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 Real Estate Investment Trust, Inc., a Maryland corporation (“Lightstone REIT”), formed on June 8, 2004, which
has elected to be taxed and qualify as a real estate investment trust for U.S. federal income tax purposes (“REIT”). The
Lightstone REIT was formed primarily for the purpose of engaging in the business of investing in and owning commercial and residential
real estate properties located throughout the United States.
The
Lightstone REIT is structured as an umbrella partnership real estate investment trust, or UPREIT, and substantially all of the Company’s
current and future business is and will be conducted through Lightstone Value Plus REIT, L.P. (the “Operating Partnership”),
a Delaware limited partnership formed on July 12, 2004. As of June 30, 2021, the Company held a 98% general partnership interest in the
Company’s Operating Partnership’s common units (“Common Units”).
The
Lightstone REIT and the Operating Partnership and its subsidiaries are collectively referred to as the “Company”
and the use of “we,” “our,” “us” or similar pronouns refers
to the Lightstone REIT, its Operating Partnership or the Company as required by the context in which such pronoun is used.
Through
its Operating Partnership, the Company owns, operates and develops commercial, residential, and hospitality properties and makes real
estate-related investments, principally in the United States. The Company’s real estate investments are held alone or jointly with
other parties. The Company also originates or acquires mortgage loans secured by real estate. Although most of its investments are of
these types, the Company may invest in whatever types of real estate or real estate-related investments that it believes is in its best
interests. Since its inception, the Company has owned and managed various commercial and residential properties located throughout the
United States. The Company currently has one operating segment.
As
of June 30, 2021, the Company has ownership interests in (i) two consolidated operating properties, (ii) three consolidated development
properties (including the Santa Clara Data Center, which is classified as held for sale) and (iii) seven unconsolidated operating properties.
With respect to its consolidated operating properties, the Company wholly owns the St. Augustine Outlet Center, a retail property containing
approximately 0.3 million square feet of gross leasable area, and has a majority ownership interest of approximately 59.2% in Gantry
Park Landing, a multi-family residential property containing 199 apartment units. With respect to its consolidated development properties,
the Company wholly owns three projects consisting of the Lower East Side Moxy Hotel, the Exterior Street Project and the Santa Clara
Data Center. The Company also holds a 2.5% ownership interest in seven hotel properties through a joint venture (the “Joint Venture”)
which the Company accounts for using a measurement alternative under which the Joint Venture is measured at cost, adjusted for observable
price changes and impairments, if any. The Joint Venture is between the Company and the operating partnership of Lightstone Value Plus
Real Estate Investment Trust II, Inc. (“Lightstone II”), a real estate investment trust also sponsored by the Company’s
Sponsor, which has a 97.5% ownership interest in the Joint Venture. Furthermore, the Company has other real estate-related investments,
including preferred investments in related parties and nonrecourse loans made to unaffiliated third-party borrowers.
The
Company’s advisor is Lightstone Value Plus REIT, LLC (the “Advisor”), which is majority owned by David Lichtenstein.
On July 6, 2004, the Advisor contributed $2 to the Operating Partnership in exchange for 200 Common Units. The Company’s Advisor
also owns 20,000 shares of the Company’s common stock (“Common Shares”) which were issued on July 6, 2004 for $200,
or $10.00 per share. Mr. Lichtenstein also is the majority owner of the equity interests of The Lightstone Group, LLC. The Lightstone
Group, LLC served as the sponsor (the “Sponsor”) during the Company’s initial public offering (the “Offering”),
which terminated on October 10, 2008. The Company’s Advisor, together with its board of directors (the “Board of Directors”),
is primarily responsible for making investment decisions on the Company’s behalf and managing its day-to-day operations. Through
his ownership and control of The Lightstone Group, LLC, Mr. Lichtenstein is the indirect owner and manager of Lightstone SLP, LLC, a
Delaware limited liability company, which owns an aggregate of $30.0 million of special general partner interests (“SLP Units”)
in the Operating Partnership which were purchased, at a cost of $100,000 per unit, in connection with the Company’s Offering. Mr.
Lichtenstein also acts as the Company’s Chairman and Chief Executive Officer. As a result, he exerts influence over but does not
control the Lightstone REIT or the Operating Partnership.
The
Company does not have any employees. The Advisor receives compensation and fees for services related to the investment and management
of the Company’s assets.
The
Company’s Advisor has affiliates which may manage and develop certain of its properties. However, the Company also contracts with
other unaffiliated third-party property managers.
LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT
TRUST, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, except per share/unit
data and where indicated in millions)
The
Company’s Common Shares are not currently listed on a national securities exchange. The Company may seek to list its stock for
trading on a national securities exchange only if a majority of independent directors believe listing would be in the best interest of
its stockholders. The Company does not intend to list its shares at this time. The Company does not anticipate that there would be any
market for its shares of common stock until they are listed for trading.
Related
Parties
The
Advisor and its affiliates, and Lightstone SLP, LLC are related parties of the Company. Certain of these entities are entitled to compensation
for services related to the investment, management and disposition of the Company’s assets. The compensation is based on the cost
of acquired properties/investments and the annual revenue earned from such properties/investments, and other such fees and expense reimbursements
as outlined in each of the respective agreements.
Gain
on Disposition of Real Estate
On
May 25, 2021, the Company completed the disposition of a parcel of land adjacent to the St. Augustine Outlet Center for a contractual
sales price of $6.8 million and recognized a gain on the disposition of real estate of approximately $3.6 million during the second quarter
of 2021.
On
April 6, 2020, the Company completed the disposition of a parcel of land adjacent to the St. Augustine Outlet Center for a contractual
sales price of $2.1 million and recognized a gain on the disposition of real estate of approximately $1.6 million during the second quarter
of 2020.
Noncontrolling
Interests
Partners
of Operating Partnership
On
July 6, 2004, the Advisor contributed $2 to the Operating Partnership in exchange for 200 Common Units in the Operating Partnership.
The Advisor has the right to convert the Common Units into cash or, at the option of the Company, an equal number of shares of Common
Shares.
In
connection with the Offering, Lightstone SLP, LLC, an affiliate of the Advisor, purchased an aggregate of $30.0 million of SLP Units.
As the majority owner of the SLP Units, Mr. Lichtenstein is the beneficial owner of a 99% interest in such SLP Units and thus receives
an indirect benefit from any distributions made in respect thereof. These SLP Units may be entitled to a portion of any regular and liquidation
distributions that the Company makes to its stockholders, but only after the Company’s stockholders have received a stated preferred
return.
In
addition, an aggregate 497,209 Common Units were issued to other unrelated parties during the years ended December 31, 2008 and 2009
and remain outstanding as of June 30, 2021.
