UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM
(Mark One)
For
the quarterly period ended
OR
For the transition period from _________ to _________
Commission
file number
(Exact Name of Registrant as Specified in Its Charter)
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
| (Address of Principal Executive Offices) | (Zip Code) |
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None.
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☑ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As of November 7, 2022, there were approximately million outstanding shares of common stock of Lightstone Value Plus REIT I, Inc., including shares issued pursuant to the dividend reinvestment plan.
LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES
INDEX
i
PART I. FINANCIAL INFORMATION,
ITEM 1. FINANCIAL STATEMENTS,
LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share data)
| As
of September 30, 2022 | As
of December 31, 2021 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Investment property: | ||||||||
| Land and improvements | $ | $ | ||||||
| Building and improvements | ||||||||
| Furniture and fixtures | ||||||||
| Construction in progress | ||||||||
| Gross investment property | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Net investment property | ||||||||
| Development projects | ||||||||
| Investments in related parties | ||||||||
| Cash and cash equivalents | ||||||||
| Marketable securities | ||||||||
| Notes receivable, net | ||||||||
| Prepaid expenses, restricted cash and other assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Mortgages payable, net | $ | $ | ||||||
| Accounts payable, accrued expenses and other liabilities | ||||||||
| Due to related parties | ||||||||
| Distributions payable | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Company’s Stockholders Equity: | ||||||||
| Preferred shares, $ par value, million shares authorized, issued and outstanding | ||||||||
| Common stock, $ par value; million shares authorized, million and million shares issued and outstanding, respectively | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated surplus | ||||||||
| Total Company’s stockholders’ equity | ||||||||
| Noncontrolling interests | ||||||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
1
PART I. FINANCIAL INFORMATION, CONTINUED:
ITEM 1. FINANCIAL STATEMENTS, CONTINUED:
LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
| For
the Three Months Ended September 30, | For
the Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenues: | ||||||||||||||||
| Rental income | $ | $ | $ | $ | ||||||||||||
| Tenant recovery income | ||||||||||||||||
| Total revenues | ||||||||||||||||
| Expenses: | ||||||||||||||||
| Property operating expenses | ||||||||||||||||
| Real estate taxes | ||||||||||||||||
| General and administrative costs | ||||||||||||||||
| Pre-opening costs | ||||||||||||||||
| Impairment charge | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total expenses | ||||||||||||||||
| Other income/(loss), net | ( | ) | ||||||||||||||
| Interest and dividend income | ||||||||||||||||
| Interest expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain on disposition of real estate | ||||||||||||||||
| Loss on demolition | ( | ) | ( | ) | ||||||||||||
| Unrealized (loss)/gain on marketable equity securities | ( | ) | ( | ) | ( | ) | ||||||||||
| Gain on sale of marketable securities | ||||||||||||||||
| Net (loss)/income | ( | ) | ( | ) | ( | ) | ||||||||||
| Less: net income attributable to noncontrolling interests | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net (loss)/income attributable to Company’s common shares | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
| Net (loss)/income per Company’s common share, basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
| Weighted average number of common shares outstanding, basic and diluted | ||||||||||||||||
The
accompanying notes are an integral part of these consolidated financial statements.
2
PART I. FINANCIAL INFORMATION, CONTINUED:
ITEM 1. FINANCIAL STATEMENTS, CONTINUED:
LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands)
(Unaudited)
| For
the Three Months Ended September 30, | For
the Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Net (loss)/income | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
| Other comprehensive(loss)/income | ||||||||||||||||
| Holding (loss)/gain on available for sale debt securities | ( | ) | ||||||||||||||
| Reclassification adjustment for gain included in net (loss)/income | ( | ) | ( | ) | ( | ) | ||||||||||
| Other comprehensive (loss)/income | ( | ) | ( | ) | ( | ) | ||||||||||
| Comprehensive (loss)/income | ( | ) | ( | ) | ( | ) | ||||||||||
| Less: Comprehensive income attributable to noncontrolling interests | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Comprehensive (loss)/income attributable to Company’s common shares | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
3
PART I. FINANCIAL INFORMATION, CONTINUED:
ITEM 1. FINANCIAL STATEMENTS, CONTINUED:
LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Amounts in thousands)
(Unaudited)
| Accumulated | ||||||||||||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||||||||||||
| Common | Paid-In | Comprehensive | Accumulated | Noncontrolling | Stockholders’ | |||||||||||||||||||||||
| Shares | Amount | Capital | Income | Surplus | Interests | Equity | ||||||||||||||||||||||
| BALANCE, June 30, 2021 | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Other comprehensive loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Distributions declared (a) | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Distributions paid to noncontrolling interests | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Contributions received from noncontrolling interests | - | |||||||||||||||||||||||||||
| Redemption and cancellation of common shares | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Shares issued from distribution reinvestment program | ||||||||||||||||||||||||||||
| BALANCE, September 30, 2021 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
| (a) |
| Accumulated | ||||||||||||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||||||||||||
| Common | Paid-In | Comprehensive | Accumulated | Noncontrolling | Stockholders’ | |||||||||||||||||||||||
| Shares | Amount | Capital | Income | Surplus | Interests | Equity | ||||||||||||||||||||||
| BALANCE, December 31, 2020 | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Net income | - | |||||||||||||||||||||||||||
| Other comprehensive income | - | |||||||||||||||||||||||||||
| Distributions declared (a) | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Distributions paid to noncontrolling interests | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Contributions received from noncontrolling interests | - | |||||||||||||||||||||||||||
| Redemption and cancellation of common shares | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Shares issued from distribution reinvestment program | ||||||||||||||||||||||||||||
| BALANCE, September 30, 2021 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
| (a) |
| Accumulated | ||||||||||||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||||||||||||
| Common | Paid-In | Comprehensive | Accumulated | Noncontrolling | Stockholders’ | |||||||||||||||||||||||
| Shares | Amount | Capital | Income | Surplus | Interests | Equity | ||||||||||||||||||||||
| BALANCE, June 30, 2022 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Other comprehensive loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Distributions declared (a) | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Distributions paid to noncontrolling interests | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Redemption and cancellation of common shares | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Shares issued from distribution reinvestment program | ||||||||||||||||||||||||||||
| BALANCE, September 30, 2022 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| (a) |
| Accumulated | ||||||||||||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||||||||||||
| Common | Paid-In | Comprehensive | Accumulated | Noncontrolling | Stockholders’ | |||||||||||||||||||||||
| Shares | Amount | Capital | Income | Surplus | Interests | Equity | ||||||||||||||||||||||
| BALANCE, December 31, 2021 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Other comprehensive loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Distributions declared (a) | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Distributions paid to noncontrolling interests | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Contributions received from noncontrolling interests | - | |||||||||||||||||||||||||||
| Redemption and cancellation of common shares | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Shares issued from distribution reinvestment program | ||||||||||||||||||||||||||||
| BALANCE, September 30, 2022 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| (a) |
The accompanying notes are an integral part of these consolidated financial statements.
4
PART I. FINANCIAL INFORMATION, CONTINUED:
ITEM 1. FINANCIAL STATEMENTS, CONTINUED:
LIGHTSTONE VALUE PLUS REIT I, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
| For
the Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net (loss)/income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net (loss)/income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Impairment charge | ||||||||
| Unrealized loss/(gain) on marketable equity securities | ( | ) | ||||||
| Gain on sale of marketable securities | ( | ) | ( | ) | ||||
| Mark to market adjustment on derivative financial instruments | ( | ) | ( | ) | ||||
| Gain on disposition of real estate | ( | ) | ( | ) | ||||
| Loss on demolition | ||||||||
| Noncash interest income | ( | ) | ( | ) | ||||
| Other non-cash adjustments | ||||||||
| Changes in assets and liabilities: | ||||||||
| Increase in prepaid expenses and other assets | ( | ) | ( | ) | ||||
| (Decrease)/increase in tenant allowances and deposits payable | ( | ) | ||||||
| Increase in accounts payable, accrued expenses and other liabilities | ||||||||
| Decrease in due to related parties | ( | ) | ||||||
| Net cash provided by operating activities | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of development property and investment property | ( | ) | ( | ) | ||||
| Purchase of marketable securities | ( | ) | ( | ) | ||||
| Proceeds from sale of marketable securities | ||||||||
| Proceeds from disposition of real estate | ||||||||
| Investment in joint venture | ( | ) | ||||||
| Proceeds from joint venture | ||||||||
| Proceeds from redemption of preferred investment in related party | ||||||||
| Funding of notes receivable | ( | ) | ||||||
| Proceeds from repayment of notes receivable | ||||||||
| Net cash (used in)/provided by investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from mortgage financing | ||||||||
| Mortgage principal payments | ( | ) | ( | ) | ||||
| Payment of loan fees and expenses | ( | ) | ( | ) | ||||
| Redemption and cancellation of common shares | ( | ) | ( | ) | ||||
| Contributions received from noncontrolling interests | ||||||||
| Distributions paid to noncontrolling interests | ( | ) | ( | ) | ||||
| Distributions paid to Company’s common stockholders | ( | ) | ( | ) | ||||
| Net cash provided by/(used in) financing activities | ( | ) | ||||||
| Net change in cash, cash equivalents and restricted cash | ( | ) | ( | ) | ||||
| Cash, cash equivalents and restricted cash, beginning of year | ||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | $ | ||||||
| See Note 2 for supplemental cash flow information. | ||||||||
| The following is a summary of the Company’s cash, cash equivalents, and restricted cash total as presented in our statements of cash flows for the periods presented: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash, cash equivalents and restricted cash | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
5
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
| 1. | Structure |
Lightstone
Value Plus REIT I, Inc., which was formerly known as Lightstone Value Plus Real Estate Investment Trust, Inc. before September
16, 2021, a Maryland corporation (“Lightstone REIT I”), formed on
Lightstone
REIT I is structured as an umbrella partnership real estate investment trust, or UPREIT, and substantially all of the Company’s
current and future business is and will be conducted through Lightstone Value Plus REIT, L.P. (the “Operating Partnership”),
a Delaware limited partnership formed on
Lightstone REIT I and the Operating Partnership and its subsidiaries are collectively referred to as the “Company” and the use of “we,” “our,” “us” or similar pronouns refers to Lightstone REIT I, its Operating Partnership or the Company as required by the context in which such pronoun is used.
Through its Operating Partnership, the Company owns, operates and develops commercial, residential, and hospitality properties and makes real estate-related investments, principally in the United States. The Company’s real estate investments are held alone or jointly with other parties. The Company also originates or acquires mortgage loans secured by real estate. Although most of its investments are of these types, the Company may invest in whatever types of real estate or real estate-related investments that it believes is in its best interests.
Since
its inception, the Company has owned and managed various commercial and residential properties located throughout the United States.
The Company evaluates all of its real estate investments as one operating segment. As of September 30, 2022, the Company has ownership
interests in (i) one consolidated operating property, (ii) two consolidated development properties, (iii) certain consolidated
land holdings, and (iv) seven unconsolidated operating properties. With respect to its consolidated operating property, the Company
has a majority ownership interest of
The
Company’s advisor is Lightstone Value Plus REIT, LLC (the “Advisor”), which is majority owned by David Lichtenstein.
On July 6, 2004, the Advisor contributed $
6
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
The Company does not have any employees. The Advisor receives compensation and fees for services related to the investment and management of the Company’s assets.
The Company’s Advisor has affiliates which may manage and develop certain of its properties. However, the Company also contracts with other unaffiliated third-party property managers.
The Company’s Common Shares are not currently listed on a national securities exchange. The Company may seek to list its stock for trading on a national securities exchange only if a majority of independent directors believe listing would be in the best interest of its stockholders. The Company does not intend to list its shares at this time. The Company does not anticipate that there would be any market for its shares of common stock until they are listed for trading.
Related Parties
The Advisor and its affiliates, and Lightstone SLP, LLC are related parties of the Company. Certain of these entities are entitled to compensation for services related to the investment, management and disposition of the Company’s assets. The compensation is based on the cost of acquired properties/investments and the annual revenue earned from such properties/investments, and other such fees and expense reimbursements as outlined in each of the respective agreements.
Noncontrolling Interests
Partners of Operating Partnership
On July 6, 2004, the Advisor contributed $2 to the Operating Partnership in exchange for 200 Common Units in the Operating Partnership. The Advisor has the right to convert the Common Units into cash or, at the option of the Company, an equal number of shares of Common Shares.
In
connection with the Offering, Lightstone SLP, LLC, an affiliate of the Advisor, purchased an aggregate of $
In
addition, an aggregate
Other Noncontrolling Interests in Consolidated Subsidiaries
Other noncontrolling interests in consolidated subsidiaries include ownership interests in (i) Pro-DFJV Holdings LLC (“PRO”) held by the Company’s Sponsor, (ii) 50-01 2nd St. Associates LLC (the “2nd Street Joint Venture”), held by the Company’s Sponsor and other affiliates and (iii) various joint ventures held by affiliates of the Sponsor that have originated promissory notes to unaffiliated third parties (see Note 5). PRO’s holdings principally consist of Marco OP Units and Marco II OP Units (see Note 6). The 2nd Street Joint Venture owns Gantry Park Landing.
7
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
| 2. | Summary of Significant Accounting Policies |
Basis of Presentation
The consolidated financial statements include the accounts of Lightstone REIT I and its Operating Partnership and its subsidiaries (over which the Company exercises financial and operating control). All inter-company balances and transactions have been eliminated in consolidation. In addition, interests in entities acquired are evaluated based on applicable accounting principles generally accepted in the United States of America (“GAAP”), and if deemed to be variable interest entities (“VIE”) in which the Company is the primary beneficiary are also consolidated. If the interest in the entity is determined not to be a VIE, then the entity is evaluated for consolidation based on legal form, economic substance, and the extent to which the Company has control, substantive participating rights or both under the respective ownership agreement. For entities in which the Company has less than a controlling interest but have significant influence, the Company accounts for the investment using the equity method of accounting.
There are judgments and estimates involved in determining if an entity in which the Company has made an investment is a VIE and, if so, whether the Company is the primary beneficiary. The entity is evaluated to determine if it is a VIE by, among other things, calculating the percentage of equity being risked compared to the total equity of the entity. Determining expected future losses involves assumptions of various possibilities of the results of future operations of the entity, assigning a probability to each possibility and using a discount rate to determine the net present value of those future losses. A change in the judgments, assumptions, and estimates outlined above could result in consolidating an entity that should not be consolidated or accounting for an investment using the equity method that should in fact be consolidated, the effects of which could be material to our financial statements.
The accompanying unaudited interim consolidated financial statements and related notes should be read in conjunction with the audited Consolidated Financial Statements of the Company and related notes as contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021. The unaudited interim consolidated financial statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair presentation of the results for the periods presented. The accompanying unaudited consolidated financial statements of Lightstone Value Plus REIT I, Inc. and its Subsidiaries have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.
GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during a reporting period. The most significant assumptions and estimates relate to the valuation of real estate and real-estate related investments, marketable securities, notes receivable, depreciable lives, and revenue recognition. Application of these assumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates.
The consolidated balance sheet as of December 31, 2021 included herein has been derived from the consolidated balance sheet included in the Company’s Annual Report on Form 10-K.
The unaudited consolidated statements of operations for interim periods are not necessarily indicative of results for the full year or any other period.
Derivative Financial Instruments
The Company utilizes derivative financial instruments to reduce interest rate risk. The Company does not hold or issue derivative financial instruments for trading purposes. The Company recognizes all derivatives as either assets or liabilities in the consolidated balance sheets and measures those instruments at fair value. Changes in fair value of those instruments are reported in the consolidated statements of operations.
8
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
Pre-Opening Costs
The Company expenses the costs associated with pre-opening activities associated with its development and construction projects as incurred. Pre-opening costs generally consist of non-recurring personnel, marketing and other costs.
COVID-19 Pandemic
On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic and it remains highly unpredictable and dynamic and its ultimate 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, and the ongoing development, administration and ultimate effectiveness of vaccines, including booster shots. Accordingly, the ongoing COVID-19 pandemic may continue to have negative effects on the U.S. and global economies for the foreseeable future.
During the COVID-19 pandemic, the occupancy of the Company’s St. Augustine Outlet Center significantly declined and because of limited leasing success, the Company began exploring various strategic alternatives for the property, which ultimately led to the Company ceasing operations of the center effective July 15, 2022 and demolishing the existing building and improvements during the third quarter of 2022. See “St. Augustine Outlet Center” for additional information.
Additionally, during 2020 the Company saw deterioration in both the occupancy and rental rates for Gantry Park Landing, which is located on Long Island, New York, as the luxury rental market in the greater New York City metropolitan area was negatively impacted by the COVID-19 pandemic. However, both occupancy and rental rates consistently improved throughout 2021 and returned to pre-COVID-19 levels. Thereafter, occupancy has continued to remain stable and the property has experienced strong growth in its rental rates thus far in 2022.
To-date, the COVID-19 pandemic has not had any significant impact on the Company’s development projects. Furthermore, the Company’s other real estate-related investments (both its preferred investment in related party and its nonrecourse loan made to an unaffiliated third-party borrower) also relate to various development projects, which are at different stages in their respective development process. These investments, which are subject to similar risks, have also not yet been significantly impacted by the COVID-19 pandemic.
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.
If the Company’s operating properties, development projects and real estate-related investments are negatively impacted for an extended period because (i) occupancy levels and rental rates decline, (ii) tenants are unable to pay their rent, (iii) borrowers are unable to pay scheduled debt service on notes receivable, (iv) development activities are delayed and/or (v) various related party entities are unable to pay monthly preferred distributions on the Company’s preferred investments in related parties, the Company’s business and financial results could be materially and adversely impacted.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current year presentation.
New Accounting Pronouncements
In June 2016, the FASB issued an accounting standards update which replaces the Company incurred loss impairment methodology currently in use with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The new guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The adoption of this standard will not have a material effect on the Company’s consolidated financial position, results of operations or cash flows.
The Company has reviewed and determined that other recently issued accounting pronouncements will not have a material impact on its financial position, results of operations and cash flows, or do not apply to its current operations.
9
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
Supplemental Cash Flow Information
Supplemental cash flow information for the periods indicated is as follows:
| For
the Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash paid for interest | $ | $ | ||||||
| Distributions declared but not paid | $ | $ | ||||||
| Investment property acquired but not paid | $ | $ | ||||||
| Amortization of deferred financing costs included in development projects | $ | $ | ||||||
| Holding loss/gain on marketable securities | $ | $ | ||||||
| Value of shares issued from distribution reinvestment program | $ | $ | ||||||
| Accrued loan exit fee included in deferred financing costs | $ | $ | ||||||
St. Augustine Outlet Center
During
the COVID-19 pandemic, the occupancy of the Company’s St. Augustine Outlet Center, a retail property located in St. Augustine
Florida, which consisted of
Because
of the aforementioned lease terminations and scheduled expirations, substantially all of the tenants vacated the property during
the first quarter of 2022 and on June 29, 2022, the Company entered into a lease termination agreement with the property’s
final tenant providing for them to receive an aggregate of $
In
connection with the terms of certain of the lease termination agreements, the Company agreed to make various payments to certain
tenants provided they closed their store and vacated the property. The Company expenses lease termination fees in the period the
lease termination agreement is executed and such expenses are included in property operating expenses on the consolidated statements
of operations. During the nine months ended September 30, 2022, the Company recognized aggregate lease termination fees of $
10
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
| 3. | Development Projects |
Lower East Side Moxy Hotel
On
December 3, 2018, the Company, through a subsidiary of the Operating Partnership, acquired three adjacent parcels of land
located at 147-151 Bowery in the Lower East Side neighborhood of Manhattan in New York City from unaffiliated third parties for
aggregate consideration of $
In
preparation for the opening of the Lower East Side Moxy Hotel, the Company incurred pre-opening costs of $
Exterior Street Project
On
February 27, 2019, the Company, through subsidiaries of the Operating Partnership, acquired two adjacent parcels of land located
at 355 and 399 Exterior Street in the Bronx neighborhood of New York City from unaffiliated third parties for an aggregate purchase
price of $
The following is a summary of the total amounts incurred and capitalized to each of the Company’s development projects as of the dates indicated and the amounts of interest capitalized to the Company’s development projects for the periods indicated:
| Amounts Capitalized to Construction in Progress | Capitalized Interest | Capitalized Interest | ||||||||||||||||||||||
| As
of September 30, | As
of December 31, | Three
Months Ended September 30, | Nine
Months Ended September 30, | |||||||||||||||||||||
| Development Project | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||
| Lower East Side Moxy Hotel | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Exterior Street Project | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
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LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
| 4. | Investments in Related Parties |
Preferred Investments
The
Company entered into agreements with various related party entities that provided for it to make preferred contributions pursuant
to certain instruments (the “Preferred Investments”) that entitle it to certain prescribed monthly preferred distributions
at an annual rate of 12%. During the nine months ended September 30, 2022, the Company redeemed $
The Preferred Investments are summarized as follows:
|
Preferred Investments |
Dividend Rate |
Preferred Investment Balance | Investment Income(1) | |||||||||||||||||||||||||
| As of September 30, |
As of December 31, |
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| 40 East End Avenue | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
| East 11th Street | ||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
Note:
| (1) |
The Joint Venture
The
Company has a
| 5. | Notes Receivable |
The Company has formed certain joint ventures (collectively, the “NR Joint Ventures”) between wholly-owned subsidiaries of the Operating Partnership (collectively, the “NR Subsidiaries”) and affiliates of the Sponsor (the “NR Affiliates”) which have originated nonrecourse loans (collectively, the “Joint Venture Promissory Notes”) to unaffiliated third-party borrowers (collectively, the “Joint Venture Borrowers”).
The NR Subsidiaries and NR Affiliates may have varying ownership interests in the NR Joint Ventures, however; certain other wholly-owned subsidiaries of the Operating Partnership serve as the manager and are the sole decision-maker for each of the NR Joint Ventures.
The Company has determined that the NR Joint Ventures are VIEs and the NR Subsidiaries are the primary beneficiaries. Since the NR Subsidiaries are the primary beneficiaries, beginning on the applicable date of formation, the Company has consolidated the operating results and financial condition of the NR Joint Ventures and accounted for the respective ownership interests of the NR Affiliates as noncontrolling interests.
