Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Mar. 23, 2015 | Jun. 30, 2014 | |
Document and Entity Information [Abstract] | |||
Document Type | 10-K | ||
Amendment Flag | FALSE | ||
Document Period End Date | 31-Dec-14 | ||
Entity Registrant Name | Lightstone Value Plus Real Estate Investment Trust III, Inc. | ||
Entity Central Index Key | 1563756 | ||
Current Fiscal Year End Date | -19 | ||
Document Fiscal Year Focus | 2014 | ||
Document Fiscal Period Focus | FY | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Common Stock, Shares Outstanding | 530,448 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | No | ||
Entity Public Float | $0 |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Assets | ||
Cash | $1,738,026 | $198,726 |
Deposits | 500,000 | |
Prepaid expenses and other assets | 182,078 | |
Total Assets | 2,420,104 | 198,726 |
Liabilities and Stockholders' Equity | ||
Accounts payable and other accrued expenses | 169,608 | |
Due to sponsor | 1,934,970 | |
Total liabilities | 2,104,578 | |
Commitments and Contingencies | ||
Company's stockholders' equity: | ||
Preferred stock, $0.01 par value; 50,000,000 shares and none authorized, respectively, none issued and outstanding | ||
Common stock, $0.01 par value; 200,000,000 and 20,000 shares authorized, respectively, 286,674 and 20,000 shares issued and outstanding, respectively | 2,867 | 200 |
Additional paid-in capital | 455,880 | 199,800 |
Accumulated deficit | -145,196 | -1,274 |
Total Company stockholders' equity | 313,551 | 198,726 |
Noncontrolling interests | 1,975 | |
Total Stockholders' Equity | 315,526 | 198,726 |
Total Liabilities and Stockholders' Equity | $2,420,104 | $198,726 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Paranthetical) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
CONSOLIDATED BALANCE SHEETS [Abstract] | ||
Preferred Stock, par value per share | $0.01 | $0.01 |
Preferred Stock, shares authorized | 50,000,000 | 0 |
Preferred Stock, shares issued | 0 | 0 |
Preferred Stock, shares outstanding | 0 | 0 |
Common Stock, par value per share | $0.01 | $0.01 |
Common Stock, shares authorized | 200,000,000 | 20,000 |
Common Stock, shares issued | 286,674 | 20,000 |
Common Stock, shares outstanding | 286,674 | 20,000 |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
CONSOLIDATED STATEMENTS OF OPERATIONS [Abstract] | ||
Revenues | ||
Expenses: | ||
General and administrative costs | 143,947 | 1,274 |
Total expenses | 143,947 | 1,274 |
Net loss | -143,947 | -1,274 |
Less: net loss attributable to noncontrolling interests | 25 | |
Net loss attributable to Company's common shares | ($143,922) | ($1,274) |
Net loss per Company's common shares, basic and diluted | ($4.16) | ($0.06) |
Weighted average number of common shares outstanding, basic and diluted | 34,605 | 20,000 |
CONSOLIDATED_STATEMENT_OF_STOC
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (USD $) | Total | Common Shares [Member] | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] | Total Noncontrolling Interests [Member] |
BALANCE at Dec. 31, 2012 | $200,000 | $200 | $199,800 | ||
BALANCE, shares at Dec. 31, 2012 | 20,000 | ||||
Net loss | -1,274 | -1,274 | |||
Selling commissions and dealer manager fees | |||||
Other offering costs | |||||
BALANCE at Dec. 31, 2013 | 198,726 | 200 | 199,800 | -1,274 | |
BALANCE, shares at Dec. 31, 2013 | 20,000 | ||||
Net loss | -143,947 | -143,922 | -25 | ||
Proceeds from offering | 2,442,905 | 2,667 | 2,440,238 | ||
Proceeds from offering, shares | 266,674 | ||||
Selling commissions and dealer manager fees | -42,821 | -42,821 | |||
Other offering costs | -2,141,337 | -2,141,337 | |||
Proceeds from noncontrolling interests | 2,000 | 2,000 | |||
BALANCE at Dec. 31, 2014 | $315,526 | $2,867 | $455,880 | ($145,196) | $1,975 |
BALANCE, shares at Dec. 31, 2014 | 286,674 |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | ($143,947) | ($1,274) |
Changes in assets and liabilities: | ||
Increase in prepaid expenses and other assets | -150,001 | |
Increase in accounts payable and other accrued expenses | 34,288 | |
Increase in due to sponsor | 43,052 | |
Net cash used in operating activities | -216,608 | -1,274 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Deposit for purchase of real estate | -500,000 | |
Net cash used in investing activities | -500,000 | |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from issuance of common stock | 2,442,905 | |
Proceeds from noncontrolling interests | 2,000 | |
Payment of commissions and offering costs | -188,997 | |
Net cash provided by financing activities | 2,255,908 | |
Net change in cash | 1,539,300 | -1,274 |
Cash, beginning of year | 198,726 | 200,000 |
Cash, end of period | 1,738,026 | 198,726 |
Supplemental cash flow information for the periods indicated is as follows: | ||
Non cash offering costs recorded in additional paid in capital | $1,995,161 |
Organization
Organization | 12 Months Ended |
Dec. 31, 2014 | |
Organization [Abstract] | |
Organization | 1. Organization |
Lightstone Value Plus Real Estate Investment Trust III, Inc. (‘‘Lightstone REIT III''), incorporated on October 5, 2012, in Maryland, intends to elect to qualify and be taxed as a real estate investment trust (‘‘REIT'') for U.S. federal income tax purposes beginning with the taxable year ended December 31, 2015. The Company will seek to acquire hotels and other commercial real estate assets primarily located in the United States. All such properties may be acquired and operated by the Company alone or jointly with another party. The Company may also originate or acquire mortgage loans secured by real estate. | |
The Lightstone REIT III is structured as an umbrella partnership REIT, or UPREIT, and substantially all of its current and future business will be conducted through Lightstone Value Plus REIT III LP, a Delaware limited partnership (the ‘‘Operating Partnership''). | |
Lightstone REIT III and the Operating Partnership are collectively referred to as the “Company” and the use of “we,” “our,” “us” or similar pronouns refers to Lightstone REIT III, its Operating Partnership or the Company as required by the context in such pronoun used. | |
Offering and Structure | |
Our sponsor David Lichtenstein (“Lichtenstein”), who does business as the Lightstone Group (the “Sponsor”) and majority owns the limited liability company of that name with a diversified portfolio of over 100 properties containing approximately 10,135 multifamily units, 1.3 million square feet of office space, 1.6 million square feet of industrial space, 24 hotels and 3.3 million square feet of retail space. The residential, office, industrial and retail properties are located in 20 states. Based in New York, and supported by regional offices in New Jersey, Maryland and Illinois, our sponsor employs approximately 425 staff and professionals. | |
Our advisor is Lightstone Value Plus REIT III LLC (the “Advisor”), which is majority owned by our Sponsor. Our Advisor, together with our Board of Directors, is and will continue to be primarily responsible for making investment decisions and managing our day-to-day operations. Mr. Lichtenstein is the majority owner and manager of Lightstone SLP III LLC, the special limited partner of our Operating Partnership. Mr. Lichtenstein also acts as our Chairman and Chief Executive Officer. As a result, he controls both the general partner and special limited partner of our Operating Partnership and is the majority decision-maker of our Operating Partnership. | |
We do not have and will not have any employees that are not also employed by our Sponsor or its affiliates. We depend substantially on our Advisor, which generally has responsibility for our day-to-day operations. Under the terms of the advisory agreement, the Advisor also undertakes to use its reasonable best efforts to present to us investment opportunities consistent with our investment policies and objectives as adopted by our Board of Directors. | |
Orchard Securities, LLC (the ‘‘Dealer Manager''), a broker-dealer registered with FINRA, will serve as the dealer manager of the Company's public offering. Orchard Securities also has opened an OSJ that does business as “Lightstone Capital Markets” and focuses primarily on distributing interests in programs sponsored by our sponsor. | |
We have two affiliated property managers (our “Property Managers”), which may manage the properties we acquire. We also use other unaffiliated third-party property managers, principally for the management of our hospitality properties. Our Property Managers are Paragon Retail Property Management LLC (“Paragon”) and Beacon Property Management LLC (“Beacon”), both of which are majority owned and controlled by our Sponsor. Paragon develops and redevelops all the factory outlet malls and certain retail properties controlled by our Sponsor. Beacon is a significant manager in the multi-family residential housing sector and oversees the management of approximately 10,000 multifamily units. | |
The Company's registration statement on Form S-11 (the “Registration Statement”), pursuant to which it is offering to sell up to 30.0 million shares of common stock at a price of $10 per share (the “Offering”) and 10.0 million shares of common stock available pursuant to our distribution reinvestment program (the “DRIP”) was declared effective under the Securities Act of 1933 on July 15, 2014 and we began offering our shares of common stock for sale to the public. | |
As of December 31, 2014, we had received aggregate gross proceeds of approximately $2.6 million from the sale of 286,674 shares of our common stock (including $2.0 million in Common Shares at a purchase price of $9.00 per Common Share to an entity 100% owned by David Lichtenstein, who also owns a majority interest in the Company's Sponsor) in our Offering. The Company intends to sell shares of its common stock under the Offering until the earlier of the date on which all the shares are sold, or July 15, 2016, two years from the date the Registration Statement was declared effective by the U.S. Securities and Exchange Commission (the “SEC”) . The Company reserves the right to reallocate the shares of common stock it is offering between the Primary Offering and the DRIP. Additionally, the Offering may be terminated at any time. | |
As of December 31, 2014, the Advisor owned 20,000 shares of common stock which were issued for $200,000 or $10.00 per share. | |
As of December 11, 2014, the Company had reached the minimum offering under its Offering by receiving subscriptions of its common shares, representing gross offering proceeds of approximately $2.0 million, and effective December 11, 2014 investors were admitted as stockholders and the Operating Partnership commenced operations. Through December 31, 2014, cumulative gross offering proceeds of approximately $2.6 million were released to the Company. The Company invested the proceeds received from the Offering and the Advisor in the Operating Partnership, and as a result, held a 99% general partnership interest as of December 31, 2014 in the Operating Partnership's common units. | |
The Company's shares of common stock are not currently listed on a national securities exchange. The Company may seek to list its shares of common stock 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 shares of common stock at this time. The Company does not anticipate that there would be any market for its shares 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 the eighth 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. | |
Noncontrolling Interest – Partners of Operating Partnership | |
Partners of Operating Partnership | |
On July 16, 2014, the Advisor contributed $2,000 to the Operating Partnership in exchange for 200 limited partner units in the Operating Partnership. A limited partner has the right to convert operating partnership units into cash or, at the option of the Company, an equal number of common shares of the Company, as allowed by the limited partnership agreement. | |
Lightstone SLP III LLC (the ‘‘Special Limited Partner''), a Delaware limited liability company of which Mr. Lichtenstein is the majority owner, ia a special limited partner in the Operating Partnership and has committed to purchase subordinated participation interests in the Operating Partnership (the “Subordinated Participation Interests”) in the amount of $50,000 for each $1.0 million in subscriptions accepted for the Offering or any follow-on offering. The Special Limited Partner may elect to purchase the Subordinated Participation Interests for cash or may contribute interests in real property of equivalent value on a semiannual basis. The Subordinated Participation Interests may be entitled to receive liquidation distributions upon the liquidation of Lightstone REIT III. (See Note 7 for a summary of related-party fees). | |
Related Parties | |
Our Advisor, our Property Managers and the Special Limited Partner are each related parties. Each of these entities has received or will receive compensation for services related to the Offering and will continue to receive compensation and services for the investment, management and disposition of our assets. These entities will receive compensation during the offering, acquisition, operational and liquidation stages. See Note 7 for additional information. |
Summary_of_Significant_Account
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2014 | |
Summary of Significant Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies |
From October 5, 2012 (date of inception) through December 31, 2012, the Company had no operating results and had no operating properties and no historical operating cash flows. For the years ended December 31, 2014 and 2013, the Company had no operating properties and no historical operating cash flows. Some of the significant accounting policies may or may not be relevant during this period, but the Company anticipates that these significant accounting policies will apply in the future. | |
Basis of Presentation | |
The consolidated financial statements include the accounts of Lightstone REIT III and the Operating Partnership and its subsidiary (over which Lightstone REIT exercises financial and operating control). As of December 31, 2014, the Company had a 99% general partnership interest in the Operating Partnership. All inter-company balances and transactions have been eliminated in consolidation. | |
