Notes
to Consolidated Financial Statements (unaudited)
(Dollar
amounts in thousands, except per share/unit data and where indicated in millions)
Lightstone
Value Plus REIT V, Inc. (“Lightstone REIT V”) which was formerly known as Lightstone Value Plus Real Estate Investment
Trust V, Inc. before August 31, 2021, was organized as a Maryland corporation on January 9, 2007 and has elected to
be taxed, and currently qualifies, as a real estate investment trust (“REIT”) for federal income tax purposes.
Lightstone
REIT V, together with its subsidiaries is collectively referred to as the “Company” and the use of “we,”
“our,” “us” or similar pronouns refers to Lightstone REIT V or the Company as required by the context
in which any such pronoun is used.
The
Company was formed primarily to acquire and operate commercial real estate and real estate-related assets on an opportunistic
and value-add basis. In particular, the Company has focused generally on acquiring commercial properties with significant possibilities
for capital appreciation, such as those requiring development, redevelopment, or repositioning, those located in markets and submarkets
with high growth potential, and those available from sellers who are distressed or face time-sensitive deadlines. The Company
has acquired a wide variety of commercial properties, including office, industrial, retail, hospitality, and multifamily. The
Company has purchased existing, income-producing properties, and newly-constructed properties. The Company has also invested in
other real estate-related investments such as mortgage and mezzanine loans. The Company intends to hold the various real properties
in which it has invested until such time as its board of directors determines that a sale or other disposition appears to be advantageous
to achieve the Company’s investment objectives or until it appears that the objectives will not be met. The Company currently
has one operating segment. As of March 31, 2022, the Company had eight wholly owned real estate investments (multi-family
apartment complexes) and one real estate-related investment (mezzanine loan).
Substantially
all of the Company’s business is conducted through Lightstone REIT V OP LP, a limited partnership organized in Delaware
(the “Operating Partnership”). As of March 31, 2022, the Company’s wholly-owned subsidiary, BHO II, Inc.,
a Delaware corporation, owned a 0.1% partnership interest in the Operating Partnership as its sole general partner. As of March 31,
2022, the Company’s wholly-owned subsidiary, BHO Business Trust II, a Maryland business trust, was the sole limited partner
of the Operating Partnership and owned the remaining 99.9% interest in the Operating Partnership.
The
Company’s business is externally managed by LSG Development Advisor LLC (the “Advisor”), an affiliate of the
Lightstone Group LLC (“Lightstone”) which provides advisory services to the Company and the Company has no employees.
Lightstone is majority owned by the chairman emeritus of the Company’s board of directors, David Lichtenstein. Pursuant
to the terms of an advisory agreement and subject to the oversight of the Company’s board of directors, the Advisor is responsible
for managing the Company’s day-to-day affairs and for services related to the management of the Company’s assets.
Organization
In
connection with the Company’s initial capitalization, the Company issued 22,500 shares of its common stock and 1,000 shares
of its convertible stock to the Company’s previous advisor on January 19, 2007. The 1,000 shares of convertible stock
were transferred to an affiliate of Lightstone on February 10, 2017 and remain outstanding. As of March 31, 2022, the
Company had 20.1 million shares of common stock outstanding.
The
Company’s common stock is not currently listed on a national securities exchange. The timing of a liquidity event for the
Company’s stockholders will depend upon then prevailing market conditions and the Company’s board of directors’
assessment of the Company’s investment objectives and liquidity options for the Company’s stockholders. Currently,
the Company’s board of directors has targeted June 30, 2028 for the commencement of a liquidity event. However, the
Company can provide no assurances as to the actual timing of the commencement of a liquidity event for its stockholders or the
ultimate liquidation of the Company. Furthermore, the Company will seek stockholder approval prior to liquidating its entire portfolio.
Lightstone
Value Plus REIT V, Inc.
Notes
to Consolidated Financial Statements (unaudited)
(Dollar
amounts in thousands, except per share/unit data and where indicated in millions)
Noncontrolling
Interests
Noncontrolling
interests represents the noncontrolling ownership interest’s proportionate share of the equity in our consolidated real
estate investments. Income and losses are allocated to noncontrolling interest holders based generally on their ownership percentage.
