UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For The Fiscal Year Ended December 31 2020, 2022

or

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

For the transition period from ____________ to ____________

Commission file number 000-55773

LIGHTSTONE REAL ESTATE INCOME TRUSTVALUE PLUS REIT IV, INC.

(Exact Name of Registrant as Specified in Its Charter)

Registrant’s telephone number, including area code:  732-367-0129732-367-0129

Securities registered under Section 12(b) of the Exchange Act:

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $0.01 par value per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐      No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐      No ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒      No ☐

Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒      No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐      No ☒

There is no established market for the Registrant’s common shares. As of June 30, 2020,2022, the last business day of the most recently completed second quarter, there were 8.38.2 million shares of the registrant’s common stock held by non-affiliates of the registrant. On March 15, 2021,2023, the board of directors of the Registrant approved an estimated value per share of the Registrant’s common stock of $8.50$10.00 per share derived from the estimated value of the Registrant’s assets less the estimated value of the Registrant’s liabilities divided by the number of shares outstanding, all as of December 31, 2020.2022. For a full description of the methodologies used to value the Registrant’s assets and liabilities in connection with the calculation of the estimated value per share, see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Market Information.” As of March 15, 2021,2023, there were approximately 8.38.1 million shares of common stock held by non-affiliates of the registrant.

DOCUMENTS INCORPORATED BY REFERENCE

None.

LIGHTSTONE REAL ESTATE INCOME TRUSTVALUE PLUS REIT IV, INC.

Table of Contents

Special Note Regarding Forward-Looking Statements

This annual report on Form 10-K, together with other statements and information publicly disseminated by Lightstone Value Plus REIT IV, Inc., which was formerly known as Lightstone Real Estate Income Trust, Inc. before September 15, 2021, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Exchange Act”), and Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project” or similar expressions. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect actual results, performances or achievements. Factors which may cause actual results to differ materially from current expectations include, but are not limited to, (i) general economic and local real estate conditions and uncertainties regarding the impact of the current COVID-19 pandemic, including its impact on our business and the economy generally, (ii) the availability of suitable acquisition/investment opportunities, (iii) financing risks, such as the inability to obtain equity, debt, or other sources of financing on favorable terms, (iv) the level and volatility of interest rates, (v) increases in operating costs and (vi)(vii) changes in governmental laws and regulations. Accordingly, there is no assurance that our expectations will be realized.

PART I.Forward-looking statements in this Annual Report on Form 10-K reflect our management’s view only as of the date of this Report, and may ultimately prove to be incorrect. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results, except as required by applicable law. We intend for these forward-looking statements to be covered by the applicable safe harbor provisions created by Section 27A of the Securities Act and Section 21E of the Exchange Act.

Cautionary Note

The representations, warranties, and covenants made by us in any agreement filed as an exhibit to this Annual Report on Form 10-K are made solely for the benefit of the parties to the agreement, including, in some cases, for the purpose of allocating risk among the parties to the agreement, and should not be deemed to be representations, warranties, or covenants to or with any other parties. Moreover, these representations, warranties, or covenants should not be relied upon as accurately describing or reflecting the current state of our affairs.

PART I.

ITEM 1. BUSINESS:

General Description of Business

Structure

Lightstone Value Plus REIT IV, Inc. (’‘Lightstone REIT IV’’), which was formerly known as Lightstone Real Estate Income Trust, Inc. (’‘Lightstone Income Trust’’),before September 15, 2021, is a Maryland corporation, formed on September 9, 2014, which elected to qualify as a real estate investment trust (“REIT”) for U.S. federal income tax purposes beginning with the taxable year ending December 31, 2016.

Lightstone Income Trust,REIT IV, together with its subsidiaries is collectively referred to as the “Company” and the use of “we,” “our,” “us” or similar pronouns refers to Lightstone Income TrustREIT IV or the Company as required by the context in which any such pronoun is used.

We have and intend tomay continue to seek opportunities to invest in real estate and real estate-related investments. Our real estate investments may include operating properties and development projects and our real estate-related investment may include mezzanine loans, mortgage loans, bridge loans and preferred equity interests, with a focus on development-related investments, including investments intended to finance development or redevelopment opportunities. We may also invest in debt and derivative securities related to real estate assets. A portion of our investments by value may be secured by or related to properties or entities advised by, or wholly or partially, directly or indirectly owned by The Lightstone Group, LLC (the “Sponsor”), its affiliates or its other sponsored real estate investment programs it sponsors.programs. Although we expect that most of our investments will be of these various types, we may also invest in whatever types of investments that we believe are in our best interests.

We currently have one operating segment. As of December 31, 2020,2022, we whollymajority owned and consolidated the operating results of one development project, the WilliamsburgBedford Avenue Holdings LLC (the “Williamsburg Moxy Hotel Joint Venture”), a joint venture in which we have a 75% membership interest, and held an unconsolidated approximate 33.3% membership interest in 40 East End Ave. Pref Member LLC (the “40 East End Ave. Joint Venture”). We account for our unconsolidated membership interest in the 40 East End Ave. Joint Venture in accordance with the equity method of accounting.

The Williamsburg Moxy Hotel Joint Venture owns land parcels located at 353-361 Bedford Avenue in the Williamsburg neighborhood of the borough of Brooklyn in New York City on which it is developing and constructing a 210-room branded hotel (the “Williamsburg Moxy Hotel”). As of December 31, 2022, the Williamsburg Moxy Hotel was under construction, but subsequently opened on March 7, 2023. Lightstone Value Plus REIT III, Inc. (“Lightstone REIT III”), a REIT also sponsored by the Sponsor and a related party, owns the other 25% membership interest in the Williamsburg Moxy Hotel Joint Venture, which is accounted for as noncontrolling interests in our consolidated financial statements.

The 40 East End Ave. Joint Venture, through affiliates, developed and constructed a luxury residential 29-unit condominium project (the “40 East Project”) located at the corner of 81st Street and East End Avenue in the Upper East Side neighborhood of Manhattan in New York City, which received its final TCO in March 2020. Through December 31, 2022, 21 of the 29 units in the 40 East End Project have been sold and the 40 East End Ave. Joint Venture owns the remaining eight unsold units. SAYT Master Holdco LLC, an entity majority-owned and controlled by David Lichtenstein, who also majority owns and controls the Sponsor, and a related party, owns an approximate 66.7% membership interest in the 40 East End Ave. Joint Venture.

Our advisor is Lightstone Real Estate Income LLC, a Delaware limited liability company (the ’‘Advisor’’), which is majority owned by David Lichtenstein. On September 12, 2014, the Advisor contributed $200,000 to Lightstone Income TrustREIT IV in exchange for 20,000 shares of common stock (“Common Shares”), or $10.00 per share. Mr. Lichtenstein also is a majority owner of the equity interests of The Lightstone Group, LLC. The Lightstone Group, LLC served as ourthe Sponsor during our initial public offering (the “Offering”) which terminated on March 31, 2017. Mr. Lichtenstein also owns 222,222 Common Shares which were issued on June 15, 2015 for $2.0 million, or $9.00 per share. Subject to the oversight of our board of directors (the “Board of Directors”) and pursuant to the terms of an advisory agreement, the Advisor has the primary responsibility for making investment decisions on our behalf and managing our day-to-day operations. Mr. Lichtenstein also acts as our Chairman and Chief Executive Officer. As a result, he exerts influence over but does not control Lightstone Income Trust.REIT IV.

We do not have any employees. The Advisor receives compensation and fees for services related to the investment and management of our assets. The Advisor has certain affiliates which may manage the properties we acquire. However, we may also contract with other unaffiliated third-party property managers.

Our Common Shares are not currently listed on a national securities exchange. We may seek to list our Common Shares for trading on a national securities exchange only if a majority of our independent directors believe listing would be in the best interest of ourits stockholders. We do not intend to list our Common Sharesshares at this time. We do not anticipate that there would be any market for our Common Shares until they are listed for trading. In the event we do not begin the process of achieving a liquidity event prior

On December 16, 2021, our stockholders approved an amendment and restatement to March 31, 2022, which is the fifth anniversary of the termination of our Offering, our charter requirespursuant to which we are no longer required to either (a) an amendment toamend our charter to extend the deadline to begin the process of achieving a liquidity event, or (b) the holding ofhold a stockholders meeting to vote on a proposal for an orderly liquidation of our portfolio.

Noncontrolling Interests in Consolidated Subsidiaries

Noncontrolling interests in consolidated subsidiaries represents Lightstone REIT III’s 25% share of the equity in the Williamsburg Moxy Hotel Joint Venture. Income and losses attributable to the Williamsburg Moxy Hotel Joint Venture are allocated to the noncontrolling interest holder based on its ownership percentage.

Related Parties

On March 18, 2016, we and the Sponsor entered into a subordinated unsecured loan agreement (the “Subordinated Agreement”) pursuant to which the Sponsor made aggregate principal advances of $12.6 million to us through March 31, 2017 (the termination date of the Offering). The outstanding principal advances bear interest at a rate of 1.48%, but no interest or principal is due and payable to the Sponsor until holders of our Common Shares have received liquidation distributions equal to their respective net investments (defined as $10.00 per Common Share) plus a cumulative, pre-tax, non-compounded annual return of 8.0% on their respective net investments.

Distributions in connection with a liquidation of the Company initially will be made to holders of our Common Shares until holders of our Common Shares have received liquidation distributions equal to their respective net investments plus a cumulative, pre-tax, non-compounded annual return of 8.0% on their respective net investments. Thereafter, only if additional liquidating distributions are available, we will be obligated to repay the outstanding principal advances and related accrued interest to the Sponsor. In the event that additional liquidation distributions are available after we repay our holders of common stockCommon Shares their respective net investments plus their 8% return on investment and then the outstanding principal advances and related accrued interest to the Sponsor, such additional distributions will be paid to holders of our Common Shares and the Sponsor as follows: 85.0% of the aggregate amount will be payable to holders of our Common Shares and the remaining 15.0% will be payable to the Sponsor.

The principal advances and the related interest are subordinate to all of our obligations as well as to the holders of our Common Shares in an amount equal to the shareholder’s net investment plus a cumulative, pre-tax, non-compounded annual return of 8.0% and only potentially payable in the event of a liquidation of the Company.

In connection with the termination of the Offering on March 31, 2017, we and the Sponsor simultaneously terminated the Subordinated Agreement and as a result, the Sponsor is no longer obligated to make any additional principal advances to us. Interest will continue to accrue on the outstanding principal advances and repayment, if any, of the principal advances and related accrued interest will still be made according to the terms of the Subordinated Agreement disclosed above.

As of December 31, 2020, $13.52022, $13.8 million of principal advances and related accrued interest were outstanding.

Our Advisor and its affiliates are related parties. Certain of these entities are entitled to compensation and fees for services related to the investment of our assets during our acquisition, development, operational and liquidation stages. The compensation levels during our acquisition and operational stages are based on percentages of the cost of acquired properties or other investments and the annual revenue earned from such properties or other investments, and other such fees and expense reimbursement outlined in each of the respective agreements.

Primary Investment Objectives

Our primary investment objectives are:

Acquisition and Investment Policies

We have and intend tomay continue to seek opportunities to invest in real estate and real estate-related investments. Our real estate investments may include operating properties and development projects and our real estate-related investments may include mezzanine loans, mortgage loans, bridge loans and preferred equity interests, with a focus on development-related investments, including those intended to finance development or redevelopment opportunities. We may also invest in debt and derivative securities related to real estate assets. A portion of our investments by value may be secured by or related to properties or entities advised by, or wholly or partially, directly or indirectly, owned by, ourthe Sponsor, its affiliates or other real estate investment programs sponsored by it. Although we expect that most of our investments will be of these various types, we may make other investments. In fact, we may invest in whatever types of investments that we believe are in our best interests.

We have and expect tomay continue to focus our originationacquisition and acquisitionorigination activity on real estate properties and real estate-related investments secured by or related to properties located in the United States, including certain related-party investments.investments generally conducted through joint venture arrangements. We sometimes refer to the foregoing types of investments as our targeted investments. We expect to target investments that generally will offer predictable current cash flow and/or attractive risk-adjusted returns based on the underwriting criteria established and employed by our advisor, which may include the anticipated leverage point, market and economic conditions, the location and quality of the underlying collateral and the borrower’s exit or refinancing plan. Our ability to continue to execute our investment strategy may be enhanced through access to ourthe Sponsor’s extensive experience in both financing and developing real estate projects it has sponsored, as opposed to a strategy that relies solely onwell as in buying assets in the open market from third-party originators.third-parties. We have and will continue to seek to build a portfolio that includesmay include some of or all the following investment characteristics: (a) provides current income; (b) is secured by high-quality commercial real estate; (c) includes subordinate capital investments by strong sponsors that support its investments and provide downside protection; and (d) possesses strong structural features that maximize repayment potential, such as a clear exit or refinancing plan by the borrower.

We have and intendmay continue to continueseek to invest in real estate-related loans and debt securities both by directly originating them and by purchasing them from third-party sellers. Although we generally prefer the benefits of direct origination, situations may arise to purchase real estate-related loans and debt securities, possibly at discounts to par, which compensate for the lack of control or structural enhancements typically associated with directly structured investments.

Financing Strategy and Policies

There is no limitation on the amount we may invest or borrow for the purchase or origination of any single property or investment. Our charter allows us to incur leverage up to 300% of our total “net assets” (as defined in our charter) as of the date of any borrowing, which is generally expected to be approximately 75% of the cost of our investments. We may only exceed this 300% limit if a majority of our independent directors approves each borrowing in excess of this limit and we disclose such borrowing to our stockholders in our next quarterly report along with a justification for the excess borrowing. In all events, we expect that our secured and unsecured borrowings will be reasonable in relation to the net value of our assets and will be reviewed by our Board of Directors at least quarterly.

We do not currently intend to exceed the leverage limit in our charter. We believe that careful use of debt helps us to achieve our diversification goals because we may have more funds available for investment. However, high levels of debt could cause us to incur higher interest charges and higher debt service payments, which would decrease the amount of cash available for distributions, if any, to our investors.

Distributions and Distributions Declared

Our Board of Directors commenced declaring and we began paying distributions on our Common Shares at the pro rata equivalent of an annual distribution of $0.80 per share, or an annualized rate of 8.0% assuming a purchase price of $10.00 per share, beginning with the period from June 22, 2015 through November 30, 2015 and monthly thereafter beginning with the month ending December 31, 2015 through the month ending June 30, 2019. Beginning with the month ending July 31, 2019, our Board of Directors decreased the regular monthly distributions on our Common Shares to the pro rata equivalent of an annual distribution of $0.40 per share, or an annualized rate of 4.0% assuming a purchase price of $10.00 per share. Distributions are payable to stockholders of record at the close of business on the last day of the month-end. All distributions were paid on or about the 15th day of the month following the month-end.