12
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
The
Joint Venture Promissory Notes generally provide for monthly interest at a prescribed variable rate, subject to a floor. In connection
with the initial funding of the Joint Venture Promissory Notes, the NR Joint Ventures receive origination fees (ranging from
The Joint Venture Promissory Notes generally have an initial term of one or two years and may provide for additional extension options subject to satisfaction of certain conditions, including the funding of additional Loan Reserves and payment of extension fees. The Joint Venture Promissory Notes are collateralized by either the membership interests of the Joint Venture Borrowers in the borrowing entity or the underlying real property being developed by the Joint Venture Borrower.
Origination fees are presented in the consolidated balance sheets as a direct deduction from the carrying value of the Joint Venture Promissory Notes and are amortized into interest income, using a straight-line method that approximates the effective interest method, over the initial term of the Joint Venture Promissory Notes. The Loan Reserves are presented in the consolidated balance sheets as a direct deduction from the carrying value of the Joint Venture Promissory Notes and are applied against the monthly interest due over the term.
During
the nine months ended September 30, 2022 and 2021, both the NR Subsidiaries and the NR Affiliates made aggregate contributions
to the NR Joint Ventures of $
The following tables summarize the Notes Receivable as of the dates indicated:
| As of September 30, 2022 | |||||||||||||||||||||||||||||||||||
| Joint Venture/Lender | Company’s Percentage | Loan Commitment Amount | Origination Fee | Origination Date | Maturity Date | Contractual Interest Rate | Outstanding Principal | Reserves | Unamortized
Origination Fee | Carrying Value | Unfunded Commitment | ||||||||||||||||||||||||
| LSC 1543 7th LLC | (Floor of 7.15%) | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
| As of December 31, 2021 | |||||||||||||||||||||||||||||||||||
| Joint Venture/Lender | Company’s Percentage | Loan Commitment Amount | Origination Fee | Origination Date | Maturity Date | Contractual Interest Rate | Outstanding Principal | Reserves | Unamortized
Origination Fee | Carrying Value | Unfunded Commitment | ||||||||||||||||||||||||
| LSC 1543 7th LLC (1) | (Floor of 7.90%) | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||
| LSC 11640 Mayfield LLC (2) | (Floor of 13.00%) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Total | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||
| (1) |
| (2) |
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LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
The following summarizes the interest earned (included in interest and dividend income on the consolidated statements of operations) for each of the Joint Venture Promissory Notes during the periods indicated:
| For
the Three Months Ended September 30, | For
the Nine Months Ended September 30, | |||||||||||||||
| Joint Venture/Lender | 2022 | 2021 | 2022 | 2021 | ||||||||||||
| LSC 1543 7th LLC | $ | $ | $ | |||||||||||||
| LSC 162nd Capital I LLC | ||||||||||||||||
| LSC 162nd Capital II LLC | ||||||||||||||||
| LSC 1650 Lincoln LLC | ||||||||||||||||
| LSC 11640 Mayfield LLC | ||||||||||||||||
| LSC 11640 Newkirk LLC | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| 6. | Marketable Securities, Derivative Financial Instruments, Fair Value Measurements and Notes Payable |
Marketable Securities
The following is a summary of the Company’s available for sale securities:
| As of September 30, 2022 | ||||||||||||||||
| Adjusted Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
| Marketable Securities: | ||||||||||||||||
| Equity securities: | ||||||||||||||||
| Common and Preferred Equity Securities | $ | $ | $ | ( | ) | $ | ||||||||||
| Marco OP Units and Marco II OP Units | ( | ) | ||||||||||||||
| ( | ) | |||||||||||||||
| Debt securities: | ||||||||||||||||
| Corporate Bonds | ( | ) | ||||||||||||||
| Total | $ | $ | $ | ( | ) | $ | ||||||||||
| As of December 31, 2021 | ||||||||||||||||
| Adjusted Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
| Marketable Securities: | ||||||||||||||||
| Equity securities: | ||||||||||||||||
| Common and Preferred Equity Securities | $ | $ | $ | ( | ) | $ | ||||||||||
| Marco OP Units and Marco II OP Units | ||||||||||||||||
| ( | ) | |||||||||||||||
| Debt securities: | ||||||||||||||||
| Corporate Bonds | ( | ) | ||||||||||||||
| Total | $ | $ | $ | ( | ) | $ | ||||||||||
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LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
As
of both September 30, 2022 and December 31, 2021, the Company held an aggregate of
Throughout
2022, financial markets have been experiencing significant increases in interest rates primarily as a result of higher inflation,
leading to the substantially lower market prices of the Company equity’s securities, especially those highly sensitive to
movements in interest rates, such are REITs and preferred securities. Because of the change in the closing price of Simon Stock
and the market price of the Company’s other equity securities, the Company incurred unrealized losses of $
Additionally,
as of September 30, 2022 and December 31, 2021, certain of the Company’s marketable debt securities had net unrealized losses
of $
The Company may sell certain of its investments prior to their stated maturities for strategic purposes, in anticipation of credit deterioration, or for duration management.
Derivative Financial Instruments
The Company has entered into two interest rate cap contracts with unrelated financial institutions in order to reduce the effect of interest rate fluctuations or risk of certain real estate investment’s interest expense on its variable rate debt. The Company is exposed to credit risk in the event of non-performance by the counterparty to these financial instruments. Management believes the risk of loss due to non-performance to be minimal.
The Company is accounting for the interest rate cap contracts as economic hedges, marking these contracts to market, taking into account present interest rates compared to the contracted fixed rate over the life of the contract and recording the unrealized gain or loss on the interest rate cap contracts in the consolidated statements of operations.
For the three and nine months ended September 30, 2022, the Company recorded an unrealized gain of $1.6 million and $2.8 million, which is included in other income/(expense), net in the consolidated statement of operations, representing the change in the fair value of these economic hedges during such periods.
The
two interest rate cap contracts have notional amounts of $
15
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.
The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:
| ● | Level 1 – Quoted prices in active markets for identical assets or liabilities. | |
| ● | Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | |
| ● | Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
Marketable securities and derivative financial instruments measured at fair value on a recurring basis as of the dates indicated are as follows:
| Fair Value Measurement Using | ||||||||||||||||
| As of September 30, 2022 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Marketable Securities: | ||||||||||||||||
| Common and Preferred Equity Securities | $ | $ | $ | $ | ||||||||||||
| Marco OP and OP II Units | ||||||||||||||||
| Corporate Bonds | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Derivative Financial Instruments: | ||||||||||||||||
| Interest Rate Cap Contracts | $ | $ | $ | $ | ||||||||||||
| Fair Value Measurement Using | ||||||||||||||||
| As of December 31, 2021 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Marketable Securities: | ||||||||||||||||
| Common and Preferred Equity Securities | $ | $ | $ | $ | ||||||||||||
| Marco OP and OP II Units | ||||||||||||||||
| Corporate Bonds | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
16
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
The fair values of the Company’s common equity securities are measured using readily quoted prices for these investments which are listed for trade on active markets. The fair values of the Company’s preferred equity securities and corporate bonds are measured using readily available quoted prices for these securities; however, the markets for these securities are not active. The fair values of the Company’s interest rate cap contracts are measured using other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Additionally, as noted above, the Company’s Marco OP and OP II units are both ultimately exchangeable for cash or similar number of shares of Simon Stock, therefore the Company uses the quoted market price of Simon Stock to measure the fair value of the Company’s Marco OP and OP II units.
The following table summarizes the estimated fair value of our investments in marketable debt securities with stated contractual maturity dates, accounted for as available-for-sale securities and classified by the contractual maturity date of the securities:
| As of | ||||
September 30, 2022 | ||||
| Due in 1 year | $ | |||
| Due in 1 year through 5 years | ||||
| Due in 5 years through 10 years | ||||
| Due after 10 years | ||||
| Total | $ | |||
The Company did not have any other significant financial assets or liabilities, which would require revised valuations that are recognized at fair value.
Notes Payable
Margin Loan
The
Company has access to a margin loan (the “Margin Loan”) from a financial institution that holds custody of certain
of the Company’s marketable securities. The Margin Loan, which is due on demand, bears interest at
Line of Credit
The
Company has a non-revolving credit facility (the “Line of Credit”) that provides for borrowings up to a maximum of
$
17
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
| 7. | Mortgages Payable, Net |
Mortgages payable, net consists of the following:
| Property/Investment | Interest Rate | Weighted
Average | Maturity Date |
Amount Due at Maturity | As
of September 30, 2022 | As
of December 31, | ||||||||||||||
| Gantry Park Landing | $ | $ | $ | |||||||||||||||||
| Lower East Side Moxy Hotel Senior | (floor of 7.75%) | |||||||||||||||||||
| Lower East Side Moxy Hotel Junior | (floor of 14.00%) | |||||||||||||||||||
| Exterior Street Project | ||||||||||||||||||||
| Exterior Street Project Supplemental | ||||||||||||||||||||
| LSC 1543 7th LLC Note Receivable | ||||||||||||||||||||
| Total mortgages payable | $ | |||||||||||||||||||
| Less: Deferred financing costs | ( | ) | ( | ) | ||||||||||||||||
| Total mortgages payable, net | $ | $ | ||||||||||||||||||
LIBOR
as of September 30, 2022 and December 31, 2021 was
LSC 1543 7th LLC Loan
On
June 30, 2022, LSC 1543 7th LLC entered into a $
Moxy Construction Loans
On
June 3, 2021, the Company, through a wholly owned subsidiary, closed on a recourse construction loan facility (the “Moxy
Senior Loan”) providing for up to $
18
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
Simultaneously
on June 3, 2021, the Company, through the same wholly owned subsidiary, also entered into a mezzanine construction loan facility
(the “Moxy Junior Loan” and together with the Moxy Senior Loan, the “Moxy Construction Loans”) providing
for up to $
In
connection with the Moxy Construction Loans, the Company has provided certain completion and carry cost guarantees. The Company
has also entered into two interest rate cap agreements with notional amounts of $
Exterior Street Loans
On
March 29, 2019, the Company entered into a $
The following table shows the contractually scheduled principal maturities of the Company’s mortgage debt during the next five years and thereafter as of September 30, 2022:
| 2022 | 2023 | 2024 | 2025 | 2026 | Thereafter | Total | ||||||||||||||||||||||
| Principal maturities | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Less: Deferred financing costs | ( | ) | ||||||||||||||||||||||||||
| Total principal maturities, net | $ | |||||||||||||||||||||||||||
Certain of the Company’s debt agreements require the maintenance of certain ratios, including debt service coverage. As of September 30, 2022, the Company was in compliance with all of its financial debt covenants. Additionally, certain of our mortgages payable also contain clauses providing for prepayment penalties.
Debt Maturities
The
Exterior Street Loans (outstanding aggregate principal balance of $
However, if the Company is unable to extend or refinance its maturing indebtedness at favorable terms, it will look to repay the then outstanding balance with available cash and/or proceeds from selective asset sales. The Company has no additional significant maturities of mortgage debt over the next 12 months.
19
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
| 8. | Equity |
Share Repurchase Program
The Company’s share repurchase program (the “SRP”) may provide its stockholders with limited, interim liquidity by enabling them to sell their shares of common stock back to the Company, subject to restrictions.
On March 25, 2020, the Board of Directors amended the SRP to remove stockholder notice requirements and also approved the suspension of all redemptions effective immediately.
Effective March 18, 2021 and May 14, 2021, the Board of Directors partially reopened the SRP to allow, subject to various conditions as set forth below, for redemptions submitted in connection with a stockholder’s death and hardship, respectively, and set the price for all such purchases to our current net asset value per share (“NAV per Share”), as determined by the Board of Directors and reported by the Company from time to time. Deaths that occurred subsequent to January 1, 2020 were eligible for consideration, subject to certain conditions. Beginning January 1, 2022, requests for redemptions in connection with a stockholder’s death must be submitted and received by the Company within one year of the stockholder’s date of death for consideration.
At the above noted dates, the Board of Directors established that on an annual basis, the Company would not redeem in excess of 0.5% of the number of shares outstanding as of the end of the preceding year for either death or hardship redemptions, respectively. Additionally, redemption requests generally would be processed on a quarterly basis and would be subject to pro ration if either type of redemption requests exceeded the annual limitation.
For the nine months ended September 30, 2022 the Company repurchased shares of common stock, pursuant to its SRP at an average price per share of $ per share.
Net Earnings Per Share
Basic net earnings per share is calculated by dividing net income attributable to common shareholders by the weighted-average number of shares of common stock outstanding during the applicable period. Dilutive income per share includes the potentially dilutive effect, if any, which would occur if our outstanding options to purchase our common stock were exercised. For all periods presented dilutive net income per share is equivalent to basic net income per share.
20
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
| 9. | Related Party Transactions |
The Company has various agreements, including an advisory agreement, with the Advisor and Lightstone Value Plus REIT Management LLC (the “Property Manager”) to pay certain fees in exchange for services performed by these entities and other affiliated entities. The Company’s ability to secure financing and subsequent real estate operations are dependent upon its Advisor, Property Manager and their affiliates to perform such services as provided in these agreements. Amounts the Company owes to the Advisor and its affiliated entities are principally for asset management fees, and are classified as due to related parties on the consolidated balance sheets.
The Company, pursuant to the related party arrangements, has recorded the following amounts for the periods indicated:
Three Months Ended September 30, | Nine
Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Asset management fees (general and administrative costs) | $ | $ | $ | $ | ||||||||||||
| Property management fees (property operating expenses) | ||||||||||||||||
| Development fees and cost reimbursement(1) | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| (1) |
See Notes 3, 4 and 5 for other related party transactions.
The advisory agreement has a one-year term and is renewable for an unlimited number of successive one-year periods upon the mutual consent of the Advisor and the Company’s independent directors. Payments to the Advisor or its affiliates may include asset acquisition fees and the reimbursement of acquisition-related expenses, development fees and the reimbursement of development-related costs, financing coordination fees, asset management fees or asset management participation, and construction management fees. The Company may also reimburse the Advisor and its affiliates for actual expenses it incurs for administrative and other services provided for it. Upon the liquidation of the Company’s assets, it may pay the Advisor or its affiliates a disposition commission.
In
connection with the Company’s Offering, Lightstone SLP, LLC purchased an aggregate of $
During
both the three and nine months ended September 30, 2022 and 2021, distributions of $
21
LIGHTSTONE
VALUE PLUS REIT I, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
| 10. | Financial Instruments |
The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, prepaid expenses, restricted cash and other assets, notes receivable, accounts payable, accrued expenses and other liabilities, due to related parties, and distributions payable approximate their fair values because of the short maturity of these instruments. The carrying amounts of the notes receivable approximate their fair values because the interest rates are variable and reflective of market rates.
The carrying amount and estimated fair value (in millions) of the Company’s mortgage debt is summarized as follows:
As
of 2022 | As
of 2021 | |||||||||||||||
| Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | |||||||||||||
| Mortgages payable | $ | $ | $ | $ | ||||||||||||
The fair value of the mortgages payable was determined by discounting the future contractual interest and principal payments by estimated current market interest rates.
| 11. | Commitments and Contingencies |
Legal Proceedings
From time to time in the ordinary course of business, the Company may become subject to legal proceedings, claims or disputes.
As of the date hereof, the Company is not a party to any material pending legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on its results of operations or financial condition, which would require accrual or disclosure of the contingency and possible range of loss.
| 12. | Subsequent Events |
Distribution Payment
On
October 15, 2022, the distribution for the three-month period ending September 30, 2022 of $
Distribution Declaration
On
November 9, 2022, the Company’s Board of Directors authorized and the Company declared a distribution of $
Additionally, on November 9, 2022, the Board of Directors declared a quarterly distribution for the quarterly period ending December 31, 2022 on the SLP Units at an annualized rate of 7.0%. Any future distributions on the SLP Units will always be subordinated until stockholders receive a stated preferred return.
Future distributions, if any, declared will be at the discretion of the Board of Directors based on their analysis of the Company’s performance over the previous periods and expectations of performance for future periods. The Board of Directors will consider various factors in its determination, including but not limited to, the sources and availability of capital, operating and interest expenses, the Company’s ability to refinance near-term debt, as well as the IRS’s annual distribution requirement that REITs distribute no less than 90% of their taxable income. The Company cannot assure that any future distributions will be made or that it will maintain any particular level of distributions that it has previously established or may establish.
22
PART I. FINANCIAL INFORMATION, CONTINUED:
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements of Lightstone Value Plus REIT I, Inc. and Subsidiaries and the notes thereto. As used herein, the terms “we,” “our” and “us” refer to Lightstone Value Plus REIT I, Inc., which was formerly known as Lightstone Value Plus Real Estate Investment Trust, Inc. before September 16, 2021, a Maryland corporation, and, as required by context, Lightstone Value Plus REIT, L.P. and its wholly owned subsidiaries, which we collectively refer to as “the Operating Partnership.” Dollar amounts are presented in thousands, except per share data and where indicated in millions.
Forward-Looking Statements
Certain information included in this Quarterly Report on Form 10-Q contains, and other materials filed or to be filed by us with the Securities and Exchange Commission, or the SEC, contain or will contain, forward-looking statements. All statements, other than statements of historical facts, including, among others, statements regarding our possible or assumed future results of our business, financial condition, liquidity, results of operations, plans and objectives, are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of Lightstone Value Plus REIT I, Inc. and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should” or similar expressions. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that actual results may differ materially from those contemplated by such forward-looking statements.
Such statements are based on assumptions and expectations which may not be realized and are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results, financial and otherwise, may differ from the results discussed in the forward-looking statements.
Risks and other factors that might cause differences, some of which could be material, include, but are not limited to, economic and market conditions, competition, tenant or joint venture partner(s) bankruptcies, changes in governmental, tax, real estate and zoning laws and regulations, failure to increase tenant occupancy and operating income, financing and development risks, construction and lease-up delays, cost overruns, the level and volatility of interest rates, the rate of revenue increases versus expense increases, the financial stability of tenants and industries, the failure of the Company (defined herein) to make additional investments in real estate properties, restrictions in current financing arrangements, the failure of the Company to continue to qualify as a real estate investment trust (“REIT”), the failure to refinance debt at favorable terms and conditions, an increase in impairment charges, loss of key personnel, failure to achieve earnings/funds from operations targets or estimates, conflicts of interest with the Advisor and its affiliates, failure of joint venture relationships, significant costs related to environmental issues and uncertainties regarding the impact of the current COVID-19 pandemic, and restrictions intended to prevent its spread on our business and the economy generally, as well as other risks listed from time to time in this Form 10-Q, our Form 10-K and in the Company’s other reports filed with the SEC.
We believe these forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are qualified in their entirety by these cautionary statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time unless required by law.
Overview
Lightstone Value Plus REIT I, Inc. (the “Lightstone REIT I”), (together with the Operating Partnership (as defined below), the “Company”, also referred to as “we”, “our” or “us” herein) has and expects to continue to acquire and operate or develop in the future, commercial, residential and hospitality properties and/or make real estate-related investments, principally in the United States. Our acquisitions and investments are, principally conducted through the Operating Partnership, and may include both portfolios and individual properties.
23
As of September 30, 2022, we have ownership interests in (i) one consolidated operating property, (ii) two consolidated development properties, (iii) certain consolidated land holdings, and (iv) seven unconsolidated operating properties. With respect to our consolidated operating property, we have a majority ownership interest of 59.2% in Gantry Park Landing, a multi-family residential property containing 199 apartment units located in the Queens neighborhood of New York City. With respect to our consolidated development properties, we wholly own two projects consisting of the Lower East Side Moxy Hotel, which opened on October 27, 2022, and the Exterior Street Project. We also wholly own and consolidate certain land parcels located in St. Augustine, Florida. Additionally, we hold a 2.5% ownership interest in seven hotel properties through a joint venture (the “Joint Venture”) which we account for using a measurement alternative under which the Joint Venture is measured at cost, adjusted for observable price changes and impairments, if any. The Joint Venture is between us and the operating partnership of Lightstone Value Plus REIT II, Inc., a real estate investment trust also sponsored by our Sponsor, which has a 97.5% ownership interest in the Joint Venture. Furthermore, we have other real estate-related investments, including preferred contributions that were made pursuant to agreement with a related party entity (the “Preferred Investment”) and a nonrecourse promissory note made to unaffiliated third-party. Our real estate investments have been and are expected to continue to be held by the Company alone or jointly with other parties.
We do not have employees. We entered into an advisory agreement pursuant to which the Advisor supervises and manages our day-to-day operations and selects our real estate and real estate related investments, subject to oversight by our board of directors (the “Board of Directors”). We pay the Advisor fees for services related to the investment and management of our assets, and we will reimburse the Advisor for certain expenses incurred on our behalf.
To maintain our qualification as a REIT, we engage in certain activities through taxable REIT subsidiaries (“TRSs”). As such, we may still be subject to U.S. federal and state income and franchise taxes from these activities.
Acquisitions and Investment Strategy
We have, to date, acquired and/or developed residential, commercial and hospitality properties principally, all of which are located in the United States and also made other real estate-related investments. Our acquisitions have included both portfolios and individual properties. Our operating properties consisted of one retail property (the St. Augustine Outlet Center) and one multi-family residential property (Gantry Park Landing) as of September 30, 2022. We also own various parcels of land and air rights we are using for the development and construction of real estate properties. Additionally, we have made preferred investments in related parties and originated nonrecourse loans through joint ventures to unaffiliated third-party borrowers.
Investments in real estate are generally made through the purchase of all or part of a fee simple ownership, or all or part of a leasehold interest. We may also purchase limited partnership interests, limited liability company interests and other equity securities. We may also enter into joint ventures with related parties for the acquisition, development or improvement of properties as well as general partnerships, co-tenancies and other participations with real estate developers, owners and others for the purpose of developing, owning and operating real properties. We will not enter into a joint venture to make an investment that we would not be permitted to make on our own. Not more than 10% of our total assets will be invested in unimproved real property. For purposes of this paragraph, “unimproved real properties” does not include properties acquired for the purpose of producing rental or other operating income, properties under construction and properties for which development or construction is planned within one year.
Current Environment
Our operating results are substantially impacted by the overall health of local, U.S. national and global economies and may be influenced by market and other challenges. Additionally, our business and financial performance may be adversely affected by current and future economic and other conditions; including, but not limited to, availability or terms of financings, financial markets volatility, political upheaval or uncertainty, natural and man-made disasters, terrorism and acts of war, unfavorable changes in laws and regulations, outbreaks of contagious diseases, cybercrime, loss of key relationships, competition, inflation, recession, supply disruptions and labor shortages.