If a property reaches a defined return threshold, then it will result in distributions to noncontrolling interests which is different
from the standard pro-rata allocation percentage. In certain instances, our joint venture agreements provide for liquidating distributions
based on achieving certain return metrics.
Acquisition
of Noncontrolling Member’s Ownership Interest (Lakes of Margate)
On
March 17, 2021, the Company acquired the noncontrolling member’s 7.5% ownership interest in the Lakes of Margate for
$1.1 million and as a result, owned 100% of the Lakes of Margate, which was subsequently sold (see Note 5).
| 2. | Summary
of Significant Accounting Policies |
Interim
Unaudited Financial Information
The
accompanying unaudited interim consolidated financial statements and related notes should be read in conjunction with the audited
consolidated financial statements and related notes as contained in the Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2021, which was filed with the Securities and Exchange Commission (the “SEC”)
on March 24, 2022. 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 V, Inc. have been prepared
in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial
information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by GAAP for complete financial statements.
Principles
of Consolidation and Basis of Presentation
Our
consolidated financial statements include our accounts and the accounts of other subsidiaries over which the Company has control.
All inter-company transactions, balances, and profits have been eliminated in consolidation. In addition, interests in entities
acquired are evaluated based on applicable GAAP, and entities 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 or entities which we are not deemed to be the primary beneficiary, it accounts for the investment
using the equity method of accounting.
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.
Earnings
per Share
The
Company had no potentially dilutive securities outstanding during the periods presented. Accordingly, basic and diluted earnings
per share is calculated by dividing net income/(loss) by the weighted-average number of shares of common stock outstanding during
the applicable period.
Lightstone
Value Plus REIT V, Inc.
Notes
to Consolidated Financial Statements (unaudited)
(Dollar
amounts in thousands, except per share/unit data and where indicated in millions)
Restricted
cash
As
required by the Company’s lenders, restricted cash is held in escrow accounts for anticipated capital expenditures, real
estate taxes, and other reserves for certain of our consolidated properties. Capital reserves are typically utilized for non-operating
expenses such as tenant improvements, leasing commissions and major capital expenditures. Alternatively, a lender may require its
own formula for an escrow of capital reserves. Restricted cash may also include certain funds temporarily placed in escrow with
qualified intermediaries to facilitate potential like-kind exchange transactions in accordance with Section 1031 of the Internal
Revenue Code.
Interest
Rate Cap Contracts
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.
Income
Taxes
The
Company has elected to be taxed as a REIT commencing with the taxable year ended December 31, 2008. If the Company qualifies
as a REIT, it generally will not be subject to U.S. federal income tax on its taxable income or capital gain that it distributes
to its stockholders. To maintain its REIT qualification, the Company must meet a number of organizational and operational requirements,
including a requirement that it annually distribute to its stockholders at least 90% of its REIT taxable income (which does not
equal net income, as calculated in accordance with GAAP), determined without regard to the deduction for dividends paid and excluding
any net capital gain. If the Company fails to remain qualified for taxation as a REIT in any subsequent year and does not qualify
for certain statutory relief provisions, its income for that year will be taxed at the regular corporate rate, and it may be precluded
from qualifying for treatment as a REIT for the four-year period following its failure to qualify as a REIT. Such an event could
materially adversely affect the Company’s net income and net cash available for distribution to stockholders.
During
2015, the Company recorded an aggregate provision for income tax of $2.7 million representing estimated foreign income tax due
as a result of the sale of two foreign investments, Alte Jakobstraße and Holstenplatz. During the first quarter of 2022,
the Company recorded an income tax benefit consisting of a refund of foreign income tax of $0.8 million.
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
continuing COVID-19 pandemic 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, the ongoing
administration and ultimate effectiveness of vaccines, including booster shots, and the eventual timeline to achieve a sufficient
level of herd immunity among the general population. Accordingly, the ongoing COVID-19 pandemic may have negative effects on the
health of the U.S. economy for the foreseeable future.
As
of March 31, 2022, the Company’s consolidated portfolio of properties consisted of eight multi-family apartment complexes.
