LVVP Lightstone Value Plus Real Estate Investment Trust V Inc (GM)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): November 9, 2023

 

Lightstone Value Plus REIT V, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

Maryland		000-53650		20-8198863
(State or other jurisdiction of incorporation or organization)		(Commission File Number)		(I.R.S. Employer Identification No.)

 

1985 Cedar Bridge Avenue, Suite 1

Lakewood, New Jersey 08701

(Address of principal executive offices)

(Zip Code)

 

(732) 367-0129 

(Registrant’s telephone number, including area code)

 

None

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act: None.

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

Item 8.01 Other Events.

 

Estimated Net Asset Value (“NAV”) and NAV per Share of Common Stock (“NAV per Share”)

 

On November 9, 2023, pursuant to the Policy for Estimation of Common Stock Value (the “Estimated Valuation Policy”), the board of directors of Lightstone Value Plus REIT V, Inc. (the “Company,” “we,” “us,” or “our”) determined and approved our estimated NAV of approximately $304.8 million and resulting estimated NAV per Share of $15.46 both as of September 30, 2023. Our estimated NAV and resulting NAV per Share are based upon the estimated fair values of our assets and liabilities as of September 30, 2023 and are effective as of November 9, 2023.

 

Our estimated NAV per Share was calculated as of a particular point in time. Accordingly, our estimated NAV per Share will fluctuate over time in response to developments related to individual assets in the portfolio and the management of those assets and in response to changes in the real estate and financial markets. There is no assurance of the extent to which the current estimated valuation should be relied upon for any purpose after its effective date regardless that it may be published on any statement issued by us or otherwise.

 

Process and Methodology

 

Our business is externally managed by LSG Development Advisor LLC (the “Advisor”), an affiliate of The Lightstone Group LLC (“Lightstone”) which provides advisory services to us and we have no employees. Our Advisor, along with any necessary material assistance or confirmation of a third-party valuation expert or service, is responsible for calculating our estimated NAV and resulting NAV per Share, which we currently expect will be done on at least an annual basis unless and until our shares of common stock are approved for listing on a national securities exchange. Our board of directors will review and approve each estimate of NAV and resulting NAV per Share.

 

Our estimated NAV and resulting NAV per Share as of September 30, 2023 were calculated with both the assistance of our Advisor and Capright Property Advisors, LLC (“Capright”), an independent third-party valuation firm engaged to assist with the valuation of our assets and liabilities. Our Advisor recommended and our board of directors established the estimated NAV per Share based upon the analyses and reports provided by our Advisor and Capright. The process of estimating the value of our assets and liabilities is performed in accordance with our Estimated Valuation Policy and the provisions of the Investment Program Association Practice Guideline 2013-01, “Valuation of Publicly Registered Non-Listed REITs.” We believe our valuations were developed in a manner reasonably designed to ensure their reliability.

 

In arriving at an estimated NAV and resulting NAV per Share, our board of directors reviewed and considered the valuation analyses prepared by our Advisor and Capright. Our Advisor presented a report to the board of directors with an estimated NAV and resulting NAV per Share. Capright provided our board of directors an opinion that the resulting “as-is” market value for the Company’s investment properties, as calculated by our Advisor, and its remaining assets and liabilities, as valued by our Advisor, along with the corresponding NAV valuation methodologies and assumptions used by our Advisor to arrive at a recommended NAV per Share of $15.46 as of September 30, 2023 were appropriate and reasonable. Our board of directors conferred with our Advisor and a representative from Capright regarding the methodologies and assumptions used to reach their respective conclusions. Our board of directors, which is responsible for determining our estimated per share value, considered all information provided in light of their own familiarity with our assets and liabilities and unanimously approved a NAV per Share of $15.46 as of September 30, 2023.

 

The engagement of Capright with respect to our estimated NAV and resulting NAV per Share as of September 30, 2023 was approved by our board of directors, including all of our independent directors. Capright has extensive experience in conducting asset valuations, including valuations of commercial real estate, debt, properties and real estate-related investments.

 

 

Capright’s opinion was subject to various limitations. In forming its opinion, Capright relied on certain information provided by our Advisor and third parties without independent verification. Our Advisor provided Capright with certain information regarding lease terms and the physical condition and capital expenditure requirements of each of our investment properties. Capright did not perform engineering or structural studies or environmental studies of any of the properties, nor did they perform an independent appraisal of our other assets and liabilities included in our estimated NAV and resulting NAV per Share.