On January 15, 2020, February 15, 2020, March 15, 2020 and April 29, 2020, we paid distributions to our stockholders for the months ended December 31, 2019, January 31, 2020, February 29, 2020 and March 31, 2020, respectively, totaling $1.1 million. These distributions were all paid in cash.

On March 25, 2020, the Board of Directors determined to suspend regular monthly distributions.

Special Distribution

On December 21, 2020, the Board of Directors authorized a special distribution of $0.37 per share of common stock payable to stockholders of record as of December 31, 2020. The total special distribution of $3.2 million, which represents a portion of the proceeds generated from asset sales, was paid on or about January 15, 2021.

Total distributions declared during the years ended December 31, 2020 and 2019 were $4.0 million and $5.1 million, respectively.  

Future distributions, if any, declared will be at the discretion of the Board of Directors based on their analysis of our performance over the previous periods and expectations of performance for future periods. The Board of Directors will consider various factors in its determination, including but not limited to, the sources and availability of capital, operating and interest expenses, our ability to refinance near-term debt, as well as the IRS’s annual distribution requirement that REITs distribute no less than 90% of their taxable income. We cannot assure that any future distributions will be made or that we will maintain any particular level of distributions that we have previously established or may establish.

Share Repurchase Program

Our share repurchase program may provide our stockholders with limited, interim liquidity by enabling them to sell their Common Shares back to us, subject to restrictions. For the period from January 1 through March 24, 2020, we repurchased 57,800 shares of common stock pursuant to our share repurchase program at an average price of $9.53 per share. For the year ended December 31, 2019, we repurchased 70,038 Common Shares at an average price per share of $9.76 per share.

On March 25, 2020, the Board of Directors amended the share repurchase program to remove stockholder notice requirements and also approved the suspension of all redemptions effective immediately.

Tax Status

We elected to qualify and be taxed as a REIT commencing with the taxable year ended December 31, 2016. As a REIT, we generally will not be subject to U.S. federal income tax on our net taxable income that we distribute currently to our stockholders. To maintain our REIT qualification under the Internal Revenue Code of 1986, as amended, (the “Code”), we must meet a number of organizational and operational requirements, including a requirement that we annually distribute to our stockholders at least 90% of our REIT taxable income (which does not equal net income, as calculated in accordance with US GAAP)generally accepted accounting principles in the United States of America (“GAAP”)), determined without regard to the deduction for dividends paid and excluding any net capital gain. If we fail to remain qualified for taxation as a REIT in any subsequent year and do not qualify for certain statutory relief provisions, our income for that year will be taxed at the regular corporate rate, and we may be precluded from qualifying for treatment as a REIT for the four-year period following our failure to qualify as a REIT. Such an event could materially adversely affect our net income and net cash available for distribution to our stockholders.

To qualify or maintain our qualification as a REIT, we engage in certain activities through a wholly-owned taxable REIT subsidiary (“TRS”). As such, we are subject to U.S. federal and state income and franchise taxes from these activities, if any.

As of December 31, 2020 and 2019, we had no material uncertain income tax positions. Additionally, even if we continue to qualify as a REIT for U.S. federal income tax purposes, we may still be subject to some U.S. federal, state and local taxes on our income and property and to U.S. federal income taxes and excise taxes on our undistributed income, if any.

Market OverviewTo maintain our qualification as a REIT, we engage in certain activities through taxable REIT subsidiaries (“TRSs”). As such, we are subject to U.S. federal and Opportunitystate income and franchise taxes from these activities.

As of December 31, 2022 and 2021, we had no material uncertain income tax positions.

Current Environment

Our operating results are substantially impacted by the overall health of local, U.S. national and global economies and may be influenced by market and other challenges. Additionally, our business and financial performance may be adversely affected by current and future economic and other conditions; including, but not limited to, availability or terms of financings, financial markets volatility, political upheaval or uncertainty, natural and man-made disasters, terrorism and acts of war, unfavorable changes in laws and regulations, outbreaks of contagious diseases, cybercrime, loss of key relationships, inflation and recession.

Our overall performance depends in part on worldwide economic and geopolitical conditions and their impacts on consumer behavior. Worsening economic conditions, increases in costs due to inflation, higher interest rates, certain labor and supply chain challenges, and developments related to the COVID-19 pandemic, and other changes in economic conditions, may adversely affect our results of operations and financial performance.

Competition

The hotel and other commercial real estate markets are highly competitive. This competition could reduce occupancy levels and revenues at our hotel, which would adversely affect our operations. We face competition from many sources. We face competition from other hotels both in the immediate vicinity and the geographic market where our hotel is located. Overbuilding in the hotel industry may increase the number of rooms available and may decrease occupancy and room rates. In addition, increases in operating costs due to inflation may not be offset by increased room rates. We also face competition from nationally recognized hotel brands with which we may not be associated.

We may also compete in markets with other owners and operators of other types of real estate; including retail, office, industrial and residential real estate. The continued development of new retail, office, industrial and residential properties has intensified the competition among owners and operators of these types of real estate in many market areas in which we may operate. We compete based on a number of factors that include location, rental rates, security, suitability of the property’s design to prospective tenants’ needs and the manner in which the property is operated and marketed. The number of competing properties in a particular market could have a material effect on our occupancy levels, rental rates and on the operating expenses of our future properties, if any. 

In addition, we compete with other entities engaged in real estate investment activities to locate suitable properties to acquire and to locate tenants and purchasers for such properties. These competitors include other REITs, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, lenders, governmental bodies and other entities. There are also other REITs with asset acquisition objectives similar to ours and others that may be organized in the future. Some of these competitors, including larger REITs, have substantially greater marketing and financial resources than we will have and generally may be able to accept more risk than we can prudently manage, including risks with respect to the creditworthiness of tenants. In addition, these same entities seek financing through similar channels to those sought by us. Therefore, we will compete for institutional investors in a market where funds for real estate investment may decrease.

Competition from these and other third-party real estate investors may limit the number of suitable investment opportunities available to us. It may also result in higher prices, lower yields and a narrower spread of yields over our borrowing costs, making it more difficult for us to acquire new investments on attractive terms. In addition, competition for desirable investments could delay investments, which may in turn reduce our earnings per share and negatively affect our ability make distributions to stockholders.

We believe that our senior management’s experience, coupled with our financing, professionalism, diversity of properties and reputation in the market for investment inindustry enables us to compete with the other real estate and/or real estate-related investments secured by or related to real estate located primarily in the United States continues to be compelling from a risk-return perspective. We have and intend primarily to continue to focus on investing in development or redevelopment opportunities because of increased demand for development and/or redevelopment projects; funding sources to fund such projects have not kept pace with demand; and traditional lenders have tightened lending standards, making it more difficult for some developers to obtain traditional financing.investment companies.

We favor a strategy weighted toward targeting debtRegulations

Our investments that balance current income with significant subordinate capitalare subject to various federal, state and downside structural protections.local laws, ordinances, and regulations, including, among other things, zoning regulations, land use controls, and environmental. We believe that we have or will obtain all permits and approvals necessary under current law to operate our investment strategy, combined with the experience and expertise of our Advisor’s management team, provides opportunities to: (a) originate loans with attractive current returns and strong structural features directly with borrowers, thereby taking advantage of market conditions in order to seek the best risk-return dynamic for our stockholders; and (b) purchase real estate-related investments from third parties, in some instances at discounts to their face amounts (or par value). We believe the combination of these strategies and the application of prudent leverage to our investments may also allow us to (i) realize appreciation opportunities in the portfolio and (ii) diversify our capital and enhance returns.investments.

COVID-19 Pandemic

On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic leading many countries, including the United States, particularly at the individual state level, to subsequently impose various degrees of restrictions and other measures, including, but not limited to, mandatory temporary closures, quarantine guidelines, limitations on travel, and “shelter in place” rules in an effort to reduce its duration and the severity of its spread. Although the COVID-19 pandemic has continued to evolve, most of these previously imposed restrictions and other measures have now been reduced and/or lifted. However, the COVID-19 pandemic remains highly unpredictable and dynamic and its duration and extent is likely dependent on numerous developments such as the regulatory approval, mass production, administration and ultimate effectiveness of vaccines, as well as the timeline to achieve a level of sufficient herd immunity amongst the general population. Accordingly, the COVID-19 pandemic may continue to have negative effects on the overall health of the U.S. economy for the foreseeable future.

To-date, the COVID-19 pandemic has not had any significant impact on our Williamsburg Moxy Hotel development project. Our other investment is our approximately 33.3% membership interest in the 40 East End Ave. Joint Venture, which owns a luxury residential condominium project (the “40 East End Avenue Project”) located at the corner of 81st Street and East End Avenue in the Upper East Side neighborhood of New York City. The 40 East End Avenue Project received its final temporary certificates of occupancy, or TCO, in March 2020 and through December 31, 2020, six of the condominium units had been sold. The 40 East End Joint Venture has an outstanding loan on the 40 East End Project (the “Condo Loan”) which is currently scheduled to mature on December 19, 2021. Because of the impact of the COVID-19 pandemic on the pace of condominium unit sales, the 40 East End Ave. Joint Venture is engaged in discussions with the lender to extend the maturity date of the Condo Loan. However, there can be no assurance that the 40 East End Ave. Joint Venture will be successful in such endeavors.

The extent to which our business may be affected by the ongoing COVID-19 pandemic will largely depend on both current and future developments, all of which are highly uncertain and cannot be reasonably predicted.

If our Williamsburg Moxy Hotel development project and/or investment in the 40 East End Ave. Joint Venture are negatively impacted for an extended period because development activities and/or sales of condominium units are delayed, our business and financial results could be materially and adversely impacted.

Environmental

As an owner of real estate, we are subject to various environmental laws of U.S. federal, state and local governments. Compliance with existing laws has not had a material adverse effect on our financial condition or results of operations, and management does not believe it will have such an impact in the future. However, we cannot predict the impact of unforeseen environmental contingencies or new or changed laws or regulations on properties in which we hold an interest, or on properties that may be acquired directly or indirectly in the future.

Employees

We do not have employees. We have entered into an advisory agreement with our Advisor pursuant to which our Advisor supervises and manages our day-to-day operations and selects our real estate and real estate related investments, subject to oversight by our Board of Directors. We pay our Advisor fees for services related to the investment, management and managementdevelopment of our assets, and we reimburse our Advisor for certain expenses incurred on our behalf.

Available Information

We electronically file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports, and proxy statements, with the SEC. Stockholders may obtain copies of our filings with the SEC, free of charge, from the website maintained by the SEC at http://www.sec.gov, or at the SEC’s Public Reference Room at 100 F. Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our office is located at 1985 Cedar Bridge Avenue, Lakewood, NJ 08701. Our telephone number is (732) 367-0129. Our website is www.lightstonecapitalmarkets.com.

ITEM 1B. UNRESOLVED STAFF COMMENTS:

None applicable.

ITEM 2. PROPERTIES:

On July 17, 2019 we acquired four adjacent parcels of land located at 353-361 Bedford Avenue in Brooklyn, New York on which we intend to develop and construct the Williamsburg Moxy Hotel, a 210-room branded hotel. As of December 31, 2020, the Williamsburg Moxy Hotel, which we wholly own and consolidate, was under development.

As of December 31, 2020,2022, we majority owned and consolidated the operating results of Bedford Avenue Holdings LLC (the “Williamsburg Moxy Hotel Joint Venture”), a joint venture in which we have a 75% membership interest, and held an unconsolidated approximate 33.3% membership interest in 40 East End Ave. Pref Member LLC (the “40 East End Ave. Joint Venture”). We account for our unconsolidated membership interest in the 40 East End Ave. Joint Venture an affiliated real estate entityin accordance with the equity method of accounting.

The Williamsburg Moxy Hotel Joint Venture owns land parcels located at 353-361 Bedford Avenue in the Williamsburg neighborhood of the borough of Brooklyn in New York City on which it is developing and constructing a 210-room branded hotel (the “Williamsburg Moxy Hotel”). As of December 31, 2022, the Williamsburg Moxy Hotel was under construction, but subsequently opened on March 7, 2023. Lightstone Value Plus REIT III, Inc. (“Lightstone REIT III”), a REIT also sponsored by the Lightstone Group, LLC (the “Sponsor “) and a related party, owns the other 25% membership interest in the Williamsburg Moxy Hotel Joint Venture, which is accounted for as noncontrolling interests in our consolidated financial statements.

The 40 East End Project,Ave. Joint Venture, through affiliates, developed and constructed a luxury residential 29-unit condominium project consisting of 29 condominium units(the “40 East Project”) located at the corner of 81st Street and East End Avenue in the Upper East Side neighborhood of Manhattan in New York City. We account for our unconsolidatedCity, which received its final TCO in March 2020. Through December 31, 2022, 21 of the 29 units in the 40 East End Project have been sold and the 40 East End Ave. Joint Venture owns the remaining eight unsold units. SAYT Master Holdco LLC, an entity majority-owned and controlled by David Lichtenstein, who also majority owns and controls the Sponsor, and a related party, owns an approximate 66.7% membership interestsinterest in the 40 East End Ave. Joint Venture in accordance with the equity method of accounting.Venture.

The following information generally applies to our investments in our real estate properties:

ITEM 3. LEGAL PROCEEDINGS:  

From time to time in the ordinary course of business, we may become subject to legal proceedings, claims or disputes.  

As of the date hereof, we are 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 itsour results of operations or financial condition, which would require accrual or disclosure of the contingency and possible range of loss.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II.

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES:

Shareholder Information

As of March 15, 2021,2023, we had approximately 8.58.3 million shares of common stock outstanding, held by a total of 2,0462,013 stockholders. The number of stockholders is based on the records of DST Systems Inc., which serves as our registrar and transfer agent.

Market Information

Our Common Shares are not currently listed on a national securities exchange. We may seek to list our Common Shares for trading on a national securities exchange only if a majority of our independent directors believe listing would be in the best interest of ourits stockholders. We do not intend to list our Common Sharesshares at this time. We do not anticipate that there would be any active market for our Common Shares until they are listed for trading. In the event we do not begin the process of achieving a liquidity event prior

On December 16, 2021, our stockholders approved an amendment and restatement to March 31, 2022, which is the fifth anniversary of the termination of our Offering, our charter requiresremoving the requirement for us to either (a) an amendment toamend our charter to extend the deadline to begin the process of achieving a liquidity event, or (b) the holding ofhold a stockholders meeting to vote on a proposal for an orderly liquidation of our portfolio.