Its multi-family properties have not been significantly impacted by the COVID-19 pandemic and their occupancy levels, rental rates
and rental collections have remained stable. Additionally, the Company’s note receivable is collateralized by a 10-unit
condominium development project located in New York City (the “Condominium Project”), which has been subject to similar
restrictions and risks. To date, both the Condominium Project and the Company’s note receivable have not been significantly
impacted by the COVID-19 pandemic.
Lightstone
Value Plus REIT V, Inc.
Notes
to Consolidated Financial Statements (unaudited)
(Dollar
amounts in thousands, except per share/unit data and where indicated in millions)
The
Company continues to closely monitor the overall extent as to which its business may be affected by the ongoing COVID-19 pandemic
which will largely depend on current and future developments, all of which are highly uncertain and cannot be reasonably predicted.
If
the Company’s properties and its real estate-related investments are negatively impacted in future periods for an extended
period because (i) tenants are unable to pay their rent, (ii) leasing demand falls causing declines in occupancy levels and/or
rental rates, and (iii) its borrower is unable to pay scheduled debt service on the outstanding note receivable; the Company’s
business and financial results could be materially and adversely impacted.
Reclassifications
Certain prior period amounts may have been reclassified
to conform to the current year presentation.
New
Accounting Pronouncements
In
June 2016, the FASB issued new guidance which replaces the 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.
500
West 22nd Street Mezzanine Loan
On
February 28, 2019, the Company, as the lender, and an unrelated third party (the “500 West 22nd Street Mezzanine Loan
Borrower”), as the borrower, entered into a loan promissory note (the “500 West 22nd Street Mezzanine Loan”)
pursuant to which the Company funded $12.0 million of mezzanine financing. On the same date, the Company initially funded $8.0
million of the 500 West 22nd Street Mezzanine Loan and subsequently, through a series of draws, the remaining $4.0 million of
the 500 West 22nd Street Mezzanine Loan was fully funded by the end of the first quarter of 2020.
The
500 West 22nd Street Mezzanine Loan bears interest at a rate of LIBOR+11.0% per annum with a floor of 13.493% (13.493% as of March 31,
2022) and had an initial maturity date of August 31, 2021, with two six-month extension options, subject to satisfaction
of certain conditions, and is collateralized by the ownership interests of the 500 West 22nd Street Mezzanine Loan Borrower. However,
as a result of the exercise of both of the two six-month extension options, the maturity date has been extended to September 1,
2022.
The
500 West 22nd Street Mezzanine Loan Borrower has developed and constructed the Condominium Project located at 500 West 22nd Street,
New York, New York, which is substantially complete. During the three months ended March 31, 2022, the 500 West 22nd Street
Mezzanine Loan Borrower repaid $1.6 million of the 500 West 22nd Street Mezzanine Loan from the proceeds of the sale of condominium
units.
In
connection with the initial funding under the 500 West 22nd Street Mezzanine Loan, the Company retained $2.1 million of the proceeds
to establish a reserve for interest and other items, which was presented in the consolidated balance sheets as a direct deduction
from the carrying value of the 500 West 22nd Street Mezzanine Loan and was applied against the first 8.0% of monthly interest
due during the initial term of the 500 West 22nd Street Mezzanine Loan. Through March 31, 2022, the entire $2.1 million reserve
has been recognized as interest income. The additional monthly interest due above the 8.0% threshold is added to the principal
balance of the 500 West 22nd Street Mezzanine Loan and payable at maturity. As of March 31, 2022, $2.1 million of additional
interest due was added to the principal balance of the 500 West 22nd Street Mezzanine Loan. The 500 West 22nd Street Mezzanine
Loan is recorded in note receivable, net on the consolidated balance sheets. During the three months ended March 31, 2022
and 2021, the Company recorded approximately $0.5 million and $0.4 million, respectively, of interest income related to the note
receivable. As of March 31, 2022, the outstanding principal balance of the 500 West 22nd Street Mezzanine Loan was $12.6
million.
Lightstone
Value Plus REIT V, Inc.
Notes
to Consolidated Financial Statements (unaudited)
(Dollar
amounts in thousands, except per share/unit data and where indicated in millions)
The
Company determined the following disclosure of estimated fair values using available market information and appropriate valuation
methodologies. However, considerable judgment is necessary to interpret market data and develop the related estimates of fair
value. The use of different market assumptions or only estimation methodologies may have a material effect on the estimated fair
value amounts.
