UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐

For the quarterly period ended September 30, 2023

Commission File Number: 000-53650

Lightstone Value Plus REIT V, Inc.

(Exact Name of Registrant as Specified in Its Charter)

1985 Cedar Bridge Avenue, Suite 1, Lakewood, New Jersey08701

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (888)808-7348

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

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 the definitions 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 ☒

As of November 7, 2023, the Registrant had approximately 19.6 million shares of common stock outstanding.

LIGHTSTONE VALUE PLUS REIT V, INC.

INDEX

PART I

FINANCIAL INFORMATION

Lightstone Value Plus REIT V, Inc.

Consolidated Balance Sheets

(dollars in thousands, except per share amounts)

See Notes to Consolidated Financial Statements.

Lightstone Value Plus REIT V, Inc.

Consolidated Statements of Operations and Comprehensive Loss

(dollars and shares in thousands, except per share amounts)

(unaudited)

See Notes to Consolidated Financial Statements.

Lightstone Value Plus REIT V, Inc.

Consolidated Statements of Stockholders’ Equity

(dollars and shares in thousands)

(unaudited)

See Notes to Consolidated Financial Statements.

Lightstone Value Plus REIT V, Inc.

Consolidated Statements of Cash Flows

(dollars in thousands)

(unaudited)

See Notes to Consolidated Financial Statements.

Lightstone Value Plus REIT V, Inc.
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data and where indicated in millions)

Lightstone Value Plus REIT V, Inc. (which may be referred to as the “Company,” “we,” “us,” or “our”), was organized as a Maryland corporation on January 9, 2007 and has elected to be taxed, and currently qualifies, as a real estate investment trust (“REIT”) for federal income tax purposes.

The Company was formed primarily to acquire and operate commercial real estate and real estate-related assets on an opportunistic and value-add basis. In particular, the Company has focused generally on acquiring commercial properties with significant possibilities for capital appreciation, such as those requiring development, redevelopment, or repositioning, those located in markets and submarkets with high growth potential, and those available from sellers who are distressed or face time-sensitive deadlines. The Company has acquired a wide variety of commercial properties, including office, industrial, retail, hospitality, multifamily and student housing. The Company has purchased existing, income-producing properties, and newly-constructed properties. The Company has also invested in other real estate-related investments such as mortgage and mezzanine loans. The Company intends to hold the various real properties in which it has invested until such time as its board of directors determines that a sale or other disposition appears to be advantageous to achieve the Company’s investment objectives or until it appears that the objectives will not be met. The Company currently has one operating segment. As of September 30, 2023, the Company had eight wholly owned real estate investments (multifamily properties) and one real estate-related investment (note receivable).

Substantially all of the Company’s business is conducted through Lightstone REIT V OP LP, a limited partnership organized in Delaware (the “Operating Partnership”). As of September 30, 2023, the Company’s wholly-owned subsidiary, BHO II, Inc., a Delaware corporation, owned a 0.1% partnership interest in the Operating Partnership as its sole general partner. As of September 30, 2023, the Company’s wholly-owned subsidiary, BHO Business Trust II, a Maryland business trust, was the sole limited partner of the Operating Partnership and owned the remaining 99.9% interest in the Operating Partnership.

The Company’s business is externally managed by LSG Development Advisor LLC (the “Advisor”), an affiliate of the Lightstone Group LLC (“Lightstone”) which provides advisory services to the Company and the Company has no employees. Lightstone is majority owned by the chairman emeritus of the Company’s board of directors, David Lichtenstein. Pursuant to the terms of an advisory agreement and subject to the oversight of the Company’s board of directors, the Advisor is responsible for managing the Company’s day-to-day affairs and for services related to the management of the Company’s assets.

Organization

In connection with the Company’s initial capitalization, the Company issued 22,500 shares of its common stock and 1,000 shares of its convertible stock to the Company’s previous advisor on January 19, 2007. The 1,000 shares of convertible stock were transferred to an affiliate of Lightstone on February 10, 2017 and remain outstanding. As of September 30, 2023, the Company had 19.7 million shares of common stock outstanding.

The Company’s common stock is not currently listed on a national securities exchange. The timing of a liquidity event for the Company’s stockholders will depend upon then prevailing market conditions and the Company’s board of directors’ assessment of the Company’s investment objectives and liquidity options for the Company’s stockholders. Currently, the Company’s board of directors has targeted June 30, 2028 for the commencement of a liquidity event. However, the Company can provide no assurances as to the actual timing of the commencement of a liquidity event for its stockholders or the ultimate liquidation of the Company. Furthermore, the Company will seek stockholder approval prior to liquidating its entire portfolio.