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

On March 15, 2021,2023, our Board of Directors determined and approved our estimated NAV of approximately $72.6$84.0 million and resulting estimated NAV per Share of $8.50,$10.00, both as of December 31, 2020 and after the addition of principal advances made by our Sponsor under the Subordinated Agreement.2022. In connection with our Offering,initial public offering (the “Offering”), which terminated on March 31, 2017, our Sponsorthe Lightstone Group, LLC (the “Sponsor”) funded an aggregate of approximately $12.6 million of principal advances. Inadvances under a subordinated agreement (the “Subordinated Agreement”). However, in the calculation of our estimated NAV as of December 31, 2020,2022, no allocation of value was made to Subordinated advances – related party because the estimated NAV per Share did not exceed an aggregate $10.00 price per share plus a cumulative, pre-tax non-compounded annual return of 8.0% as of that date. Our estimated NAV and resulting NAV per Share are based upon the estimated fair value of our assets and liabilities as of December 31, 2022 and are effective as of March 15, 2023.

The estimated NAV of our shares was calculated as of a particular point in time.  The estimated NAV of our shares 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 the real estate and finance 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 Lightstone Real Estate Income LLC (the “Advisor”), an affiliate of the Lightstone Group, LLC, 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 NAV, which we currently expect will be done on at least an annual basis unless our Common Shares are approved for listing on a national securities exchange. Our Board of Directors will review each estimate of NAV and approve the resulting NAV per Share.

Our estimated NAV per Share as of December 31, 20202022 was calculated with the assistance of both our Advisor and Marshall & Steven’s Incorporated (“M&S”), an independent third-party valuation firm engaged by us to assist with the valuation of our assets, liabilities and any allocations of value to the Sponsor’s subordinated advances. Our Advisor recommended and our Board of Directors established the estimated NAV per Share as of December 31, 20202022 based upon the analyses and reports provided by our Advisor and M&S. The process for estimating the value of our assets, liabilities and allocations of value to our Sponsor’s subordinated advances is performed in accordance with the provisions of the Investment Program Association (the “IPA”) Practice Guideline 2013-01, “Valuations of Publicly Registered Non-Listed REITs,” issued April 29, 2013. We believe that our valuations were developed in a manner reasonably designed to ensure their reliability.

The engagement of M&S with respect to our NAV per Share as of December 31, 20202022 was approved by our Board of Directors, including all of our independent directors. M&S has extensive experience in conducting asset valuations, includedincluding valuations of commercial real estate, debt, properties and real estate-related investments.

With respect to our NAV per Share as of December 31, 2020,2022, M&S prepared appraisal reports (the “M&S Appraisal Reports”) summarizing key inputs and assumptions on the two propertiesreal estate assets (collectively, the “M&S Appraised Properties”Real Estate Assets”) in which we held ownership interests as of December 31, 2020.2022.

M&S also prepared a NAV report (the “December 20202022 NAV Report”) which summarized the values of our ownership interests in real estate assets, non-real estate assets and liabilities, which were used to calculate our estimated theNAV and resulting NAV per Share, all as of December 31, 2020.2022. The December 20202022 NAV Report relied upon (i) M&S’s Appraisal Reports for the M&S Appraised PropertiesReal Estate Assets and (ii) our Advisor’s estimate of the value of cash and cash equivalents, restricted cash and other assets, mortgage payable distributionsand accounts payable, accrued expenses and other liabilities to calculate our estimated NAV and resulting NAV per Share as of December 31, 2020.2022.

The table below sets forth the calculation of our estimated NAV and resulting estimated NAV per Share as of December 31, 20202022 as well as the comparable calculation as of December 31, 2019:2021. Certain amounts are reflected net of noncontrolling interests, as applicable.

Use of an Independent Valuation Firm

As discussed above, our Advisor is responsible for calculating our NAV. In connection with determining our NAV, our Advisor may rely on the material assistance or confirmation of a third-party valuation expert or service. In this regard, M&S was selected by our Board of Directors to assist our Advisor in the calculation of our estimated NAV and resulting estimated NAV per Share as of December 31, 2020.2022. M&S services included appraising the M&S Appraised PropertiesReal Estate Assets and preparing the December 20202022 NAV Report. M&S is engaged in the business of appraising commercial real estate properties and is not affiliated with us or the Advisor. The compensation we paid to M&S was based on the scope of work and not on the appraised values of our real estate properties. The appraisals were performed in accordance with the Code of Ethics and the Uniform Standards of Professional Appraisal Practice, or USPAP, the real estate appraisal industry standards created by The Appraisal Foundation. The M&S Appraisal Reports were reviewed, approved, and signed by an individual with the professional designation of MAI licensed in the state where each real property is located. The use of the reports is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. In preparing its reports, M&S did not, and was not requested to; solicit third-party indications of interest for our common stock in connection with possible purchases thereof or the acquisition of all or any part of us. In preparing its reports, M&S did not, and was not requested to solicit third-party indications of interest for our common stock in connection with possible purchases thereof or the acquisition of all or any part of us.

M&S collected reasonably available material information that it deemed relevant in appraising these real estate properties. M&S relied in part on property-level information provided by our Advisor, including (i) property historical and projected operating revenues and expenses; and/or (ii) information regarding recent or planned capital expenditures.

In conducting their investigation and analyses, M&S took into account customary and accepted financial and commercial procedures and considerations as they deemed relevant. Although M&S reviewed information supplied or otherwise made available by us or the Advisor for reasonableness, they assumed and relied upon the accuracy and completeness of all such information and of all information supplied or otherwise made available to them by any other party and did not independently verify any such information. M&S assumed that any operating or financial forecasts and other information and data provided to or otherwise reviewed by or discussed with M&S were reasonably prepared in good faith on bases reflecting the then best currently available estimates and judgments of our management, our Board of Directors, and/or the Advisor. M&S relied on us to advise them promptly if any information previously provided became inaccurate or was required to be updated during the period of their review.

In performing its analyses, M&S made numerous other assumptions as of various points in time with respect to industry performance, general business, economic, and regulatory conditions, and other matters, many of which are beyond their control and our control. M&S also made assumptions with respect to certain factual matters. For example, unless specifically informed to the contrary, M&S assumed that our joint ventures have clear and marketable title to each real estate property appraised, that no title defects exist, that any improvements were made in accordance with law, that no hazardous materials are present or were present previously, that no significant deed restrictions exist, and that no changes to zoning ordinances or regulations governing use, density, or shape are pending or being considered. Furthermore, M&S’s analyses, opinions, and conclusions were necessarily based upon market, economic, financial, and other circumstances and conditions existing as of or prior to the date of the M&S Appraisal Reports, and any material change in such circumstances and conditions may affect M&S’s analyses and conclusions. The M&S Appraisal Reports contain other assumptions, qualifications, and limitations that qualify the analyses, opinions, and conclusions set forth therein. Furthermore, the prices at which our ownership interests in the real estate properties may actually be sold could differ from M&S’s analyses.

M&S is actively engaged in the business of appraising commercial real estate properties and real estate related-investments similar to those owned or invested by us in connection with public security offerings, private placements, business combinations, and similar transactions. We do not believe that there are any material conflicts of interest between M&S, on the one hand, and us, the Sponsor, the Advisor, and our affiliates, on the other hand. Our Advisor engaged M&S on behalf of our Board of Directors to deliver their reports to assist in the NAV calculation as of December 31, 20202022 and M&S received compensation for those efforts. In addition, we agreed to indemnify M&S against certain liabilities arising out of this engagement. M&S has previously assisted in our prior NAV calculations and has also been engaged by us for certain valuation services with respect to our investments. M&S may from time to time in the future perform other services for us and our Sponsor or other affiliates of the Sponsor, so long as such other services do not adversely affect the independence of M&S as certified in the M&S Appraisal Reports. During the past two years M&S has also been engaged to provide appraisal services to another non-traded REIT sponsored by our Sponsor for which it was paid usual and customary fees.

Although M&S considered any comments received from us and the Advisor relating to their reports, the final estimated fair values for the M&S Appraised Properties were determined by M&S. The reports were addressed to our Board of Directors to assist our Board of Directors in calculating an estimated NAV per Share as of December 31, 2020.2022. The reports were not addressed to the public, may not be relied upon by any other person to establish an estimated NAV per Share, and do not constitute a recommendation to any person to purchase or sell any shares of our common stock.

Our goal in calculating our estimated NAV is to arrive at values that are reasonable and supportable using what we deem to be appropriate valuation methodologies and assumptions. The reports, including the analysis, opinions, and conclusions set forth in such reports, are qualified by the assumptions, qualifications, and limitations set forth in the respective reports. The following is a summary of our valuation methodologies used to value our assets and liabilities by key component:

Real Estate Assetsestate assets

As of December 31, 2020, our real estate assets consist of (i) one wholly2022, we majority owned and consolidated development propertythe operating results of Bedford Avenue Holdings LLC (the Williamsburg“Williamsburg Moxy Hotel)Hotel Joint Venture”), a joint venture in which we have a 75% membership interest, and (ii) oneheld an unconsolidated development property (the “40 East End Project”), held through our approximate 33.3% membership interest in a joint venture (the 40 East End AveAve. Pref Member LLC (the “40 East End Ave. Joint Venture”). We account for our unconsolidated membership interest in the 40 East End Ave. Joint Venture (collectively,in accordance with the “Real Estate Assets”).equity method of accounting.

The Williamsburg Moxy Hotel Joint Venture owns land parcels located at 353-361 Bedford Avenue in the Williamsburg neighborhood of the borough of Brooklyn in New York City on which it is developing and constructing a 210-room branded hotel (the “Williamsburg Moxy Hotel”). As of December 31, 2022, the Williamsburg Moxy Hotel was under construction, but subsequently opened on March 7, 2023. Lightstone Value Plus REIT III, Inc. (“Lightstone REIT III”), a REIT also sponsored by the Sponsor and a related party, owns the other 25% membership interest in the Williamsburg Moxy Hotel Joint Venture, which is accounted for as noncontrolling interests in our consolidated financial statements.

The 40 East End Ave. Joint Venture, through affiliates, developed and constructed a luxury residential 29-unit condominium project (the “40 East Project”) located at the corner of 81st Street and East End Avenue in the Upper East Side neighborhood of Manhattan in New York City, which received its final TCO in March 2020. Through December 31, 2022, 21 of the 29 units in the 40 East End Project have been sold and the 40 East End Ave. Joint Venture owns the remaining eight unsold units. SAYT Master Holdco LLC, an entity majority-owned and controlled by David Lichtenstein, who also majority owns and controls the Sponsor, and a related party, owns an approximate 66.7% membership interest in the 40 East End Ave. Joint Venture.

Additionally, Lightstone Value Plus REIT I, Inc.(“Lightstone REIT I”), a REIT also sponsored by the Sponsor, made $30.0 million of preferred equity contributions (the “Preferred Contributions”) to a subsidiary of the 40 East End Ave. Joint Venture, pursuant to an instrument that entitles Lightstone REIT I to monthly preferred distributions at a rate of 12% per annum. No distributions may be paid to the members until the Preferred Contributions are redeemed in full. In December 2019 and February 2020, the 40 East End Ave. Joint Venture redeemed an aggregate $13.0 million and $11.0 million of Preferred Contributions, respectively, reducing Lightstone REIT I’s Preferred Contributions to $6.0 million, which remains outstanding as of December 31, 2022.

As described above, we engaged M&S to provide an appraisal of the M&S Appraised PropertiesReal Estate Assets as of December 31, 20202022 consisting of the Williamsburg Moxy Hotel and the 40 East End Ave.Avenue Project.

In preparing their appraisal reports, the scope of the work performed by M&S amongincluded the following procedures, as well other things:factors:

M&S employed the income approach and/or the sales comparison approach to estimate the value of the appraised properties. The income approach involves an economic analysis of the property based on its potential to provide future net annual income. As part of the valuation, a discounted cash flow analysis (“DCF Analysis”) and/or direct capitalization analysis was used in the income approach to determine the value of our interest in the portfolio. The indicated value by the income approach represents the amount an investor may pay for the expectation of receiving the net cash flow from the property.

The direct capitalization analysis is based upon the net operating income of the property capitalized at an appropriate capitalization rate for the property based upon property characteristics and competitive position and market conditions at the date of the appraisal.

In applying the DCF Analysis, pro forma statements of operations for the property including revenues and expenses are analyzed and projected over a multi-year period or the expected “sell out” period for a condominium project. If applicable, the property is assumed to be sold at the end of the multi-year holding period. If applicable, the reversion value of the property which can be realized upon sale at the end of the holding period is calculated based on the capitalization of the estimated net operating income of the property in the year of sale, utilizing a capitalization rate deemed appropriate in light of the age, anticipated functional and economic obsolescence and competitive position of the property at the time of sale. Net proceeds to owners are determined by deducting appropriate costs of sale. The discount rate selected for the DCF Analysis is based upon estimated target rates of return for buyers of similar properties.

The sales comparison approach utilizes indices of value derived from actual or proposed sales of comparable properties to estimate the value of the subject property. The appraiser analyzed such comparable sale data as was available to develop a market value conclusion for the subject property.

M&S prepared the M&S Appraisal Reports summarizing key inputs and assumptions, for each of the appraised properties using financial information provided by us and our Advisor. From such review, M&S selected the appropriate cash flow discount rate, residual discount rate, and terminal capitalization rate in the DCF Analysis, if applicable, the appropriate capitalization rate in the direct capitalization analysis and the appropriate price per unit in the sales comparison analysis. As for those properties consolidated on our financials, and for which we do not own 100% of the ownership interest, the property value was adjusted to reflect our ownership interest in such property after consideration of the distribution priorities associated with such property.

The estimated values for our investments in real estate may or may not represent current market values and do not equal the book values of our real estate investments in accordance with US GAAP. Our consolidated investment in real estate is currently carried in our consolidated financial statements at its amortized cost basis, adjusted for any loss impairments and bargain purchase gains recognized to date. Our unconsolidated investments in real estate are currently accounted for under the cost method of accounting in our consolidated financial statements.