Other
Noncontrolling Interests in Consolidated Subsidiaries
Other
noncontrolling interests in consolidated subsidiaries include ownership interests in (i) Pro-DFJV Holdings LLC (“PRO”) held
by the Company’s Sponsor (see Note 9), (ii) 50-01 2nd St. Associates LLC (the “2nd Street Joint Venture”), held by
the Company’s Sponsor and other affiliates (see Note 9) 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 4). The 2nd Street Joint Venture owns Gantry Park Landing, a multi-family apartment building located
in Queens, New York.
2.
Summary of Significant Accounting Policies
Basis
of Presentation
The
consolidated financial statements include the accounts of the Lightstone REIT and its Operating Partnership and its subsidiaries (over
which the Company exercises financial and operating control). All inter-company balances and transactions have been eliminated in consolidation.
In addition, interests in entities acquired are evaluated based on applicable accounting principles generally accepted in the United
States of America (“GAAP”), and if deemed to be variable interest entities (“VIE”) in which the Company is the
primary beneficiary are also consolidated. If the interest in the entity is determined not to be a VIE, then the entity is evaluated
for consolidation based on legal form, economic substance, and the extent to which the Company has control, substantive participating
rights or both under the respective ownership agreement. For entities in which the Company has less than a controlling interest but have
significant influence, the Company accounts for the investment using the equity method of accounting.
LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT
TRUST, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, except per share/unit
data and where indicated in millions)
There
are judgments and estimates involved in determining if an entity in which the Company has made an investment is a VIE and, if so, whether
the Company is the primary beneficiary. The entity is evaluated to determine if it is a VIE by, among other things, calculating
the percentage of equity being risked compared to the total equity of the entity. Determining expected future losses involves assumptions
of various possibilities of the results of future operations of the entity, assigning a probability to each possibility and using a discount
rate to determine the net present value of those future losses. A change in the judgments, assumptions, and estimates outlined
above could result in consolidating an entity that should not be consolidated or accounting for an investment using the equity method
that should in fact be consolidated, the effects of which could be material to our financial statements.
The
accompanying unaudited interim consolidated financial statements and related notes should be read in conjunction with the audited Consolidated
Financial Statements of the Company and related notes as contained in the Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2020. The unaudited interim consolidated financial statements include all adjustments (consisting only of normal recurring
adjustments) and accruals necessary in the judgment of management for a fair presentation of the results for the periods presented. The
accompanying unaudited consolidated financial statements of Lightstone Value Plus Real Estate Investment Trust, Inc. and its Subsidiaries
have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 8 of
Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted
in the United States of America for complete financial statements.
GAAP
requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during a reporting period. The
most significant assumptions and estimates relate to the valuation of real estate and real-estate related investments, marketable securities,
notes receivable, depreciable lives, and revenue recognition. Application of these assumptions requires the exercise of judgment as to
future uncertainties and, as a result, actual results could differ from these estimates.
The
consolidated balance sheet as of December 31, 2020 included herein has been derived from the consolidated balance sheet included in the
Company’s Annual Report on Form 10-K.
The
unaudited consolidated statements of operations for interim periods are not necessarily indicative of results for the full year or any
other period.
COVID-19
Pandemic
The
World Health Organization declared COVID-19 a global pandemic on March 11, 2020 and since that time many of the previously imposed restrictions
and other measures which were instituted in response have been subsequently reduced or lifted. However, the COVID-19 pandemic remains
highly unpredictable and dynamic and its duration and extent continue to be dependent on various developments, such as the emergence
of variants to the virus that may cause additional strains of COVID-19, the administration and ultimate effectiveness of vaccines, and
the eventual timeline to achieve a sufficient level of herd immunity among the general population. Accordingly, the COVID-19 pandemic
may continue to have negative effects on the health of the U.S. economy for the foreseeable future.
As
a result of previously imposed restrictions, the Company temporarily closed its St. Augustine Outlet Center from March 20, 2020 through
May 7, 2020. Primarily because of the impact of the COVID-19 pandemic, the property’s occupancy declined and also during 2020 the
Company provided forbearance of certain rent payments to various tenants. Additionally, the Company has seen 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 has been negatively impacted by the COVID-19 pandemic.
To-date,
the COVID-19 pandemic has not had any significant impact on the Company’s development projects. Furthermore, the Company’s
other real estate-related investments (both its preferred investments in related parties and nonrecourse loans made to unaffiliated third-party
borrowers) also relate to various development projects which are at different stages in their respective development process. These investments,
which are subject to similar restrictions and other measures, have also not yet been significantly impacted by the COVID-19 pandemic.
LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT
TRUST, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, except per share/unit
data and where indicated in millions)
The
overall extent to which the Company’s business may be affected by the ongoing COVID-19 pandemic will largely depend on both current
and future developments, all of which are highly uncertain and cannot be reasonably predicted.
If
the Company’s operating properties, development projects and real estate-related investments are negatively impacted for an extended
period because (i) occupancy levels and rental rates 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 the Company’s preferred investments in related parties, the Company’s
business and financial results could be materially and adversely impacted.
New
Accounting Pronouncements
In
June 2016, the FASB issued an accounting standards update which replaces the Company incurred loss impairment methodology currently in
use with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable
information to inform credit loss estimates. The new guidance is effective for fiscal years beginning after December 15, 2022,
including interim periods within those fiscal years. The Company is currently in the process of evaluating the impact the adoption
of this standard will have on the Company’s consolidated financial statements.
The
Company has reviewed and determined that other recently issued accounting pronouncements will not have a material impact on its financial
position, results of operations and cash flows, or do not apply to its current operations.
Supplemental
Cash Flow Information
Supplemental
cash flow information for the periods indicated is as follows:
Summary of supplemental cash flow information
|
|
|
|
|
|
|
|
|
For the Six Months Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
4,581
|
|
|
$
|
4,310
|
|
Distributions declared but not paid
|
|
$
|
3,908
|
|
|
$
|
3,912
|
|
Investment property acquired but not paid
|
|
$
|
5,588
|
|
|
$
|
1,447
|
|
Amortization of deferred financing costs included in construction in progress
|
|
$
|
297
|
|
|
$
|
806
|
|
Holding loss/gain on marketable securities
|
|
$
|
107
|
|
|
$
|
1,480
|
|
Value of shares issued from distribution reinvestment program
|
|
$
|
161
|
|
|
$
|
163
|
|
3.