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COVID-19 Pandemic
On March 20, 2020, the World Health Organization declared COVID-19 a global pandemic and it remains highly unpredictable and dynamic and its ultimate 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, and the ongoing development, administration and ultimate effectiveness of vaccines, including booster shots. Accordingly, the ongoing COVID-19 pandemic may continue to have negative effects on the U.S. and global economies for the foreseeable future.
During the COVID-19 pandemic, the occupancy of our St. Augustine Outlet Center, which is located in St. Augustine, Florida, significantly declined and because of limited leasing success, we began exploring various strategic alternatives for the St. Augustine Outlet Center, which ultimately led to us ceasing operations of the center effective July 15, 2022 and demolishing the existing building and improvements during the third quarter of 2022. See “St. Augustine Outlet Center” for additional information.
Additionally, during 2020 we saw deterioration in both the occupancy and rental rates for Gantry Park Landing, which is located on Long Island, New York, as the luxury rental market in the greater New York City metropolitan area was negatively impacted by the COVID-19 pandemic. However, both occupancy and rental rates consistently improved throughout 2021 and returned to pre-COVID-19 levels. Thereafter, occupancy has continued to remain stable and the property has experienced strong growth in its rental rates thus far in 2022.
To-date, the COVID-19 pandemic has not had any significant impact on our development projects Furthermore, our other real estate-related investments (both our preferred investment in related party and nonrecourse loan made to an unaffiliated third-party borrower) also relate to various development projects which are at different stages in their respective development process. These investments, which are subject to similar risks, have also not yet been significantly impacted by the COVID-19 pandemic.
The extent to which our business may be affected by the ongoing COVID-19 pandemic will largely depend on both current and future developments, all of which are highly uncertain and cannot be reasonably predicted.
If our operating properties, development projects and real estate-related investments are negatively impacted for an extended period because (i) occupancy levels and rental rates further decline, (ii) tenants are unable to pay their rent, (iii) borrowers are unable to pay scheduled debt service on notes receivable, (iv) development activities are delayed and/or (v) various related party entities are unable to pay monthly preferred distributions on our preferred investments in related parties, our business and financial results could be materially and adversely impacted.
We are not currently aware of any other material trends or uncertainties, favorable or unfavorable, that may be reasonably anticipated to have a material impact on either capital resources or the revenues or income to be derived from our operations, other than those referred to above or throughout this Form 10-Q. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during a reporting period.
Wholly Owned and Consolidated Real Estate Properties:
St. Augustine Outlet Center
We wholly owned the St. Augustine Outlet Center, located in St. Augustine, Florida, which was originally built in 1998 and subsequently acquired by us in 2006 and renovated and further expanded in 2008.
During the COVID-19 pandemic, the occupancy of our St. Augustine Outlet Center, a retail property which consisted of 0.3 million of gross leasable area, significantly declined and because of limited leasing success, we began exploring various strategic alternatives for the property. As a result, during the third quarter of 2021, we determined that we would no longer continue to pursue leasing of space to tenants and therefore, began to enter into lease termination agreements with certain tenants and also provided notice to our other tenants that we would not renew their leases at the scheduled expiration of their lease. Due to this change in leasing strategy and resulting decrease in the fair value of the St. Augustine Outlet Center, we recorded a non-cash loss on impairment of real estate of $11.3 million during the third quarter of 2021.
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Because of the aforementioned lease terminations and scheduled expirations, substantially all of the tenants vacated the property during the first quarter of 2022 and on June 29, 2022, we entered into a lease termination agreement with the property’s final tenant providing for them to receive an aggregate of $750 provided they vacated the property no later than July 15, 2022. The final tenant vacated the property in July 2022 and we ceased operations of the St. Augustine Outlet Center effective July 15, 2022 and shortly thereafter, commenced demolition of the property’s building and improvements in order to prepare the various land parcels for sale and/or lease. The demolition of the property’s buildings and improvements was substantially completed during the third quarter of 2022 and we recognized a loss on demolition of $16.6 million consisting of the write-off of the carrying value of the property’s building and improvements plus related costs.
In connection with the terms of certain of the lease termination agreements, we agreed to make various payments to certain tenants provided they closed their store and vacated the property. We expense lease termination fees in the period the lease termination agreement is executed and such expenses are included in property operating expenses on the consolidated statements of operations. During the nine months ended September 30, 2022, we recognized aggregate lease termination fees of $825. During the three and nine months ended September 30, 2021, we recognized a lease termination fee of $425.
Gantry Park Landing
We have a 59.2% membership interest in a consolidated joint venture which developed, constructed and owns Gantry Park Landing, a multi-family apartment building located in the Queens neighborhood of New York City. The following table contains certain information for Gantry Park Landing as of September 30, 2022.
| Location | Year Built | Leaseable Units | Percentage 2022 | Annualized Revenues |
Annualized Revenues per unit at September 30, 2022 | |||||||||||||||||
| Gantry Park Landing (Multi-Family Apartment Building) | Queens, New York | 2013 | 199 | 98.0 | % | $ | 9.6 million | $ | 49,465 | |||||||||||||
Annualized revenue is defined as the minimum monthly payments due as of September 30, 2022 annualized.
Development Properties
Lower East Side Moxy Hotel
On December 3, 2018, we acquired three adjacent parcels of land located at 147-151 Bowery in the Lower East Side neighborhood of Manhattan in New York City and on December 6, 2018, we acquired certain air rights located at 329 Broome Street in the Lower East Side neighborhood of Manhattan in New York The land and air rights were acquired for the development and construction of a 296-room Marriott Moxy hotel (the “Lower East Side Moxy Hotel”), that opened on October 27, 2022.
Exterior Street Project
On February 27, 2019, we, initially acquired two adjacent parcels of land located at 355 and 399 Exterior Street in the Bronx neighborhood of New York City and subsequently acquired an additional adjacent parcel in September 2021. The land parcels were acquired for the development of a multi-family residential property (the “Exterior Street Project”).
The following is a summary of the total amounts incurred and capitalized to our development projects as of September 30, 2022:
| Development Project | ||||
| Lower East Side Moxy Hotel | $ | 196,284 | ||
| Exterior Street Project | 91,589 | |||
| Total | $ | 287,873 | ||
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Results of Operations
For the Three Months Ended September 30, 2022 vs. September 30, 2021
Consolidated
Revenues
Our revenues are comprised of rental income and tenant recovery income. Total revenues increased slightly by $0.1 million to $2.4 million for the three months ended September 30, 2022 compared to $2.3 million for the same period in 2021. This increase reflects higher revenues of $0.6 million for Gantry Park Landing resulting from higher occupancy and rental rates substantially offset by lower revenues of $0.5 million for the St. Augustine Outlet Center, which ceased operations effective July 15, 2022.
Property operating expenses
Property operating expenses decreased by $0.5 million to $0.9 million for the three months ended September 30, 2022 compared to $1.4 million for the same period in 2021. The decrease is primarily attributable to lower property operating costs for the St. Augustine Outlet Center, which ceased operations effective July 15, 2022. Additionally, during the three months ended September 30, 2021, we recognized a lease termination fee of $0.4 million related to the St. Augustine Outlet Center, which is included in property operating expenses.
Real estate taxes
Real estate taxes were $0.1 million for both the three months ended September 30, 2022 and 2021.
General and administrative costs
General and administrative costs decreased slightly by $0.1 million to $0.5 million for the three months ended September 30, 2022 compared to $0.6 million for the same period in 2021.
Pre-opening costs
In preparation for the opening of the Lower East Side Moxy Hotel, which opened on October 26, 2022, we incurred pre-opening costs of $0.3 million during the three months ended September 30, 2022. No pre-opening costs were incurred during the 2021 period.
Depreciation and amortization
Depreciation and amortization decreased by $1.0 million to $0.5 million for the three months ended September 30, 2022 compared to $1.5 million for the same period in 2021. The decrease is primarily attributable to lower depreciation and amortization for the St. Augustine Outlet Center, which ceased operations effective July 15, 2022.
Interest and dividend income
Interest and dividend income decreased by $0.9 million to $2.3 million for the three months ended September 30, 2022 compared to $3.2 million for the same period in 2021. The decrease primarily reflects lower interest and dividend income earned on our notes receivable of $0.5 million, marketable securities of $0.2 million and preferred investments of $0.2 million.
Interest expense, net
Interest expense, net, including amortization of deferred financing costs, increased slightly by $0.1 million to $0.7 million for the three months ended September 30, 2022 compared to $0.6 million for the same period in 2021. During the three months ended September 30, 2022 and 2021, $4.9 million and $2.2 million, respectively, of interest was capitalized to our development projects.
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Gain on disposition of real estate
During the third quarter of 2022, we recognized a gain on disposition of real estate of $1.1 million related to Oakview, a shopping center located in Omaha, Nebraska, which we previously disposed of in September 2017.
During the third quarter of 2021, we recognized a gain on the disposition of real estate of $0.2 million related to the sale of the Santa Clara Data Center on July 7, 2021.
Loss on demolition
We ceased operations of the St. Augustine Outlet Center effective July 15, 2022 and shortly thereafter, commenced demolition of the property’s building and improvements. During the third quarter of 2022, the demolition was substantially completed and we recognized a loss on demolition of $16.6 million consisting of the write-off of the carrying value of the property’s building and improvements plus related costs.
Unrealized (loss)/gain on marketable equity securities
During the three months ended September 30, 2022 and 2021, we recorded unrealized losses on marketable equity securities of $1.2 million and $3.5 million, respectively. Unrealized gains and losses represent the change in the fair value of our marketable equity securities during the indicated periods.
Gain on sale of marketable securities
During the three months ended September 30, 2021, we recorded a gain on the sale of marketable securities of $4.7 million that represented the difference between the sales price and carrying value of our marketable securities sold. There were no sales of marketable securities during the three months ended September 30, 2022.
Noncontrolling interests
The net earnings allocated to noncontrolling interests relates to (i) parties that hold units in the Operating Partnership, (ii) the interest in PRO-DFJV Holdings LLC (“PRO”) held by our Sponsor, (iii) the ownership interests in 50-01 2nd St. Associates LLC (the “2nd Street Joint Venture”) held by our Sponsor and other affiliates and (iv) the ownership interest in various joint ventures held by affiliates of our Sponsor that have originated nonrecourse loans to unaffiliated third-party borrowers.
For the Nine Months Ended September 30, 2022 vs. September 30, 2021
Consolidated
Revenues
Our revenues are comprised of rental income and tenant recovery income. Total revenues decreased by $0.4 million to $7.2 million for the nine months ended September 30, 2022 compared to $7.6 million for the same period in 2021. This decrease reflects lower revenues of $1.6 million for the St. Augustine Outlet Center resulting from substantially all of its tenants vacating during the first quarter of 2022 and us subsequently ceasing operations of the property effective July 15, 2022, partially offset by higher revenues of $1.2 million for Gantry Park Landing resulting from higher occupancy and rental rates.
Property operating expenses
Property operating expenses increased slightly by $0.1 million to $3.3 million for the nine months ended September 30, 2022 compared to $3.2 million for the same period in 2021. The increase is primarily attributable to lease termination fees, which are included in property operating expenses, of $0.8 million and $0.4 million, recognized during the nine months ended September 30, 2022 and 2021, respectively. The increase in lease termination fees was offset by lower property operating costs for the St. Augustine Outlet Center, which ceased operations effective July 15, 2022.
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Real estate taxes
Real estate taxes decreased slightly by $0.1 million to $0.2 million for the nine months ended September 30, 2022 compared to $0.3 million for the same period in 2021.
General and administrative costs
General and administrative costs decreased slightly by $0.1 million to $1.7 million for the nine months ended September 30, 2022 compared to $1.8 million for the same period in 2021.
Pre-opening costs
In preparation for the opening of the Lower East Side Moxy Hotel, which opened on October 27, 2022, we incurred pre-opening costs of $0.7 million during the nine months ended September 30, 2022. No pre-opening costs were incurred during the 2021 period.
Depreciation and amortization
Depreciation and amortization decreased by $1.8 million to $2.0 million for the nine months ended September 30, 2022 compared to $3.8 million for the same period in 2021. The decrease is primarily attributable to lower depreciation and amortization for the St. Augustine Outlet Center, which ceased operations effective July 15, 2022.
Interest and dividend income
Interest and dividend income decreased by $3.7 million to $6.7 million for the nine months ended September 30, 2022 compared to $10.4 million for the same period in 2021. The decrease primarily reflects lower interest and dividend income earned on our notes receivable of $3.4 million and preferred investments of $0.2 million.
Interest expense, net
Interest expense, net, including amortization of deferred financing costs, decreased by $0.6 million to $1.4 million for the nine months ended September 30, 2022 compared to $2.0 million for the same period in 2021. During the nine months ended September 30, 2022 and 2021, $11.9 million and $5.6 million, respectively, of interest was capitalized to our development projects.
Gain on disposition of real estate
During the third quarter of 2022, we recognized a gain on disposition of real estate of $1.1 million related to Oakview, a shopping center located in Omaha, Nebraska, which we previously disposed of in September 2017.
During the nine months ended September 30, 2021, we recognized an aggregate gain on the disposition of real estate of $3.8 million consisting of a second quarter gain of $3.6 million related to the sale of a parcel of land adjacent to the St. Augustine Outlet Center on May 21, 2021 and a third quarter gain of $0.2 million related to the sale of the Santa Clara Data Center on July 7, 2021.
Loss on demolition
We ceased operations of the St. Augustine Outlet Center effective July 15, 2022 and shortly thereafter, commenced demolition of the property’s building and improvements. During the third quarter of 2022, the demolition was substantially completed and we recognized a loss on demolition of $16.6 million consisting of the write-off of the carrying value of the property’s building and improvements plus related costs.
Unrealized (loss)/gain on marketable equity securities
During the nine months ended September 30, 2022, we recorded an unrealized loss on marketable equity securities of $20.0 million and during the nine months ended September 30, 2021, we recorded an unrealized gain on marketable equity securities of $10.6 million. Unrealized gains and losses represent the change in the fair value of our marketable equity securities during the indicated periods.
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Gain on sale of marketable securities
During the nine months ended September 30, 2022, we recorded a gain on the sale of marketable securities of $1.2 million and during the nine months ended September 30, 2021, we recorded a gain on the sale of marketable securities of $4.7 million. These gains and losses represented the difference between the sales price and carrying value of our marketable securities sold during those periods.
Noncontrolling interests
The net earnings allocated to noncontrolling interests relates to (i) parties that hold units in the Operating Partnership, (ii) the interest in PRO-DFJV Holdings LLC (“PRO”) held by our Sponsor, (iii) the ownership interests in 50-01 2nd St. Associates LLC (the “2nd Street Joint Venture”) held by our Sponsor and other affiliates and (iv) the ownership interest in various joint ventures held by affiliates of our Sponsor that have originated nonrecourse loans to unaffiliated third-party borrowers.
Financial Condition, Liquidity and Capital Resources
Overview:
As of September 30, 2022, we had $37.9 million of cash on hand, $0.6 million of restricted cash and $41.5 million of marketable securities. We also have the ability to make draws from a line of credit up to a maximum of $20.0 million ($10.3 million was available as of September 30, 2022), subject to certain conditions (see “Notes Payable – Line of Credit”). We currently believe that these items along with rental income from our operating properties; interest and dividend income earned on our marketable securities, notes receivable and preferred investment; as well as proceeds received from the repayment of the notes receivable and redemption of the preferred investment will be sufficient to satisfy our expected cash requirements primarily consisting our anticipated operating expenses, scheduled debt service, capital expenditures (including certain of our development activities) and distributions to our shareholders, if any, required to maintain our status as a REIT for the foreseeable future. However, we may also obtain additional funds through selective asset dispositions, joint venture arrangements, new borrowings and refinancing of existing debt.
We currently have two development projects. Construction of our Lower East Side Moxy Hotel was substantially complete as of September 30, 2022 and the hotel and two of its five food and beverage venues subsequently opened on October 27, 2022. Additionally, our Exterior Street Project is currently under development and we expect to seek construction financing to fund a substantial portion of its future development and construction costs. See “Development Activities” for additional information.
Our
borrowings consist of single-property mortgages as well as mortgages cross-collateralized by a pool of properties.
In general the type of future financing executed by us to a large extent will be dictated
by the nature of the investment and current market conditions. To the extent floating rate debt is used to finance the purchase
of real estate, management will evaluate a number of protections against significant increases in interest rates, including the
purchase of interest rate cap instruments.
Additionally, in order to leverage our investments in marketable securities and seek a higher rate of return, we have access to borrowings under a margin loan collateralized by the securities held with the financial institution that has provided the margin loan. This loan is due on demand and any outstanding balance must be paid upon the liquidation of securities.
Our charter provides that the aggregate amount of borrowing, both secured and unsecured, may not exceed 300% of net assets in the absence of a justification showing that a higher level is appropriate, the approval of the Board of Directors and disclosure to stockholders. Net assets means our total assets, other than intangibles, at cost before deducting depreciation or other non-cash reserves less our total liabilities, calculated at least quarterly on a basis consistently applied. Any excess in borrowing over such 300% of net assets level must be approved by a majority of our independent directors and disclosed to our stockholders in our next quarterly report to stockholders, along with justification for such excess. As of September 30, 2022, our total borrowings of $245.0 million represented 99% of net assets.
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Any future properties that we may acquire or investments we may make may be funded through a combination of borrowings, proceeds generated from the sale and redemption of our marketable securities, available for sale, proceeds received from the selective disposition of our properties and proceeds received from the redemption of our preferred investments in related parties. These borrowings may consist of single-property mortgages as well as mortgages cross-collateralized by a pool of properties. Such mortgages may be put in place either at the time we acquire a property or subsequent to our purchasing a property for cash. In addition, we may acquire properties that are subject to existing indebtedness where we choose to assume the existing mortgages. Generally, though not exclusively, we intend to seek to encumber our properties with debt, which will be on a non-recourse basis. This means that a lender’s rights on default will generally be limited to foreclosing on the property. However, we may, at our discretion, secure recourse financing or provide a guarantee to lenders if we believe this may result in more favorable terms. When we give a guaranty for a property owning entity, we will be responsible to the lender for the satisfaction of the indebtedness if it is not paid by the property owning entity.
We may also obtain lines of credit to be used to acquire properties or real estate-related assets. These lines of credit will be at prevailing market terms and will be repaid from proceeds from the sale or refinancing of properties, working capital or permanent financing. Our Sponsor or its affiliates may guarantee the lines of credit although they will not be obligated to do so. We expect that such properties may be purchased by our Sponsor’s affiliates on our behalf, in our name, in order to minimize the imposition of a transfer tax upon a transfer of such properties to us.
We have various agreements, including an advisory agreement, with the Advisor to pay certain fees in exchange for services performed by the Advisor and/or its affiliated entities. Additionally, our ability to secure financing and our real estate operations are dependent upon our Advisor and its affiliates to perform such services as provided in these agreements.
In addition to meeting working capital needs and distributions, if any, to our stockholders, our capital resources are used to make certain payments to our Advisor and its affiliates, including payments related to asset acquisition fees and the reimbursement of acquisition-related costs, development fees and cost reimbursement, property management and leasing commissions, and asset management fee. We also reimburse our Advisor and its affiliates for actual expenses it incurs for administrative and other services provided to us. Additionally, the Operating Partnership may be required to make distributions to Lightstone SLP, LLC, an affiliate of the Advisor.
The advisory agreement has a one-year term and is renewable for an unlimited number of successive one-year periods upon the mutual consent of the Advisor and our independent directors.
The following table represents the fees incurred associated with the payments to our Advisor and its affiliates:
| Three
Months Ended September 30, | Nine
Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Asset management fees (general and administrative costs) | $ | 124 | $ | 206 | $ | 449 | $ | 661 | ||||||||
| Property management fees (property operating expenses) | 68 | 99 | 223 | 267 | ||||||||||||
| Development fees and cost reimbursement(1) | 641 | 877 | 2,258 | 2,789 | ||||||||||||
| Total | $ | 833 | $ | 1,182 | $ | 2,930 | $ | 3,717 | ||||||||
| (1) | Development fees and development costs that we reimburse our Advisor for are capitalized and are included in the carrying value of the associated development project and classified as development projects on the consolidated balance sheets. As of September 30, 2022 and December 31, 2021, the Company owed the Advisor and its affiliated entities $0.3 million and $0.7 million, respectively, for development fees and cost reimbursements, which is included in accounts payable, accrued expenses and other liabilities on the consolidated balance sheets. See Note 3 of the Notes to Consolidated Financial Statements for additional information. |
Additionally, we may be required to make distributions on the special general partner interests (“SLP Units”) in the Operating Partnership held by Lightstone SLP, LLC, an affiliate of the Advisor. In connection with the Company’s initial public offering, Lightstone SLP, LLC purchased an aggregate of $30.0 million of SLP Units. These SLP Units, the purchase price of which will be repaid only after stockholders receive a stated preferred return and their net investment, entitle Lightstone SLP, LLC to a portion of any regular distributions made by the Operating Partnership.
During both the three and nine months ended September 30, 2022 and 2021, distributions of $0.5 million and $1.5 million were declared and paid on the SLP units.