As
of March 31, 2022 and December 31, 2021, management estimated that the carrying value of cash and cash equivalents,
restricted cash, note receivable, prepaid expenses and other assets and accounts payable and accrued and other liabilities were
at amounts that reasonably approximated their fair value based on their highly-liquid nature and/or short-term maturities.
The
fair value of the notes payable is categorized as a Level 2 in the fair value hierarchy. The fair value was estimated using a
discounted cash flow analysis valuation on the estimated borrowing rates currently available for loans with similar terms and
maturities. The fair value of the notes payable was determined by discounting the future contractual interest and principal payments
by a market rate. Disclosure about fair value of financial instruments is based on pertinent information available to management
as of March 31, 2022 and December 31, 2021. Carrying amounts of our notes payable and the related estimated fair value
is summarized as follows:
Schedule of Notes payable and the related estimated fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of March 31, 2022 |
|
|
As
of December 31, 2021 |
|
|
|
Carrying
Amount |
|
|
Estimated
Fair Value |
|
|
Carrying
Amount |
|
|
Estimated
Fair Value |
|
Notes
payable |
|
$ |
293,119 |
|
|
$ |
296,499 |
|
|
$ |
282,375 |
|
|
$ |
287,194 |
|
The
following table presents certain information about the Company’s wholly owned and consolidated multifamily real estate properties
as of March 31, 2022:
Schedule Of Real Estate Properties |
|
|
|
|
Property
Name |
|
Location |
|
Date
Acquired |
Arbors
Harbor Town |
|
Memphis,
Tennessee |
|
December 20,
2011 |
Parkside
Apartments (“Parkside”) |
|
Sugar
Land, Texas |
|
August 8,
2013 |
Flats
at Fishers |
|
Fishers,
Indiana |
|
November 30,
2017 |
Axis
at Westmont |
|
Westmont,
Illinois |
|
November 27,
2018 |
Valley
Ranch Apartments |
|
Ann
Arbor, Michigan |
|
February 14,
2019 |
Autumn
Breeze Apartments |
|
Noblesville,
Indiana |
|
March 17,
2020 |
BayVue
Apartments |
|
Tampa,
Florida |
|
July 7,
2021 |
Citadel
Apartments |
|
Houston,
Texas |
|
October 6,
2021 |
Acquisition
Activities
Acquisition
of BayVue Apartments
On
July 7, 2021, the Company completed the acquisition of a 368-unit multifamily property located in Tampa, Florida (the “BayVue
Apartments”), from an unrelated third party for a contractual purchase price of $59.5 million, excluding closing and other
acquisition related costs. The acquisition was funded with $44.3 million of initial proceeds from a mortgage financing (see Note
7 for additional information) and $15.2 million of cash on hand, including escrowed funds released by a qualified intermediary.
In connection with the acquisition, the Company paid the Advisor an aggregate of $1.0 million in acquisition fees and acquisition
expense reimbursements.
Lightstone
Value Plus REIT V, Inc.
Notes
to Consolidated Financial Statements (unaudited)
(Dollar
amounts in thousands, except per share/unit data and where indicated in millions)
Acquisition
of Citadel Apartments
On
October 6, 2021, the Company acquired a 293-unit multifamily property located in Houston, Texas (the “Citadel Apartments”),
from an unrelated third party for a contractual purchase price of $66.0 million, excluding closing and other acquisition related
costs. The acquisition was funded with $38.0 million of initial proceeds from mortgage financings (see Note 7 for additional information)
and $28.0 million of cash on hand. In connection with the acquisition, the Company paid the Advisor an aggregate of $1.2 million
in acquisition fees and acquisition expense reimbursements.
Acquisition
of Noncontrolling Interest in Parkside
On
December 30, 2021, the Company acquired the noncontrolling member’s 10.0% ownership interest in Parkside for $3.6 million
and recorded the $3.7 million difference between the contractual purchase price and the carrying value of the noncontrolling member’s
interest to additional paid-in capital. As a result, the Company now owns 100% of Parkside.