Development Projects
Lower
East Side Moxy Hotel
On
December 3, 2018, the Company, through a subsidiary of the Operating Partnership, acquired adjacent three parcels of land located
at 147-151 Bowery, New York, New York (collectively, the “Bowery Land”) from 151 Emmut Properties LLC and 145-149 Bowery
LLC, both unaffiliated third parties, for aggregate consideration of approximately $56.5 million, excluding closing and other acquisition
related costs. Additionally, on December 6, 2018, the Company, though a subsidiary of the Operating Partnership, acquired certain
air rights located at 329 Broome Street, New York, New York (the “Air Rights”) from B.R.P. Realty Corp., an unaffiliated
third party, for approximately $2.4 million, excluding closing and other acquisition related costs. The Company is using the Bowery Land
and Air Rights for the development and construction of a 296-room Marriott Moxy hotel (the “Lower East Side Moxy Hotel”).
Exterior
Street Project
On
February 27, 2019, the Company, through subsidiaries of the Operating Partnership, acquired two adjacent parcels of land located at 355
and 399 Exterior Street, New York, New York (collectively, the “Exterior Street Land”), from Borden Realty Corp and 399 Exterior
Street Associates LLC, unaffiliated third parties, for an aggregate purchase price of approximately $59.0 million, excluding closing
and other acquisition related costs. The Company is using the Exterior Street Land for the development and construction of a multi-family
residential property (the “Exterior Street Project”).
LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT
TRUST, 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 is a summary of the amounts incurred and capitalized to construction in progress for the Lower East Side Moxy Hotel and the
Exterior Street Project as of the dates indicated and the amounts of interest capitalized to construction in progress for the periods
indicated:
Schedule of development projects
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts Capitalized to Construction in Progress
|
|
|
Capitalized Interest
|
|
|
Capitalized Interest
|
|
|
|
As of
June 30,
|
|
|
As of
December 31,
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
Development Project
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Lower East Side Moxy Hotel
|
|
$
|
115,274
|
|
|
$
|
98,608
|
|
|
$
|
1,232
|
|
|
$
|
1,060
|
|
|
$
|
2,346
|
|
|
$
|
2,107
|
|
Exterior Street Project
|
|
|
83,916
|
|
|
|
74,230
|
|
|
|
480
|
|
|
|
680
|
|
|
|
1,039
|
|
|
|
1,788
|
|
Total
|
|
$
|
199,190
|
|
|
$
|
172,838
|
|
|
$
|
1,712
|
|
|
$
|
1,740
|
|
|
$
|
3,385
|
|
|
$
|
3,895
|
|
4.
Held for Sale and Disposition of the Santa Clara Data Center
On
January 10, 2019, the Company acquired a parcel of land located at 2175 Martin Avenue, Santa Clara, California (the “Martin
Avenue Land”) from an unaffiliated third party, for approximately $10.6 million. Subsequently, the Company completed certain activities
associated with the potential development and construction of the Santa Clara Data Center on the Martin Avenue Land.
As
of December 31, 2020, the Company had incurred and capitalized to construction in progress aggregate costs of $13.4 million related to
the Santa Clara Data Center, which were included in construction in progress on its consolidated balance sheet as of that date. Additionally,
during the three and six months ended June 30, 2020, $0.1 million and $0.2 million, respectively, of interest was capitalized to construction
in progress for the Santa Clara Data Center. No interest was capitalized for the Santa Clara Data Center during the 2021 periods.
On
May 28, 2021, the Company and Prime Data Centers, Corp. (the “Santa Clara Data Center Buyer”), an unaffiliated third party,
entered into a purchase and sale agreement (the “Santa Clara Data Center PSA”) pursuant to which the Company would dispose
of the Santa Clara Data Center to the Santa Clara Data Center Buyer for a contractual sales price of $13.9 million.
During
the second quarter of 2021, the Santa Clara Data Center met the criteria to be classified as held for sale and therefore, its associated
assets of $13.4 million are classified as held for sale in the consolidated balance sheet as of June 30, 2021.
Subsequently,
on July 7, 2021, the Company completed the disposition of the Santa Clara Data Center pursuant to the terms of the Santa Clara Data Center
PSA.
5.
Marketable Securities, Fair Value Measurements and Notes Payable
Marketable
Securities:
The
following is a summary of the Company’s available for sale securities:
Summary of available for sale securities and other investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2021
|
|
|
|
Adjusted Cost
|
|
|
Gross Unrealized Gains
|
|
|
Gross Unrealized Losses
|
|
|
Fair Value
|
|
Marketable Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Securities, primarily REITs
|
|
$
|
8,745
|
|
|
$
|
6,264
|
|
|
$
|
(166
|
)
|
|
$
|
14,843
|
|
Marco OP Units and Marco II OP Units
|
|
|
19,227
|
|
|
|
8,075
|
|
|
|
-
|
|
|
|
27,302
|
|
|
|
|
27,972
|
|
|
|
14,339
|
|
|
|
(166
|
)
|
|
|
42,145
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Bonds
|
|
|
17,606
|
|
|
|
578
|
|
|
|
(72
|
)
|
|
|
18,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
45,578
|
|
|
$
|
14,917
|
|
|
$
|
(238
|
)
|
|
$
|
60,257
|
|
LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT
TRUST, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, except per share/unit
data and where indicated in millions)
|
|
As of December 31, 2020
|
|
|
|
Adjusted Cost
|
|
|
Gross Unrealized Gains
|
|
|
Gross Unrealized Losses
|
|
|
Fair Value
|
|
Marketable Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Securities, primarily REITs
|
|
$
|
9,386
|
|
|
$
|
2,054
|
|
|
$
|
(575
|
)
|
|
$
|
10,865
|
|
Marco OP Units and Marco II OP Units
|
|
|
19,227
|
|
|
|
-
|
|
|
|
(1,383
|
)
|
|
|
17,844
|
|
|
|
|
28,613
|
|
|
|
2,054
|
|
|
|
(1,958
|
)
|
|
|
28,709
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Bonds
|
|
|
16,964
|
|
|
|
546
|
|
|
|
(148
|
)
|
|
|
17,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
45,577
|
|
|
$
|
2,600
|
|
|
$
|
(2,106
|
)
|
|
$
|
46,071
|
|
As
of both June 30, 2021 and December 31, 2020, the Company held an aggregate of 209,243 Marco OP Units and Marco II OP Units, of which
89,695 were owned by PRO. The Marco OP Units and the Marco II OP Units are exchangeable for a similar number of common operating partnership
units (“Simon OP Units”) of Simon Property Group, L.P., (“Simon OP”), the operating partnership of Simon Property
Group, Inc. (“Simon”), a public REIT that is an owner and operator of shopping malls and outlet centers. Subject to the various
conditions, the Company may elect to exchange the Marco OP Units and/or the Marco II OP Units to Simon OP Units which must be immediately
delivered to Simon in exchange for cash or similar number of shares of Simon’s common stock (“Simon Stock”). Accordingly,
the Marco OP Units and Marco II OP Units are valued based on the closing price of Simon Stock, which was $130.48 per share and $85.28
per share as of June 30, 2021 and December 31, 2020, respectively.