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Summary of Cash Flows
The following summary discussion of our cash flows is based on the consolidated statements of cash flows and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below:
| For
the Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Net cash flows provided by operating activities | $ | 9,033 | $ | 11,770 | ||||
| Net cash flows (used in)/provided by investing activities | (60,428 | ) | 28,378 | |||||
| Net cash flows provided by/(used in) financing activities | 47,247 | (51,901 | ) | |||||
| Net change in cash, cash equivalents and restricted cash | (4,148 | ) | (11,753 | ) | ||||
| Cash, cash equivalents and restricted cash, beginning of year | 42,592 | 46,841 | ||||||
| Cash, cash equivalents and restricted cash, end of the period | $ | 38,444 | $ | 35,088 | ||||
Operating activities
The net cash provided by operating activities of $9.0 million for the nine months ended September 30, 2022 consists of the following:
| ● | cash inflows of $3.8 million from our net loss after adjustment for non-cash items; and |
| ● | cash inflows of $5.2 million associated with the net changes in operating assets and liabilities. |
Investing activities
The net cash used in investing activities of $60.4 million for the nine months ended September 30, 2022 consists primarily of the following:
| ● | purchases of investment property principally attributable to our development activities of $54.4 million; |
| ● | aggregate proceeds from the full redemption of one of our preferred investments in related parties of $8.5 million; |
| ● | net proceeds from sales of marketable securities of $2.3 million; and |
| ● | net funds used for the issuance of notes receivable of $16.9 million. |
Financing activities
The net cash provided by financing activities of $47.2 million for the nine months ended September 30, 2022 is primarily related to the following:
| ● | debt principal payments of $1.0 million; |
| ● | net proceeds from mortgage financing of $73.7 million; |
| ● | redemption and cancellation of common shares of $3.9 million; |
| ● | contributions received from our noncontrolling interests of $21.9 million; |
| ● | distributions to our noncontrolling interests of $32.1 million; and |
| ● | distributions to our common shareholders of $11.3 million. |
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Development Activities
Lower East Side Moxy Hotel
On December 3, 2018, we, through a subsidiary of the Operating Partnership, acquired three adjacent parcels of land located at 147-151 Bowery in the Lower East Side neighborhood of Manhattan in New York City from unaffiliated third parties for aggregate consideration of $56.5 million, excluding closing and other acquisition related costs. Additionally, on December 6, 2018, we, though a subsidiary of the Operating Partnership, acquired certain air rights located at 329 Broome Street in the Lower East Side neighborhood of Manhattan in New York City from an unaffiliated third party for $2.4 million, excluding closing and other acquisition related costs. The land and air rights were acquired for the development and construction of a 296-room Marriott Moxy hotel (the “Lower East Side Moxy Hotel”). On June 3, 2021, we entered into a development agreement (the “Development Agreement”) with an affiliate of the Advisor (the “Moxy Lower East Side Developer”) pursuant to which the Lower East Side Moxy Developer is being paid a development fee equal to 3% of hard and soft costs incurred in connection with the development and construction of the Lower East Side Moxy Hotel. The advisor and its affiliates are also reimbursed for certain development-related costs attributable to the Lower East Side Moxy Hotel. Additionally on June 3, 2021, we obtained construction financing for the Lower East Side Moxy Hotel. As of September 30, 2022, construction of the Lower East Side Moxy Hotel was substantially complete and the hotel and two of its five food and beverage venues opened in October 2022. The remaining food and beverage venues are currently expected to open by the end of 2022.
On June 3, 2021, we, through a wholly owned subsidiary, closed on a recourse construction loan facility (the “Moxy Senior Loan”) providing for up to $90.0 million of funds for the development, construction and certain pre-opening costs associated with the Lower East Side Moxy Hotel. At closing, $35.6 million of proceeds were initially advanced under the Moxy Senior Loan, which were used to repay in full a then outstanding mortgage loan. The Moxy Senior Loan bears interest at LIBOR + 7.50%, subject to an 8.00% floor, and initially matures on June 3, 2024, with two one-year extension options, subject to the satisfaction of certain conditions. The Moxy Senior Loan is collateralized by the Lower East Side Moxy Hotel. As of September 30, 2022, the outstanding principal balance of the Moxy Senior Loan was $64.6 million, the interest rate was 10.64% and the remaining availability under the facility was up to $25.4 million, which is expected to be used to fund the remaining construction and pre-opening costs for the project.
Simultaneously on June 3, 2021, we, through the same wholly owned subsidiary, also entered into a mezzanine construction loan facility (the “Moxy Junior Loan” and together with the Moxy Senior Loan, the “Moxy Construction Loans”) providing for up to $40.0 million of additional funds for the development, construction and certain pre-opening costs associated with the Lower East Side Moxy Hotel. The Moxy Junior Loan bears interest at LIBOR + 13.50%, subject to a 14.00% floor, and initially matures on June 3, 2024, with two one-year extension options subject to the satisfaction of certain conditions. The Moxy Junior Loan is subordinate to the Moxy Senior loan but also collateralized by the Lower East Side Moxy Hotel. We provided a principal guarantee of up to $7.0 million with respect to the Moxy Junior Loan. As of September 30, 2022, the outstanding principal balance of the Moxy Junior Loan was $40.0 million as it was fully drawn and the interest rate was 16.64%.
In connection with the Moxy Construction Loans, we provided certain completion and carry cost guarantees. We also entered into two interest rate cap agreements with notional amounts of $90.0 million and $40.0 million pursuant to which LIBOR through June 30, 2023 and its replacement rate thereafter is capped at 3.00% and 2.5%, respectively, through June 3, 2024. Furthermore, in connection with the Moxy Construction Loans, we paid $5.3 million of loan fees and expenses and accrued $1.1 million of loan exit fees which are due at the initial maturity date and are included in accounts payable, accrued expenses and other liabilities on the consolidated balance sheets as of September 30, 2022 and December 31, 2021.
Exterior Street Project
On February 27, 2019, we, through subsidiaries of the Operating Partnership, acquired two adjacent parcels of land located at 355 and 399 Exterior Street in the Bronx neighborhood of New York City from unaffiliated third parties for an aggregate purchase price of $59.0 million, excluding closing and other acquisition related costs. In September 2021, we subsequently acquired an additional adjacent parcel of land at cost from an affiliate of our Advisor for $1.0 million in order to achieve certain zoning compliance. The land parcels were acquired for the development of a multi-family residential property (the “Exterior Street Project”).
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On March 29, 2019, we entered into a $35.0 million loan (the “Exterior Street Loan”) which commencing on October 10, 2020 bears interest at LIBOR + 2.25% (5.39% as of September 30, 2022) through its scheduled maturity date. The Exterior Street Loan requires monthly interest-only payments with the outstanding principal balance due in full at its maturity date. The Exterior Street Loan was initially scheduled to mature on April 9, 2021 but has been further extended to November 24, 2022. Additionally, on December 21, 2021, the loan agreement was amended to provide an additional $7.0 million loan (the “Exterior Street Supplemental Loan” and collectively with the Exterior Street Loan, the “Exterior Street Loans”) which bears interest at LIBOR + 2.50% (5.39% as of September 30, 2022) and requires monthly interest-only payments with the outstanding principal balance due in full at its maturity date. The Exterior Street Loans are collateralized by the Exterior Street Project.
The following is a summary of the total amounts incurred and capitalized to development projects on the consolidated balance sheet for the Lower East Side Moxy Hotel and the Exterior Street Project as of September 30, 2022:
| Development Project | ||||
| Lower East Side Moxy Hotel | $ | 196,284 | ||
| Exterior Street Project | 91,589 | |||
| Total | $ | 287,873 | ||
To-date the ongoing COVID-19 pandemic as well as other economic conditions and uncertainties have not had a significant impact on our development activities associated with either the Lower East Side Moxy Hotel or the Exterior Street Project. As discussed above, we have already obtained construction financing for the Lower East Side Moxy Hotel and the remaining availability under the facility is expected to be used to fund the remaining construction and pre-opening costs related to the project. However, with respect to our Exterior Street Project which is currently under development, we currently expect to seek construction financing to fund a substantial portion of its future development and construction costs. However, the ongoing COVID-19 pandemic as well as other economic conditions and uncertainties may (i) affect our ability to obtain construction financing, and/or (ii) cause delays or increase costs associated with building materials or construction services necessary for construction, which could adversely impact our ability to either ultimately commence and/or complete construction as planned, on budget or at all for the Exterior Street Project.
Although we currently believe our capital resources are sufficient to fund our expected development activities for the next 12 months, there can be no assurance we will be successful in obtaining construction financing at favorable terms, if at all.
Preferred Investments
We entered into agreements with various related party entities that provided for us to make preferred contributions pursuant to certain instruments (the “Preferred Investments”) that entitle us to certain prescribed monthly preferred distributions at an annual rate of 12%. During the nine months ended September 30, 2022, we redeemed $8.5 million (including $4.5 million in the third quarter of 2022) of our East 11th Street Preferred Investment, which is now fully redeemed. As a result, as of September 30, 2022, we only have one remaining Preferred Investment, which is our 40 East End Avenue Preferred Investment with an outstanding balance of $6.0 million. The Preferred Investments are classified as held-to-maturity securities, recorded at cost and included in investments in related parties on the consolidated balance sheets. The fair value of our remaining Preferred Investment approximates its carrying value based on market rates for similar instruments as of September 30, 2022.
The Preferred Investments are summarized as follows:
| Preferred Investment Balance | Investment Income (1) | ||||||||||||||||||||||||||
| Dividend | As
of September 30, | As
of December 31, | Three
Months Ended September 30, | Nine
Months Ended September 30, | |||||||||||||||||||||||
| Preferred Investments | Rate | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| 40 East End Avenue | 12% | $ | 6,000 | $ | 6,000 | $ | 184 | $ | 184 | $ | 546 | $ | 546 | ||||||||||||||
| East 11th Street | 12% | - | 8,500 | 108 | 261 | 593 | 774 | ||||||||||||||||||||
| Total | $ | 6,000 | $ | 14,500 | $ | 292 | $ | 445 | $ | 1,139 | $ | 1,320 | |||||||||||||||
Note:
| (1) | – Included in interest and dividend income on the consolidated statements of operations. |
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Notes Receivable
We have formed certain joint ventures (collectively, the “NR Joint Ventures”) between wholly-owned subsidiaries of the Operating Partnership (collectively, the “NR Subsidiaries”) and affiliates of the Sponsor (the “NR Affiliates”) which have originated nonrecourse loans (collectively, the “Joint Venture Promissory Notes”) to unaffiliated third-party borrowers (collectively, the “Joint Venture Borrowers”).
The N/R Subsidiaries and NR Affiliates may have varying ownership interests in the N/R Joint Ventures, however; certain other wholly owned subsidiaries of the Operating Partnership serve as the manager and the sole decision-maker for each of the N/R Joint Ventures. We have determined that the NR Joint Ventures are VIEs and the NR Subsidiaries are the primary beneficiaries. Since the NR Subsidiaries are the primary beneficiaries, beginning on the applicable date of formation, we consolidated the operating results and financial condition of the NR Joint Ventures and accounted for the respective ownership interests of the NR Affiliates as noncontrolling interests.
The Joint Venture Promissory Notes generally provide for monthly interest at a prescribed variable rate, subject to a floor. In connection with the initial funding of the Joint Venture Promissory Notes, the NR Joint Ventures receive origination fees (ranging from 1.00% to 1.50%) based on the principal commitment under the loan and retain a portion of the loan proceeds to establish a reserve for interest and other items (the “Loan Reserves”). The Joint Venture Promissory Notes are recorded in notes receivable, net on the consolidated balance sheets.
The Joint Venture Promissory Notes generally have an initial term of one or two years and may provide for additional one-year extension options subject to satisfaction of certain conditions, including the funding of additional Loan Reserves and payment of extension fees. The Joint Venture Promissory Notes are collateralized by either the membership interests of the Joint Venture Borrowers in the borrowing entity or the underlying real property being developed by the Joint Venture Borrower.
The Joint Venture Promissory Notes are recorded in notes receivable, net on the consolidated balance sheets. The origination fees received are presented in the consolidated balance sheets as a direct deduction from the carrying value of the Joint Venture Promissory Notes and are amortized into interest income, using a straight-line method that approximates the effective interest method, over the initial term of the Joint Venture Promissory Notes. The Loan Reserves are presented in the consolidated balance sheets as a direct deduction from the carrying value of the Joint Venture Promissory Notes and are applied against the monthly interest due over the initial term.
The following tables summarize the Notes Receivable as of the dates indicated:
| As of September 30, 2022 | |||||||||||||||||||||||||||||||||||
| Joint Venture/Lender | Company’s Percentage | Loan Commitment Amount | Origination Fee | Origination Date | Maturity Date | Contractual Interest Rate | Outstanding Principal | Reserves | Unamortized
Origination Fee | Carrying Value | Unfunded Commitment | ||||||||||||||||||||||||
| LSC 1543 7th LLC | 50% | 49,000 | 1.00% | March 2, 2022 | August 31, 2023 | SOFR
plus 7.00% (Floor of 7.15%) | $ | 49,000 | $ | (1,821 | ) | $ | (450 | ) | $ | 46,729 | $ | - | |||||||||||||||||
| As of December 31, 2021 | |||||||||||||||||||||||||||||||||||
| Joint Venture/Lender | Company’s Percentage | Loan Commitment Amount | Origination Fee | Origination Date | Maturity Date | Contractual Interest Rate | Outstanding Principal | Reserves | Unamortized
Origination Fee | Carrying Value | Unfunded Commitment | ||||||||||||||||||||||||
| LSC 1543 7th LLC (1) | 50% | 20,000 | 1.00% | August 27, 2019 | February 28, 2022 | Libor
plus 5.40% (Floor of 7.90%) | $ | 17,500 | $ | - | $ | (33 | ) | $ | 17,467 | $ | - | ||||||||||||||||||
| LSC 11640 Mayfield LLC (2) | 50% | 18,000 | 1.50% | March 4, 2020 | March 1, 2022 | Libor
plus 11.00% (Floor of 13.00%) | 10,040 | (629 | ) | (24 | ) | 9,387 | 6,960 | ||||||||||||||||||||||
| - | |||||||||||||||||||||||||||||||||||
| Total | $ | 27,540 | $ | (629 | ) | $ | (57 | ) | $ | 26,854 | $ | 6,960 | |||||||||||||||||||||||
| (1) | Repaid in full during March 2022. |
| (2) | Repaid in full during February 2022. |
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The following summarizes the interest earned (included in interest and dividend income on the consolidated statements of operations) for each of the Joint Venture Promissory Notes during the periods indicated:
| For
the Three Months Ended September 30, | For
the Nine Months Ended September 30, | |||||||||||||||
| Joint Venture/Lender | 2022 | 2021 | 2022 | 2021 | ||||||||||||
| LSC 1543 7th LLC | $ | 1,230 | 454 | $ | 2,957 | $ | 1,348 | |||||||||
| LSC 162nd Capital I LLC | - | 123 | - | 373 | ||||||||||||
| LSC 162nd Capital II LLC | - | 266 | - | 807 | ||||||||||||
| LSC 1650 Lincoln LLC | - | 545 | - | 1,618 | ||||||||||||
| LSC 11640 Mayfield LLC | - | 383 | 455 | 1,125 | ||||||||||||
| LSC 11640 Newkirk LLC | - | - | - | 1,585 | ||||||||||||
| Total | $ | 1,230 | $ | 1,771 | $ | 3,412 | $ | 6,856 | ||||||||
LSC 1543 7th LLC Loan
On June 30, 2022, LSC 1543 7th LLC entered into a $31.3 million loan (the “LSC 1543 7th LLC Loan”) which bears interest at SOFR + 3.50% (5.19% as of September 30, 2022). The LSC 1543 7th LLC Loan is initially scheduled to mature on December 30, 2023, but may be further extended through December 30, 2024 and September 30, 2025, through the exercise of two extension options. The LSC 1543 7th LLC Loan requires monthly interest-only payments with the outstanding principal balance due at its maturity date and is collateralized by a nonrecourse loan originated by LSC 1543 7th LLC (the “LSC 1543 7th LLC Note Receivable”). See Note 5. On June 30, 2022, $28.6 million of the net proceeds from the LSC 1543 7th LLC Loan were temporarily funded to an affiliate of our advisor and were subsequently transferred to us and then distributed to the members of LSC 1543 7th LLC in July 2022, of which our 50% share was $14.3 million. As of September 30, 2022, the outstanding principal balance of the LSC 1543 7th LLC Loan was $29.9 million and the remaining availability under the facility was up to $1.4 million.
Distribution Reinvestment Program (“DRIP”)
Our distribution reinvestment program (“DRIP”) provides our shareholders with an opportunity to purchase additional shares of our common stock at a discount by reinvesting distributions. Under our distribution reinvestment program, a shareholder may acquire, from time to time, additional shares of our common stock by reinvesting cash distributions payable by us to such shareholder, without incurring any brokerage commission, fees or service charges.
The DRIP had been suspended since 2015 until our DRIP Registration Statement on Form S-3D was filed and became effective as amended and restated, under the Securities Act of 1933 on October 25, 2018.
Pursuant to the DRIP following its reactivation, our stockholders who elect to participate may invest all or a portion of the cash distributions that we pay them on shares of our common stock in additional shares of our common stock without paying any fees or commissions. The purchase price for shares under the DRIP will be equal to 95% of our current estimated net asset value per share (“NAV per Share”), as determined by the Board of Directors and reported by us from time to time. On December 16, 2021, the Board of Directors determined our NAV per Share of $11.75, as of September 30, 2021, which resulted in a purchase price for shares under the DRIP of $11.16 per share. As of September 30, 2022, 9.9 million shares remain available for issuance under our DRIP.
The Board of Directors reserves the right to terminate the DRIP for any reason without cause by providing written notice of termination of the DRIP to all participants.
Share Repurchase Program
Our share repurchase program (the “SRP”) may provide our stockholders with limited, interim liquidity by enabling them to sell their shares of common stock back to us, subject to restrictions.
On March 25, 2020, the Board of Directors amended the SRP to remove stockholder notice requirements and also approved the suspension of all redemptions effective immediately.
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Effective March 15, 2021 and May 14, 2021, the Board of Directors partially reopened the SRP to allow, subject to various conditions as set forth below, for redemptions submitted in connection with a stockholder’s death and hardship, respectively, and set the price for all such purchases to our current NAV per Share, as determined by the Board of Directors and reported by us from time to time. Deaths that occurred subsequent to January 1, 2020 were eligible for consideration, subject to certain conditions. Beginning January 1, 2022, requests for redemptions in connection with a stockholder’s death must be submitted and received by us within one year of the stockholder’s date of death for consideration.
At the above noted dates, the Board of Directors established that on an annual basis, we would not redeem in excess of 0.5% of the number of shares outstanding as of the end of the preceding year for either death or hardship redemptions, respectively. Additionally, redemption requests generally would be processed on a quarterly basis and would be subject to pro ration if either type of redemption requests exceeded the annual limitation.
On March 18, 2022, the Board of Directors approved an increase to the annual threshold for death redemptions from up to 0.5% to 1.0%.
For the nine months ended September 30, 2022 we repurchased 330,738 shares of common stock, pursuant to our SRP at an average price per share of $11.75 per share.
Contractual Obligations
The following is a summary of our contractual obligations outstanding over the next five years and thereafter as of September 30, 2022.
| Contractual Obligations | 2022 | 2023 | 2024 | 2025 | 2026 | Thereafter | Total | |||||||||||||||||||||
| Mortgage Payable | $ | 42,355 | $ | 31,353 | $ | 171,329 | $ | - | $ | - | $ | - | $ | 245,037 | ||||||||||||||
| Interest Payments 1 | 6,787 | 18,615 | 9,911 | - | - | - | 35,313 | |||||||||||||||||||||
| Total Contractual Obligations | $ | 49,142 | $ | 49,968 | $ | 181,240 | $ | - | $ | - | $ | - | $ | 280,350 | ||||||||||||||
| 1) | These amounts represent future interest payments related to mortgage payable obligations based on the fixed and variable interest rates specified in the associated debt agreement. All variable rate debt agreements are based on the one-month LIBOR rate or SOFR rate, as applicable. For purposes of calculating future interest amounts on variable interest rate debt the one-month LIBOR and SOFR rates as of September 30, 2022 were used. |
Notes Payable
Margin Loan
We have access to a margin loan (the “Margin Loan”) from a financial institution that holds custody of certain of our marketable securities. The Margin Loan, which is due on demand, bears interest at LIBOR + 0.85% (3.99% as of September 30, 2022) and is collateralized by the marketable securities in our account. The amounts available to us under the Margin Loan are at the discretion of the financial institution and not limited to the amount of collateral in our account. There were no amounts outstanding under the Margin Loan as of September 30, 2022 and December 31, 2021.
Line of Credit
We have a non-revolving credit facility (the “Line of Credit”) with a financial institution that provides for borrowings up to a maximum of $20.0 million, subject to a 55% loan-to-value ratio based on the fair value of the underlying collateral, matures on November 30, 2022 and bears interest at LIBOR + 1.35% (4.49% as of September 30, 2022). The Line of Credit is collateralized by an aggregate of 209,243 of Marco OP Units and Marco II OP Units and was guaranteed by PRO. As of September 30, 2022, the amount of borrowings available to be drawn under the Line of Credit was $10.3 million. No amounts were outstanding under the Line of Credit as of both September 30, 2022 and December 31, 2021.
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Debt Maturities
The Exterior Street Loans (outstanding principal balance of $42.0 million as of September 30, 2022) mature on November 24, 2022. We currently intend to extend or refinance the Exterior Street Loans on or before their maturity date.
However, if we are unable to extend or refinance any of our maturing indebtedness at favorable terms, we will look to repay the then outstanding balance with available cash and/or proceeds from selective asset sales. We have no additional significant maturities of mortgage debt over the next 12 months.
Funds from Operations and Modified Funds from Operations
The historical accounting convention used for real estate assets requires straight-line depreciation of buildings, improvements, and straight-line amortization of intangibles, which implies that the value of a real estate asset diminishes predictably over time. We believe that, because real estate values historically rise and fall with market conditions, including, but not limited to, inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using the historical accounting convention for depreciation and certain other items may be less informative.
Because of these factors, the National Association of Real Estate Investment Trusts (“NAREIT”), an industry trade group, has published a standardized measure of performance known as funds from operations (“FFO”), which is used in the REIT industry as a supplemental performance measure. We believe FFO, which excludes certain items such as real estate-related depreciation and amortization, is an appropriate supplemental measure of a REIT’s operating performance. FFO is not equivalent to our net income or loss as determined under GAAP.
We calculate FFO, a non-GAAP measure, consistent with the standards established over time by the Board of Governors of NAREIT, as restated in a White Paper approved by the Board of Governors of NAREIT effective in December 2018 (the “White Paper”). The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. Our FFO calculation complies with NAREIT’s definition.
We believe that the use of FFO provides a more complete understanding of our performance to investors and to management and reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income.
Changes in the accounting and reporting promulgations under GAAP that were put into effect in 2009 subsequent to the establishment of NAREIT’s definition of FFO, such as the change to expense as incurred rather than capitalize and depreciate acquisition fees and expenses incurred for business combinations, have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses, as items that are expensed under GAAP across all industries. These changes had a particularly significant impact on publicly registered, non-listed REITs, which typically have a significant amount of acquisition activity in the early part of their existence, particularly during the period when they are raising capital through ongoing initial public offerings.
Because of these factors, the Investment Program Association (the “IPA”), an industry trade group, published a standardized measure of performance known as modified funds from operations (“MFFO”), which the IPA has recommended as a supplemental measure for publicly registered, non-listed REITs. MFFO is designed to be reflective of the ongoing operating performance of publicly registered, non-listed REITs by adjusting for those costs that are more reflective of acquisitions and investment activity, along with other items the IPA believes are not indicative of the ongoing operating performance of a publicly registered, non-listed REIT, such as straight-lining of rents as required by GAAP. We believe it is appropriate to use MFFO as a supplemental measure of operating performance because we believe that both before and after we have deployed all of our offering proceeds and are no longer incurring a significant amount of acquisition fees or other related costs, it reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. MFFO is not equivalent to our net income or loss as determined under GAAP.