 

In forming their conclusion as to the “as-is” value of the investment properties held by us as of September 30, 2023, Capright’s opinion was subject to various limitations. In connection with their engagement, Capright completed appraisals of seven of our eight of our wholly owned multifamily properties. Our other multifamily property, the Flats at Fishers was sold on November 1, 2023. Accordingly, our Advisor and Capright deemed it appropriate for its estimated fair value of $69.8 million as of September 30, 2023 to equal its contractual sales price less closing and other related transaction costs. With respect to the seven appraisals performed by Capright, the scope of their work included:

 

●

Review of property level information provided by our Advisor;

 

●

Review of the historical performance of our investment properties and business plans related to operations of these investments;

 

●

Review of the data models prepared by the Advisor supporting the valuation for each investment; and Review of the applicable markets by means of publications and other resources to measure current market conditions, supply and demand factors, and growth patterns.

 

In addition to their appraisals of seven of our eight wholly owned multifamily properties, Capright also evaluated the following information to arrive at their opinion of Flats at Fishers and our other assets and liabilities:

 

●

Review of the closing statement and other relevant documents with respect to the disposition of the Flats at Fishers, which occurred on November 1, 2023.

 

●

Review of key market assumptions for our Advisor’s valuation of our notes payable, which consist of the mortgage loans on our properties, including but not limited to interest rates and collateral;

 

●

Review of key market assumptions for our Advisor’s valuation of our note receivable, net, which consists of a mortgage loan on a condominium project, including but not limited to interest rates and collateral; and

 

●

Review of key market assumptions for our Advisor’s valuation of all our other assets and liabilities.

 

Capright has acted as a valuation advisor to us in connection with this assignment. The compensation paid to Capright in connection with this assignment was not contingent upon the successful completion of any transaction or conclusion reached by Capright. Capright may be engaged to provide financial advisory services to us, our Advisor, or other Lightstone-sponsored investment programs or their affiliates in the future.

 

The following is a summary of the valuation methodologies used for each type of asset and liability:

 

Investment property, net. We have generally focused on acquiring commercial real estate properties in various asset classes. Accordingly, Capright utilized a variety of valuation methodologies, each deemed appropriate for the asset type under consideration to assign an estimated value to each asset.

 

The values of our investment properties were generally estimated utilizing multiple valuation methods, as appropriate for each asset, including an income approach using discounted cash flow analysis and a sales comparable analysis. The key assumptions used in the income approach are specific to each property type, market location, and quality of each property and were based on similar investors’ return expectations and market assessments. The key assumptions are reflected in the table included under “Allocation of Estimated NAV per Share” below. In calculating values for our assets, both balance sheet and estimates of future cash flows as of September 30, 2023 were used. With respect to the Flats at Fishers, which was sold on November 1, 2023, our Advisor and Capright deemed it appropriate for its estimated fair value of $69.8 million as of September 30, 2023 to equal to its contractual sales price less closing and other related transaction costs.

 

 

In forming its opinion, Capright prepared appraisals on our other seven wholly owned multifamily properties in connection with the valuation. The appraisals estimated values by using discounted cash flows, comparable sales, or a weighting of these approaches in determining each property’s value. The appraisals employed a range of terminal capitalization rates, discount rates, growth rates, and other variables that fell within ranges that Capright believed would be used by similar investors to value the properties we own. The assumptions used in developing these estimates were specific to each property (including holding periods) and were determined based upon a number of factors including the market in which the property is located, the specific location of the property within the market, property and market vacancy, tenant demand for space, and investor demand and return requirements.

 

While we and our Advisor believe that the approaches used by Capright in valuing our investment properties, including an income approach using a discounted cash flows analysis and a comparable sales analysis, are standard in the real estate industry, the estimated fair values for our investment properties may or may not represent current market values or fair values determined in accordance with generally accepted accounting principles in the United States (“GAAP”). Our investment properties are carried at their amortized cost basis, subject to any adjustments applicable under GAAP, in our consolidated financial statements.

 

Cash and cash equivalents. As of September 30, 2023, the aggregate estimated fair value of our cash and cash equivalents were deemed to approximate their aggregate carrying value our consolidated balance sheet due to their short term maturities.