Lightstone Value Plus REIT V, Inc.
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data and where indicated in millions)

Interim Unaudited Financial Information

The accompanying unaudited interim consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements and related notes as contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the Securities and Exchange Commission (the “SEC”) on March 28, 2023. The unaudited interim consolidated financial statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair presentation of the results for the periods presented. The accompanying unaudited consolidated financial statements of Lightstone Value Plus REIT V, Inc. have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

Principles of Consolidation and Basis of Presentation

The Company’s consolidated financial statements includes its accounts and the accounts of other subsidiaries over which the Company has control. All inter-company transactions, balances, and profits have been eliminated in consolidation. In addition, interests in entities acquired are evaluated based on applicable GAAP, and entities deemed to be variable interest entities (“VIE”) in which the Company is the primary beneficiary are also consolidated. If the interest in the entity is determined not to be a VIE, then the entity is evaluated for consolidation based on legal form, economic substance, and the extent to which the Company has control, substantive participating rights or both under the respective ownership agreement. For entities in which the Company has less than a controlling interest or entities which it is not deemed to be the primary beneficiary, it accounts for the investment using the equity method of accounting.

The consolidated balance sheet as of December 31, 2022 included herein has been derived from the consolidated balance sheet included in the Company’s Annual Report on Form 10-K.

The unaudited consolidated statements of operations for interim periods are not necessarily indicative of results for the full year or any other period.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.

Earnings per Share

The Company had no potentially dilutive securities outstanding during the periods presented. Accordingly, basic and diluted earnings per share is calculated by dividing net income/(loss) by the weighted-average number of shares of common stock outstanding during the applicable period.

Income Taxes

The Company has elected to be taxed as a REIT commencing with the taxable year ended December 31, 2008. If the Company qualifies as a REIT, it generally will not be subject to U.S. federal income tax on its taxable income or capital gain that it distributes to its stockholders. To maintain its REIT qualification, the Company must meet a number of organizational and operational requirements, including a requirement that it annually distribute to its stockholders at least 90% of its REIT taxable income (which does not equal net income, as calculated in accordance with GAAP), determined without regard to the deduction for dividends paid and excluding any net capital gain. If the Company fails to remain qualified for taxation as a REIT in any subsequent year and does not qualify for certain statutory relief provisions, its income for that year will be taxed at the regular corporate rate, and it may be precluded from qualifying for treatment as a REIT for the four-year period following its failure to qualify as a REIT. Such an event could materially adversely affect the Company’s net income and net cash available for distribution to stockholders.

Lightstone Value Plus REIT V, Inc.
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data and where indicated in millions)

To maintain its qualification as a REIT, the Company may engage in certain activities through taxable REIT subsidiaries (“TRSs”). As such, it may be subject to U.S. federal and state income and franchise taxes from these activities.

The Company’s income tax expense and benefits are included in other income, net on its consolidated statements of operations. During the three and nine months ended September 30, 2023, the Company recorded income tax expense of $34 and $0.8 million, respectively, primarily consisting of state income tax. During the three and nine months ended September 30, 2022, the Company recorded estimated income tax expense of $31 and an income tax benefit of $0.9 million, respectively. The income tax benefit for the nine months ended September 30, 2022 includes an $0.8 million partial refund of previously paid foreign income tax which was received in the first quarter of 2022.

As of September 30, 2023 and December 31, 2022, the Company had no material uncertain income tax positions.

Concentration of Credit Risk

As of September 30, 2023 and December 31, 2022, the Company had cash deposited in certain financial institutions in excess of federally insured levels. The Company regularly monitors the financial stability of these financial institutions and believes that it is not exposed to any significant credit risk in cash and cash equivalents or restricted cash.

Recently Adopted Accounting Standards

In June 2016, the Financial Accounting Standards Board issued an accounting standards update, “Financial Instruments-Credit Losses-Measurement of Credit Losses on Financial Instruments,” which changes how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The updated standard introduces an impairment model that is based on expected credit losses, rather than incurred losses, to estimate credit losses for financial instruments measured at amortized cost. For other receivables and held-to-maturity debt instruments, entities are required to use a new forward looking expected loss model that generally will result in an earlier recognition of allowances for losses. Financial instruments with similar risk characteristics may be grouped together when estimating expected credit losses. The update was effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted the new standard, as of January 1, 2023, and it did not have a material impact on the consolidated financial statements.

Current Environment

The Company’s 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, the Company’s 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.

The Company’s 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 other changes in economic conditions, may adversely affect the Company’s results of operations and financial performance.

