Exhibit 99.1
LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT TRUST III, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share/unit data and where indicated in millions)
On August 19, 2019, certain wholly owned subsidiaries (collectively, the “Green Bay Sellers”) of Lightstone Value Plus Real Estate Investment Trust III, Inc.’s (the “Company”) operating partnership and MCR Hospitality Fund REIT LLC (the “Green Bay Buyer”), an unaffiliated third party, entered into a purchase and sale agreement (the “SpringHill Suites – Green Bay Agreement”) pursuant to which the Green Bay Sellers would dispose of a SpringHill Suites by Marriott hotel (the “SpringHill Suites – Green Bay Hotel”) located in Green Bay, Wisconsin to the Green Bay Buyers for an aggregate contractual sales price of $19.6 million.
On October 24, 2019, pursuant to the terms of the SpringHill Suites – Green Bay Agreement, the Green Bay Sellers completed the disposition of the SpringHill Suites – Green Bay Hotel to the Green Bay Buyer for an aggregate contractual sales price of $19.6 million. Approximately $12.0 million of the proceeds were used towards the repayment the Company’s revolving credit facility that was collateralized, in part, by the SpringHill Suites – Green Bay Hotel.
Pro Forma Financial Statements
The following unaudited pro forma condensed consolidated financial statements have been prepared based on the historical financial statements of the Company after giving effect to the sale of the SpringHill Suites – Green Bay Hotel, and the assumptions and adjustments described in the accompanying notes to these unaudited pro forma condensed consolidated financial statements. The unaudited pro forma condensed consolidated statements of operations give effect to the disposal of the SpringHill Suites – Green Bay Hotel by the Company as if it had occurred on January 1, 2018 and the unaudited pro forma condensed consolidated balance sheet gives effect to the disposal of the Hotel Portfolio by the Company as if it had occurred on June 30, 2019. The unaudited pro forma condensed consolidated financial statements were derived by adjusting the historical financial statements of the Company for the removal of assets, liabilities, revenues and expenses associated with the Hotel Portfolio and the pro forma adjustments described in the notes.
The unaudited pro forma condensed consolidated financial statements, including the notes thereto, are qualified in their entirety by reference to, and should be read in conjunction with, the audited historical consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018, filed on April 1, 2019 and the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, filed on August 14, 2019.
The unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only and are not necessarily indicative of the consolidated financial position or consolidated results of operations that would have actually been reported had the disposition occurred on January 1, 2018 for consolidated statements of operations purposes and as of June 30, 2019 for consolidated balance sheet purposes, nor are they necessarily indicative of the Company’s future consolidated financial position or consolidated results of operations. The unaudited pro forma condensed consolidated financial statements are based upon estimates and assumptions. These estimates and assumptions are preliminary and have been made solely for the purposes of developing this pro forma information.
LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT TRUST III, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2019
| | | Historical | | | Pro Forma
Adjustments | | | Pro Forma | |
| Assets | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Net investment property | | $ | 132,047,086 | | | $ | (18,198,108 | ) (b) | | $ | 113,848,978 | |
| Investments in unconsolidated affiliated real estate entities | | | 28,144,798 | | | | - | | | | 28,144,798 | |
| Cash and cash equivalents | | | 4,450,336 | | | | 19,600,000 | (a) | | | 11,627,336 | |
| | | | | | | | (12,000,000 | ) (c) | | | | |
| | | | | | | | (423,000 | ) (d) | | | | |
| Marketable securities, available for sale | | | 2,939,786 | | | | - | | | | 2,939,786 | |
| Restricted cash | | | 2,066,020 | | | | - | | | | 2,066,020 | |
| Accounts receivable and other assets | | | 3,214,686 | | | | - | | | | 3,214,686 | |