The following summarizes the valuation approaches used for our Real Estate Assets:real estate assets:

Construction in progress:

On July 17, 2019, we acquired four adjacent parcels of land located at 353-361 Bedford Avenue in Brooklyn, New York (collectively, the “Williamsburg Land”), from unaffiliated third parties, for an aggregate purchase price of approximately $30.4 million, excluding closing and other acquisition related costs, on which we are developing and constructing a 216-room branded hotel (the “Williamsburg Moxy Hotel”).

As of December 31, 2020, the Williamsburg Moxy Hotel was under development and M&S deemed it appropriate to determine its fair value of approximately $45.8 million as of such date based on the estimated fair value of the Williamsburg Land of $35.7 million (using a sales comparison approach) plus other development costs incurred of $10.1 million.

The estimated fair value of the Williamsburg Moxy Hotel as December 31, 2022 of $45.8$151.0 million using a DCF Analysis taking into consideration the expected net operating income (“NOI”) of the property upon stabilization less the remaining estimated costs to complete. NOI is all gross revenues from the property less all operating expenses, including property taxes and management fees but excluding depreciation.

The following summarizes the key assumptions that were used in the DCF Analysis to estimate the value of our Williamsburg Moxy Hotel as of December 31, 2022:

Accordingly, the estimated fair value of our 75% ownership interest in the Williamsburg Moxy Hotel was $113.3 million as of December 31, 2022.

The estimated fair value of our 75% ownership interest in the Williamsburg Moxy Hotel of $113.3 million compared to our relative carrying value of $40.5$86.0 million, both as of December 31, 2020,2022, equates to an increase in value of 13.1%31.7%.

While we believe that the assumptions utilized in the DCF Analysis are reasonable, a change in these assumptions would affect the calculation of the value of the Williamsburg Moxy Hotel. The table below presents the estimated increase or decrease to our estimated NAV per Share resulting from a 25-basis point increase and decrease in the discount rate and capitalization rate used in the DCF Analysis. 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.

Investment in unconsolidated affiliated real estate entity:

We have an approximate 33.3% membership interest in 40 East End Ave. Pref Member LLC (the “40 East End Ave. Joint Venture”), an affiliated real estate entity, which we account for in accordance with the equity method of accounting.

The 40 East End Ave. Joint Venture owns the 40 East End Avenue Project, a luxury residential 29-unit condominium project located at the corner of 81st Street and East End Avenue in the Upper East Side neighborhood of New York City. The 40 East End Avenue Project received its final temporary certificates of occupancy, or TCO, in March 2020 and through December 31, 2020, six of the condominium units have been sold.

M&S deemed it appropriate to determine the estimated fair value of the 40 East End Ave. Joint Venture’s ownership in the remaining eight unsold units in 40 East End Project as December 31, 20202022 of approximately $138.9 $45.3 million based on a DCF Analysis of the estimated net sales proceeds andtaking into consideration the expected timing of the sales for the remaining 23 unsold condominium units, as well as the remaining estimated construction and carrying costs. M&S used a discount rate of 5.5%5.0% in the DCF Analysis.

While we believe that the assumptions utilized in the DCF Analysis are reasonable, any changesa change in these assumptions would affect the calculation of the estimated fair value of the 40 East End Project as of December 31, 2020. Although any ofAvenue Project. However, the assumptions could change, assuming onlyestimated increase or decrease to our estimated NAV per Share resulting from both a 25-basis point increase and decrease in the discount rate used in the DCF Analysis would be negligible. These amounts are presented to provide a hypothetical illustration of possible results assuming just a change was made to the possible resultdiscount rate with all other factors remaining constant,constant. Further, the estimated fair value of the 40 East End Project would have decreaseddiscount rate could change by $0.3 million and increased by $0.3 million, respectively, as of December 31, 2020.more or less than 25-basis points or not at all.

As of December 31, 2020,2022, the estimated fair value of our approximate 33.3% ownership interest in the 40 East End Ave. Joint Venture of approximately $15.6$13.2 million was calculated based on the appraised value of the eight remaining unsold units in the 40 East End Project of $138.9$45.3 million plus all otherof the 40 East End Ave. Joint Venture’s non-real estate assets, net of $3.7$0.3 million; less (i) the estimated fair value of its outstanding mortgage indebtedness of $89.9 million and (ii) the preferred member’s equity interest of $6.0 million. The estimated fair value of our approximate 33.3% ownership interest in the 40 East End Ave. Joint Venture of $15.6$13.2 million comparedrepresented an increase of 1.6% relative to our carrying value of $11.0$13.0 million both as of December 31, 2020, equates to an increase in value of 41.8%.2022.

Cash and cash equivalents:  The estimated value of our cash and cash equivalents equals its carrying value.

Restricted cash: cash and other assets:The estimated valuevalues of our restricted cash equals its carrying value.

Other assets: Ourand other assets consist of deposits, due from related parties, prepaid expenses and other assets. The estimated values of these items approximate their carrying values due to their short maturities.

Mortgage payable: We have a mortgage payable that bears interest at a variable rate. The estimated value of our variable-rate mortgage loan werewas deemed to approximate its carrying value because its interest rate moves in conjunction with changes to market interest rates.

Distributions payable: On December 21, 2020, the Board of Directors authorized a special distribution of $0.37 per Common ShareAccounts payable, to stockholders of record as of December 31, 2020. The total special distribution of $3.2 million, which represents a portion of the proceeds generated from asset sales, was paid on or about January 15, 2021. Due to its short maturity, the estimated fair value of our distribution payable approximates its carrying value.

Otheraccrued expenses and other liabilities:  Our other liabilities consistThe carrying values of our accounts payable, accrued expenses and accrued expenses. The carrying values of these itemsother liabilities were considered to equal their fair value due to their short maturities.

Subordinated advances – related party: Our Subordinated advances –related party, consisting of approximately $12.6 million of principal advances made by our Sponsor under the Subordinated Agreement and the related accrued interest, are classified as a liability on our consolidated balance sheets. However, for purposes of our NAV, we do not estimate their fair value in accordance with US GAAP. Rather, the IPA’s Practice Guideline 2013-01provides for adjustments to the NAV for preferred securities, special interests and incentive fees based on the aggregate NAV of the company and payable to the Sponsor in a hypothetical liquidation of the company as of the valuation date in accordance with the provisions of the partnership or Advisory agreements and the terms of the preferred securities. Because our Subordinated advances – related party are only payable to our Sponsor in a liquidation event, we believe they should be valued for our NAV in accordance with these provisions.

Accordingly, no allocations of value are made to our Subordinated advances – related party unless the estimated NAV per Share would have exceeded $10.00 per share plus a cumulative, pre-tax non-compounded annual return of 8.0% as of the indicated valuation date. In connection with our Offering, which terminated on March 31, 2017, our Sponsor funded an aggregate of approximately $12.6 million of principal advances under the Subordinated Agreement. In the calculation of our estimated NAV as of December 31, 2020,2022, no allocation of value was made to our Subordinated advances – related party, because the estimated NAV per Share did not exceed an aggregate $10.00 price per share plus a cumulative, pre-tax non-compounded annual return of 8.0% as of that date.

Historical Estimated NAV and NAV per Share

Additional information on our historical reported estimated NAV and NAV per Share as of December 31, 20192021 may be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 20192021 filed on March 30, 2020.23, 2022.

Limitations and Risks

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

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 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 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 with US GAAP, nor do they represent an actual liquidation value of our assets and liabilities or the price that shares of our common stock would trade at on a national securities exchange. As of the date of this filing, although we have not sought stockholder approval to adopt a plan of liquidation of the Company, certain distributions may be payable to our Sponsor in connection with a liquidation event. Accordingly, our estimated NAV per Share reflects any allocation of value to the Sponsor’s subordinated advances representing the amount that would be payable to the sponsor in connection with a liquidation event pursuant to the guidelines for estimating NAV contained in IPA Practice Guideline 2013-01, “Valuation of Publicly Registered Non-Listed REITs”. Our estimated NAV per Share is based on the estimated value of our assets less the estimated value of our liabilities less any allocations of value to the Sponsor’s subordinated advances 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 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. We currently expect that our Advisor will estimate our NAV on at least an annual basis. Our Board of Directors will review and approve each estimate of NAV.

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:

Share Repurchase Program

Our share repurchase program (the “SRP”) may provide eligibleour stockholders with limited, interim liquidity by enabling them to sell their Common Shares back to us, subject to restrictions and applicable law. A selling stockholder must be unaffiliated with us, and must have beneficially held the Common Shares for at least one year prior to offering the Common Shares for sale to us through the share repurchase program. Subject to certain limitations, we may also redeem Common Shares upon the request of the estate, heir or beneficiary of a deceased stockholder.

The prices at which stockholders who have held Common Shares for the required one-year period may sell Common Shares back to us are as follows:

Pursuant to the terms of our share repurchase program and subject to our Board of Director’s approval, we will make repurchases, if requested, at least on a quarterly basis provided such repurchases do not impair our capital or operations. Each stockholder whose repurchase request is granted will receive the repurchase amount approximately 30 days after the fiscal quarter in which we grant the repurchase request. Subject to certain limitations, we may also repurchase Common Shares upon the request of the estate, heir or beneficiary of a deceased stockholder. We will limit the number of Common Shares repurchased pursuant to our share repurchase program as follows: during any 12-month period, we will not make repurchases of Common Shares in excess of 5.0% of the weighted average number of Common Shares outstanding during the prior calendar year; provided, however, that Common Shares repurchased in the case of the death of a stockholder will not count against this 5.0% limit.

For the period from January 1 through March 24, 2020, we repurchased 57,800 shares of common stock pursuant to our share repurchase program at an average price of $9.53 per share. For the year ended December 31, 2019, we repurchased 70,038 Common Shares at an average price per share of $9.76 per share.restrictions.

On March 25, 2020, the Board of Directors amended the share repurchase programSRP to remove stockholder notice requirements and also approved the suspension of all redemptions effective immediately.redemptions.

Distributions

DistributionsEffective May 10, 2021, our Board of Directors reopened the SRP only for redemptions submitted in connection with either a stockholder’s death or hardship and Distributions Declaredset the price for all such purchases at our estimated NAV per Share, as determined by the Board of Directors and reported by the Company from time to time, on the date of redemption. Additionally, beginning on January 1, 2022, any requests for redemptions in connection with a stockholder’s death must be submitted and received by us within one year of the stockholder’s date of death for consideration.

Our Board of Directors has established that on an annual basis we will not redeem in excess of 0.5% of the number of shares outstanding as of the end of the preceding year for either death or hardship redemptions, respectively. Redemption requests are expected to be processed on a quarterly basis and may be subject to pro ration if either type of redemption requests exceed the annual limitation.

For the year ended December 31, 2022, we repurchased 79,324 Common Shares at a weighted average price per share of $8.55 per share. For the year ended December 31, 2021, we repurchased 59,745 Common Shares at a weighted average price per share of $8.50 per share.

Distributions

The Board of Directors commenced declaring and we began paying distributions on our Common Shares at the pro rata equivalent of an annual distribution of $0.80 per share, or an annualized rate of 8.0% assuming a purchase price of $10.00 per share, beginning with the period from June 22, 2015 through November 30, 2015 and monthly thereafter beginning with the month ending December 31, 2015 through the month ending June 30, 2019. Beginning with the month ending July 31, 2019 ourthrough the month ending March 31, 2020, the Board of Directors decreased the regular monthly distributions on our Common Shares to the pro rata equivalent of an annual distribution of $0.40 per share, or an annualized rate of 4.0% assuming a purchase price of $10.00 per share. Distributions arewere payable to stockholders of record at the close of business on the last day of the month-end. All distributions were paid on or about the 15th day of the month following the month-end.

On January 15, 2020, February 15, 2020, March 15, 2020 and April 29, 2020, we paid distributions to our stockholders for the months ended December 31, 2019, January 31, 2020, February 29, 2020 and March 31, 2020, respectively, totaling $1.1 million. These distributions were all paid in cash.

On March 25, 2020, the Board of Directors determined to suspend regular monthly distributions.

2020 Special Distribution

On December 21, 2020, the Board of Directors authorized and we declared a special distribution of $0.37 per share of common stockshare payable to stockholders of record as of December 31, 2020.2020 (the “2020 Special Distribution”). The total special distribution2020 Special Distribution of $3.2 million, which representsrepresented a portion of the proceeds generated from asset sales, was paid on or about January 15, 2021.

2021 Special Distribution

On August 9, 2021, the Board of Directors authorized and we declared a special distribution of $0.215 per common share payable to stockholders of record as of September 30, 2021 (the “2021 Special Distribution”). The total 2021 Special Distribution of $1.8 million, which represented a portion of the proceeds generated from asset sales and was paid on or about October 15, 2021.

No distributions were declared or paid during the year ended December 31, 2022. Total distributions declared and paid during the yearsyear ended December 31, 2020 and 20192021 were $4.0$1.8 million and $5.1$5.0 million, respectively.  

Future distributions, if any, declared will be at the discretion of the Board of Directors based on their analysis of our performance over the previous periods and expectations of performance for future periods. The Board of Directors will consider various factors in its determination, including but not limited to, the sources and availability of capital, operating and interest expenses, our ability to refinance near-term debt, as well as the IRS’s annual distribution requirement that REITs distribute no less than 90% of their taxable income. We cannot assure that any future distributions will be made or that we will maintain any particular level of distributions that we have previously established or may establish.

Recent Sales of Unregistered Securities

During the period covered by this Form 10-K, we did not sell any equity securities that were not registered under the Securities Act of 1933.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS:

You should read the following discussion and analysis together with our consolidated financial statements and notes thereto included in this Annual Report on Form 10-K. The following information contains forward-looking statements, which are subject to risks and uncertainties. Should one or more of these risks or uncertainties materialize, actual results may differ materially from those expressed or implied by the forward-looking statements. Please see “Special Note Regarding Forward-Looking Statements” above for a description of these risks and uncertainties.  Dollar amounts are presented in whole numbers, except per share data and where indicated in millions.

Overview

Overview

Lightstone Value Plus REIT IV, Inc. (“Lightstone REIT IV’’), which was formerly known as Lightstone Real Estate Income Trust, Inc. (’‘Lightstone Income Trust’’),before September 15, 2021, is a Maryland corporation, formed on September 9, 2014, which elected to qualify as a real estate investment trust (“REIT”) for U.S. federal income tax purposes beginning with the taxable year ending December 31, 2016.

Lightstone Income Trust,REIT IV, together with its subsidiaries is collectively referred to as the “Company” and the use of “we,” “our,” “us” or similar pronouns refers to Lightstone Income TrustREIT IV or the Company as required by the context in which any such pronoun is used.