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“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 and investments in other real estate entities, depreciable lives of long-lived assets and revenue recognition. Application of these assumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates. | |
Investments in other real estate entities where the Company has the ability to exercise significant influence, but does not exercise financial and operating control, and is not considered to be the primary beneficiary will be accounted for using the equity method. Investments in other real estate entities where the Company has virtually no influence will be accounted for using the cost method. | |
Use of Estimates | |
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, depreciable lives, revenue recognition, and the collectability of trade accounts receivable and loans receivable. Application of these assumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates. | |
Marketable Securities | |
Marketable securities may consist of equity securities and corporate bonds that are designated as available-for-sale and are recorded at fair value. Unrealized holding gains or losses will be reported as a component of accumulated other comprehensive income (loss). Realized gains or losses resulting from the sale of these securities will be determined based on the specific identification of the securities sold. An impairment charge will be recognized when the decline in the fair value of a security below the amortized cost basis is determined to be other-than-temporary. The Company will consider various factors in determining whether to recognize an impairment charge, including the duration and severity of any decline in fair value below our amortized cost basis, any adverse changes in the financial condition of the issuers and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. | |
Revenue | |
Hotel revenue will be recognized as earned, which is generally defined as the date upon which a guest occupies a room or utilizes the hotel's services. | |
For other commercial properties, which the Company may invest in, minimum rents will be recognized on a straight-line accrual basis, over the terms of the related leases. The capitalized above-market lease values and the capitalized below-market lease values will be amortized as an adjustment to rental income over the initial lease term. Percentage rents, which are based on commercial tenants' sales, will be recognized once the sales reported by such tenants exceed any applicable breakpoints as specified in the tenants' leases. Recoveries from commercial tenants for real estate taxes, insurance and other operating expenses, and from residential tenants for utility costs, will be recognized as revenues in the period that the applicable costs are incurred. | |
Real Estate Loans Receivable | |
Real estate loans receivable will be recorded at cost, net of any premiums or discounts which are accreted or amortized over the life of the related loan receivable utilizing the effective interest method, and reviewed for potential impairment at each balance sheet date. A loan receivable is considered impaired when it becomes probable, based on current information, that we will be unable to collect all amounts due according to the loan's contractual terms. The amount of impairment, if any, is measured by comparing the recorded amount of the loan to the present value of the expected cash flows or the fair value of the collateral. If a loan was deemed to be impaired, the Company would record a reserve for loan losses through a charge to income for any shortfall. Premiums or discounts will no longer be accreted or amortized for loans that are in default. | |
Accounts Receivable | |
The Company will make estimates of the uncollectability of its accounts receivable related to base rents, expense reimbursements and other revenues. The Company will analyze accounts receivable and historical bad debt levels, customer creditworthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. In addition, tenants in bankruptcy will be analyzed and estimates will be made in connection with the expected recovery of pre-petition and post-petition claims. The Company's reported net income or loss will be directly affected by management's estimate of the collectability of accounts receivable. | |
Investments in Real Estate | |
Accounting for Acquisitions | |
When the Company makes an investment in real estate, the fair value of the real estate acquired will be allocated to the acquired tangible assets, consisting of land, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, acquired in-place leases, and the value of tenant relationships, based in each case on their fair values. Purchase accounting will be applied to assets and liabilities related to real estate entities acquired based upon the percentage of interest acquired. Fees incurred related to acquisitions will be expensed as incurred and recorded in general and administrative costs in the consolidated statements of operation. Transaction costs incurred related to the Company's investments in unconsolidated affiliated entities, accounted for under the equity method of accounting, will be capitalized as part of the cost of the investment. | |
Upon the acquisition of real estate operating properties, the Company will estimate the fair value of acquired tangible assets and identified intangible assets and liabilities and certain liabilities such as assumed debt and contingent liabilities, at the date of acquisition, based on evaluation of information and estimates available at that date, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other relevant market data. Based on these estimates, the Company will evaluate the existence of goodwill or a gain from a bargain purchase and will allocate the initial purchase price to the applicable assets, liabilities and noncontrolling interests, if any. As final information regarding fair value of the assets acquired, liabilities assumed and noncontrolling interests is received and estimates are refined, appropriate adjustments will be made to the purchase price allocation. The allocations will be finalized as soon as all the information necessary is available and in no case later than within twelve months from the acquisition date. | |
Carrying Value of Assets | |
The amounts to be capitalized as a result of periodic improvements and additions to real estate property, when applicable, and the periods over which the assets will be depreciated or amortized, will be determined based on the application of accounting standards that may require estimates as to fair value and the allocation of various costs to the individual assets. Differences in the amount attributed to the assets may be significant based upon the assumptions made in calculating these estimates. | |
Impairment Evaluation | |
Management will evaluate the recoverability of its investments in real estate assets at the lowest identifiable level, the individual property level. Long-lived assets will be tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An impairment loss will be recognized only if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. | |
The Company will evaluate the long-lived assets for potential impairment on a quarterly basis and record an impairment charge when there is an indicator of impairment and the undiscounted projected cash flows are less than the carrying amount for a particular property. The estimated cash flows used for the impairment analysis and the determination of estimated fair value will be based on the Company's plans for the respective assets and the Company's views of market and economic conditions. The estimates consider matters such as future operating income, market and other applicable trends and residual value, as well as the effects of demand, competition, and recent sales data for comparable properties. Changes in estimated future cash flows due to changes in the Company's plans or views of market and economic conditions could result in recognition of impairment losses, which, under the applicable accounting guidance, may be substantial. | |
Depreciation and Amortization | |
Depreciation expense for real estate assets will be computed based on the straight-line method using a weighted average composite life of thirty-nine years for buildings and improvements and five to ten years for furniture, fixtures and equipment. Expenditures for tenant improvements will be capitalized and amortized over the initial term of each lease. Maintenance and repairs will be charged to expense as incurred. | |
Deferred Costs | |
Deferred costs may consist of deferred financing and deferred leasing costs. | |
The Company will capitalize initial direct costs associated with financing and leasing activities. The costs will be capitalized upon the execution of the loan or lease and amortized over the initial term of the corresponding loan or lease. Amortization of deferred loan costs will begin in the period during which the loan is originated using the effective interest method over the term of the loan. Deferred leasing costs will be amortized to expense upon the earlier of the store opening date or the date the tenant's lease obligation begins. | |
Investments in Unconsolidated Entities | |
The Company will evaluate its investments in other entities for consolidation. The percentage interest in the joint venture, evaluation of control and whether a variable interest entity (‘‘VIE'') exists will all be considered in determining if the investment qualifies for consolidation. | |
The Company will account for its investments in unconsolidated entities using the equity or cost method of accounting, as appropriate. Under the equity method, the investment will be recorded initially at cost, and subsequently adjusted for equity in net income/(loss) and cash contributions and distributions. The net income/ (loss) of each investor will be allocated in accordance with the provisions of the applicable operating agreements of the entities. The allocation provisions in these agreements may differ from the ownership interest held by each investor. Differences between the carrying amount of the Company's investment in the respective joint venture and the Company's share of the underlying equity of such unconsolidated entities will be amortized over the respective lives of the underlying assets as applicable. These items will be reported as a single line item in the consolidated statements of operations as income or loss from investments in unconsolidated affiliated entities. Under the cost method of accounting, the investment will be recorded initially at cost, and subsequently adjusted for cash contributions and distributions resulting from any capital events. Dividends earned from the underlying entities will be recorded as interest income in the consolidated statements of operations. | |
On a quarterly basis, the Company will assess whether the values of the investments in unconsolidated affiliated entities have been impaired. An investment is impaired only if management's estimate of the fair value of the investment is less than the carrying value of the investment, and such decline in value is deemed to be other than temporary. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the investment over the fair value of the investment. Management's estimate of value for each investment is based on a number of assumptions that are subject to economic and market uncertainties. As these factors are difficult to predict and are subject to future events that may alter management's assumptions, the values estimated by management in the impairment analysis may not be realized. Any decline that is not considered temporary will result in the recording of an impairment charge. | |
Income Taxes | |
As of December 31, 2014 and 2013, the Company is subject to federal income taxes as a regular (subchapter C) corporation. The Company intends to elect to be taxed as a REIT commencing with the taxable year ended December 31, 2015. If the Company qualifies as a REIT, it generally will not be subject to U.S. federal income tax on its net taxable income that it distributes to its stockholders. To maintain its REIT qualification, the Company must meet a number of organizational and operational requirements, including a requirement that it annually distribute to its stockholders at least 90% of its REIT taxable income (which does not equal net income, as calculated in accordance with GAAP), determined without regard to the deduction for dividends paid and excluding any net capital gain. If the Company fails to remain qualified for taxation as a REIT in any subsequent year and does not qualify for certain statutory relief provisions, its income for that year will be taxed at regular corporate rates, and it may be precluded from qualifying for treatment as a REIT for the four-year period following its failure to qualify as a REIT. Such an event could materially adversely affect the Company's net income and net cash available for distribution to stockholders. | |
As of December 31, 2014 and 2013, we had no material uncertain income tax positions. The tax years subsequent to and including 2012 remain open to examination by the major taxing jurisdictions to which we are subject. Additionally, even if we qualify as a REIT for U.S. federal income tax purposes, we may still be subject to some U.S. federal, state and local taxes on our income and property and to U.S. federal income taxes and excise taxes on our undistributed income. | |
Additionally, even if the Company qualifies as a REIT, it may still be subject to some U.S. federal, state and local taxes on its income and property and to U.S. federal income taxes and excise taxes on its undistributed income. | |
To maintain our qualification as a REIT, we may engage in certain activities through wholly-owned taxable REIT subsidiaries (“TRS”). As such, we will be subject to U.S. federal and state income and franchise taxes from these activities. | |
Organization and Offering Costs | |
Organization and offering costs include all the expenses incurred in connection with the Offering. Organization and offering costs (other than selling commissions and dealer manager fee) of the Company may be paid by the Advisor on behalf of the Company. | |