| Total Assets | | $ | 172,862,712 | | | $ | (11,021,108 | ) | | $ | 161,841,604 | |
| | | | | | | | | | | | | |
| Liabilities and Stockholders' Equity | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Accounts payable and other accrued expenses | | $ | 4,082,229 | | | $ | - | | | $ | 4,082,229 | |
| Mortgages payable, net | | | 79,306,725 | | | | (12,000,000 | ) (c) | | | 67,306,725 | |
| Due to related parties | | | 773,436 | | | | - | | | | 773,436 | |
| Distributions payable | | | 659,851 | | | | - | | | | 659,851 | |
| Total liabilities | | | 84,822,241 | | | | (12,000,000 | ) | | | 72,822,241 | |
| | | | | | | | | | | | | |
| Commitments and Contingencies | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Stockholders' Equity: | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Total Company stockholders' equity | | | 75,948,354 | | | | 978,892 | (e) | | | 76,927,246 | |
| | | | | | | | | | | | | |
| Noncontrolling interests | | | 12,092,117 | | | | - | | | | 12,092,117 | |
| | | | | | | | | | | | | |
| Total Stockholders' Equity | | | 88,040,471 | | | | 978,892 | | | | 89,019,363 | |
| | | | | | | | | | | | | |
| Total Liabilities and Stockholders' Equity | | $ | 172,862,712 | | | $ | (11,021,108 | ) | | $ | 161,841,604 | |
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements
LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT TRUST III, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
| | | For the Six Months Ended June 30, 2019 | |
| | | Historical | | | SpringHill
Suites – Green
Bay Hotel (f) | | | Pro Forma
Adjustments | | | Pro Forma | |
| | | | | | | | | | | | | |
| Revenues | | $ | 15,961,171 | | | $ | (1,482,003 | ) | | | - | | | $ | 14,479,168 | |
| | | | | | | | | | | | | | | | | |
| Expenses: | | | | | | | | | | | | | | | | |
| Property operating expenses | | | 10,236,205 | | | | (1,066,467 | ) | | | - | | | | 9,169,738 | |
| Real estate taxes | | | 813,016 | | | | (73,386 | ) | | | - | | | | 739,630 | |
| General and administrative costs | | | 1,459,399 | | | | (1,976 | ) | | | (71,497 | ) | (g) | | 1,385,926 | |
| Depreciation and amortization | | | 2,895,547 | | | | (416,244 | ) | | | - | | | | 2,479,303 | |
| Total operating expenses | | | 15,404,167 | | | | (1,558,073 | ) | | | (71,497 | ) | | | 13,774,597 | |
| Operating income | | | 557,004 | | | | 76,070 | | | | 71,497 | | | | 704,571 | |
| | | | | | | | | | | | | | | | | |
| Interest expense | | | (2,421,670 | ) | | | - | | | | 356,800 | | (h) | | (2,064,870 | ) |
| Income from investments in unconsolidated affiliated real estate entities | | | (1,948,380 | ) | | | - | | | | - | | | | (1,948,380 | ) |
| Other income, net | | | 57,616 | | | | (236 | ) | | | - | | | | 57,380 | |
| Net income | | | (3,755,430 | ) | | | 75,834 | | | | 428,297 | | | | (3,251,299 | ) |
| Less: net income attributable to noncontrolling interests | | | 50 | | | | | | | | | | | | 50 | |
| Net income attributable to common shares | | $ | (3,755,380 | ) | | | | | | | | | | $ | (3,261,249 | ) |
| | | | | | | | | | | | | | | | | |
| Net (loss)/income per Company's common shares, basic and diluted | | | (0.28 | ) | | | | | | | | | | | (0.24 | ) |
| | | | | | | | | | | | | | | | | |
| Weighted average number of common shares outstanding, basic and diluted | | $ | 13,388,924 | | | | | | | | | | | $ | 13,388,924 | |
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT TRUST III, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
| | | For the Year Ended December 31, 2018 | |
| | | Historical | | | SpringHill
Suites – Green
Bay Hotel (f) | | �� | Pro Forma
Adjustments | | | Pro Forma | |
| | | | | | | | | | | | | |
| Revenues | | $ | 33,966,599 | | | $ | (4,507,151 | ) | | | - | | | $ | 29,459,448 | |
| | | | | | | | | | | | | | | | | |
| Expenses: | | | | | | | | | | | | | | | | |
| Property operating expenses | | | 20,852,350 | | | | (2,501,848 | ) | | | - | | | | 18,350,502 | |
| Real estate taxes | | | 1,627,650 | | | | (147,173 | ) | | | - | | | | 1,480,477 | |
| General and administrative costs | | | 2,962,769 | | | | (23,702 | ) | | | (142,994 | ) | (g) | | 2,796,073 | |
| Depreciation and amortization | | | 5,610,224 | | | | (791,573 | ) | | | - | | | | 4,818,651 | |
| Total operating expenses | | | 31,052,993 | | | | (3,464,296 | ) | | | (142,994 | ) | | | 27,445,703 | |
| Operating income | | | 2,913,606 | | | | (1,042,855 | ) | | | 142,994 | | | | 2,013,745 | |