During
2020, financial markets experienced significant volatility in response to the current COVID-19 pandemic, including significant changes
in market interest rates and market prices of certain equity securities. Primarily because of this volatility, the Company incurred unrealized
gains of $5.1 million and $2.7 million, for the three months ended June 30, 2021 and 2020, respectively, and an unrealized gain of $14.1
million for the six months ended June 30, 2021 and an unrealized loss of $18.6 million for the six months ended June 30, 2020. These
unrealized gains and losses incurred on the Company’s marketable equity securities are included in its consolidated statements
of operations.
The
Company considers the declines in market value of its investments in marketable debt securities to be temporary in nature. When evaluating
its investments in marketable debt securities for other-than-temporary impairment, the Company reviews factors such as the length of
time and extent to which fair value has been below cost basis, the financial condition of the issuer and any changes thereto, and the
Company’s intent to sell, or whether it is more likely than not it will be required to sell, the marketable debt security before
recovery of its amortized cost basis. During the three and six months ended June 30, 2021 and 2020, the Company did not recognize any
impairment charges on its investments in marketable debt securities. As of June 30, 2021, the Company does not consider any of its investments
in marketable debt securities to be other-than-temporarily impaired.
The
Company may sell certain of its investments in marketable debt securities prior to their stated maturities for strategic purposes, in
anticipation of credit deterioration, or for duration management.
Fair
Value Measurements
Fair
value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal
or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.
The
standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last
unobservable, that may be used to measure fair value:
|
●
|
Level
1 – Quoted prices in active markets for identical assets or liabilities.
|
|
|
|
|
●
|
Level
2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets
or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable
market data for substantially the full term of the assets or liabilities.
|
|
|
|
|
●
|
Level
3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the
assets or liabilities.
|
LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT
TRUST, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, except per share/unit
data and where indicated in millions)
Marketable
securities measured at fair value on a recurring basis as of the dates indicated are as follows:
Schedule of Marketable securities measured at fair value on a recurring basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement Using
|
|
|
|
|
As of June 30, 2021
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Securities, primarily REITs
|
|
$
|
14,843
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
14,843
|
|
Marco OP and OP II Units
|
|
|
-
|
|
|
|
27,302
|
|
|
|
-
|
|
|
|
27,302
|
|
Corporate Bonds
|
|
|
-
|
|
|
|
18,112
|
|
|
|
-
|
|
|
|
18,112
|
|
Total
|
|
$
|
14,843
|
|
|
$
|
45,414
|
|
|
$
|
-
|
|
|
$
|
60,257
|
|
|
|
Fair Value Measurement Using
|
|
|
|
|
As of December 31, 2020
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Securities, primarily REITs
|
|
$
|
10,865
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
10,865
|
|
Marco OP and OP II Units
|
|
|
-
|
|
|
|
17,844
|
|
|
|
-
|
|
|
|
17,844
|
|
Corporate Bonds
|
|
|
-
|
|
|
|
17,362
|
|
|
|
-
|
|
|
|
17,362
|
|
Total
|
|
$
|
10,865
|
|
|
$
|
35,206
|
|
|
$
|
-
|
|
|
$
|
46,071
|
|
The
fair values of the Company’s investments in Corporate Bonds are measured using readily available quoted prices for similar assets.
Additionally, as noted above, the Company’s Marco OP and Marco OP II Units are ultimately exchangeable for cash or similar number
of shares of Simon Stock, therefore the Company uses the quoted market price of Simon Stock to measure the fair value of the Company’s
Marco OP and Marco OP II Units.
The
following table summarizes the estimated fair value of our investments in marketable debt securities with stated contractual maturity
dates, accounted for as available-for-sale securities and classified by the contractual maturity date of the securities:
Schedule of contractual maturity
|
|
|
|
|
|
June 30,
2021
|
|
Due in 1 year
|
|
$
|
2,007
|
|
Due in 1 year through 5 years
|
|
|
4,435
|
|
Due in 5 years through 10 years
|
|
|
-
|
|
Due after 10 years
|
|
|
11,670
|
|
Total
|
|
$
|
18,112
|
|
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% (0.95% as of June 30,
2021) and is collateralized by the marketable securities in the Company’s account. The amounts available to the Company under the
Margin Loan are at the discretion of the financial institution and not limited to the amount of collateral in its account. There were
no amounts outstanding under this Margin Loan as of June 30, 2021 and December 31, 2020.
LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT
TRUST, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, except per share/unit
data and where indicated in millions)
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, is scheduled to mature on October
9, 2021 and bears interest at LIBOR + 1.35% (1.45% as of June 30, 2021). The Line of Credit is collateralized by an aggregate of 209,243
of Marco OP Units and Marco II OP Units and is guaranteed by PRO. As of June 30, 2021, the amount of borrowings available to be drawn
under the Line of Credit was approximately $15.0 million. No amounts were outstanding under the Line of Credit as of both June 30, 2021
and December 31, 2020. The Company intends to seek to extend the Line of Credit on or before its scheduled maturity date.
6. Notes
Receivable
Beginning
in 2019, the Company has formed certain joint ventures (collectively, the “NR Joint Ventures”) between wholly-owned subsidiaries
of the Operating Partnership (collectively, the “NR Subsidiaries”) and affiliates of the Sponsor (the “NR Affiliates”)
which have originated nonrecourse loans (collectively, the “Joint Venture Promissory Notes”) to unaffiliated third-party
borrowers (collectively, the “Joint Venture Borrowers”).
The
NR Subsidiaries and NR Affiliates have varying ownership interests in the NR Joint Ventures and certain other wholly-owned subsidiaries
of the Operating Partnership serve as the manager and are the sole decision-maker for each of the NR Joint Ventures.
The
Company has determined that the NR Joint Ventures are VIEs and the NR Subsidiaries are the primary beneficiaries. Since the NR
Subsidiaries are the primary beneficiaries, beginning on the applicable date of formation, the Company has consolidated the operating
results and financial condition of the NR Joint Ventures and accounted for the respective ownership interests of the NR Affiliates as
noncontrolling interests.
The
Joint Venture Promissory Notes provide for monthly interest at a prescribed variable rate, subject to a floor. In connection with funding
of the Joint Venture Promissory Notes, the NR Joint Ventures have received origination fees (1.00% - 1.50%) based on the principal amount
of the loan and retained a portion of the loan proceeds to establish a reserve for interest and other items (the “Loan Reserves”).
The Joint Venture Promissory Notes are recorded in notes receivable, net on the consolidated balance sheets.
The
Joint Venture Promissory Notes generally have an initial term of one or two years and may provide for additional extension options subject
to satisfaction of certain prescribed conditions, including the funding of an additional Loan Reserves and payment of an extension fee.