Dispositions
Activities
The
following dispositions did not represent a strategic shift that had a major effect on the Company’s operations and financial
results and therefore did not qualify to be reported as discontinued operations and their operating results are reflected in the
Company’s results from continuing operations in the consolidated statements of operations for all periods presented through
their respective dates of disposition:
Disposition
of Lakes of Margate
On
March 17, 2021, the Company completed the disposition of the Lakes of Margate for a contractual sales price of $50.8 million
to an unrelated third party (the “Lakes of Margate Buyer”). At closing, the Lakes of Margate Buyer paid $15.1 million
and assumed the existing mortgage loan secured by the Lakes of Margate Loan with an outstanding principal balance of $35.7 million.
Additionally, on March 17, 2021, the Company paid $1.1 million for the 7.5% membership interest held in the Lakes of Margate
by the minority owner and recorded the $2.1 million difference between the contractual purchase price and the carrying value of
the noncontrolling member’s interest to additional paid-in capital. As a result, at the time of the completion of the sale
of the Lakes at Margate it was wholly owned by the Company. In connection with the disposition of the Lakes of Margate, the Company
recognized a gain on sale of investment property of $27.8 million during the first quarter of 2021.
Disposition
of the River Club Properties
On
December 22, 2021, the Company completed the disposition of the River Club Apartments and the Townhomes at River Club, two
student housing complexes with a total of 1,134 beds (collectively, the “River Club Properties”) located in Athens,
Georgia, for a contractual sales price of $77.3 million to an unrelated third party. In connection with the transaction, the Company
repaid in full the existing outstanding mortgage indebtedness of $30.4 million secured by the River Club Properties. Additionally,
on December 20, 2021, the Company paid $10.2 million for the 15.0% membership interest held in the River Club Properties
by the minority owner and recorded the $11.7 million difference between the contractual purchase price and the carrying value
of the noncontrolling member’s interest to additional paid-in capital. As a result, at the time of the completion of the
sale of the River Club Properties it was wholly owned by the Company. In connection with the disposition of the River Club Properties,
the Company recognized a gain on the sale of investment property of $55.0 million during the fourth quarter of 2021.
Lightstone
Value Plus REIT V, Inc.
Notes
to Consolidated Financial Statements (unaudited)
(Dollar
amounts in thousands, except per share/unit data and where indicated in millions)
| 6. | Marketable
Securities, Derivative Financial Instruments and Fair Value Measurements |
Marketable
Securities
The
following is a summary of the Company’s available for sale securities as of the dates indicated:
Schedule of available-for-sale securities reconciliation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of March 31, 2022 |
|
Debt
securities: |
|
Adjusted
Cost |
|
|
Gross
Unrealized Gains |
|
|
Gross
Unrealized Losses |
|
|
Fair
Value |
|
Corporate
and Government Bonds |
|
$ |
3,605 |
|
|
$ |
9 |
|
|
$ |
(124 |
) |
|
$ |
3,490 |
|
|
|
As
of December 31, 2021 |
|
Debt
securities: |
|
Adjusted
Cost |
|
|
Gross
Unrealized Gains |
|
|
Gross
Unrealized
Losses |
|
|
Fair
Value |
|
Corporate
and Government Bonds |
|
$ |
3,634 |
|
|
$ |
47 |
|
|
$ |
(36 |
) |
|
$ |
3,645 |
|
When
evaluating the 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. As of March 31, 2022, the Company did not recognize any impairment charges.
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:
Summary of the estimated fair value of our investments in marketable debt securities with stated contractual maturity dates |
|
|
|
|
|
|
As
of March 31, 2022 |
|
Due
in 1 year |
|
$ |
725 |
|
Due
in 1 year through 5 years |
|
|
2,673 |
|
Due
in 5 years through 10 years |
|
|
92 |
|
Due
after 10 years |
|
|
- |
|
Total |
|
$ |
3,490 |
|
Derivative
Financial Instruments
The
Company has entered into two interest rate cap contracts with unrelated financial institutions in order to reduce the effect of
interest rate fluctuations or risk of certain real estate investment’s interest expense on its variable rate debt. The Company
is exposed to credit risk in the event of non-performance by the counterparty to these financial instruments. Management believes
the risk of loss due to non-performance to be minimal.