 

Marketable securities, available for sale. As of September 30, 2023, the aggregate estimated fair value of our marketable securities were equal to their aggregate carrying value on our consolidated balance sheet, all of which were valued based on Level 2 inputs. Level 2 inputs are inputs 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. All of our marketable securities measured using Level 2 inputs were valued based on a market approach using readily available quoted market prices for similar assets.

 

Restricted cash. As of September 30, 2023, the estimated fair value of our restricted cash was deemed to approximate its carrying value on our consolidated balance sheet due to its short term maturity.

 

Note receivable, net. As of September 30, 2023, the estimated fair value of our note receivable, net was deemed to approximate its carrying value on our consolidated balance sheet based on current market rates for similar instruments.

 

Notes payable, net. As of September 30, 2023, we had notes payable, which consist of mortgage loans, that bear interest at both variable and fixed rates. The estimated fair values of our variable-rate mortgage loans were deemed to approximate their carrying values because their interest rates move in conjunction with changes to market interest rates. The estimated fair values of our fixed-rate mortgage loans were estimated by our Advisor using a discounted cash flow analysis, which used inputs based on the remaining loan terms and estimated market interest rates for mortgage loans with similar characteristics, including remaining loan term and loan-to-value ratios. The estimated market interest rates for our fixed-rate notes payable were generally determined based on market rates for available comparable debt. The estimated market interest rates for our fixed-rate mortgage loans ranged from 5.46% to 5.88% as of September 30, 2023.

 

Accrued Distributions Payable. On September 29, 2023, our board of directors declared a special distribution of $0.11 per common share payable to shareholders of record on September 30, 2023 (the “2023 Special Distribution”). The 2023 Special Distribution, which totaled $2.2 million, was subsequently paid on or about October 16, 2023. As of September 30, 2023, the estimated fair value of our accrued distribution payable was deemed to approximate its carrying value on our consolidated balance sheet due to its short term maturity.

 

 

Other assets and liabilities, net. Our other assets and liabilities, net consist of prepaid expenses and other assets, and accounts payable, accrued expenses and other liabilities. For a majority of our other assets and liabilities, the carrying values as of September 30, 2023 were deemed to approximate their fair values by our Advisor because they are already carried at their fair value in the consolidated balance sheet or due to their cost-based characteristics or short term maturities. Certain of our other assets and liabilities, primarily straight-line rent receivable, lease-related intangibles and deferred costs, have been eliminated for the purpose of the valuation because these items were already considered in the valuation of the respective investment properties or financial instruments (e.g.,, notes receivable, notes payable, etc.).

 

Common stock outstanding. In deriving our estimated NAV per Share, the total estimated NAV was divided by our fully diluted common shares outstanding as of September 30, 2022. As of the valuation date, we had approximately 19.7 million common shares outstanding and none of our financial instruments that may be converted into common shares were convertible into a known or determinable number of common shares. The determination of the number of common shares outstanding used in calculating the estimated NAV per Share is the same as used in our GAAP computations for per share amounts in our consolidated financial statements.

 

Our estimated NAV per Share was calculated by aggregating the estimated fair values of our assets, subtracting the estimated fair values of our liabilities, and dividing the resulting estimated net asset value by our fully-diluted shares of common stock outstanding, all as of September 30, 2023.

 

Allocation of Estimated NAV per Share

 

The table below sets forth the calculation of our estimated NAV per Share as of September 30, 2023, as well as the calculation of our estimated NAV per Share as of September 30, 2022. The estimated NAV per Share of $15.46 as of September 30, 2023, represents an increase of $0.71 per share, or 4.8%, from the estimated NAV per Share of $14.75 as of September 30, 2022.

 

		As of				As of
		September 30, 2023(3)				September 30, 2022
Investment properties, net(1)		$	26.84			$	25.73
Cash and cash equivalents			2.63				2.95
Restricted cash			0.28				0.25
Marketable securities			0.18				0.17
Note receivable			0.25				0.28
Notes payable			(14.39	)			(14.34	)
Distributions payable			(0.11	)			-
Other assets and liabilities, net			(0.22	)			(0.29	)
Estimated NAV per Share(2)		$	15.46			$	14.75

 

Notes:

(1)

The following are the key assumptions (shown on a weighted average basis) used in the discounted cash flow models utilized by Capright under the income approach to estimate the fair value of seven of our eight wholly owned multifamily properties as of September 30, 2023.