These costs include all costs and expenses paid by the Company in connection with its formation and the offering, including the Company's legal, accounting, printing, mailing and filing fees, charges of the escrow agent, reimbursements to the Dealer Manager and participating broker-dealers for due diligence expenses set forth in detailed and itemized invoices, amounts to reimburse the Advisor for its portion of the salaries of the employees of its affiliates who provide services to the Advisor, and other costs in connection with administrative oversight of such offering and the marketing process, such as preparing supplemental sales materials, holding educational conferences and attending retail seminars conducted by the Dealer Manager or participating broker-dealers. | |
The Advisor will advance the organization and offering expenses to the extent that the Company does not have the funds to pay such expenses. Organization and offering expenses paid by the Advisor prior to December 11, 2014 (date of breaking escrow) were not recorded as liabilities to the Company. Subsequent to December 11, 2014 (date of breaking escrow), the Company recorded any offering costs incurred from its inception to stockholders' equity as a reduction to additional paid in capital (“APIC”) as well as any organization costs incurred from its inception as a general and administrative cost and a liability to the advisor for any costs paid by the Advisor. The Company recorded an adjustment to APIC in the amount of $2.0 million on December 11, 2014 (date of breaking escrow) representing the liability to the Advisor for these offering costs. For the years ended December 31, 2014 and 2013, approximately $2.1 million and $0, respectively, have been incurred for organization and offering expenses. As of December 31, 2014, the Company has recorded approximately $2.1 million of these expenses against APIC, which represent costs incurred from commencement of its Offering. The related liability for any of these organization and offering costs is included in Due to sponsor in the consolidated balance sheets. | |
Accounting for Derivative Financial Instruments and Hedging Activities | |
The Company may enter into derivative financial instrument transactions in order to mitigate interest rate risk on a related financial instrument. The Company may designate these derivative financial instruments as hedges and apply hedge accounting. The Company will record all derivative instruments at fair value on the consolidated balance sheet. | |
Derivative instruments designated in a hedge relationship to mitigate exposure to variability in expected future cash flows, or other types of forecasted transactions, will be considered cash flow hedges. The Company will formally document all relationships between hedging instruments and hedged items, as well as our risk-management objective and strategy for undertaking each hedge transaction. The Company will periodically review the effectiveness of each hedging transaction, which involves estimating future cash flows. Cash flow hedges will be accounted for by recording the fair value of the derivative instrument on the consolidated balance sheet as either an asset or liability, with a corresponding amount recorded in other comprehensive income (loss) within stockholders' equity. Amounts will be reclassified from other comprehensive income (loss) to the consolidated statement of operations in the period or periods the hedged forecasted transaction affects earnings. Derivative instruments designated in a hedge relationship to mitigate exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, will be considered fair value hedges. The effective portion of the derivatives gain or loss will be initially reported as a component of other comprehensive income and subsequently reclassified into earnings when the transaction affects earnings. The ineffective portion of the gain or loss will be reported in earnings immediately. | |
Stock-Based Compensation | |
The Company has adopted a stock-based incentive award plan to align the long-term financial interest of its independent directors, officers and employees (if it ever has employees), employees of its Advisor and other affiliates, certain of its consultants and certain consultants to the Advisor and other affiliates who, directly or indirectly, provide services to the Company, with those of the stockholders. Awards will be granted at the fair market value on the date of the grant with fair value estimated using the Black-Scholes- Merton option valuation model, which incorporates assumptions surrounding the volatility, dividend yield, the risk-free interest rate, expected life, and the exercise price as compared to the underlying stock price on the grant date. As stock-based compensation expense recognized in the consolidated statements of operations will be based on awards ultimately expected to vest, the amount of expense will be reduced for forfeitures estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures will be estimated based on historical experience. The tax benefits associated with these share-based payments will be classified as financing activities in the consolidated statement of cash flows as required under previous regulations. | |
Concentration of Risk | |
The Company maintains its cash in bank deposit accounts, which, at times, may exceed U.S. federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents. | |
Basic and Diluted Net Earnings per Common Share | |
Net earnings per common share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding. Diluted income per share takes into account the effect of any dilutive instruments, such as stock options, but uses the average share price for the period in determining the number of incremental shares, if any, that are to be added to the weighted-average number of shares outstanding. The Company had no potentially dilutive securities outstanding during the periods presented. | |
Financial Instruments | |
The carrying amounts of cash and cash equivalents approximate their fair values because of the short maturity of these instruments. | |
New Accounting Pronouncements | |
In April 2014, the Financial Accounting Standards Board ("FASB") issued an accounting standards update providing new guidance on the requirements for reporting a discontinued operation. The update changes the criteria for determining which disposals can be presented as discontinued operations and modifies related disclosure requirements. This update is effective for fiscal years beginning on or after December 15, 2014, and interim periods within those years. Early adoption is permitted, but only for disposals (or classifications as held for sale) that have not been reported in the financial statements previously issued or available for issuance. The adoption of this standard update affects presentation only and, as such, will not have a material impact on the Company's consolidated financial statements. | |
In May 2014, the FASB issued an accounting standards update to improve financial reporting by reducing the cost and complexity of associated with the incremental reporting requirements for development stage entities. The update removes all incremental financial reporting requirements from GAAP for development stage entities, including the inception-to-date information and certain other disclosures. For public business entities, this update is effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Early application of the amendments is permitted for any annual or interim reporting period for which the entity's financial statements have not been issued. The Company adopted this standard during the quarter ended June 30, 2014 and as a result, is no longer required to present incremental disclosure for development stage entities in its Quarterly Reports on Form 10-Q or Annual Reports on Form 10-K. | |
In May 2014, the FASB issued an accounting standards update that completes the joint effort by the FASB and International Accounting Standards Board to improve financial reporting by creating common revenue recognition guidance for GAAP and International Financial Reporting Standards. The update applies to all companies that enter into contracts with customers to transfer goods or services and is effective for us for interim and annual reporting periods beginning after December 15, 2016. Early application is not permitted and companies have the choice to apply the update either retrospectively to each reporting period presented or by recognizing the cumulative effect of applying the update at the date of initial application (January 1, 2017) and not adjusting comparative information. The Company is currently evaluating the requirements and impact of this update on its consolidated financial statements. |
Selling_Commission_Dealer_Mana
Selling Commission, Dealer Manager Fees and Other Offering Costs | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
Selling Commission, Dealer Manager Fees And Other Offering Costs [Abstract] | |||||||||||||
Selling Commission, Dealer Manager Fees and Other Offering Costs | 3. Selling Commission, Dealer Manager Fees and Other Offering Costs | ||||||||||||
Selling commissions and dealer manager fees are paid to the Dealer Manager or soliciting dealers, as applicable, pursuant to various agreements, and other third-party offering expenses such as registration fees, due diligence fees, marketing costs, and professional fees are accounted for as a reduction against additional paid-in capital (“APIC”) as costs are incurred. Any organizational costs are accounted for as general and administrative costs. The following table represents the selling commissions and dealer manager and other offering costs for the periods indicated: | |||||||||||||
For the Years Ended December 31, | |||||||||||||
2014 | 2013 | ||||||||||||
Selling commissions and dealer manager fees | $ | 42,821 | $ | - | |||||||||
Other offering costs | $ | 2,141,337 | - | ||||||||||
Since commencement of its Offering through December 31, 2014, the Company has incurred approximately $42,821 in selling commissions and dealer manager fees and $2.1 million of other offering costs. |
Financial_Instruments
Financial Instruments | 12 Months Ended |
Dec. 31, 2014 | |
Financial Instruments [Abstract] | |
Financial Instruments | 4. Financial Instruments |
The carrying amounts of cash and cash equivalents, restricted escrows, prepaid expenses and other assets, accounts payable and accrued expenses and due to sponsor approximate their fair values as of December 31, 2014 because of the short maturity of these instruments. |
Stockholders_Equity
Stockholder's Equity | 12 Months Ended |
Dec. 31, 2014 | |
Stockholder's Equity [Abstract] | |
Stockholder's Equity | 5. Stockholder's Equity |
Preferred Stock | |
The Company's charter authorizes its board of directors to designate and issue one or more classes or series of preferred stock without approval of the stockholders of Common Shares. On July 11, 2014, the Company amended and restated its charter to authorize the issuance of 50,000,000 shares of preferred stock. Prior to the issuance of shares of each class or series, the Company's board of directors is required by Maryland law and by the Company's charter to set, subject to the Company's charter restrictions on ownership and transfer of stock, the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of redemption of each class or series of preferred stock so issued, which may be more beneficial than the rights, preferences and privileges attributable to Common Shares. The issuance of preferred stock could have the effect of delaying, deferring or preventing a change in control of the Company. As of December 31, 2014 and December 31, 2013, the Company had no outstanding shares of preferred stock. | |
Common Shares | |
All of the common stock being offered by the Company will be duly authorized, fully paid and nonassessable. Subject to the restrictions on ownership and transfer of stock contained in the Company's charter and except as may otherwise be specified in the charter, the holders of Common Shares are entitled to one vote per Common Share on all matters submitted to a stockholder vote, including the election of the Company's directors. There is no cumulative voting in the election of directors. Therefore, the holders of a majority of outstanding Common Shares can elect the Company's entire board of directors. Except as the Company's charter may provide with respect to any series of preferred stock that the Company may issue in the future, the holders of Common Shares will possess exclusive voting power. | |
Holders of the Company's Common Shares will be entitled to receive such distributions as authorized from time to time by the Company's board of directors and declared out of legally available funds, subject to any preferential rights of any preferred stock that the Company issues in the future. In any liquidation, each outstanding Common Share entitles its holder to share (based on the percentage of Common Shares held) in the assets that remain after the Company pays its liabilities and any preferential distributions owed to preferred stockholders. Holders of Common Shares do not have preemptive rights, which means that there is no automatic option to purchase any new Common Shares that the Company issues, nor do holders of Common Shares have any preference, conversion, exchange, sinking fund or redemption rights. Holders of Common Shares will not have appraisal rights unless the board of directors determines that appraisal rights apply, with respect to all or any classes or series of stock, to a particular transaction or all transactions occurring after the date of such determination in connection with which holders of such Common Shares would otherwise be entitled to exercise appraisal rights. Common Shares will be nonassessable by the Company upon its receipt of the consideration for which the board of directors authorized its issuance. | |