Lightstone Value Plus REIT V, Inc.
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data and where indicated in millions)

On February 28, 2019, the Company, as the lender, and an unrelated third party (the “Loan Borrower”), as the borrower, entered into a loan promissory note (the “Mezzanine Loan”), pursuant to which the Company funded an aggregate $12.0 million of mezzanine financing collateralized by the ownership interests of the Loan Borrower in a condominium project (the “Park House”) located at 500 West 22nd Street in the West Chelsea neighborhood of New York City.

The Mezzanine Loan bore interest at a rate of LIBOR plus 11.0% per annum with a floor of 13.493% (17.885% as of December 31, 2022) and had a maturity date of March 1, 2023. Additionally, the Mezzanine Loan provided for monthly interest-only payments at a rate of 8% with the additional interest above the 8% threshold added to the outstanding principal balance and due at maturity.

The Loan Borrower developed and constructed Park House, which contains 10 residential units and ground floor retail space. The Park House was substantially completed in July 2022, and during the year ended December 31, 2022, the Loan Borrower repaid $10.6 million of the Mezzanine Loan with proceeds from the sale of condominium units. As of December 31, 2022, the remaining outstanding principal balance of the Mezzanine Loan was $3.8 million, including $2.4 million of additional interest due at maturity, which was classified as note receivable, net on the consolidated balance sheet.

During the first quarter of 2023, the Company and Loan Borrower refinanced the Mezzanine Loan resulting in a $5.0 million senior loan (the “Senior Loan”) secured by the Loan Borrower’s ownership interest in Park House, consisting of the remaining unsold condominium units and the ground floor retail space. The Senior Loan bears interest at a rate of SOFR plus 5.50% per annum with a floor of 10.0% (10.82% as of September 30, 2023) and has a term of twelve-months with one six-month extension option, subject to the satisfaction of certain conditions. As of September 30, 2023, the carrying amount of the Senior Loan was $4.9 million, consisting of outstanding principal of $5.0 million less interest reserves of $0.1 million, which is classified as notes receivable, net on the consolidated balance sheet.

The Company determined the following disclosure of estimated fair values using available market information and appropriate valuation methodologies. However, considerable judgment is necessary to interpret market data and develop the related estimates of fair value. The use of different market assumptions or only estimation methodologies may have a material effect on the estimated fair value amounts.

As of September 30, 2023 and December 31, 2022, the Company estimated that the carrying value of its cash and cash equivalents, restricted cash, note receivable, prepaid expenses and other assets (exclusive of interest rate cap contracts - see Note 6), accrued distribution payable, and accounts payable and accrued and other liabilities were at amounts that reasonably approximated their fair value based on their highly-liquid nature and/or short-term maturities.

The fair value of the notes payable is categorized as a Level 2 in the fair value hierarchy. The fair value was estimated using a discounted cash flow analysis valuation on the estimated borrowing rates currently available for loans with similar terms and maturities. The fair value of the notes payable was determined by discounting the future contractual interest and principal payments by a market rate. Disclosure about fair value of financial instruments is based on pertinent information available to management as of September 30, 2023 and December 31, 2022. Carrying amounts of the Company’s notes payable and the related estimated fair value is summarized as follows:

Lightstone Value Plus REIT V, Inc.
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data and where indicated in millions)

The following table presents certain information about the Company’s wholly owned and consolidated multifamily real estate properties as of September 30, 2023:

Held for Sale and Disposition of the Flats at Fishers

On August 2, 2023, the Company and BAM Acquisitions LLC (the “Flats at Fishers Buyer”), an unaffiliated third party, entered into a purchase and sale agreement (the “Flats at Fishers Agreement”) pursuant to which the Company would dispose of its 306-unit multifamily property located in Fishers, Indiana (the “Flats at Fishers”) to the Flats at Fishers Buyer for a contractual sales price of $71.0 million.

During the third quarter of 2023, the Flats at Fishers met the criteria to be classified as held for sale and therefore, its associated assets and liabilities were classified as held for sale in the consolidated balance sheet as of September 30, 2023.

On November 1, 2023, the Company completed the disposition of the Flats at Fishers pursuant to the terms of the Flats at Fishers Agreement. In connection with the disposition of the Flats at Fishers, its non-recourse mortgage loan (the “Flats at Fishers Mortgage”) of $27.7 million was defeased at a total cost of $27.1 million and its non-recourse subordinated mortgage loan (the “Flats at Fisher Supplemental Mortgage”) of $8.9 million was repaid in full. The Company’s net proceeds from the disposition of the Flats at Fishers were $33.8 million after the aforementioned defeasance of the Flats at Fishers Mortgage and repayment of the Flats at Fisher Supplemental Mortgage, pro rations and closing and other related transaction costs. The net proceeds have been temporarily placed in an escrow with a qualified intermediary to potentially facilitate a Section 1031 exchange transaction pursuant to the requirements of the Internal Revenue Code, as Amended.