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We define MFFO, a non-GAAP measure, consistent with the IPA’s Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations (the “Practice Guideline”) issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for acquisition and transaction-related fees and expenses and other items. In calculating MFFO, we follow the Practice Guideline and exclude acquisition and transaction-related fees and expenses (which includes costs incurred in connection with strategic alternatives), amounts relating to straight line rent receivables and amortization of market lease and other intangibles, net (which are adjusted in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments), accretion of discounts and amortization of premiums on debt investments and borrowings, mark-to-market adjustments included in net income (including gains or losses incurred on assets held for sale), gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis.
We believe that, because MFFO excludes costs that we consider more reflective of acquisition activities and other non-operating items, MFFO can provide, on a going-forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of our operating performance after the period in which we are acquiring properties and once our portfolio is stabilized. We also believe that MFFO is a recognized measure of sustainable operating performance by the non-listed REIT industry and allows for an evaluation of our performance against other publicly registered, non-listed REITs.
Not all REITs, including publicly registered, non-listed REITs, calculate FFO and MFFO the same way. Accordingly, comparisons with other REITs, including publicly registered, non-listed REITs, may not be meaningful. Furthermore, FFO and MFFO are not indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as determined under GAAP as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs including our ability to make distributions to our stockholders. FFO and MFFO should be reviewed in conjunction with other GAAP measurements as an indication of our performance. FFO and MFFO should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The methods utilized to evaluate the performance of a publicly registered, non-listed REIT under GAAP should be construed as more relevant measures of operational performance and considered more prominently than the non-GAAP measures, FFO and MFFO, and the adjustments to GAAP in calculating FFO and MFFO.
Neither the SEC, NAREIT, the IPA nor any other regulatory body or industry trade group has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, NAREIT, the IPA or another industry trade group may publish updates to the White Paper or the Practice Guidelines or the SEC or another regulatory body could standardize the allowable adjustments across the publicly registered, non-listed REIT industry, and we would have to adjust our calculation and characterization of FFO or MFFO accordingly.
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The below table illustrates the items deducted in the calculation of FFO and MFFO. Items are presented net of non-controlling interest portions where applicable.
| For
the Three Months Ended | For
the Nine Months Ended | |||||||||||||||
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||||||
| Net (loss)/income | $ | (13,359 | ) | $ | (8,338 | ) | $ | (26,779 | ) | $ | 14,400 | |||||
| FFO adjustments: | ||||||||||||||||
| Depreciation and amortization of real estate assets | 478 | 1,545 | 1,976 | 3,826 | ||||||||||||
| Gain on disposal of investment property | (1,105 | ) | (213 | ) | (1,154 | ) | (3,802 | ) | ||||||||
| Loss on disposal of asset | 16,593 | - | 16,593 | - | ||||||||||||
| Impairment loss | - | 11,341 | - | 11,341 | ||||||||||||
| FFO | 2,607 | 4,335 | (9,364 | ) | 25,765 | |||||||||||
| MFFO adjustments: | ||||||||||||||||
| Other Adjustment | ||||||||||||||||
| Acquisition and other transaction related costs expensed(1) | - | - | - | - | ||||||||||||
| Amortization of above or below market leases and liabilities(2) | - | - | - | - | ||||||||||||
| Mark-to-market adjustments(3) | (415 | ) | 3,407 | 17,116 | (10,670 | ) | ||||||||||
| (Gain)/loss on debt extinguishment(4) | - | (175 | ) | - | 143 | |||||||||||
| Gain on sale of marketable securities(4) | - | (4,669 | ) | (1,160 | ) | (4,653 | ) | |||||||||
| MFFO | 2,192 | 2,898 | 6,592 | 10,585 | ||||||||||||
| Straight-line rent(5) | 2 | 22 | 27 | (16 | ) | |||||||||||
| MFFO - IPA recommended format | $ | 2,194 | $ | 2,920 | $ | 6,619 | $ | 10,569 | ||||||||
| Net (loss)/income | $ | (13,359 | ) | $ | (8,338 | ) | $ | (26,779 | ) | $ | 14,400 | |||||
| Less: income attributable to noncontrolling interests | (183 | ) | (582 | ) | (783 | ) | (3,332 | ) | ||||||||
| Net (loss)/income applicable to Company’s common shares | $ | (13,542 | ) | $ | (8,920 | ) | $ | (27,562 | ) | $ | 11,068 | |||||
| Net (loss)/income per common share, basic and diluted | $ | (0.62 | ) | $ | (0.40 | ) | $ | (1.25 | ) | $ | 0.50 | |||||
| FFO | $ | 2,607 | $ | 4,335 | $ | (9,364 | ) | $ | 25,765 | |||||||
| Less: FFO attributable to noncontrolling interests | (698 | ) | (1,018 | ) | (1,650 | ) | (4,058 | ) | ||||||||
| FFO attributable to Company’s common shares | $ | 1,909 | $ | 3,317 | $ | (11,014 | ) | $ | 21,707 | |||||||
| FFO per common share, basic and diluted | $ | 0.09 | $ | 0.15 | $ | (0.50 | ) | $ | 0.97 | |||||||
| MFFO - IPA recommended format | $ | 2,194 | $ | 2,920 | $ | 6,619 | $ | 10,569 | ||||||||
| Less: MFFO attributable to noncontrolling interests | (736 | ) | (923 | ) | (2,623 | ) | (3,421 | ) | ||||||||
| MFFO attributable to Company’s common shares | $ | 1,458 | $ | 1,997 | $ | 3,996 | $ | 7,148 | ||||||||
| Weighted average number of common shares outstanding, basic and diluted | 21,887 | 22,221 | 21,996 | 22,276 | ||||||||||||
Notes:
| (1) | The purchase of properties, and the corresponding expenses associated with that process, is a key operational feature of our business plan to generate operational income and cash flows in order to make distributions to investors. In evaluating investments in real estate, management differentiates the costs to acquire the investment from the operations derived from the investment. Such information would be comparable only for non-listed REITs that have completed their acquisition activity and have other similar operating characteristics. By excluding expensed acquisition costs, management believes MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties. Acquisition fees and expenses include payments to our advisor or third parties. Acquisition fees and expenses under GAAP are considered operating expenses and as expenses included in the determination of net income and income from continuing operations, both of which are performance measures under GAAP. Such fees and expenses are paid in cash, and therefore such funds will not be available to distribute to investors. Such fees and expenses negatively impact our operating performance during the period in which properties are being acquired. Therefore, MFFO may not be an accurate indicator of our operating performance, especially during periods in which properties are being acquired. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to the property. Acquisition fees and expenses will not be paid or reimbursed, as applicable, to our advisor even if there are no further proceeds from the sale of shares in our offering, and therefore such fees and expenses would need to be paid from either additional debt, operational earnings or cash flows, net proceeds from the sale of properties or from ancillary cash flows. |
40
| (2) | Under GAAP, certain intangibles are accounted for at cost and reviewed at least annually for impairment, and certain intangibles are assumed to diminish predictably in value over time and amortized, similar to depreciation and amortization of other real estate related assets that are excluded from FFO. However, because real estate values and market lease rates historically rise or fall with market conditions, management believes that by excluding charges relating to amortization of these intangibles, MFFO provides useful supplemental information on the performance of the real estate. |
| (3) | Management believes that adjusting for mark-to-market adjustments is appropriate because they are nonrecurring items that may not be reflective of ongoing operations and reflects unrealized impacts on value based only on then current market conditions, although they may be based upon current operational issues related to an individual property or industry or general market conditions. Mark-to-market adjustments are made for items such as ineffective derivative instruments, certain marketable equity securities and any other items that GAAP requires we make a mark-to-market adjustment for. The need to reflect mark-to-market adjustments is a continuous process and is analyzed on a quarterly and/or annual basis in accordance with GAAP. |
| (4) | Management believes that adjusting for gains or losses related to extinguishment/sale of debt, derivatives or securities holdings is appropriate because they are items that may not be reflective of ongoing operations. By excluding these items, management believes that MFFO provides supplemental information related to sustainable operations that will be more comparable between other reporting periods. |
| (5) | Under GAAP, rental receipts are allocated to periods using various methodologies. This may result in income recognition that is significantly different than underlying contract terms. By adjusting for these items (to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments), MFFO provides useful supplemental information on the realized economic impact of lease terms and debt investments, providing insight on the contractual cash flows of such lease terms and debt investments, and aligns results with management’s analysis of operating performance. |
The table below presents our cumulative distributions paid and cumulative FFO attributable to the Company’s common shares:
| From
inception through September 30, 2022 | ||||
| FFO attributable to Company’s common shares | $ | 255,719 | ||
| Distributions paid | $ | 274,906 | ||
On October 15, 2022, the distribution for the three-month period ending September 30, 2022 of $3.8 million was paid in full using a combination of cash and approximately 7,000 shares of the Company’s common stock issued pursuant to the Company’s DRIP, at a discounted price of $11.16 per share, equal to 95% of the Company’s most current estimated net asset value (“NAV”) per share of $11.75 as of September 30, 2021.
The amount of distributions paid to our stockholders in the future will be determined by our Board and is dependent on a number of factors, including funds available for payment of dividends, our financial condition, capital expenditure requirements and annual distribution requirements needed to maintain our status as a REIT under the Internal Revenue Code.
New Accounting Pronouncements
See Note 2 to the Notes to Consolidated Financial Statements for further information of certain accounting standards that have been adopted during 2022, if any, and certain accounting standards that we have not yet been required to implement and may be applicable to our future operations.
41
ITEM 4. CONTROLS AND PROCEDURES.
As of the end of the period covered by this report, management, including our chief executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based upon, and as of the date of the evaluation, our chief executive officer and principal financial officer concluded that the disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required.
There have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. There were no material weaknesses identified in the evaluation, and therefore, no corrective actions were taken.
42
PART II. OTHER INFORMATION:
ITEM 1. LEGAL PROCEEDINGS
From time to time in the ordinary course of business, we may become subject to legal proceedings, claims or disputes.
As of the date hereof, the Company is not a party to any material pending legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on its results of operations or financial condition, which would require accrual or disclosure of the contingency and possible range of loss. Additionally, the Company has not recorded any loss contingencies related to legal proceedings in which the potential loss is deemed to be remote.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the period covered by this Form 10-Q, we did not sell any equity securities that were not registered under the Securities Act of 1933.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
43
ITEM 6. EXHIBITS
| * | Filed herewith |
44
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| LIGHTSTONE VALUE PLUS REIT I, INC. | |||
| Date: | November 14, 2022 | By: | /s/ David Lichtenstein |
| David Lichtenstein | |||
| Chairman and Chief Executive Officer (Principal Executive Officer) | |||
| Date: | November 14, 2022 | By: | /s/ Seth Molod |
| Seth Molod | |||
Chief Financial Officer and Treasurer (Duly Authorized Officer and Principal Financial and Accounting Officer) | |||
45
EXHIBIT 31.1
Certifications
I, David Lichtenstein, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Lightstone Value Plus REIT I, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f), for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| /s/ David Lichtenstein | |
| David Lichtenstein | |
| Chairman and Chief Executive Officer | |
| (Principal Executive Officer) | |
| Date: November 14, 2022 |
EXHIBIT 31.2
Certifications
I, Seth Molod, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Lightstone Value Plus REIT I, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f), for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| /s/ Seth Molod | |
| Seth Molod | |
| Chief Financial Officer and Treasurer | |
| (Principal Financial and Accounting Officer) | |
| Date: November 14, 2022 |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
I, David Lichtenstein, the Chief Executive Officer and Chairman of the Board of Directors of Lightstone Value Plus REIT I, Inc. (the “Company”) certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
(1) The Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2022 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C 78m); and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ David Lichtenstein | |
| David Lichtenstein | |
| Chairman and Chief Executive Officer | |
| (Principal Executive Officer) | |
| Date: November 14, 2022 |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
I, Seth Molod, the Chief Financial Officer, Treasurer and Principal Accounting Officer of Lightstone Value Plus REIT I, Inc. (the “Company”) certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
(1) The Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2022 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C 78m); and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Seth Molod | |
| Seth Molod | |
| Chief Financial Officer and Treasurer | |
| (Principal Financial and Accounting Officer) | |
| Date: November 14, 2022 |
CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) - $ / shares shares in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Preferred shares, par value | $ 0.01 | $ 0.01 |
| Preferred shares, shares authorized | 10,000 | 10,000 |
| Preferred shares, shares issued | 0 | 0 |
| Preferred shares, shares outstanding | 0 | 0 |
| Common stock, par value | $ 0.01 | $ 0.01 |
| Common stock, shares authorized | 60,000 | 60,000 |
| Common stock, shares issued | 21,900 | 22,200 |
| Common stock, shares outstanding | 21,900 | 22,200 |
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Revenues: | ||||
| Rental income | $ 2,370 | $ 2,300 | $ 7,117 | $ 7,486 |
| Tenant recovery income | 13 | 32 | 80 | 109 |
| Total revenues | 2,383 | 2,332 | 7,197 | 7,595 |
| Expenses: | ||||
| Property operating expenses | 922 | 1,368 | 3,315 | 3,240 |
| Real estate taxes | 61 | 71 | 185 | 291 |
| General and administrative costs | 538 | 616 | 1,710 | 1,787 |
| Pre-opening costs | 317 | 671 | ||
| Impairment charge | 11,341 | 11,341 | ||
| Depreciation and amortization | 478 | 1,545 | 1,976 | 3,826 |
| Total expenses | 2,316 | 14,941 | 7,857 | 20,485 |
| Other income/(loss), net | 1,609 | 297 | 2,839 | (96) |
| Interest and dividend income | 2,320 | 3,193 | 6,712 | 10,352 |
| Interest expense, net | (677) | (580) | (1,427) | (1,977) |
| Gain on disposition of real estate | 1,105 | 213 | 1,154 | 3,802 |
| Loss on demolition | (16,593) | (16,593) | ||
| Unrealized (loss)/gain on marketable equity securities | (1,190) | (3,521) | (19,964) | 10,556 |
| Gain on sale of marketable securities | 4,669 | 1,160 | 4,653 | |
| Net (loss)/income | (13,359) | (8,338) | (26,779) | 14,400 |
| Less: net income attributable to noncontrolling interests | (183) | (582) | (783) | (3,332) |
| Net (loss)/income attributable to Company’s common shares | $ (13,542) | $ (8,920) | $ (27,562) | $ 11,068 |
| Net (loss)/income per Company’s common share, basic and diluted | $ (0.62) | $ (0.40) | $ (1.25) | $ 0.50 |
| Weighted average number of common shares outstanding, basic and diluted | 21,887 | 22,221 | 21,996 | 22,276 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Income Statement [Abstract] | ||||
| Net (loss)/income | $ (13,359) | $ (8,338) | $ (26,779) | $ 14,400 |
| Other comprehensive(loss)/income | ||||
| Holding (loss)/gain on available for sale debt securities | (107) | 4,605 | 919 | 4,696 |
| Reclassification adjustment for gain included in net (loss)/income | (4,669) | (1,160) | (4,653) | |
| Other comprehensive (loss)/income | (107) | (64) | (241) | 43 |
| Comprehensive (loss)/income | (13,466) | (8,402) | (27,020) | 14,443 |
| Less: Comprehensive income attributable to noncontrolling interests | (181) | (581) | (778) | (3,333) |
| Comprehensive (loss)/income attributable to Company’s common shares | $ (13,647) | $ (8,983) | $ (27,798) | $ 11,110 |
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands |
9 Months Ended | |
|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||
| Net (loss)/income | $ (26,779) | $ 14,400 |
| Adjustments to reconcile net (loss)/income to net cash provided by operating activities: | ||
| Depreciation and amortization | 1,976 | 3,826 |
| Impairment charge | 11,341 | |
| Unrealized loss/(gain) on marketable equity securities | 19,964 | (10,556) |
| Gain on sale of marketable securities | (1,160) | (4,653) |
| Mark to market adjustment on derivative financial instruments | (2,847) | (114) |
| Gain on disposition of real estate | (1,154) | (3,802) |
| Loss on demolition | 16,593 | |
| Noncash interest income | (2,995) | (4,203) |
| Other non-cash adjustments | 225 | 596 |
| Changes in assets and liabilities: | ||
| Increase in prepaid expenses and other assets | (1,537) | (671) |
| (Decrease)/increase in tenant allowances and deposits payable | (38) | 26 |
| Increase in accounts payable, accrued expenses and other liabilities | 6,717 | 5,711 |
| Decrease in due to related parties | 68 | (131) |
| Net cash provided by operating activities | 9,033 | 11,770 |
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||
| Purchase of development property and investment property | (54,401) | (42,797) |
| Purchase of marketable securities | (12,052) | (4,188) |
| Proceeds from sale of marketable securities | 14,326 | 11,859 |
| Proceeds from disposition of real estate | 20,052 | |
| Investment in joint venture | (12) | |
| Proceeds from joint venture | 79 | 138 |
| Proceeds from redemption of preferred investment in related party | 8,500 | |
| Funding of notes receivable | (44,420) | |
| Proceeds from repayment of notes receivable | 27,540 | 43,326 |
| Net cash (used in)/provided by investing activities | (60,428) | 28,378 |
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||
| Proceeds from mortgage financing | 74,318 | 40,596 |
| Mortgage principal payments | (1,034) | (63,745) |
| Payment of loan fees and expenses | (627) | (5,692) |
| Redemption and cancellation of common shares | (3,888) | (1,246) |
| Contributions received from noncontrolling interests | 21,895 | 186 |
| Distributions paid to noncontrolling interests | (32,068) | (10,523) |
| Distributions paid to Company’s common stockholders | (11,349) | (11,477) |
| Net cash provided by/(used in) financing activities | 47,247 | (51,901) |
| Net change in cash, cash equivalents and restricted cash | (4,148) | (11,753) |
| Cash, cash equivalents and restricted cash, beginning of year | 42,592 | 46,841 |
| Cash, cash equivalents and restricted cash, end of period | 38,444 | 35,088 |
| Cash and cash equivalents | 37,872 | 33,378 |
| Restricted cash | 572 | 1,710 |
| Total cash, cash equivalents and restricted cash | $ 38,444 | $ 35,088 |
Structure |
9 Months Ended | |||
|---|---|---|---|---|
Sep. 30, 2022 | ||||
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
| Structure |
Lightstone Value Plus REIT I, Inc., which was formerly known as Lightstone Value Plus Real Estate Investment Trust, Inc. before September 16, 2021, a Maryland corporation (“Lightstone REIT I”), formed on June 8, 2004, which has elected to be taxed and qualify as a real estate investment trust for U.S. federal income tax purposes (“REIT”). Lightstone REIT I was formed primarily for the purpose of engaging in the business of investing in and owning commercial and residential real estate properties located throughout the United States.
Lightstone REIT I is structured as an umbrella partnership real estate investment trust, or UPREIT, and substantially all of the Company’s current and future business is and will be conducted through Lightstone Value Plus REIT, L.P. (the “Operating Partnership”), a Delaware limited partnership formed on July 12, 2004. As of September 30, 2022, the Company held a 98% general partnership interest in the Company’s Operating Partnership’s common units (“Common Units”).
Lightstone REIT I and the Operating Partnership and its subsidiaries are collectively referred to as the “Company” and the use of “we,” “our,” “us” or similar pronouns refers to Lightstone REIT I, its Operating Partnership or the Company as required by the context in which such pronoun is used.
Through its Operating Partnership, the Company owns, operates and develops commercial, residential, and hospitality properties and makes real estate-related investments, principally in the United States. The Company’s real estate investments are held alone or jointly with other parties. The Company also originates or acquires mortgage loans secured by real estate. Although most of its investments are of these types, the Company may invest in whatever types of real estate or real estate-related investments that it believes is in its best interests.
Since its inception, the Company has owned and managed various commercial and residential properties located throughout the United States. The Company evaluates all of its real estate investments as one operating segment. As of September 30, 2022, the Company has ownership interests in (i) one consolidated operating property, (ii) two consolidated development properties, (iii) certain consolidated land holdings, and (iv) seven unconsolidated operating properties. With respect to its consolidated operating property, the Company has a majority ownership interest of 59.2% in Gantry Park Landing, a multi-family residential property containing 199 apartment units located in the Queens neighborhood of New York City. With respect to its development properties, the Company wholly owns two projects consisting of the Lower East Side Moxy Hotel, which opened on October 27, 2022, and the Exterior Street Project. The Company also wholly owns and consolidates certain land holdings located in St. Augustine, Florida. Additionally, the Company holds a 2.5% ownership interest in seven hotel properties through a joint venture (the “Joint Venture”) which the Company accounts for using a measurement alternative under which the Joint Venture is measured at cost, adjusted for observable price changes and impairments, if any. The Joint Venture is between the Company and the operating partnership of Lightstone Value Plus REIT II, Inc., a REIT also sponsored by the Company’s Sponsor, which has a 97.5% ownership interest in the Joint Venture. Furthermore, the Company has other real estate-related investments, including a preferred investment in related party and a nonrecourse loan made to unaffiliated third-party borrower.
The Company’s advisor is Lightstone Value Plus REIT, LLC (the “Advisor”), which is majority owned by David Lichtenstein. On July 6, 2004, the Advisor contributed $2 to the Operating Partnership in exchange for 200 Common Units. The Company’s Advisor also owns shares of the Company’s common stock (“Common Shares”) which were issued on July 6, 2004 for $200, or $ per share. Mr. Lichtenstein also is the majority owner of the equity interests of The Lightstone Group, LLC. The Lightstone Group, LLC served as the sponsor (the “Sponsor”) during the Company’s initial public offering (the “Offering”), which terminated on October 10, 2008. The Company’s Advisor, together with its board of directors (the “Board of Directors”), is primarily responsible for making investment decisions on the Company’s behalf and managing its day-to-day operations. Through his ownership and control of The Lightstone Group, LLC, Mr. Lichtenstein is the indirect owner and manager of Lightstone SLP, LLC, a Delaware limited liability company, which owns an aggregate of $30.0 million of special general partner interests (“SLP Units”) in the Operating Partnership which were purchased, at a cost of $100,000 per unit, in connection with the Company’s Offering. Mr. Lichtenstein also acts as the Company’s Chairman and Chief Executive Officer. As a result, he exerts influence over but does not control Lightstone REIT I or the Operating Partnership.