 

	Exit capitalization rate			6.42	%
	Discount rate			7.54	%
	Annual market rent growth			3.00	%
	Average holding period (in years)			10.0

 

(2)

As of September 30, 2023, we had 19,714,611 shares of common stock outstanding. The potential dilutive effect of our common stock equivalents does not affect our estimated NAV per Share as there were no potentially dilutive securities outstanding as of the valuation date.

(3)

Amounts include the associated assets and liabilities of the Flats at Fishers which are classified as held for sale on our consolidated balance sheet as of September 30, 2023.

 

 

As of September 30, 2023, the aggregate estimated fair value of our investment properties was $529.1 million and the aggregate carrying value of our investment properties was $353.8 million, which equates to an overall increase in value of 49.5%.

 

As previously discussed, the Flats of Fishers was sold on November 1, 2023 and our Advisor and Capright deemed it appropriate for its estimated fair value of $69.8 million as of September 30, 2023 to equal its contractual sales price less closing and other related transaction costs. While we believe that Capright’s assumptions utilized for estimating the fair values for our remaining seven wholly owned multifamily properties are reasonable, any changes in these assumptions would affect the calculations of the estimated fair values of our investment properties. The table below presents the estimated increase or decrease to our estimated NAV per Share as of September 30, 2023 resulting from a 25 basis point increase and decrease in the discount rates and capitalization rates for the remaining seven of our wholly owned multifamily properties. The table is presented to provide a hypothetical illustration of possible results if only one change in assumptions was made, with all other factors remaining constant. Further, each of these assumptions could change by more or less than 25 basis points or not at all.

 

		Change in NAV per Share
		Increase of				Decrease of
		25 basis points				25 basis points
Capitalization rate		$	(1.00	)		$	1.09
Discount rate		$	(0.43	)		$	0.43

 

Historical Offering Share Price and Special Distributions per Share

 

In connection with our initial and follow-on public offerings (collectively, the “Offerings”), we previously offered our common shares for sale under the primary portion of the Offerings at a price per share of $10,00, subject to certain volume discounts. The primary portions of the Offerings commenced on January 21, 2008 and subsequently terminated effective March 15, 2012.

 

Through the date of this filing, the Company has declared and paid certain special distributions on its common shares aggregating $3.61 per share as follows:

 

Special Distribution per Share				Declaration Date		Record Date		Approximate Payment Date
$	0.50			March 20, 2012		April 3, 2012		May 10, 2012
$	0.50			August 8, 2014		September 15, 2014		September 18, 2014
$	1.00			March 18, 2015		March 30, 2015		March 31, 2015
$	1.50			November 20, 2015		December 31, 2015		January 6, 2016
$	0.11			September 29, 2023		September 30, 2023		October 16, 2023
$	3.61

 

Historical Estimated NAV per Share

 

Our historical reported estimated NAV per Share as approved by our board of directors for the preceding year is set forth below:

 

September 30, 2022

Current Report on Form 8-K filed November 11, 2022

 

 

Limitations and Risks

 

As with any valuation methodology, the methodology used to determine our estimated NAV and resulting NAV per Share is based upon a number of estimates and assumptions that may prove later not to be accurate or complete. Further, different participants with different property-specific and general real estate and capital market assumptions, estimates, judgments and standards could derive a different estimated NAV per Share, which could be significantly different from the estimated NAV per Share approved by our board of directors. The estimated NAV per Share approved by our board of directors does not represents the fair value of our assets and liabilities in accordance with GAAP, and such estimated NAV per Share is not a representation, warranty or guarantee that:

 

●

A stockholder would be able to resell his or her shares at the estimated NAV per Share;

 

●

A stockholder would ultimately realize distributions per share of common stock equal to the estimated NAV per Share upon liquidation of our assets and settlement of our liabilities or a sale of the Company;

 

●

Our shares of common stock would trade at the estimated NAV per Share on a national securities exchange,

 

●

An independent third-party appraiser or other third-party valuation firm would agree with the estimated NAV per Share; or

 

●

The methodology used to estimate our NAV per Share would be acceptable to FINRA or under the Employee Retirement Income Security Act with respect to their respective requirements.