The disposition of the Flats at Fishers did not qualify to be reported as discontinued operations since it did not represent a strategic shift that had a major effect on the Company’s operations and financial results. Accordingly, the operating results of the Flats at Fishers are reflected in our results from continuing operations for all periods presented through its date of disposition.

The following summary presents the major components of the Flats at Fishers’ assets and liabilities held for sale as of September 30, 2023.

Lightstone Value Plus REIT V, Inc.
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data and where indicated in millions)

Marketable Securities

The following is a summary of the Company’s available for sale securities as of the dates indicated:

The Company may be exposed to credit losses through its available-for-sale debt securities. Unrealized losses or impairments resulting from the amortized cost basis of any available-for-sale debt security exceeding its fair value are evaluated for identification of credit and non-credit related factors. Any difference between the fair value of the debt security and the amortized cost basis not attributable to credit related factors are reported in other comprehensive income. A credit-related impairment is recognized as an allowance on the balance sheet with a corresponding adjustment to earnings. When evaluating the investments for impairment at each reporting period, the Company reviews factors such as the extent of the unrealized loss, current and future economic market conditions and the economic and financial condition of the issuer and any changes thereto. As of September 30, 2023, the Company has not recognized an allowance for expected credit losses related to available-for-sale debt securities as the Company has not identified any unrealized losses for these investments attributable to credit factors. The Company’s unrealized loss on investments in corporate bonds was primarily caused by rising interest rates. The Company does not currently intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before recovery of their amortized cost basis.

The following table summarizes the estimated fair value of our investments in marketable debt securities with stated contractual maturity dates, accounted for as available-for-sale securities and classified by the contractual maturity date of the securities:

Derivative Financial Instruments

The Company has entered into interest rate cap contracts with unrelated financial institutions in order to reduce the effect of interest rate fluctuations associated with certain of its variable rate debt. The Company is exposed to credit risk in the event of non-performance by the counterparty to these financial instruments. Management believes the risk of loss due to non-performance to be minimal.

Lightstone Value Plus REIT V, Inc.
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data and where indicated in millions)

The Company accounts for its interest rate cap contracts as economic hedges marking them to their fair value taking into account present interest rates compared to the contracted fixed rate over the life of the contract. The changes in the fair value of these economic hedges represent unrealized gains or losses which are classified as mark to market adjustment on derivative financial instruments on the consolidated statements of operations.

As of September 30, 2023, the Company had three interest rate cap contracts. The first interest rate cap contract, which was entered into at a cost of $1.4 million on July 17, 2023 with an effective date of July 15, 2023, has a notional amount of $52.2 million, matures on July 15, 2024 and effectively caps SOFR at 2.50% during its term. This interest rate contract replaced another interest rate contract that expired on July 15, 2023 and had substantially similar terms. The second interest rate cap contract had a notional amount of $49.0 million, subsequently matured on October 11, 2023 and effectively capped both LIBOR and its SOFR replacement rate at 2.00% during its term. The third interest rate cap contract, which was entered into at a cost of $0.9 million on September 11, 2023 with an effective date of October 11, 2023, has a notional amount of $49.0 million, matures on April 11, 2024 and effectively caps SOFR at 2.00% during its term. This interest rate cap contract replaced the interest rate cap contract that expired on October 11, 2023.

The fair value of the interest rate cap contracts was $2.1 million and $1.8 million as of September 30, 2023 and December 31, 2022, respectively, and is included in prepaid expenses and other assets on the consolidated balance sheets.

For the three and nine months ended September 30, 2023, the Company recorded unrealized losses of $0.5 million and $1.7 million, respectively, and for the three and nine months ended September 30, 2022, the Company recorded unrealized gains of $0.8 million and $1.9 million, respectively. These unrealized gains and losses represent the change in the fair values of the Company’s interest rate cap contracts during the indicated periods.

During the three and nine months ended September 30, 2023, the Company earned $0.8 million and $2.1 million, respectively, from its interest rate cap contracts. During both the three and nine months ended September 30, 2022, the Company earned $0.1 million from its interest rate cap contracts. Earnings from interest rate cap contracts are recorded in interest expense, net on the consolidated statements of operations.

Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:

The fair values of the Company’s investments in debt securities are measured using quoted prices for these investments; however, the markets for these assets are not active. The fair values of the Company’s interest rate cap contracts are measured using other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. As of September 30, 2023 and December 31, 2022, all of the Company’s debt securities and interest rate cap contracts were classified as Level 2 assets and there were no transfers between the level classifications during the nine months ended September 30, 2023 and 2022.