The
Company is accounting for the interest rate cap contracts as economic hedges, marking these contracts to market, taking into
account present interest rates compared to the contracted fixed rate over the life of the contract and recording the unrealized
gain or loss on the interest rate cap contracts in the consolidated statements of operations.
For
the three months ended March 31, 2022, the Company recorded an unrealized gain of $0.6 million in the consolidated statement
of operations representing the change in the fair value of these economic hedges during such period.
The
two interest rate cap contracts have an aggregate notional amount of $52.2 million and $49.0 million, respectively, mature on
July 15, 2023 and October 11, 2023 and effectively cap LIBOR at 2.50% and 2.00%, respectively. The aggregate fair value
of the interest rate cap contracts was $0.6 million as of March 31, 2022 and is included in prepaid expenses and other assets
on the consolidated balance sheet. (See Note 7 for additional information.)
Lightstone
Value Plus REIT V, Inc.
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. |
The
fair values of the Company’s investments in debt securities are measured using quoted prices for these investments; however,
the markets for these assets 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. As of March 31, 2022, all of the Company’s debt securities and interest rate cap contracts were classified
as Level 2 assets and there were no transfers between the level classifications during the three months ended March 31, 2022.
Lightstone
Value Plus REIT V, Inc.
Notes
to Consolidated Financial Statements (unaudited)
(Dollar
amounts in thousands, except per share/unit data and where indicated in millions)
Notes
payable consists of the following:
Schedule of information on notes payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property |
|
Interest
Rate |
|
Weighted
Average Interest Rate as of March 31,
2022 |
|
|
Maturity
Date |
|
Amount
Due
at Maturity |
|
|
As
of March 31, 2022 |
|
|
As
of December 31, 2021 |
|
Arbors
Harbor Town |
|
4.53% |
|
|
4.53 |
% |
|
January 1, 2026 |
|
$ |
29,000 |
|
|
$ |
29,000 |
|
|
$ |
29,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arbors
Harbor Town Supplemental |
|
3.52% |
|
|
3.52 |
% |
|
January 1, 2026 |
|
|
5,379 |
|
|
|
5,814 |
|
|
|
5,842 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parkside |
|
4.45% |
|
|
4.45 |
% |
|
June
1, 2025 |
|
|
15,782 |
|
|
|
16,890 |
|
|
|
16,974 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Axis
at Westmont |
|
4.39% |
|
|
4.39 |
% |
|
February
1, 2026 |
|
|
34,343 |
|
|
|
36,943 |
|
|
|
37,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valley
Ranch Apartments |
|
4.16% |
|
|
4.16 |
% |
|
March
1, 2026 |
|
|
43,414 |
|
|
|
43,414 |
|
|
|
43,414 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flats
at Fishers |
|
3.78% |
|
|
3.78 |
% |
|
July
1, 2026 |
|
|
26,090 |
|
|
|
28,460 |
|
|
|
28,592 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flats
at Fishers Supplemental |
|
3.85% |
|
|
3.85 |
% |
|
July
1, 2026 |
|
|
8,366 |
|
|
|
9,109 |
|
|
|
9,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Autumn
Breeze Apartments |
|
3.39% |
|
|
3.39 |
% |
|
April
1, 2030 |
|
|
25,518 |
|
|
|
29,920 |
|
|
|
29,920 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BayVue
Apartments |
|
LIBOR
+ 3.10% (floor 3.10%) |
|
|
3.23 |
% |
|
July
9, 2024 |
|
|
44,569 |
|
|
|
44,569 |
|
|
|
44,383 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Citadel
Apartments Senior |
|
LIBOR
+ 1.50% (floor 1.60%) |
|
|
1.60 |
% |
|
October
11, 2024 |
|
|
39,200 |
|
|
|
39,200 |
|
|
|
30,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Citadel
Apartments Junior |
|
LIBOR
+ 8.75% (floor 8.85%) |
|
|
8.85 |
% |
|
October
11, 2024 |
|
|
9,800 |
|
|
|
9,800 |
|
|
|
7,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
notes payable |
|
|
|
|
3.78 |
% |
|
|
|
$ |
281,461 |
|
|
|
293,119 |
|
|
|
282,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Deferred financing costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,444 |
) |
|
|
(4,777 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
notes payable, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
288,675 |
|
|
$ |
277,598 |
|
Lightstone
Value Plus REIT V, Inc.