On July 11, 2014, the Company amended and restated its charter to authorize the issuance of 200,000,000 Common Shares. Under its charter, the Company cannot make some material changes to its business form or operations without the approval of stockholders holding at least a majority of the shares of our stock entitled to vote on the matter. These include (1) amendment of its charter, (2) its liquidation or dissolution, and (3) its merger, consolidation or the sale or other disposition of its assets. Share exchanges in which the Company is the acquirer, however, do not require stockholder approval. The Company had 286,674 and 20,000 shares of common stock outstanding as of December 31, 2014 and December 31, 2013, respectively. | |
Stock Incentive Plan | |
The Company has adopted a stock incentive plan to align the long-term financial interest of its independent directors, officers and employees (if it ever has employees), employees of the Advisor and other affiliates, certain of its consultants and certain consultants to the Advisor and other affiliates who, directly or indirectly, provide consulting services to the Company, with those of its stockholders. The Company's board of directors intends to design long-term incentive awards to ensure that eligible officers, employees, consultants and independent directors have a continuing stake in its long-term success, that the total compensation realized by its executive officers reflects its multi-year performance as measured by the efficient use of capital and changes in stockholder value, and that a portion of its executive officer's total compensation is earned over a multi-year period and is forfeitable if the employment of the executive officer is terminated. | |
The Company's board of directors has the full authority to administer and interpret the plan, including to grant to the Company's independent directors, officers and employees (if it ever has employees), employees of the Advisor and other affiliates, certain of the Company's consultants and certain consultants to the Advisor and other affiliates who, directly or indirectly, provide consulting services to the Company (a) stock options, (b) stock appreciation rights, (c) restricted stock, (d) performance shares, and (e) other stock-based awards; to determine, in accordance to the terms of the stock incentive plan, the number of Common Shares to be covered by each award granted and the terms and conditions, consistent with the terms of the stock incentive plan, of any award granted; and generally, to exercise such powers and to perform such acts as the board of directors deems necessary or expedient to promote the Company's best interests that are not in conflict with the provisions of the stock incentive plan. The board of directors, however, may not take any action under the stock incentive plan that would result in a repricing of any stock option without having first obtained the affirmative vote of the stockholders. | |
The aggregate number of Common Shares that may be issued or used for reference purposes or with respect to which awards may be granted under the stock incentive plan will not exceed 5.0% of the Company's outstanding shares of common stock on a fully diluted basis at any time and in any event will not exceed 3,000,000 shares of common stock subject to adjustment for stock splits, combinations, reclassifications, reorganizations and certain other specified events pursuant to the stock incentive plan. Grants will be issued on the date they are approved by the board of directors, except in certain circumstances, such as for new hires, who may be granted awards on or following commencement of employment on the second day after we release our financial results for that quarter. The exercise price for stock options will be determined by the board of directors at the time of the grant and will not be less than 100% (or, in the case of an incentive stock option granted to a ten percent stockholder, 110%) of the fair market value of the shares of common stock at the time of the grant. The board of directors will set the vesting schedule, which may be subject to the attainment of specified performance targets or such other factors as the board of directors may determine, in its sole discretion. | |
Distributions | |
U.S. federal income tax law requires that a REIT distribute annually at least 90% of its REIT taxable income (which does not equal net income, as calculated in accordance with GAAP) determined without regard to the deduction for dividends paid and excluding any net capital gain. In order to continue to qualify for REIT status, we may be required to make distributions in excess of cash available. | |
Distributions will be at the discretion of our Board of Directors. We may pay such distributions from the sale of shares of our common stock or borrowings if we do not generate sufficient cash flow from our operations to fund distributions. Our ability to pay regular distributions and the size of these distributions will depend upon a variety of factors. For example, our borrowing policy permits us to incur short-term indebtedness, having a maturity of two years or less, and we may have to borrow funds on a short-term basis to meet the distribution requirements that are necessary to achieve the tax benefits associated with qualifying as a REIT. We cannot assure that regular distributions will continue to be made or that we will maintain any particular level of distributions that we have established or may establish. | |
We are an accrual basis taxpayer, and as such our REIT taxable income could be higher than the cash available to us. We may therefore borrow to make distributions, which could reduce the cash available to us, in order to distribute 90% of our REIT taxable income as a condition to our election to be taxed as a REIT. These distributions made with borrowed funds may constitute a return of capital to stockholders. “Return of capital” refers to distributions to investors in excess of net income. To the extent that distributions to stockholders exceed earnings and profits, such amounts constitute a return of capital for U.S. federal income tax purposes, although such distributions might not reduce stockholders' aggregate invested capital. Because our earnings and profits are reduced for depreciation and other non-cash items, it is likely that a portion of each distribution will constitute a tax-deferred return of capital for U.S. federal income tax purposes. | |
On January 14, 2015, the board of directors (the “Board of Directors”) of the Company authorized and the Company declared a distribution rate which will be calculated based on stockholders of record each day during the applicable period at a rate of $0.00164383 per day, and will equal a daily amount that, if paid each day for a 365-day period, would equal a 6.0% annualized rate based on a share price of $10.00. The distribution will began to accrue on December 11, 2014 (date of breaking escrow) through February 28, 2015 (the end of the month following the Company's initial property acquisition) and on a monthly basis thereafter. The first distribution will be payable on March 15, 2015 and by the 15th day following each month end to stockholders of record at the close of business each day during the prior month. The stockholders have an option to elect the receipt of Common Shares under the Company's distribution reinvestment program. | |
Our stockholders have the option to elect the receipt of shares of common stock in lieu of cash under our DRIP. | |
The amount of distributions to be paid to our stockholders in the future will be determined by our Board of Directors and are dependent on a number of factors, including funds available for payment of distributions, our financial condition, capital expenditure requirements and annual distribution requirements needed to maintain our status as a REIT under the Code. |
Noncontrolling_Interests
Noncontrolling Interests | 12 Months Ended |
Dec. 31, 2014 | |
Noncontrolling Interests [Abstract] | |
Noncontrolling Interests | 6. Noncontrolling Interests |
Partners of Operating Partnership | |
On July 16, 2014, the Advisor contributed $2,000 to the Operating Partnership in exchange for 200 limited partner units in the Operating Partnership. A limited partner has the right to convert operating partnership units into cash or, at the option of the Company, an equal number of common shares of the Company, as allowed by the limited partnership agreement. | |
Lightstone REIT III invested the proceeds received from the offering and the Advisor in the Operating Partnership, and as a result, held a 99% general partnership interest as of December 31, 2014 in the Operating Partnership's common units. | |
Lightstone SLP III LLC (the ‘‘Special Limited Partner''), a Delaware limited liability company of which Mr. Lichtenstein is the majority owner, is a special limited partner in the Operating Partnership and has committed to purchase subordinated participation interests in the Operating Partnership (the “Subordinated Participation Interests”) in the amount of $50,000 for each $1.0 million in subscriptions accepted for the Offering or any follow-on offering. The Special Limited Partner may elect to purchase the Subordinated Participation Interests for cash or may contribute interests in real property of equivalent value on a semiannual basis. The Subordinated Participation Interests will entitle the Special Limited Partner to receive liquidation distributions upon the liquidation of Lightstone REIT III. (See Note 7 for a summary of related-party fees). |
Related_Party_Transactions
Related Party Transactions | 12 Months Ended | ||
Dec. 31, 2014 | |||
Related Party Transactions [Abstract] | |||
Related Party Transactions | 7. Related Party Transactions | ||
The Company has agreements with the Dealer Manager, the Advisor, the Property Managers and the Special Limited Partner to pay certain fees and liquidation distributions, as follows, in exchange for services performed by these entities and other affiliated entities. The following table summarizes all the compensation and fees the Company may pay to the Dealer Manager, the Advisor, the Property Managers, the Special Limited Partner or their affiliates, including amounts to reimburse their costs in providing services. The Special Limited Partner has committed to contribute to the Operating Partnership cash or interests in real property in exchange for subordinated participation interests in the Operating Partnership that may entitle the Special Limited Partner to the subordinated distribution described in the table below. | |||
Organization and Offering Stage | |||
Fees | Amount | ||
Selling Commissions | The Dealer Manager will receive selling commissions in an amount of up to 7% of the gross proceeds in the primary offering. The Dealer Manager will reallow all selling commissions to the participating broker-dealer or registered representative of the dealer manager who actually sold the Common Shares. Selling commissions are expected to be approximately $21.0 million if the maximum offering of 30.0 million shares of common stock is sold under the Offering. Alternatively, a participating broker-dealer or registered representative of the Dealer Manager who actually sold the shares of common stock may elect to receive a fee equal to 7.5% of the gross proceeds from the sale of shares of common stock, of which 2.5% will be paid at the time of sale of shares of common stock and 1.0% will be paid on each anniversary of the closing of such sale up to and including the fifth anniversary of the closing of such sale, in which event, a portion of the dealer manager fee will be reallowed such that the combined selling commission and dealer manager fee do not exceed 10.0% of the gross offering proceeds (excluding securities purchased through the DRIP). From the Company's inception through December 31, 2014, approximately $29,534 of selling commissions have been incurred. | ||
Fees | Amount | ||
Dealer Manager Fee | The Dealer Manager will receive a dealer manager fee in an amount of up to 3% of gross proceeds in the primary offering. The Dealer Manager, in its sole discretion, may reallow all or any portion of the dealer manager fee to participating broker-dealers as a marketing fee. No dealer manager fee will be paid with respect to sales under the Company's DRIP. The dealer manager fee will be reduced to 2.5% of the gross proceeds on sales by a participating broker-dealer or registered representative of the dealer manager in the Company's primary offering in the event a participating broker-dealer or registered representative of the dealer manager elects to receive the 7.5% fee described in ‘‘— Selling Commissions'' above. The estimated dealer management fee is expected to be approximately $9.0 million if the maximum offering of 30.0 million shares of common stock are sold under the Offering. From the Company's inception through December 31, 2014, approximately $13,287 of dealer manager fees have been incurred. | ||
Organization and Offering Expenses | The Company will reimburse the Advisor for all organization and offering expenses in connection with our offering, other than the selling commissions and dealer manager fee. The Company expects that such organization and offering expenses, other than selling commissions and dealer manager fee, will amount to approximately 2.0% of gross offering proceeds. In no event will organization and offering expenses exceed 15.0% of gross offering proceeds. From the Company's inception through December 31, 2014, approximately $2.2 of organization and offering expenses have been incurred. | ||
Operational Stage | |||
Fees | Amount | ||
Acquisition Fee | The Company will pay to the Advisor or its affiliates 1.0% of the contract purchase price of each property acquired (including its pro rata share (direct or indirect) of debt attributable to such property) or 1.0% of the amount advanced for a loan or other investment (including its pro rata share (direct or indirect) of debt attributable to such investment), as applicable. | ||
‘‘Contract purchase price'' or the ‘‘amount advanced for a loan or other investment'' means the amount actually paid or allocated in respect of the purchase, development, construction or improvement of a property, the amount of funds advanced with respect to a mortgage, or the amount actually paid or allocated in respect of the purchase of other real estate-related assets, in each case inclusive of any indebtedness assumed or incurred in respect of such asset but exclusive of acquisition fees and acquisition expenses. | |||