The Company does not have any employees. The Advisor receives compensation and fees for services related to the investment and management of the Company’s assets.
The Company’s Advisor has affiliates which may manage and develop certain of its properties. However, the Company also contracts with other unaffiliated third-party property managers.
The Company’s Common Shares are not currently listed on a national securities exchange. The Company may seek to list its stock for trading on a national securities exchange only if a majority of independent directors believe listing would be in the best interest of its stockholders. The Company does not intend to list its shares at this time. The Company does not anticipate that there would be any market for its shares of common stock until they are listed for trading.
Related Parties
The Advisor and its affiliates, and Lightstone SLP, LLC are related parties of the Company. Certain of these entities are entitled to compensation for services related to the investment, management and disposition of the Company’s assets. The compensation is based on the cost of acquired properties/investments and the annual revenue earned from such properties/investments, and other such fees and expense reimbursements as outlined in each of the respective agreements.
Noncontrolling Interests
Partners of Operating Partnership
On July 6, 2004, the Advisor contributed $2 to the Operating Partnership in exchange for 200 Common Units in the Operating Partnership. The Advisor has the right to convert the Common Units into cash or, at the option of the Company, an equal number of shares of Common Shares.
In connection with the Offering, Lightstone SLP, LLC, an affiliate of the Advisor, purchased an aggregate of $30.0 million of SLP Units. As the majority owner of the SLP Units, Mr. Lichtenstein is the beneficial owner of a 99% interest in such SLP Units and thus receives an indirect benefit from any distributions made in respect thereof. These SLP Units may be entitled to a portion of any regular and liquidation distributions that the Company makes to its stockholders, but only after the Company’s stockholders have received a stated preferred return.
In addition, an aggregate 497,209 Common Units were issued to other unrelated parties during the years ended December 31, 2008 and 2009 and remain outstanding as of September 30, 2022.
Other Noncontrolling Interests in Consolidated Subsidiaries
Other noncontrolling interests in consolidated subsidiaries include ownership interests in (i) Pro-DFJV Holdings LLC (“PRO”) held by the Company’s Sponsor, (ii) 50-01 2nd St. Associates LLC (the “2nd Street Joint Venture”), held by the Company’s Sponsor and other affiliates and (iii) various joint ventures held by affiliates of the Sponsor that have originated promissory notes to unaffiliated third parties (see Note 5). PRO’s holdings principally consist of Marco OP Units and Marco II OP Units (see Note 6). The 2nd Street Joint Venture owns Gantry Park Landing.
|
Summary of Significant Accounting Policies |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Significant Accounting Policies |
Basis of Presentation
The consolidated financial statements include the accounts of Lightstone REIT I and its Operating Partnership and its subsidiaries (over which the Company exercises financial and operating control). All inter-company balances and transactions have been eliminated in consolidation. In addition, interests in entities acquired are evaluated based on applicable accounting principles generally accepted in the United States of America (“GAAP”), and if deemed to be variable interest entities (“VIE”) in which the Company is the primary beneficiary are also consolidated. If the interest in the entity is determined not to be a VIE, then the entity is evaluated for consolidation based on legal form, economic substance, and the extent to which the Company has control, substantive participating rights or both under the respective ownership agreement. For entities in which the Company has less than a controlling interest but have significant influence, the Company accounts for the investment using the equity method of accounting.
There are judgments and estimates involved in determining if an entity in which the Company has made an investment is a VIE and, if so, whether the Company is the primary beneficiary. The entity is evaluated to determine if it is a VIE by, among other things, calculating the percentage of equity being risked compared to the total equity of the entity. Determining expected future losses involves assumptions of various possibilities of the results of future operations of the entity, assigning a probability to each possibility and using a discount rate to determine the net present value of those future losses. A change in the judgments, assumptions, and estimates outlined above could result in consolidating an entity that should not be consolidated or accounting for an investment using the equity method that should in fact be consolidated, the effects of which could be material to our financial statements.
The accompanying unaudited interim consolidated financial statements and related notes should be read in conjunction with the audited Consolidated Financial Statements of the Company and related notes as contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021. The unaudited interim consolidated financial statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair presentation of the results for the periods presented. The accompanying unaudited consolidated financial statements of Lightstone Value Plus REIT I, Inc. and its Subsidiaries have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.
GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during a reporting period. The most significant assumptions and estimates relate to the valuation of real estate and real-estate related investments, marketable securities, notes receivable, depreciable lives, and revenue recognition. Application of these assumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates.
The consolidated balance sheet as of December 31, 2021 included herein has been derived from the consolidated balance sheet included in the Company’s Annual Report on Form 10-K.
The unaudited consolidated statements of operations for interim periods are not necessarily indicative of results for the full year or any other period.
Derivative Financial Instruments
The Company utilizes derivative financial instruments to reduce interest rate risk. The Company does not hold or issue derivative financial instruments for trading purposes. The Company recognizes all derivatives as either assets or liabilities in the consolidated balance sheets and measures those instruments at fair value. Changes in fair value of those instruments are reported in the consolidated statements of operations.
Pre-Opening Costs
The Company expenses the costs associated with pre-opening activities associated with its development and construction projects as incurred. Pre-opening costs generally consist of non-recurring personnel, marketing and other costs.
COVID-19 Pandemic
On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic and it remains highly unpredictable and dynamic and its ultimate 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, and the ongoing development, administration and ultimate effectiveness of vaccines, including booster shots. Accordingly, the ongoing COVID-19 pandemic may continue to have negative effects on the U.S. and global economies for the foreseeable future.
During the COVID-19 pandemic, the occupancy of the Company’s St. Augustine Outlet Center significantly declined and because of limited leasing success, the Company began exploring various strategic alternatives for the property, which ultimately led to the Company ceasing operations of the center effective July 15, 2022 and demolishing the existing building and improvements during the third quarter of 2022. See “St. Augustine Outlet Center” for additional information.
Additionally, during 2020 the Company saw deterioration in both the occupancy and rental rates for Gantry Park Landing, which is located on Long Island, New York, as the luxury rental market in the greater New York City metropolitan area was negatively impacted by the COVID-19 pandemic. However, both occupancy and rental rates consistently improved throughout 2021 and returned to pre-COVID-19 levels. Thereafter, occupancy has continued to remain stable and the property has experienced strong growth in its rental rates thus far in 2022.
To-date, the COVID-19 pandemic has not had any significant impact on the Company’s development projects. Furthermore, the Company’s other real estate-related investments (both its preferred investment in related party and its nonrecourse loan made to an unaffiliated third-party borrower) also relate to various development projects, which are at different stages in their respective development process. These investments, which are subject to similar risks, have also not yet been significantly impacted by the COVID-19 pandemic.
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.
If the Company’s operating properties, development projects and real estate-related investments are negatively impacted for an extended period because (i) occupancy levels and rental rates decline, (ii) tenants are unable to pay their rent, (iii) borrowers are unable to pay scheduled debt service on notes receivable, (iv) development activities are delayed and/or (v) various related party entities are unable to pay monthly preferred distributions on the Company’s preferred investments in related parties, the Company’s business and financial results could be materially and adversely impacted.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current year presentation.
New Accounting Pronouncements
In June 2016, the FASB issued an accounting standards update which replaces the Company incurred loss impairment methodology currently in use with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The new guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The adoption of this standard will not have a material effect on the Company’s consolidated financial position, results of operations or cash flows.
The Company has reviewed and determined that other recently issued accounting pronouncements will not have a material impact on its financial position, results of operations and cash flows, or do not apply to its current operations.
Supplemental Cash Flow Information
Supplemental cash flow information for the periods indicated is as follows:
St. Augustine Outlet Center
During the COVID-19 pandemic, the occupancy of the Company’s St. Augustine Outlet Center, a retail property located in St. Augustine Florida, which consisted of 0.3 million of gross leasable area, significantly declined and because of limited leasing success, the Company began exploring various strategic alternatives for the property. As a result, during the third quarter of 2021, the Company determined that it would no longer continue to pursue leasing of space to tenants and therefore, began to enter into lease termination agreements with certain tenants and also provided notice to its other tenants that it would not renew their leases at the scheduled expiration of their lease. Due to this change in leasing strategy and resulting decrease in the fair value of the St. Augustine Outlet Center, the Company recorded a non-cash loss on impairment of real estate of $11.3 million during the third quarter of 2021.
Because of the aforementioned lease terminations and scheduled expirations, substantially all of the tenants vacated the property during the first quarter of 2022 and on June 29, 2022, the Company entered into a lease termination agreement with the property’s final tenant providing for them to receive an aggregate of $750 provided they vacated the property no later than July 15, 2022. The final tenant vacated the property in July 2022 and the Company ceased operations of the St. Augustine Outlet Center effective July 15, 2022 and shortly thereafter, commenced demolition of the property’s building and improvements in order to prepare the various land parcels for sale and/or lease. The demolition of the property’s buildings and improvements was substantially completed during the third quarter of 2022 and the Company recognized a loss on demolition of $16.6 million consisting of the write-off of the carrying value of the property’s building and improvements plus related costs.
In connection with the terms of certain of the lease termination agreements, the Company agreed to make various payments to certain tenants provided they closed their store and vacated the property. The Company expenses lease termination fees in the period the lease termination agreement is executed and such expenses are included in property operating expenses on the consolidated statements of operations. During the nine months ended September 30, 2022, the Company recognized aggregate lease termination fees of $825. During the three and nine months ended September 30, 2021, the Company recognized a lease termination fee of $425.
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Development Projects |
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| Business Combination and Asset Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Development Projects |
Lower East Side Moxy Hotel
On December 3, 2018, the Company, through a subsidiary of the Operating Partnership, acquired three adjacent parcels of land located at 147-151 Bowery in the Lower East Side neighborhood of Manhattan in New York City from unaffiliated third parties for aggregate consideration of $56.5 million, excluding closing and other acquisition related costs. Additionally, on December 6, 2018, the Company, though a subsidiary of the Operating Partnership, acquired certain air rights located at 329 Broome Street in the Lower East Side neighborhood of Manhattan in New York City from an unaffiliated third party for $2.4 million, excluding closing and other acquisition related costs. The land and air rights were acquired for the development and construction of a 296-room Marriott Moxy hotel (the “Lower East Side Moxy Hotel”). On June 3, 2021, the Company entered into a development agreement (the “Development Agreement”) with an affiliate of the Advisor (the “Moxy Lower East Side Developer”) pursuant to which the Lower East Side Moxy Developer is being paid a development fee equal to 3% of hard and soft costs incurred in connection with the development and construction of the Lower East Side Moxy Hotel. The advisor and its affiliates are also reimbursed for certain development-related costs attributable to the Lower East Side Moxy Hotel. Additionally on June 3, 2021, the Company obtained construction financing for the Lower East Side Moxy Hotel. As of September 30, 2022, the construction of the Lower East Side Moxy Hotel was substantially complete and the hotel and two of its five food and beverage venues subsequently opened in October 2022. The remaining food and beverage venues are currently expected to open by the end of 2022.
In preparation for the opening of the Lower East Side Moxy Hotel, the Company incurred pre-opening costs of $0.3 million and $0.7 million during the three and nine months ended September 30, 2022, respectively. No pre-opening costs were incurred in the 2021 periods. Pre-opening costs generally consist of non-recurring personnel, marketing and other costs.
Exterior Street Project
On February 27, 2019, the Company, through subsidiaries of the Operating Partnership, acquired two adjacent parcels of land located at 355 and 399 Exterior Street in the Bronx neighborhood of New York City from unaffiliated third parties for an aggregate purchase price of $59.0 million, excluding closing and other acquisition related costs. In September 2021, the Company subsequently acquired an additional adjacent parcel of land at cost from an affiliate of its Advisor for $1.0 million in order to achieve certain zoning compliance. The land parcels were acquired for the development of a multi-family residential property (the “Exterior Street Project”).
The following is a summary of the total amounts incurred and capitalized to each of the Company’s development projects as of the dates indicated and the amounts of interest capitalized to the Company’s development projects for the periods indicated:
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Investments in Related Parties |
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| SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investments in Related Parties |
Preferred Investments
The Company entered into agreements with various related party entities that provided for it to make preferred contributions pursuant to certain instruments (the “Preferred Investments”) that entitle it to certain prescribed monthly preferred distributions at an annual rate of 12%. During the nine months ended September 30, 2022, the Company redeemed $8.5 million (including $4.5 million in the third quarter of 2022) of its East 11th Street Preferred Investment, which is now fully redeemed. As a result, as of September 30, 2022, the Company’s only has one remaining Preferred Investment, which is its 40 East End Avenue Preferred Investment with an outstanding balance of $6.0 million. The Preferred Investments are classified as held-to-maturity securities, recorded at cost and included in investments in related parties on the consolidated balance sheets. The fair value of the Company’s remaining Preferred Investment approximates its carrying value based on market rates for similar instruments as of September 30, 2022.
The Preferred Investments are summarized as follows:
Note:
The Joint Venture
The Company has a 2.5% membership interest in the Joint Venture, which holds ownership interests in seven hotels. The carrying value of its investment was $0.9 million and $1.0 million, as of September 30, 2022 and December 31, 2021, respectively, which is included in investment in related parties on the consolidated balance sheets. |
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Notes Receivable |
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| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Receivable |
The Company has formed certain joint ventures (collectively, the “NR Joint Ventures”) between wholly-owned subsidiaries of the Operating Partnership (collectively, the “NR Subsidiaries”) and affiliates of the Sponsor (the “NR Affiliates”) which have originated nonrecourse loans (collectively, the “Joint Venture Promissory Notes”) to unaffiliated third-party borrowers (collectively, the “Joint Venture Borrowers”).
The NR Subsidiaries and NR Affiliates may have varying ownership interests in the NR Joint Ventures, however; certain other wholly-owned subsidiaries of the Operating Partnership serve as the manager and are the sole decision-maker for each of the NR Joint Ventures.
The Company has determined that the NR Joint Ventures are VIEs and the NR Subsidiaries are the primary beneficiaries. Since the NR Subsidiaries are the primary beneficiaries, beginning on the applicable date of formation, the Company has consolidated the operating results and financial condition of the NR Joint Ventures and accounted for the respective ownership interests of the NR Affiliates as noncontrolling interests.
The Joint Venture Promissory Notes generally provide for monthly interest at a prescribed variable rate, subject to a floor. In connection with the initial funding of the Joint Venture Promissory Notes, the NR Joint Ventures receive origination fees (ranging from 1.00% to 1.50%) based on the principal commitment under the loan and retain a portion of the loan proceeds to establish a reserve for interest and other items (the “Loan Reserves”). The Joint Venture Promissory Notes are recorded in notes receivable, net on the consolidated balance sheets.
The Joint Venture Promissory Notes generally have an initial term of one or two years and may provide for additional extension options subject to satisfaction of certain conditions, including the funding of additional Loan Reserves and payment of extension fees. The Joint Venture Promissory Notes are collateralized by either the membership interests of the Joint Venture Borrowers in the borrowing entity or the underlying real property being developed by the Joint Venture Borrower.
Origination fees are presented in the consolidated balance sheets as a direct deduction from the carrying value of the Joint Venture Promissory Notes and are amortized into interest income, using a straight-line method that approximates the effective interest method, over the initial term of the Joint Venture Promissory Notes. The Loan Reserves are presented in the consolidated balance sheets as a direct deduction from the carrying value of the Joint Venture Promissory Notes and are applied against the monthly interest due over the term.
During the nine months ended September 30, 2022 and 2021, both the NR Subsidiaries and the NR Affiliates made aggregate contributions to the NR Joint Ventures of $21.9 million and $0.2 million, respectively. Additionally, during the nine months ended September 30, 2022 and 2021, the NR Joint Ventures made aggregate distributions to both the NR Subsidiaries and NR Affiliates of $29.3 million and $8.6 million, respectively, based on their respective membership interests.
The following tables summarize the Notes Receivable as of the dates indicated:
The following summarizes the interest earned (included in interest and dividend income on the consolidated statements of operations) for each of the Joint Venture Promissory Notes during the periods indicated:
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Marketable Securities, Derivative Financial Instruments, Fair Value Measurements and Notes Payable |
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| Marketable Securities Derivative Financial Instruments Fair Value Measurements And Notes Payable | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Marketable Securities, Derivative Financial Instruments, Fair Value Measurements and Notes Payable |
Marketable Securities
The following is a summary of the Company’s available for sale securities:
As of both September 30, 2022 and December 31, 2021, the Company held an aggregate of 209,243 Marco OP Units and Marco II OP Units, of which 89,695 were owned by PRO. The Marco OP Units and the Marco II OP Units are both exchangeable for a similar number of common operating partnership units (“Simon OP Units”) of Simon Property Group, L.P., (“Simon OP”), the operating partnership of Simon Property Group, Inc. (“Simon Inc.”), a public REIT that is an owner and operator of shopping malls and outlet centers. Subject to the various conditions, the Company may elect to exchange the Marco OP Units and/or the Marco II OP Units to Simon OP Units which must be immediately delivered to Simon Inc. in exchange for cash or similar number of shares of Simon Inc.’s common stock (“Simon Stock”). Accordingly, the Marco OP Units and Marco II OP Units are valued based on the closing price of Simon Stock, which was $ per share and $ per share as of September 30, 2022 and December 31, 2021, respectively.
Throughout 2022, financial markets have been experiencing significant increases in interest rates primarily as a result of higher inflation, leading to the substantially lower market prices of the Company equity’s securities, especially those highly sensitive to movements in interest rates, such are REITs and preferred securities. Because of the change in the closing price of Simon Stock and the market price of the Company’s other equity securities, the Company incurred unrealized losses of $1.2 million and $20.0 million for the three and nine months ended September 30, 2022, respectively, compared to unrealized loss of $3.5 million and an unrealized gain of $10.6 million for the three and nine months ended September 30, 2021, respectively. These unrealized gains and losses incurred on the Company’s marketable equity securities are included in its consolidated statements of operations.
Additionally, as of September 30, 2022 and December 31, 2021, certain of the Company’s marketable debt securities had net unrealized losses of $270 and $28, respectively. However, the Company does not consider these declines in market value to be other than temporary in nature. When evaluating the debt investments for other-than-temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer and any changes thereto, and the Company’s intent to sell, or whether it is more likely than not it will be required to sell, the investment before recovery of the investment’s amortized cost basis. During the three and nine months ended September 30, 2022 and 2021, the Company did not recognize any other-than-temporary impairment charges. As of both September 30, 2022 and December 31, 2021, the Company did not consider any of its investments to be other-than-temporarily impaired.
The Company may sell certain of its investments prior to their stated maturities for strategic purposes, in anticipation of credit deterioration, or for duration management.
Derivative Financial Instruments
The Company has entered into two interest rate cap contracts with unrelated financial institutions in order to reduce the effect of interest rate fluctuations or risk of certain real estate investment’s interest expense on its variable rate debt. The Company is exposed to credit risk in the event of non-performance by the counterparty to these financial instruments. Management believes the risk of loss due to non-performance to be minimal.
The Company is accounting for the interest rate cap contracts as economic hedges, marking these contracts to market, taking into account present interest rates compared to the contracted fixed rate over the life of the contract and recording the unrealized gain or loss on the interest rate cap contracts in the consolidated statements of operations.
For the three and nine months ended September 30, 2022, the Company recorded an unrealized gain of $1.6 million and $2.8 million, which is included in other income/(expense), net in the consolidated statement of operations, representing the change in the fair value of these economic hedges during such periods.
The two interest rate cap contracts have notional amounts of $90.0 million and $40.0 million, respectively, and effectively cap the London Interbank Offered Rate (“LIBOR”) through June 30, 2023 and its replacement rate thereafter at 3.00% and 2.50%, respectively. Both interest rate cap contracts mature on June 3, 2024. The aggregate fair value of the interest rate cap contracts was $3.1 million as of September 30, 2022 and is included in prepaid expenses, restricted cash and other assets on the consolidated balance sheets. See Note 7 for additional information.
Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.
The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:
Marketable securities and derivative financial instruments measured at fair value on a recurring basis as of the dates indicated are as follows:
The fair values of the Company’s common equity securities are measured using readily quoted prices for these investments which are listed for trade on active markets. The fair values of the Company’s preferred equity securities and corporate bonds are measured using readily available quoted prices for these securities; however, the markets for these securities are not active. The fair values of the Company’s interest rate cap contracts are measured using other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Additionally, as noted above, the Company’s Marco OP and OP II units are both ultimately exchangeable for cash or similar number of shares of Simon Stock, therefore the Company uses the quoted market price of Simon Stock to measure the fair value of the Company’s Marco OP and OP II units.
The following table summarizes the estimated fair value of our investments in marketable debt securities with stated contractual maturity dates, accounted for as available-for-sale securities and classified by the contractual maturity date of the securities:
The Company did not have any other significant financial assets or liabilities, which would require revised valuations that are recognized at fair value.
Notes Payable
Margin Loan
The Company has access to a margin loan (the “Margin Loan”) from a financial institution that holds custody of certain of the Company’s marketable securities. The Margin Loan, which is due on demand, bears interest at LIBOR + 0.85% (3.99% as of September 30, 2022) and is collateralized by the marketable securities in the Company’s account. The amounts available to the Company under the Margin Loan are at the discretion of the financial institution and not limited to the amount of collateral in its account. There were no amounts outstanding under this Margin Loan as of September 30, 2022 and December 31, 2021.
Line of Credit
The Company has a non-revolving credit facility (the “Line of Credit”) that provides for borrowings up to a maximum of $20.0 million, subject to a 55% loan-to-value ratio based on the fair value of the underlying collateral, matures on November 30, 2022 and bears interest at LIBOR + 1.35% (4.49% as of September 30, 2022). The Line of Credit is collateralized by an aggregate of of Marco OP and OP II Units and is guaranteed by PRO. As of September 30, 2022, the amount of borrowings available to be drawn under the Line of Credit was $10.3 million. No amounts were outstanding under the Line of Credit as of both September 30, 2022 and December 31, 2021.
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Mortgages Payable, Net |
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| SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgages Payable, Net |
Mortgages payable, net consists of the following:
LIBOR as of September 30, 2022 and December 31, 2021 was 3.14% and 0.10%, respectively. SOFR as of September 30, 2022 was 2.52%. The Company’s loans are secured by the indicated real estate and are non-recourse to the Company, unless otherwise indicated.