Lightstone Value Plus REIT V, Inc.
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data and where indicated in millions)

Notes payable consists of the following:

Lightstone Value Plus REIT V, Inc.
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data and where indicated in millions)

SOFR as of September 30, 2023 was 5.32%. LIBOR as of December 31, 2022 was 5.22%. The Company’s loans are secured by the indicated real estate and are non-recourse to the Company, unless otherwise indicated.

The following table provides information with respect to the contractual maturities and scheduled principal repayments of the Company’s indebtedness as of September 30, 2023.

As of September 30, 2023, the Company was in compliance with all of its financial debt covenants.

Citadel Apartments Mortgages

On October 6, 2021, the Company entered into a non-recourse mortgage loan facility for up to $39.2 million (the “Citadel Apartments Senior Mortgage”). Simultaneously, on October 6, 2021, the Company also entered into a non-recourse mortgage loan facility for up to $9.8 million (the “Citadel Apartments Junior Mortgage” and together with the Citadel Apartments Senior Mortgage, the “Citadel Apartments Mortgages”). The Citadel Apartments Mortgages provided for a replacement benchmark rate in connection with the phase-out of LIBOR and effective on July 15, 2023, the Citadel Apartments Senior Mortgage’s interest rate converted from LIBOR plus 1.50%, with a floor of 1.60%, to SOFR plus 1.61%, with a floor of 1.71%, and the Citadel Apartments Junior Mortgage’s interest rate converted from LIBOR plus 8.75%, with a floor of 8.85%, to SOFR plus 8.86%, with a floor of 8.96%.

The Citadel Apartments Mortgages, which initially mature on October 11, 2024, have two one-year extension options, subject to the satisfaction of certain conditions, and are both collateralized by the Citadel Apartments. However, the Citadel Apartments Junior Mortgage is subordinate to the Citadel Apartments Senior Mortgage. Although the Citadel Apartments Mortgages are currently scheduled to mature on October 11, 2024, the Company currently intends to exercise the first of its two one-year extension options to extend the maturity of the Citadel Apartments Mortgages to October 11, 2025.

Pursuant to the terms of the Citadel Apartments Mortgages, the Company is required to enter into one or more interest rate cap contracts in the aggregate notional amount of $49.0 million for as long as the Citadel Apartments Mortgages remain outstanding. In connection with the Citadel Apartments Mortgages, the Company previously entered into an interest rate cap contract with a notional amount of $49.0 million pursuant to which the LIBOR and the replacement SOFR rates were capped at 2.00% through October 11, 2023. On September 11, 2023, the Company entered into a replacement interest rate cap contract with an unrelated financial institution at a cost of $0.9 million. The new interest rate cap contract has an effective date of October 11, 2023, a notional amount of $49.0 million, matures on April 11, 2024 and effectively caps SOFR at 2.00%.

Lightstone Value Plus REIT V, Inc.
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data and where indicated in millions)

BayVue Apartments Mortgage

On July 7, 2021, the Company entered into a non-recourse mortgage loan facility for up to $52.2 million (the “BayVue Apartments Mortgage”), which initially matures on July 9, 2024 and has two one-year extension options, subject to the satisfaction of certain conditions. The BayVue Apartments Mortgage provided for a replacement benchmark rate in connection with the phase-out of LIBOR and effective on July 15, 2023, the interest rate converted from LIBOR plus 3.00%, with a floor of 3.10%, to SOFR plus 3.11%, with a floor of 3.21%. As of September 30, 2023, the outstanding principal balance and remaining availability under the BayVue Apartments Mortgage was $47.2 million and $5.0 million, respectively. The remaining availability may be drawn for certain capital improvements to the property pursuant to the loan agreement. Although the BayVue Apartments Mortgage is currently scheduled to mature on July 9, 2024, the Company currently intends to exercise the first of its two one-year extension options to extend the maturity of the BayVue Apartments Mortgage to July 9, 2025.

Pursuant to the terms of the BayVue Apartments Mortgage, the Company is required to enter into one or more interest rate cap contracts in the aggregate notional amount of $52.2 million for as long as the BayVue Apartments Mortgage remains outstanding. In connection with the BayVue Apartments Mortgage, the Company previously entered into an interest rate cap contract with a notional amount of $52.2 million pursuant to which the LIBOR rate was capped at 2.50% through July 15, 2023. On July 17, 2023, the Company entered into a replacement interest rate cap contract with an unrelated financial institution at a cost of $1.4 million. The new interest rate cap contract, which had an effective date of July 15, 2023, has a notional amount of $52.2 million, matures on July 15, 2024 and effectively caps SOFR at 2.50%.