Fees | Amount | ||
Acquisition Expenses | The Company will reimburse the Advisor for expenses actually incurred related to selecting or acquiring assets on the Company's behalf, regardless of whether the Company actually acquires the related assets. In addition, the Company will pay third parties, or reimburse the Advisor or its affiliates, for any investment-related expenses due to third parties, including, but not limited to legal fees and expenses, travel and communications expenses, cost of appraisals, nonrefundable option payments on property not acquired, accounting fees and expenses and title insurance premiums, regardless of whether the Company acquires the related assets. The Company estimates that total acquisition expenses (including those paid to third parties, as described above) will be approximately 0.6% of the contract purchase price of each property (including its pro rata share (direct or indirect) of debt attributable to such property) and 0.6% of the amount advanced for a loan or other investment (including its pro rata share (direct or indirect) of debt attributable to attributable to such investment), as applicable. In no event will the total of all acquisition fees, financing coordination fees and acquisition expenses (including those paid to third parties, as described above) payable with respect to a particular investment be unreasonable or exceed 5% of the contract purchase price of each property including its pro rata share (direct or indirect) of debt attributable to such property) or 5% of the amount advanced for a loan or other investment (including its pro rata share (direct or indirect) of debt attributable to attributable to such investment), as applicable. | ||
Construction | The Company expects to engage the Property Managers to provide construction management services for some of its properties. The Company will pay a construction management fee in an amount of up to 5% of the cost of any improvements that the Property Managers may undertake. The Property Managers may subcontract the performance of their duties to third parties. | ||
Management Fee | |||
Fees | Amount | ||
Asset Management Subordinated Participation | The following description of the asset management subordinated participation will apply until the date on which the initial public offering has ended and the Company has invested substantially all the net proceeds therefrom. | ||
Within 30 days after the end of each calendar quarter (subject to the approval of the Company's board of directors), the Company, as the general partner of the Operating Partnership, will pay an asset management subordinated participation by issuing a number of operating partnership units designated as Class B units of the Operating Partnership (‘‘Class B Units'') to the Advisor equal to: (i) the cost of the Company's assets multiplied by 0.1875%; divided by (ii) the value of one Common Share as of the last day of such calendar quarter, which is equal initially to $9.00 (the primary offering price minus selling commissions and dealer manager fees). The fair value of issued Class B Units will be determined and expensed when the Company deems the achievement of the performance condition (described below) to be probable. | |||
The Advisor will be entitled to receive distributions on the vested and unvested Class B Units it receives in connection with its asset management subordinated participation at the same rate as distributions received on the Common Shares; such distributions will be in addition to the incentive fees and distributions the Advisor and its affiliates may receive from the Company, which consist of the annual subordinated performance fee payable to the Advisor and the liquidation distributions payable to the Special Limited Partner. | |||
Class B Units are subject to forfeiture until such time as: (a) the value of the Operating Partnership's assets plus all distributions made equals or exceeds the total amount of capital contributed by investors plus a 6.0% cumulative, pretax, non-compounded annual return thereon, or the ‘‘economic hurdle''; (b) any one of the following events occurs concurrently with or subsequently to the achievement of the economic hurdle described above: (i) a listing of the Common Shares on a national securities exchange; (ii) a transaction to which the Company or the Operating Partnership shall be a party, as a result of which OP Units or Common Shares shall be exchanged for or converted into the right, or the holders of such securities shall otherwise be entitled, to receive cash, securities or other property or any combination thereof; or (iii) the termination of the advisory agreement without cause; and (c) the Advisor pursuant to the advisory agreement is providing services to the Company immediately prior to the occurrence of an event of the type described in clause (b) above, unless the failure to provide such services is attributable to the termination without cause of the advisory agreement by an affirmative vote of a majority of the Company's independent directors after the economic hurdle described above has been met. | |||
Any outstanding Class B Units will be forfeited immediately if the advisory agreement is terminated for any reason other than a termination without cause. Any outstanding Class B Units will be forfeited immediately if the advisory agreement is terminated without cause by an affirmative vote of a majority of the Company's board of directors before the economic hurdle described above has been met. | |||
Fees | Amount | ||
Asset Management Fee | The following description of the asset management fee will apply beginning on the date on which the initial public offering has ended and the Company has invested substantially all the net proceeds therefrom. | ||
The Company will pay the Advisor or its assignees a monthly asset management fee equal to one-twelfth (1⁄12) of 0.75% of the Company's average invested assets. Average invested assets means, for a specified period, the average of the aggregate book value of our assets invested, directly or indirectly, in equity interests in and loans secured by real estate, before deducting depreciation, bad debts or other non- cash reserves, computed by taking the average of such values at the end of each month during such period. | |||
Property | Property management fees with respect to properties managed by the Property Managers will be payable monthly to the Property Managers in an amount not to exceed the fee customarily charged in arm's-length transactions by others rendering similar services in the same geographic area for similar properties as determined by a survey of property managers in such area. The Property Managers may subcontract the performance of their duties to third parties. The Company will reimburse the Property Managers for costs and expenses, which may include personnel costs for on-site personnel providing direct services for the properties and for roving maintenance personnel to the extent needed at the properties from time to time, and the cost of travel and entertainment, printing and stationery, advertising, marketing, signage, long distance phone calls and other expenses that are directly related to the management of specific properties. Notwithstanding the foregoing, the Company will not reimburse the Property Managers for their general overhead costs or, other than as set forth above, for the wages and salaries and other employee-related expenses of their employees. | ||
Management Fees | |||
In addition, the Company will pay the Property Managers a separate fee for the one- time initial rent-up or leasing-up of newly constructed properties in an amount not to exceed the fee customarily charged in arm's-length transactions by others rendering similar services in the same geographic area for similar properties as determined by a survey of brokers and agents in such area. | |||
Operating Expenses | Commencing 12 months after the commencement of the Offering, the Company will reimburse the Advisor's costs of providing administrative services at the end of each fiscal quarter, subject to the limitation that the Company will not reimburse the Advisor (except in limited circumstances) for any amount by which the total | ||
operating expenses at the end of the four preceding fiscal quarters exceeds the greater of (i) 2% of average invested assets (as defined above under ‘‘— Asset Management Fee'') for that fiscal year, and (ii) 25% of net income other than any additions to reserves for depreciation, bad debt or other similar non-cash reserves and excluding any gain from the sale of assets for that period. | |||
Additionally, the Company will reimburse the Advisor or its affiliates for personnel costs in connection with other services; however, the Company will not reimburse the Advisor for (a) services for which the Advisor or its affiliates are entitled to compensation in the form of a separate fee, or (b) the salaries and benefits of the named executive officers. | |||
Fees | Amount | ||
Financing | If the Advisor provides services in connection with the financing of an asset, assumption of a loan in connection with the acquisition of an asset or origination or refinancing of any loan on an asset, the Company will pay the Advisor or its assignees a financing coordination fee equal to 0.75% of the amount available or outstanding under such financing. The Advisor may reallow some of or all this financing coordination fee to reimburse third parties with whom it may subcontract to procure such financing. | ||
Coordination Fee | |||
Liquidation/Listing Stage | |||
Fees | Amount | ||
Real Estate Disposition Commissions | For substantial services in connection with the sale of a property, the Company will pay to the Advisor or any of its affiliates a real estate disposition commission in an amount equal to the lesser of (a) one-half of a real estate commission that is reasonable, customary and competitive in light of the size, type and location of the property and (b) 2.0% of the contract sales price of the property; provided, however, that in no event may the real estate commissions paid to the Advisor, its affiliates and unaffiliated third parties exceed the lesser of 6.0% of the contract sales price or a real estate commission that is reasonable, customary and competitive in light of the size, type and location of the property. The Company's independent directors will determine whether the Advisor or its affiliates have provided a substantial amount of services to the Company in connection with the sale of a property. A substantial amount of services in connection with the sale of a property includes the preparation by the Advisor or its affiliates of an investment package for the property (including an investment analysis, an asset description and other due diligence information) or such other substantial services performed by the Advisor or its affiliates in connection with a sale. | ||
Annual Subordinated | The Company will pay the Advisor an annual subordinated performance fee calculated on the basis of the annual return to holders of Common Shares, payable annually in arrears, such that for any year in which holders of Common Shares receive payment of a 6.0% annual cumulative, pre-tax, non-compounded return on their respective net investments, , the Advisor will be entitled to 15.0% of the total return in excess of such 6.0% per annum; provided, that the amount paid to the Advisor will not exceed 10.0% of the aggregate return for such year, and provided, further, that the amount paid to the Advisor will not be paid unless holders of Common Shares receive a return of their respective net investments. This fee will be payable only from realized appreciation in the Company's assets upon their sale, other disposition or refinancing, which results in the return on stockholders' respective net investments exceeding 6.0% per annum. | ||
Performance Fee | |||
For purposes of the annual subordinated performance fee, “net investment” means $10.00 per Common Share, less a pro rata share of any proceeds received from the sale, other disposition or refinancing of assets. | |||
Fees | Amount | ||
Liquidation Distributions to the Special Limited | Distributions from the Operating Partnership in connection with its liquidation initially will be made to the Company (which the Company will distribute to holders of Common Shares), until holders of Common Shares have received liquidation distributions from the Operating Partnership equal to their respective net investments plus a cumulative, pre-tax, non-compounded annual return of 6.0% on their respective net investments. | ||
Thereafter, the Special Limited Partner will be entitled to receive liquidation distributions from the Operating Partnership until it has received liquidation distributions from the Operating Partnership equal to its net investment plus cumulative, pre-tax, non-compounded annual return of 6.0% on its net investment. | |||
Thereafter, 85.0% of the aggregate amount of any additional liquidation distributions by the Operating Partnership will be payable to the Company (which the Company will distribute to holders of Common Shares), and the remaining 15.0% will be payable to the Special Limited Partner. | |||
With respect to holders of Common Shares, “net investment” means $10.00 per Common Share, less a pro rata share of any proceeds received from the sale, other disposition or refinancing of assets. With respect to the Special Limited Partner, “net investment” means the value of all contributions of cash or property the Special Limited Partner has made to the Operating Partnership in consideration for its subordinated participation interests, measured as of the respective times of contribution, less a pro rata share of any proceeds received from the sale, other disposition or refinancing of assets. | |||
In addition to certain related party payments made to the Dealer Manager, the Company also has agreements with the Advisor and the Property Managers and their affiliates to perform such services as provided in these agreements. No amounts were paid to the Advisor or the Property Managers for the years ended December 31, 2014 and 2013. |
Commitments_and_Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2014 | |
Commitments and Contingencies [Abstract] | |