LSC 1543 7th LLC Loan
On June 30, 2022, LSC 1543 7th LLC entered into a $31.3 million loan (the “LSC 1543 7th LLC Loan”) which bears interest at SOFR + 3.50% (5.19% as of September 30, 2022). The LSC 1543 7th LLC Loan is initially scheduled to mature on December 30, 2023, but may be further extended through December 30, 2024 and September 30, 2025, through the exercise of two extension options. The LSC 1543 7th LLC Loan requires monthly interest-only payments with the outstanding principal balance due at its maturity date and is collateralized by a nonrecourse loan originated by LSC 1543 7th LLC (the “LSC 1543 7th LLC Note Receivable”). See Note 5. On June 30, 2022, $28.6 million of the net proceeds from the LSC 1543 7th LLC Loan were temporarily funded to an affiliate of the Company’s advisor and were subsequently transferred to the Company and then distributed to the members of LSC 1543 7th LLC in July 2022, of which the Company’s 50% share was $14.3 million. As of September 30, 2022, the outstanding principal balance of the LSC 1543 7th LLC Loan was $29.9 million and the remaining availability under the facility was up to $1.4 million.
Moxy Construction Loans
On June 3, 2021, the Company, through a wholly owned subsidiary, closed on a recourse construction loan facility (the “Moxy Senior Loan”) providing for up to $90.0 million of funds for the development, construction and certain pre-opening costs associated with the Lower East Side Moxy Hotel. At closing, $35.6 million of proceeds were initially advanced under the Moxy Senior Loan, which were used to repay in full a then outstanding mortgage loan. The Moxy Senior Loan bears interest at LIBOR + 7.50%, subject to an 8.00% floor, and initially matures on June 3, 2024, with two one-year extension options, subject to the satisfaction of certain conditions. The Moxy Senior Loan is collateralized by the Lower East Side Moxy Hotel. As of September 30, 2022, the outstanding principal balance of the Moxy Senior Loan was $64.6 million, the interest rate was 10.64% and the remaining availability under the facility was up to $25.4 million, which is expected to be used to fund the remaining construction and pre-opening costs for the project.
Simultaneously on June 3, 2021, the Company, through the same wholly owned subsidiary, also entered into a mezzanine construction loan facility (the “Moxy Junior Loan” and together with the Moxy Senior Loan, the “Moxy Construction Loans”) providing for up to $40.0 million of additional funds for the development, construction and certain pre-opening costs associated with the Lower East Side Moxy Hotel. The Moxy Junior Loan bears interest at LIBOR + 13.50%, subject to a 14.00% floor, and initially matures on June 3, 2024, with two one-year extension options, subject to the satisfaction of certain conditions. The Moxy Junior Loan is subordinate to the Moxy Senior Loan but also collateralized by the Lower East Side Moxy Hotel. The Company has provided a principal guarantee of up to $7.0 million with respect to the Moxy Junior Loan. As of September 30, 2022, the outstanding principal balance of the Moxy Junior Loan was $40.0 million as it was fully drawn and its interest rate was 16.64%.
In connection with the Moxy Construction Loans, the Company has provided certain completion and carry cost guarantees. The Company has also entered into two interest rate cap agreements with notional amounts of $90.0 million and $40.0 million pursuant to which LIBOR through June 30, 2023 and its replacement rate thereafter is capped at 3.00% and 2.50%, respectively, through June 3, 2024. Furthermore, in connection with the Moxy Construction Loans, the Company paid $5.3 million of loan fees and expenses and accrued $1.1 million of loan exit fees which are due at the initial maturity date and are included in accounts payable, accrued expenses and other liabilities on the consolidated balance sheets as of September 30, 2022 and December 31, 2021.
Exterior Street Loans
On March 29, 2019, the Company entered into a $35.0 million loan (the “Exterior Street Loan”) which, commencing on October 10, 2020, bears interest at LIBOR + 2.25% (5.39% as of September 30, 2022) through its scheduled maturity date. The Exterior Street Loan requires monthly interest-only payments with the outstanding principal balance due in full at its maturity date. The Exterior Street Loan was initially scheduled to mature on April 9, 2021 but has been further extended to November 24, 2022. Additionally, on December 21, 2021, the loan agreement was amended to provide an additional $7.0 million loan (the “Exterior Street Supplemental Loan” and collectively with the Exterior Street Loan, the “Exterior Street Loans”) which bears interest at LIBOR + 2.50% (5.39% as of September 30, 2022) and requires monthly interest-only payments with the outstanding balance due in full at its maturity date. The Exterior Street Loans and are collateralized by the Exterior Street Project.
The following table shows the contractually scheduled principal maturities of the Company’s mortgage debt during the next five years and thereafter as of September 30, 2022:
Certain of the Company’s debt agreements require the maintenance of certain ratios, including debt service coverage. As of September 30, 2022, the Company was in compliance with all of its financial debt covenants. Additionally, certain of our mortgages payable also contain clauses providing for prepayment penalties.
Debt Maturities
The Exterior Street Loans (outstanding aggregate principal balance of $42.0 million as of September 30, 2022) mature on November 24, 2022. The Company currently intends to seek to extend or refinance the Exterior Street Loans on or before their maturity date.
However, if the Company is unable to extend or refinance its maturing indebtedness at favorable terms, it will look to repay the then outstanding balance with available cash and/or proceeds from selective asset sales. The Company has no additional significant maturities of mortgage debt over the next 12 months.
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Equity |
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Sep. 30, 2022 | |||
| Equity [Abstract] | |||
| Equity |
Share Repurchase Program
The Company’s share repurchase program (the “SRP”) may provide its stockholders with limited, interim liquidity by enabling them to sell their shares of common stock back to the Company, subject to restrictions.
On March 25, 2020, the Board of Directors amended the SRP to remove stockholder notice requirements and also approved the suspension of all redemptions effective immediately.
Effective March 18, 2021 and May 14, 2021, the Board of Directors partially reopened the SRP to allow, subject to various conditions as set forth below, for redemptions submitted in connection with a stockholder’s death and hardship, respectively, and set the price for all such purchases to our current net asset value per share (“NAV per Share”), as determined by the Board of Directors and reported by the Company from time to time. Deaths that occurred subsequent to January 1, 2020 were eligible for consideration, subject to certain conditions. Beginning January 1, 2022, requests for redemptions in connection with a stockholder’s death must be submitted and received by the Company within one year of the stockholder’s date of death for consideration.
At the above noted dates, the Board of Directors established that on an annual basis, the Company would not redeem in excess of 0.5% of the number of shares outstanding as of the end of the preceding year for either death or hardship redemptions, respectively. Additionally, redemption requests generally would be processed on a quarterly basis and would be subject to pro ration if either type of redemption requests exceeded the annual limitation.
On March 18, 2022, the Board of Directors approved an increase to the annual threshold for death redemptions from up to 0.5% to 1.0%.
For the nine months ended September 30, 2022 the Company repurchased shares of common stock, pursuant to its SRP at an average price per share of $ per share.
Net Earnings Per Share
Basic net earnings per share is calculated by dividing net income attributable to common shareholders by the weighted-average number of shares of common stock outstanding during the applicable period. Dilutive income per share includes the potentially dilutive effect, if any, which would occur if our outstanding options to purchase our common stock were exercised. For all periods presented dilutive net income per share is equivalent to basic net income per share.
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Related Party Transactions |
The Company has various agreements, including an advisory agreement, with the Advisor and Lightstone Value Plus REIT Management LLC (the “Property Manager”) to pay certain fees in exchange for services performed by these entities and other affiliated entities. The Company’s ability to secure financing and subsequent real estate operations are dependent upon its Advisor, Property Manager and their affiliates to perform such services as provided in these agreements. Amounts the Company owes to the Advisor and its affiliated entities are principally for asset management fees, and are classified as due to related parties on the consolidated balance sheets.
The Company, pursuant to the related party arrangements, has recorded the following amounts for the periods indicated:
See Notes 3, 4 and 5 for other related party transactions.
The advisory agreement has a one-year term and is renewable for an unlimited number of successive one-year periods upon the mutual consent of the Advisor and the Company’s independent directors. Payments to the Advisor or its affiliates may include asset acquisition fees and the reimbursement of acquisition-related expenses, development fees and the reimbursement of development-related costs, financing coordination fees, asset management fees or asset management participation, and construction management fees. The Company may also reimburse the Advisor and its affiliates for actual expenses it incurs for administrative and other services provided for it. Upon the liquidation of the Company’s assets, it may pay the Advisor or its affiliates a disposition commission.
In connection with the Company’s Offering, Lightstone SLP, LLC purchased an aggregate of $30.0 million of SLP Units which are included in noncontrolling interests in the consolidated balance sheets. These SLP Units, the purchase price of which will be repaid only after stockholders receive a stated preferred return and their net investment, entitle Lightstone SLP, LLC to a portion of any regular distributions made by the Operating Partnership.
During both the three and nine months ended September 30, 2022 and 2021, distributions of $0.5 million and $1.5 million were declared and paid on the SLP units.
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Financial Instruments |
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investments, All Other Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Financial Instruments |
The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, prepaid expenses, restricted cash and other assets, notes receivable, accounts payable, accrued expenses and other liabilities, due to related parties, and distributions payable approximate their fair values because of the short maturity of these instruments. The carrying amounts of the notes receivable approximate their fair values because the interest rates are variable and reflective of market rates.
The carrying amount and estimated fair value (in millions) of the Company’s mortgage debt is summarized as follows:
The fair value of the mortgages payable was determined by discounting the future contractual interest and principal payments by estimated current market interest rates. |
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Commitments and Contingencies |
9 Months Ended | ||
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Sep. 30, 2022 | |||
| Commitments and Contingencies Disclosure [Abstract] | |||
| Commitments and Contingencies |
Legal Proceedings
From time to time in the ordinary course of business, the Company may become subject to legal proceedings, claims or disputes.
As of the date hereof, the Company is not a party to any material pending legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on its results of operations or financial condition, which would require accrual or disclosure of the contingency and possible range of loss. |
Subsequent Events |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2022 | |||
| Subsequent Events [Abstract] | |||
| Subsequent Events |
Distribution Payment
On October 15, 2022, the distribution for the three-month period ending September 30, 2022 of $3.8 million was paid in full using a combination of cash and approximately shares of the Company’s common stock issued pursuant to the Company’s DRIP, at a discounted price of $ per share, equal to 95% of the Company’s most recently published estimated net asset value per share of $ as of September 30, 2021.
Distribution Declaration
On November 9, 2022, the Company’s Board of Directors authorized and the Company declared a distribution of $0.175 per share for the quarterly period ending December 31, 2022. The quarterly distribution is the pro rata equivalent of an annual distribution of $ per share, or an annualized rate of 7.0% assuming a purchase price of $ per share. The distribution will be paid on or about the 15th day of the month following the quarter-end to stockholders of record at the close of business on the last day of the quarter-end. The stockholders have an option to elect the receipt of shares under the Company’s DRIP.
Additionally, on November 9, 2022, the Board of Directors declared a quarterly distribution for the quarterly period ending December 31, 2022 on the SLP Units at an annualized rate of 7.0%. Any future distributions on the SLP Units will always be subordinated until stockholders receive a stated preferred return.
Future distributions, if any, declared will be at the discretion of the Board of Directors based on their analysis of the Company’s performance over the previous periods and expectations of performance for future periods. The Board of Directors will consider various factors in its determination, including but not limited to, the sources and availability of capital, operating and interest expenses, the Company’s ability to refinance near-term debt, as well as the IRS’s annual distribution requirement that REITs distribute no less than 90% of their taxable income. The Company cannot assure that any future distributions will be made or that it will maintain any particular level of distributions that it has previously established or may establish. |
Summary of Significant Accounting Policies (Policies) |
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation | Basis of Presentation
The consolidated financial statements include the accounts of Lightstone REIT I and its Operating Partnership and its subsidiaries (over which the Company exercises financial and operating control). All inter-company balances and transactions have been eliminated in consolidation. In addition, interests in entities acquired are evaluated based on applicable accounting principles generally accepted in the United States of America (“GAAP”), and if deemed to be variable interest entities (“VIE”) in which the Company is the primary beneficiary are also consolidated. If the interest in the entity is determined not to be a VIE, then the entity is evaluated for consolidation based on legal form, economic substance, and the extent to which the Company has control, substantive participating rights or both under the respective ownership agreement. For entities in which the Company has less than a controlling interest but have significant influence, the Company accounts for the investment using the equity method of accounting.
There are judgments and estimates involved in determining if an entity in which the Company has made an investment is a VIE and, if so, whether the Company is the primary beneficiary. The entity is evaluated to determine if it is a VIE by, among other things, calculating the percentage of equity being risked compared to the total equity of the entity. Determining expected future losses involves assumptions of various possibilities of the results of future operations of the entity, assigning a probability to each possibility and using a discount rate to determine the net present value of those future losses. A change in the judgments, assumptions, and estimates outlined above could result in consolidating an entity that should not be consolidated or accounting for an investment using the equity method that should in fact be consolidated, the effects of which could be material to our financial statements.
The accompanying unaudited interim consolidated financial statements and related notes should be read in conjunction with the audited Consolidated Financial Statements of the Company and related notes as contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021. The unaudited interim consolidated financial statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair presentation of the results for the periods presented. The accompanying unaudited consolidated financial statements of Lightstone Value Plus REIT I, Inc. and its Subsidiaries have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.
GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during a reporting period. The most significant assumptions and estimates relate to the valuation of real estate and real-estate related investments, marketable securities, notes receivable, depreciable lives, and revenue recognition. Application of these assumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates.
The consolidated balance sheet as of December 31, 2021 included herein has been derived from the consolidated balance sheet included in the Company’s Annual Report on Form 10-K.
The unaudited consolidated statements of operations for interim periods are not necessarily indicative of results for the full year or any other period.
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| Derivative Financial Instruments | Derivative Financial Instruments
The Company utilizes derivative financial instruments to reduce interest rate risk. The Company does not hold or issue derivative financial instruments for trading purposes. The Company recognizes all derivatives as either assets or liabilities in the consolidated balance sheets and measures those instruments at fair value. Changes in fair value of those instruments are reported in the consolidated statements of operations.
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| Pre-Opening Costs | Pre-Opening Costs
The Company expenses the costs associated with pre-opening activities associated with its development and construction projects as incurred. Pre-opening costs generally consist of non-recurring personnel, marketing and other costs.
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| COVID-19 Pandemic | COVID-19 Pandemic
On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic and it remains highly unpredictable and dynamic and its ultimate 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, and the ongoing development, administration and ultimate effectiveness of vaccines, including booster shots. Accordingly, the ongoing COVID-19 pandemic may continue to have negative effects on the U.S. and global economies for the foreseeable future.
During the COVID-19 pandemic, the occupancy of the Company’s St. Augustine Outlet Center significantly declined and because of limited leasing success, the Company began exploring various strategic alternatives for the property, which ultimately led to the Company ceasing operations of the center effective July 15, 2022 and demolishing the existing building and improvements during the third quarter of 2022. See “St. Augustine Outlet Center” for additional information.
Additionally, during 2020 the Company saw deterioration in both the occupancy and rental rates for Gantry Park Landing, which is located on Long Island, New York, as the luxury rental market in the greater New York City metropolitan area was negatively impacted by the COVID-19 pandemic. However, both occupancy and rental rates consistently improved throughout 2021 and returned to pre-COVID-19 levels. Thereafter, occupancy has continued to remain stable and the property has experienced strong growth in its rental rates thus far in 2022.
To-date, the COVID-19 pandemic has not had any significant impact on the Company’s development projects. Furthermore, the Company’s other real estate-related investments (both its preferred investment in related party and its nonrecourse loan made to an unaffiliated third-party borrower) also relate to various development projects, which are at different stages in their respective development process. These investments, which are subject to similar risks, have also not yet been significantly impacted by the COVID-19 pandemic.
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.
If the Company’s operating properties, development projects and real estate-related investments are negatively impacted for an extended period because (i) occupancy levels and rental rates decline, (ii) tenants are unable to pay their rent, (iii) borrowers are unable to pay scheduled debt service on notes receivable, (iv) development activities are delayed and/or (v) various related party entities are unable to pay monthly preferred distributions on the Company’s preferred investments in related parties, the Company’s business and financial results could be materially and adversely impacted.
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| Reclassifications | Reclassifications
Certain prior period amounts have been reclassified to conform to the current year presentation.
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| New Accounting Pronouncements | New Accounting Pronouncements
In June 2016, the FASB issued an accounting standards update which replaces the Company incurred loss impairment methodology currently in use with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The new guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The adoption of this standard will not have a material effect on the Company’s consolidated financial position, results of operations or cash flows.
The Company has reviewed and determined that other recently issued accounting pronouncements will not have a material impact on its financial position, results of operations and cash flows, or do not apply to its current operations.
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| Supplemental Cash Flow Information | Supplemental Cash Flow Information
Supplemental cash flow information for the periods indicated is as follows:
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| St. Augustine Outlet Center | St. Augustine Outlet Center
During the COVID-19 pandemic, the occupancy of the Company’s St. Augustine Outlet Center, a retail property located in St. Augustine Florida, which consisted of 0.3 million of gross leasable area, significantly declined and because of limited leasing success, the Company began exploring various strategic alternatives for the property. As a result, during the third quarter of 2021, the Company determined that it would no longer continue to pursue leasing of space to tenants and therefore, began to enter into lease termination agreements with certain tenants and also provided notice to its other tenants that it would not renew their leases at the scheduled expiration of their lease. Due to this change in leasing strategy and resulting decrease in the fair value of the St. Augustine Outlet Center, the Company recorded a non-cash loss on impairment of real estate of $11.3 million during the third quarter of 2021.
Because of the aforementioned lease terminations and scheduled expirations, substantially all of the tenants vacated the property during the first quarter of 2022 and on June 29, 2022, the Company entered into a lease termination agreement with the property’s final tenant providing for them to receive an aggregate of $750 provided they vacated the property no later than July 15, 2022. The final tenant vacated the property in July 2022 and the Company ceased operations of the St. Augustine Outlet Center effective July 15, 2022 and shortly thereafter, commenced demolition of the property’s building and improvements in order to prepare the various land parcels for sale and/or lease. The demolition of the property’s buildings and improvements was substantially completed during the third quarter of 2022 and the Company recognized a loss on demolition of $16.6 million consisting of the write-off of the carrying value of the property’s building and improvements plus related costs.
In connection with the terms of certain of the lease termination agreements, the Company agreed to make various payments to certain tenants provided they closed their store and vacated the property. The Company expenses lease termination fees in the period the lease termination agreement is executed and such expenses are included in property operating expenses on the consolidated statements of operations. During the nine months ended September 30, 2022, the Company recognized aggregate lease termination fees of $825. During the three and nine months ended September 30, 2021, the Company recognized a lease termination fee of $425.