| | | | | | | | | | | | | | | | | |
| Interest expense | | | (5,224,217 | ) | | | - | | | | 757,440 | | (h) | | (4,466,777 | ) |
| Loss from investments in unconsolidated affiliated real estate entities | | | (2,695,001 | ) | | | - | | | | - | | | | (2,695,001 | ) |
| Loss on sale of marketable securities | | | (56,458 | ) | | | - | | | | - | | | | (56,458 | ) |
| Other income, net | | | 788,760 | | | | 1,150 | | | | - | | | | 789,910 | |
| Net loss | | | (4,273,310 | ) | | | (1,041,705 | ) | | | 900,434 | | | | (4,414,581 | ) |
| Less: net loss attributable to noncontrolling interests | | | 51 | | | | | | | | | | | | 51 | |
| Net loss attributable to common shares | | $ | (4,273,259 | ) | | | | | | | | | | $ | (4,414,530 | ) |
| | | | | | | | | | | | | | | | | |
| Net loss per Company's common shares, basic and diluted | | | (0.28 | ) | | | | | | | | | | | (0.28 | ) |
| | | | | | | | | | | | | | | | | |
| Weighted average number of common shares outstanding, basic and diluted | | $ | 15,537,316 | | | | | | | | | | | $ | 15,537,316 | |
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT TRUST III, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Pro Forma Presentation
The pro forma condensed consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission.
The unaudited pro forma condensed consolidated financial statements of the Company have been prepared based on the historical balance sheet of the Company as of June 30, 2019 and the historical statement of operations for the Company for the six months ended June 30, 2019 and for the year ended December 31, 2018 after giving effect to the adjustments described below.
The Company employs accounting policies that are in accordance with accounting principles generally accepted in the United States of America. In management's opinion, all material adjustments necessary to reflect fairly the pro forma financial position and pro forma results of operations of the Company have been made.
The ongoing activity presented in these unaudited pro forma condensed consolidated financial statements represents the Company’s assets, liabilities, revenues and expenses that reflect the disposition of the SpringHill Suites – Green Bay Hotel. This pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the consolidated operating results and consolidated financial position that might have been achieved had the transaction described above occurred on the dates indicated, nor is it necessarily indicative of the operating results and financial position that may occur in the future.
Note 2. Pro Forma Assumptions
Pro forma adjustments:
The accompanying unaudited pro forma financial statements have been prepared as if (i) the disposition was completed on June 30, 2019 for the balance sheet and (ii) the disposition was completed as of January 1, 2018 for statement of operations purposes and reflect the following pro forma adjustments:
| a) | To reflect the sale consideration of $19.6 million cash received in connection with the disposition of the SpringHill Suites – Green Bay Hotel. |
| b) | To reflect the elimination of the net book value of the SpringHill Suites – Green Bay Hotel. |
| c) | To reflect the use of $12.0 million of proceeds used towards repayment of the Company’s revolving credit facility that was collateralized, in part, by the SpringHill Suites – Green Bay Hotel. |
| d) | To reflect the $0.4 million in estimated direct expenses paid in connection with the disposition of the SpringHill Suites – Green Bay Hotel including legal, accounting and other professional fees. |
| e) | To record the net gain of $1.0 million on the disposition of the SpringHill Suites – Green Bay Hotel. |
| f) | To reflect the elimination of the operations of the SpringHill Suites – Green Bay Hotel. |
| g) | To add back the asset management fees paid to the advisor by the Company with respect to the SpringHill Suites – Green Bay Hotel. |
| | h) | To add back interest expense that would not be incurred as a result of the repayment of the Company’s revolving credit facility with $12.0 million of proceeds from the disposition of the SpringHill Suites – Green Bay Hotel. |
Note 3. Unaudited Pro Forma Earnings Per Share Data
Basic and diluted pro forma earnings per share were calculated using the weighted average shares outstanding of the Company for the six months ended June 30, 2019 and for the year ended December 31, 2018.