Commitments and Contingencies | 8. 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. |
Quarterly_Financial_Data
Quarterly Financial Data | 12 Months Ended | ||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||
Quarterly Financial Data [Abstract] | |||||||||||||||||||||
Quarterly Financial Data | 9. Quarterly Financial Data (Unaudited) | ||||||||||||||||||||
The following table presents selected unaudited quarterly financial data for each quarter during the year ended December 31, 2014 and 2013: | |||||||||||||||||||||
2014 | |||||||||||||||||||||
Year ended | Quarter ended | Quarter ended | Quarter ended | Quarter ended | |||||||||||||||||
December 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||||||||
Net loss | $ | (143,947 | ) | $ | (119,218 | ) | $ | (22,867 | ) | $ | (595 | ) | $ | (1,267 | ) | ||||||
Less loss attributable to noncontrolling interests | 25 | 21 | 4 | - | - | ||||||||||||||||
Net loss applicable to Company's common shares | $ | (143,922 | ) | $ | (119,197 | ) | $ | (22,863 | ) | $ | (595 | ) | $ | (1,267 | ) | ||||||
Net loss per common share, basic and diluted | $ | (4.16 | ) | $ | (1.53 | ) | $ | (1.14 | ) | $ | (0.25 | ) | $ | (0.02 | ) | ||||||
2013 | |||||||||||||||||||||
Year ended | Quarter ended | Quarter ended | Quarter ended | Quarter ended | |||||||||||||||||
December 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||||||||
Net loss | $ | (1,274 | ) | $ | (224 | ) | $ | (223 | ) | $ | (237 | ) | $ | (590 | ) | ||||||
Less loss attributable to noncontrolling interests | - | - | - | - | - | ||||||||||||||||
Net loss applicable to Company's common shares | $ | (1,274 | ) | $ | (224 | ) | $ | (223 | ) | $ | (237 | ) | $ | (590 | ) | ||||||
Net loss per common share, basic and diluted | $ | (0.06 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.03 | ) |
Subsequent_Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2014 | |
Subsequent Events [Abstract] | |
Subsequent Events | 10. Subsequent Events |
Distribution Declaration | |
On January 14, 2015, the board of directors (the “Board of Directors”) of the Company authorized and the Company declared a distribution rate which will be calculated based on stockholders of record each day during the applicable period at a rate of $0.00164383 per day, and will equal a daily amount that, if paid each day for a 365-day period, would equal a 6.0% annualized rate based on a share price of $10.00. The distribution will begin to accrue on December 11, 2014 (date of breaking escrow) through February 28, 2015 (the end of the month following the Company's initial property acquisition) and on a monthly basis thereafter. The first distribution will be payable on March 15, 2015 and by the 15th day following each month end to stockholders of record at the close of business each day during the prior month. The stockholders have an option to elect the receipt of Common Shares under the Company's distribution reinvestment program. | |
Acquisition of Hampton Inn & Suites, Des Moines, Iowa (the “Hampton Inn – Des Moines”) | |
On February 4, 2015, the Company completed the acquisition of a 120-room select service hotel located in Des Moines, Iowa (the “Hampton Inn – Des Moines”) from an unrelated third party, for an aggregate purchase price of approximately $10.9 million, excluding closing and other related transaction costs. Prior to the completion of the acquisition, the Company made a deposit of $0.5 million for the purchase of the Hampton Inn – Des Moines that is included in Deposits on the consolidated balance sheets as of December 31, 2014. Additionally, in connection with the acquisition, the Company's Advisor received an acquisition fee equal to 1.0% of the contractual purchase price, approximately $0.1 million. The acquisition was funded with approximately $2.7 million of offering proceeds and approximately $8.2 million of proceeds from a $10.0 million Revolving Promissory Note (the “Revolving Promissory Note”) from the operating partnership of Lightstone Value Plus Real Estate Investment Trust II, Inc. (“Lightstone II”), a real estate investment trust also sponsored by the Company's sponsor. | |
The Revolving Promissory Note was entered into on February 4, 2015, has a term of one year, bears interest at a floating rate of three-month Libor plus 6.0% and requires quarterly interest payments through its stated maturity with the entire unpaid balance due upon maturity. The Company paid an origination fee of $100,000 to Lightstone II in connection with the Revolving Promissory Note and pledged its ownership interest in the Hampton Inn – Des Moines as collateral for the Revolving Promissory Note. |
Summary_of_Significant_Account1
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2014 | |
Summary of Significant Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation |
The consolidated financial statements include the accounts of Lightstone REIT III and the Operating Partnership and its subsidiary (over which Lightstone REIT exercises financial and operating control). As of December 31, 2014, the Company had a 99% general partnership interest in the Operating Partnership. All inter-company balances and transactions have been eliminated in consolidation. | |
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“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 and investments in other real estate entities, depreciable lives of long-lived assets and revenue recognition. Application of these assumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates. | |
Investments in other real estate entities where the Company has the ability to exercise significant influence, but does not exercise financial and operating control, and is not considered to be the primary beneficiary will be accounted for using the equity method. Investments in other real estate entities where the Company has virtually no influence will be accounted for using the cost method. | |
Use of Estimates | Use of Estimates |
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, depreciable lives, revenue recognition, and the collectability of trade accounts receivable and loans receivable. Application of these assumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates. | |
Marketable Securities | Marketable Securities |
Marketable securities may consist of equity securities and corporate bonds that are designated as available-for-sale and are recorded at fair value. Unrealized holding gains or losses will be reported as a component of accumulated other comprehensive income (loss). Realized gains or losses resulting from the sale of these securities will be determined based on the specific identification of the securities sold. An impairment charge will be recognized when the decline in the fair value of a security below the amortized cost basis is determined to be other-than-temporary. The Company will consider various factors in determining whether to recognize an impairment charge, including the duration and severity of any decline in fair value below our amortized cost basis, any adverse changes in the financial condition of the issuers and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. | |
Revenue | Revenue |
Hotel revenue will be recognized as earned, which is generally defined as the date upon which a guest occupies a room or utilizes the hotel's services. | |
For other commercial properties, which the Company may invest in, minimum rents will be recognized on a straight-line accrual basis, over the terms of the related leases. The capitalized above-market lease values and the capitalized below-market lease values will be amortized as an adjustment to rental income over the initial lease term. Percentage rents, which are based on commercial tenants' sales, will be recognized once the sales reported by such tenants exceed any applicable breakpoints as specified in the tenants' leases. Recoveries from commercial tenants for real estate taxes, insurance and other operating expenses, and from residential tenants for utility costs, will be recognized as revenues in the period that the applicable costs are incurred. | |
Real Estate Loans Receivable | Real Estate Loans Receivable |
Real estate loans receivable will be recorded at cost, net of any premiums or discounts which are accreted or amortized over the life of the related loan receivable utilizing the effective interest method, and reviewed for potential impairment at each balance sheet date. A loan receivable is considered impaired when it becomes probable, based on current information, that we will be unable to collect all amounts due according to the loan's contractual terms. The amount of impairment, if any, is measured by comparing the recorded amount of the loan to the present value of the expected cash flows or the fair value of the collateral. If a loan was deemed to be impaired, the Company would record a reserve for loan losses through a charge to income for any shortfall. Premiums or discounts will no longer be accreted or amortized for loans that are in default. | |
Accounts Receivable | Accounts Receivable |
The Company will make estimates of the uncollectability of its accounts receivable related to base rents, expense reimbursements and other revenues. The Company will analyze accounts receivable and historical bad debt levels, customer creditworthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. In addition, tenants in bankruptcy will be analyzed and estimates will be made in connection with the expected recovery of pre-petition and post-petition claims. The Company's reported net income or loss will be directly affected by management's estimate of the collectability of accounts receivable. | |
Investments in Real Estate | Investments in Real Estate |
Accounting for Acquisitions | |
When the Company makes an investment in real estate, the fair value of the real estate acquired will be allocated to the acquired tangible assets, consisting of land, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, acquired in-place leases, and the value of tenant relationships, based in each case on their fair values. Purchase accounting will be applied to assets and liabilities related to real estate entities acquired based upon the percentage of interest acquired. Fees incurred related to acquisitions will be expensed as incurred and recorded in general and administrative costs in the consolidated statements of operation. Transaction costs incurred related to the Company's investments in unconsolidated affiliated entities, accounted for under the equity method of accounting, will be capitalized as part of the cost of the investment. | |
Upon the acquisition of real estate operating properties, the Company will estimate the fair value of acquired tangible assets and identified intangible assets and liabilities and certain liabilities such as assumed debt and contingent liabilities, at the date of acquisition, based on evaluation of information and estimates available at that date, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other relevant market data. Based on these estimates, the Company will evaluate the existence of goodwill or a gain from a bargain purchase and will allocate the initial purchase price to the applicable assets, liabilities and noncontrolling interests, if any. As final information regarding fair value of the assets acquired, liabilities assumed and noncontrolling interests is received and estimates are refined, appropriate adjustments will be made to the purchase price allocation. The allocations will be finalized as soon as all the information necessary is available and in no case later than within twelve months from the acquisition date. | |
Carrying Value of Assets | |
The amounts to be capitalized as a result of periodic improvements and additions to real estate property, when applicable, and the periods over which the assets will be depreciated or amortized, will be determined based on the application of accounting standards that may require estimates as to fair value and the allocation of various costs to the individual assets. Differences in the amount attributed to the assets may be significant based upon the assumptions made in calculating these estimates. | |
Impairment Evaluation | |
Management will evaluate the recoverability of its investments in real estate assets at the lowest identifiable level, the individual property level. Long-lived assets will be tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An impairment loss will be recognized only if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. | |
The Company will evaluate the long-lived assets for potential impairment on a quarterly basis and record an impairment charge when there is an indicator of impairment and the undiscounted projected cash flows are less than the carrying amount for a particular property. The estimated cash flows used for the impairment analysis and the determination of estimated fair value will be based on the Company's plans for the respective assets and the Company's views of market and economic conditions. The estimates consider matters such as future operating income, market and other applicable trends and residual value, as well as the effects of demand, competition, and recent sales data for comparable properties. Changes in estimated future cash flows due to changes in the Company's plans or views of market and economic conditions could result in recognition of impairment losses, which, under the applicable accounting guidance, may be substantial. | |
Depreciation and Amortization | Depreciation and Amortization |
Depreciation expense for real estate assets will be computed based on the straight-line method using a weighted average composite life of thirty-nine years for buildings and improvements and five to ten years for furniture, fixtures and equipment. Expenditures for tenant improvements will be capitalized and amortized over the initial term of each lease. Maintenance and repairs will be charged to expense as incurred. | |
Deferred Costs | Deferred Costs |
Deferred costs may consist of deferred financing and deferred leasing costs. | |
The Company will capitalize initial direct costs associated with financing and leasing activities. The costs will be capitalized upon the execution of the loan or lease and amortized over the initial term of the corresponding loan or lease. Amortization of deferred loan costs will begin in the period during which the loan is originated using the effective interest method over the term of the loan. Deferred leasing costs will be amortized to expense upon the earlier of the store opening date or the date the tenant's lease obligation begins. | |
