stockholder wishes to present a proposal at the 2024 annual meeting of stockholders, whether or not the proposal is intended to be
included in the proxy statement for that meeting, our bylaws require advance written notice to our secretary no earlier than May 23,
2024 and no later than 5:00 p.m., Eastern Time, on June 22, 2024. However, if we hold the 2024 annual meeting before November 14, 2024
or after January 13, 2025, written notice of a stockholder proposal must be delivered not earlier than the 150th day before
the date of the 2024 annual meeting of stockholders and not later than 5:00 p.m., Eastern Time, on the later of the 120th
day before the date of the 2024 annual meeting of stockholders or the tenth day following the day on which public announcement of the
date of the 2024 annual meeting is first made. Any stockholder proposals not received by us by the applicable date in the previous sentence
will be considered untimely. Our secretary will provide a copy of bylaws upon written request and without charge.
In
addition to satisfying the foregoing advance notice requirements under our bylaws, to comply with the universal proxy rules, the notice
given by any stockholder who intends to solicit proxies in support of director nominees other than the Company’s nominees must
comply with any additional requirements of Rule 14a-19 under the Exchange Act. Rule 14a-4(c) promulgated under the Exchange Act permits
our management to exercise discretionary voting authority under proxies it solicits with respect to untimely proposals.
All
nominations must also comply with the Charter. All proposals should be sent via registered, certified or express mail to our Secretary
at our principal executive offices at: Lightstone Value Plus REIT III, Inc., 1985 Cedar Bridge Avenue, Suite 1, Lakewood, New Jersey
08701, Attention: Joseph Teichman (telephone: (866) 792-8700).
By
Order of the Board of Directors,
Joseph
Teichman
General Counsel and Secretary
Lakewood,
New Jersey
October 16, 2023
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