We have and may continue to seek opportunities to invest in real estate and real estate-related investments. Our real estate investments may include operating properties and development projects and its real estate-related investment may include mezzanine loans, mortgage loans, bridge loans and preferred equity interests, with a focus on development-related investments, including investments intended to finance development or redevelopment opportunities. We may also invest in debt and derivative securities related to real estate assets. A portion of our investments may be secured by or related to properties or entities advised by, or wholly or partially, directly or indirectly owned by, The Lightstone Group, LLC (the “Sponsor”), its affiliates or other real estate investment programs it sponsors. Although we expect that most of our investments will be of these various types, we may also make other investments. In fact, we may invest in whatever types of investments that we believe are in its best interests.

We currently have one operating segment. As of December 31, 2020,2022, we whollymajority owned and consolidated the operating results of one development project, the WilliamsburgBedford Avenue Holdings LLC (the “Williamsburg Moxy Hotel Joint Venture”), a joint venture in which we have a 75% membership interest, and held an unconsolidated approximate 33.3% membership interest in 40 East End Ave. Pref Member LLC (the “40 East End Ave. Joint Venture”). We account for our unconsolidated membership interest in the 40 East End Ave. Joint Venture in accordance with the equity method of accounting.

On July 17, 2019 we acquired four adjacentThe Williamsburg Moxy Hotel Joint Venture owns land parcels of land located at 353-361 Bedford Avenue in the Williamsburg neighborhood of the borough of Brooklyn in New York City on which we areit is developing and constructing a 210-room branded hotel (the “Williamsburg Moxy Hotel”). As of December 31, 2022, the Williamsburg Moxy Hotel was under construction, but subsequently opened on March 7, 2023. Lightstone Value Plus REIT III, Inc. (“Lightstone REIT III”), a 210-room branded hotel. As of December 31, 2020,REIT also sponsored by the Sponsor and a related party, owns the other 25% membership interest in the Williamsburg Moxy Hotel Joint Venture, which we wholly own and consolidate, was under development.is accounted for as noncontrolling interests in our consolidated financial statements.

With respect to our unconsolidated property as of December 31, 2020, we held an approximate 33.3% membership interest in theThe 40 East End Ave. Joint Venture, an affiliated real estate entity which owns the 40through affiliates, developed and constructed a luxury residential 29-unit condominium project (the “40 East End Project, a substantially complete luxury residential development project consisting of 29 condominium units on a parcel of landProject”) located at the corner of 81st Street and East End Avenue in the Upper East Side neighborhood of Manhattan in New York City.City, which received its final TCO in March 2020. Through December 31, 2022, 21 of the 29 units in the 40 East End Project have been sold and the 40 East End Ave. Joint Venture owns the remaining eight unsold units. SAYT Master Holdco LLC, an entity majority-owned and controlled by David Lichtenstein, who also majority owns and controls the Sponsor, and a related party, owns an approximate 66.7% membership into in the 40 East End Ave. Joint Venture.

We have and will continue to seek to originate, acquire and manage a diverse portfolio of real estate and/or real estate-related investments, including investments in mezzanine loans, first lien mortgage loans, second lien mortgage loans, bridge loans and/or preferred equity interests, with a focus on development investments and investments intended to finance development or redevelopment opportunities. We may also invest in debt and derivative securities related to real estate assets. A substantial portion of our investments may be secured by or related to properties or entities advised by, or wholly or partially, directly or indirectly owned by, the Sponsor, its affiliates or its other sponsored real estate investment programs.

We do not have employees. We entered into an advisory agreement withOur advisor is Lightstone Real Estate Income LLC, a Delaware limited liability company (the ’‘Advisor’’), which we referis majority owned by David Lichtenstein. On September 12, 2014, the Advisor contributed $200,000 to Lightstone REIT IV in exchange for 20,000 shares of common stock (“Common Shares”), or $10.00 per share. Mr. Lichtenstein also is a majority owner of the equity interests of The Lightstone Group, LLC. The Lightstone Group, LLC served as the “Advisor,”Sponsor during our initial public offering (the “Offering”) which terminated on March 31, 2017. Mr. Lichtenstein also owns 222,222 Common Shares which were issued on June 15, 2015 for $2.0 million, or $9.00 per share. Subject to the oversight of our board of directors (the “Board of Directors”) and pursuant to the terms of an advisory agreement, the Advisor has the primary responsibility for making investment decisions on our behalf and managing our day-to-day operations. Mr. Lichtenstein also acts as our Chairman and Chief Executive Officer. As a result, he exerts influence over but does not control Lightstone REIT IV.

We do not have employees. We have entered into an advisory agreement with the Advisor, pursuant to which the Advisor supervises and manages our day-to-day operations and selects our real estate and real estate related investments, subject to oversight by our Board of Directors. We pay the Advisor fees for services related to the investment, management and managementdevelopment of our assets, and we reimburse the Advisor for certain expenses incurred on our behalf.

On March 18, 2016, we and the Sponsor entered into a subordinated unsecured loan agreement (the “Subordinated Agreement”) pursuant to which the Sponsor made aggregate principal advances of $12.6 million to us through March 31, 2017 (the termination date of the Offering). The outstanding principal advances bear interest at a rate of 1.48%, but no interest or principal is due and payable to the Sponsor until holders of our Common Shares have received liquidation distributions equal to their respective net investments (defined as $10.00 per Common Share) plus a cumulative, pre-tax, non-compounded annual return of 8.0% on their respective net investments.

Distributions in connection with a liquidation of the Company initially will be made to holders of our Common Shares until holders of our Common Shares have received liquidation distributions equal to their respective net investments plus a cumulative, pre-tax, non-compounded annual return of 8.0% on their respective net investments. Thereafter, only if additional liquidating distributions are available, we will be obligated to repay the outstanding principal advances and related accrued interest to the Sponsor. In the event that additional liquidation distributions are available after the we repay our holders of common stockCommon Shares their respective net investments plus their 8% return on investment and then the outstanding principal advances and related accrued interest to the Sponsor, such additional distributions will be paid to holders of our Common Shares and the Sponsor as follows: 85.0% of the aggregate amount will be payable to holders of our Common Shares and the remaining 15.0% will be payable to the Sponsor.

The principal advances and the related interest are subordinate to all of our obligations as well as to the holders of our Common Shares in an amount equal to the shareholder’s net investment plus a cumulative, pre-tax, non-compounded annual return of 8.0% and only potentially payable in the event of a liquidation of the Company.

In connection with the termination of the Offering on March 31, 2017, we and the Sponsor simultaneously terminated the Subordinated Agreement and as a result, the Sponsor is no longer obligated to make any additional principal advances to us. Interest will continue to accrue on the outstanding principal advances and repayment, if any, of the principal advances and related accrued interest will still be made according to the terms of the Subordinated Agreement disclosed above.

As of December 31, 2020, $13.52022, $13.8 million of principal advances and related accrued interest were outstanding.

To qualify or maintain our qualification as a REIT, we engage in certain activities through a wholly-owned taxable REIT subsidiary (“TRS”). As such, we are subject to U.S. federal and state income and franchise taxes from these activities, if any.

Acquisitions and Investment Strategy

Our strategy is to originate, acquire and manage a diverse portfolio of real estate or real estate-related investments located primarily in the United States. A substantial portion of our investments currently are related-party investments located in relatively large metropolitan areas. We generally have sought to create a portfolio of investments that either generate or are expected to generate attractive cash flow for distributions. Additionally, a focus on investing in debt instruments aligns with our primary investment objectives. However, we have and still may target capital appreciation from our investments.

We have not established any limits on the percentage of our portfolio that may be comprised of various categories of assets which present differing levels of risk. The allocation of our assets under management is dependent, in part, upon the then-current commercial real estate market, the investment opportunities it presents and available financing, if any, as well as other micro and macro market conditions.

We have and expect tomay continue to seek opportunities to originate, acquire and manage a diverse portfolio ofinvest in real estate and/orand real estate-related investments. Our real estate investments may include operating properties and development projects and its real estate-related investments includingmay include mezzanine loans, first lien mortgage loans, second lien mortgage loans, bridge loans and preferred equity interests, with a focus on developmentdevelopment-related investments, and investmentsincluding those intended to finance development or redevelopment opportunities. We may also invest in debt and derivative securities related to real estate assets, such as commercial mortgage-backed securities (“CMBS”); collateralized debt obligations (“CDOs”); debt securities issued by real estate companies; and credit default swaps. We have and expect to continue to focusassets. A portion of our origination and acquisition activity on real estate-related investments may be secured by or related to properties or entities advised by, or wholly or partially, directly or indirectly, owned by, our sponsor, its affiliates or other real estate investment programs sponsored by it. Although we expect that most of our investments will be of these various types, we may make other investments. In fact, we may invest in whatever types of investments that we believe are in our best interests.

We have and may continue to focus our acquisition and origination activity on real estate properties and real estate-related investments located in the United States, and primarilyincluding certain related-party investments.investments generally conducted through joint venture arrangements. We sometimes refer to the foregoing types of investments as our targeted investments. We have and will continueexpect to target investments that generally will offer predictable current cash flow and/or attractive risk-adjusted returns based on the underwriting criteria established and employed by our Advisor,advisor, which includesmay include the anticipated leverage point, market and economic conditions, the location and quality of the underlying collateral and the borrower’s exit or refinancing plan. We believe ourOur ability to continue to execute our investment strategy may be enhanced through access to our Sponsor’sthe sponsor’s extensive experience in both financing and developing real estate projects it has sponsored, as opposed to a strategy that relies solely onwell as in buying assets in the open market from third-party originators.third-parties. We have and will continue to seek to build a portfolio that includesmay include some of or all the following investment characteristics: (a) provides current income; (b) is secured by high-quality commercial real estate; (c) includes subordinate capital investments by strong sponsors that support ourits investments and provide downside protection; and (d) possesses strong structural features that maximize repayment potential, such as a clear exit or refinancing plan by the borrower.

We have and may also continue to seek to invest in real estate-related loans and debt securities both by directly originating them and by purchasing them from third-party sellers. Although we generally prefer the benefits of direct origination, situations may arise to purchase real estate-related loans and debt securities, possibly at discounts to par, which compensate for the lack of control or structural enhancements typically associated with directly structured investments.

Although we expect that most of our investments will be of these types, we may invest in whatever types of real estate-related investments that we believe are in our best interests.Current Environment

Current Environment

Our operating results are substantially impacted by the overall health of local, U.S. national and global economies and may be influenced by market and other challenges. Additionally, our business and financial performance may be adversely affected by current and future economic and other conditions; including, but not limited to, availability or terms of financings, financial markets volatility, political upheaval or uncertainty, natural and man-made disasters, terrorism and acts of war, unfavorable changes in laws and regulations, outbreaks of contagious diseases, cybercrime, loss of key relationships, inflation and recession.

With respectOur overall performance depends in part on worldwide economic and geopolitical conditions and their impacts on consumer behavior. Worsening economic conditions, increases in costs due to contagious diseases,inflation, higher interest rates, certain labor and supply chain challenges, and developments related to the extent to whichCOVID-19 pandemic, and other changes in economic conditions, may adversely affect our business may be affected by the current outbreakresults of the Coronavirus will largely depend on both currentoperations and future developments, including its duration, spread and treatment, and related travel advisories and restrictions, all of which are highly uncertain and cannot be reasonably predicted.financial performance. 

If our investments are negatively impacted for an extended period, our business and financial results could be materially and adversely impacted. While we believe there are certain cost reduction strategies we can implement, there can be no assurance that they would fully mitigateUse of Estimates in the adverse impactPreparation of any lost revenue and income.Financial Statements

These and other market and economic challenges could materially affect (i) the value and performance of our investments, (ii) our ability to pay future distributions, if any, (iii) the availability or terms of financings, (iv) our ability to make scheduled principal and interest payments, and (v) our ability to refinance any outstanding debt when contractually due.

COVID-19 Pandemic

On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic leading many countries, includingThe consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States particularly at the individual state level, to subsequently impose various degrees of restrictions and other measures, including, but not limited to, mandatory temporary closures, quarantine guidelines, limitations on travel, and “shelter in place” rules in an effort to reduce its duration and the severity of its spread. Although the COVID-19 pandemic has continued to evolve, most of these previously imposed restrictions and other measures have now been reduced and/or lifted. However, the COVID-19 pandemic remains highly unpredictable and dynamic and its duration and extent is likely dependent on numerous developments such as the regulatory approval, mass production, administration and ultimate effectiveness of vaccines, as well as the timeline to achieve a level of sufficient herd immunity amongst the general population. Accordingly, the COVID-19 pandemic may continue to have negative effects on the overall health of the U.S. economy for the foreseeable future.

To-date, the COVID-19 pandemic has not had any significant impact on our Williamsburg Moxy Hotel development project. Our other investment is our approximately 33.3% membership interest in the 40 East End Ave. Joint Venture, which owns a luxury residential condominium project (the “40 East End Avenue Project”America (“GAAP”) located at the corner of 81st Street and East End Avenue in the Upper East Side neighborhood of New York City. The 40 East End Avenue Project received its final temporary certificates of occupancy, or TCO, in March 2020 and through December 31, 2020, six of the condominium units had been sold. The 40 East End Joint Venture has an outstanding loan on the 40 East End Project (the “Condo Loan”) which is currently scheduled to mature on December 19, 2021. Because of the impact of the COVID-19 pandemic on the pace of condominium unit sales, the 40 East End Ave. Joint Venture is engaged in discussions with the lender to extend the maturity date of the Condo Loan. However, there can be no assurance that the 40 East End Ave. Joint Venture will be successful in such endeavors.

The extent to which our business may be affected by the ongoing COVID-19 pandemic will largely depend on both current and future developments, all of which are highly uncertain and cannot be reasonably predicted.

If our Williamsburg Moxy Hotel development project and/or investment in the 40 East End Ave. Joint Venture are negatively impacted for an extended period because development activities and/or sales of condominium units are delayed, our business and financial results could be materially and adversely impacted.

We are not currently aware of any other material trends or uncertainties, favorable or unfavorable, that may be reasonably anticipated to have a material impact on either capital resources or the revenues or income to be derived from our operations, other than those referred to above or throughout this Form 10-K. The preparation of financial statements in conformity with US. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during a reporting period. The most significant assumptions and estimates relate to the valuation of real estate and investments in other real estate entities. Application of these assumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates. 

Critical Accounting Estimates and Policies

General.