Investments in Unconsolidated Entities | Investments in Unconsolidated Entities |
The Company will evaluate its investments in other entities for consolidation. The percentage interest in the joint venture, evaluation of control and whether a variable interest entity (‘‘VIE'') exists will all be considered in determining if the investment qualifies for consolidation. | |
The Company will account for its investments in unconsolidated entities using the equity or cost method of accounting, as appropriate. Under the equity method, the investment will be recorded initially at cost, and subsequently adjusted for equity in net income/(loss) and cash contributions and distributions. The net income/ (loss) of each investor will be allocated in accordance with the provisions of the applicable operating agreements of the entities. The allocation provisions in these agreements may differ from the ownership interest held by each investor. Differences between the carrying amount of the Company's investment in the respective joint venture and the Company's share of the underlying equity of such unconsolidated entities will be amortized over the respective lives of the underlying assets as applicable. These items will be reported as a single line item in the consolidated statements of operations as income or loss from investments in unconsolidated affiliated entities. Under the cost method of accounting, the investment will be recorded initially at cost, and subsequently adjusted for cash contributions and distributions resulting from any capital events. Dividends earned from the underlying entities will be recorded as interest income in the consolidated statements of operations. | |
On a quarterly basis, the Company will assess whether the values of the investments in unconsolidated affiliated entities have been impaired. An investment is impaired only if management's estimate of the fair value of the investment is less than the carrying value of the investment, and such decline in value is deemed to be other than temporary. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the investment over the fair value of the investment. Management's estimate of value for each investment is based on a number of assumptions that are subject to economic and market uncertainties. As these factors are difficult to predict and are subject to future events that may alter management's assumptions, the values estimated by management in the impairment analysis may not be realized. Any decline that is not considered temporary will result in the recording of an impairment charge. | |
Income Taxes | Income Taxes |
As of December 31, 2014 and 2013, the Company is subject to federal income taxes as a regular (subchapter C) corporation. The Company intends to elect to be taxed as a REIT commencing with the taxable year ended December 31, 2015. If the Company qualifies as a REIT, it generally will not be subject to U.S. federal income tax on its net taxable income that it distributes to its stockholders. To maintain its REIT qualification, the Company must meet a number of organizational and operational requirements, including a requirement that it annually distribute to its stockholders at least 90% of its REIT taxable income (which does not equal net income, as calculated in accordance with GAAP), determined without regard to the deduction for dividends paid and excluding any net capital gain. If the Company fails to remain qualified for taxation as a REIT in any subsequent year and does not qualify for certain statutory relief provisions, its income for that year will be taxed at regular corporate rates, and it may be precluded from qualifying for treatment as a REIT for the four-year period following its failure to qualify as a REIT. Such an event could materially adversely affect the Company's net income and net cash available for distribution to stockholders. | |
As of December 31, 2014 and 2013, we had no material uncertain income tax positions. The tax years subsequent to and including 2012 remain open to examination by the major taxing jurisdictions to which we are subject. Additionally, even if we qualify as a REIT for U.S. federal income tax purposes, we may still be subject to some U.S. federal, state and local taxes on our income and property and to U.S. federal income taxes and excise taxes on our undistributed income. | |
Additionally, even if the Company qualifies as a REIT, it may still be subject to some U.S. federal, state and local taxes on its income and property and to U.S. federal income taxes and excise taxes on its undistributed income. | |
To maintain our qualification as a REIT, we may engage in certain activities through wholly-owned taxable REIT subsidiaries (“TRS”). As such, we will be subject to U.S. federal and state income and franchise taxes from these activities. | |
Organization and Offering Costs | Organization and Offering Costs |
Organization and offering costs include all the expenses incurred in connection with the Offering. Organization and offering costs (other than selling commissions and dealer manager fee) of the Company may be paid by the Advisor on behalf of the Company. | |
These costs include all costs and expenses paid by the Company in connection with its formation and the offering, including the Company's legal, accounting, printing, mailing and filing fees, charges of the escrow agent, reimbursements to the Dealer Manager and participating broker-dealers for due diligence expenses set forth in detailed and itemized invoices, amounts to reimburse the Advisor for its portion of the salaries of the employees of its affiliates who provide services to the Advisor, and other costs in connection with administrative oversight of such offering and the marketing process, such as preparing supplemental sales materials, holding educational conferences and attending retail seminars conducted by the Dealer Manager or participating broker-dealers. | |
The Advisor will advance the organization and offering expenses to the extent that the Company does not have the funds to pay such expenses. Organization and offering expenses paid by the Advisor prior to December 11, 2014 (date of breaking escrow) were not recorded as liabilities to the Company. Subsequent to December 11, 2014 (date of breaking escrow), the Company recorded any offering costs incurred from its inception to stockholders' equity as a reduction to additional paid in capital (“APIC”) as well as any organization costs incurred from its inception as a general and administrative cost and a liability to the advisor for any costs paid by the Advisor. The Company recorded an adjustment to APIC in the amount of $2.0 million on December 11, 2014 (date of breaking escrow) representing the liability to the Advisor for these offering costs. For the years ended December 31, 2014 and 2013, approximately $2.1 million and $0, respectively, have been incurred for organization and offering expenses. As of December 31, 2014, the Company has recorded approximately $2.1 million of these expenses against APIC, which represent costs incurred from commencement of its Offering. The related liability for any of these organization and offering costs is included in Due to sponsor in the consolidated balance sheets. | |
Accounting for Derivative Financial Instruments and Hedging Activities | Accounting for Derivative Financial Instruments and Hedging Activities |
The Company may enter into derivative financial instrument transactions in order to mitigate interest rate risk on a related financial instrument. The Company may designate these derivative financial instruments as hedges and apply hedge accounting. The Company will record all derivative instruments at fair value on the consolidated balance sheet. | |
Derivative instruments designated in a hedge relationship to mitigate exposure to variability in expected future cash flows, or other types of forecasted transactions, will be considered cash flow hedges. The Company will formally document all relationships between hedging instruments and hedged items, as well as our risk-management objective and strategy for undertaking each hedge transaction. The Company will periodically review the effectiveness of each hedging transaction, which involves estimating future cash flows. Cash flow hedges will be accounted for by recording the fair value of the derivative instrument on the consolidated balance sheet as either an asset or liability, with a corresponding amount recorded in other comprehensive income (loss) within stockholders' equity. Amounts will be reclassified from other comprehensive income (loss) to the consolidated statement of operations in the period or periods the hedged forecasted transaction affects earnings. Derivative instruments designated in a hedge relationship to mitigate exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, will be considered fair value hedges. The effective portion of the derivatives gain or loss will be initially reported as a component of other comprehensive income and subsequently reclassified into earnings when the transaction affects earnings. The ineffective portion of the gain or loss will be reported in earnings immediately. | |
Stock-Based Compensation | Stock-Based Compensation |
The Company has adopted a stock-based incentive award plan to align the long-term financial interest of its independent directors, officers and employees (if it ever has employees), employees of its Advisor and other affiliates, certain of its consultants and certain consultants to the Advisor and other affiliates who, directly or indirectly, provide services to the Company, with those of the stockholders. Awards will be granted at the fair market value on the date of the grant with fair value estimated using the Black-Scholes- Merton option valuation model, which incorporates assumptions surrounding the volatility, dividend yield, the risk-free interest rate, expected life, and the exercise price as compared to the underlying stock price on the grant date. As stock-based compensation expense recognized in the consolidated statements of operations will be based on awards ultimately expected to vest, the amount of expense will be reduced for forfeitures estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures will be estimated based on historical experience. The tax benefits associated with these share-based payments will be classified as financing activities in the consolidated statement of cash flows as required under previous regulations. | |
Concentration of Risk | Concentration of Risk |
The Company maintains its cash in bank deposit accounts, which, at times, may exceed U.S. federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents. | |
Basic and Diluted Net Earnings per Common Share | Basic and Diluted Net Earnings per Common Share |
Net earnings per common share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding. Diluted income per share takes into account the effect of any dilutive instruments, such as stock options, but uses the average share price for the period in determining the number of incremental shares, if any, that are to be added to the weighted-average number of shares outstanding. The Company had no potentially dilutive securities outstanding during the periods presented. | |
Financial Instruments | Financial Instruments |
The carrying amounts of cash and cash equivalents approximate their fair values because of the short maturity of these instruments. | |
New Accounting Pronouncements | New Accounting Pronouncements |
In April 2014, the Financial Accounting Standards Board ("FASB") issued an accounting standards update providing new guidance on the requirements for reporting a discontinued operation. The update changes the criteria for determining which disposals can be presented as discontinued operations and modifies related disclosure requirements. This update is effective for fiscal years beginning on or after December 15, 2014, and interim periods within those years. Early adoption is permitted, but only for disposals (or classifications as held for sale) that have not been reported in the financial statements previously issued or available for issuance. The adoption of this standard update affects presentation only and, as such, will not have a material impact on the Company's consolidated financial statements. | |
In May 2014, the FASB issued an accounting standards update to improve financial reporting by reducing the cost and complexity of associated with the incremental reporting requirements for development stage entities. The update removes all incremental financial reporting requirements from GAAP for development stage entities, including the inception-to-date information and certain other disclosures. For public business entities, this update is effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Early application of the amendments is permitted for any annual or interim reporting period for which the entity's financial statements have not been issued. The Company adopted this standard during the quarter ended June 30, 2014 and as a result, is no longer required to present incremental disclosure for development stage entities in its Quarterly Reports on Form 10-Q or Annual Reports on Form 10-K. | |
In May 2014, the FASB issued an accounting standards update that completes the joint effort by the FASB and International Accounting Standards Board to improve financial reporting by creating common revenue recognition guidance for GAAP and International Financial Reporting Standards. The update applies to all companies that enter into contracts with customers to transfer goods or services and is effective for us for interim and annual reporting periods beginning after December 15, 2016. Early application is not permitted and companies have the choice to apply the update either retrospectively to each reporting period presented or by recognizing the cumulative effect of applying the update at the date of initial application (January 1, 2017) and not adjusting comparative information. The Company is currently evaluating the requirements and impact of this update on its consolidated financial statements. |
