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 September 30,
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 September 30, 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 September 30, 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 September 30, 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
Effective
as of December 30, 2021, the Company wholly-owns all of its real estate investments and does not have any remaining noncontrolling interests.
Prior to December 30, 2021, noncontrolling interests represented the noncontrolling ownership interest’s proportionate share of
the equity in the Company’s consolidated real estate investments. Income and losses were allocated to noncontrolling interest holders
based generally on their ownership percentage but in certain instances, if a property reached a defined return threshold, then it may
have resulted in distributions to noncontrolling interests which were different from the standard pro-rata allocation percentage. Additionally,
in certain instances, the joint venture agreements may have provided for liquidating distributions based on achieving certain return
metrics.
Acquisitions
of Noncontrolling Members’ Ownership Interests in Consolidated Real Estate Investments
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).
On
December 20, 2021, the Company acquired the noncontrolling member’s 15.0% membership interest in the River Club Properties for
$10.2 million and as a result, owned 100% of the River Club Properties, which were subsequently sold (see Note 5).
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.
|
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.
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)
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.
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, 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 recorded 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 of $0.8 million representing a partial refund of the foreign income tax paid.
Reclassifications
Certain
prior period amounts have been reclassified to conform to the current year presentation.
COVID-19
Pandemic
On
March 11, 2020, the World Health Organization declared COVID-19 a global pandemic and it remains highly unpredictable and dynamic and
its ultimate duration and extent continue to be dependent on various developments, such as the emergence of variants to the virus that
may cause additional strains of COVID-19, and the development, administration and ultimate effectiveness of vaccines, including booster
shots. Accordingly, the ongoing COVID-19 pandemic may continue to have negative effects on the U.S. and global economies for the foreseeable
future.
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)
As
of September 30, 2022, the Company’s consolidated portfolio of properties consisted of eight multi-family apartment complexes,
all of which are located in the U.S. 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 since the onset of the COVID-19 pandemic. Additionally, the
Company’s note receivable (the “500 West 22nd Street Mezzanine Loan”) is collateralized by a substantially completed
10-unit condominium development project located in New York City (the “Condominium Project”), which is subject to risks related
to the COVID-19 pandemic. To date, both the Condominium Project and the Company’s 500 West 22nd Street Mezzanine Loan have not
been significantly impacted by the COVID-19 pandemic.
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 by the ongoing COVID-19 pandemic 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) the borrower is unable to pay scheduled debt service on the 500 West 22nd Street Mezzanine Loan;
the Company’s business and financial results could be materially and adversely impacted.
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 the 500 West 22nd Street Mezzanine Loan, a loan promissory note, 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 September 30,
2022) and had an initial maturity date of August 31, 2021, which has been extended to March 1, 2023, and is collateralized by the ownership
interests of the 500 West 22nd Street Mezzanine Loan Borrower. The 500 West 22nd Street Mezzanine Loan provides for monthly interest-only
payments at a rate of 8% with the additional interest above the 8% threshold added to the outstanding principal balance and due at maturity.
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 nine months ended September 30, 2022, the 500 West 22nd Street Mezzanine
Loan Borrower repaid $8.8 million of the 500 West 22nd Street Mezzanine Loan with proceeds from the sale of condominium units.
As
of September 30, 2022, the remaining outstanding principal balance of the 500 West 22nd Street Mezzanine Loan was $5.5 million,
including $2.4 million of additional interest due at maturity. The 500 West 22nd Street Mezzanine Loan is classified as note receivable,
net on the consolidated balance sheet. During the three and nine months ended September 30, 2022, the Company recorded $0.2 million
and $1.0 million, respectively, of interest income related to the note receivable and during the three and nine months ended September 30,
2021, the Company recorded $0.5 million and $1.3 million, respectively, of interest income related to the note receivable.
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 September 30, 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, accrued expenses 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 September 30, 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 September 30, 2022 |
|
|
As
of December 31, 2021 |
|
|
|
Carrying
Amount |
|
|
Estimated
Fair Value |
|
|
Carrying
Amount |
|
|
Estimated
Fair Value |
|
Notes
payable |
|
$ |
293,636 |
|
|
$ |
291,362 |
|
|
$ |
282,375 |
|
|
$ |
287,194 |
|
|
5. |
Real Estate Properties |
The
following table presents certain information about the Company’s wholly owned and consolidated multifamily real estate properties
as of September 30, 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.
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 September 30, 2022 |
|
|
|
Adjusted
Cost |
|
|
Gross
Unrealized Gains |
|
|
Gross
Unrealized Losses |
|
|
Fair
Value |
|
Debt
securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
and Government Bonds |
|
$ |
3,713 |
|
|
$ |
- |
|
|
$ |
(249 |
) |
|
$ |
3,464 |
|
|
|
As
of December 31, 2021 |
|
|
|
Adjusted
Cost |
|
|
Gross
Unrealized Gains |
|
|
Gross
Unrealized Losses |
|
|
Fair
Value |
|
Debt
securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 September 30, 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 September 30, 2022 |
|
Due
in 1 year |
|
$ |
586 |
|
Due
in 1 year through 5 years |
|
|
2,805 |
|
Due
in 5 years through 10 years |
|
|
73 |
|
Due
after 10 years |
|
|
- |
|
Total |
|
$ |
3,464 |
|
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)
Derivative
Financial Instruments
The
Company has entered into two interest rate cap contracts with unrelated financial institutions in order to reduce the effect of interest
rate fluctuations or risk of certain real estate investment’s interest expense on its variable rate debt. The Company is exposed
to credit risk in the event of non-performance by the counterparty to these financial instruments. Management believes the risk of loss
due to non-performance to be minimal.