Notes
to Consolidated Financial Statements (unaudited)
(Dollar
amounts in thousands, except per share/unit data and where indicated in millions)
Citadel
Apartments
On
October 6, 2021, the Company entered into a non-recourse mortgage loan facility for up to $39.2 million (the “Citadel
Apartments Senior Mortgage”). At closing, $30.4 million of proceeds were initially advanced under the Citadel Apartments
Senior Mortgage. The Citadel Apartments Senior Mortgage requires monthly interest-only payments through its maturity date and
bears interest at LIBOR+1.50% subject to a 1.60% floor. Simultaneously, on October 6, 2021, the Company also entered into
a non-recourse mortgage loan facility for up to $9.8 million (the “Citadel Apartments Junior Mortgage” and together
with the Citadel Apartments Senior Mortgage, the “Citadel Apartments Mortgages”). At closing, $7.6 million of proceeds
were initially advanced under the Citadel Apartments Junior Mortgage. The Citadel Apartments Junior Mortgage requires monthly
interest-only payments through its maturity date and bears interest at LIBOR+8.75%, subject to a 8.85% floor.
The
Citadel Apartments Mortgages initially mature on October 11, 2024, with two one-year extension options, subject to the satisfaction
of certain conditions, and are collateralized by the Citadel Apartments, while the Citadel Apartments Junior Mortgage is subordinate
to the Citadel Apartments Senior Mortgage. In connection with the acquisition of the Citadel Apartments, an aggregate $38.0 million
was initially funded under the Citadel Apartments Mortgages and the Company paid the balance of the purchase price of $28.0 million
with cash. In connection with the Citadel Apartments Mortgages, the Company paid the Advisor an aggregate of $0.5 million in debt
financing fees. All of the remaining availability of $11.0 million under the Citadel Apartment Mortgages was subsequently advanced
to the Company in January 2022 and as of March 31, 2022, the aggregate outstanding principal balance under the Citadel
Apartment Mortgages was $49.0 million.
In
connection with the Citadel Apartment Mortgages, the Company has entered into an interest rate cap agreement pursuant to which
the LIBOR rate will be capped at 2.00% (up to $49.0 million) through October 11, 2023.
BayVue
Apartments
On
July 7, 2021, the Company entered into a non-recourse mortgage loan facility for up to $52.2 million (the “BayVue Apartments
Mortgage”) scheduled to initially mature on July 9, 2024, with two, one-year extension options, subject to the satisfaction
of certain conditions. The BayVue Apartments Mortgage requires monthly interest-only payments through its maturity date and bears
interest at LIBOR+3.10% subject to a 3.10% floor. The BayVue Apartments Mortgage is collateralized by the BayVue Apartments. In
connection with the BayVue Apartments Mortgage, the Company paid the Advisor $0.3 million in debt financing fees. As of March 31,
2022, the outstanding principal balance and remaining availability under the BayVue Apartments Mortgage was $44.6 million and
$7.6 million, respectively. The remaining availability may be drawn for certain capital improvements to the property pursuant
to the loan agreement.
In
connection with the BayVue Apartments Mortgage, the Company has entered into an interest rate cap agreement pursuant to which
the LIBOR rate will be capped at 2.50% (up to $52.2 million) through July 15, 2023.
The
following table provides information with respect to the contractual maturities and scheduled principal repayments of the Company’s
indebtedness as of March 31, 2022.
Schedule of contractual obligations for principal payments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
|
2023 |
|
|
2024 |
|
|
2025 |
|
|
2026 |
|
|
Thereafter |
|
|
Total |
|
Principal
maturities |
|
$ |
1,298 |
|
|
$ |
2,191 |
|
|
$ |
96,031 |
|
|
$ |
18,138 |
|
|
$ |
147,729 |
|
|
$ |
27,732 |
|
|
$ |
293,119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
deferred financing costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,444 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
notes payable, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
288,675 |
|
Lightstone
Value Plus REIT V, Inc.