Selling_Commission_Dealer_Mana1
Selling Commission, Dealer Manager Fees and Other Offering Costs (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
Selling Commission, Dealer Manager Fees And Other Offering Costs [Abstract] | |||||||||||||
Summary of Selling Commission, Dealer Manager Fees and Other Offering Costs | For the Years Ended December 31, | ||||||||||||
2014 | 2013 | ||||||||||||
Selling commissions and dealer manager fees | $ | 42,821 | $ | - | |||||||||
Other offering costs | $ | 2,141,337 | - |
Quarterly_Financial_Data_Table
Quarterly Financial Data (Tables) | 12 Months Ended | ||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||
Quarterly Financial Data [Abstract] | |||||||||||||||||||||
Schedule of Quarterly Financial Data | The following table presents selected unaudited quarterly financial data for each quarter during the year ended December 31, 2014 and 2013: | ||||||||||||||||||||
2014 | |||||||||||||||||||||
Year ended | Quarter ended | Quarter ended | Quarter ended | Quarter ended | |||||||||||||||||
December 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||||||||
Net loss | $ | (143,947 | ) | $ | (119,218 | ) | $ | (22,867 | ) | $ | (595 | ) | $ | (1,267 | ) | ||||||
Less loss attributable to noncontrolling interests | 25 | 21 | 4 | - | - | ||||||||||||||||
Net loss applicable to Company's common shares | $ | (143,922 | ) | $ | (119,197 | ) | $ | (22,863 | ) | $ | (595 | ) | $ | (1,267 | ) | ||||||
Net loss per common share, basic and diluted | $ | (4.16 | ) | $ | (1.53 | ) | $ | (1.14 | ) | $ | (0.25 | ) | $ | (0.02 | ) | ||||||
2013 | |||||||||||||||||||||
Year ended | Quarter ended | Quarter ended | Quarter ended | Quarter ended | |||||||||||||||||
December 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||||||||
Net loss | $ | (1,274 | ) | $ | (224 | ) | $ | (223 | ) | $ | (237 | ) | $ | (590 | ) | ||||||
Less loss attributable to noncontrolling interests | - | - | - | - | - | ||||||||||||||||
Net loss applicable to Company's common shares | $ | (1,274 | ) | $ | (224 | ) | $ | (223 | ) | $ | (237 | ) | $ | (590 | ) | ||||||
Net loss per common share, basic and diluted | $ | (0.06 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.03 | ) |
Organization_Details
Organization (Details) (USD $) | 1 Months Ended | 12 Months Ended | 11 Months Ended | |
Jul. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 11, 2014 | |
Organization Consolidation And Presentation Of Financial Statements [Line Items] | ||||
Date of incorporation | 5-Oct-12 | |||
Issuance of common shares, value | $2,442,905 | |||
Gross proceeds from sale of common stock | 2,442,905 | |||
Contribution from advisor | 2,000 | |||
Number of limited partner units issued to advisor | 200 | |||
Price per unit that the Special Limited Partner has committed to purchase | $50,000 | |||
Amount in subscriptions accepted required for the Special Limited Partner to purchase one unit | 1,000,000 | |||
The Lightstone Group (Sponsor) [Member] | ||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | ||||
Number of properties | 100 | |||
The Lightstone Group (Sponsor) [Member] | Residential [Member] | ||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | ||||
Multifamily units | 10,135 | |||
The Lightstone Group (Sponsor) [Member] | Office [Member] | ||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | ||||
Real estate area | 1,300,000 | |||
The Lightstone Group (Sponsor) [Member] | Industrial [Member] | ||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | ||||
Real estate area | 1,600,000 | |||
The Lightstone Group (Sponsor) [Member] | Hotel [Member] | ||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | ||||
Number of properties | 24 | |||
The Lightstone Group (Sponsor) [Member] | Retail [Member] | ||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | ||||
Real estate area | 3,300,000 | |||
Beacon [Member] | Residential [Member] | ||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | ||||
Multifamily units | 10,000 | |||
Lightstone Value Plus REIT III LLC [Member] | ||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | ||||
Issuance of common shares, shares | 20,000 | |||
Issuance of common shares, value | 200,000 | |||
Shares issued, price per share | $10 | |||
General partner ownership interest | 99.00% | |||
Company owned by David Lichtenstein [Member] | ||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | ||||
Issuance of common shares, value | 2,000,000 | |||
Shares issued, price per share | $9 | |||
Stock Offering [Member] | ||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | ||||
Shares reserved for issuance | 30,000,000 | |||
Shares reserved for issuance, price per share | $10 | |||
Issuance of common shares, shares | 286,674 | |||
Gross proceeds from sale of common stock | $2,600,000 | $2,000,000 | ||
Distribution Reinvestment Plan [Member] | ||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | ||||
Shares reserved for issuance | 10,000,000 |
Summary_of_Significant_Account2
Summary of Significant Accounting Policies (Details) (USD $) | 12 Months Ended | 27 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | |
Accounting Policies [Line Items] | |||
REIT annual distribution, percent of taxable income | 90.00% | ||
Adjustment to APIC for liability to Advisor for offering costs | $1,995,161 | ||
Organization and offering expenses incurred | $2,100,000 | $0 | $2,200,000 |
Lightstone Value Plus REIT III LLC [Member] | |||
Accounting Policies [Line Items] | |||
General partner ownership interest | 99.00% | ||
Buildings and Improvements [Member] | |||
Accounting Policies [Line Items] | |||
Weighted average composite life | 39 years | ||
Furniture, Fixtures and Equipment [Member] | Minimum [Member] | |||
Accounting Policies [Line Items] | |||
Weighted average composite life | 5 years | ||
Furniture, Fixtures and Equipment [Member] | Maximum [Member] | |||
Accounting Policies [Line Items] | |||
Weighted average composite life | 10 years |
Selling_Commission_Dealer_Mana2
Selling Commission, Dealer Manager Fees and Other Offering Costs (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Selling Commission, Dealer Manager Fees And Other Offering Costs [Abstract] | ||
Selling commissions and dealer manager fees | $42,821 | |
Other offering costs | $2,141,337 |
Stockholders_Equity_Details
Stockholder's Equity (Details) (USD $) | 0 Months Ended | 12 Months Ended | |
Jan. 14, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Stockholder's Equity [Abstract] | |||
Preferred Stock, shares authorized | 50,000,000 | 0 | |
Preferred Stock, shares outstanding | 0 | 0 | |
Common Stock, shares authorized | 200,000,000 | 20,000 | |
Common Stock, shares outstanding | 286,674 | 20,000 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
REIT annual distribution, percent of taxable income | 90.00% | ||
Distribution declared | 14-Jan-15 | ||
Distribution on per day basis | $0.00 | ||
Number of days used to calculate daily amount of distribution | 365 days | ||
Annualized rate of dividend | 6.00% | ||
Face value of share | $10 | ||
Distribution payment date | 15-Mar-15 | ||
Stock Incentive Plan [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Percent of outstanding shares issuable | 5.00% | ||
Maximum number of shares issuable | 3,000,000 | ||
Exercise price, percent of fair market value | 100.00% | ||
Stock Incentive Plan [Member] | Ten Percent Stockholder [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Exercise price, percent of fair market value | 110.00% |
Noncontrolling_Interests_Detai
Noncontrolling Interests (Details) (USD $) | 1 Months Ended | 12 Months Ended |
Jul. 31, 2014 | Dec. 31, 2014 | |
Noncontrolling Interest [Line Items] | ||
Contribution from advisor | $2,000 | |
Number of limited partner units issued to advisor | 200 | |
Price per unit that the Special Limited Partner has committed to purchase | $50,000 | |
Amount in subscriptions accepted required for the Special Limited Partner to purchase one unit | $1,000,000 | |
Lightstone Value Plus REIT III LLC [Member] | ||
Noncontrolling Interest [Line Items] | ||
General partner ownership interest | 99.00% |
Related_Party_Transactions_Org
Related Party Transactions (Organization and Offering Stage) (Details) (USD $) | 12 Months Ended | 27 Months Ended | |
Share data in Millions, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 |
Related Party Transaction [Line Items] | |||
Organization and offering expenses incurred | $2,100,000 | $0 | $2,200,000 |
Selling commissions | 29,534 | ||
Dealer manager fee | 13,287 | ||
Stock Offering [Member] | |||
Related Party Transaction [Line Items] | |||
Expected selling commissions | 21,000,000 | 21,000,000 | |
Shares reserved for issuance | 30 | 30 | |
Expected dealer manager fee | $9,000,000 | $9,000,000 | |
Dealer Manager [Member] | Stock Offering [Member] | |||
Related Party Transaction [Line Items] | |||
Selling commissions, percent of gross proceeds | 7.00% | ||
Dealer manager fee, percent of gross proceeds | 3.00% | ||
Participating broker-dealer or registered representative [Member] | Maximum [Member] | |||
Related Party Transaction [Line Items] | |||
Dealer manager fee, percent of gross proceeds | 10.00% | ||
Participating broker-dealer or registered representative [Member] | Stock Offering [Member] | |||
Related Party Transaction [Line Items] | |||
Selling commissions, percent of gross proceeds | 7.50% | ||
Dealer manager fee, percent of gross proceeds | 2.50% | ||
Participating broker-dealer or registered representative [Member] | Stock Offering [Member] | Time of Sale of Stock [Member] | |||
Related Party Transaction [Line Items] | |||
Selling commissions, percent of gross proceeds | 2.50% | ||
Participating broker-dealer or registered representative [Member] | Stock Offering [Member] | Each Anniversary of Stock Sale Closing [Member] | |||
Related Party Transaction [Line Items] | |||
Selling commissions, percent of gross proceeds | 1.00% | ||
Advisor [Member] | Stock Offering [Member] | |||
Related Party Transaction [Line Items] | |||
Organization and offering expenses, percent of gross proceeds | 2.00% | ||
Advisor [Member] | Stock Offering [Member] | Maximum [Member] | |||
Related Party Transaction [Line Items] | |||
Organization and offering expenses, percent of gross proceeds | 15.00% |
Related_Party_Transactions_Ope
Related Party Transactions (Operational Stage) (Details) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Related Party Transaction [Line Items] | |
Acquisition fee, percent of property purchase price | 1.00% |
Acquisition fee, percent of loan advancement or other investment | 1.00% |
Acquisition expenses, percent of property purchase price | 0.60% |
Acquisition expenses, percent of loan advancement or other investment. | 0.60% |
Acquisition fees, financing coordination fees and acquisition expenses, percent of property purchase price | 5.00% |
Acquisition fees, financing coordination fees and acquisition expenses, percent of loan advancement or other investment | 5.00% |
Construction management fee, percent | 5.00% |
Asset management subordinated participation, stock to be issued valuation multiplier | 0.19% |
Common stock, price per share | $9 |
Cumulative, pretax, non-compounded annual return, percent | 6.00% |
Asset management fee, multiplier | 0.08% |
Asset management fee, percent of average invested assets | 0.75% |
Minimum percentage of average invested assets | 2.00% |
Minimum percentage of net income | 25.00% |
Financing coordination fee, percent | 0.75% |
Related_Party_Transactions_Liq
Related Party Transactions (Liquidation/Listing Stage) (Details) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Related Party Transactions [Abstract] | |
Real estate disposition commission, percent of contract sales price of the property | 2.00% |
Real estate commission, percent | 6.00% |
Annual cumulative, pre-tax, non-compounded return on net investments, percent | 6.00% |
Annual subordinated performance fee after cumulative return, percent | 15.00% |
Annual subordinated performance fee, maximum percentage of aggregate return payable | 10.00% |
Net investment per share | $10 |
Liquidation distributions, percent payable to company | 85.00% |
Liquidation distributions, percent payable to Special Limited Partner | 15.00% |
Quarterly_Financial_Data_Detai
Quarterly Financial Data (Details) (USD $) | 3 Months Ended | 12 Months Ended | ||||||||
Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | |
Quarterly Financial Data [Abstract] | ||||||||||
Net loss | ($119,218) | ($22,867) | ($595) | ($1,267) | ($224) | ($223) | ($237) | ($590) | ($143,947) | ($1,274) |
Less loss attributable to noncontrolling interests | 21 | 4 | 25 | |||||||
Net loss applicable to Company's common shares | ($119,197) | ($22,863) | ($595) | ($1,267) | ($224) | ($223) | ($237) | ($590) | ($143,922) | ($1,274) |
Net loss per common share, basic and diluted | ($1.53) | ($1.14) | ($0.25) | ($0.02) | ($0.01) | ($0.01) | ($0.01) | ($0.03) | ($4.16) | ($0.06) |
Subsequent_Events_Details
Subsequent Events (Details) (USD $) | 0 Months Ended | |
Jan. 14, 2015 | Feb. 04, 2015 | |
Subsequent Event [Line Items] | ||
Distribution declared | 14-Jan-15 | |
Distribution on per day basis | $0.00 | |
Number of days used to calculate daily amount of distribution | 365 days | |
Annualized rate of dividend | 6.00% | |
Face value of share | $10 | |
Distribution payment date | 15-Mar-15 | |
Subsequent Event [Member] | Hampton Inn - Des Moines [Member] | ||
Subsequent Event [Line Items] | ||
Aggregate purchase price | 10,900,000 | |
Deposit for purchase | 500,000 | |
Acquisition fees received by the advisor as percentage of acquisition price | 1.00% | |
Amount of acquisition fees to company's advisor | 100,000 | |
Offering funds used in acquisition | 2,700,000 | |
Subsequent Event [Member] | Revolving Promissory Note [Member] | ||
Subsequent Event [Line Items] | ||
Face amount | 10,000,000 | |
Term | 1 year | |
Spread over LIBOR | 6.00% | |
Subsequent Event [Member] | Revolving Promissory Note [Member] | Hampton Inn - Des Moines [Member] | ||
Subsequent Event [Line Items] | ||
Amount of debt used in acquisition | 8,200,000 | |
Subsequent Event [Member] | Lightstone II [Member] | Revolving Promissory Note [Member] | ||
Subsequent Event [Line Items] | ||
Origination fee | $100,000 |