The
Company is accounting for the interest rate cap contracts as economic hedges, marking these contracts to market, taking into account
present interest rates compared to the contracted fixed rate over the life of the contract and recording the unrealized gain or loss
on the interest rate cap contracts in the consolidated statements of operations.
For
the three and nine months ended September 30, 2022, the Company recorded an unrealized gain of $0.8 million and $1.9 million, respectively,
in the consolidated statements of operations representing the change in the fair value of these economic hedges during such periods.
The Company did not have any derivative financial instruments during the 2021 periods.
The
interest rate cap contracts have notional amounts of $52.2 million and $49.0 million, respectively, mature on July 15, 2023 and October
11, 2023, respectively, and effectively cap LIBOR at 2.50% and 2.00%, respectively. The aggregate fair value of the interest rate cap
contracts was $1.9 million as of September 30, 2022 and is included in prepaid expenses and other assets on the consolidated balance
sheets. During both the three and nine months ended September 30, 2022, the Company earned $54 from the interest rate cap contracts
which are recorded in interest expense, net on the consolidated statements of operations. See Note 7 for additional information.
Fair
Value Measurements
Fair
value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal
or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.
The
standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last
unobservable, that may be used to measure fair value:
|
● |
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 value 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 value 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 September 30, 2022 and December 31, 2021, 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 nine months ended September 30,
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 September 30, 2022 |
|
|
Maturity
Date |
|
Amount
Due at Maturity |
|
|
As
of September 30, 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 |
|
|
|
5,760 |
|
|
|
5,842 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parkside |
|
4.45% |
|
|
4.45 |
% |
|
June
1, 2025 |
|
|
15,782 |
|
|
|
16,728 |
|
|
|
16,974 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Axis
at Westmont |
|
4.39% |
|
|
4.39 |
% |
|
February
1, 2026 |
|
|
34,343 |
|
|
|
36,641 |
|
|
|
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 |
|
|
|
28,205 |
|
|
|
28,592 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flats
at Fishers Supplemental |
|
3.85% |
|
|
3.85 |
% |
|
July
1, 2026 |
|
|
8,366 |
|
|
|
9,029 |
|
|
|
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%) |
|
|
4.09 |
% |
|
July
9, 2024 |
|
|
45,939 |
|
|
|
45,939 |
|
|
|
44,383 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Citadel
Apartments Senior |
|
LIBOR
+ 1.50% (floor 1.60%) |
|
|
3.17 |
% |
|
October
11, 2024 |
|
|
39,200 |
|
|
|
39,200 |
|
|
|
30,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Citadel
Apartments Junior |
|
LIBOR
+ 8.75% (floor 8.85%) |
|
|
10.06 |
% |
|
October
11, 2024 |
|
|
9,800 |
|
|
|
9,800 |
|
|
|
7,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
notes payable |
|
|
|
|
4.16 |
% |
|
|
|
$ |
282,831 |
|
|
|
293,636 |
|
|
|
282,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Deferred financing costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,752 |
) |
|
|
(4,777 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
notes payable, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
289,884 |
|
|
$ |
277,598 |
|
LIBOR
as of September 30, 2022 and December 31, 2021 was 2.76% and 0.10%, respectively. The Company’s loans are secured
by the indicated real estate and are non-recourse to the Company, unless otherwise indicated.
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 September 30, 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 with a notional amount of
$49.0 million pursuant to which the LIBOR rate is capped at 2.00% 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 September 30, 2022,
the outstanding principal balance and remaining availability under the BayVue Apartments Mortgage was $45.9 million and $6.3 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 with a notional amount of
$52.2 million pursuant to which the LIBOR rate is capped at 2.50% 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 September 30, 2022.
Schedule of contractual obligations for principal payments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
|
2023 |
|
|
2024 |
|
|
2025 |
|
|
2026 |
|
|
Thereafter |
|
|
Total |
|
Principal
maturities |
|
$ |
445 |
|
|
$ |
2,191 |
|
|
$ |
97,401 |
|
|
$ |
18,138 |
|
|
$ |
147,729 |
|
|
$ |
27,732 |
|
|
$ |
293,636 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
deferred financing costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,752 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
notes payable, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
289,884 |
|
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 nine months ended September 30, 2022 the Company repurchased 71,010 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 nine months ended September 30, 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 affiliates 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, 2023. The Company is dependent on
the Advisor and its affiliates for certain services that are essential to it, including asset acquisition and disposition decisions,
property management and leasing services, financing services, and other general administrative responsibilities. In the event that these
entities are 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 September 30, |
|
|
For
the Nine Months Ended September 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Acquisition
fees and acquisition expense reimbursement (1) |
|
$ |
- |
|
|
$ |
1,041 |
|
|
$ |
- |
|
|
$ |
1,041 |
|
Debt
financing fees (2) |
|
|
- |
|
|
|
448 |
|
|
|
- |
|
|
|
448 |
|
Property
management fees (property operating expenses) |
|
|
127 |
|
|
|
109 |
|
|
|
369 |
|
|
|
337 |
|
Administrative
services reimbursement (general and administrative costs) |
|
|
376 |
|
|
|
347 |
|
|
|
1,069 |
|
|
|
1,012 |
|
Asset
management fees (general and administrative costs) |
|
|
853 |
|
|
|
723 |
|
|
|
2,582 |
|
|
|
2,044 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,356 |
|
|
$ |
2,668 |
|
|
$ |
4,020 |
|
|
$ |
4,882 |
|
(1) |
Capitalized
to the corresponding asset and amortized over its estimated useful life. |
(2) |
Capitalized
upon the execution of the loan, presented in the consolidated balance sheets as a direct deduction from the carrying value of the
corresponding loan and amortized over the initial term of the corresponding loan. |
|
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.