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with US GAAP. The preparation of our consolidated financial statements requires us to make estimates and judgments about the effects of matters or future events that are inherently uncertain. These estimates and judgments may affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

On an ongoing basis, we evaluate our estimates, including contingencies and litigation. We base these estimates on historical experience and on various other assumptions that we believe to be reasonable in the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

To assist in understanding our results of operations and financial position, we have identified our critical accounting policies and discussed them below. These accounting policies are most important to the portrayal of our results and financial position, either because of the significance of the financial statement items to which they relate or because they require management’s most difficult, subjective or complex judgments.   

Principles of Consolidation and Basis of Presentation

Our consolidated financial statements include our accounts and the accounts of other subsidiaries over which we have 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 deemed to be variable interest entities (“VIE”) in which we are 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 we have control, substantive participating rights or both under the respective ownership agreement. For entities in which we have significant influence but less than a controlling interest or entities which we are not deemed to be the primary beneficiary, we account for the investment using the equity method of accounting.

There are judgments and estimates involved in determining if an entity in which we have made an investment is a VIE and, if so, whether we are the primary beneficiary.  The entity is evaluated to determine if it is a VIE by, among other things, calculating the percentage of equity being risked compared to the total equity of the entity.  Determining expected future losses involves assumptions of various possibilities of the results of future operations of the entity, assigning a probability to each possibility and using a discount rate to determine the net present value of those future losses.  A change in the judgments, assumptions, and estimates outlined above could result in consolidating an entity that should not be consolidated or accounting for an investment using the equity method that should in fact be consolidated, the effects of which could be material to our financial statements.

Accounting for Development Projects

We incur a variety of costs in the development of a property. The costs of land and building under development include specifically identifiable costs. The capitalized costs include, but are not limited to, pre-construction costs essential to the development of the property, development costs, construction costs, interest costs, real estate taxes and other costs incurred during the period of development. We cease capitalization when the development project is substantially complete and placed in service, which may occur in phases.phases. Determination of when a development project is substantially complete and capitalization must cease involves a degree of judgment.

Once the development project is placed in service, which may occur in phases or for an entire building or project, the costs capitalized to construction in progress are transferred to land and improvements, buildings and improvements, and furniture and fixtures on our consolidated balance sheets at the historical cost of the property.

Impairment Evaluation

We evaluate our investments in real estate assets for potential impairment whenever events or changes in circumstances indicate that the undiscounted projected cash flows are less than the carrying amount for a particular property. We evaluate the recoverability of our investments in real estate assets at the lowest identifiable level, the individual property level. No single indicator would necessarily result in us preparing an estimate to determine if an individual property’s future undiscounted cash flows are less than its carrying value. We use judgment to determine if the severity of any single indicator, or the fact there are a number of indicators of less severity that when combined, would result in an indication that a property requires an estimate of the undiscounted cash flows to determine if an impairment has occurred. Relevant facts and circumstances include, among others, significant underperformance relative to historical or projected future operating results and significant negative industry or economic trends. The estimated cash flows used for the impairment analysis are subjective and require us to use our judgment and the determination of estimated fair value are based on our plans for the respective assets and our views of market and economic conditions. The estimates consider matters such as future operating income, market and other applicable trends and residual value, as well as the effects of demand, competition, and recent sales data for comparable properties. An impairment loss is recognized only if the carrying amount of a property is not recoverable and exceeds its fair value.

Investments in Unconsolidated Entities

We evaluate our investments in other entities for consolidation. We consider our percentage interest in the joint venture, evaluation of control and whether a variable interest entityVIE exists when determining if the investment qualifies for consolidation or if it should be accounted for as an unconsolidated investment under the equity method of accounting.

If an investment qualifies for the equity method of accounting, our investment is recorded initially at cost, and subsequently adjusted for equity in net income (loss) and cash contributions and distributions. The net income or loss of an unconsolidated investment is allocated to its investors in accordance with the provisions of the operating agreement of the entity. The allocation provisions in these agreements may differ from the ownership interest held by each investor. Differences, if any, between the carrying amount of our investment in the respective joint venture and our share of the underlying equity of such unconsolidated entity are amortized over the respective lives of the underlying assets as applicable. These items are reported as a single line item in the consolidated statements of operations as income or loss from investments in unconsolidated affiliated entities.

We review investments for impairment in value whenever events or changes in circumstances indicate that the carrying amount of such investment may not be recoverable. An investment is impaired only if management’s estimate of the fair value of the investment is less than the carrying value of the investment, and such decline in value is deemed to be other than temporary. The ultimate realization of our investment in partially owned entities is dependent on a number of factors including the performance of that entity and market conditions. If we determine that a decline in the value of a partially owned entity is other than temporary, we will record an impairment charge. 

Noncontrolling Interests

Noncontrolling interests represents the noncontrolling member’s share of the equity in certain of the Company’s consolidated real estate investments. Income and losses are allocated to noncontrolling interest holders based generally on their ownership percentage.

Treatment of Management Compensation and Expense Reimbursements

Management of our operations is outsourced to our Advisor and certain other affiliates of ourthe Sponsor. Fees related to each of these services are accounted for based on the nature of such service and the relevant accounting literature. Such fees include acquisition fees associated with the purchase of interests in real estate entities; and asset management fees paid to our Advisor. These fees are expensed or capitalized to the basis of assets acquired assets,or constructed, as appropriate.

Income Taxes

We elected to qualify and be taxed as a REIT commencing with the taxable year ended December 31, 2016. As a REIT, we generally will not be subject to U.S. federal income tax on our net taxable income that we distribute currently to our stockholders. To maintain our REIT qualification under the Internal Revenue Code of 1986, as amended, (the “Code”), we must meet a number of organizational and operational requirements, including a requirement that we annually distribute to our stockholders at least 90% of our REIT taxable income (which does not equal net income, as calculated in accordance with US GAAP)generally accepted accounting principles in the United States of America (“GAAP”)), determined without regard to the deduction for dividends paid and excluding any net capital gain. If we fail to remain qualified for taxation as a REIT in any subsequent year and do not qualify for certain statutory relief provisions, our income for that year will be taxed at the regular corporate rate, and we may be precluded from qualifying for treatment as a REIT for the four-year period following our failure to qualify as a REIT. Such an event could materially adversely affect our net income and net cash available for distribution to our stockholders.

To qualify or maintain our qualification as a REIT, we engage in certain activities through a wholly-owned taxable REIT subsidiary (“TRS”). As such, we are subject to U.S. federal and state income and franchise taxes from these activities, if any.

As of December 31, 2020 and 2019, we had no material uncertain income tax positions. Additionally, even if we continue to qualify as a REIT for U.S. federal income tax purposes, we may still be subject to some U.S. federal, state and local taxes on our income and property and to U.S. federal income taxes and excise taxes on our undistributed income, if any.

To maintain our qualification as a REIT, we engage in certain activities through taxable REIT subsidiaries (“TRSs”). As such, we are subject to U.S. federal and state income and franchise taxes from these activities.

As of December 31, 2022 and 2021, we had no material uncertain income tax positions.

Results of Operations

Investments

Through December 31, 2020,For the periods presented, we have madehad ownership interests in the following real estate and real estate-related investments:

105-109 W. 28^th Street Preferred Investment 

We previously entered into an agreement, as amended, with various related party entities that provided for us to make aggregate preferred equity contributions (the “105-109 W. 28^th Street Preferred Investment”) of up to $37.0 million in an affiliate of our Sponsor (the “Moxy Developer”), which owns a parcel of land located at 105-109 W. 28^thStreet, New York, New York, on which it constructed a 343-room Marriott Moxy hotel, which opened during February 2019. The 105-109 W. 28^th Street Preferred Investment was made pursuant to an instrument that entitled us to monthly preferred distributions at a rate of 12% per annum. 

We received aggregate repayments of $26.5 million during March 2019 and subsequently received the remaining outstanding balance of $10.5 million on August 26, 2019 and as a result, have fully redeemed the 105-109 W. 28th Street Preferred Investment. 

The Cove Joint Venture

On January 31, 2017, we along with LSG Cove LLC, an affiliate of our Sponsor, our Sponsor’s other public program, Lightstone Value Plus Real Estate Investment Trust III, Inc. (“Lightstone III”) and Maximus Cove Investor LLC (“Maximus”), an unrelated third party acquired the membership interests in RP Maximus Cove L.L.C. (the “Cove Joint Venture”) from an unrelated third party. We, LSG Cove LLC, Lightstone III and Maximus had 22.5%, 45.0%, 22.5% and 10.0% membership interests in the Cove Joint Venture, respectively. The Cove Joint Venture owned and operated The Cove at Tiburon (the “Cove”), a multi-family complex consisting of 281-units, or 289,690 square feet, contained within 32 apartment buildings over 20.1 acres, located in Tiburon, California from January 31, 2017 through February 12, 2020 (see below).

We accounted for our 22.5% membership interest in the Cove Joint Venture in accordance with the equity method of accounting.

On February 12, 2020, we, LSG Cove LLC and Lightstone III subsequently redeemed our respective membership interests in the Cove Joint Venture for an aggregate redemption price of $87.6 million. In connection, with the redemption of our 22.5% membership interest in the Cove Joint Venture, we received proceeds of $21.9 million which resulted in the recognition of a gain on the disposition of unconsolidated affiliated real estate entity of $8.2 million during the first quarter of 2020.

As a result of the redemption of our 22.5% membership interest in the Cove Joint Venture on February 12, 2020, we no longer have an ownership interest in the Cove Joint Venture. During August 2020, we received $0.1 million of additional proceeds related to the redemption of our membership interest in the Cove Joint Venture and recognized a gain on the disposition of investment in unconsolidated affiliated real estate entity of $0.1 million during the third quarter of 2020. As a result, we have recognized an aggregate gain on the disposition of investment in unconsolidated affiliated real estate entity of $8.3 million during the year ended December 31, 2020.

40 East End Ave. Joint Venture

On March 31, 2017, we entered into a joint venture agreement (the “40 East End Ave. Transaction”) with SAYT Master Holdco LLC, an entity majority-owned and controlled by David Lichtenstein, who also majority owns and controls the Sponsor, and a related party, (the “40 East End Seller”), providing for us to acquire an approximate 33.3% of the 40 East End Seller’s approximate 100% membership interest in 40 East End Ave. Pref MemberJoint Venture from SAYT Master Holdco LLC (the “40 East End Ave. Joint Venture”).

Thefor aggregate consideration of $10.3 million. As a result, SAYT Master Holdco LLC owns an approximate 66.7% membership interest in the 40 East End Ave. Joint Venture, through affiliates, owns the 40 East End Avenue Project, a luxury residential 29-unit condominium project located at the corner of 81st Street and East End Avenue in the Upper East Side neighborhood of New York City. The 40 East End Avenue Project received its final TCO inVenture. Commencing on March 2020 and through December 31, 2020, six of the condominium units2017, we have been sold.

We accountaccounted for our approximate 33.3% membership interest in the 40 East End Ave. Joint Venture in accordance with the equity method of accounting.

Williamsburg Moxy Hotel

On July 17, 2019, we, through our then wholly owned subsidiary, Bedford Avenue Holdings LLC, acquired four adjacentland parcels of land located at 353-361 Bedford Avenue in the Williamsburg neighborhood of the borough of Brooklyn in New York (collectively, City for the “Williamsburg Land”) on which we are developingdevelopment and constructing a 210-room branded hotel (the “Williamsburgconstruction of the Williamsburg Moxy Hotel”)Hotel. As of December 31, 2020,2022, the Williamsburg Moxy Hotel was under development.construction, but subsequentlyopened on March 7, 2023.

The operating resultsWilliamsburg Moxy Joint Venture

On August 5, 2021, we formed the Williamsburg Moxy Hotel Joint Venture with Lightstone REIT III, pursuant to which Lightstone REIT III acquired 25% of our investments are reflectedmembership interest in Bedford Avenue Holdings LLC. As a result, we and Lightstone REIT III have 75% and 25% membership interests, respectively, in the Williamsburg Moxy Hotel Joint Venture. Commencing on August 5, 2021, we have consolidated the Williamsburg Moxy Hotel Joint Venture and accounted for Lightstone REIT III’s 25% membership interest as noncontrolling interests in our consolidated statements of operations commencing from their respective dates of acquisition.financial statements.

See the Notes to Consolidated Financial Statements for additional information on our investments.

For the Year Ended December 31, 20202022 vs. December 31, 20192021

InvestmentInterest income

Our investmentinterest income duringwas $90,900 and $32,166 for the yearyears ended December 31, 2020 consisted solely of2022 and 2021, respectively. Our interest income onwas attributable to our cash and cash equivalents and the Israeli Bonds. Our investment income during the year ended December 31, 2019 consisted of (i) preferred distributions related to our 105-109 W. 28^th Street Preferred Investment and (ii) interest income earned on our cash and cash equivalents and the Israeli Bonds.equivalents.

Our investment income decreased by $2.2 million to $0.2 million during the year ended December 31, 2020 compared to $2.4 million for the same period in 2019. The decrease reflects lower preferred distributions on our 105-109 W. 28th Street Preferred Investment of $1.6 million during the 2020 period resulting from the full redemption of the 105-109 W. 28th Street Preferred Investment during 2019 and by an aggregate decrease of $0.6 million of interest income earned on our cash and cash equivalents and the Israeli Bonds during the 2020 period. 

Loss from investmentsinvestment in unconsolidated affiliated real estate entitiesentity

OurOur loss from investmentsinvestment in unconsolidated affiliated real estate entities during the year ended December 31, 2020 was $2.8 million compared to $4.4 million for the same period in 2019. Our loss from investments in unconsolidated affiliated real estate entitiesentity is attributable to our ownership interestsinterest in the 40 East End Ave. Joint Venture. The loss from our investment in the 40 East End Ave. Joint Venture was $0.3 million and $0.4 million for the Cove Joint Venture through the date of redemption of our membership interest on February 12, 2020. years ended December 31, 2022 and 2021, respectively. We account for our investmentsinvestment in unconsolidated affiliated real estate entitiesthe 40 East End Ave. Joint Venture in accordance with the equity method of accounting. See Note 6 of the Notes to Consolidated Financial Statements for additional information.

General and administrative expensescosts

General and administrative expenses costs were $0.9was $0.7 million during the year ended December 31, 2020 compared to $1.3and $0.8 million for the same period in 2019. The decrease was primarily attributable to lower asset management fees during the 2020 period due to the redemption of our 22.5% membership interest in the Cove Joint Venture on February 12, 2020.