The Joint Venture Promissory Notes are collateralized by either the membership interests of the Joint Venture Borrowers in the borrowing
entity or the underlying real property being developed by the Joint Venture Borrower.
The
origination fees received are presented in the consolidated balance sheets as a direct deduction from the carrying value of the Joint
Venture Promissory Notes and are amortized into interest income, using a straight-line method that approximates the effective interest
method, over the initial term of the Joint Venture Promissory Notes. The Loan Reserves are presented in the consolidated
balance sheets as a direct deduction from the carrying value of the Joint Venture Promissory Notes and are applied against
the monthly interest due over the term.
During
the six months ended June 30, 2021 and 2020, both the NR Subsidiaries and the NR Affiliates made aggregate contributions to the NR Joint
Ventures of $40 and $3.5 million, respectively. Additionally, during the six months ended June 30, 2021 and 2020, the NR Joint Ventures
made aggregate distributions to both the NR Subsidiaries and NR Affiliates of $7.9 million and $1.1 million, respectively, based on their
respective membership interests.
LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT
TRUST, 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 tables summarize the Notes Receivable as of the dates indicated:
Summary of Notes Receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of June 30, 2021
|
|
|
|
Company’s
|
|
|
Loan
|
|
|
|
|
|
|
|
|
|
Contractual
|
|
|
|
|
|
|
|
Unamortized
|
|
|
|
|
|
|
|
|
|
Ownership
|
|
|
Commitment
|
|
|
Origination
|
|
|
Origination
|
|
Maturity
|
|
Interest
|
|
Outstanding
|
|
|
|
|
|
Origination
|
|
|
Carrying
|
|
|
Unfunded
|
|
Joint Venture/Lender
|
|
Percentage
|
|
|
Amount
|
|
|
Fee
|
|
|
Date
|
|
Date
|
|
Rate
|
|
Principal
|
|
|
Reserves
|
|
|
Fee
|
|
|
Value
|
|
|
Commitment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LSC
162nd Capital I LLC
|
|
|
45.45
|
%
|
|
$
|
4,234
|
|
|
|
1.50
|
%
|
|
February
5, 2019
|
|
September
11, 2021
|
|
Libor
plus 7.50% (Floor of 11%)
|
|
$
|
4,076
|
|
|
$
|
(113
|
)
|
|
$
|
(8
|
)
|
|
$
|
3,955
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LSC
162nd Capital II LLC
|
|
|
45.45
|
%
|
|
|
9,166
|
|
|
|
1.50
|
%
|
|
February
5, 2019
|
|
September
11, 2021
|
|
Libor
plus 7.50% (Floor of 11%)
|
|
|
8,824
|
|
|
|
(244
|
)
|
|
|
(18
|
)
|
|
|
8,562
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LSC
1543 7th LLC
|
|
|
50
|
%
|
|
|
20,000
|
|
|
|
1.00
|
%
|
|
August
27, 2019
|
|
August
26, 2021
|
|
Libor
plus 5.40% (Floor of 7.90%)
|
|
|
20,000
|
|
|
|
-
|
|
|
|
(33
|
)
|
|
|
19,967
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LSC
1650 Lincoln LLC
|
|
|
50
|
%
|
|
|
24,000
|
|
|
|
1.00
|
%
|
|
August
27, 2019
|
|
August
26, 2021
|
|
Libor
plus 5.40% (Floor of 7.90%)
|
|
|
24,000
|
|
|
|
-
|
|
|
|
(40
|
)
|
|
|
23,960
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LSC
11640 Mayfield LLC
|
|
|
50
|
%
|
|
|
18,000
|
|
|
|
1.50
|
%
|
|
March
4, 2020
|
|
March
1, 2022
|
|
Libor
plus 10.50% (Floor of 12.50%)
|
|
|
10,750
|
|
|
|
(1,694
|
)
|
|
|
(91
|
)
|
|
|
8,965
|
|
|
|
7,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LSC
87 Newkirk LLC(1)
|
|
|
50
|
%
|
|
|
42,700
|
|
|
|
1.25
|
%
|
|
July
2, 2020
|
|
December 1,
2021
|
|
Libor
plus 6.00% (Floor of 7.00%)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
67,650
|
|
|
$
|
(2,051
|
)
|
|
$
|
(190
|
)
|
|
$
|
65,409
|
|
|
$
|
7,250
|
|
|
(1)
|
Repaid
in full during April 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December
31, 2020
|
|
|
|
Company’s
Ownership
|
|
|
Loan
Commitment
|
|
|
Origination
|
|
|
Origination
|
|
Maturity
|
|
Contractual
Interest
|
|
Outstanding
|
|
|
|
|
|
Unamortized Origination
|
|
|
Carrying
|
|
|
Unfunded
|
|
Joint Venture/Lender
|
|
Percentage
|
|
|
Amount
|
|
|
Fee
|
|
|
Date
|
|
Date
|
|
Rate
|
|
Principal
|
|
|
Reserves
|
|
|
Fee
|
|
|
Value
|
|
|
Commitment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LSC 162nd Capital I LLC
|
|
|
45.45
|
%
|
|
$
|
4,234
|
|
|
|
1.50
|
%
|
|
February 5, 2019
|
|
September 11, 2021
|
|
Libor plus 7.50% (Floor of 11%)
|
|
$
|
4,076
|
|
|
$
|
(338
|
)
|
|
$
|
(33
|
)
|
|
$
|
3,705
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LSC 162nd Capital II LLC
|
|
|
45.45
|
%
|
|
|
9,166
|
|
|
|
1.50
|
%
|
|
February 5, 2019
|
|
September 11, 2021
|
|
Libor plus 7.50% (Floor of 11%)
|
|
|
8,824
|
|
|
|
(732
|
)
|
|
|
(71
|
)
|
|
|
8,021
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LSC 1543 7th LLC
|
|
|
50
|
%
|
|
|
20,000
|
|
|
|
1.00
|
%
|
|
August 27, 2019
|
|
August 26, 2021
|
|
Libor plus 5.40% (Floor of 7.90%)
|
|
|
20,000
|
|
|
|
-
|
|
|
|
(33
|
)
|
|
|
19,967
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LSC 1650 Lincoln LLC
|
|
|
50
|
%
|
|
|
24,000
|
|
|
|
1.00
|
%
|
|
August 27, 2019
|
|
August 26, 2021
|
|
Libor plus 5.40% (Floor of 7.90%)
|
|
|
24,000
|
|
|
|
-
|
|
|
|
(40
|
)
|
|
|
23,960
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LSC 11640 Mayfield LLC
|
|
|
50
|
%
|
|
|
18,000
|
|
|
|
1.50
|
%
|
|
March 4, 2020
|
|
March 1, 2022
|
|
Libor plus 10.50% (Floor of 12.50%)
|
|
|
10,750
|
|
|
|
(2,369
|
)
|
|
|
(158
|
)
|
|
|
8,223
|
|
|
|
7,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LSC 87 Newkirk LLC
|
|
|
50
|
%
|
|
|
42,700
|
|
|
|
1.25
|
%
|
|
July 2, 2020
|
|
December 1, 2021
|
|
Libor plus 6.00% (Floor of 7.00%)
|
|
|
42,700
|
|
|
|
(1,597
|
)
|
|
|
(355
|
)
|
|
|
40,748
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
110,350
|
|
|
$
|
(5,036
|
)
|
|
$
|
(690
|
)
|
|
$
|
104,624
|
|
|
$
|
7,250
|
|
LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT
TRUST, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, except per share/unit
data and where indicated in millions)
The
following summarizes the interest earned (included in interest and dividend income on the consolidated statements of operations) for
each of the Joint Venture Promissory Notes during the periods indicated:
Summarizes the interest earned for each of the Joint Venture Promissory Notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended June 30,
|
|
|
For the Six Months
Ended June 30,
|
|
Joint Venture/Lender
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LSC 162nd Capital I LLC