Share Redemption Program

The Company’s board of directors has adopted a share redemption program (the “SRP”) that permits stockholders to sell their shares back to the Company, subject to the significant conditions and limitations of the program. The Company’s board of directors can amend the provisions of the SRP at any time without the approval of its stockholders.

Effective March 25, 2021, the Company’s board of directors reopened the SRP, which had been suspended since December 13, 2019, solely for redemptions submitted in connection with a stockholder’s death and set the price for all such purchases to the Company’s current NAV per Share, as determined by its board of directors and reported by the Company from time to time.

On November 10, 2022, the Company’s board of directors adopted a Seventh Amended and Restated Share Redemption Program (the “Amended SRP”), which became effective on January 1, 2023. Under the terms of the Amended SRP, any stockholder may request redemption of their shares, subject to the significant conditions and limitations of the program. Redemption requests are no longer limited to requests upon the death of a qualifying stockholder, as had been the case under the SRP through December 31, 2022. Additionally, under the terms of the Amended SRP, the Company will redeem shares at 85% of the NAV per Share as of the date the request for redemption is approved.

Pursuant to the terms of the Amended SRP, any shares approved for redemption are redeemed on a periodic basis as determined by the Company’s board of directors, generally expected to be at the end of each quarterly period. However, the Company will not redeem, during any calendar year, more than 5% of the number of shares outstanding on last day of the previous calendar year (the “5% Limitation”). The cash available for redemption of shares will be set by the Company’s board of directors not less often than annually (the “Funding Limitation” and, together with the 5% Limitation, the “Redemption Limitations”). The Company’s board of directors has set the amount of cash available for redemption of shares for the year ended December 31, 2023 at $8.0 million, which is generally to be allocated $2.0 million for each quarterly period. The Company may change the amount of the Redemption Limitations upon 10 business days’ notice to its stockholders and will provide notice of any change to the Redemption Limitations by including such information in (a) a Current Report on Form 8-K or in its annual or quarterly reports, all publicly filed with the United States Securities and Exchange Commission or (b) a separate mailing to its stockholders.

Lightstone Value Plus REIT V, Inc.
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data and where indicated in millions)

Redemption requests will be honored pro rata among all requests received subject to the Redemption Limitations and will not be honored on a first come, first served basis.

The Company’s board of directors reserves the right in its sole discretion at any time and from time to time, subject to any notice requirements described in our SRP, to (1) reject any request for redemption of shares, (2) change the purchase price for redemption of shares, (3) limit the funds to be used for redemption of shares under the SRP or otherwise change the Redemption Limitations, or (4) amend, suspend (in whole or in part) or terminate the SRP.

For the nine months ended September 30, 2023, the Company repurchased 329,140 shares of common stock, pursuant to its SRP at a weighted average price per share of $12.61 per share. For the nine months ended September 30, 2022, the Company repurchased 71,010 shares of common stock, pursuant to its SRP at a weighted average price per share of $12.91 per share.

Distributions

The Company did not make any distributions to its stockholders during the nine months ended September 30, 2023 and 2022.

On September 20, 2023, the Company’s board of directors declared a special cash distribution of $0.11 per share of common stock payable to stockholders of record as of September 30, 2023 (the “2023 Special Distribution”). The 2023 Special Distribution totaled $2.2 million, which represented of a portion of the net proceeds generated from asset sales, and was paid on or about October 16, 2023.

The Company has agreements with the Advisor and its affiliates to pay certain fees and reimburse certain expenses in connection with services performed and costs incurred by these entities and other related parties. The Company is dependent on the Advisor and its affiliates for certain services that are essential to it, including investment decisions, asset disposition decisions, property management and leasing services, financing services, and other general administrative responsibilities. In the event that these entities are unable to provide the Company with their respective services, the Company would be required to obtain such services from other sources.

The advisory agreement has a one-year term and is renewable annually upon the mutual consent of the Advisor and the Company’s independent directors.

The following table represents the fees incurred associated with the payments to the Company’s Advisor and its affiliates for the periods indicated:

Lightstone Value Plus REIT V, Inc.
Notes to Consolidated Financial Statements (unaudited)
(Dollar amounts in thousands, except per share data and where indicated in millions)

Legal Proceedings

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

As of the date hereof, the Company is not a party to any material pending legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on its results of operations or financial condition, which would require accrual or disclosure of the contingency and possible range of loss.

The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and the notes thereto.