Foreign currency transaction loss

 We previously maintained funds in a bank account that was denominated in ILS and was re-measured into U.S. Dollars at the current exchange rate at the end of each reporting period. As of December 31, 2019, we maintained 4,455 ILS in a bank account, which was re-measured to $1,291, and was included in cash and cash equivalents on our consolidated balance sheet. During the first quarter of 2020, we converted all of our ILS to U.S. Dollars and as a result, no longer have any ILS in the bank account. For the years ended December 31, 20202022 and 2019, our foreign currency transaction loss was $47,648 and $55,549,2021, respectively.

Interest expense, net

Interest expense, whichnet is attributable to the outstanding principal advances of $12.6 million included in Subordinated Advances – Related Party, and was $186,954 for both the years ended December 31, 20202022 and 2019. See Note 62021. Additionally, during the years ended December 31, 2022 and 2021, $6.6 million and $1.7 million of interest was capitalized to construction in progress during the development and construction of the Notes to Financial Statements for additional information with to the outstanding principal advances and accrued interest thereon.Williamsburg Moxy Hotel.

Pre-opening costs

In preparation for the opening of the Williamsburg Moxy Hotel, which opened on March 7, 2023, the Williamsburg Moxy Hotel Joint Venture incurred pre-opening costs of $1.5 million during the year ended December 31, 2022. No pre-opening costs were incurred during the 2021 period.

Noncontrolling interests

The net earnings allocated to noncontrolling interests relates to Lightstone REIT III’s 25% membership interest in the Williamsburg Moxy Hotel Joint Venture commencing on August 5, 2021.

Financial Condition, Liquidity and Capital Resources  

Overview:

For the year ended As of December 31, 2020, our primary source of funds were aggregate proceeds received in connection with the redemption of our membership interest in the Cove Joint Venture of $22.0 million and proceeds from the disposition of marketable securities (Israeli Bonds) of $4.1 million. As of December 31, 2020,2022, we had cash and cash equivalents of $31.4$8.3 million.

We currently believe that our current available cash on hand plus cash flow generated from the Williamsburg Moxy Hotel, which opened on March 7, 2023, will be sufficient to satisfy our expected cash requirements for at least twelve months from the date of filing this report, which primarily consistingconsist of our anticipated operating expenses, scheduled debt service, and any necessary capital contributions for our investmentsinvestment in unconsolidated affiliated real estate entitiesentity and distributions to our shareholders, if any, required to maintain our qualification as a REIT and our development activities and certain constructionfor the foreseeable future. The remaining costs associated with the development and construction of the Williamsburg Moxy Hotel are expected to be primarily funded from the availability under the related construction financing. See “Williamsburg Moxy Hotel” for the foreseeable future, and we do not anticipate a need to raise funds from other than these sources within the next 12 months. However, we ultimately expect to obtain financing to fund a substantial portion of our construction costs for the Williamsburg Moxy Hotel. However, there can be no assurance we will be successful in obtaining construction financing at favorable terms, if at all. additional information.

We intend to limit our aggregate long-term permanent borrowings to 75% of the aggregate fair market value of all properties unless any excess borrowing is approved by a majority of the independent directors and is disclosed to our stockholders. Market conditions will dictate our overall leverage limit; as such our aggregate long-term permanent borrowings may be less than 75% of aggregate fair market value of all properties. We may also incur short-term indebtedness, having a maturity of two years or less.

Our charter provides that the aggregate amount of our borrowing, both secured and unsecured, may not exceed 300% of net assets in the absence of a satisfactoryjustification showing that a higher level is appropriate, the approval of our Board of Directors and disclosure to stockholders. Net assets means our total assets, other than intangibles, at cost before deducting depreciation or other non-cash reserves less our total liabilities, calculated at least quarterly on a basis consistently applied. Any excess in borrowing over such 300% of net assets level must be approved by a majority of our independent directors and disclosed to our stockholders in our next quarterly report to stockholders, along with justification for such excess. Market conditions will dictate our overall leverage limit; as such our aggregate borrowings may be less than 300% of net assets.

Our future borrowings may consist of single-property mortgages as well as mortgages cross-collateralized by a pool of properties. Such mortgages may be put in place either at the time we acquire a property or subsequent to our purchasing a property for cash. In addition, we may acquire properties that are subject to existing indebtedness where we choose to assume the existing mortgages. Generally, though not exclusively, we intend to seek to encumber our properties with non-recourse debt. This means that a lender’s rights on default will generally be limited to foreclosing on the property. However, we may, at our discretion, secure recourse financing or provide a guarantee to lenders if we believe this may result in more favorable terms. When we give a guaranty for a property owning entity, we will be responsible to the lender for the satisfaction of the indebtedness if it is not paid by the property owning entity.

In general the type of future financing executed by us to a large extent will be dictated by the nature of the investment and current market conditions. For long-term real estate investments, it is our intent to finance future acquisitions using long-term fixed rate debt. However there may be certain types of investments and market circumstances which may result in variable rate debt being the more appropriate choice of financing. To the extent floating rate debt is used to finance the purchase of real estate, management will evaluate a number of protections against significant increases in interest rates, including the purchase of interest rate cap instruments.

We may also obtain lines of credit to be used to acquire real estate and/or real estate related investments. If obtained, these lines of credit will be at prevailing market terms and will be repaid proceeds from the sale or refinancing of real estate and/or real estate related investments, working capital and/or permanent financing. OurThe Sponsor and/or its affiliates may guarantee our lines of credit although they are not obligated to do so. We expect that such properties may be purchased by ourthe Sponsor’s affiliates on our behalf, in our name, in order to minimize the imposition of a transfer tax upon a transfer of such properties to us.

In addition to making investments in accordance with our investment objectives, we expect to use our capital resources to make certain payments to our Advisor. We have agreements with the Advisor to pay certain fees, in exchange for services performed by the Advisor and/or its affiliated entities.

The following table represents the fees incurred associated with the payments to As of December 31, 2021, we owed the Advisor forand its affiliated entities $0.3 million, which is included in accounts payable, accrued expenses and other liabilities on the period indicated:consolidated balance sheets. Additionally, as of December 31, 2022 the Advisor and its affiliates owed us $3,961, which is included in restricted cash and other assets on the consolidated balance sheets.

The advisory agreement has a one-year term and is renewable for an unlimited number of successive one-year periods upon the mutual consent of our Advisor and our independent directors. DuringPayments to our acquisition and development stage, paymentsAdvisor or its affiliates may include asset acquisition fees and financing coordination fees and the reimbursement of acquisition-related expenses, to our Advisor. During our operational stage, we pay our Advisor andevelopment fees and the reimbursement of development-related costs, financing coordination fees, asset management feefees or asset management participation, orand construction management fees. We may also reimburse our Advisor and its affiliates for actual expenses it incurs for administrative and other services provided for us. Upon the liquidation of our assets, we may pay our Advisor or its affiliates a real estate disposition commission.

Development fees and the reimbursement of development-related costs attributable to the Williamsburg Moxy Hotel which are paid to the Advisor and its affiliates are capitalized and included in the carrying value of the investment in the Williamsburg Moxy Hotel, which is classified as construction in progress on the consolidated balance sheets. During the years ended December 31, 2022 and 2021, development fees and reimbursed development-related costs totaling $1.8 million and $1.7 million, respectively, were incurred.

Summary of Cash Flows

The following summary discussion of our cash flows is based on the consolidated statements of cash flows and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below:

Our principal sources of cash flow were derived from the disposition of our membership interest in the Cove Joint Venture and the sales of all of our Israeli Bonds. We believe our cash available on hand will provide us with sufficient resources to fund our operating expenses, our development activities and certain construction costs associated with the Williamsburg Moxy Hotel, expected debt service, any necessary capital contributions to our investments in unconsolidated affiliated real estate entities and distributions, if any, required to maintain our qualification as a REIT.

Operating activities

The net cash used in operating activities of $0.7$2.7 million during the year ended December 31, 20202022 consisted of our net incomeloss of $4.8$2.6 million aand the net change in assets and liabilities of $0.4 million less the noncash effect of our loss from our investmentsinvestment in unconsolidated affiliated real estate entities of $2.8 million and net changes in operating assets and liabilities of $0.2 million offset by an aggregate gain of $8.3 million on the disposition of our membership interest in the Cove Joint Venture and a gainentity of $0.3 million on the sale of our marketable securities.million.

Investing activities

The net cash provided byused in investing activities of $19.7 million during the 2020 periodyear ended December 31, 2022 of $44.9 million consisted of aggregate proceeds received in connection with the redemption$42.4 million of our membership interest in the Cove Joint Venture of $22.0 milliondevelopment and proceeds from the disposition of marketable securities of $4.1 million offset by developmentconstruction costs of $5.3 million associated with the Williamsburg Moxy Hotel and capital contributions of $2.5 million made to the 40 East End Ave. Joint Venture of $1.1 million.Venture.

Financing activities

The net cash used inprovided by financing activities of $1.7 million during the 2020 periodyear ended December 31, 2022 of $44.9 million consisted of distributionsproceeds from the construction financing for the Williamsburg Moxy Hotel of $1.1$45.4 million, net capital contributions made by Lightstone REIT III to our common stockholdersthe Williamsburg Moxy Hotel Joint Venture of $0.2 million and redemptions and cancellation of shares of our common stock of $0.6$0.7 million.

Williamsburg Moxy Hotel

On July 17, 2019, we, through aour then wholly owned subsidiary, Bedford Avenue Holdings LLC, acquired land parcels located at 353-361 Bedford Avenue in the Williamsburg Land,neighborhood of the borough of Brooklyn in New York City, from unaffiliated third parties for an aggregate purchase price of $30.4 million, excluding closing and other acquisition related costs, on which we are developingfor the development and constructing theconstruction of Williamsburg Moxy Hotel. The acquisition was funded with cash on hand ($14.4 million) and proceeds from a mortgage loan ($16.0 million).

In connection with the closing of the acquisition of the Williamsburg Land, we simultaneously entered into a nonrecourse mortgage loan collateralized by the Williamsburg Land (the “Williamsburg Mortgage”) for $16.0 million. The Williamsburg Mortgage matures on August 9, 2021, bears interest at Libor plus 2.50% (2.64% as of December 31, 2020) and requires monthly interest-only payments through maturity with the principal balance due in full at maturity. As of December 31, 2020,2022, the outstanding principal balanceWilliamsburg Moxy Hotel was under construction, but subsequently opened on March 7, 2023.

Williamsburg Moxy Hotel Joint Venture

On August 5, 2021, we formed the Williamsburg Moxy Hotel Joint Venture with Lightstone REIT III, pursuant to which Lightstone REIT III acquired 25% of our membership interest in Bedford Avenue Holdings LLC for aggregate consideration of $7.9 million. Subsequent to its acquisition, Lightstone REIT III has made net capital contributions to the Williamsburg Moxy Hotel Joint Venture aggregating $4.5 million through December 31, 2022, including $0.2 million made during the year ended December 31, 2022.

As a result, we and Lightstone REIT III have 75% and 25% membership interests, respectively, in the Williamsburg Moxy Hotel Joint Venture. Additionally, we are the managing member of the Williamsburg Mortgage was $16.0 million, which is presented on the consolidated balance sheetMoxy Hotel Joint Venture and is classified as Mortgage Payable, Net. Our totaled scheduled interest payments for 2021 through the maturity date of August 9, 2021 is $286,000.Lightstone REIT III has consent rights with respect to all major decisions.

We currently intenddetermined that the Williamsburg Moxy Hotel Joint Venture is a VIE and we are the primary beneficiary. As we are the member most closely associated with the Williamsburg Moxy Hotel Joint Venture and therefore have the power to seek to obtain construction financing on or beforedirect the maturity dateactivities of the Williamsburg Mortgage. There can be no assuranceMoxy Hotel Joint Venture that most significantly impact its performance, we will be successful in obtaining construction financing or that it will be obtained at satisfactory terms. If we are unable to obtain construction financing prior tohave consolidated the maturity dateoperating results and financial condition of the Williamsburg Mortgage, we intendMoxy Hotel Joint Venture and accounted for the ownership interest of Lightstone REIT III as noncontrolling interests commencing on August 5, 2021. Contributions are allocated in accordance with each investor’s ownership percentage. Profit and cash distributions are allocated in accordance with each investor’s ownership percentage.

On August 5, 2021, the Williamsburg Moxy Hotel Joint Venture entered into a development agreement (the “Development Agreement”) with an affiliate of the Advisor (the “Williamsburg Moxy Developer”) pursuant to refinance or repaywhich the then outstanding balanceWilliamsburg Moxy Developer is being paid a development fee equal to 3% of hard and soft costs, as defined in the Development Agreement, incurred in connection with available cashthe development and construction of the Williamsburg Moxy Hotel (see Note 6 of the Notes to Consolidated Financial Statements for additional information). Additionally on hand on or beforeAugust 5, 2021, the Williamsburg Moxy Hotel Joint Venture obtained construction financing for the Williamsburg Moxy Hotel as discussed below. Additionally, the Advisor and its maturity date. We have no other maturities of mortgage debt overaffiliates are reimbursed for certain development and development-related costs attributable to the next 12 months.Williamsburg Moxy Hotel.

As of December 31, 2020, we2022, the Williamsburg Moxy Hotel Joint Venture incurred and capitalized to construction in progress an aggregate of $40.5$114.6 million (including cumulative capitalized interest of $9.8 million) consisting of acquisition and other costs attributable to the development and construction of the Williamsburg Moxy Hotel. During the years ended December 31, 2022 and 2021, $6.6 million and $1.7 million, respectively, of interest was capitalized to construction in progress.

In preparation for the opening of the Williamsburg Moxy Hotel, which opened on March 7, 2023, the Williamsburg Moxy Hotel Joint Venture incurred pre-opening costs of $1.5 million during the year ended December 31, 2022. No pre-opening costs were incurred during 2021 period. Pre-opening costs generally consist of non-recurring personnel, marketing and other costs.

An adjacent land owner has questioned the Williamsburg Moxy Hotel Joint Venture’s right to develop and construct the Williamsburg Moxy Hotel without his consent. The Williamsburg Moxy Hotel Joint Venture is currently responding to this concern and we believe it will, in due course, be recognized that the adjacent owner waived his right to object in 2017 when he signed a waiver, consent and subordination allowing the future development of our property as it exists today.  While this matter is currently pending in the court system, continued use of the property will ultimately be determined by the government of New York City and we have a number of avenues that we believe are viable paths to unfettered certificates of occupancy.  While any dispute has an element of uncertainty, we currently believe that the likelihood of an unfavorable outcome with respect to any of the aforementioned proceedings is remote. No provision for loss has been recorded in connection therewith. See Note 7 of the Notes to Consolidated Financial Statements for additional information.

Moxy Construction Loan

On August 5, 2021, the Williamsburg Moxy Hotel Joint Venture entered into a recourse construction loan facility for up to $77.0 million (the “Moxy Construction Loan”) to fund the development, construction and certain pre-opening costs associated with the Williamsburg Moxy Hotel. The Moxy Construction Loan is scheduled to initially mature on February 5, 2024, with two, six-month extension options, subject to the satisfaction of certain conditions. The Moxy Construction Loan bears interest at LIBOR plus 9.00%, subject to a 9.50% floor, with monthly interest-only payments based on a rate of 7.50% and the excess added to the outstanding loan balance due at maturity. LIBOR as of December 31, 2022 and 2021 was 4.39% and 0.10%, respectively. Additionally, the Moxy Construction Loan provides for a replacement benchmark rate based on SOFR in connection with the phase-out of LIBOR after June 30, 2023. The Moxy Construction Loan is collateralized by the Williamsburg Moxy Hotel.

As of December 31, 2022 and 2021, the outstanding principal balance of the Moxy Construction Loan was $65.6 million (including $1.7 million of interest capitalized to principal) which is presented, net of deferred financing fees of $2.0 million and $18.6 million (including $0.1 million of interest capitalized to principal) which is presented, net of deferred financing fees of $3.7 million, respectively, on the consolidated balance sheets and is classified as mortgage payable, net. As of December 31, 2022, the remaining availability under the facility was up to $11.4 million and its interest rate was 13.39%.

The Moxy Construction Loan (outstanding principal balance of $65.6 million as of December 31, 2022) matures on February 5, 2024. The Williamsburg Moxy Hotel Joint Venture currently intends to seek to extend or refinance the Moxy Construction Loan on or before its maturity date.

In connection with the Moxy Construction Loan, the Williamsburg Moxy Hotel Joint Venture has provided certain completion and carry cost guarantees. Furthermore, in connection with the Moxy Construction Loan, the Williamsburg Moxy Hotel Joint Venture paid $3.7 million of loan fees and expenses during the year ended December 31, 2021 and accrued $0.8 million of loan exit fees which are due at the initial maturity date and are included in accounts payable, accrued expenses and other liabilities on the consolidated balance sheets as of both and December 31, 2022 and 2021.

40 East End Ave. Joint Venture

On March 31, 2017, we entered into a joint venture agreement (the “40 East End Ave. Transaction”) with SAYT Master Holdco LLC, an entity majority-owned and controlled by David Lichtenstein, who also majority owns and controls ourthe Sponsor, and a related party, (the “40 East End Seller”), providing for us to acquire approximatelyan approximate 33.3% of themembership interest in 40 East End Seller’sAve. Joint Venture from SAYT Master Holdco LLL for aggregate consideration of $10.3 million. As a result, SAYT Master Holdco LLC owns the an approximate 100%66.7% of the membership interest in the 40 East End Ave. Joint Venture for aggregate consideration of $10.3 million.Venture.

Our ownership interest in the 40 East End Ave. Joint Venture is a non-managing interest. Because we exert significant influence over but do not control the 40 East End Ave. Joint Venture, we account for our ownership interest in the 40 East End Ave. Joint Venture in accordance with the equity method of accounting. All contributions to and distributions of earnings from the 40 East End Ave. Joint Venture are made on a pro rata basis in proportion to each member’s equity interest percentage. Any distributions in excess of earnings from the 40 East End Ave. Joint Venture are made to the members pursuant to the terms of its operating agreement. We commenced recording our allocated portion of earnings and cash distributions, if any, from the 40 East End Ave. Joint Venture beginning as of March 31, 2017 with respect to our membership interest of approximately 33.3% in the 40 East End Ave. Joint Venture.

Additionally, Lightstone Value Plus Real Estate Investment Trust,REIT I, Inc. (“(“Lightstone REIT I”), a real estate investment trustREIT also sponsored by ourthe Sponsor, made $30.0 million of preferred equity contributions (the “Preferred Contributions”) to a subsidiary of the 40 East End Ave. Joint Venture, pursuant to an instrument that entitles Lightstone REIT I to monthly preferred distributions at a rate of 12% per annum. No distributions may be paid to the members until the Preferred Contributions are redeemed in full. In December 2019 and February 2020, the 40 East End Ave. Joint Venture redeemed an aggregate $13.0 million and $11.0 million of Preferred Contributions, respectively, reducing Lightstone REIT I’s Preferred Contributions to $6.0 million, which remains outstanding as of December 31, 2022.

The 40 East End Ave. Joint Venture, through affiliates, ownsdeveloped and constructed the 40 East End Avenue Project, a luxury residential 29-unit condominium project located at the corner of 81st81^st Street and East End Avenue in the Upper East Side neighborhood of Manhattan in New York City. The 40 East End Avenue ProjectCity, which received its final TCO in March 2020 and through2020. Through December 31, 2020, six2022, 21 of the condominium29 units in the 40 East Project have been sold.

On March 21, 2017,sold and the 40 East End Ave. Joint Venture obtained financing from a financial institution of up to $85.3 million (the “40 East End Ave. Mortgage”) forowns the land acquisition and construction of the 40 East End Ave. Project. remaining eight unsold units.

On December 19, 2019, the 40 East End Ave. Joint Venture refinanced the 40 East End Ave. Mortgage with a loanobtained financing (the “Condo Loan”) from anothera financial institution of $95.2 million, of which $90.2 million was initially funded at closing and the remaining $5.0 million was subsequently advanced in April 2020. The Condo Loan, matureswhich was initially scheduled to mature on December 19, 2021, bearsbore interest at LIBOR plus 2.45%, which iswas payable monthly, and requiresrequired principal payments to be made at certain prescribed amounts from proceeds from the sales of condominium units.units with any remaining outstanding balance due in full at maturity.

During 2020,On December 30, 2021, the 40 East End Ave. Joint Venture made aggregate principal payments of $5.3 million onand the financial institution amended the Condo Loan reducing its outstanding principal balanceproviding for an extension of the maturity date to $90.7 million ($89.9 million, netDecember 20, 2022 and revisions to the timing and amounts of deferred financing costs) as of December 31, 2020. Theserequired principal payments wereto be made withfrom proceeds from the salessale of condominium units, totaling $3.3 million and a balloon payment of $2.0 million,all of which our proportionate share was $0.7 million.

Pursuant towere met. During the termsfourth quarter of the Condo Loan,2022, the 40 East End Ave. Joint Venture was required to make a principal paydown on December 19, 2020 ifrepaid the then outstanding principal balance of the Condo Loan had not been paid down to at least $81.0 million as of that date. However, in lieu of a required principal paydown of $11.7. million, the lender agreed to accept an immediate principal paydown of $2.0 million, which was paid on December 18, 2020, and allow for the remaining required principal paydown of $9.7 million to be paid during the first quarter of 2021, which was paid in March 2021. The 40 East End Ave. Joint Venture used proceeds from the sales of condominium units which closed in the first quarter of 2021 to make the remaining required principal paydown. The 40 East End Ave. Joint Venture will be required to make another principal paydown on June 19, 2021 if principal paydowns from additional condominium sales proceeds do not reduce the outstanding principal balance of the Condo Loan to at least $73.0 million as of that date.full.

In connection with the closing of the Condo Loan , the 40 East End Ave. Joint Venture used a portion of the initial loan proceeds to (i) fully repay the then outstanding principal balance of $80.3 million plus accrued and unpaid interest of $0.2 million for the 40 East End Ave. Mortgage and (ii) redeem $9.5 million of Lightstone I’s Preferred Contributions. Additionally, in connection with the refinancing, the 40 East End Ave. Joint Venture recognized a loss on the early extinguishment of debt of $0.8 million during the fourth quarter of 2019, of which our proportionate share was $0.3 million.

The Condo Loan is scheduled to mature on December 19, 2021. Because of the impact of the COVID-19 pandemic on the pace of condominium unit sales, the 40 East End Ave. Joint Venture is engaged in discussions with the lender to extend the maturity date of the Condo Loan. However, there can be no assurance that the 40 East End Ave. Joint Venture will be successful in such endeavors.

Our Sponsor and its affiliates (collectively, the “40 East End Guarantors”) have provided certain guarantees with respect to the Condo Loan and the members have agreed to reimburse the 40 East End Guarantors for any balance that may become due under the guarantees (the “40 East End Guarantee”), of which our share is approximately 33.3%. We have determined that the fair value of our share of the 40 East End Guarantee is immaterial.

On December 26, 2019, the 40 East End Ave. Joint Venture redeemed an additional $3.5 million of Lightstone I’s Preferred Contributions. As a result, Lightstone I’s outstanding Preferred Contributions were $17.0 million as of December 31, 2019. An additional $11.0 million of Lightstone I’s Preferred Contributions were redeemed on February 13, 2020 reducing Lightstone I’s Preferred Contributions to $6.0 million, which remains outstanding as of December 31, 2020.

Subsequent to our acquisition through December 31, 2020,2022, we have made an aggregate of $5.7$8.4 million (including $1.1 million and $0.8 million during the years ended December 31, 2020 and 2019, respectively) of additional capital contributions to the 40 East End Ave. Joint Venture.

Other than our proportionate share of any required balloon payments that may become due under the Condo Loan, we do not expect to make any significant capital contributions to the 40 East End Ave. Joint Venture, overof which $2.5 million were made during the next 12 months. Additionally, we do not expectyear ended December 31, 2022, including $2.0 million in the fourth quarter of 2022 to receive any distributions fromfund our proportionate share for the 40 East End Ave. Joint Venture overrepayment in full of the next 12 months as substantially all of proceeds from any sales of condominium units must first be used to pay-down the Condo Loan and thereafter to redeem Lightstone I’s remaining Preferred Contributions..

Distributions and Distributions DeclaredShare Repurchase Program

Our share repurchase program (the “SRP”) may provide our stockholders with limited, interim liquidity by enabling them to sell their Common Shares back to us, subject to restrictions.

On March 25, 2020, the Board of Directors amended the SRP to remove stockholder notice requirements and also approved the suspension of all redemptions.

Effective May 10, 2021, our Board of Directors reopened the SRP only for redemptions submitted in connection with either a stockholder’s death or hardship and set the price for all such purchases at our estimated net asset value per share, as determined by the Board of Directors and reported by the Company from time to time, on the date of redemption. Additionally, beginning on January 1, 2022, any requests for redemptions in connection with a stockholder’s death must be submitted and received by us within one year of the stockholder’s date of death for consideration.

Our Board of Directors has established that on an annual basis we will not redeem in excess of 0.5% of the number of shares outstanding as of the end of the preceding year for either death or hardship redemptions, respectively. Redemption requests are expected to be processed on a quarterly basis and may be subject to pro ration if either type of redemption requests exceed the annual limitation. For

For the year ended December 31, 2022, we repurchased 79,324 Common Shares at a weighted average price per share of $8.55 per share. For the year ended December 31, 2021, we repurchased 59,745 Common Shares at a weighted average price per share of $8.50 per share.

Distributions

The Board of Directors commenced declaring and we began paying distributions on our Common Shares at the pro rata equivalent of an annual distribution of $0.80 per share, or an annualized rate of 8.0% assuming a purchase price of $10.00 per share, beginning with the period from June 22, 2015 through November 30, 2015 and monthly thereafter beginning with the month ending December 31, 2015 through the month ending June 30, 2019. Beginning with the month ending July 31, 2019 ourthrough the month ending March 31, 2020, the Board of Directors decreased the regular monthly distributions on our Common Shares to the pro rata equivalent of an annual distribution of $0.40 per share, or an annualized rate of 4.0% assuming a purchase price of $10.00 per share. Distributions arewere payable to stockholders of record at the close of business on the last day of the month-end. All distributions were paid on or about the 15th day of the month following the month-end.

On January 15, 2020, February 15, 2020, March 15, 2020 and April 29, 2020, we paid distributions to our stockholders for the months ended December 31, 2019, January 31, 2020, February 29, 2020 and March 31, 2020, respectively, totaling $1.1 million. These distributions were all paid in cash.

On March 25, 2020, the Board of Directors determined to suspend regular monthly distributions for months ending after March 2020.distributions.

2020 Special Distribution

On December 21, 2020, the Board of Directors authorized and we declared a special distribution of $0.37 per share of common stockshare payable to stockholders of record as of December 31, 2020.2020 (the “2020 Special Distribution”). The total special distribution2020 Special Distribution of $3.2 million, which representsrepresented a portion of the proceeds generated from asset sales, was paid on or about January 15, 2021.

2021 Special Distribution

On August 9, 2021, the Board of Directors authorized and we declared a special distribution of $0.215 per common share payable to stockholders of record as of September 30, 2021 (the “2021 Special Distribution”). The total 2021 Special Distribution of $1.8 million, which represented a portion of the proceeds generated from asset sales and was paid on or about October 15, 2021.

No distributions were declared or paid during the year ended December 31, 2022. Total distributions declared and paid during the yearsyear ended December 31, 2020 and 20192021 were $4.0$1.8 million and $5.1$5.0 million, respectively.  

Future distributions, if any, declared will be at the discretion of the Board of Directors based on their analysis of our performance over the previous periods and expectations of performance for future periods. The Board of Directors will consider various factors in its determination, including but not limited to, the sources and availability of capital, operating and interest expenses, our ability to refinance near-term debt, as well as the IRS’s annual distribution requirement that REITs distribute no less than 90% of their taxable income. We cannot assure that any future distributions will be made or that we will maintain any particular level of distributions that we have previously established or may establish.

Share Repurchase Program

Our share repurchase program may provide our stockholders with limited, interim liquidity by enabling them to sell their Common Shares back to us, subject to restrictions. For the period from January 1 through March 24, 2020, we repurchased 57,800 shares of common stock pursuant to our share repurchase program at an average price of $9.53 per share. For the year ended December 31, 2019, we repurchased 70,038 Common Shares at an average price per share of $9.76 per share.

On March 25, 2020, the Board of Directors amended the share repurchase program to remove stockholder notice requirements and also approved the suspension of all redemptions effective immediately.

New Accounting Pronouncements

See Note 2 to the Notes to Consolidated Financial Statements for further information concerning accounting standards that we have not yet been required to adopt and may be applicable to our future operations.