|
|
$
|
126
|
|
|
$
|
249
|
|
|
$
|
250
|
|
|
$
|
363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LSC 162nd Capital II LLC
|
|
|
272
|
|
|
|
540
|
|
|
|
541
|
|
|
|
785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LSC 1543 7th LLC
|
|
|
449
|
|
|
|
436
|
|
|
|
894
|
|
|
|
873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LSC 1650 Lincoln LLC
|
|
|
539
|
|
|
|
524
|
|
|
|
1,073
|
|
|
|
1,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LSC 11640 Mayfield LLC
|
|
|
373
|
|
|
|
373
|
|
|
|
743
|
|
|
|
488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LSC 11640 Newkirk LLC
|
|
|
790
|
|
|
|
-
|
|
|
|
1,585
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,549
|
|
|
$
|
2,122
|
|
|
$
|
5,086
|
|
|
$
|
3,557
|
|
LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT
TRUST, 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:
Schedule of Mortgages Payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property/Investment
|
|
Interest Rate
|
|
Weighted Average Interest Rate as of June 30,
2021
|
|
|
Maturity Date
|
|
Amount Due at Maturity
|
|
|
As of
June 30,
2021
|
|
|
As of
December 31,
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gantry Park Landing
|
|
4.48%
|
|
|
4.48
|
%
|
|
November 2024
|
|
$
|
65,317
|
|
|
$
|
70,207
|
|
|
$
|
70,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lower East Side Moxy Hotel
|
|
Repaid in full on June 3, 2021
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
35,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lower East Side Moxy Hotel
|
|
LIBOR + 7.50% (floor of 8.00%)
|
|
|
8.00
|
%
|
|
June 2024
|
|
|
35,610
|
|
|
|
35,610
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exterior Street Project
|
|
LIBOR + 2.25%
|
|
|
2.37
|
%
|
|
April 2022
|
|
|
35,000
|
|
|
|
35,000
|
|
|
|
35,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Santa Monica Notes Receivable
|
|
LIBOR + 3.75% (floor of 5.50%)
|
|
|
5.50
|
%
|
|
August 2021
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87 Newkirk Note Receivable
|
|
Repaid in full on April 5, 2021
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
27,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgages payable
|
|
|
|
|
4.94
|
%
|
|
|
|
$
|
160,927
|
|
|
|
165,817
|
|
|
|
193,536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Deferred financing costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,029
|
)
|
|
|
(1,151
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgages payable, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
158,788
|
|
|
$
|
192,385
|
|
LIBOR
as of June 30, 2021 and December 31, 2020 was 0.11% and 0.14%, respectively. The Company’s loans are secured by the indicated real
estate and are non-recourse to the Company, unless otherwise indicated.
On July 22, 2020, the Company, through the 87 Newkirk Joint Venture, entered into a $27.5 million loan (the “87 Newkirk Loan”)
which bore interest at LIBOR + 3.80%, subject to a 4.80% floor, and was scheduled to initially mature on January 1, 2022. The 87 Newkirk
Loan required monthly interest-only payments with the outstanding principal balance due in full at its maturity date and was collateralized
by the 87 Newkirk Note Receivable. On April 5, 2021, the 87 Newkirk Joint Venture repaid the 87 Newkirk Loan in full using a portion
of the proceeds it received from the repayment in full of the 87 Newkirk Note Receivable.
On
November 12, 2019, the Company, through LSC 1543 7th LLC and LSC 1650 Lincoln LLC (collectively, the “Santa Monica Joint Ventures”),
entered into a $25.0 million loan (the “Santa Monica Loan”) which bears interest at LIBOR + 3.75%, subject to a 5.50% floor,
and is currently scheduled to mature on August 26, 2021, but has one remaining six-month extension option, subject to satisfaction of
certain conditions . The Santa Monica Loan requires monthly interest-only payments with the outstanding principal balance due at its
maturity date and is cross-collateralized by two nonrecourse loans originated by the Santa Monica Joint Ventures (see Note 6).
On
March 29, 2019, the Company entered into the $35.0 million Exterior Street Loan which initially bore interest at 4.50% and was scheduled
to mature on April 9, 2020, but had two six-month extension options. However, because the Company exercised both extension options,
the maturity date was extended to April 9, 2021 and upon the exercise of the second extension option on October 9, 2020, the interest
rate became LIBOR plus 2.25%. The Exterior Street Loan requires monthly interest-only payments through its maturity date and is collateralized
by the Exterior Street Project. During April 2021, the maturity date of the Exterior Street Loan was further extended to April 9, 2022.
On
December 3, 2018, the Company entered into a mortgage loan which was collateralized by the Lower East Side Moxy Hotel (the
“Lower East Side Moxy Mortgage”) for up to $35.6 million. The Lower East Side Moxy Mortgage had an initial
term of two years, bore interest at LIBOR+4.25%, subject to a 6.63% floor, and required monthly interest-only payments through its stated
maturity with the entire unpaid balance due upon maturity. In November 2020 the maturity date of Lower East Side Moxy Mortgage was extended
to March 3, 2021 and in March 2021 it was further extended until June 3, 2021, on which date it was then repaid in full as discussed
below.
On
June 3, 2021, the Company, through a wholly owned subsidiary, closed on a recourse construction loan facility (the “Moxy Senior
Loan”) with MSD Partners, L.P. (“MSD”) providing for up to $90 million of funds for the development and construction
of the Lower East Side Moxy Hotel. At closing, $35.6 million of proceeds were advanced under the Moxy Senior Loan and used to repay in
full the Lower East Side Moxy Mortgage. The Moxy Senior Loan bears interest at LIBOR plus 7.50%, subject to an 8.00% floor, and initially
matures on June 3, 2024, with two one-year extension options subject to the satisfaction of certain conditions. The Moxy Senior Loan
is collateralized by the Lower East Side Moxy Hotel. As of June 30, 2021, the outstanding principal balance of the Moxy Senior Loan was
$35.6 million and the remaining availability under the facility was up to $54.4 million.
LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT
TRUST, 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”) with Lionheart Strategic
Management LLC (“Lionheart”) providing for up to $40 million of additional funds for the development and construction of
the Lower East Side Moxy Hotel. No advances had been made under the Moxy Junior Loan as of June 30, 2021. The Moxy Junior Loan bears
interest at LIBOR plus 13.50%, subject to a 14.00% floor, and initially matures on June 3, 2024, with two one-year extension options
subject to the satisfaction of certain conditions. The Moxy Junior Loan is subordinate to the Moxy Senior loan but also collateralized
by the Lower East Side Moxy Hotel. The Company has provided a principal guarantee of up to $7.0 million with respect to the Moxy Junior
Loan.
Future
draws to cover the costs associated with the development and construction of the Lower East Side Moxy Hotel will first be advanced under
the Moxy Junior Loan until it has been fully funded and thereafter, funds will be advanced under the remaining availability of the Moxy
Senior Loan.
In
connection with the Moxy Construction Loans, the Company has provided certain completion and carry cost guarantees. The Company has also
entered into an interest rate cap agreement pursuant to which the LIBOR rate will be capped at 3.00% on the Moxy Senior Loan through
June 3, 2024 at a cost of $0.2 million. Furthermore, in connection with the Moxy Construction Loans, the Company paid $5.3 million of
loan fees and expenses and accrued $1.1 million of loan exit fees which are due at the initial maturity date and are included in accounts
payable, accrued expenses and other liabilities on the consolidated balance sheets as of June 30, 2021.
The
following table shows the contractually scheduled principal maturities of the Company’s mortgage debt during the next five years
and thereafter as of June 30, 2021:
Scheduled of Contractually Principal Maturities During Next Five Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
|
2024
|
|
|
2025
|
|
|
Thereafter
|
|
|
Total
|
|
Principal maturities
|
|
$
|
25,667
|
|
|
$
|
36,389
|
|
|
$
|
1,454
|
|
|
$
|
102,307
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
165,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Deferred financing costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,029
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total principal maturities, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
158,788
|
|
Certain
of the Company’s debt agreements require the maintenance of certain ratios, including debt service coverage. As of June 30, 2021,
the Company was in compliance with all of its financial debt covenants. Additionally, certain of our mortgages payable also contain clauses
providing for prepayment penalties.
Debt
Maturities
The
Exterior Street Loan (outstanding principal balance of $35.0 million as of June 30, 2021) is scheduled to mature on April 9, 2022.
The Company intends to refinance the Exterior Street Loan on or before the its maturity date.
The
Santa Monica Loan (outstanding principal balance of $25.0 million as of June 30, 2021) is scheduled to mature on August 26, 2021.
The Company currently intends to exercise the remaining six-month extension option on the Santa Monica Loan on or before its current
maturity date.
However,
if the Company is unable to extend or refinance any of its maturing indebtedness at favorable terms, it will look to repay the then outstanding
balance with available cash and/or proceeds from selective asset sales. The Company has no additional significant maturities of mortgage
debt over the next 12 months.
LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT
TRUST, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, except per share/unit
data and where indicated in millions)
The
Company’s retail property (St. Augustine Outlet Center) and multi-family residential property (Gantry Park Landing) are both leased
to tenants under operating leases. Substantially all of our multi-family residential property leases have initial terms of 12 months
or less. Our retail space leases expire between the remainder of 2021 and 2025.
As
of June 30, 2021, the approximate fixed future minimum rent payments, excluding variable lease consideration, from the Company’s
retail property, due to us under non-cancelable leases are as follows:
Schedule of Future Minimum Rental Payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
|
2024
|
|
|
2025
|
|
|
Thereafter
|
|
|
Total
|
|
$
|
739
|
|
|
$
|
605
|
|
|
$
|
524
|
|
|
$
|
338
|
|
|
$
|
118
|
|
|
$
|
-
|
|
|
$
|
2,324
|
|
The
Company has excluded its multi-family residential property’s leases from this table as substantially all of its multi-family residential
property’s leases have initial terms of 12 months of less.
Share
Repurchase Program
The
Company’s share repurchase program (the “SRP”) may provide its stockholders with limited, interim liquidity by enabling
them to sell their shares of common stock back to the Company, subject to restrictions.
On
March 25, 2020, the Board of Directors amended the SRP to remove stockholder notice requirements and also approved the suspension of
all redemptions effective immediately.
Effective
March 15, 2021 and May 14, 2021, the Board of Directors partially reopened the SRP to allow, subject to various conditions as set forth
below, for redemptions submitted in connection with a stockholder’s death and hardship, respectively, and set the price for all
such purchases to $11.18, which is 100% of the NAV per Share. Deaths that occurred subsequent to January 1, 2020 are eligible for consideration.
Beginning January 1, 2022, requests for redemptions in connection with a stockholder’s death must be submitted and received by
the Company within one year of the stockholder’s date of death for consideration.
On
an annual basis, the Company will not redeem in excess of 0.5% of the number of shares outstanding as of the end of the preceding year
for either death or hardship redemptions, respectively. Redemption requests are expected to be processed on a quarterly basis and may
be subject to pro ration if either type of redemption requests exceed the annual limitation.
Net
Earnings Per Share
Basic
net earnings per share is calculated by dividing net income attributable to common shareholders by the weighted-average number of shares
of common stock outstanding during the applicable period. Dilutive income per share includes the potentially dilutive effect, if any,
which would occur if our outstanding options to purchase our common stock were exercised. For all periods presented dilutive net income
per share is equivalent to basic net income per share.
|
10.
|
Related
Party Transactions
|
The
Company has various agreements, including an advisory agreement, with the Advisor and Lightstone Value Plus REIT Management LLC (the
“Property Manager”) to pay certain fees in exchange for services performed by these entities and other affiliated entities.
The Company’s ability to secure financing and subsequent real estate operations are dependent upon its Advisor, Property Manager
and their affiliates to perform such services as provided in these agreements. Amounts the Company owes to the Advisor and its
affiliated entities are principally for asset management fees, and are classified as due to related parties on the consolidated balance
sheets.
LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT
TRUST, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, except per share/unit
data and where indicated in millions)
The
Company, pursuant to the related party arrangements, has recorded the following amounts for the periods indicated:
Amount recorded in pursuant to related party arrangement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset management fees (general and administrative costs)
|
|
$
|
211
|
|
|
$
|
215
|
|
|
$
|
455
|
|
|
$
|
430
|
|
Property management fees (property operating expenses)
|
|
|
72
|
|
|
|
103
|
|
|
|
168
|
|
|
|
213
|
|
Development fees and cost reimbursement(1)
|
|
|
1,603
|
|
|
|
308
|
|
|
|
1,913
|
|
|
|
696
|
|
Total
|
|
$
|
1,886
|
|
|
$
|
626
|
|
|
$
|
2,536
|
|
|
$
|
1,339
|
|
|
(1)
|
Development
fees and development costs that the Company reimburses its Advisor for are capitalized and are included in the carrying value of the
associated development project and classified as construction in progress on the consolidated balance sheets.
|
The
advisory agreement has a one-year term and is renewable for an unlimited number of successive one-year periods upon the mutual consent
of the Advisor and the Company’s independent directors. Payments to the Advisor or its affiliates may include asset acquisition
fees and the reimbursement of acquisition-related expenses, development fees and the reimbursement of development-related costs, financing
coordination fees, asset management fees or asset management participation, and construction management fees. The Company may also reimburse
the Advisor and its affiliates for actual expenses it incurs for administrative and other services provided for it. Upon the liquidation
of the Company’s assets, it may pay the Advisor or its affiliates a disposition commission.
In
connection with the Company’s Offering, Lightstone SLP, LLC purchased an aggregate of $30.0 million of SLP Units which are included
in noncontrolling interests in the consolidated balance sheets. These SLP Units, the purchase price of which will be repaid only after
stockholders receive a stated preferred return and their net investment, entitle Lightstone SLP, LLC to a portion of any regular distributions
made by the Operating Partnership.
During
both the three and six months ended June 30, 2021 and 2020, distributions of $0.5 million and $1.0 million, respectively, were declared
and paid on the SLP units.
Preferred
Investments
The
Company has entered into agreements with various related party entities that provide for it to make preferred contributions pursuant
to certain instruments (the “Preferred Investments”) that entitle it to certain prescribed monthly preferred distributions
(see below for additional information). The fair value of these investments approximated their carrying values based on market rates
for similar instruments.
The
Preferred Investments are summarized as follows:
Summary of the Preferred Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Investment Balance
|
|
|
Investment
Income(1)
|
|
|
|
|
|
|
As of
June 30,
|
|
|
As of
December 31,
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
Preferred Investments
|
|
Dividend Rate
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
40 East End Avenue
|
|
|
12
|
%
|
|
$
|
6,000
|
|
|
$
|
6,000
|
|
|
$
|
182
|
|
|
$
|
182
|
|
|
$
|
362
|
|
|
$
|
518
|
|
East 11th Street
|
|
|
12
|
%
|
|
|
8,500
|
|
|
|
8,500
|
|
|
|
258
|
|
|
|
258
|
|
|
|
513
|
|
|
|
519
|
|
Miami Moxy
|
|
|
12
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
45
|
|
Total
|
|
|
|
|
|
$
|
14,500
|
|
|
$
|
14,500
|
|
|
$
|
440
|
|
|
$
|
440
|
|
|
$
|
875
|
|
|
$
|
1,082
|
|
Note:
|
(1)
|
Included
in interest and dividend income on the consolidated statements of operations.
|
The
Joint Venture
The
Company has a 2.5% membership interest in the Joint Venture, which holds ownership interests in seven hotels. The carrying value
of its investment was $1.0 million and $1.1 million, as of June 30, 2021 and December 31, 2020, respectively, which is included in investment
in related parties on the consolidated balance sheets.
LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT
TRUST, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, except per share/unit
data and where indicated in millions)
|
11.
|
Financial
Instruments
|
The
carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, restricted escrows, tenants’ accounts
receivable and accounts payable and accrued expenses approximate their fair values because of the short maturity of these instruments.
The carrying amounts of the notes receivable approximate their fair values because the interest rates are variable and reflective of
market rates.
The
carrying amount and estimated fair value (in millions) of the Company’s mortgage debt is summarized as follows:
Schedule of mortgage debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2021
|
|
|
As of December 31, 2020
|
|
|
|
Carrying Amount
|
|
|
Estimated Fair Value
|
|
|
Carrying Amount
|
|
|
Estimated Fair Value
|
|
Mortgages payable
|
|
$
|
165.8
|
|
|
$
|
168.5
|
|
|
$
|
193.5
|
|
|
$
|
198.0
|
|
The
fair value of the mortgages payable was determined by discounting the future contractual interest and principal payments by estimated
current market interest rates.
|
12.
|
Commitments
and Contingencies
|
Legal
Proceedings
From
time to time in the ordinary course of business, the Company may become subject to legal proceedings, claims or disputes.
As
of the date hereof, the Company is not a party to any material pending legal proceedings of which the outcome is probable or reasonably
possible to have a material adverse effect on its results of operations or financial condition, which would require accrual or disclosure
of the contingency and possible range of loss.
13.
Subsequent Events
Distribution
Payment
On
July 15, 2021, the distribution for the three-month period ending June 30, 2021 of $3.9 million was paid in full using a combination
of cash and approximately 7,000 shares of the Company’s common stock issued pursuant to the Company’s DRIP, at a discounted
price of $10.62 per share, equal to 95% of the Company’s most recently published estimated net asset value per share of $11.18
as of September 30, 2020.
Distribution
Declaration
On
August 9, 2021, the Company’s Board of Directors authorized and the Company declared a distribution of $0.175 per share for the
quarterly period ending June 30, 2021. The quarterly distribution is the pro rata equivalent of an annual distribution of $0.70 per share,
or an annualized rate of 7.0% assuming a purchase price of $10.00 per share. The distribution will be paid on or about the 15th day of
the month following the quarter-end to stockholders of record at the close of business on the last day of the quarter-end. The stockholders
have an option to elect the receipt of shares under the Company’s DRIP.
Additionally,
on August 9, 2021, the Board of Directors declared a quarterly distribution for the quarterly period ending June 30, 2021 on the SLP
Units at an annualized rate of 7.0%. Any future distributions on the SLP Units will always be subordinated until stockholders receive
a stated preferred return.
Future
distributions declared will be at the discretion of the Board of Directors based on their analysis of our performance over the previous
periods and expectations of performance for future periods and may differ from the amount of the distribution determined for this period.
The Board of Directors will consider various factors in its determination, including but not limited to, the sources and availability
of capital, current rental revenues, operating and interest expenses and our ability to refinance near-term debt. In addition, the Company
currently intends to continue to comply with REIT distribution requirements. The Company cannot assure that regular distributions will
continue to be made or that it will maintain any particular level of distributions that it has established or may establish.
PART
I. FINANCIAL INFORMATION, CONTINUED: