UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 20212022

 

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 Value Plus REIT IV, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

Maryland 47-1796830

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

1985 Cedar Bridge Avenue, Suite 1

Lakewood, New Jersey
08701
(Address of Principal Executive Offices) (Zip Code)

(732) 367-0129

(Registrant’s Telephone Number, Including Area Code)

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.

 

Large accelerated filer  ☐ Accelerated filer
Non-accelerated filer ☒Smaller reporting company
  Emerging growth company

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

 

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 10, 2021,7, 2022, there were 8.58.4 million outstanding shares of common stock of Lightstone Value Plus REIT IV, Inc.

 

 

 

 

 

 

LIGHTSTONE VALUE PLUS REIT IV, INC. AND SUBSIDIARIES

INDEX

 

  Page
PART IFINANCIAL INFORMATION 
  
Item 1.Financial Statements (unaudited)1
 
Item 1.Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020Financial Statements (unaudited)1
  
 Consolidated Balance Sheets as of September 30, 2022 and December 31, 20211
Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 20212022 and 202020212
  
Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2021 and 20203
 
 Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 20212022 and 2020202143
   
 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 20212022 and 2020202154
  
 Notes to Consolidated Financial Statements65
   
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations1413
  
Item 4.Controls and Procedures2321
  
PART IIOTHER INFORMATION 
  
Item 1.Legal Proceedings2422
   
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds2422
  
Item 3.Defaults Upon Senior Securities2422
   
Item 4.Mine Safety Disclosures2422
  
Item 5.Other Information2422
  
Item 6.Exhibits 25Exhibits23

i

 

 

PART I. FINANCIAL INFORMATION:

ITEM 1. FINANCIAL STATEMENTS:

LIGHTSTONE VALUE PLUS REIT IV, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

         
  September 30,
2021
  December 31,
2020
 
  (unaudited)    
Assets        
         
Investment property:        
Construction in progress $61,021,642  $40,479,640 
Investment in unconsolidated affiliated real estate entity  10,793,908   10,988,023 
Cash and cash equivalents  18,622,753   31,406,204 
Restricted cash and other assets  855,332   116,419 
Total Assets $91,293,635  $82,990,286 
         
Liabilities and Stockholders’ Equity        
         
Mortgage payable, net $11,889,881  $16,000,000 
Accounts payable, accrued expenses and other liabilities  6,578,769   1,178,674 
Distributions payable  1,829,250   3,151,447 
Subordinated advances - related party  13,591,523   13,451,692 
Total Liabilities  33,889,423   33,781,813 
         
Commitments and Contingencies  -   - 
         
Stockholders’ Equity:        
         
Company’s Stockholders’ Equity:        
         
Preferred stock, $0.01 par value; 50.0 million shares authorized, NaN issued and outstanding  0   0 
Common stock, $0.01 par value; 200.0 million shares authorized, 8.5 million shares issued and outstanding  85,281   85,374 
Additional paid-in-capital  71,586,391   71,665,213 
Accumulated deficit  (25,145,110)  (22,542,114)
Total Company’s Stockholders’ Equity  46,526,562   49,208,473 
Noncontrolling interests  10,877,650   0 
Total Stockholders’ Equity  57,404,212   49,208,473 
Total Liabilities and Stockholders’ Equity $91,293,635  $82,990,286 

The accompanying notes are an integral part of these consolidated financial statements.

1

PART I. FINANCIAL INFORMATION, CONTINUED:

         
  September 30,
2022
  December 31,
2021
 
  (unaudited)     
Assets        
         
Investment property:        
Construction in progress $104,118,514  $72,999,787 
Investment in unconsolidated affiliated real estate entity  10,653,947   10,793,084 
Cash and cash equivalents  10,992,481   11,955,515 
Restricted cash and other assets  1,515,053   440,855 
Total Assets $127,279,995  $96,189,241 
         
Liabilities and Stockholders’ Equity        
         
Mortgage payable, net $50,625,135  $14,843,736 
Accounts payable, accrued expenses and other liabilities  7,494,638   9,895,523 
Subordinated advances - related party  13,778,477   13,638,646 
Total Liabilities  71,898,250   38,377,905 
         
Commitments and Contingencies        
         
Stockholders’ Equity:        
         
Company’s Stockholders’ Equity:        
         
Preferred stock, $0.01 par value; 50.0 million shares authorized, none issued and outstanding  -   - 
Common stock, $0.01 par value; 200.0 million shares authorized, 8.4 million and 8.5 million shares issued and outstanding, respectively  83,994   84,777 
Additional paid-in-capital  70,489,237   71,157,978 
Accumulated deficit  (27,390,383)  (25,651,846)
         
Total Company’s Stockholders’ Equity  43,182,848   45,590,909 
Noncontrolling interests  12,198,897   12,220,427 
         
Total Stockholders’ Equity  55,381,745   57,811,336 
         
Total Liabilities and Stockholders’ Equity $127,279,995  $96,189,241 

 

ITEM 1. FINANCIAL STATEMENTS, CONTINUED:

LIGHTSTONE VALUE PLUS REIT IV, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

                 
  For the Three Months Ended
September 30,
  For the Nine Months Ended
September 30,
 
  2021  2020  2021  2020 
             
Income/(loss):                
Investment income $8,738  $15,753  $30,021  $151,603 
Gain from disposition of investment in unconsolidated affiliated real estate entity  0   120,328   0   8,300,837 
Gain on sale of marketable securities  0   0   0   264,589 
Earnings from investments in unconsolidated affiliated real estate entities  1,172,990   (601,185)  (194,115)  (1,515,479)
                 
Total income/(loss)  1,181,728   (465,104)  (164,094)  7,201,550 
                 
Expenses:                
General and administrative costs  153,666   161,060   469,821   611,683 
Interest expense  47,123   46,994   139,831   139,960 
Foreign currency transaction loss  0   0   0   47,648 
                 
Total expenses  200,789   208,054   609,652   799,291 
                 
Net income/(loss) $980,939  $(673,158) $(773,746) $6,402,259 
                 
Net income/(loss) per common share, basic and diluted $0.12  $(0.08) $(0.09) $0.75 
                 
Weighted average number of common shares outstanding, basic and diluted  8,529,553   8,537,424   8,534,772   8,543,753 

The accompanying notes are an integral part of these consolidated financial statements.

2

PART I. FINANCIAL INFORMATION, CONTINUED:

ITEM 1. FINANCIAL STATEMENTS, CONTINUED.

LIGHTSTONE VALUE PLUS REIT IV, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

                 
  For the Three Months Ended
September 30,
  For the Nine Months Ended
September 30,
 
  2021  2020  2021  2020 
             
Net income/(loss) $980,939  $(673,158) $(773,746) $6,402,259 
                 
Other comprehensive loss:                
Holding loss on marketable securities, available for sale  0   0   0   (135,500)
Reclassification adjustment for gain included in net income  0   0   0   (264,589)
                 
Other comprehensive loss  0   0   0   (400,089)
                 
Comprehensive income/(loss) $980,939  $(673,158) $(773,746) $6,002,170 

The accompanying notes are an integral part of these consolidated financial statements.

3

PART I. FINANCIAL INFORMATION, CONTINUED:

ITEM 1. FINANCIAL STATEMENTS, CONTINUED.  

LIGHTSTONE VALUE PLUS REIT IV, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

                         
        Additional  Accumulated Other       
  Common  Paid-In  Comprehensive  Accumulated  Total 
  Shares  Amount  Capital  Income  Deficit  Equity 
                   
BALANCE, June 30, 2020  8,537,424  $85,374  $71,665,213  $               -  $(17,101,228) $54,649,359 
                         
Net loss  -   -   -   -   (673,158)  (673,158)
                         
BALANCE, September 30, 2020  8,537,424  $85,374  $71,665,213  $-  $(17,774,386) $53,976,201 

        Additional  Accumulated Other       
  Common  Paid-In  Comprehensive  Accumulated  Total 
  Shares  Amount  Capital  Income  Deficit  Equity 
BALANCE, December 31, 2019  8,595,224  $85,952  $72,215,685  $400,089  $(23,324,903) $49,376,823 
                         
Net income  -   -   -   -   6,402,259   6,402,259 
Distributions declared (a)  -   -   -   -   (851,742)  (851,742)
Redemption and cancellation of shares  (57,800)  (578)  (550,472)  -   -   (551,050)
Other comprehensive loss  -   -   -   (400,089)  -   (400,089)
                         
BALANCE, September 30, 2020  8,537,424  $85,374  $71,665,213  $-  $(17,774,386) $53,976,201 

(a)Dividends per share were $0.10.

        Additional          
  Common  Paid-In  Accumulated  Noncontrolling  Total 
  Shares  Amount  Capital  Deficit  Interests  Equity 
BALANCE, June 30, 2021  8,537,424  $85,374  $71,665,213  $(24,296,799) $-  $47,453,788 
                         
Net income  -   -   -   980,939   -   980,939 
Distributions declared (a)  -   -   -   (1,829,250)  -   (1,829,250)
Contributions of noncontrolling interests  -   -   -   -   10,877,650   10,877,650 
Redemption and cancellation of shares  (9,284)  (93)  (78,822)  -   -   (78,915)
                         
BALANCE, September 30, 2021  8,528,140  $85,281  $71,586,391  $(25,145,110) $10,877,650  $57,404,212 

(a)Dividends per share were $0.215.

        Additional          
  Common  Paid-In  Accumulated  Noncontrolling  Total 
  Shares  Amount  Capital  Deficit  Interests  Equity 
BALANCE, December 31, 2020  8,537,424  $85,374  $71,665,213  $(22,542,114) $-  $49,208,473 
                         
Net loss  -   -   -   (773,746)  -   (773,746)
Distributions declared (a)  -   -   -   (1,829,250)  -   (1,829,250)
Contributions of noncontrolling interests  -   -   -   -   10,877,650   10,877,650 
Redemption and cancellation of shares  (9,284)  (93)  (78,822)  -   -   (78,915)
                         
BALANCE, September 30, 2021  8,528,140  $85,281  $71,586,391  $(25,145,110) $10,877,650  $57,404,212 

(a)Dividends per share were $0.215.

The accompanying notes are an integral part of these consolidated financial statements.

 

41

 

 

PART I. FINANCIAL INFORMATION, CONTINUED:

ITEM 1. FINANCIAL STATEMENTS, CONTINUED:

 

LIGHTSTONE VALUE PLUS REIT IV, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

                 
  For the
Three Months Ended
September 30,
  For the
Nine Months Ended
September 30,
 
  2022  2021  2022  2021 
(Loss)/income:                
Investment income $34,081  $8,738  $34,081  $30,021 
Earnings from investment in unconsolidated affiliated real estate entity  (279,481)  1,172,990   (623,124)  (194,115)
                 
Total (loss)/income  (245,400)  1,181,728   (589,043)  (164,094)
                 
Expenses:                
General and administrative costs  155,326   153,666   458,393   469,821 
Interest expense, net  47,123   47,123   139,831   139,831 
Pre-opening costs  318,335   -   737,618   - 
                 
Total expenses  520,784   200,789   1,335,842   609,652 
                 
Net (loss)/income $(766,184) $980,939  $(1,924,885) $(773,746)
                 
Less: net loss attributable to noncontrolling interests  79,783   -   186,348   - 
                 
Net (loss)/income attributable to Company’s common shares $(686,401) $980,939  $(1,738,537) $(773,746)
                 
Net (loss)/income per common share, basic and diluted $(0.09) $0.12  $(0.23) $(0.09)
                 
Weighted average number of common shares outstanding, basic and diluted  8,400,822   8,529,553   8,425,857   8,534,772 

The accompanying notes are an integral part of these consolidated financial statements.

2

PART I. FINANCIAL INFORMATION, CONTINUED:

ITEM 1. FINANCIAL STATEMENTS, CONTINUED:

LIGHTSTONE VALUE PLUS REIT IV, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

                         
     Additional          
  Common  Paid-In  Accumulated  Noncontrolling  Total 
  Shares  Amount  Capital  Deficit  Interests  Equity 
BALANCE, June 30, 2021  8,537,424  $85,374  $71,665,213  $(24,296,799) $-  $47,453,788 
                         
Net income  -   -   -   980,939   -   980,939 
Distributions declared (a)  -   -   -   (1,829,250)  -   (1,829,250)
Contributions of noncontrolling interests  -   -   -   -   10,877,650   10,877,650 
Redemption and cancellation of shares  (9,284)  (93)  (78,822)  -   -   (78,915)
                         
BALANCE, September 30, 2021  8,528,140  $85,281  $71,586,391  $(25,145,110) $10,877,650  $57,404,212 

(a)Dividends per share were $0.215.

     Additional          
  Common  Paid-In  Accumulated  Noncontrolling  Total 
  Shares  Amount  Capital  Deficit  Interests  Equity 
BALANCE, December 31, 2020  8,537,424  $85,374  $71,665,213  $(22,542,114) $-  $49,208,473 
                         
Net loss  -   -   -   (773,746)  -   (773,746)
Distributions declared (a)  -   -   -   (1,829,250)  -   (1,829,250)
Contributions of noncontrolling interests  -   -   -   -   10,877,650   10,877,650 
Redemption and cancellation of shares  (9,284)  (93)  (78,822)  -   -   (78,915)
                         
BALANCE, September 30, 2021  8,528,140  $85,281  $71,586,391  $(25,145,110) $10,877,650  $57,404,212 

(a)Dividends per share were $0.215.

     Additional        Total 
  Common  Paid-In  Accumulated  Noncontrolling  Stockholders’ 
  Shares  Amount  Capital  Deficit  Interests  Equity 
BALANCE, June 30, 2022  8,404,409  $84,044  $70,532,087  $(26,703,982) $12,407,132  $56,319,281 
                         
Net loss  -   -   -   (686,401)  (79,783)  (766,184)
Distributions paid to noncontrolling interests  -   -   -   -   (128,452)  (128,452)
Redemption and cancellation of common stock  (5,000)  (50)  (42,850)  -   -   (42,900)
                         
BALANCE, September 30, 2022  8,399,409  $83,994  $70,489,237  $(27,390,383) $12,198,897  $55,381,745 

     Additional        Total 
  Common  Paid-In  Accumulated  Noncontrolling  Stockholders’ 
  Shares  Amount  Capital  Deficit  Interests  Equity 
BALANCE, December 31, 2021  8,477,679  $84,777  $71,157,978  $(25,651,846) $12,220,427  $57,811,336 
                         
Net loss  -   -   -   (1,738,537)  (186,348)  (1,924,885)
Contributions of noncontrolling interests  -   -   -   -   293,270   293,270 
Distributions paid to noncontrolling interests  -   -   -   -   (128,452)  (128,452)
Redemption and cancellation of common stock  (78,270)  (783)  (668,741)  -   -   (669,524)
                         
BALANCE, September 30, 2022  8,399,409  $83,994  $70,489,237  $(27,390,383) $12,198,897  $55,381,745 

The accompanying notes are an integral part of these consolidated financial statements.

3

PART I. FINANCIAL INFORMATION, CONTINUED:

ITEM 1. FINANCIAL STATEMENTS, CONTINUED:

LIGHTSTONE VALUE PLUS REIT IV, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

                
 For the Nine Months Ended
September 30,
  For the
Nine Months Ended
September 30,
 
 2021  2020  2022  2021 
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net (loss)/income $(773,746) $6,402,259 
Adjustments to reconcile net (loss)/income to cash used in operating activities:        
Earnings from investments in unconsolidated affiliated real estate entities  194,115   1,515,479 
Gain from disposition of investment in unconsolidated affiliated real estate entity  0   (8,300,837)
Gain on sale of marketable securities  0   (264,589)
Amortization of discount on debt securities  0   (30,196)
Foreign currency transaction loss  0   47,648 
Net loss $(1,924,885) $(773,746)
Adjustments to reconcile net loss to cash used in operating activities:        
Loss from investment in unconsolidated affiliated real estate entity  623,124   194,115 
Changes in assets and liabilities:                
Increase in deposits and other assets  (631,605)  (83,835)
Increase/(decrease) in accounts payable, accrued expenses and other liabilities  982,505   (84,349)
Increase in other assets  (318,154)  (631,605)
Increase in accounts payable, accrued expenses and other liabilities  1,038,015   982,505 
Increase in accrued interest on subordinated advances - related party  139,831   139,960   139,831   139,831 
        
Cash used in operating activities  (88,900)  (658,460)
Net cash used in operating activities  (442,069)  (88,900)
                
CASH FLOWS FROM INVESTING ACTIVITIES:                
Purchase of investment property  (16,504,596)  (3,780,598)  (32,434,075)  (16,504,596)
Proceeds from sale of marketable securities  0   4,141,195 
Proceeds from disposition of investment in unconsolidated affiliated real estate entity  0   21,989,574 
        
Cash (used in)/provided by investing activities  (16,504,596)  22,350,171 
Investment in unconsolidated affiliated real estate entity  (483,987)  - 
Net cash used in investing activities  (32,918,062)  (16,504,596)
                
CASH FLOWS FROM FINANCING ACTIVITIES:                
Proceeds from mortgage financing  16,000,000   0   33,657,848   16,000,000 
Mortgage payments  (16,000,000)  0   -   (16,000,000)
Payment of loan fees and expenses  (3,729,935)  0   -   (3,729,935)
Distributions paid to noncontrolling interests  (128,452)  - 
Contributions of noncontrolling interests  10,877,650   0   293,270   10,877,650 
Redemption and cancellation of common stock  (78,915)  (551,050)  (669,524)  (78,915)
Distributions paid to Company’s common stockholders  (3,151,447)  (1,137,582)  -   (3,151,447)
        
Cash provided by/(used in) financing activities  3,917,353   (1,688,632)
        
Effect of exchange rate changes on cash and cash equivalents  0   (47,648)
Net cash provided by financing activities  33,153,142   3,917,353 
                
Net change in cash, cash equivalents and restricted cash  (12,676,143)  19,955,431   (206,989)  (12,676,143)
Cash, cash equivalents and restricted cash, beginning of year  31,490,826   14,263,182   12,197,119   31,490,826 
Cash, cash equivalents and restricted cash, end of period $18,814,683  $34,218,613  $11,990,130  $18,814,683 
                
Supplemental disclosure of cash flow information:                
Non-cash purchase of investment property $4,680,726  $827,233  $4,998,283  $4,680,726 
Unpaid interest accrued and capitalized as mortgage payable and construction in progress $52,847  $0  $785,570  $52,847 
Distributions declared, but not paid $1,829,250  $0  $-  $1,829,250 
Amortization of deferred financing costs included in construction in progress $337,329  $343,759  $1,337,981  $337,329 
Accrued exit fee $770,000  $0  $-  $770,000 
                
The following is a summary of the Company’s cash, cash equivalents and restricted cash total as presented in our statements of cash flows for the periods presented:                
Cash and cash equivalents $18,622,753  $34,033,071  $10,992,481  $18,622,753 
Restricted cash  191,930   185,542   997,649   191,930 
Total cash, cash equivalents and restricted cash $18,814,683  $34,218,613  $11,990,130  $18,814,683 

The accompanying notes are an integral part of these consolidated financial statements.

 

54

 

LIGHTSTONE VALUE PLUS REIT IV, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(unaudited)

(unaudited)

1.1.Structure

Lightstone Value Plus REIT IV, Inc. (“Lightstone REIT IV”), which was formerly known as Lightstone Real Estate Income Trust, Inc. 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 ended December 31, 2016.

 

Lightstone 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 REIT IV or the Company as required by the context in which any such pronoun is used.

 

The Company has and intends to continue to seek opportunities to invest in real estate and real estate-related investments. The Company’s 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. The Company may also invest in debt and derivative securities related to real estate assets. A portion of the Company’s 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 other real estate investment programs it sponsors. Although the Company expects that most of its investments will be of these various types, it may also make other investments. In fact, it may invest in whatever types of investments that it believes are in its best interests.

 

The Company currently has one 1operating segment. As of September 30, 2021, it2022, the Company majority owned and consolidated the operating results of one development project, the Williamsburga joint venture (the “Williamsburg Moxy Hotel Joint Venture”), in which it has 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”). The Company accounts for its unconsolidated membership interest in the 40 East End Ave. Joint Venture in accordance with the equity method of accounting.

 

The Company’s advisor is Lightstone Real Estate Income LLC (the “Advisor”), which is majority owned by David Lichtenstein. On September 12, 2014, the Advisor contributed $200,000 for 20,000 shares of common stock (“Common Shares”), or $10.00$10.00 per share of the Lightstone REIT IV. Mr. Lichtenstein also is a majority owner of the equity interests of The Lightstone Group, LLC. The Lightstone Group, LLC served as the Company’s Sponsor during itsthe Company’s initial public offering (the “Offering”) which terminated on March 31, 2017. Mr. Lichtenstein 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 the Company’s 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 behalf of the Company and managing its day-to-day operations. Mr. Lichtenstein also acts as the Company’s Chairman and Chief Executive Officer. As a result, he exerts influence over but does not control Lightstone REIT IV.

 

The Company does not have any employees. The Advisor receives compensation and fees for services related to the investment and management of the Company’s assets. The Advisor has certain affiliates which may manage the properties the Company acquires. However, the Company may also contract with other unaffiliated third-party property managers.

 

The Company’s Common Shares arestock is not currently listed on a national securities exchange. The Company may seek to list its Common Sharesstock for trading on a national securities exchange only if a majority of its independent directors believe listing would be in the best interest of its stockholders. The Company does not intend to list its Common Sharesshares at this time. The Company does not anticipate that there would be any market for its Common Sharesshares of common stock until they are listed for trading. In the event the Company does not begin the process of achieving a liquidity event prior to March 31, 2022, which is the fifth anniversary of the termination of its Offering, its charter requires either (a) an amendment to the Company’s charter to extend the deadline to begin the process of achieving a liquidity event, or (b) the holding of a stockholders meeting to vote on a proposal for an orderly liquidation of its portfolio.

 

Noncontrolling Interests in Consolidated Subsidiaries

Noncontrolling interests in consolidated subsidiaries include ownership interestsrepresents the noncontrolling member’s 25% share of the equity in the Williamsburg Moxy Hotel Joint Venture withheld by Lightstone Value Plus REIT III, Inc (“Lightstone REIT III”), a real estate investment trustREIT also sponsored by the Company’s Sponsor and a related party. Income and losses attributable to the Williamsburg Moxy Hotel Joint Venture are allocated to the noncontrolling interest holder based on its ownership percentage. See Note 3 for additional information.

 

65

 

 

LIGHTSTONE VALUE PLUS REIT IV, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(unaudited)

 

2.Summary of Significant Accounting Policies

The accompanying 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 the Lightstone REIT IV and Subsidiaries 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 Rule 8-03 of Regulation S-X.

 

The consolidated financial statements have been prepared in accordance with GAAP. 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 debtand investments and securities.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.

 

The consolidated balance sheet as of December 31, 20202021 included herein has been derived from the consolidated balance sheet included in the Company’s Annual Report on Form 10-K.

 

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

 

Principles of Consolidation and Basis of Presentation

 

The consolidated financial statements include the accounts of Lightstone REIT IV and Subsidiariesits subsidiaries (over which the Companyit exercises financial and operating control). All inter-company accountsbalances and transactions have been eliminated in consolidation. In determining whetheraddition, interests in entities acquired are evaluated based on applicable GAAP, and if 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. Investments in other real estate entities where the Company has a controllingthe ability to exercise significant influence, but does not exercise financial interestand operating control, and is not considered to be the primary beneficiary are accounted for using the equity method.

There are judgments and estimates involved in a joint venture anddetermining if an entity in which the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the other partners or members as well as whether the entityCompany has made an investment is a variable interest entity for whichVIE and, if so, whether the Company is 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.

 

Financial Instruments

 

The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, restricted cash and other assets, the Williamsburg Mortgage and accounts payable and accrued expenses and other liabilities approximate their fair values because of the short maturity of these instruments.

The carrying amount of the Moxy Construction Loanmortgage payable approximates fair value because its interest rate is variable and reflective of market rates.

ReclassificationsPre-Opening Costs

Certain prior period amounts have been reclassified to conform toThe Company expenses the current year presentation.costs associated with pre-opening activities associated with its development and construction projects as incurred. Pre-opening costs generally consist of non-recurring personnel, marketing and other costs.

6

LIGHTSTONE VALUE PLUS REIT IV, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(unaudited)

 

COVID-19 Pandemic

TheOn March 11, 2020, the World Health Organization declared COVID-19 a global pandemic on March 11, 2020 and since that time many of the previously imposed restrictions and other measures which were instituted in response have been subsequently reduced or lifted. However, the COVID-19 pandemicit remains highly unpredictable and dynamic and its ultimate duration and extent continue to be dependent on various developments, such as the emergence of variants to the virus that may cause additional strains of COVID-19, and the ongoing development, administration and ultimate effectiveness of vaccines, andincluding booster shots. Accordingly, the eventual timeline to achieve a sufficient level of herd immunity among the general population. Accordingly, theongoing COVID-19 pandemic may continue to have negative effects on the health of the U.S. economyand global economies for the foreseeable future.

 

To-date, the COVID-19 pandemic has not had any significant impact on the Company’s Williamsburg Moxy Hotel Joint Venture’s 210-room branded hotel (the “Williamsburg Moxy Hotel”) development project.project located in the Williamsburg neighborhood of Brooklyn in New York City, which is currently under construction and expected to open during the first quarter of 2023. The Company’s other investment is its approximately 33.3% membership interest in the 40 East End Ave. Joint Venture, which ownssubstantially completed the development and construction of a 29-unit 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 Manhattan in New York City. The 40 East End Avenue Project previously received its final temporary certificates of occupancy, or TCO,City in March 2020, and through September 30, 2021, ten condominium units have been sold. The 40 East End Ave. Joint Venture has an outstanding loan onwhich was at the 40 East End Project (the “Condo Loan”) which is currently scheduled to mature on December 19, 2021. Because of the impactonset of the COVID-19 pandemic onpandemic. Thereafter, the pace of condominium unit sales has been impacted by the ongoing COVID-19 pandemic and through September 30, 2022, 19 of the condominium units had been sold. Additionally, because of the pace of condominium sales, the 40 East End Ave. Joint Venture is engaged in discussions with the lender to extendhas obtained an amendment, including an extension of the maturity date, ofto the Condo Loan. However, there can be no assurance thatloan secured by the 40 East End Ave. Joint Venture will be successful in such endeavors.remaining unsold condominium units. See Note 4 for additional information.

7

LIGHTSTONE VALUE PLUS REIT IV, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(unaudited)

 

The extent to which the Company’s 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 the COVID-19 pandemic or its effect on the U.S. economy negatively impactCompany’s investments in the Williamsburg Moxy Hotel development project and/or investment in the 40 East End Ave. Joint Venture for an extended period, the Company’sare negatively impacted, its business and financial results could be materially and adversely impacted.

 

Reclassifications

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

New Accounting Pronouncements

The Company has reviewed and determined that recently issued accounting pronouncements will not have a material impact on its financial position, results of operations and cash flows, or do not apply to its current operations.

3.Williamsburg Moxy Hotel

On July 17, 2019, the Company, through its then wholly owned subsidiary, Bedford Avenue Holdings LLC acquired four adjacent parcels of land located at 353-361 Bedford Avenue in the Williamsburg neighborhood of Brooklyn in New York City (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 it is developing and constructing a 210-room branded hotel (the “Williamsburg Moxy Hotel”). In connection with the acquisition of the Williamsburg Land, the Company simultaneously entered into a $Moxy Hotel is being developed.

16.0 million nonrecourse mortgage loan (the “Williamsburg Mortgage”) collateralized by the

Williamsburg Land.Moxy Joint Venture

 

On August 5, 2021, the Company formed a joint venture (the “Williamsburgthe Williamsburg Moxy Hotel Joint Venture”)Venture with Lightstone REIT III, pursuant to which Lightstone REIT III acquired 25% of the Company’s membership interest in the Bedford Avenue Holdings LLC for aggregate consideration of $7.9 million. Subsequent to the initial acquisition, Lightstone REIT III made additional net capital contributions to the Williamsburg Moxy Hotel Joint Venture of $2.94.5 million through September 30, 2021.2022, including $0.2 million made during the nine months ended September 30, 2022.

 

As a result, the Company and Lightstone REIT III have 75% and 25% membership interests, respectively, in the Williamsburg Moxy Hotel Joint Venture. Additionally, the Company is the managing member of the Williamsburg Moxy Hotel Joint Venture and Lightstone REIT III has consent rights with respect to all major decisions.

7

LIGHTSTONE VALUE PLUS REIT IV, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(unaudited)

 

The Company has determined that the Williamsburg Moxy Hotel Joint Venture is a variable interest entityVIE and the Company is the primary beneficiary. As the Company is the member most closely associated with the Williamsburg Moxy Hotel Joint Venture and therefore has the power to direct the activities of the Williamsburg Moxy Hotel Joint Venture that most significantly impact its performance, the Company consolidates the operating results and financial condition of the Williamsburg Moxy Hotel Joint Venture and accounts for the ownership interest of Lightstone REIT III as noncontrolling interests. Contributions are allocated in accordance with each investor’s ownership percentage. ProfitEarnings and cash distributions are allocated in accordance with each investor’s ownership percentage.

 

On August 4, 2021, the Williamsburg Joint Venture entered into a development agreement (the “Development Agreement”) with an affiliate of the Advisor (the “Williamsburg Moxy Developer”) pursuant to which the Williamsburg 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 the development and construction of the Williamsburg Moxy Hotel (see Note 6 for additional information). Additionally on August 5, 2021, the Williamsburg Moxy Joint Venture obtained construction financing for the Williamsburg Moxy Hotel as discussed below. The Williamsburg Moxy Hotel is under currently under construction and expected to open during the first quarter of 2023. Additionally, the advisor and its affiliates are reimbursed for certain development-related costs attributable to the Williamsburg Moxy Hotel.

As of September 30, 2021,2022, the Williamsburg Moxy Hotel Joint Venture incurred and capitalized to construction in progress an aggregate of $61.0104.1 million (including capitalized interest of $2.3$7.4 million) consisting of acquisition and other costs attributable to the development of the Williamsburg Moxy Hotel. During the three and nine months ended September 30, 2021, the Company capitalized interest of approximately2022, $0.61.8 million and $0.84.2 million, respectively, of interest was capitalized to construction in progress and during the three and nine months ended September 30, 2020,2021, $0.6 million and $0.8 million, respectively, of interest was capitalized to construction in progress.

In preparation for the Company capitalized interestopening of approximatelythe Williamsburg Moxy Hotel, which is currently expected to occur during the first quarter of 2023, the Williamsburg Moxy Hotel Joint Venture incurred pre-opening costs of $0.3 million and $0.90.7 million respectively,during the three and nine months ended September 30, 2022, respectively. No pre-opening costs were incurred in connection with the development2021 periods. Pre-opening costs generally consist of the Williamsburg Moxy Hotel.non-recurring personnel, marketing and other costs.

 

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$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 ofthe first 7.50% withdrawn under the accruedfacility and unpaid interestthe excess added to the outstanding loan balance due at maturity. LIBOR as of September 30, 2022 and December 31, 2021 was 2.76% and 0.10%, respectively. The Moxy Construction Loan is collateralized by the Williamsburg Moxy Hotel. The Williamsburg Moxy Hotel Joint Venture received initial proceeds of $16.0 million under the Moxy Construction Loan and repaid the Williamsburg Mortgage ($16.0 million) in full.

As of September 30, 2022 and December 31, 2021, the outstanding principal balance of the Moxy Construction Loan was $16.1$53.0 million (including $0.9 million of interest capitalized to principal) which is presented, net of deferred financing fees of $2.4 million and $18.6 million (including $0.1 million of interest capitalized to principal) which is presented, net of deferred financing fees of $4.2$3.7 million, respectively, on the consolidated balance sheetsheets and is classified as Mortgage Payable,mortgage payable, net. As of September 30, 2021,2022, the remaining availability under the Moxy Construction Loanfacility was up to $61.0 million.$24.9 million and its interest rate was 11.76%.

8

LIGHTSTONE VALUE PLUS REIT IV, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(unaudited)

 

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 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 September 30, 2022 and December 31, 2021.

8

LIGHTSTONE VALUE PLUS REIT IV, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(unaudited)

 

4.InvestmentsInvestment in Unconsolidated Affiliated Real Estate EntitiesEntity

 

40 East End Ave. Joint Venture

 

On March 31, 2017, the Company 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 Company’s Sponsor, and a related party (the “40 East End Seller”), providing for the Company to acquire approximately 33.3% of the 40 East End Seller’s approximate 100% membership interest in the 40 East End Ave. Pref Member LLC (the “40 East End Ave. Joint Venture”)Venture for aggregate consideration of approximately $10.3 million.

 

The Company’s ownership interest in the 40 East End Ave. Joint Venture is a non-managing interest. Because the Company exerts significant influence over but does not control the 40 East End Ave. Joint Venture, it accounts for its 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. The Company commenced recording its 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 its membership interest of approximately 33.3% in the 40 East End Ave. Joint Venture. Additionally, Lightstone Value Plus REIT I, Inc. (“Lightstone REIT I”), a real estate investment trustREIT also sponsored by the Company’s 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.

 

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 Manhattan in New York City. The 40 East End Avenue Project received its final TCO in March 2020 and through September 30, 2021, ten2022, 19 of the condominium units have been sold.

 

On March 21, 2017, 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”) for the land acquisition and construction of the 40 East End Ave. Project. 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, iswhich was previously scheduled to mature on December 19, 2021, bears interest at LIBOR plus 2.45%, which is payable monthly, and requires principal payments to be made at certain prescribed amounts from proceeds from the sales of condominium units with any remaining outstanding balance due in full at maturity.

 

Pursuant to the terms of the Condo Loan, the 40 East End Ave. Joint Venture was required to make a principal paydown onOn December 19, 2020 if 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, of which the Company’s proportionate share was approximately $0.7 million, which was paid on December 18, 2020, and allowed for the remaining required principal paydown of $9.7 million to be subsequently paid during the first quarter of 2021. The 40 East End Ave. Joint Venture used proceeds from the sale condominium units which closed during the first quarter of 2021 to make the remaining required principal paydown.

The 40 East End Ave. Joint Venture was required to make another principal paydown of $8.0 million on June 19, 2021 since principal paydowns from additional condominium sales proceeds had not reduced the outstanding principal balance of the Condo Loan to at least $73.0 million as of that date. However, the lender has agreed to rolling 30-day extensions, commencing on June 19, 2021, to provide further time for the 40 East End Ave. Joint Venture to close on the sale of additional condominiums units and apply the resulting proceeds to the required principal paydown. During the third quarter of30, 2021, the 40 East End Ave. Joint Venture closed onand the financial institution amended the Condo Loan providing for an extension of the maturity date to December 20, 2022 and revisions to the timing and amounts of required principal payments to be made from proceeds from the sale of two additional condominium unitunits, all of which generated sufficient proceeds to makehave been met. During the required principal paydown. As ofnine months ended September 30, 2021, the Condo Loan had an outstanding principal balance of $58.9 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,2022, the 40 East End Ave. Joint Venture used an aggregate of $17.3 million of proceeds from the sale of four condominium units to reduce the principal balance of the Condo Loan to $19.2 million, which remains outstanding as of September 30, 2022. During October 2022, one additional condominium unit was sold and proceeds of $9.0 million were used to make a principal paydown on the Condo Loan reducing its outstanding balance to $10.2 million.

As discussed above, the Condo Loan is engagedcurrently scheduled to mature on December 20, 2022. If the Condo Loan has not been repaid in discussions withfull before its maturity date, the lender40 East End Ave. Joint Venture intends to extendseek a further extension to 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 Company’s 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 the Company’s share is approximately 33.3%33.3%. The Company has determined that the fair value of its share of the 40 East End Guarantee is immaterial.

9

 

 

LIGHTSTONE VALUE PLUS REIT IV, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(unaudited)

 

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 balancean aggregate of $80.380.5 million plus accruedof principal and unpaid interest under a construction loan previously used to fund the development and construction of $0.2 million for the 40 East End Ave. MortgageAvenue Project and (ii) redeem $9.5 million of Lightstone REIT I’s Preferred Contributions.

The 40 East End Ave. Joint Venture subsequently redeemed an additional $3.5 million and $11.011.0 million of Preferred Contributions on December 26, 2019 and February 13, 2020, respectively, reducing Lightstone REIT I’s Preferred Contributions to $6.0$6.0 million, which remains outstanding as of September 30, 2021.2022.

 

Subsequent to the Company’s acquisition through September 30, 2021,2022, it has made an aggregate of $5.76.4 million of additional capital contributions to the 40 East End Ave. Joint Venture, of which none were$0.5 million was made during the nine months ended September 30, 2021. The Company’s investment in the 40 East Ave. Joint Venture was $10.8 million and $11.0 million as of September 30, 2021 and December 31, 2020, respectively.2022.

 

The 40 East End Ave. Joint Venture Financial Information

The following table represents the condensed income statements for the 40 East End Ave. Joint Venture:

 

Schedule of financial information of joint venture                                
(amounts in thousands) For the Three Months September 30,
2021
  For the Three Months September 30,
2020
  For the Nine Months Ended September 30,
2021
  For the Nine Months Ended September 30,
2020
  For the
Three Months
September 30,
2022
  For the
Three Months
September 30,
2021
  For the
Nine Months Ended
September 30,
2022
  For the
Nine Months Ended
September 30,
2021
 
Revenues $23,407  $3,008  $33,914  $15,910  $-  $23,407  $18,678  $33,914 
                                
Cost of goods sold  18,142   3,197   28,395   14,778   -   18,142   18,037   28,395 
Impairment of real estate inventory  239   0   1,471   0   -   239   112   1,471 
Other expenses  628   668   1,878   1,916   415   628   1,164   1,878 
Depreciation and amortization  0   0   0   0 
Operating income/(loss)  4,398   (857)  2,170   (784)
Operating (loss)/income  (415)  4,398   (635)  2,170 
                                
Interest expense and other, net  (876)  (949)  (2,753)  (3,294)  (425)  (876)  (1,236)  (2,753)
Net income/(loss) $3,522  $(1,806) $(583) $(4,078)
Company’s share of net income/(loss) (33.3%) $1,173  $(601) $(194) $(1,358)
Net (loss)/income $(840) $3,522  $(1,871) $(583)
Company’s share of net (loss)/income (33.3%) $(280) $1,173  $(623) $(194)

 

The following table represents the condensed balance sheets for the 40 East End Ave. Joint Venture:

 

         
  As of  As of 
(amounts in thousands) September 30,
2021
  December 31,
2020
 
       
Real estate inventory $96,781  $125,086 
Cash and restricted cash  699   4,446 
Other assets  416   587 
         
Total assets $97,896  $130,119 
         
Mortgage payable, net $58,681  $89,876 
Other liabilities  850   1,309 
Members’ capital  38,365   38,934 
         
Total liabilities and members’ capital $97,896  $130,119 

The Cove Joint Venture

On January 31, 2017, the Company, through its wholly owned subsidiary, REIT IV COVE LLC along with LSG Cove LLC, an affiliate of the Sponsor and a related party, REIT III COVE LLC, a subsidiary of the operating partnership of Lightstone REIT III and Maximus Cove Investor LLC (“Maximus”), an unrelated third party, completed the acquisition of all of RP Cove, L.L.C’s membership interest in RP Maximus Cove, L.L.C. (the “Cove Joint Venture”) for aggregate consideration of approximately $255.0 million (the “Cove Transaction”). Excluding mortgage financing obtained by the Cove Joint Venture in connection with the Cove Transaction, the Company paid $20.0 million for a 22.5% non-managing membership interest in the Cove Joint Venture.

  As of  As of 
(amounts in thousands) September 30,
2022
  December 31,
2021
 
Real estate inventory $57,065  $74,481 
Cash and restricted cash  185   767 
Other assets  292   436 
Total assets $57,542  $75,684 
         
Mortgage payable, net $19,160  $36,391 
Other liabilities  452   972 
Members’ capital  37,930   38,321 
Total liabilities and members’ capital $57,542  $75,684 

 

10

 

 

LIGHTSTONE VALUE PLUS REIT IV, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(unaudited)

The Cove Joint Venture owned and operated The Cove at Tiburon (the “Cove”), a 281-unit, luxury waterfront multifamily residential property located in Tiburon, California from January 31, 2017 through February 12, 2020, As discussed below, the Company disposed of its 22.5% membership interest in the Cove Joint Venture on February 12, 2020.(unaudited)

 

The Company accounted for its 22.5% membership interest in the Cove Joint Venture in accordance with the equity method of accounting because it exercised significant influence, but did not exercise financial and operating control over this entity. For the period from January 1, 2020 through February 12, 2020, the Company’s share of the Cove Joint Venture’s loss of approximately $0.7 million was $0.2 million which is recorded as a loss from investments in unconsolidated affiliated real estate entities on the consolidated statements of operations.

On February 12, 2020, REIT IV Cove LLC, LSG Cove LLC and REIT III COVE LLC each redeemed their respective membership interests in the Cove Joint Venture for an aggregate redemption price of $87.6 million. In connection, with the redemption of the Company’s 22.5% membership interest in the Cove Joint Venture, it 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 the Company’s 22.5% membership interest in the Cove Joint Venture on February 12, 2020, it no longer had an ownership interest in the Cove Joint Venture. During August 2020, the Company received $0.1 million of additional proceeds related to the redemption of its 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, the Company 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.

5.5.Stockholders’ Equity

Distributions

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

Future distributions, if any, declared will be at the discretion of the Board of Directors based on their analysis of the Company’s 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, the Company’s ability to refinance near-termmaturing debt, as well as the IRS’s annual distribution requirement that REITs distribute no less than 90% of their taxable income. The Company cannot assure that any future distributions will be made or that it will maintain any particular level of distributions that it has previously established or may establish.

 

2020 Special Distribution

On December 21, 2020, the Board of Directors authorized and the Company declared a special distribution of $0.37 per common share payable to stockholders of record as of December 31, 2020 (the “2020 Special Distribution”). The total 2020 Special Distribution of $3.2 million, which represented 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 the Company 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.

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LIGHTSTONE VALUE PLUS REIT IV, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(unaudited)

Share Repurchase Program

The Company’s share repurchase program may provide its stockholders with limited, interim liquidity by enabling them to sell their Common Shares back to the Company, subject to restrictions.

 

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. On March 25, 2020, the Board of Directors determined to suspend the share repurchase program effective immediately.

 

Effective May 10, 2021, the Board of Directors reopened the share repurchase program for redemptions submitted in connection with a stockholder’s death or hardship and set the price for all such purchases at the Company’s estimated net asset value per share, as determined by the Company’s board of directors and reported by the Company from time to 100% of the NAV per Share ($8.50 as of December 31, 2020).time.

 

Deaths that occurred subsequent to January 1, 2020 are eligible for consideration.consideration, subject to certain conditions. Beginning January 1, 2022, requests for redemptions in connection with a stockholder’s death must be submitted and received by the Company within one year of the stockholder’s date of death for consideration.

 

On an annual basis, the Company will not redeem in excess of 0.5% of the number of shares outstanding as of the end of the preceding year 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 nine months ended September 30, 20212022, the Company repurchased 9,28478,270 shares of common stock, pursuant to our share repurchase programCommon Shares at an average price per share of $8.508.55 per share.

 

Net Earnings per Common Share

Net earnings per Common Share on a basic and fully diluted basis is earnings divided by the weighted average number of shares of common stock outstanding. The Company does not have any potentially dilutive securities.

 

6.6.Related Party Transactions and Other Arrangements

The Company has various agreements including an advisory agreement, with the Advisor to pay certain fees, in exchange for services performed by the Advisor and/or its affiliated entities. As of September 30, 2021, the Company owed the Advisor and its affiliated entities $6,789, which is included in accounts payable, accrued expenses and other liabilities on the consolidated balance sheets. Additionally, as of December 31, 2020, the Advisor and its affiliated entities owed the Company $122, which was included in restricted cash and other assets on the consolidated balance sheets.

 

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

Schedule of Fees and offering costs                
  For the Three Months Ended
September 30,
  For the Nine Months Ended
September 30,
 
  2021  2020  2021  2020 
Development cost reimbursement (1) $157,967  $75,188  $424,824  $207,944 
Asset management fees (general and administrative costs)  -   -   -   77,313 
                 
Total $157,967  $75,188  $424,824  $285,257 

(1)Development costs that the Company reimburses its Advisor for are capitalized and are included in the carrying value of the Company’s investment in the Williamsburg Moxy Hotel which is classified as construction in progress 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 the Advisor and the Company’s independent directors. Payments to the Advisor or its affiliates may include asset acquisition fees and the reimbursement of acquisition-related expenses, development fees and the reimbursement of development-related costs, financing coordination fees, asset management fees or asset management participation, and construction management fees. The Company may also reimburse the Advisor and its affiliates for actual expenses it incurs for administrative and other services provided for it. Upon the liquidation of the Company’s assets, it may pay the Advisor or its affiliates a disposition commission.

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LIGHTSTONE VALUE PLUS REIT IV, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(unaudited)

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 three and nine months ended September 30, 2022, development fees and reimbursed development-related costs totaling $0.5 million and $1.4 million, respectively, were incurred and during the three and nine months ended September 30, 2021, respectively, development fees and reimbursed development-related costs totaling $0.7 million and $1.2 million, respectively, were incurred. See Note 3 for additional information.

As of December 31, 2021, the Company owed the Advisor and its affiliated entities $0.3 million, which is included in accounts payable, accrued expenses and other liabilities on the consolidated balance sheets. Additionally, as of September 30, 2022 the Advisor and its affiliated entities owed the Company $3,961, which was included in restricted cash and other assets on the consolidated balance sheets.

 

Subordinated Advances – Related Party

On March 18, 2016, the Company and its Sponsor entered into the Subordinated Agreement, a subordinated unsecured loan agreement (the “Subordinated Agreement”) with the Sponsor pursuant to which the Sponsor made aggregate principal advances of $12.6 million 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 or payable to the Sponsor until holders of the Company’s Common Shares have received liquidationliquidating distributions equal to their respective net investments (defined as $10.00$10.00 per Common Share) plus a cumulative, pre-tax, non-compounded annual return of 8.0%8.0% on their respective net investments.

 

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

 

The principal advances and the related interest are subordinate to all of the Company’s obligations as well as to the holders of its Common Shares in an amount equal to the shareholder’s net investment plus a cumulative, pre-tax, non-compounded annual return of 8.0%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, the Company and the Sponsor simultaneously terminated the Subordinated Agreement. As a result of the termination, the Sponsor is no longer obligated to make any additional principal advances to the Company. Interest will continue to accrue on the outstanding principal advances and repayment, if any, of the principal advances and related accrued interest will be made according to the terms of the Subordinated Agreement disclosed above.

 

As of both September 30, 20212022 and December 31, 2020,2021, an aggregate of approximately $12.6 million of principal advances haveSubordinated Advances had been funded, which along with the related accrued interest of $959,5101.1 million and $819,6791.0, million, respectively, are classified as Subordinated Advances – Related Party, a liability on the consolidated balance sheets. During both the three and nine months ended September 30, 2022 and 2021, the Company accrued $47,123 and $139,831, respectively, and during the three and nine months ended September 30, 2020, the Company accrued $46,994 and $139,960, respectively, of interest on the principal advances.

7.7.Commitments and Contingencies

Legal Proceedings

 

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

 

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

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PART I. FINANCIAL INFORMATION, CONTINUED:

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements of Lightstone Value Plus REIT IV, Inc. and Subsidiaries (“Lightstone REIT IV”), and the notes thereto. As used herein, the terms “we,” “our” and “us” refer to Lightstone Value Plus REIT IV, Inc., a Maryland corporation, and its subsidiaries.

 

Forward-Looking Statements

 

Certain information included in this Quarterly Report on Form 10-Q contains, and other materials filed or to be filed by us with the Securities and Exchange Commission (the “SEC”), contain or will contain, forward-looking statements. All statements, other than statements of historical facts, including, among others, statements regarding our possible or assumed future results of our business, financial condition, liquidity, results of operations, plans and objectives, are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of Lightstone Value Plus REIT IV, Inc. and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should” or similar expressions. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that actual results may differ materially from those contemplated by such forward-looking statements.

 

Such statements are based on assumptions and expectations which may not be realized and are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results, financial and otherwise, may differ from the results discussed in the forward-looking statements.

 

Risks and other factors that might cause differences, some of which could be material, include, but are not limited to, economic and market conditions, competition, tenant or joint venture partner(s) bankruptcies, our lack of operating history, the availability of cash flows from operations to pay distributions, changes in governmental, tax, real estate and zoning laws and regulations, failure to increase tenant occupancy and operating income, rejection of leases by tenants in bankruptcy, financing and development risks, construction and lease-up delays, cost overruns, the level and volatility of interest rates, the rate of revenue increases versus expense increases, the financial stability of various tenants and industries, our failure to make additional investments in real estate properties, the failure to upgrade our tenant mix, restrictions in current financing arrangements, the failure to fully recover tenant obligations for common area maintenance, insurance, taxes and other property expenses, our failure to continue to qualify as a real estate investment trust (“REIT”), the failure to refinance debt at favorable terms and conditions, an increase in impairment charges, loss of key personnel, failure to achieve earnings/funds from operations targets or estimates, conflicts of interest with the Advisor and the Sponsor and their affiliates, failure of joint venture relationships, significant costs related to environmental issues and uncertainties regarding the impact of the current COVID-19 pandemic, and restrictions intended to prevent its spread on our business and the economy generally, as well as other risks listed from time to time in this Form 10-Q, our Form 10-K and in our other reports filed with the SEC.

 

We believe these forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are qualified in their entirety by these cautionary statements. Further, forward-looking statements speak only as of the date they are made, and 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 over time unless required by law.

 

Overview

Lightstone Value Plus REIT IV, Inc. (“Lightstone REIT IV”), which was formerly known as Lightstone Real Estate Income Trust, Inc. 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 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 REIT IV or the Company as required by the context in which any such pronoun is used.

 

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We have and intend to 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 other sponsored real estate investment programs it sponsors. 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.

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We currently have one operating segment. As of September 30, 2021,2022, we majority owned and consolidated the operating results of one development project, the Williamsburga joint venture (the “Williamsburg Moxy Hotel 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.

 

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 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 ourthe Sponsor during our initial public offering (the “Offering”) which terminated on March 31, 2017. Mr. Lichtenstein 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 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 to March 31, 2022, which is the fifth anniversary of the termination of our Offering, our charter requires either (a) an amendment to our charter to extend the deadline to begin the process of achieving a liquidity event, or (b) the holding of a stockholders meeting to vote on a proposal for an orderly liquidation of our portfolio.

 

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, competition, inflation, recession, supply disruptions and recession.labor shortages.

 

COVID-19 Pandemic

TheOn March 20, 2020, the World Health Organization declared COVID-19 a global pandemic on March 11, 2020 and since that time many of the previously imposed restrictions and other measures which were instituted in response have been subsequently reduced or lifted. However, the COVID-19 pandemicit remains highly unpredictable and dynamic and its ultimate duration and extent continue to be dependent on various developments, such as the emergence of variants to the virus that may cause additional strains of COVID-19, and the ongoing development, administration and ultimate effectiveness of vaccines, andincluding booster shots. Accordingly, the eventual timeline to achieve a sufficient level of herd immunity among the general population. Accordingly, theongoing COVID-19 pandemic may continue to have negative effects on the health of the U.S. economyand global economies for the foreseeable future.

 

To-date, the COVID-19 pandemic has not had any significant impact on ourthe Williamsburg Moxy HotelJoint Venture’s 210-room branded hotel (the “Williamsburg Moxy Hotel”) development project.project located in the Williamsburg neighborhood of Brooklyn in New York City, which is currently under construction and expected to open during the first quarter of 2023. Our other investment is aour approximately 33.3% membership interest in the 40 East End Ave. Joint Venture, which ownssubstantially completed the development and construction of a 29-unit 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 Manhattan in New York City. The 40 East End Avenue Project previously received its final temporary certificates of occupancy, or TCO,City in March 2020, and through September 30, 2021, ten condominium units have been sold. The 40 East End Ave. Joint Venture has an outstanding loan onwhich was at the 40 East End Project (the “Condo Loan”) which is currently scheduled to mature on December 19, 2021. Because of the impactonset of the COVID-19 pandemic onpandemic. Thereafter, the pace of condominium unit sales has been impacted by the ongoing COVID-19 pandemic and through September 30, 2022, 19 of the condominium units have been sold. Additionally, because of the pace of condominium sales, the 40 East End Ave. Joint Venture is engaged in discussions with the lender to extendhas obtained an amendment, including an extension of the maturity date, ofto the Condo Loan. However, there can be no assurance thatloan secured by the 40 East End Ave. Joint Venture will be successful in such endeavors.remaining unsold condominium units. See Note 4 of the Notes to Consolidated Financial Statements for additional information.

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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 the COVID-19 pandemic or its effect on the U.S. economy negatively impactour investments in the Williamsburg Moxy Hotel development project and/or investment in the 40 East End Ave. Joint Venture for an extended period,are negatively impacted, 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-Q. The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“GAAP”) requires our 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.

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Current Portfolio Summary –

As of September 30, 2021,2022, we majority owned and consolidated the operating results of the Williamsburg Moxy Hotel Joint Venture, which is currently developing and constructing the Williamsburg Moxy Hotel, a 210-room branded hotel.

 

As of September 30, 2021,2022, we held an unconsolidated approximate 33.3% membership interest in the 40 East End Ave. Joint Venture, an affiliated real estate entity which owns the 40 East End Project, a luxury residential condominium project consisting of 29 units, located at the corner of 81st Street and East End Avenue in the Upper East Side neighborhood of New York City.which 19 have been sold. We account for our unconsolidated membership interests in the 40 East End Ave. Joint Venture in accordance with the equity method of accounting.

 

Critical Accounting Policies and Estimates

 

There were no material changes during the nine months ended September 30, 20212022 to our critical accounting policies as reported in our Annual Report on Form 10-K for the year ended December 31, 2020.2021.

Results of Operations

For the periods presented, we had ownership interests in the following real estate and real estate-related investments:

The Cove Joint Venture

On January 31, 2017 we along with LSG Cove LLC, an affiliate of our Sponsor, Lightstone Value Plus REIT III, Inc. (“Lightstone REIT III”), a real estate investment trust also sponsored by our Sponsor and a related party, 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 owns and operates 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.

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 approximately $87.6 million. In connection, with the redemption of our 22.5% membership interest in the Cove Joint Venture, we received proceeds of approximately $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 approximately $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 the 40 East End Ave. Pref Member LLC (the “40 East End Ave. Joint Venture”).Venture.

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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 81st81st Street and East End Avenue in the Upper East Side neighborhood of Manhattan in New York City. The 40 East End Avenue Project received its final TCO in March 2020 and through September 30, 2021, ten2022, 19 condominium units have been sold.

 

We account for our approximateapproximately 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 adjacent parcels of land located at 353-361 Bedford Avenue in the Williamsburg neighborhood of Brooklyn in New York City (collectively, the “Williamsburg Land”) on which we are currently developing and constructing the Williamsburg Moxy Hotel.Hotel is being developed.

 

On August 5, 2021, we formed a joint venture (the “Williamsburgthe Williamsburg Moxy Hotel Joint Venture”)Venture with Lightstone REIT III, pursuant to which Lightstone REIT III acquired 25% of our membership interest in the Bedford Avenue Holdings LLC for aggregate consideration of $7.9 million. Subsequent to the initial acquisition, Lightstone REIT III made additional net capital contributions to the Williamsburg Moxy Hotel Joint Venture of $2.9$4.5 million through September 30, 2021.2022, including $0.2 million made during the nine months ended September 30, 2022.

 

As a result, we and Lightstone REIT III have 75% and 25% membership interests, respectively, in the Williamsburg Moxy Hotel Joint Venture.

Additionally, during 2019, we acquired corporate bonds that were publicly traded on the Tel Aviv Stock Exchange (the “Israeli Bonds”) and denominated in New Israeli Shekel (“ILS”) that we subsequently sold during the first quarter of 2020.

 

The operating results of these investments have been reflected in our consolidated statements of operations commencing from their respective dates of acquisition through their respective dates of disposition.

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For the Three Months Ended September 30, 20212022 vs. September 30, 20202021

Investment income – interest income

Our investment income was $8,738$34,081 and $15,753$8,738 for the three months ended September 30, 2022 and 2021, and 2020, respectively. During both the three months ended September 30, 20212022 and 2020,2021, our investment income consisted solely of interest income on our cash and cash equivalents.

Earnings from investmentsinvestment in unconsolidated affiliated real estate entitiesentity

 

OurOur earnings from investmentsinvestment in unconsolidated affiliated real estate entities during the three months ended September 30, 2021 was income of $1.2 million compared to a loss of $0.6 million for the same period in 2020. For both of the three months ended September 30, 2021 and 2020, our earnings from investments in unconsolidated affiliated real estate entities isentity are solely attributable to our ownership interest in the 40 East End Ave. Joint Venture. The earnings from our investment in the 40 East End Ave. Joint Venture was a loss of $0.3 million and income of $1.2 million for the three months ended September 30, 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.

General and administrative expensescosts

 

General and administrative expenses costs were $0.2$0.2 million duringfor both of the three months ended September 30, 20212022 and 2020.2021.

 

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 $47,123 and $46,994 for both the three months ended September 30, 20212022 and 2020, respectively.2021. Additionally, during the three months ended September 30, 2022 and 2021, and 2020, $0.6$1.8 million and $0.3$0.6 million of interest was capitalized to construction in progress for ourthe Williamsburg Moxy Hotel development project.

Pre-opening costs

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In preparation for the opening of the Williamsburg Moxy Hotel, which is currently expected to occur during the first quarter of 2023, the Williamsburg Moxy Hotel Joint Venture incurred pre-opening costs of $0.3 million during the three months ended September 30, 2022. No pre-opening costs were incurred during the 2021 period.

For the Nine Months Ended September 30, 20212022 vs. September 30, 20202021

Investment income – interest income

Our investment income was $30,021$34,081 and $151,603$30,021 for the nine months ended September 30, 2022 and 2021, and 2020, respectively. During both the nine months ended September 30, 2022 and 2021, our investment income consisted solely of interest income on our cash and cash equivalents. Our investment income during the nine months ended September 30, 2020 consisted of interest income on our cash and cash equivalents plus interest income on the Israeli Bonds of $63,688 which was earned in the first quarter of 2020.

 

Earnings from investment in unconsolidated affiliated real estate entitiesentity

 

Our lossOur earnings from investmentsinvestment in unconsolidated affiliated real estate entities during the nine months ended September 30, 2021 was $0.2 million compared to $1.5 million for the same period in 2020. For the nine months ended September 30, 2021, our loss from investments in unconsolidated affiliated real estate entities isentity are solely attributable to our ownership interest in the 40 East End Ave. Joint Venture. For the nine months ended September 30, 2020, The earnings from our loss from investments in unconsolidated affiliated real estate entities is attributable to our ownership interestsinvestment in the 40 East End Ave. Joint Venture were losses of $0.6 million and $0.2 million for the Cove Joint Venture through the date of redemption of our membership interest on February 12, 2020. nine months ended September 30, 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.

General and administrative expensescosts

 

General and administrative expensescosts were $0.5 million for both the nine months ended September 30, 2021 was $0.5 million, an decrease of $0.1 million, compared to $0.6 million for the same period in 2020 which was primarily attributable to a decrease in asset management fees as a result of the redemption of our membership interest in the Cove Joint Venture.2022 and 2021.

Foreign currency transaction loss

 

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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. 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 nine months ended September 30, 2020, our foreign currency transaction loss was $47,648, all of which was incurred in the first quarter of 2020.

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 $139,831 and $139,960 for both the threenine months ended September 30, 2021 2022 and 2020, respectively.2021. Additionally, during the nine months ended September 30, 2022 and 2021, $4.2 million and 2020, $0.8 million and $0.9 million of interestinterest was capitalized to construction in progress for our Williamsburg Moxy Hotel development project.

Pre-opening costs

In preparation for the opening of the Williamsburg Moxy Hotel, which is currently expected to occur during the first quarter of 2023, the Williamsburg Moxy Hotel Joint Venture incurred pre-opening costs of $0.7 million during the nine months ended September 30, 2022. No pre-opening costs were incurred during the 2021 period.

 

Financial Condition, Liquidity and Capital Resources

 

As of September 30, 2021,2022, we had cash and cash equivalents of $18.6$11.0 million. We currently believe that our current available cash on hand will be sufficient to satisfy our expected cash requirements primarily consisting of our anticipated operating expenses, scheduled debt service, and any necessary capital contributions for our investment in unconsolidated affiliated real estate entity and distributions to our shareholders, if any, required to maintain our qualification as a REIT for the foreseeable future. However, a substantial amount of theThe remaining development, construction and certain pre-opening costs associated with the development and construction of the Williamsburg Moxy Hotel willare expected to be funded through a combinationfrom the remaining availability of up to $24.9 million under the construction financing and a joint venture arrangement.financing. See “Williamsburg Moxy Hotel” for 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.

18

 

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 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.

 

We have agreements with the Advisor to pay certain fees, in exchange for services performed by the Advisor and/or its affiliated entities. As of September 30, 2021, we owed the Advisor and its affiliated entities $6,789, which is included in accounts payable, accrued expenses and other liabilities on the consolidated balance sheets. Additionally, as of December 31, 2020, the Advisor and its affiliated entities owed us $122, which was included in restricted cash and other assets on the consolidated balance sheets.

The following table represents the fees incurred associated with the payments to our Advisor for the periods indicated:

17

 

  For the Three Months Ended
September 30,
  For the Nine Months Ended
September 30,
 
  2021  2020  2021  2020 
Development cost reimbursement (1) $157,967  $75,188  $424,824  $207,944 
Asset management fees (general and administrative costs)  -   -   -   77,313 
Total $157,967  $75,188  $424,824  $285,257 

(1)Development costs that we reimburse our Advisor for are capitalized and are included in the carrying value of our investment in the Williamsburg Moxy Hotel which is classified as construction in progress 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 ourthe Advisor and our independent directors. Payments to ourthe Advisor or its affiliates may include asset acquisition fees and the reimbursement of acquisition-related expenses, development fees and the reimbursement of development-related costs, financing coordination fees, asset management fees or asset management participation, and construction management fees. We may also reimburse ourthe Advisor and its affiliates for actual expenses it incurs for administrative and other services provided for us.it. Upon the liquidation of our assets, we may pay ourthe Advisor or its affiliates a 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 three and nine months ended September 30, 2022, development fees and reimbursed development-related costs totaling $0.5 million and $1.4 million, respectively, were incurred and during the three and nine months ended September 30, 2021, respectively, development fees and reimbursed development-related costs totaling $0.7 million and $1.2 million, respectively, were incurred. See Notes 3 and 6 of the Notes to Consolidated Financial Statements for additional information.

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As of December 31, 2021, we owed the Advisor and its affiliates $0.3 million, which is included in accounts payable, accrued expenses and other liabilities on the consolidated balance sheets. Additionally, as of September 30, 2022 the Advisor and its affiliates owed us $3,961, which is included in restricted cash and other assets on the consolidated balance sheets.

Summary of Cash Flows

The following summary discussion of our cash flows is based on the 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:

 

 For the Nine
Months Ended
September 30,
2021
  For the Nine
Months Ended
September 30,
2020
 
      For the
Nine Months Ended
September 30,
2022
  For the
Nine Months Ended
September 30,
2021
 
Net cash flows used in operating activities $(88,900) $(658,460) $(442,069) $(88,900)
Net cash flows (used in)/provided by investing activities  (16,504,596)  22,350,171 
Net cash flows provided by/(used in) financing activities  3,917,353   (1,688,632)
Effect of exchange rate changes on cash and cash equivalents  -   (47,648)
Net cash flows used in investing activities  (32,918,062)  (16,504,596)
Net cash flows provided by financing activities  33,153,142   3,917,353 
Net change in cash, cash equivalents and restricted cash  (12,676,143)  19,955,431   (206,989)  (12,676,143)
Cash, cash equivalents and restricted cash, beginning of the year  31,490,826   14,263,182   12,197,119   31,490,826 
Cash, cash equivalents and restricted cash, end of the period $18,814,683  $34,218,613  $11,990,130  $18,814,683 

Operating activities

The net cash used in operating activities of $0.1 million during the nine months ended September 30, 20212022 consisted of our net loss of $0.8$1.9 million after adjustments for the noncash effect of our loss from our investment in unconsolidated affiliated real estate entity of $0.2$0.6 million and changes in assets and liabilities $0.5of $0.9 million.

Investing activities

 

The net cash used in investing activities of $32.9 million during the nine months ended September 30, 20212022 consisted solelyprimarily of $16.5$32.4 million of development and construction costs associated with the Williamsburg Moxy Hotel.Hotel and capital contributions of $0.5 million made to the 40 East End Ave. Joint Venture.

Financing activities

 

The net cash provided by financing activities of $33.2 million during the nine months ended September 30, 20212022 consisted primarily of $3.9proceeds from the Moxy Construction Loan of $33.7 million, consisted of contributions of $10.9$0.3 million made by Lightstone REIT III to the Williamsburg Moxy Hotel Joint Venture, proceeds from a mortgage payabledistributions of $16.0$0.1 million fully offsetmade by the $16.0 million repayment in full of an existing mortgage payable, the payment of loan fees and expenses of $3.7 million, a special distribution for 2020 of $3.2 million paidWilliamsburg Moxy Hotel Joint Venture to our common stockholders in January 2021,Lightstone REIT III and redemptionredemptions and cancellation of shares of common stock of $0.1$0.7 million.

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Williamsburg Moxy Hotel

 

On July 17, 2019, we, through our then wholly owned subsidiary, Bedford Avenue Holdings LLC acquired four adjacent parcels of land located at 353-361 Bedford Avenue in Brooklyn, New York (collectively, the “Williamsburg Land”),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 210-room branded hotel (the “Williamsburg Moxy Hotel”). In connection with the acquisition of the Williamsburg Land, we simultaneously entered into a $16.0 million nonrecourse mortgage loan (the “Williamsburg Mortgage”) collateralized by the Moxy Hotel is being developed.

Williamsburg Land.Moxy Joint Venture

 

On August 5, 2021, we formed a joint venture (the “Williamsburgthe Williamsburg Moxy Hotel Joint Venture”)Venture with Lightstone REIT III, pursuant to which Lightstone REIT III acquired 25% of our membership interest in the Bedford Avenue Holdings LLC for aggregate consideration of $7.9 million. Subsequent to the initial acquisition, Lightstone REIT III made additional net capital contributions to the Williamsburg Moxy Hotel Joint Venture of $2.9$4.5 million through September 30, 2021.2022, including $0.2 million made during the nine months ended September 30, 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 Moxy Hotel Joint Venture and Lightstone REIT III has consent rights with respect to all major decisions.

 

We determined that the Williamsburg Moxy Hotel Joint Venture is a variable interest entityVIE 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 direct the activities of the Williamsburg Moxy Hotel Joint Venture that most significantly impact its performance, we consolidate the operating results and financial condition of the Williamsburg Moxy Hotel Joint Venture and account for the ownership interest of Lightstone REIT III as noncontrolling interests. 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 4, 2021, the Williamsburg Joint Venture entered into a development agreement (the “Development Agreement”) with an affiliate of the Advisor (the “Williamsburg Moxy Developer”) pursuant to which the Williamsburg 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 the development and construction of the Williamsburg Moxy Hotel (see Note 6 of the Notes to Consolidated Financial Statements for additional information). Additionally on August 5, 2021, the Williamsburg Moxy Joint Venture obtained construction financing for the Williamsburg Moxy Hotel as discussed below. The Williamsburg Moxy Hotel is under currently under construction and expected to open during the first quarter of 2023. Additionally, the advisor and its affiliates are reimbursed for certain development and development-related costs attributable to the Williamsburg Moxy Hotel.

 

As of September 30, 2021,2022, the Williamsburg Moxy Hotel Joint Venture incurred and capitalized to construction in progress an aggregate of $61.0$104.1 million (including capitalized interest of $2.3$7.4 million) consisting of acquisition and other costs attributable to the development of the Williamsburg Moxy Hotel. During the three and nine months ended September 30, 2021, we capitalized interest of approximately $0.62022, $1.8 million and $0.8$4.2 million, respectively, of interest was capitalized to construction in progress and during the three and nine months ended September 30, 2020, we capitalized interest of approximately $0.32021, $0.6 million and $0.9$0.8 million, respectively, of interest was capitalized to construction in connection withprogress.

In preparation for the developmentopening of the Williamsburg Moxy Hotel.Hotel, which is expected to occur during the first quarter of 2023, the Williamsburg Moxy Hotel Joint Venture incurred pre-opening costs of $0.3 million and $0.7 million during the three and nine months ended September 30, 2022. No pre-opening costs were incurred in the 2021 periods. Pre-opening costs generally consist of non-recurring personnel, marketing and other costs.

20

 

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 ofthe first 7.50% withdrawn under the accruedfacility and unpaid interestthe excess added to the outstanding loan balance due at maturity. LIBOR as of September 30, 2022 and December 31, 2021 was 2.76% and 0.10%, respectively. The Moxy Construction Loan is collateralized by the Williamsburg Moxy Hotel. The Williamsburg Moxy Hotel Joint Venture received initial proceeds of $16.0 million under the Moxy Construction Loan and repaid the Williamsburg Mortgage ($16.0 million) in full.

As of September 30, 2022 and December 31, 2021, the outstanding principal balance of the Moxy Construction Loan was $16.1$53.0 million (including $0.9 million of interest capitalized to principal) which is presented, net of deferred financing fees of $2.4 million and $18.6 million (including $0.1 million of interest capitalized to principal) which is presented, net of deferred financing fees of $4.2$3.7 million, respectively, on the consolidated balance sheetsheets and is classified as Mortgage Payable,mortgage payable, net. As of September 30, 2021,2022, the remaining availability under the Moxy Construction Loanfacility was up to $61.0 million.

$24.9 million and its interest rate was 11.76%.

 

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 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 September 30, 2022 and December 31, 2021.

19

 

40 East End Ave. Joint Venture

 

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

 

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 REIT I, Inc.(“Lightstone REIT I”), a real estate investment trustREIT also sponsored by our 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.

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 Manhattan in New York City. The 40 East End Avenue Project received its final TCO in March 2020 and through September 30 2021, 2022, ten19 condominium units have been sold.

 

On March 21, 2017, 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”) for the land acquisition and construction of the 40 East End Ave. Project. 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, iswhich was previously scheduled to mature on December 19, 2021, bears interest at LIBOR plus 2.45%, which is payable monthly, and requires principal payments to be made at certain prescribed amounts from proceeds from the sales of condominium units with any remaining outstanding balance due in full at maturity.

 

Pursuant to the terms of the Condo Loan, the 40 East End Ave. Joint Venture was required to make a principal paydown onOn December 19, 2020 if 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 allowed for the remaining required principal paydown of $9.7 million to be subsequently paid during the first quarter of 2021. The 40 East End Ave. Joint Venture used proceeds from the sale of condominium units which closed in the first quarter of 2021 to make the remaining required principal paydown.

21

The 40 East End Ave. Joint Venture was required to make another principal paydown of $8.0 million on June 19, 2021 since principal paydowns from additional condominium sales proceeds had not reduced the outstanding principal balance of the Condo Loan to at least $73.0 million as of that date. However, the lender has agreed to rolling 30-day extensions, commencing on June 19, 2021, to provide further time for the 40 East End Ave. Joint Venture to close on the sale of additional condominium units and apply the resulting proceeds to the required principal paydown. During the third quarter of30, 2021, the 40 East End Ave. Joint Venture closed onand the financial institution amended the Condo Loan providing for an extension of the maturity date to December 20, 2022 and revisions to the timing and amounts of required principal payments to be made from proceeds from the sale of two additional condominium unitunits, all of which generated sufficient proceeds to makehave been met. During the required principal paydown. As ofnine months ended September 30, 2021, the Condo Loan had an outstanding principal balance of $58.9 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,2022, the 40 East End Ave. Joint Venture used an aggregate of $17.3 million of proceeds from the sale of four condominium units to reduce the principal balance of the Condo Loan to $19.2 million, which remains outstanding as of September 30, 2022. During October 2022, one additional condominium unit was sold and proceeds of $9.0 million were used to make a principal paydown on the Condo Loan reducing its outstanding balance to $10.2 million.

As discussed above, the Condo Loan is engagedcurrently scheduled to mature on December 20, 2022. If the Condo Loan has not been repaid in discussions withfull before its maturity date, the lender40 East End Ave. Joint Venture intends to extendseek a further extension to 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.

 

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 an aggregate of $80.5 million of principal and interest under a construction loan previously used to fund the then outstanding principal balancedevelopment and construction of $80.3 million plus accrued and unpaid interest of $0.2 million for the 40 East End Ave. MortgageAvenue Project and (ii) redeem $9.5 million of Lightstone REIT I’s Preferred Contributions.

The 40 East End Ave. Joint Venture subsequently redeemed an additional $3.5 million and $11.0 million of Preferred Contributions on December 26, 2019 and February 13, 2020, respectively, reducing Lightstone REIT I’s Preferred Contributions to $6.0 million, which remains outstanding as of September 30, 2021.2022.

 

Subsequent to our acquisition through September 30, 2021,2022, we have made an aggregate of $5.7$6.4 million of additional capital contributions to the 40 East End Ave. Joint Venture, of which none$0.5 million were made during the nine months ended September 30, 2021.2022.

 

Because proceeds from sales of condominium units must first be used to fully pay-down the Condo Loan and thereafter to redeem Lightstone REIT I’s remaining Preferred Contributions, we currently do not expect to receive any distributions from the 40 East End Ave. Joint Venture over the next 12 months.

20

Distributions

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

 

Future distributions, if any, declared will be at the discretion of the Board of Directors based on their analysis of ourthe Company’s performance over the previous periods and expectations of performance for future periods and may differ from the amount of the distribution determined for this period.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, and ourthe Company’s ability to refinance near-term debt. In addition, we currently intend to continue to comply with REITdebt, as well as the IRS’s annual distribution requirements. Werequirement that REITs distribute no less than 90% of their taxable income. The Company cannot assure that any future distributions will be made or that weit will maintain any particular level of distributions that we haveit has previously established or may establish.

2020 Special Distribution

On December 21, 2020, the Board of Directors authorized and we declared a special distribution of $0.37 per common share payable to stockholders of record as of December 31, 2020 (the “2020 Special Distribution”). The total 2020 Special Distribution of $3.2 million, which represented 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.

22

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.

 

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. On March 25, 2020, the Board of Directors determined to suspend the share repurchase program effective immediately.

 

Effective May 10, 2021, the Board of Directors reopened the share repurchase program for redemptions submitted in connection with a stockholder’s death or hardship and set the price for all such purchases at our current estimated net asset value per share, as determined by the Company’s board of directors and reported by the Company from time to 100% of the NAV per Share ($8.50 as of December 31, 2020).time.

 

Deaths that occurred subsequent to January 1, 2020 are eligible for consideration.consideration, subject to certain conditions. Beginning January 1, 2022, 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.

 

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 nine months ended September 30, 2021 we2022, the Company repurchased 9,284 shares of common stock, pursuant to our share repurchase program78,270 Common Shares at an average price per share of $8.50$8.55 per share.

 

ITEM 4. CONTROLS AND PROCEDURES.

 

As of the end of the period covered by this report, management, including our chief executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based upon, and as of the date of the evaluation, our chief executive officer and principal financial officer concluded that the disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required.

 

There have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

2321

 

PART II. OTHER INFORMATION:

ITEM 1. 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 our results of operations or financial condition, which would require accrual or disclosure of the contingency and possible range of loss. Additionally, we have not recorded any loss contingencies related to legal proceedings in which the potential loss is deemed to be remote.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Recent Sales of Unregistered Securities

 

During the period covered by this Form 10-Q, we did not sell any unregistered securities.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

None.

 

ITEM 5. OTHER INFORMATION

 

None.

 

2422

 

ITEM 6. EXHIBITS

 

Exhibit


Number

 

Description

31.1* 

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.

31.2* 

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.

32.1* 

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Pursuant to SEC Release 34-47551 this Exhibit is furnished to the SEC and shall not be deemed to be “filed.”

32.2* 

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Pursuant to SEC Release 34-47551 this Exhibit is furnished to the SEC and shall not be deemed to be “filed.”

101* 

XBRL (eXtensible Business Reporting Language).The following financial information from Lightstone Value Plus REIT IV, Inc. on Form 10-Q for the quarter ended September 30, 2021,2022, filed with the SEC on November 12, 2021,14, 2022, formatted in XBRL includes: (1) Consolidated Balance Sheets, (2) Consolidated Statements of Operations, (3) Consolidated Statements of Stockholders’ Equity, (4) Consolidated Statements of Cash Flows, and (5) the Notes to the Consolidated Financial Statement.

 

*Filed herewith

 

2523

 

 

SIGNATURES

 

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

 

 

LIGHTSTONE VALUE PLUS REIT IV, INC.

  
Date: November 12, 202114, 2022By:/s/ David Lichtenstein
 David Lichtenstein
 

Chairman and Chief Executive Officer

(Principal Executive Officer)

Date: November 12, 202114, 2022By:/s/ Seth Molod
 Seth Molod
 

Chief Financial Officer

(Duly Authorized Officer and Principal Financial and Accounting Officer)

26

 

24