Forward-Looking Statements

Certain statements in this Quarterly Report on Form 10-Q constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements include discussion and analysis of the financial condition of Lightstone Value Plus REIT V, Inc. and our subsidiaries (which may be referred to herein as the “Company,” “we,” “us” or “our”), including our ability to make accretive real estate or real estate-related investments, rent space on favorable terms, to address our debt maturities and to fund our liquidity requirements, to sell our assets when we believe advantageous to achieve our investment objectives, our anticipated capital expenditures, the amount and timing of anticipated future cash distributions to our stockholders, the estimated net asset value per share of our common stock (“NAV per Share”), and other matters. Words such as “may,” “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “would,” “could,” “should” and variations of these words and similar expressions are intended to identify forward-looking statements.

These forward-looking statements are not historical facts but reflect the intent, belief or current expectations of our management based on their knowledge and understanding of the business and industry, the economy and other future conditions. These statements are not guarantees of future performance, and we caution stockholders not to place undue reliance on forward-looking statements. Actual results may differ materially from those expressed or forecasted in the forward-looking statements due to a variety of risks, uncertainties and other factors, including but not limited to the factors described below:

Forward-looking statements in this Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q 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.

Executive Overview

We were formed primarily to acquire and operate commercial real estate and real estate-related assets on an opportunistic and value-add basis. In particular, we have focused generally on acquiring commercial properties with significant possibilities for capital appreciation, such as those requiring development, redevelopment or repositioning, those located in markets and submarkets with high growth potential, and those available from sellers who were distressed or faced time-sensitive deadlines. In addition, our opportunistic and value-add investment strategy has included investments in real estate-related assets that present opportunities for higher current income. Since inception, we have acquired a wide variety of commercial properties, including office, industrial, retail, hospitality, multifamily and student housing. We have purchased existing, income-producing properties and newly constructed properties. We have also invested in mortgage and mezzanine loans. We have made our investments in or in respect of real estate assets located in the United States and other countries based on our view of existing market conditions. All of our current investments are located in the United States. We currently intend to hold our various real properties until such time as our board of directors determines that a sale or other disposition appears to be advantageous to achieve our investment objectives or until it appears that the objectives will not be met. We currently have one operating segment. As of September 30, 2023, our investments included eight wholly owned real estate investments (multifamily properties) and one real estate-related investment (note receivable).

Concentration of Credit Risk

As of September 30, 2023 and December 31, 2022, we had cash deposited in certain financial institutions in excess of federally insured levels. We regularly monitor the financial stability of these financial institutions and believe that we are not exposed to any significant credit risk in cash and cash equivalents or restricted cash.

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 other changes in economic conditions, may adversely affect our results of operations and financial performance.

Liquidity and Capital Resources

We had cash and cash equivalents of $51.9 million, marketable securities, available for sale of $3.6 million and restricted cash of $5.0 million as of September 30, 2023.

Our principal demands for funds going forward are expected to be for the payment of (a) operating expenses, including capital expenditures, and (b) scheduled debt service on our outstanding indebtedness, including any required replacement interest rate cap contracts. We also may, at our discretion, use funds for (a) tender offers and/or redemptions of shares of our common stock, (b) distributions, if any, to our shareholders, and (c) selective acquisitions and/or real estate-related investments. Generally, we expect to meet our cash needs with our cash and cash equivalents on hand along with our cash flow from operations, the release of certain funds held in restricted cash, the remaining availability on certain of our mortgage loans and the repayment of our outstanding note receivable.

However, to the extent that our cash flow from operations and available cash on hand and marketable securities are not sufficient to cover our cash needs, we may use proceeds from additional borrowings and/or selective asset sales to fund such needs.

Our non-recourse mortgage loan facility (the “BayVue Apartments Mortgage”), which had an outstanding principal balance of $47.2 million as of September 30, 2023, is currently scheduled to mature on July 9, 2024, but has two one-year extension options, subject to the satisfaction of certain conditions. We currently intend to exercise the first extension option to extend the maturity date of the BayVue Apartments Mortgage to July 9, 2025, as discussed in Note 7 of the Notes to Consolidated Financial Statements.

Our non-recourse mortgage loan facilities (the “Citadel Apartments Mortgages”), which had aggregate outstanding principal balances of $49.0 million as of September 30, 2023, are currently scheduled to mature on October 11, 2024, but have two one-year extension options, subject to the satisfaction of certain conditions. We currently intend to exercise the first extension option to extend the maturity date of the Citadel Apartments Mortgages to October 11, 2025, as discussed in Note 7 of the Notes to Consolidated Financial Statements.