 

The Internal Revenue Service and the Department of Labor do not provide any guidance on the methodology an issuer must use to determine its estimated NAV per share. FINRA guidance provides that NAV valuations be derived from a methodology that conforms to standard industry practice.

 

As with any valuation methodology, our methodology is based upon a number of estimates and assumptions that may not be accurate or complete. Different parties with different assumptions and estimates could derive different estimated NAVs and resulting NAVs per share, and these differences could be significant. The estimated NAV per Share is not audited and does not represent the fair value of our assets less our liabilities in accordance GAAP, nor do they represent an actual liquidation value of our assets and liabilities or the amount shares of our common stock would trade at on a national securities exchange. Our estimated NAV per Share is based on the estimated value of our assets less the estimated value of our liabilities and other non-controlling interests divided by the number of our diluted shares of common stock outstanding, all as of the date indicated. Our estimated NAV per Share does not reflect a discount for the fact we are externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values. Our estimated NAV per Share does not take into account estimated disposition costs or fees or penalties, if any, that may apply upon the prepayment of certain of our debt obligations or the impact of restrictions on the assumption of certain debt. Our estimated NAV per Share will fluctuate over time as a result of, among other things, future acquisitions or dispositions of assets, developments related to individual assets and the management of those assets and changes in the real estate and capital markets. Different parties using different assumptions and estimates could derive different NAVs and resulting estimated NAVs per share, and these differences could be significant. Markets for real estate and real estate-related investments can fluctuate and values are expected to change in the future. Our Estimated Valuation Policy requires us to update our estimated NAV per Share value on an annual basis. Our board of directors will review and approve each estimate of NAV and resulting estimated NAV per Share.

 

 

The following factors may cause a stockholder not to ultimately realize distributions per share of common stock equal to the estimated NAV per Share upon liquidation:

 

●

The methodology used to determine estimated NAV per Share includes a number of estimates and assumptions that may not prove to be accurate or complete as compared to the actual amounts received in the liquidation.

 

●

In a liquidation, certain assets may not be liquidated at their estimated values because of transfer fees and disposition fees, which are not reflected in the estimated NAV calculation.

 

●

In a liquidation debt obligations may have to be prepaid and the costs of any prepayment penalties may reduce the liquidation amounts. Prepayment penalties are not included in determining the estimated value of liabilities in determining estimated NAV.

 

●

In a liquidation, the real estate assets may derive a portfolio premium which premium is not considered in determining estimated NAV.

 

●

In a liquidation, the potential buyers of the assets may use different estimates and assumptions than those used in determining estimated NAV.

 

●

If the liquidation occurs through a listing of the common stock on a national securities exchange, the capital markets may value the Company’s net assets at a different amount than the estimated NAV. Such valuation would likely be based upon customary REIT valuation methodology including funds from operation (“FFO”) multiples of other comparable REITs, FFO coverage of dividends and adjusted FFO payout of the Company’s anticipated dividend.

 

●

If the liquidation occurs through a merger of the Company with another REIT, the amount realized for the common stock may not equal the estimated NAV per Share because of many factors including the aggregate consideration received, the make-up of the consideration (e.g., cash, stock or both), the performance of any stock received as part of the consideration during the merger process and thereafter, the reception of the merger in the market and whether the market believes the pricing of the merger was fair to both parties.

 

For further information regarding the limitations of our estimated NAV per Share, see our Estimated Valuation Policy filed as Exhibit 99.2 to our Current Report on Form 8-K as filed with the U.S. Securities and Exchange Commission on August 15, 2017.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	LIGHTSTONE VALUE PLUS REIT V, INC.
Date: November 13, 2023	By:	/s/ Seth Molod
		Seth Molod
		Chief Financial Officer and Principal Accounting Officer

 

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Cover	Nov. 09, 2023
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Nov. 09, 2023
Entity File Number	000-53650
Entity Registrant Name	Lightstone Value Plus REIT V, Inc.
Entity Central Index Key	0001387061
Entity Tax Identification Number	20-8198863
Entity Incorporation, State or Country Code	MD
Entity Address, Address Line One	1985 Cedar Bridge Avenue
Entity Address, Address Line Two	Suite 1
Entity Address, City or Town	Lakewood
Entity Address, State or Province	NJ
Entity Address, Postal Zip Code	08701
City Area Code	(732)
Local Phone Number	367-0129
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false

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