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Summary of Significant Accounting Policies (Tables) |
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of summary of supplemental cash flow information |
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Development Projects (Tables) |
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Combination and Asset Acquisition [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of development projects |
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Investments in Related Parties (Tables) |
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of preferred investments |
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Notes Receivable (Tables) |
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of summary of notes receivable |
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| Schedule of interest earned for each of the joint venture promissory notes |
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Marketable Securities, Derivative Financial Instruments, Fair Value Measurements and Notes Payable (Tables) |
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| Marketable Securities Derivative Financial Instruments Fair Value Measurements And Notes Payable | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of summary of available for sale securities and other investments |
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| Schedule of marketable securities measured at fair value on a recurring basis |
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| Schedule of contractual maturity |
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Mortgages Payable, Net (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of mortgages payable |
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| Scheduled of contractually principal maturities during next five years |
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Related Party Transactions (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of summary of amount recorded in pursuant to related party arrangement |
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Financial Instruments (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investments, All Other Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of mortgage debt |
|
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Structure (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands |
1 Months Ended | 9 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|
Jul. 06, 2004 |
Aug. 25, 2009 |
Sep. 30, 2022 |
Dec. 31, 2009 |
Dec. 31, 2008 |
|
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |||||
| Date of formation | Jun. 08, 2004 | ||||
| Cash contributed for units | $ 2 | ||||
| Partners units acquired | 200 | ||||
| Shares issued, price per share | $ 11.75 | ||||
| Issuance of common units, shares | 497,209 | 497,209 | |||
| Lightstone Slp Llc [Member] | |||||
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |||||
| Purchased of aggregate amount | $ 30,000 | ||||
| Lightstone Value Plus R E I T [Member] | |||||
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |||||
| General partner ownership interest | 98.00% | ||||
| Lightstone Value Plus R E I T [Member] | Wholly Owned Properties [Member] | Industrial Properties [Member] | |||||
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |||||
| General partner ownership interest | 59.20% | ||||
| Lightstone Value Plus R E I T [Member] | Wholly Owned Properties [Member] | Seven Hotel Properties [Member] | |||||
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |||||
| General partner ownership interest | 2.50% | ||||
| Lightstone Value Plus R E I T [Member] | Wholly Owned Properties [Member] | Residential Real Estate Properties [Member] | |||||
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |||||
| General partner ownership interest | 97.50% | ||||
| Pro Dfjvholdings Limited Liability Company [Member] | |||||
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |||||
| General partner ownership interest | 99.00% | ||||
| Lightstone Value Plus R E I T [Member] | |||||
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |||||
| Date of formation | Jul. 12, 2004 | ||||
| Number of common shares held | 20,000 | ||||
| Proceeds from issue of shares | $ 200 | ||||
| Shares issued, price per share | $ 10.00 | ||||
| Lightstone Slp Llc [Member] | |||||
| Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |||||
| Aggregate SLP units owned in operating partnership | $ 30,000 | ||||
| Purchase cost per SLP unit of operating partnership | $ 100,000 | ||||
Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands |
9 Months Ended | |
|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Accounting Policies [Abstract] | ||
| Cash paid for interest | $ 9,691 | $ 6,424 |
| Distributions declared but not paid | 3,831 | 3,889 |
| Investment property acquired but not paid | 2,059 | 4,483 |
| Amortization of deferred financing costs included in development projects | 2,094 | 848 |
| Holding loss/gain on marketable securities | 241 | 43 |
| Value of shares issued from distribution reinvestment program | 249 | 242 |
| Accrued loan exit fee included in deferred financing costs | $ 1,100 | |
Summary of Significant Accounting Policies (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Jul. 15, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Accounting Policies [Abstract] | ||||
| Retail property | $ 300 | |||
| Non-cash impairment charge | 16,600 | $ 11,300 | ||
| operating expenses | $ 750 | |||
| Lease termination fees | $ 425 | $ 825 | $ 425 | |
Development Projects (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Dec. 31, 2021 |
|
| Property, Plant and Equipment [Line Items] | |||||
| Amounts Capitalized to Construction in Progress | $ 287,873 | $ 287,873 | $ 234,214 | ||
| Capitalized Interest | 4,925 | $ 2,199 | 11,929 | $ 5,584 | |
| Lower East Side Moxy Hotel [Member] | |||||
| Property, Plant and Equipment [Line Items] | |||||
| Amounts Capitalized to Construction in Progress | 196,284 | 196,284 | 146,747 | ||
| Capitalized Interest | 4,024 | 1,722 | 9,792 | 4,068 | |
| Exterior Street Project [Member] | |||||
| Property, Plant and Equipment [Line Items] | |||||
| Amounts Capitalized to Construction in Progress | 91,589 | 91,589 | $ 87,467 | ||
| Capitalized Interest | $ 901 | $ 477 | $ 2,137 | $ 1,516 | |
Development Projects (Details Narrative) - USD ($) $ in Thousands |
1 Months Ended | 3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|---|
Dec. 03, 2018 |
Feb. 27, 2019 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Business Acquisition [Line Items] | ||||||
| Unaffiliated amount | $ 2,400 | $ 2,400 | ||||
| Pre-opening costs | 317 | 671 | ||||
| Affiliate cost | 1,000 | |||||
| Lower East Side Moxy Hotel [Member] | ||||||
| Business Acquisition [Line Items] | ||||||
| Pre-opening costs | $ 300 | $ 700 | $ 0 | |||
| Bowery Land [Member] | ||||||
| Business Acquisition [Line Items] | ||||||
| Business combination, consideration transferred | $ 56,500 | |||||
| Borden Realty Corp And399 Exterior Street Associates Llc [Member] | ||||||
| Business Acquisition [Line Items] | ||||||
| Business combination, consideration transferred | $ 59,000 | |||||
Investments in Related Parties (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||||
|---|---|---|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Dec. 31, 2021 |
|||
| Forty East End Avenue Preferred Investment [Member] | |||||||
| SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |||||||
| Preferred Investments, Dividend Rate, Percentage | 12.00% | ||||||
| Investments in and Advances to Affiliates, at Fair Value, Gross Additions | $ 6,000 | $ 6,000 | |||||
| Preferred Stock Dividend Income | [1] | $ 184 | $ 184 | $ 546 | $ 546 | ||
| East Eleventh Street [Member] | |||||||
| SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |||||||
| Preferred Investments, Dividend Rate, Percentage | 12.00% | ||||||
| Investments in and Advances to Affiliates, at Fair Value, Gross Additions | 8,500 | ||||||
| Preferred Stock Dividend Income | [1] | 108 | 261 | 593 | 774 | ||
| Preferred Investments [Member] | |||||||
| SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |||||||
| Investments in and Advances to Affiliates, at Fair Value, Gross Additions | 6,000 | $ 14,500 | |||||
| Preferred Stock Dividend Income | [1] | $ 292 | $ 445 | $ 1,139 | $ 1,320 | ||
| |||||||
Investments in Related Parties (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | 12 Months Ended |
|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2022 |
Dec. 31, 2021 |
|
| East 11th Street Preferred Investment. [Member] | |||
| SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |||
| Investments in and advances to affiliates at fair value gross additions | $ 4,500 | $ 8,500 | |
| Forty East End Avenue Preferred Investment [Member] | |||
| SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |||
| Investments in and advances to affiliates at fair value gross additions | $ 6,000 | $ 6,000 | |
| Joint Venture [Member] | |||
| SEC Schedule, 12-15, Insurance Companies, Summary of Investments, Other than Investments in Related Parties [Line Items] | |||
| Equity Method Investment, Ownership Percentage | 2.50% | 2.50% | 2.50% |
| Investment | $ 900 | $ 900 | $ 1,000 |
Notes Receivable (Details) - Notes Receivable [Member] - USD ($) $ in Thousands |
9 Months Ended | 12 Months Ended | |||||
|---|---|---|---|---|---|---|---|
Sep. 30, 2022 |
Dec. 31, 2021 |
||||||
| Outstanding Principal | $ 27,540 | ||||||
| Reserves | (629) | ||||||
| Unamortized Origination Fee | (57) | ||||||
| Carrying value | 26,854 | ||||||
| Unfunded Commitment | $ 6,960 | ||||||
| LSC 1543 7th LLC [Member] | |||||||
| Company's Ownership percentage | 50.00% | 50.00% | [1] | ||||
| Original Loan Amount | $ 49,000 | $ 20,000 | [1] | ||||
| Origination Fee (as a percent) | 1.00% | 1.00% | [1] | ||||
| Origination Date | Mar. 02, 2022 | Aug. 27, 2019 | [1] | ||||
| Maturity Date | Aug. 31, 2023 | Feb. 28, 2022 | [1] | ||||
| Contractual Interest Rate | SOFR plus 7.00% (Floor of 7.15%) | Libor plus 5.40% (Floor of 7.90%) | [1] | ||||
| Outstanding Principal | $ 49,000 | $ 17,500 | [1] | ||||
| Reserves | (1,821) | [1] | |||||
| Unamortized Origination Fee | (450) | (33) | [1] | ||||
| Carrying value | 46,729 | 17,467 | [1] | ||||
| Unfunded Commitment | [1] | ||||||
| LSC 11640 Mayfield LLC [Member] | |||||||
| Company's Ownership percentage | [2] | 50.00% | |||||
| Original Loan Amount | [2] | $ 18,000 | |||||
| Origination Fee (as a percent) | [2] | 1.50% | |||||
| Origination Date | [2] | Mar. 04, 2020 | |||||
| Maturity Date | [2] | Mar. 01, 2022 | |||||
| Contractual Interest Rate | [2] | Libor plus 11.00% (Floor of 13.00%) | |||||
| Outstanding Principal | [2] | $ 10,040 | |||||
| Reserves | [2] | (629) | |||||
| Unamortized Origination Fee | [2] | (24) | |||||
| Carrying value | [2] | 9,387 | |||||
| Unfunded Commitment | [2] | $ 6,960 | |||||
| |||||||
Notes Receivable (Details 1) - Notes Receivable [Member] - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Interest Income Purchased Receivables | $ 1,230 | $ 1,771 | $ 3,412 | $ 6,856 |
| LSC 1543 7th LLC [Member] | ||||
| Interest Income Purchased Receivables | 1,230 | 454 | 2,957 | 1,348 |
| LSC 162nd Capital I LLC [Member] | ||||
| Interest Income Purchased Receivables | 123 | 373 | ||
| LSC162nd Capital Ii LLC [Member] | ||||
| Interest Income Purchased Receivables | 266 | 807 | ||
| LSC1650 Lincoln LLC [Member] | ||||
| Interest Income Purchased Receivables | 545 | 1,618 | ||
| LSC 11640 Mayfield LLC [Member] | ||||
| Interest Income Purchased Receivables | 383 | 455 | 1,125 | |
| LSC 11640 Newkirk LLC [Member] | ||||
| Interest Income Purchased Receivables | $ 1,585 | |||
Notes Receivable (Details Narrative) - Notes Receivable [Member] - USD ($) $ in Thousands |
9 Months Ended | |
|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Nr Subsidiaries [Member] | ||
| Debt Instrument [Line Items] | ||
| Notes receivable, related parties, noncurrent | $ 21,900 | $ 200 |
| Payment for distributions | $ 29,300 | $ 8,600 |
| Minimum [Member] | ||
| Debt Instrument [Line Items] | ||
| Percentage of origination fee on notes receivables | 1.00% | |
| Maximum [Member] | ||
| Debt Instrument [Line Items] | ||
| Percentage of origination fee on notes receivables | 1.50% | |
Marketable Securities, Derivative Financial Instruments, Fair Value Measurements and Notes Payable (Details) - USD ($) $ in Thousands |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2022 |
Dec. 31, 2021 |
|
| Equity Securities, primarily REITs [Member] | ||
| Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items] | ||
| Equity securities, adjusted cost | $ 24,600 | $ 24,932 |
| Equity securities, gross unrealized gains | 2,541 | |
| Equity securities, gross unrealized losses | (2,905) | (135) |
| Equity securities, fair value | 21,695 | 27,338 |
| Equity Securities [Member] | ||
| Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items] | ||
| Equity securities, adjusted cost | 43,827 | 44,159 |
| Equity securities, gross unrealized gains | 16,745 | |
| Equity securities, gross unrealized losses | (3,353) | (135) |
| Equity securities, fair value | 40,474 | 60,769 |
| Marco Op Units And Op Two Units [Member] | ||
| Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items] | ||
| Equity securities, adjusted cost | 19,227 | 19,227 |
| Equity securities, gross unrealized gains | 14,204 | |
| Equity securities, gross unrealized losses | (448) | |
| Equity securities, fair value | 18,779 | 33,431 |
| Corporate Bond Securities [Member] | ||
| Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items] | ||
| Equity securities, adjusted cost | 1,290 | 2,073 |
| Equity securities, gross unrealized gains | ||
| Equity securities, gross unrealized losses | (270) | (28) |
| Equity securities, fair value | 1,020 | 2,045 |
| Debt Securities [Member] | ||
| Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items] | ||
| Equity securities, adjusted cost | 45,117 | 46,232 |
| Equity securities, gross unrealized gains | 16,745 | |
| Equity securities, gross unrealized losses | (3,623) | (163) |
| Equity securities, fair value | $ 41,494 | $ 62,814 |
Marketable Securities, Derivative Financial Instruments, Fair Value Measurements and Notes Payable (Details 1) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | $ 41,494 | $ 62,814 |
| Interest Rate Cap Contracts | 3,110 | |
| Equity Securities [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | 21,695 | 27,338 |
| Marco Op Units And Op Two Units [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | 18,779 | 33,431 |
| Corporate Bond Securities [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | 1,020 | 2,045 |
| Fair Value, Inputs, Level 1 [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | 870 | 6,825 |
| Interest Rate Cap Contracts | ||
| Fair Value, Inputs, Level 1 [Member] | Equity Securities [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | 870 | 6,825 |
| Fair Value, Inputs, Level 1 [Member] | Marco Op Units And Op Two Units [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | ||
| Fair Value, Inputs, Level 1 [Member] | Corporate Bond Securities [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | ||
| Fair Value, Inputs, Level 2 [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | 40,624 | 55,989 |
| Interest Rate Cap Contracts | 3,110 | |
| Fair Value, Inputs, Level 2 [Member] | Equity Securities [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | 20,825 | 20,513 |
| Fair Value, Inputs, Level 2 [Member] | Marco Op Units And Op Two Units [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | 18,779 | 33,431 |
| Fair Value, Inputs, Level 2 [Member] | Corporate Bond Securities [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | 1,020 | 2,045 |
| Fair Value, Inputs, Level 3 [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | ||
| Interest Rate Cap Contracts | ||
| Fair Value, Inputs, Level 3 [Member] | Equity Securities [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | ||
| Fair Value, Inputs, Level 3 [Member] | Marco Op Units And Op Two Units [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities | ||
| Fair Value, Inputs, Level 3 [Member] | Corporate Bond Securities [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Available-for-sale Securities |
Marketable Securities, Derivative Financial Instruments, Fair Value Measurements and Notes Payable (Details 2) $ in Thousands |
Sep. 30, 2022
USD ($)
|
|---|---|
| Marketable Securities Derivative Financial Instruments Fair Value Measurements And Notes Payable | |
| Due in 1 year | |
| Due in 1 year through 5 years | |
| Due in 5 years through 10 years | |
| Due after 10 years | 1,020 |
| Total | $ 1,020 |
Marketable Securities, Derivative Financial Instruments, Fair Value Measurements and Notes Payable (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Dec. 31, 2021 |
|
| Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items] | |||||
| Marketable securities unrealized gain loss | $ 1,200 | $ 3,500 | $ 20,000 | $ 10,600 | |
| Marketable debt securities losses | 270 | $ 28 | |||
| Notional amount | $ 90,000 | $ 90,000 | $ 40,000 | ||
| Derivative interest rate | 3.00% | 3.00% | 2.50% | ||
| Derivative maturity date | Jun. 03, 2024 | ||||
| Aggregate fair value instruments | $ 3,110 | $ 3,110 | |||
| Debt instrument, interest rate at end of period | 2.52% | 2.52% | |||
| Non-revolving credit facility [Member] | |||||
| Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items] | |||||
| Debt instrument, interest rate terms | at LIBOR + 1.35% | ||||
| Borrowing capacity | $ 20,000 | $ 20,000 | |||
| Line of credit, maturity date | Nov. 30, 2022 | ||||
| Debt instrument, interest rate at end of period | 4.49% | 4.49% | |||
| Shares for collateralized | 209,243 | ||||
| Remaining capacity | $ 10,300 | $ 10,300 | |||
| Line of credit | 0 | $ 0 | $ 0 | ||
| Margin Loan [Member] | |||||
| Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items] | |||||
| Debt instrument, interest rate terms | LIBOR + 0.85% | ||||
| Notes payable | $ 0 | $ 0 | $ 0 | ||
| Marco Op Units And Op Two Units [Member] | |||||
| Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items] | |||||
| Equity Securities Securities Held During Period | 209,243 | 209,243 | |||
| Share price | $ 89.75 | $ 89.75 | $ 159.77 | ||
| PRO [Member] | |||||
| Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items] | |||||
| Equity Securities Securities Held During Period | 89,695 | 89,695 | |||
| Derivative [Member] | |||||
| Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items] | |||||
| Aggregate fair value instruments | $ 3,100 | $ 3,100 | |||
Mortgages Payable, Net (Details) - USD ($) $ in Thousands |
9 Months Ended | |
|---|---|---|
Sep. 30, 2022 |
Dec. 31, 2021 |
|
| Real Estate Properties [Line Items] | ||
| Weighted average interest rate | 7.19% | |
| Amount due at maturity | $ 241,848 | |
| Total mortgages payable | 245,037 | $ 171,753 |
| Less: Deferred financing costs | (4,327) | (6,047) |
| Total mortgages payable, net | $ 240,710 | 165,706 |
| Gantry Park Landing [Member] | ||
| Real Estate Properties [Line Items] | ||
| Debt instrument, interest rate terms | 4.48% | |
| Weighted average interest rate | 4.48% | |
| Maturity date | November 2024 | |
| Amount due at maturity | $ 65,317 | |
| Total mortgages payable | $ 68,506 | 69,540 |
| Annual distribution rate | ||
| Real Estate Properties [Line Items] | ||
| Debt instrument, interest rate terms | LIBOR + 7.50% (floor of 7.75%) | |
| Weighted average interest rate | 8.59% | |
| Maturity date | June 2024 | |
| Amount due at maturity | $ 64,631 | |
| Total mortgages payable | $ 64,631 | 35,610 |
| Preferred Equity Distributions Additional Investment Available | ||
| Real Estate Properties [Line Items] | ||
| Debt instrument, interest rate terms | LIBOR + 13.50% (floor of 14.00%) | |
| Weighted average interest rate | 14.73% | |
| Maturity date | June 2024 | |
| Amount due at maturity | $ 40,000 | |
| Total mortgages payable | $ 40,000 | 24,603 |
| Exterior Street Project [Member] | ||
| Real Estate Properties [Line Items] | ||
| Debt instrument, interest rate terms | LIBOR + 2.25% | |
| Weighted average interest rate | 3.30% | |
| Maturity date | November 2022 | |
| Amount due at maturity | $ 35,000 | |
| Total mortgages payable | $ 35,000 | 35,000 |
| Exterior Street Project Supplemental [Member] | ||
| Real Estate Properties [Line Items] | ||
| Debt instrument, interest rate terms | LIBOR + 2.50% | |
| Weighted average interest rate | 3.55% | |
| Maturity date | November 2022 | |
| Amount due at maturity | $ 7,000 | |
| Total mortgages payable | $ 7,000 | 7,000 |
| LSC 1543 7th LLC Note Receivable [Member] | ||
| Real Estate Properties [Line Items] | ||
| Debt instrument, interest rate terms | SOFR + 3.50% | |
| Weighted average interest rate | 5.66% | |
| Maturity date | December 2023 | |
| Amount due at maturity | $ 29,900 | |
| Total mortgages payable | $ 29,900 |
Mortgages Payable, Net (Details 1) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract] | ||
| 2021 | $ 42,355 | |
| 2022 | 31,353 | |
| 2023 | 171,329 | |
| 2024 | ||
| 2025 | ||
| Thereafter | ||
| Total | 245,037 | $ 171,753 |
| Less: Deferred financing costs | (4,327) | (6,047) |
| Total principal maturities, net | $ 240,710 | $ 165,706 |
Mortgages Payable, Net (Details Narrative) - USD ($) $ in Thousands |
1 Months Ended | 9 Months Ended | |||||
|---|---|---|---|---|---|---|---|
Jun. 03, 2021 |
Dec. 03, 2018 |
Dec. 21, 2021 |
Mar. 29, 2019 |
Sep. 30, 2022 |
Jun. 30, 2022 |
Dec. 31, 2021 |
|
| Debt Instrument [Line Items] | |||||||
| Debt instrument interest london interbank offered rate | 3.14% | 0.10% | |||||
| Interest rate | 2.52% | ||||||
| Debt instrument, collateral amount | $ 90,000 | $ 28,600 | |||||
| Due to affiliate | 14,300 | ||||||
| Loan fees | $ 5,300 | ||||||
| Accrued loan | 1,100 | ||||||
| Outstanding principal balance | 245,037 | $ 171,753 | |||||
| Moxy Senior Loan [Member] | |||||||
| Debt Instrument [Line Items] | |||||||
| Debt instrument, description of variable rate basis | LIBOR + 7.50% | ||||||
| At cost | 90,000 | ||||||
| Lower East Side Moxy Hotel [Member] | |||||||
| Debt Instrument [Line Items] | |||||||
| Debt instrument, collateral amount | $ 7,000 | ||||||
| Lower East Side Moxy Hotel [Member] | Equity Securities, primarily REITs [Member] | |||||||
| Debt Instrument [Line Items] | |||||||
| Debt instrument, collateral amount | $ 40,000 | ||||||
| Moxy Junior Loan [Member] | |||||||
| Debt Instrument [Line Items] | |||||||
| Debt instrument, description of variable rate basis | LIBOR + 13.50% | ||||||
| At cost | 40,000 | ||||||
| Moxy Junior Loan [Member] | Lower East Side Moxy Hotel [Member] | |||||||
| Debt Instrument [Line Items] | |||||||
| Debt instrument, collateral amount | $ 40,000 | ||||||
| LSC 1543 7th LLC Loan [Member] | |||||||
| Debt Instrument [Line Items] | |||||||
| Debt instrument, description of variable rate basis | SOFR + 3.50% | ||||||
| Debt instrument, maturity date | Dec. 30, 2023 | ||||||
| Moxy Senior Loan [Member] | |||||||
| Debt Instrument [Line Items] | |||||||
| Debt instrument, maturity date | Jun. 03, 2024 | ||||||
| Debt instrument, collateral amount | $ 35,600 | ||||||
| LSC 1543 7th LLC Loan [Member] | |||||||
| Debt Instrument [Line Items] | |||||||
| Original Loan Amount | $ 29,900 | $ 31,300 | |||||
| Remaining availability under the facility | 1,400 | ||||||
| Equity Securities, primarily REITs [Member] | |||||||
| Debt Instrument [Line Items] | |||||||
| Debt instrument, collateral amount | $ 25,400 | ||||||
| Moxy Construction Loan [Member] | |||||||
| Debt Instrument [Line Items] | |||||||
| Debt instrument, description of variable rate basis | LIBOR through June 30, 2023 and its replacement rate thereafter is capped at 3.00% and 2.50% | ||||||
| Exterior Street Loan [Member] | |||||||
| Debt Instrument [Line Items] | |||||||
| Original Loan Amount | $ 7,000 | $ 35,000 | |||||
| Debt instrument, description of variable rate basis | LIBOR + 2.50% | LIBOR + 2.25% | |||||
| Debt instrument, maturity date | Sep. 30, 2022 | ||||||
| Outstanding principal balance | $ 42,000 | ||||||
Equity (Details Narrative) - $ / shares |
1 Months Ended | 9 Months Ended |
|---|---|---|
Mar. 18, 2022 |
Sep. 30, 2022 |
|
| Class of Stock [Line Items] | ||
| Repurchase authorization | On March 18, 2022, the Board of Directors approved an increase to the annual threshold for death redemptions from up to 0.5% to 1.0%. | |
| Share price | $ 11.75 | |
| Common Stock [Member] | ||
| Class of Stock [Line Items] | ||
| Repurchase shares | 330,738 |
Related Party Transactions (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||||
|---|---|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|||
| Related Party Transactions [Abstract] | ||||||
| Asset management fees (general and administrative costs) | $ 124 | $ 206 | $ 449 | $ 661 | ||
| Property management fees (property operating expenses) | 68 | 99 | 223 | 267 | ||
| Development fees and cost reimbursement | [1] | 641 | 877 | 2,258 | 2,789 | |
| Total | $ 833 | $ 1,182 | $ 2,930 | $ 3,717 | ||
| ||||||
Related Party Transactions (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Distributions cost | $ 500 | $ 1,500 | $ 500 | $ 1,500 |
| Lightstone Slp Llc [Member] | ||||
| Business Combination, Bargain Purchase, Gain Recognized, Amount | $ 30,000 | |||
Financial Instruments (Details) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Investments, All Other Investments [Abstract] | ||
| Carrying Amount | $ 245,000 | $ 171,800 |
| Estimated Fair Value | $ 245,200 | $ 174,400 |
Subsequent Events (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands |
Oct. 15, 2022 |
Nov. 09, 2022 |
Sep. 30, 2021 |
|---|---|---|---|
| Subsequent Event [Line Items] | |||
| Dividend reinvestment plan share discounted price | $ 11.75 | ||
| Subsequent Event [Member] | |||
| Subsequent Event [Line Items] | |||
| Business combination, consideration transferred | $ 3,800 | ||
| Shares issued from distribution reinvestment program (in shares) | 7,000 | ||
| Dividend reinvestment plan share discounted price | $ 11.16 | ||
| Annualized Distribution Rate | $ 0.175 | ||
| Dividends Declared Amount Per Share, Annual Distribution | 0.70 | ||
| Share price | $ 10.00 |