Notes
to Consolidated Financial Statements (unaudited)
(Dollar
amounts in thousands, except per share/unit data and where indicated in millions)
Share
Redemption Program and Redemption Price
The
Company’s board of directors has adopted a share redemption program (the “SRP”) that permits stockholders to
sell their shares back to it, subject to the significant conditions and limitations of the program. The Company’s board
of directors can amend the provisions of the SRP at any time without the approval of the stockholders.
On
December 13, 2019, the Company’s board of directors approved the suspension of the SRP. Pursuant to the terms of the
SRP, while the SRP is suspended, the Company will not accept any requests for redemption.
Effective
March 25, 2021, the Company’s board of directors reopened the SRP solely for redemptions submitted in connection with
a stockholder’s death and set the price for all such purchases to $9.42, which was 100% of the estimated NAV per Share as
of September 30, 2020. 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. Death redemption requests are expected to be processed on a quarterly basis and may be subject to pro ration if death redemption
requests exceed the annual limitation.
The
Company’s board of directors will continue to consider the liquidity available to stockholders going forward, balanced with
other long-term interests of the stockholders and the Company. It is possible that in the future additional liquidity will be
made available by the Company through the SRP, issuer tender offers or other methods, though it can make no assurances as to whether
that will happen, or the timing or terms of any such liquidity.
In
accordance with the Company’s SRP, the per share redemption price automatically adjusted to $12.91 effective November 11,
2021 as a result of the determination and approval by the Company’s board of directors of the updated estimated NAV per
Share.
For
the three months ended March 31, 2022, the Company repurchased 24,419 shares of common stock, pursuant to its SRP at an average
price per share of $12.91 per share.
Distributions
The
Company made an election to qualify as a REIT for federal income tax purposes commencing with its taxable year ended December 31,
2008. U.S. federal tax law requires a REIT distribute at least 90% of its annual REIT taxable income (which does not equal net
income, as calculated in accordance with GAAP) determined without regard to the deduction for dividends paid and excluding any
net capital gain. In order to continue to qualify for REIT status, the Company may be required to make distributions in excess
of cash available. Distributions are authorized at the discretion of the Company’s board of directors based on their analysis
of the Company’s performance over the previous periods and expectations of performance for future periods. Such analyses
may include actual and anticipated operating cash flow, changes in market capitalization rates for investments suitable for the
Company’s portfolio, capital expenditure needs, general financial and market conditions, proceeds from asset sales, and
other factors that the Company’s board of directors deems relevant.
The
Company’s board of directors’ decision will be substantially influenced by their obligation to ensure that the Company
maintains its federal tax status as a REIT. The Company cannot provide assurance that it will pay distributions at any particular
level, or at all.
The
Company did not make any distributions to its stockholders during the three months ended March 31, 2022 and 2021.
Lightstone
Value Plus REIT V, Inc.
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 agreements with the Advisor and its affiliate to pay certain fees in exchange for services performed by these entities
and other related parties. These agreements have a one-year term and currently extend through June 30, 2022. The Company
is dependent on the Advisor and its affiliates for certain services that are essential to it, including asset disposition decisions,
property management and leasing services, and other general administrative responsibilities. In the event that these companies
were unable to provide the Company with their respective services, the Company would be required to obtain such services from
other sources.
The
following table represents the fees incurred associated with the payments to the Company’s Advisor and its affiliates for
the periods indicated:
Schedule of Related Party Transactions |
|
|
|
|
|
|
|
|
|
|
For
the Three Months Ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
Property
management fees (property operating expenses) |
|
$ |
117 |
|
|
$ |
118 |
|
Administrative
services reimbursement (general and administrative costs) |
|
|
347 |
|
|
|
333 |
|
Asset
management fees (general and administrative costs) |
|
|
868 |
|
|
|
695 |
|
Total |
|
$ |
1,332 |
|
|
$ |
1,146 |
|
| 10. | Commitments
and Contingencies |
Legal
Proceedings
From
time to time in the ordinary course of business, the Company may become subject to legal proceedings, claims or disputes.
As
of the date hereof, 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.