We have borrowed money to acquire properties and make other investments. Under our charter, the maximum amount of our indebtedness is limited to 300% of our “net assets” (as defined by our charter) as of the date of any borrowing; however, we may exceed that limit if approved by a majority of our independent directors. In addition to our charter limitation, our board of directors has adopted a policy to generally limit our borrowings to 75% of the value of our assets unless substantial justification exists that borrowing a greater amount is in our best interests. Our policy limitation, however, does not apply to individual real estate assets.

Results of Operations

We currently have one operating segment. As of September 30, 2023, we had eight wholly owned real estate investments (multifamily properties) and one real estate-related investment (note receivable).

The tables below reflect occupancy and effective monthly rental rates for our operating properties owned as of the dates indicated:

Held for Sale and Disposition of the Flats at Fishers

On August 2, 2023, we entered into a purchase and sale agreement (the “Flats at Fishers Agreement”) pursuant to which we would dispose of a 306-unit multifamily property located in Fishers, Indiana (the “Flats at Fishers”) for a contractual sales price of $71.0 million.

During the third quarter of 2023, the Flats at Fishers met the criteria to be classified as held for sale and therefore, its associated assets and liabilities were classified as held for sale in the consolidated balance sheet as of September 30, 2023.

On November 1, 2023, we completed the disposition of the Flats at Fishers pursuant to the terms of the Flats at Fishers Agreement. In connection with the disposition of the Flats at Fishers, its non-recourse mortgage loan (the “Flats at Fishers Mortgage”) of $27.7 million was defeased at a cost of $27.1 million and its non-recourse subordinated mortgage loan (the “Flats at Fisher Supplemental Mortgage”) of $8.9 million was repaid in full. Our net proceeds from the disposition of the Flats at Fishers were $33.8 million, after the aforementioned defeasance of the Flats at Fishers Mortgage and the repayment of the Flats at Fisher Supplemental Mortgage, pro rations, and closing and other related transaction costs. The net proceeds have been temporarily placed in an escrow with a qualified intermediary to potentially facilitate a Section 1031 exchange transaction pursuant to the requirements of the Internal Revenue Code, as Amended.

The disposition of the Flats at Fishers did not qualify to be reported as discontinued operations since it did not represent a strategic shift that had a major effect on our operations and financial results. Accordingly, the operating results of the Flats at Fishers are reflected in our results from continuing operations for all periods presented through its date of disposition.

Three months ended September 30, 2023 as compared to the three months ended September 30, 2022.

Our operating results for the three months ended September 30, 2023 and 2022 are attributable to our eight wholly owned investment properties, all of which were owned by us during the entire periods presented. The following table provides summary information about our results of operations (dollars in thousands):

Revenues Rental revenues for the three months ended September 30, 2023 were $12.7 million, an increase of $0.7 million, compared to $12.0 million for the same period in 2022. Our rental revenues primarily increased during the 2023 period as a result of higher average monthly rent per unit.

Property Operating ExpensesProperty operating expenses for the three months ended September 30, 2023 were $4.2 million, an increase of $0.3 million, compared to $3.9 million for the same period in 2022. Our property operating expenses increased during the 2023 period primarily as a result of higher utilities and insurance costs.

Real Estate TaxesReal estate taxes for the three months ended September 30, 2023 were $1.8 million, a slight increase of $0.1 million, compared to $1.7 million for the same period in 2022.

General and Administrative Expenses General and administrative expenses for the three months ended September 30, 2023 were $2.1 million, a slight increase of $0.1 million, compared to $2.0 million for the same period in 2022.

Depreciation and AmortizationDepreciation and amortization expense for the three months ended September 30, 2023 was $3.4 million, a decrease of $0.8 million, compared to $4.2 million for the same period in 2022. Our depreciation and amortization expenses decreased $0.9 million as a result of a decreased amortization expense resulting from in-place lease intangibles becoming fully amortized during 2022.

Interest Expense, Net Interest expense, net for the three months ended September 30, 2023 was $4.0 million, an increase of $0.4 million, compared to $3.6 million for the same period in 2022. Interest expense is attributable to the mortgage financings associated with our multifamily properties and reflect higher market interest rates on our variable rate indebtedness during the 2023 period as well as changes in the weighted average principal outstanding during the periods. Additionally, during the three months ended September 30, 2023 and 2022, we earned $0.8 million and $0.1 million, respectively, from our interest rate cap contracts which is recorded in interest expense, net.

Mark to Market Adjustment on Derivative Financial Instruments During the three months ended September 30, 2023 and 2022, we recorded a negative mark to market adjustment of $0.5 million and a positive mark to market adjustment of $0.8 million, respectively. These mark to market adjustments represent the changes in the fair values of our interest rate cap contracts during such periods.

Nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.

The following table provides summary information about our results of operations (dollars in thousands):